Unassociated Document

10QSB 1 v042915_10qsb.htm Unassociated Document

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-12401

WITS BASIN PRECIOUS MINERALS INC.

(Exact Name of Registrant as specified in Its Charter)

Minnesota	84-1236619
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

80 South 8th Street, Suite 900, Minneapolis, MN 55402

(Address of Principal Executive Offices)

612.349.5277

(Issuer’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

As of May 12, 2006, there were 85,616,680 shares of common stock, $.01 par value, outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x

WITS BASIN PRECIOUS MINERALS INC.

FORM 10-QSB INDEX

MARCH 31, 2006

		Page
PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets -
	As of March 31, 2006 and December 31, 2005	4

	Condensed Consolidated Statements of Operations -
	For the three months ended March 31, 2006 and March 31, 2005	5

	Condensed Consolidated Statements of Cash Flows -
	For the three months ended March 31, 2006 and March 31, 2005	6

	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of
	Financial Condition and Results of Operations	16

Item 3.	Controls and Procedures	25



PART II	OTHER INFORMATION


Item 1.	Legal Proceedings	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 5.	Other Information	28

Item 6.	Exhibits	28
Signatures		29

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of probable ore reserves, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-QSB, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-QSB with respect to future events, the outcome of which is subject to risks, which may have a significant impact on our business, operating results or financial condition. Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. We undertake no obligation to update forward-looking statements. The risks identified in the section of

Item 2 entitled “RISK FACTORS,” among others, may impact forward-looking statements contained in this Form 10-QSB.

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

(unaudited)

	March 31,			December 31,
	2006			2005
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	172,427		$	117,816
Investment		17,994			11,260
Prepaid expenses		567,855			163,396
Total current assets		758,276			292,472

PROPERTY AND EQUIPMENT, net		86,038			89,559
PARTICIPATION MINING RIGHTS, net		56,326			120,803
DEBT ISSUANCE COSTS, net		982			4,662
	$	901,622		$	507,496

LIABILITIES and SHAREHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable, net of original issue discount	$	946,967		$	301,111
Accounts payable		109,193			136,223
Accrued expenses		106,368			65,972
Total current liabilities		1,162,528			503,306


COMMITMENTS and CONTINGENCIES

SHAREHOLDERS’ EQUITY (DEFICIT):
Common stock, $.01 par value, 150,000,000 shares
authorized; 69,526,779 and 65,674,329 shares issued
and outstanding, respectively		695,268			656,743
Additional paid-in capital		35,620,537			34,487,774
Warrants		6,928,346			6,418,685
Accumulated deficit		(22,932,460	)		(22,932,460	)
Deficit accumulated during exploration stage, subsequent
to April 30, 2003		(20,571,687	)		(18,618,908	)
Accumulated other comprehensive loss		(910	)		(7,644	)
Total shareholders’ equity (deficit)		(260,906	)		4,190
	$	901,622		$	507,496

The accompanying notes are an integral part of these consolidated financial statements.

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Operations

(unaudited)

							May 1, 2003
	Three Months Ended March 31,						(inception) to
				Restated			March 31,
	2006			2005			2006
Revenues	$	—		$	—		$	—

Operating Expenses:
General and administrative	$	1,047,032		$	1,047,040		$	7,963,964
Exploration expenses		228,190			269,020			7,859,408
Depreciation and amortization		3,521			52,825			442,571
Stock issued as penalty		—			—			2,152,128
Loss on impairment of Brazmin		—			—			667,578
Loss on disposal of assets		—			—			1,633
Total operating expenses		1,278,743			1,368,885			19,087,282
Loss from Operations		(1,278,743	)		(1,368,885	)		(19,087,282	)

Other Income (Expense)
Other income (expense), net		—			(1,541	)		2,225
Interest expense		(674,036	)		(123,762	)		(1,751,704	)
Total other expense		(674,036	)		(125,303	)		(1,749,479	)
Loss from Operations before Income
Tax Benefit and Discontinued Operations		(1,952,779	)		(1,494,188	)		(20,836,761	)
Benefit from Income Taxes		—			—			243,920
Loss from continuing operations		(1,952,779	)		(1,494,188	)		(20,592,841	)

Discontinued Operations
Gain from operations of discontinued segments		—			—			21,154
Net Loss	$	(1,952,779	)	$	(1,494,188	)	$	(20,571,687	)

Basic and diluted net loss per common share:
Continuing operations	$	(0.03	)	$	(0.03	)	$	(0.50	)
Discontinued operations		—			—			—
Net Loss	$	(0.03	)	$	(0.03	)	$	(0.50	)

Basic and diluted weighted average
common shares outstanding		67,815,238			58,126,334			41,466,107

The accompanying notes are an integral part of these consolidated financial statements.

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three months ended March 31,						May 1, 2003
				Restated			(inception) to
	2006			2005			March 31, 2006
OPERATING ACTIVITIES:
Net loss	$	(1,952,779	)	$	(1,494,188	)	$	(20,571,687	)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation and amortization		3,521			52,825			442,571
Loss on disposal of assets		—			—			1,633
Loss on impairment of Brazmin		—			—			742,578
Issue of common stock for exploration rights		—			94,000			4,935,290
Amortization of participation mining rights		64,477			144,308			2,043,674
Amortization of debt issuance costs		3,680			21,916			137,876
Amortization of original issue discount		645,856			108,333			1,548,248
Amortization of prepaid consulting fees related to issuance of warrants and common stock		217,038			177,335			2,036,800
Compensation expense related to stock options and warrants		419,524			98,250			1,169,522
Contributed services by an executive		25,000			25,000			229,500
Issuance of common stock as penalty related to October 2003 private placement		—			—			2,152,128
Interest expense related to issuance of common stock and warrants		—			—			88,790
Unrealized loss on investment		—			1,541			—
Changes in operating assets and liabilities:
Accounts receivable, net		—			30,817			43,017
Prepaid expenses		11,838			(211,550	)		191,944
Accounts payable		11,970			(75,403	)		95,051
Accrued expenses		40,396			(108,454	)		(114,219	)
Net cash used in operating activities		(509,479	)		(1,135,270	)		(4,827,284	)

INVESTING ACTIVITIES:
Purchases of property and equipment		—			—			(94,612	)
Proceeds from sale of Brazmin		—			—			25,000
Investment in participation mining rights		—			—			(2,239,121	)
Net cash used in investing activities		—			—			(2,308,733	)

FINANCING ACTIVITIES:
Payments on long-term debt		—			(127,781	)		(334,645	)
Private placement advances held in escrow		—			(734,950	)		—
Cash proceeds from issuance of common stock		—			1,628,669			4,725,272
Cash proceeds from exercise of stock options		—			—			169,900
Cash proceeds from exercise of warrants		214,090			—			517,028
Cash proceeds from short-term debt		350,000			—			1,100,000
Cash proceeds from long-term debt		—			—			650,000
Debt issuance costs		—			—			(138,858	)
Net cash provided by financing activities		564,090			765,938			6,688,697

Change in Cash and Equivalents; and Liabilities of Discontinued Operations		—			—			(77,293	)
Increase (Decrease) in Cash and Equivalents		54,611			(369,332	)		(524,613	)
Cash and Equivalents, beginning of period		117,816			1,122,348			697,040
Cash and Equivalents, end of period	$	172,427		$	753,016		$	172,427

The accompanying notes are an integral part of these consolidated financial statements.

WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Notes to Condensed Consolidated Financial Statements

March 31, 2006

(unaudited)

NOTE 1 - NATURE OF BUSINESS

Wits Basin Precious Minerals Inc., and subsidiaries (“we,” “us,” “our,” “Wits Basin” or the “Company”) is a minerals exploration and development company based in Minneapolis, Minnesota. As of March 31, 2006, we hold interests in mineral exploration projects in South Africa (FSC Project), Canada (Holdsworth) and Colorado (Bates-Hunter).

Our primary holding is a 35 percent interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”), which holds the rights and interests in the “FSC Project,” an exploration project adjacent to the historic Witwatersrand goldfields in South Africa. We own the exploration rights of the “Holdsworth Project,” a property located near the village of Hawk Junction, Ontario, Canada. We acquired rights to the FSC and Holdsworth Projects in June 2003. On January 21, 2005, we acquired purchase rights under a purchase agreement, which provides us with exploration rights of the Bates-Hunter Gold Mine located in Central City, Colorado and the possible future purchase of the assets of the Hunter Gold Mining Corporation.

As of the date of this report, we do not claim to have any mineral reserves on our properties. Furthermore, we do not directly own any permits, we possess only a few pieces of equipment and we employ insufficient numbers of personnel necessary to actually explore and/or mine for minerals, therefore, we will be substantially dependent on the third party contractors we engage to perform such operations.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-KSB filed March 31, 2006. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year as a whole.

NOTE 3 - NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted net loss per common share is determined using the weighted average number of common shares outstanding during the periods presented, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of options, warrants and conversion of convertible debt. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

At March 31, 2006, the total principal and interest due on notes payable was $1,151,970, which are convertible at the option of the holders into 5,759,851 shares of our common stock, based on a $0.20 per share conversion price. These shares were not included in computing the net loss per share because the net effect would be antidilutive for each of the periods presented.

NOTE 4 - COMPANY’S CONTINUED EXISTENCE

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company during its exploration stage has sustained losses totaling $20,571,687. At March 31, 2006, the Company’s current liabilities exceeded assets by $404,252. Furthermore, since we do not expect to generate any revenues for the foreseeable future, our ability to continue as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. Without additional capital, we will be unable to fund exploration of our current property interests or acquire interests in other mineral exploration projects that may become available. We have estimated our cash needs over the next twelve months to be approximately $4,800,000. Subsequent to March 31, 2006, we completed a round of financing through the exercise of issued and outstanding warrants and we received approximately $3.9 million in cash. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether.

NOTE 5 - PREPAID EXPENSES

Prepaid expenses consist of two components: prepaid consulting fees and other prepaid expenses. The prepaid consulting fees are calculated amounts from the issuance of common stock, warrants or options to consultants for various services that we do not have internal infrastructure to perform. The amortization periods coincide with terms of the agreements. The other prepaid expenses contain amounts we have prepaid for general and administrative purposes and are being expensed as utilized.

During the three months ended March 31, 2006, we entered into various consulting agreements and issued (i) 1,000,000 shares of our common stock (valued at $200,000 based on an average five day closing sale price of our common stock) as compensation for management services to a consultant, (ii) 150,000 two-year warrants exercisable at $0.25 per share (valued at $37,314 using the Black-Scholes pricing model) as compensation to a consultant for strategic planning and public relations; and (iii) 600,000 shares of our common stock (valued at $180,000 based on an average five day closing sale price of our common stock) and 1,000,000 two-year warrants, (in 500,000 increments exercisable at $0.50 and $1.00) valued at $216,021 using the Black-Scholes pricing model as compensation to a consulting firm for strategic planning and public relations. Amortization of these issuance costs will vary between six and twenty four months to coincide with the term of the consulting agreements.

Components of prepaid expenses are as follows:

	March 31,		December 31,
	2006		2005
Prepaid consulting fees	$	558,573	$	142,276
Other prepaid expenses		9,282		21,120
	$	567,855	$	163,396

NOTE 6 - PARTICIPATION MINING RIGHTS

The Participation Mining Rights are the capitalized investments we made in the mineral exploration projects of the FSC Project in South Africa and the Holdsworth Project in Canada. These investments are in the form of: (a) shares of our common stock and warrants issued to purchase the rights to explore or buy assets, (b) cash expenditures required by the agreements we entered into to obtain those rights, and (c) historical costs we recorded as part of certain acquisitions. We have amortized all of the projects costs except for the remaining cash balance held by Kwagga for the FSC Project. We do not have the right to a refund of that remaining balance, except in very specific events and therefore do not consider those funds to be a prepaid expense, but an investment in exploration.

We have adopted the policy to expense all further exploration project expenses as incurred (less any fixed assets or other normally capitalized costs) until we can establish a timeline for revenue recognition from either the mining of a mineral or the sale of a developed property.

FSC and Holdsworth Projects

In June 2003, we acquired two exploration projects in a transaction with Hawk Precious Minerals USA, Inc., (“Hawk USA”), a wholly owned subsidiary of Toronto-based Hawk Precious Minerals Inc., (“Hawk”). Hawk is an affiliate of ours. One of the projects is the FSC Project, in which we have acquired a 35 percent equity interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”) in exchange for a $2,100,000 investment. Kwagga is a subsidiary of AfriOre International (Barbados) Ltd., (“AfriOre”). Kwagga holds the exploration rights for the FSC Project located in the Republic of South Africa adjacent to the major goldfields discovered at the historic Witwatersrand Basin. AfriOre is a precious minerals exploration company with offices in Johannesburg, South Africa and the operator of the FSC Project.

To date, we have invested $2,100,000 in Kwagga, which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. Once the current exploration funds have been expended completely, estimated to be mid-year 2006, AfriOre and Kwagga will deliver to us a report describing the results of the drilling activities. Within 120 days of our receipt of that report, we have the option to increase our ownership position in Kwagga to 50 percent in exchange for a further investment of $1,400,000. We have had initial conversations with AfriOre regarding possible financing options for the next investment. If we choose not to make this additional investment, then we would continue to own the shares representing our 35 percent interest, but we would no longer have any rights to increase our participation and would be subject to rapid dilution resulting from any additional investment in Kwagga. Furthermore, should Kwagga fail to complete the entire drillhole program, we could realize a complete loss of any remaining funds advanced to Kwagga.

AfriOre consults with us regarding the work to be carried out on the FSC Project. AfriOre is responsible for ensuring that the property and the project are at all times in compliance with applicable laws. AfriOre is also required to provide us with quarterly written reports describing the work completed and the funds expended therewith. As consideration for its role as the project operator, AfriOre is entitled to a fee equal to 10 percent of all qualified expenditures made in connection with the FSC Project.

In accordance with South African legislation, Kwagga will offer to a black economic empowerment group an option to purchase up to a 28 percent equity stake in Kwagga at a price to be mutually agreed upon by us, Kwagga and AfriOre. If such empowerment groups exercises such right to be granted, our interest in Kwagga would be proportionately diluted. For example, if we own 50 percent of Kwagga’s outstanding capital stock prior to the time any black economic empowerment group purchases a 28 percent stake, we would own 36 percent of Kwagga’s outstanding capital after the sale.

After all of the funds contributed by us and any black empowerment group have been expended on the FSC Project, we, AfriOre and any such empowerment group will contribute on a pro rata basis all such further amounts necessary to continue funding the exploration work on the project on a pro rata basis. In the event any of the parties do not fully contribute in proportion to their respective equity interest in Kwagga, such party’s interest will be proportionately diluted.

Certain components of our Participation Mining Rights are based on the distributions made by us to Kwagga and further advanced to AfriOre to fund the drillhole program of the FSC Project. Of the $2,100,000 already invested in Kwagga, $56,326 remains in their cash reserves at March 31, 2006. The majority of all exploration expenses processed by AfriOre, is denominated in the South African Rand, whereas all of our funding has been in the US Dollar. Since June 30, 2003, the Rand has appreciated against the Dollar by as much as approximately 25 percent. This reduction in the US Dollar plus the cost overruns associated with the additional depth drilled on each drillhole (BH47 and BH48) and sidewall repair on BH48 are the major factors that have contributed to decreasing the initial 5 to 7 drillhole program on the FSC to be revised to only a three drillhole program. The initial drillhole, BH47 was completed in June 2004 to a depth of 2,984 meters (approximately 9,800 feet) and the second drillhole, BH48 was completed in August 2005 to a depth of 2,559 meters (approximately 8,400 feet).

In order for AfriOre to begin preparation to commence on the third drillhole, they must receive the drilling permit (issued by the Department of Minerals and Energy, which is currently in process) and be provided with additional satisfaction that we have secured funds of at least $500,000.

The other exploration project we acquired from Hawk USA in June 2003, is the Holdsworth Project, located in the Wawa area near the village of Hawk Junction, Ontario, Canada. The Holdsworth Project consists of 19 contiguous patented mining claims covering approximately 304 hectares (approximately 750 acres). The mining claims allow us to conduct exploration and exploitation activities in the near surface oxide zone of the Holdsworth Project. Once we have secured the financing, which we estimate to be approximately $150,000, our plan would be to conduct pre-exploration activities on the Holdsworth Project. The primary objective of these pre-exploration activities will be to confirm the results of prior exploration activities conducted on or near this property. Until we have the results of the pre-exploration activities, we will not be in a position to determine the scope and cost of further exploration activities, if any, necessary for the Holdsworth Project. Hawk USA’s contributions of its rights in the FSC Project and its mining claims held in the Holdsworth Project were valued at their historical cost, an aggregate of $246,210.

Components of participation mining rights are as follows:

	March 31, 2006			December 31, 2005
Investment made in Kwagga	$	2,100,000		$	2,100,000
Historical value assigned to the FSC & Holdsworth Projects		246,210			246,210
Miscellaneous costs (1)		82,889			82,889
Gross participation mining rights		2,429,099			2,429,099
Less exploration expenditures report by AfriOre and Kwagga		(2,043,674	)		(1,979,197	)
Less amortization of historical and miscellaneous costs		(329,099	)		(329,099	)
	$	56,326		$	120,803

(1)

Includes the June 2003 Hawk agreement costs and the issuance of an option to a former director.

NOTE 7 - DEBT ISSUANCE COSTS

Related to two secured convertible promissory notes (See Note 8 - Notes Payable) issued in the fourth quarter of 2005, we paid $7,361 of debt issuance costs for legal fees.

The following table summarizes the amortization of debt issuance costs:

	March 31, 2006			December 31, 2005
Gross debt issuance costs	$	7,361		$	7,361
Less: amortization of debt issuance costs		(6,379	)		(2,699	)
Debt issuance costs, net	$	982		$	4,662

NOTE 8 - NOTES PAYABLE

Promissory Note with Andrew Green

As additional consideration for the PN, we agreed to amend the terms of a warrant (originally issued as part of our October 2003 private placement) to purchase up to 500,000 shares of our common stock held by Mr. Green to reduce the exercise price from $0.25 per share to $0.01 per share based on a default provision in the PN, and we recorded a non-cash interest charge of $55,284 based on the Black-Scholes pricing model. Furthermore, since we had not repaid the PN in full by July 15, 2005, we were required to issue 50,000 shares of our unregistered common stock for each month there remained an outstanding balance beginning August 15, 2005, up to a maximum issuance of 150,000 shares. As of October 15, 2005, we have issued 150,000 of such penalty shares. We recorded the issuance of these penalty shares as an additional interest component, valuing each issuance with the closing sale price of our common stock, thereby recording $20,000 in additional non-cash interest expense.

In August 2005, Mr. Green exercised the warrant to purchase 500,000 shares of common stock and we deducted the new warrant exercise price ($0.01 per share) of $5,000 in the aggregate from the accrued interest owed to him from the PN.

The PN had a due date of September 15, 2005. On October 18, 2005, Mr. Green informed us that he did not consider us in default as of September 16, 2005 and furthermore was open to signing a new note arrangement. See the information that follows pertaining to our new agreement with Mr. Green.

Secured Convertible Promissory Note with Pacific Dawn Capital, LLC and Andrew Green

On September 30, 2005, we issued Pacific Dawn Capital, LLC, a California limited liability company (“Pacific”) a six-month secured convertible promissory note (the “Pacific Note”) in the principal amount of $600,000, or such lesser amount that is actually drawn by us pursuant to a loan and security agreement with Pacific dated September 30, 2005 (the “Pacific Loan Agreement”). The Pacific Note is secured by substantially all of our assets and bore an interest rate of six percent per annum. In order to effectuate the note, Pacific required the personal guaranty of Stephen D. King, a board member of ours. In exchange for agreeing to personally guaranty our obligations under the Pacific Note, we issued Mr. King a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share.

Under the Pacific Loan Agreement, beginning October 1, 2005, we have the right to draw up to $100,000 per month (up to an aggregate of $600,000) by providing Pacific notice of our intent to exercise a monthly draw along with a report of the exploration operations for Bates-Hunter. Pacific has the right to reject the draw if it is not satisfied with the report. If we fail to exercise a draw during any month, we waive our right to draw the $100,000 for that month.

On October 3, 2005, we drew the initial monthly amount of $100,000 and issued to Pacific (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement. For each subsequent $100,000 monthly draw, we will issue another five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share.

We also provided Pacific certain preemptive rights under the Pacific Loan Agreement. Furthermore, Pacific has the right to convert any portion of the principal or interest of the Pacific Note outstanding into shares of our common stock based on a conversion rate equal to $0.20 per share and is considered to be conventional convertible debt under the accounting guidance of Emerging Issues Task Force (“EITF”) 05-2. We hold the right to call the Pacific Note at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares have been registered.

On November 1, 2005, we entered into a new loan and security agreement with Andrew Green (the “Green Note”) whereby his original $250,000 unsecured note (“Existing Financing”) which became due was refinanced to allow us to draw up to an aggregate of $600,000, on terms similar to the Pacific Loan Agreement, as amended. In consideration for refinancing the Existing Financing into the Green Note, we issued a five-year warrant to purchase up to 2,500,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement. On November 9, 2005, we drew the initial monthly amount of $100,000 and issued to Mr. Green (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share. The Green Note bears interest of 12 percent per annum. The Green Note requires no payments until the maturity date of April 30, 2006. We have the option to prepay interest accruing on any given month by paying either (i) the amount of the monthly accrual in cash or (ii) by issuing 50,000 shares of common stock. The Green Note is convertible at Mr. Green’s option at a conversion rate of $0.20 per share and is considered to be conventional convertible debt under the accounting guidance of EITF 05-2. We have a call option that triggers at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares are registered. In order to effectuate the Green Note, Mr. Green required the personal guaranty of Stephen D. King, a board member of ours. In exchange for agreeing to personally guaranty our obligations under the Green Note, we issued a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share to Mr. King.

Contemporaneously, we amended the Pacific Loan Agreement and Pacific Note to allow for similar terms between Mr. Green and Pacific and to enable the parties to have equal security interests in our Company. Pursuant to an intercreditor agreement between Mr. Green and Pacific, Mr. Green is pari passu in a secondary security interest to the assets of the Company. The amended note allows Pacific to receive a monthly interest rate of 12 percent per annum (versus the original rate of six percent). Furthermore, the amended note requires no payments until the maturity date of April 30, 2006 and the monthly interest payments have been modified as follows: we have the option to prepay interest accruing on any given month by paying either (i) the amount of the monthly accrual in cash or (ii) by issuing 50,000 shares of common stock.

The application of the provisions of EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments” for Mr. Green and Pacific resulted in the proceeds of the two loans being allocated based on the relative fair value of the loan, common stock and warrants. Lastly, due to the reduced relative fair value assigned to the convertible debt, the debt has a beneficial conversion feature that is “in-the-money” on the commitment date. Based on EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” the amount of the discount assigned to the beneficial conversion feature was limited to the amount of the proceeds allocated to the debt instrument.

Unsecured Promissory Note

On October 10, 2005, we entered into a short-term loan arrangement with a shareholder whereby we borrowed $100,000 through a purchase agreement with an unsecured promissory note. The promissory note bears an interest rate of six percent per annum and matures on April 10, 2006. As further consideration for the financing, we issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement.

The proceeds of the loan were allocated based on the relative fair value of the loan and the warrants granted in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.”

Notes Payable - Summarized

During the three months ended March 31, 2006, we drew an additional $350,000, therefore, through the inception of the notes and as of March 31, 2006, we have received an aggregate sum of $1,100,000 in debt financing, issued 1,000,000 shares of common stock and issued 13,000,000 warrants. The weighted average interest rate for all debt outstanding as of March 31, 2006 was 11.5 percent.

The following table summarizes the note payable balances:

Original gross proceeds	$	750,000
Less: original issue discount at time of issuance of note for common stock and warrants		(521,304	)
Less: beneficial conversion feature		(179,977	)
		48,719
Less: principal payments		—
Add: amortization of original issue discount and beneficial conversion feature		252,392
Balance at December 31, 2005		301,111
Additional draws on notes payable		350,000
Less: original issue discount at time of issuance of note for warrants		(252,014	)
Less: beneficial conversion feature		(97,986	)
		—
Less: principal payments		—
Add: amortization of original issue discount and beneficial conversion feature		645,856
Balance at March 31, 2006	$	946,967

NOTE 9 - COMPREHENSIVE LOSS

Comprehensive loss includes our net loss and the change in unrealized gain (loss) on available for sale investments (the 175,000 shares of MacDonald common stock held). We report the unrealized gain (loss) on the investment in securities in our Condensed Consolidated Balance Sheet. The following table details the changes in our Accumulated Other Comprehensive Loss balance:

Balance at December 31, 2005	$	(7,644	)
Unrealized gain		6,734
Balance at March 31, 2006	$	(910	)

NOTE 10- STOCK OPTIONS

On January 1, 2006, the Company adopted Financial Accounting Standards Board (“FASB”) Statement No. 123(R), “Share-Based Payment,” which requires the fair value of share-based payments, including grants of employee stock options and employee stock purchase plan shares, to be recognized in the income statement based on their fair values unless a fair value is not reasonable estimable. Prior to the Company’s adoption of SFAS No. 123(R), the Company followed the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related interpretations, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” The fair value of the Company’s stock options issued prior to the adoption of SFAS No. 123(R) was estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions, including expected stock price volatility and the estimated life of each award. The fair value of these stock options was estimated assuming no expected dividends and estimates of expected life, volatility and risk-free interest rate at the time of grant. Prior to the adoption of SFAS No. 123(R), the Company used historical and implied market volatility as a basis for calculating expected volatility.

No share-based employee compensation cost was recognized in the consolidated statement of operations for the periods ended March 31, 2006 and 2005. We did not grant any employee stock options during the three months ended March 31, 2006.

The Company elected to adopt the modified prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS No. 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date will be recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123 pro forma disclosures.

The impact of adopting Statement No. 123(R) can not be predicted at this time because it will depend on levels of share-based payments granted in the future, valuation methodology adopted and assumptions selected at the time of future grants. With the adoption of Statement No. 123(R), we may elect to utilize a different valuation method and/or different valuation assumptions. These selections may have a significant impact on the amount of share-based payment expense under Statement No. 123(R).

On January 13, 2006, the Company’s Board of Directors approved the amendment of its 2001 Employee Stock Option Plan (the “2001 Plan”) to increase the shares reserved under the 2001 Plan from 1,450,000 to 2,500,000 shares.

NOTE 11 - RESTATEMENT

Statement of Operations Restatement for the Three Months Ended March 31, 2005

The following table reconciles the previously reported net loss amount to the restated net loss amount for the quarter ended March 31, 2005. No loss per share adjustment was required.

	Net Loss
Previously reported amount	$	(1,686,754	)
G & A expenses previously recorded		917,830
Exploration expenses previously recorded		590,796
Restated G & A expenses (a)		(1,047,040	)
Restated exploration expenses (b)		(269,020	)
Restated net loss for the quarter ended March 31, 2005	$	(1,494,188	)

(a) An additional $129,210 of prepaid expenses resulted from the amortization of the value of the warrant issued in January 2005 for consulting services.

(b) A reduction of the quarterly expense resulted from a translation error in calculating the US dollar equivalent from the reported amounts in the South African Rand. The information transmitted was incorrectly interpreted, requiring a reduction adjustment of $321,776.

Statement of Cash Flows Restatement for the Three Months Ended March 31, 2005

We made corrections in the presentation of the cash flow statements within the Operation Activities section only, with no correction to the net cash used in operating activities as reported previously. The following table reconciles the net loss to the restated amount for the quarter ended March 31, 2005.

Previously reported amortization of participation mining rights	$	466,084
Corrected amortization of participation mining rights		(144,308	)
Reclass of amortization of prepaid consulting fees related to stock/warrants		(177,335	)
Previously reported prepaid expenses from changes in operating assets		(163,425	)
Corrected prepaid expenses from changes in operating assets		211,550
Net adjustment		192,566
Previously reported operating activities net loss		(1,686,754	)
Corrected operating activities net loss	$	(1,494,188	)

NOTE 12 - SUBSEQUENT EVENTS

On April 28, 2006, the Company completed a round of financing through the exercise of issued and outstanding warrants to certain warrant holders who qualified as accredited investors. For each two warrants exercised by a warrant holder (at a price of $0.25 per share), the warrant holder received two shares of common stock and a new three-year warrant (with an exercise price of $0.50 per share). Certain of the warrant holders were offered a limited time reduction of the exercise price (in which the warrants were originally price from $5.50 to $0.75 per share) of $0.25 per share. The Company received subscription agreements to exercise approximately 15.8 million common stock purchase warrants and as a result, expects to receive approximately $3.9 million in cash. With these additional funds, the Company re-paid all of its outstanding principal debt under three promissory notes (in the aggregate amount of $1,100,000) in May 2006.

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections” which replaces APB Opinion No. 20, “Accounting Changes” and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion No. 28.” SFAS 154 changes the requirements for the accounting for and the reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles required recognition by recording a cumulative effect adjustment within net income in the period of change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the specific period effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. During the quarter ended March 31, 2006, the Company adopted SFAS 154. The adoption had no impact on the Company’s consolidated financial statements for the first quarter of 2006.

WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Item 2. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended December 31, 2005.

OVERVIEW

We are a minerals exploration and development company based in Minneapolis, Minnesota. As of March 31, 2006, we hold interests in mineral exploration projects in South Africa (FSC Project), Canada (Holdsworth) and Colorado (Bates-Hunter).

· FSC Project. In June 2003, we acquired two exploration projects in a transaction with Hawk Precious Minerals USA, Inc., (“Hawk USA”), a wholly owned subsidiary of Toronto-based Hawk Precious Minerals Inc., (“Hawk”). Hawk is an affiliate of ours. In one of these projects, which we refer to as the “FSC Project,” we have acquired a 35 percent equity interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”) in exchange for a $2,100,000 investment. Kwagga is a subsidiary of AfriOre International (Barbados) Ltd., (“AfriOre”). Kwagga holds the exploration rights for the FSC Project located in the Republic of South Africa adjacent to the major goldfields discovered at the historic Witwatersrand Basin. AfriOre is a precious minerals exploration company with offices in Johannesburg, South Africa and the operator of the FSC Project.

· Holdsworth Project. The other exploration project we acquired from Hawk USA, located in the Wawa area near the village of Hawk Junction, Ontario, Canada, we refer to as the “Holdsworth Project.” The Holdsworth Project consists of 19 contiguous patented mining claims, which allows us to conduct exploration and exploitation activities in the near surface oxide zone of the property. Once we have secured the financing, which we estimate to be approximately $150,000, we plan to conduct pre-exploration activities on the Holdsworth Project. The primary objective of these pre-exploration activities will be to confirm the results of prior exploration activities conducted on or near this property. Until we have the results of the pre-exploration activities, we will not be in a position to determine the scope and cost of further exploration activities, if any, necessary for the Holdsworth Project.

· Bates-Hunter Gold Mine. On January 21, 2005, we closed on an assignment of a purchase agreement to purchase all of the outstanding capital stock of the Hunter Gold Mining Corporation, a British Columbia corporation, which owns 100% interest in the Bates-Hunter Gold Mine located in Central City, Colorado. We have until November 30, 2006 to complete our due diligence, at which time, should the historical data prove viable, we could complete the purchase for a fixed price of $4,600,000 Canadian. The assets of Hunter Gold Mining Corporation consist of the Bates-Hunter Gold Mine, the Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment.

In the future, we will continue to seek new areas for exploration and the rights that would allow us to be either owners or participants. These rights may take the form of direct ownership of mineral exploration or, like our interest in the FSC Project, these rights may take the form of ownership interests in entities holding exploration rights. Furthermore, although our main focus is in gold exploration projects, future projects may involve other minerals.

Our principal office is located at 80 South 8^th Street, Suite 900, Minneapolis, Minnesota 55402. Our telephone number is (612) 349-5277 and our Internet address is www.witsbasin.com. Our securities trade on the Over-the-Counter Bulletin Board under the symbol “WITM.”

RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2006 COMPARED TO MARCH 31, 2005.

Revenues

We had no revenues from continuing operations for the quarters ended March 31, 2006 and 2005. Furthermore, we do not anticipate having any future revenues until an economic mineral deposit is discovered or unless we make further acquisitions or complete other mergers or joint ventures with business models that produce such results.

Operating Expenses

General and administrative expenses were $1,047,032 for the three months ended March 31, 2006 as compared to $1,047,040 for the same period in 2005. Of the expenses reported in 2006 and 2005, the majority related primarily to our marketing programs and consulting fees, which included direct mailing campaigns, emailing campaigns, minerals trade publications, research analysts, public relations, luncheons and special invite events and improvements to our website. We anticipate the future marketing dollar expenditures will decrease for the remainder of fiscal 2006.

Exploration expenses were $228,190 for the three months ended March 31, 2006 as compared to $269,020 for the same period in 2005. Exploration expenses for 2006 relate to the expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site and the Bates-Hunter project. We anticipate the rate of spending for the remaining fiscal 2006 exploration expenses will increase due to the additional drill rigs at the FSC project and our due diligence exploratory work commencing at the Bates-Hunter. Exploration expenses for 2005 related to (i) expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site, (ii) McFaulds Lake (which our rights expired on December 31, 2005) and (iii) the Bates-Hunter project.

Depreciation and amortization expenses were $3,521 for the three months ended March 31, 2006 as compared to $52,825 for the same period in 2005. Related to our due diligence process at the Bates-Hunter Gold Mine in Colorado, we have made certain purchases of equipment ($94,612) necessary to operate and de-water the property. Depreciation of these purchases is calculated on a straight-line method, which was $3,521 for the three months ended March 31, 2006. Amortization expenses for 2005 ($52,825) include the FSC and McFaulds Lake, both of which were fully amortized by June 30, 2005.

Other Income and Expense

Our other income and expense consists of interest income, interest expense and other expense. Interest expense for the three months ended March 31, 2006 was $674,036 compared to $123,762 for the same period in 2005. The 2006 interest expense relates to the three promissory notes payable. It is anticipated that interest expense will decrease for the remainder of fiscal 2006, since all three notes were repaid in May 2006.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements primarily through the sale of our business assets and the sale of securities. We do not generate sufficient net positive cash flows from our operations to fund the next twelve months. For the quarters ended March 31, 2006 and 2005, we had net cash used in operating activities of $509,479 and $1,135,270, respectively.

We had a working capital deficit of $404,252 at March 31, 2006, compared to $210,834 at December 31, 2005. Cash and equivalents were $172,427 at March 31, 2006, representing an increase of $54,611 from the cash and equivalents of $117,816 at December 31, 2005.

On June 1, 2004 we received gross proceeds of $650,000 in consideration for issuing an 18-month secured convertible promissory note (the “Note”) to Pandora Select Partners LP (“Pandora”), a Virgin Islands limited partnership. The Note was secured by substantially all of our assets and bore interest of 10 percent per annum. The principal and interest monthly payment was $46,278. In lieu of cash, we could satisfy our repayment obligations by issuing shares of our common stock. On any payments we elected to pay in shares of common stock, the per-share value would be equal to 85 percent of the average of the high closing bid price of our common stock during the 20 trading days immediately preceding the payment date. From inception and through March 31, 2005, all payments were made in cash. From April through October 2005, all payments were paid by the issuance of common stock. The final November payment was a combination of cash and common stock. We paid $334,645 in principal payments during 2005 and issued an aggregate of 2,400,000 shares of our common stock. The Note was repaid in full as of December 9, 2005.

As of September 30, 2004, we have invested $2,100,000 in Kwagga (with a balance of $56,326 remaining at March 31, 2006), which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. In order for AfriOre to begin preparation to commence on the third drillhole, they must receive the drilling permit (issued by the Department of Minerals and Energy, which is currently in process) and be provided with additional satisfaction that we have secured funds of at least $500,000. Once the entire $2,100,000 has been expended, we will have a further right to increase our equity position in Kwagga for an additional $1,400,000 cash investment.

On January 7, 2005, we completed a private placement of units of our securities, each unit consisting of one share of our common stock and a warrant to purchase one-half share of common stock at an exercise price of $0.25 per share. We sold an aggregate of 25,050,000 units at a price per unit of $0.10, resulting in gross proceeds of $2,505,000. In connection with the private placement, we engaged a placement agent, Galileo Asset Management SA, Switzerland. As compensation for their services, we paid a cash commission of $22,750.

On January 21, 2005, we closed on an assignment of a purchase agreement (the “Purchase Agreement”) by and among us, Hunter Corporation and Swaisland. Swaisland has sold us his rights to purchase the assets of the Hunter Corporation. The Hunter Corporation owns a 100% interest in the Bates-Hunter Gold Mine located in Central City, Colorado. We have begun our due diligence on the Bates-Hunter Gold Mine, requiring expenditures of approximately $1,150,000. Our rights under the Purchase Agreement requires us to be completed with our due diligence by November 30, 2006, at which time, should the historical data prove viable, we may complete the purchase of the assets held of the Hunter Corporation for a fixed price of $4,600,000 Canadian (approximately US$3,950,000 at December 31, 2005). The assets consist of the Bates-Hunter Mine, the Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment. In addition to the Cdn$4,600,000 purchase price, we would be required to issue the following additional compensation: (i) we will issue a warrant to Swaisland to purchase 1,000,000 shares of our common stock at a price per share equal to the 10-day closing average sale price of our common stock; (ii) Swaisland will retain a two percent net smelter return royalty on all future production from the Bates-Hunter Gold Mine; and (iii) Goldrush Casino and Mining Corporation will retain a one percent net smelter return royalty (up to a maximum payment of $1,500,000). Furthermore, if the Cdn$4,600,000 payment has not been made by November 30, 2006 and Hunter Corporation has not otherwise granted an extension for payment, the Purchase Agreement will become null and void and neither party shall have any further rights or obligations thereunder.

In May 2005, we entered into warrant exercise agreements with two consultants, allowing them a reduced exercise price on previously issued and outstanding warrants, which both expired on March 31, 2006. They held an aggregate of 3,063,834 warrants exercisable with a range of original pricing was from $0.40 to $5.50 per share. Each warrant exercise agreement allowed for monthly exercises with an exercise price of $0.20 per share. For the three months ended March 31, 2006, an aggregate of 695,450 warrants were exercised into common stock with net proceeds of $139,090 received.

In May 2005, we entered into a short-term loan arrangement with a shareholder, Andrew Green, (“Mr. Green”) whereby we borrowed $250,000 through a purchase agreement with an unsecured promissory note (“PN”). The PN bore an initial interest rate of six percent per annum, which increased to 18 percent per annum on July 15, 2005, because we had not repaid the PN in full by July 15, 2005. As additional consideration for the PN, we agreed to amend the terms of a warrant (originally issued as part of our October 2003 private placement) to purchase up to 500,000 shares of our common stock held by Mr. Green to reduce the exercise price from $0.25 per share to $0.01 per share based on a default provision in the PN. In August 2005, Mr. Green exercised the warrant to purchase 500,000 shares of common stock and we deducted the new warrant exercise price ($0.01 per share) of $5,000 from the accrued interest owed to him from the PN. See the information that follows pertaining to our renegotiated agreement with Mr. Green.

On September 30, 2005, we issued Pacific Dawn Capital, LLC, a California limited liability company (“Pacific”) a six-month secured convertible promissory note (the “Pacific Note”) in the principal amount of $600,000, or such lesser amount that is actually drawn by us pursuant to a loan and security agreement with Pacific dated September 30, 2005 (the “Pacific Loan Agreement”). The Pacific Note is secured by substantially all of our assets and bore an interest rate of six percent per annum. In order to effectuate the note, Pacific required a personal guaranty of Stephen D. King, a board member of ours. In exchange for agreeing to personally guaranty our obligations under the Pacific Note, we issued Mr. King a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share.

Under the Pacific Loan Agreement, beginning October 1, 2005, we have the right to draw up to $100,000 per month (up to an aggregate of $600,000) by providing Pacific notice of our intent to exercise a monthly draw along with a report of the exploration operations for the Bates-Hunter. Pacific has the right to reject the draw if it is not satisfied with the report. If we fail to exercise a draw during any month, we waive our right to draw the $100,000 for that month.

We also provided Pacific certain preemptive rights under the Pacific Loan Agreement. Furthermore, Pacific has the right to convert any portion of the principal or interest of the Pacific Note outstanding into shares of our common stock based on a conversion rate equal to $0.20 per share. We hold the right to call the Pacific Note at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares have been registered.

On November 1, 2005, we renegotiated our financing agreements with Mr. Green and Pacific. Mr. Green entered into a new loan and security agreement (the “Green Note”) whereby his original $250,000 unsecured note (“Existing Financing”) was combined to allow us to draw up to an aggregate of $600,000, on terms similar to the Pacific Loan Agreement, as amended. In consideration for the refinancing of the Existing Financing into the Green Note, we issued a five-year warrant to purchase up to 2,500,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement. On November 9, 2005, we drew the initial monthly amount of $100,000 and issued to Mr. Green (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share. The Green Note bears interest of 12 percent per annum. The Green Note requires no payments until the maturity date of April 30, 2006. We have the option to prepay interest accruing on any given month by paying either (i) the amount of the monthly accrual in cash or (ii) by issuing 50,000 shares of common stock. The Green Note is convertible at Mr. Green’s option at a conversion rate of $0.20 per share. We have a call option that triggers at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares are registered. In order to effectuate the Green Note, Mr. Green required a personal guaranty of Stephen D. King, a board member of ours. In exchange for agreeing to personally guaranty our obligations under the Green Note, we issued Mr. King a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share to Mr. King.

On October 10, 2005, we entered into a short-term loan arrangement with a shareholder of ours whereby we borrowed $100,000 through a purchase agreement with an unsecured promissory note. The promissory note bears an interest rate of six percent per annum and matures on April 10, 2006.

As of March 31, 2006, we have received an aggregate sum of $1,100,000 in debt financing and accrued $51,970 of interest.

In February 2006, an investor exercised on 300,000 stock purchase warrants with an exercise price of $0.25 per share and received 300,000 shares of common stock. We received $75,000 in proceeds.

Our existing sources of liquidity will not provide cash to fund operations for the next twelve months. We have estimated our cash needs over the next twelve months to be approximately $4,800,000 (to include anticipated debt servicing of approximately $1,200,000, $1,000,000 for the Bates-Hunter, $150,000 for the Holdsworth project, and in order to continue with exploration at the FSC Project, we are required to have an additional $500,000 advance available, which would be applied to the next investment of $1,400,000 required in order to maintain our level of participation in Kwagga). Additionally, should the exploration results for Bates-Hunter prove viable, we will require $4,600,000 Canadian to complete the purchase by November 30, 2006. We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether.

RISKS RELATING TO OUR COMMON STOCK

TRADING OF OUR COMMON STOCK IS LIMITED.

Trading of our common stock is conducted on the National Association of Securities Dealers’ Over-the-Counter Bulletin Board, or “OTC Bulletin Board.” This has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

BECAUSE IT IS A “PENNY STOCK” IT CAN BE DIFFICULT TO SELL SHARES OF OUR COMMON STOCK.

Our common stock is a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for you to sell your shares of our stock. Because of the rules, there is less trading in penny stocks. Also, many brokers choose not to participate in penny stock transactions. Accordingly, you may not always be able to sell our shares of common stock publicly at times and prices that you feel are appropriate.

RISKS RELATING TO OUR FINANCIAL CONDITION

WE CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND OPERATIONS DURING 2006.

As of March 31, 2006, we had only approximately $172,000 of cash and cash equivalents. Since we do not expect to generate any revenue from operations in 2006, we will be required to raise additional capital in financing transactions in order to satisfy our expected cash expenditures. We expect to raise such additional capital by selling shares of our capital stock or by borrowing money. However, such additional capital may not be available to us at acceptable terms or at all. Further, if we sell additional shares of our capital stock, your ownership position in our Company will be subject to dilution. In the event that we are unable to obtain additional capital, we may be forced to reduce our operating expenditures or to cease operations altogether.

WE HAVE MINIMAL OPERATING ASSETS.

After we completed the sales of our Hosted Solutions Business and our Accounting Software Business in 2003, we became an exploration stage company and do not anticipate having any revenues from operations until an economic mineral deposit is discovered or unless we complete other acquisitions or joint ventures with business models that produce such revenues. As of March 31, 2006 we hold certain rights in three projects: the FSC Project in South Africa, the Holdsworth Property in Canada and the Bates-Hunter Gold Mine in Colorado. None of these projects may ever produce any significant mineral deposits.

WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE.

Since becoming an exploration stage company in May 2003 through March 31, 2006, we have incurred an aggregate net loss of $20,571,687. We expect operating losses to continue for the foreseeable future and may never be able to operate profitably.

OUR INDEPENDENT AUDITORS HAVE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have had net losses for each of the years ended December 31, 2005 and 2004, and we have an accumulated deficit as of March 31, 2006. Since the financial statements for each of these periods were prepared assuming that we would continue as a going concern, in the view of our independent auditors, these conditions raise substantial doubt about our ability to continue as a going concern. Furthermore, since we do not expect to generate any revenues for the foreseeable future, our ability to continue as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. If we are unable to raise additional capital, we may be forced to discontinue our business.

FOREIGN CURRENCY EXCHANGE RATES.

Since our entrance into the precious minerals arena, we have had very limited dealings with foreign currency transactions, even though most of our transactions have been with foreign entities. Most of the funds requests have required US Dollar denominations. Exchange rates are influenced by global economic trends beyond our control. Even though we may not record direct losses due to our dealings with exchanges into foreign currencies [market risk], we have an associated reduction in the productivity of assets.

We’ve invested $2,100,000 in US funds in Kwagga, whereby they in turn transfer funds to AfriOre. The majority of all exploration expenditures that AfriOre deals in are denominated in the South African Rand and the exchange from the US Dollar to the South African Rand has sustained a reduction. On June 30, 2003, the exchange rate was approximately R7.51 = $1.00. Since June 30, 2003, the Rand has appreciated against the Dollar by as much as approximately 25 percent. On December 31, 2005, the exchange rate was approximately R6.33 = $1.00. The fluctuations between the Dollar and the Rand is one of the factors that has decreased our initial 5 to 7 drillhole program on the FSC to be revised to only a three drillhole program. Furthermore, should the Dollar weaken further in relationship to the Rand, we may sustain additional reductions in the number of drillholes completed with future investments.

Our assignment of a purchase agreement to purchase the Bates-Hunter Gold Mine from Hunter Gold Mining Corporation, a British Columbia corporation, on January 21, 2005 was denominated at $3,000,000 US. Upon our receiving an extension to complete the due diligence process on December 31, 2005, the purchase price was re-negotiated and is now stated at $4,600,000 Canadian. On January 21, 2005 the exchange rate was approximately Cdn 0.82 = $1.00. On March 31, 2006, the exchange rate was approximately Cdn 0.86 = $1.00. If this trend continues and we complete the purchase of the Bates-Hunter Gold, our need for additional funds could impact our liquidity.

RISKS RELATING TO OUR BUSINESS

SINCE BECOMING ENGAGED IN THE MINERAL EXPLORATION BUSINESS IN JUNE 2003, WE HAVE RELIED ON AN EXCLUSION FROM THE DEFINITION OF “INVESTMENT COMPANY” IN ORDER TO AVOID BEING SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940. TO THE EXTENT THE NATURE OF OUR BUSINESS CHANGES IN THE FUTURE, WE MAY BECOME SUBJECT TO THE REQUIREMENTS OF THE INVESTMENT COMPANY ACT, WHICH WOULD LIMIT OUR BUSINESS OPERATIONS AND REQUIRE US TO SPEND SIGNIFICANT RESOURCES IN ORDER TO COMPLY WITH SUCH ACT.

The Investment Company Act defines an “investment company,” among other things, as an issuer that is engaged in the business of investing, reinvesting, owning, holding or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government. Because the value of our interest in the FSC Project has exceeded 40 percent of our unconsolidated assets, excluding cash and government securities, since June 2003, we may meet this threshold definition of “investment company.” However, the Investment Company Act also excludes from this definition any person substantially all of whose business consists of owning or holding oil, gas or other mineral royalties or leases or fractional interests therein, or certificates of interest or participation relating to such mineral royalties or leases. Based on an opinion of counsel, we believe that we satisfy this mineral company exception to the definition of “investment company” for the period from June 26, 2003 through August 29, 2004. If our reliance on the mineral company exclusion from the definition of investment company during this period is misplaced, we may have been in violation of the Investment Company Act, the consequences of which can be significant. For example, investment companies that fail to register under the Investment Company Act are prohibited from conducting business in interstate commerce, which includes selling securities or entering into other contracts in interstate commerce. Section 47(b) of the Investment Company Act provides that a contract made, or whose performance involves, a violation of the act is unenforceable by either party unless a court finds that enforcement would produce a more equitable result than non-enforcement. Similarly, a court may not deny rescission to any party seeking to rescind a contract that violates the Investment Company Act, unless the court finds that denial of rescission would produce more equitable result than granting rescission. Accordingly, for example, certain investors who purchase our securities during any period in which we were required to register as investment company may seek to rescind their subscriptions.

We further believe that we have continued to qualify for the mineral company exclusion from August 30, 2004 through the date of this report and are not therefore subject to the requirements of the Investment Company Act of 1940. If in the future the nature of our business changes such that the mineral company exception to the threshold definition of investment company is not available to us, we will be required to register as an investment company with the SEC. The ramifications of becoming an investment company, both in terms of the restrictions it would have on our Company and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also imposes various restrictions with regard to our ability to enter into affiliated transactions, the diversification of our assets and our ability to borrow money. If we became subject to the Investment Company Act at some point in the future, our ability to continue pursuing our business plan would be severely limited as it would be significantly more difficult for us to raise additional capital in a manner that would comply with the requirements of the Investment Company Act. To the extent we are unable to raise additional capital, we may be forced to discontinue our operations or sell or otherwise dispose of our mineral assets.

LAWS GOVERNING MINERAL RIGHTS OWNERSHIP HAVE CHANGED IN SOUTH AFRICA.

The South African mining industry has undergone a series of significant changes culminating in the enactment of the Mineral and Petroleum Resources Development Act No. 28 of 2002 (“the Act”) on May 1, 2004. The Act legislates the abolition of private mineral rights in South Africa and replaces them with a system of state licensing based on the patrimony over minerals, as is the case with the bulk of minerals in other established mining jurisdictions such as Canada and Australia. On May 3, 2004 the Department of Minerals and Energy (the “DME”) announced that it was seeking legal advice on the implications of the Act in light of South Africa’s international agreements.

Holders of old-order mining rights, of the type held by Kwagga, are required within five years of the May 1, 2004 commencement date, to apply for conversion of their old order rights into new order mining rights in terms of the Act. Old order mining rights will continue to be in force during the conversion period, subject to the terms and conditions under which they were granted. Once a new order right is granted, security of tenure is guaranteed for a period of up to 30 years, subject to ongoing compliance with the conditions under which the right has been granted. A mining right may be renewed for further periods of up to 30 years at a time, subject to fulfillment of certain conditions.

In order to be able to convert old order mining rights to new order mining rights, a holder must primarily: apply in the correct form for conversion at the relevant office of the DME before May 1, 2009; submit a prescribed social and labor plan; and undertake to “give effect to” the black economic empowerment and socio-economic objectives of the Act (the “Objectives”) and set out the manner in which it will give effect to the Objectives.

In general, the Objectives are embodied in the broad-based socio-economic empowerment charter which was signed by the DME, the South African Chamber of Mines and others on October 11, 2002 (the “Charter”), and which was followed on February 18, 2003 by the release of the appendix to the Charter known as the Scorecard. The Charter and Scorecard has since been published for information during August 2004. The Charter is based on seven key principles, two of which are focused on ownership targets for historically disadvantaged South Africans (“HDSAs”) and beneficiation, and five of which are operationally oriented and cover areas focused on improving conditions for HDSAs.

Regarding ownership targets, the Charter (as read with the Scorecard) requires each mining company to achieve the following HDSA ownership targets for the purpose of qualifying for the grant of new order rights: (i) 15% ownership by HDSAs in that company or its attributable units of production by May 1, 2009, and (ii) 26% ownership by HDSAs in that company or its attributable units of production by May 1, 2014. The Charter states that such transfers must take place in a transparent manner and for fair market value. It also states that the South African mining industry will assist HDSA companies in securing financing to fund HDSA participation, in the amount of ZAR100 billion within the first five years. The Charter does not specify the nature of the assistance to be provided.

Kwagga and AfriOre are actively engaged in discussions with DME officials and others to ensure that Kwagga fulfills the ownership requirements for conversion under the Act; however, the finalization of the means of achieving that end will require greater certainty regarding the operation and interpretation of the Act and pending related legislation.

At present, the financial implications and market-related risks brought about by the various pieces of the new legislation (including the Mineral and Petroleum Royalty Bill) cannot be assessed. It is not clear when the next draft of the Mineral and Petroleum Royalty Bill will be released. The Government has, however, indicated that no royalties will be payable until 2009. Material impacts on both the ownership structure and operational costs at the FSC Project are possible. Kwagga and AfriOre continue to explore their options and monitor the implementation and interpretation of the Act and the progress of other ancillary regulations and legislation closely.

DUE TO LEGISLATION ENACTED IN SOUTH AFRICA, KWAGGA WILL BE REQUIRED TO SELL A SUBSTANTIAL AMOUNT OF ITS STOCK, WHICH WOULD DILUTE OUR EQUITY POSITION IN KWAGGA.

In accordance with the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry, Kwagga will offer up to 28 percent of its capital stock at fair market value to a HDSA investor group. Any investment by such a group will dilute our ownership of Kwagga and, accordingly, the right to receive profits generated from the FSC Project, if any.

WE ARE SUBSTANTIALLY DEPENDENT UPON OUR CHIEF EXECUTIVE OFFICER.

We are substantially dependent on the expertise and industry knowledge of H. Vance White, our chief executive officer. The loss of his services could have an adverse effect on us and we do not currently have key person insurance with respect to Mr. White.

ONE OF OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WITH REGARD TO CERTAIN TRANSACTIONS THAT WE MAY ENTER.

H. Vance White, who is a director and the chief executive officer of our Company, is both an officer and director of Hawk Precious Minerals Inc., a junior exploration company and the parent company of Hawk USA, and a partner in Brooks & White Associates, an unincorporated Canadian partnership that provides management, financial and investor relations services to junior mineral resource exploration companies. As a result of his positions with other companies that may, from time to time, compete with us, Mr. White may have a conflict of interest to the extent the other companies with which he is affiliated acquire rights in exploration projects that may be suitable for us to acquire.

OUR SUCCESS IN CONNECTION WITH THE FSC PROJECT IS SUBSTANTIALLY DEPENDENT ON THE PROJECT’S OPERATOR.

We are relying heavily on the ability of AfriOre, the FSC Project operator, to make prudent use of all funds in connection with the exploration of the FSC Project. If AfriOre does not use these funds wisely, we may not realize any return on our investment. Further, we are dependent on the financial health and condition of AfriOre. In the event AfriOre became insolvent or otherwise unable to carry out its obligations of exploration, we could lose the entire amount we have invested in exploration of the FSC Project. We also depend on AfriOre to obtain and maintain various governmental licenses and permits necessary to explore and develop the properties. The failure to obtain and maintain such licenses and permits may cause significant delays in exploring and developing the properties, or even may prevent the completion of any of these activities altogether.

THE OPERATORS OF OUR EXPLORATION PROJECTS MAY NOT HAVE ALL NECESSARY TITLE TO THE MINING EXPLORATION RIGHTS.

We expect that Kwagga and AfriOre will have good and proper right, title and interest in and to the respective mining exploration rights they currently own, have optioned or intend to acquire and that they will explore and develop. Such rights may be subject to prior unregistered agreements or interests or undetected claims or interests, which could materially impair our ability to participate in the development of the FSC Project. The failure to comply with all applicable laws and regulations, including failure to pay taxes and to carry out and file assessment work, may invalidate title to portions of the properties where the exploration rights are held.

WE WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE TO FUND OUR CURRENT EXPLORATION PROJECT INTERESTS OR TO ACQUIRE INTERESTS IN OTHER EXPLORATION PROJECTS.

Additional financing will be needed in order to fund beyond the three drillhole exploration program currently underway at the FSC Project, to fund exploration of the Holdsworth Project and Bates-Hunter, or to potentially complete further acquisitions or complete other acquisitions or joint ventures with other business models. Our means of acquiring investment capital is limited to private equity and debt transactions. We have no significant sources of currently available funds to engage in additional exploration and development. Without additional capital, we will be unable to fund exploration of our current property interests or acquire interests in other mineral exploration projects that may become available. See “—Risks Relating to Our Financial Condition - We Currently Do Not Have Enough Cash to Fund Operations During 2006.”

OUR PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN GOLD PRICES.

The profitability of a gold exploration project could be significantly affected by changes in the market price of gold. Mine production and the willingness of third parties such as central banks to sell or lease gold affects the supply of gold. Demand for gold can be influenced by economic conditions, attractiveness as an investment vehicle and the relative strength of the US Dollar and local investment currencies. Other factors include the level of interest rates, exchange rates, inflation and political stability. The aggregate effect of these factors is impossible to predict with accuracy. Worldwide production levels also affect gold prices. In addition, the price of gold has on occasion been subject to very rapid short-term changes due to speculative activities. Fluctuations in gold prices may adversely affect the value of any discoveries made at the sites with which we are involved.

THE NATURE OF MINERAL EXPLORATION IS INHERENTLY RISKY.

The exploration for and development of mineral deposits involves significant financial risks, which even experience and knowledge may not eliminate, regardless of the amount of careful evaluation applied to the process. Very few properties are ultimately developed into producing mines. Whether a gold deposit will be commercially viable depends on a number of factors, including:

financing costs;

proximity to infrastructure;

the particular attributes of the deposit, such as its size and grade; and

governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land use, importing and exporting of gold and environmental protection.

The outcome of any of these factors may prevent us from receiving an adequate return on invested capital.

MINERAL EXPLORATION IS EXTREMELY COMPETITIVE.

There is a limited supply of desirable mineral properties available for claim staking, lease or other acquisition in the areas where we contemplate participating in exploration activities. We compete with numerous other companies and individuals, including competitors with greater financial, technical and other resources than we possess, in the search for and the acquisition of attractive mineral properties. Our ability to acquire properties in the future will depend not only on our ability to develop our present properties, but also on our ability to select and acquire suitable producing properties or prospects for future mineral exploration. We may not be able to compete successfully with our competitors in acquiring such properties or prospects.

Item 3. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-QSB Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were adequate and effective (as of the date of their evaluation) for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the Company under Exchange Act of 1934.

Since the Company does not have a formal audit committee, its Board of Directors oversees the responsibilities of the audit committee. The Board is fully aware that there is lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, the Board has determined that considering the employees involved and the control procedures in place, risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties does not justify the expenses associated with such increases at this time.

During the period covered by this report, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting subsequent to such evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 30, 2006, we entered into an exclusive private placement agreement with Midtown Partners & Co., LLC, as placement agent, to provide the Company with assistance in a private placement transaction. No transactions were completed with their assistance. Effective March 31, 2006, we terminated the exclusive agreement with the issuance of a stock purchase warrant to purchase up to 250,000 shares of our common stock, with an exercise price of $0.25 per share and an expiration date of March 31, 2011. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that the placement agent is “accredited” (as defined by Rule 501(a)) promulgated under the Securities Act, that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

In May 2005, we entered into agreements with two of our shareholders, whereby we offered a reduced exercise price on all stock purchase warrants they held to reflect a $0.20 per share exercise price. At that time, they held an aggregate of 3,063,834 warrants with exercise prices that ranged from $0.40 to $5.50 per share. For the three months ending March 31, 2006, an aggregate of 695,450 warrants were exercised. The agreements expired March 31, 2006. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that each shareholder is “accredited” (as defined by Rule 501(a)) promulgated under the Securities Act, that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

During the three months ended March 31, 2006, we entered into various agreements with consultants for services related to management services, strategic planning, investor relations, capital markets and website marketing. We issued an aggregate 2,707,000 shares of our un-registered common stock and 1,350,000 warrants to purchase shares of our common stock to seven consultants for their services, with some services extending into 2007. Certain warrants were issued below market price on date of grant. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company reasonably believes that each consultant is “sophisticated,” no general solicitation was involved, and the transaction did not otherwise involve a public offering.

During the three months ended March 31, 2006, we issued to two promissory note holders, warrants to purchase an aggregate of up to 3,500,000 shares of our un-registered common stock, with an exercise price of $0.12 per share as required under the terms of the promissory notes. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that the promissory note holders are “accredited” (as defined by Rule 501(a) promulgated under the Securities Act) that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

In March 2006, we issued 150,000 shares of our common stock to the principal owner of a public relations firm, in exchange for amounts due them for services rendered totaling $35,065, which we had previously recorded as accounts payable. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that the owner is “accredited” (as defined by Rule 501(a)) promulgated under the Securities Act, that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

Item 5. Other Information

The Company’s Board of Directors elected Stephen D. King, a board member, to serve as its President, effective May 15, 2006. The Company has not entered into an employment agreement with Mr. King, but will pay Mr. King a salary of $5,000 per month. H. Vance White will continue his roles as the Company’s Chief Executive Officer and member of the board.

The Company entered into a consulting agreement with Corporate Resource Management, Inc., a Minnesota corporation (“CRM”) effective May 15, 2006. CRM is an entity wholly owned by Deb King, the spouse of Stephen D. King. CRM will provide the Company with investment banking services relating to the purchase and sale of mining related assets. The terms of the agreement include the following: (i) one year initial term with the right to terminate with a 30-day written notice, subject to a $75,000 termination fee payable to CRM if terminated by the Company without cause, (ii) a fee of $10,000 per month, plus reimbursement of normal out-of-pocket expenses, and (iii) commissions of up to two percent of the value of the transaction upon successful closings of any asset transactions during the term of the agreement and for a period of one year following termination.

Item 6. Exhibits

10.1	Consulting Agreement by and among the Company and Corporate Resource Management, Inc., dated May 15, 2006.

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	WITS BASIN PRECIOUS MINERALS INC.

Date: May 12, 2006	By:	/s/ H. Vance White
		H. Vance White Chief Executive Officer


	By:	/s/ Mark D. Dacko
		Mark D. Dacko Chief Financial Officer

EXHIBIT INDEX

Exhibit No

Description

10.1	Consulting Agreement by and among the Company and Corporate Resource Management, Inc., dated May 15, 2006.

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.