10QSB 1 v075411_10qsb.htm

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, 2007

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		(I.R.S. Employer Identification No.)
Incorporation or Organization)

900 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402-8773

(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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No x

As of May 11, 2007, there were 104,251,674 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, 2007

		Page

PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets - As of March 31, 2007 and December 31, 2006	4

	Condensed Consolidated Statements of Operations - For the three months ended March 31, 2007 and March 31, 2006	5

	Condensed Consolidated Statements of Cash Flows - For the three months ended March 31, 2007 and March 31, 2006	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	26

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	27

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

Item 6.	Exhibits	27

	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, 2007			December 31, 2006
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	368,384		$	85,910
Receivable		111			10,323
Investment - marketable securities		21,466			21,241
Prepaid expenses		247,121			53,815
Total current assets		637,082			171,289

PROPERTY AND EQUIPMENT, net		85,587			80,087
ADVANCE PAYMENTS ON EQUITY INVESTMENTS		500,000			-
	$	1,222,669		$	251,376

LIABILITIES and SHAREHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	66,222		$	68,622
Accrued expenses		274,881			143,000
Total current liabilities		341,103			211,622

COMMITMENTS and CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Common stock, $.01 par value, 150,000,000 shares
authorized; 104,251,674 and 94,747,739 shares issued
and outstanding, respectively		1,042,517			947,477
Additional paid-in capital		46,011,781			42,954,263
Stock subscriptions receivable		(59,000	)		(932,600	)
Warrants		6,573,652			7,515,487
Accumulated deficit		(22,932,460	)		(22,932,460	)
Deficit accumulated during exploration stage, subsequent
to April 30, 2003		(29,752,331	)		(27,509,595	)
Accumulated other comprehensive loss		(2,593	)		(2,818	)
Total shareholders’ equity		881,566			39,754
	$	1,222,669		$	251,376

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)

	Three Months Ended March 31,						May 1, 2003 (inception) to March 31,
	2007			2006			2007
Revenues	$	—		$	—		$	—

Operating Expenses:
General and administrative	$	1,053,952		$	1,047,032		$	12,934,365
Exploration expenses		723,618			228,190			8,333,868
Depreciation and amortization		3,669			3,521			463,933
Merger transaction costs		248,317			—			248,317
Stock issued as penalty		—			—			2,152,128
Loss on impairment of Kwagga		—			—			2,100,000
Loss on sale of Brazmin		—			—			667,578
Loss on disposal of assets		—			—			1,633
Total operating expenses		2,029,556			1,278,743			26,901,822
Loss from Operations		(2,029,556	)		(1,278,743	)		(26,901,822	)

Other Income (Expense):
Other income (expense), net		2,716			—			36,063
Interest expense		(215,896	)		(674,036	)		(3,151,646	)
Total other expense		(213,180	)		(674,036	)		(3,115,583	)
Loss from Operations before Income
Tax Benefit and Discontinued Operations		(2,242,736	)		(1,952,779	)		(30,017,405	)
Benefit from Income Taxes		—			—			243,920
Loss from continuing operations		(2,242,736	)		(1,952,779	)		(29,773,485	)

Discontinued Operations
Gain from operations of discontinued segments		—			—			21,154
Net Loss	$	(2,242,736	)	$	(1,952,779	)	$	(29,752,331	)

Basic and diluted net loss per common share:
Continuing operations	$	(0.02	)	$	(0.03	)	$	(0.56	)
Discontinued operations		—			—			0.00
Net Loss	$	(0.02	)	$	(0.03	)	$	(0.56	)

Basic and diluted weighted average
common shares outstanding		97,356,038			67,815,238			53,571,700

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 (inception) to March 31,
	2007			2006			2007
OPERATING ACTIVITIES:
Net loss	$	(2,242,736	)	$	(1,952,779	)	$	(29,752,331	)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation and amortization		3,669			3,521			463,933
Loss on disposal of assets		—			—			1,633
Loss on sale of Brazmin		—			—			667,578
Gain from discontinued operations		—			—			(21,154	)
Issuance of common stock for exploration rights		160,000			—			5,300,090
Loss on impairment of Kwagga		—			64,477			2,100,000
Amortization of debt issuance costs		9,140			3,680			147,998
Amortization of original issue discount		202,844			645,856			1,904,125
Amortization of prepaid consulting fees related to issuance of warrants and common stock		19,877			217,038			4,583,965
Compensation expense related to stock options		515,341			—			638,214
Issuance of common stock and warrants for services		—			419,524			1,169,522
Contributed services by an executive		—			25,000			274,500
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		—			—			1,173,420
Changes in operating assets and liabilities:
Accounts receivable, net		10,212			—			17,906
Prepaid expenses		(213,183	)		11,838			(339,946	)
Accounts payable		(2,400	)		11,970			(4,059	)
Accrued expenses		131,881			40,396			54,294
Net cash used in operating activities		(1,405,355	)		(509,479	)		(9,468,184	)

INVESTING ACTIVITIES:
Purchases of property and equipment		(9,169	)		—			(115,523	)
Proceeds from sale of Brazmin		—			—			125,000
Purchases of investments		—			—			(2,244,276	)
Advance payments on equity investments		(500,000	)		—			(500,000	)
Net cash used in investing activities		(509,169	)		—			(2,734,799	)

FINANCING ACTIVITIES:
Payments on short-term and long-term debt		(700,000	)		—			(2,134,645	)
Cash proceeds from issuance of common stock, net of offering costs		370,000			—			5,215,272
Cash proceeds from exercise of stock options		30,000			—			199,900
Cash proceeds from exercise of warrants		1,806,138			214,090			6,291,798
Cash proceeds from short-term debt		700,000			350,000			1,800,000
Cash proceeds from long-term debt		—			—			650,000
Debt issuance costs		(9,140	)		—			(147,998	)
Net cash provided by financing activities		2,196,998			564,090			11,874,327

Increase (Decrease) in Cash and Equivalents		282,474			54,611			(328,656	)
Cash and Equivalents, beginning of period		85,910			117,816			697,040
Cash and Equivalents, end of period	$	368,384		$	172,427		$	368,384

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, 2007

(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, 2007, we hold interests in mineral exploration projects in Colorado (Bates-Hunter), Mexico (Vianey), South Africa (FSC) and two immaterial projects in Canada. The following is a summary of our three current projects:

On September 20, 2006, we executed a formal asset purchase agreement relating to the purchase of assets of the Hunter Gold Mining Corporation, a corporation incorporated under the laws of British Columbia, Canada, which assets includes the Bates-Hunter Mine in Central City, Colorado, the Golden Gilpin Mill located in Black Hawk, Colorado and the associated real and personal property assets. The closing of the transaction contemplated by the asset purchase agreement is currently anticipated to occur in the 2^nd quarter of 2007. The Bates-Hunter Mine was a prior producing gold mine from the 1860’s until the 1930’s. We are continuing with a defined work program, which includes dewatering the existing mine shaft and performing a surface drilling program.

On December 18, 2006, we entered into a formal joint venture agreement with Journey Resources Corp., a corporation formed under the laws of the Province of British Columbia (“Journey”) and Minerales Jazz S.A. De C.V., a corporation duly organized pursuant to the laws of Mexico, a wholly owned subsidiary of Journey. Pursuant to the terms of the joint venture agreement, we own a twenty five percent undivided beneficial interest in “located mineral claims” in the property known as the Vianey Mine Concession located in the State of Guerrero, Mexico (“Vianey”). In addition to located mineral claims, our interest includes all surface rights, personal property and permits associated with Vianey and all other claims, leases and interests in minerals acquired within two kilometers of the external perimeter of Vianey. We also own the exclusive right and option to acquire up to an additional twenty five percent undivided beneficial interest in the project.

We hold a 35 percent equity interest in Kwagga Gold (Barbados) Limited (“Kwagga”), which, through its wholly owned subsidiary Kwagga Gold (Proprietary) Limited, holds mineral exploration rights in South Africa. This project is referred to as the “FSC Project.” The exploration efforts that have been conducted were adjacent to the historic Witwatersrand Basin. The last completed drill hole on this property occurred in 2005. Kwagga is a subsidiary of AfriOre International (Barbados) Limited, a corporation formed under the laws of Barbados. On February 16, 2007, Lonmin Plc announced that it acquired all of the equity interest of AfriOre. Lonmin Plc is a primary producer of Platinum Group Metals (PGMs) with its headquarters in London. We are currently in negotiations with Lonmin to revise our current agreement in order to continue with the FSC Project.

As of March 31, 2007, 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 are 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 April 16, 2007. 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, 2007 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.

As of March 31, 2007, we have (i) 11,982,000 shares of common stock issuable upon the exercise of stock options with a weighted average exercise price of $0.64 per share issued under our stock option plans, (ii) 21,798,833 shares of common stock issuable upon the exercise of warrants with a weighted average exercise price of $0.69 per share, (iii) 3,620,000 shares issuable upon the closing of the transaction contemplated by the purchase agreement pertaining to the assets of the Bates-Hunter Mine, (iv) reserved an aggregate of 2,550,000 shares of common stock pursuant to amendments of secured promissory notes and subsequent extensions of certain purchase rights, with a per share price of $0.20 per share and (v) 1,000,000 shares of common stock reserved for the exercise of a warrant to be issued should we complete the purchase of the Bates-Hunter Mine. These 40,950,833 shares were excluded from the basic and diluted weighted average outstanding shares amount for computing the net loss per common 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 $29,752,331. 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, relating to our general and administrative needs along with the Bates-Hunter, Vianey and Kwagga FSC projects, to be approximately $4,800,000.

Subsequent to March 31, 2007 (see Note 15), we completed certain financing transactions that will meet our needs for the immediate future. However, this does not take into account our needs relating to any future acquisitions, which amounts we cannot estimate at this time. In the event that we are unable to obtain other additional capital in the future, we would be forced to reduce operating expenditures and/or cease operations altogether.

NOTE 5 - RECEIVABLE

Pursuant to a stock subscription agreement for which we accepted, in lieu of cash, a secured promissory note in payment of the subscription price, we held a secured promissory note of the subscriber dated April 28, 2006, the satisfaction of which was secured by the stock issued to the subscriber. The note accrued interest at a rate of five percent per annum and the accrued and unpaid interest on December 31, 2006 was $10,323. We collected this receivable in February 2007.

In January 2007, we entered into a three-year surface use agreement with an unrelated party (husband and wife owners) for the purpose of having access to their property located in Gilpin County, Colorado, which allows us access to, from and across the surface of their property and the right to enter upon their property for the purpose of conducting our mineral exploration and drilling activities. The agreement required an initial $15,000 payment and the establishment of an escrow account for the disbursement of two annual payments of $15,000 in January 2008 and 2009. The agreement is cancelable upon the immediate release of the remaining escrow funds to the owners of the property. The escrow balance accrues nominal interest, of which we have recorded $111 for the three months ended March 31, 2007.

NOTE 6- INVESTMENT - MARKETABLE SECURITIES

We hold 225,000 shares (nominal amount) of MacDonald Mines Exploration Ltd., a Toronto Stock Exchange listed company (TSX-V:BMK), that we received under joint venture agreements with MacDonald. We received 175,000 of the shares in 2004 and received an additional 50,000 shares in 2006 with respect to certain Canadian projects.

NOTE 7 - 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 miscellaneous amounts we have prepaid for general and administrative purposes and a $200,000 retainer paid to a law firm in Hong Kong handling the legal matters regarding the potential merger with Easyknit. These prepaid items are being expensed as utilized.

Also, included in the other prepaid expenses are two bonds (held in the form of certificate of deposit, CD, $10,000 each) required by the State of Colorado for exploration activities. The CD’s accrue nominal interest and will not be expensed unless an event requires us to release them to the State. Subsequent to March 31, 2007, one of the CD’s has been released and returned to the Company by the State.

Components of prepaid expenses are as follows:

	March 31,		December 31,
	2007		2006
Prepaid consulting fees	$	5,950	$	25,827
Other prepaid expenses		241,171		27,988
	$	247,121	$	53,815

NOTE 8 - PROPERTY AND EQUIPMENT

Related to our on-going exploration efforts at the Bates-Hunter Mine in Colorado, we have made certain purchases of equipment necessary to operate and de-water the property. Depreciation of these purchases is calculated on a straight-line method over the estimated useful life, presently ranging from five to seven years. Components of our depreciable assets are as follows:

	March 31,			December 31,
	2007			2006
Equipment purchases	$	115,522		$	106,353
Less accumulated depreciation		(29,935	)		(26,266	)
	$	85,587		$	80,087

NOTE 9 - ADVANCE PAYMENTS ON EQUITY INVESTMENTS

In the first quarter of 2007, we entered into an agreement, with board approval, to acquire from SSC Mandarin Financial Services Limited (“SSC Mandarin Financial”), an affiliate of the SSC Mandarin Group, a 40% equity interest in SSC Mandarin Africa (Proprietary) Limited, a South African corporation (“SSC Mandarin Africa”), which was previously a wholly owned subsidiary of SSC Mandarin Financial, for $400,000 USD, which has been paid. SSC Mandarin Africa holds certain finder agreements to locate iron ore properties for potential acquisition by a South African mining company. Norman Lowenthal, a director, is a non-executive chairman of SSC Mandarin Financial.

In the first quarter of 2007, we entered into an option agreement with SSC Mandarin Financial to acquire an option to purchase, at an exercise price of $5,000,000 US Dollars, a 60% interest in SSC-Sino Gold Consulting Co. Limited (“SSC-Sino”), a corporation governed by the laws of the People’s Republic of China which is currently 70% owned by SSC Mandarin Financial and 30% owned by the China Gold Association. The price of the option was $100,000 USD, which has been paid. SSC-Sino holds an option to acquire 100% of an operating iron ore property located in China.

NOTE 10 - SHORT-TERM DEBT

On February 23, 2007, in consideration of a $700,000 loan to the Company from Andrew Green, a significant shareholder of the Company, the Company issued a promissory note in the principal amount of $700,000 to Mr. Green. The promissory note had a maturity date of March 31, 2007, and bore interest at a rate of 6% per annum. The promissory note was paid in full on March 29, 2007 along with accrued interest of $3,912. Under the terms of the promissory note, and as additional consideration for the loan, the Company reduced the exercise price of certain pre-existing warrants to purchase an aggregate of 3,550,000 shares of our common stock from $0.12 to $0.09125 and extended the expiration date of an outstanding right to purchase up to 3,000,000 shares of the Company’s common stock at a price per share of $0.20 from March 31, 2007 to December 31, 2007. The fair value of these equity modifications totaling $202,844 was recorded as a discount to the note and was amortized over the term of the note.

NOTE 11 - STOCK SUBSCRIPTIONS RECEIVABLE

On April 28, 2006, we completed a round of financing through the exercise of issued and outstanding warrants to certain warrant holders who qualified as accredited investors. Certain of the warrant holders were offered a limited time reduction of the exercise price of $0.25 per share. We accepted subscription agreements to exercise 15,577,401 common stock purchase warrants and received approximately $3.84 million in cash (which includes $307,600 for which we accepted, in lieu of cash, a secured promissory note, bearing interest at five percent per annum, was due December 29, 2006 and is secured by the stock issued). Of those warrants exercised, warrants representing 1,230,401 shares, which were held by a former director of ours, Wayne W. Mills, during: (i) April 2001 (340,734 issued with an original exercise price of $3.00 per share), (ii) October 2003 (208,000 issued with an original exercise price of $0.50 per share); (iii) May 2004 (475,000 issued with an original exercise price of $0.40 per share) and (iv) 206,667 warrants he purchased in a private transaction from another shareholder. The secured promissory note was paid in February 2007 along with the $10,323 of interest receivable.

By December 31, 2006, we had received subscription exercise forms from 11 shareholders who held 2,060,000 stock purchase warrants, all with an exercise price of $0.25 per share, totaling $515,000, issued in connection with our private placement of 16,600,000 units of January 2005, all with an expiration date of December 31, 2006. All of these shareholders paid their respective subscription subsequent to December 31, 2006.

In December 2006, we issued a consultant 200,000 shares upon the exercise of a stock option originally granted in October 2005 at an exercise price of $0.15 per share. The $30,000 cash exercise amount was paid in February 2007.

Under provisions of a Loan Agreement entered into with Pacific Dawn Capital, and related promissory note issued to Pacific Dawn, Pacific Dawn had the right to purchase, at a price per share of $0.20, a number of shares of our common stock equal to the maximum principal amount drawn against the promissory note divided by $0.20. Of the available right to purchase option of 2,000,000 shares, Pacific Dawn purchased 1,000,000 shares of common stock in December 2006. Pacific Dawn paid $120,000 of the exercise price in December 2006 and the remaining $80,000 in January 2007.

By February 2007, all $932,600 of the stock subscriptions funds receivable as of December 31, 2006 have been received.

In January 2007, Relevant Marketing, a consultant, acquired 300,000 shares of common stock pursuant to its exercise of a stock purchase warrant, issued in April 2005, to purchase shares at an original exercise price of $0.50 per share, but which was subsequently re-priced to $0.15 per share. Relevant Marketing paid $15,000 of the aggregate $45,000 exercise price in March 2007. We have released 100,000 of the shares, and are holding the remaining 200,000 shares as collateral until the remaining $30,000 is paid. Relevant Marketing employs Deb Kramer, the spouse of our CEO, Stephen D. King.

In March 2007, a consultant exercised two stock purchase warrants held into an aggregate of 100,000 un-registered shares of common stock. The stock options were issued in October and December 2006 (exercisable at $0.29 per share). The consultant paid the $29,000 in April 2007.

NOTE 12 - COMPREHENSIVE LOSS

Comprehensive loss includes our net loss and the change in unrealized gain (loss) on available for sale investments (the 225,000 shares of MacDonald common stock held). We report the unrealized gain (loss) on the investment in securities in our Condensed Consolidated Balance Sheets. The following table details the changes in our Accumulated Other Comprehensive Loss balance:

Balance at December 31, 2006	$	(2,818	)
Unrealized gain		225
Balance at March 31, 2007	$	(2,593	)

NOTE 13 - STOCK OPTIONS

Stock Based Compensation

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 reasonably 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 pricing model, which assumes no expected dividends and estimates the option 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.

The Company elected to adopt the modified prospective transition method, under which prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). The valuation provisions of SFAS No. 123(R) apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. The Company had no remaining estimated compensation for grants that were outstanding as of the effective date that would need to be recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123 pro forma disclosures. The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2007, reflects the impact of SFAS 123(R).

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statements of operations. During the three months ended March 31, 2007, we granted stock options to two employees allowing for the purchase of up to an aggregate of 5,500,000 shares of common stock.

On February 19, 2007, the Company entered into an employment agreement with William Green as President of Asia Operations. The Company issued Mr. Green a ten-year option to purchase 2,500,000 shares of the Company’s common stock at an exercise price of $0.43 per share, the fair market value of the Company’s common stock on the date of grant. The option shall vest in three installments as follows: (i) with respect to 1,000,000 shares at such time Mr. Green relocates to Hong Kong and establishes a home office for the Company in Hong Kong; (ii) with respect to an additional 500,000 shares on (A) the earliest of the first anniversary of the effective date or (B) the achievement of a milestone, as determined by the Board of Directors or (C) the termination of Executive’s employment by the Company; and (iii) with respect to the remaining 1,000,000 shares on the earlier of (A) the time the Company achieves certain performance criteria to be established by the Company’s board of directors or (B) the third anniversary of the option grant. Mr. Green is a sibling of Andrew Green, a significant shareholder and creditor of the Company.

On March 9, 2007, the Company issued a ten-year option to Stephen D. King to purchase 3,000,000 shares of the Company’s common stock at an exercise price of $1.02 per share, the fair market value of the Company’s common stock on the date of grant, in consideration for his services as Chief Executive Officer of the Company. The option vests in six equal annual installments commencing on the first anniversary of the grant date. Under certain circumstances the vesting of the option shall be accelerated, in part: (a) upon the completion of a merger between the Company (or a subsidiary of the Company formed for that purpose) and Easyknit Enterprises Holdings Limited (or a subsidiary of Easyknit Enterprises Holdings Limited formed for that purpose) the then last remaining annual installment shall immediately vest and (b) upon the completion of each material acquisition of mining related assets by the Company the then last remaining annual installment shall immediately vest, provided that, the board of directors of the Company, in its sole discretion, shall determine whether an acquisition is “material.” In the event the Company attempts to obtain listing of its common stock on a stock exchange and such stock exchange, as a condition to listing (to be determined in the sole discretion of the board of directors of the Company), requires that the Company reduce the number of shares issued to Mr. King pursuant to the option, the Company shall be entitled to reduce the number of shares accordingly to obtain listing on that exchange, provided that the shares are not then vested.

The Company recorded $515,341 of compensation expense for the three months ended March 31, 2007, relating to the 5,500,000 stock option grants from this quarter and vesting amounts from options granted in 2006. This expense is included in selling, general and administrative expense. There was no tax benefit from recording this non-cash expense due to the Company having a full valuation allowance against its deferred tax assets. The compensation expense had no material impact on the loss per share for the three months ended March 31, 2007. There remains $4,064,870 of total unrecognized compensation expense, which is expected to be recognized over a period of approximately six years. No share-based employee compensation cost was recognized in the condensed consolidated financial statements for the three-month period ended March 31, 2006.

The Company uses the Black-Scholes pricing model as a method for determining the estimated fair value for employee stock awards under SFAS 123(R), which is the same pricing model used in prior years to calculate pro forma compensation expense under SFAS 123 footnote disclosures. Compensation expense for employee stock awards is recognized on a straight-line basis over the vesting period of the award. The adoption of SFAS 123(R) also requires certain changes to the accounting for income taxes and the method used in determining diluted shares, as well as additional disclosure related to the cash flow effects resulting from share-based compensation.

In determining the compensation expense of the options granted during the three months ended March 31, 2007, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below.

Risk free interest rate		4.625%
Expected life of options granted		10 years
Expected volatility factor		158% - 160%
Expected dividend yield		—

Option Grants

The Company has six stock option plans: the 1993 and 1999 Stock Option Plans, the 2000 and 2003 Director Stock Option Plans, the 2001 Employee Stock Option Plan and the 2007 Stock Incentive Plan. As of March 31, 2007, an aggregate of 19,750,000 shares of our common stock may be granted under these plans as determined by the board of directors. Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the plans. In general, options vest over a period ranging from immediate vesting to five years and expire 10 years from the date of grant. On March 9, 2007, the board of directors of the Company adopted and approved the 2007 Stock Incentive Plan and reserved 5,000,000 shares of its common stock for issuance under the 2007 Plan. Additionally, the Company has two non-plans: the Meteor Director Options and the Non-Plan Stock Options, both of which are outside of its plans.

The following table summarizes information about the Company’s stock options:

	Number of Options			Weighted Average Exercise Price
Options outstanding December 31, 2006		6,512,000			0.56
Granted		5,500,000			0.75
Canceled or expired		(30,000	)		5.00
Exercised		—			—
Options outstanding - March 31, 2007		11,982,000		$	0.64

Weighted average fair value of options
granted during the three months ended March 31, 2007				$	0.75
Weighted average fair value of options
granted during the three months ended March 31, 2006				$	N/A

The following table summarizes information about stock options outstanding at March 31, 2007:

	Options Outstanding
Range of Exercise Prices	Number Outstanding		Weighted Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$0.15 to $0.50		6,775,000		8.7 years	$	0.33	$	4,531,250
$0.56 to $1.25		4,806,000		7.9 years	$	0.87		681,500
$2.75 to $5.00		401,000		0.9 years	$	3.07		—
$0.15 to $5.00		11,982,000		8.1 years	$	0.64		5,212,750

	Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$0.15 to $0.50		3,575,000		8.4 years	$	0.30	$	2,503,250
$0.56 to $1.25		1,806,000		4.5 years	$	0.62		681,500
$2.75 to $5.00		401,000		0.9 years	$	3.07		—
$0.15 to $5.00		5,782,000		6.7 years	$	0.59		3,184,750

(1) The aggregate intrinsic value in the table represents the difference between the closing stock price on March 31, 2007 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on March 31, 2007. The total intrinsic value of options exercised during the three months ended March 31, 2007 and 2006 was none as no options were exercised during the periods.

NOTE 14 - STOCK WARRANTS

For warrants issued to non-employees in exchange for services, we account for such warrants in accordance with EITF Issue No. 96-18. We value the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the services is more reliably measurable. No warrant grants were made during the quarter ended March 31, 2007.

The following table summarizes information about the Company’s warrants:

	Number		Weighted Average Exercise Price		Range of Exercise Price

Outstanding at December 31, 2006		29,578,833	$	0.56	$	0.12 - $7.15
Granted		—		—		—
Cancelled or expired		—		—		—
Exercised		7,780,000		0.16		.09125- 0.75
Outstanding at March 31, 2007		21,798,833	$	0.69	$	0.9125 - $7.15

Warrants exercisable at March 31, 2007		21,798,833	$	0.69	$	0.9125 - $7.15

NOTE 15 - SUBSEQUENT EVENTS

On April 10, 2007, we entered into a Convertible Securities Purchase Agreement with China Gold, LLC, a Kansas limited liability company (“China Gold”), whereby we agreed to offer and sell, and China Gold agreed to purchase, an aggregate of $12,000,000 in convertible secured promissory notes over 12 months, with up to an additional $13,000,000 in convertible secured promissory notes to be issued at the discretion of both parties. The issuance and sale of convertible secured promissory notes under the Convertible Securities Purchase Agreement is subject to certain conditions, including Wits Basin having a sufficient number of authorized and unissued shares available to permit the conversion of the outstanding promissory notes issued to China Gold. Promissory notes issued under the Convertible Securities Purchase Agreement are to have a five-year term, bear interest at a rate of 8.25%, and are convertible at the option of the holder, after the expiration of 120 days from the date of issue, into shares of our common stock at a conversion price of $1.00 per share. The notes are also subject to automatic conversion in certain conditions. On April 10, 2007, we issued and sold the initial promissory note under the Convertible Securities Purchase Agreement in the aggregate amount of $3,000,000. Additionally, in May 2007, we offered and sold to China Gold an additional convertible secured promissory note under the Convertible Securities Purchase Agreement in the aggregate amount of $2,000,000. To date, we have sold an aggregate of $5,000,000 in convertible secured promissory notes to China Gold, and have received net proceeds of $4,900,000 pursuant to the sale of the notes, less $100,000 paid to an affiliate of China Gold in the form of a loan fee. We also agreed to pay up to $40,000 in accountable expenses of China Gold with respect to notes sold under the Convertible Note Purchase Agreement.

In April 2007, we entered into option agreements to acquire from SSC Mandarin Group Limited (“SSC Mandarin Group”) 100% of the equity interest in two corporations, each of which were shell corporations or had nominal assets at the time: (i) China Global Mining Resources Limited, a British Virgin Islands corporation (“China Global BVI”), for $10,000 HK Dollars, and (ii) China Global Mining Resources Limited, a Hong Kong corporation, for $10,000 HK Dollars.

In April and May 2007, we loaned an aggregate of $3,730,000 to China Global BVI under 6 unsecured promissory notes. Each of the promissory notes accrues interest at a rate of 8%, and are payable on June 30, 2007.

In April 2007, in consideration of a $625,000 loan from Andrew Green, we issued a promissory note to Mr. Green in the principal amount of $625,000. The promissory note has a maturity date of May 28, 2007, and bears simple interest at a rate of 12% per annum. Our payment obligations under the note are secured by a security interest in our option to acquire an interest in SSC-Sino. Additionally, we have provided Mr. Green a right of first refusal to acquire 10% of our interest in the option to acquire the equity interest in SSC-Sino Gold.

On April 20, 2007, we entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Easyknit Enterprises Holdings Limited, a Bermuda corporation with its principal place of business in Hong Kong and listed on the Hong Kong Stock Exchange (SEHK: 0616) (“Easyknit”), and Race Merger, Inc., a Minnesota corporation and wholly owned subsidiary of Easyknit (“Merger Sub”), whereby Merger Sub will merge with and into us, and we will constitute the surviving corporation to the merger and a wholly owned subsidiary of Easyknit following completion of the merger. Pursuant to the merger, our shareholders immediately prior to the effective time of the merger, on a fully diluted basis, shall hold approximately 46% of the shares of common stock of Easyknit issued and outstanding immediately following the effective time of the merger, on a fully diluted basis (including therein certain proposed share issuances relating to our potential acquisitions). Each of the parties has made and will be required to make at the effective time of the merger standard representations and warranties in the Merger Agreement, and the consummation of the merger is subject to a certain conditions, including, without limitation, the completion and satisfaction of due diligence by the parties, the approval of our stockholders, the approval of Easyknit’s stockholders (in accordance with the Hong Kong Stock Exchange Listing Rules, AMEX Listing Rules and certain other rules and regulations), the effectiveness of the registration statement to be filed with the Securities and Exchange Commission and other standard conditions. The terms of the merger are disclosed in our Current Report on Form 8-K filed with the SEC on April 26, 2007.

This disclosure regarding the merger is issued pursuant to Rule 135 under the Securities Act of 1933, as amended, and shall not constitute an offer to exchange, sell or purchase or the solicitation of an offer to exchange, sell or purchase any securities. An offer of securities in the United States pursuant to a business combination transaction will only be made through a prospectus which is part of an effective registration statement filed with the Securities and Exchange Commission (the “SEC”). In connection with the proposed merger of Wits Basin and Easyknit, Easyknit will file a registration statement on Form F-4, which will include a proxy statement of Wits Basin that also constitutes a prospectus of Easyknit, and other documents with the SEC. Such registration statement, however, is not currently available. SHAREHOLDERS OF WITS BASIN ARE URGED TO READ THE DEFINITIVE REGISTRATION STATEMENT ON FORM F-4 AND OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, INCLUDING THE DEFINITIVE PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE DEFINITIVE REGISTRATION STATEMENT ON FORM F-4, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The final proxy statement/prospectus will be mailed to shareholders of Wits Basin. Investors and security holders will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing relevant information about Wits Basin and Easyknit without charge, at the SEC’s website (http://www.sec.gov) once such documents are filed with the SEC. Copies of the proxy statement/prospectus will also be available, without charge, once they are filed with the SEC by directing a request to the Company.

Easyknit and Wits Basin, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wits Basin’s shareholders with respect to the proposed merger. Information about Easyknit’s directors and executive officers will be available in Wits Basin’s proxy statement to be filed with the SEC as referenced above. Information about Wits Basin’s directors and officers will be available in Wits Basin’s proxy statement to be filed with the SEC as referenced above, and is currently available in Wits Basin’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 filed with the SEC on April 16, 2007 and other public filings with the SEC made by Wits Basin. Other information about the participants in the proxy solicitation and a description of their direct and indirect interests (by security holdings or otherwise) will be contained in the proxy statement and other relevant materials after they are filed with the SEC.

NOTE 16 - EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2006, Financial Accounting Standards Board (FASB) issued Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES - AN INTERPRETATION OF FASB STATEMENT NO. 109 (“FIN 48”). FIN 48 clarifies the accounting treatment (recognition and measurement) for an income tax position taken in a tax return and recognized in a company’s financial statements. The new standard also contains guidance on “derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.” The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on our consolidated financial position or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS (“SFAS No. 157”). This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information to develop those assumptions. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of this statement. We believe the adoption of SFAS No. 157 will not have a material impact on our consolidated financial position or results of operations.

In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. We believe the adoption of SFAS No. 159 will not have a material impact on our consolidated financial position or results of operations.

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, 2006.

OVERVIEW

We are a minerals exploration and development company based in Minneapolis, Minnesota. As of March 31, 2007, we hold interests in mineral exploration projects in Colorado (Bates-Hunter), Mexico (Vianey), South Africa (FSC) and two immaterial projects in Canada. The following is a summary of our three current projects:

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 Kwagga, 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 900 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402-8773. 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, 2007 COMPARED TO MARCH 31, 2006.

Revenues

We had no revenues from continuing operations for the quarters ended March 31, 2007 and 2006. 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 $1,053,952 for the three months ended March 31, 2007 as compared to $1,047,032 for the same period in 2006. Of the expenses reported in 2007 and 2006, the majority related primarily to our marketing programs and consulting fees, which included direct mailing and 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 2007.

Exploration expenses were $723,618 for the three months ended March 31, 2007 as compared to $228,190 for the same period in 2006. Exploration expenses for 2007 relate to the expenditures of the Bates-Hunter and Vianey projects. We anticipate the rate of spending for the remaining fiscal 2007 exploration expenses will increase due to the additional drill rigs at the Bates-Hunter and our due diligence exploratory work continuing at Vianey. Exploration expenses for 2006 related to the expenditures being reported by Kwagga at the FSC Project and the Bates-Hunter project.

Depreciation and amortization expenses were $3,669 for the three months ended March 31, 2007 as compared to $3,521 for the same period in 2006. Related to our due diligence process at the Bates-Hunter Mine in Colorado, we have made certain purchases of equipment ($115,522) necessary to operate and de-water the property. Depreciation of these purchases is calculated on a straight-line method.

Other Income and Expense

Other income and expense consists of interest income, interest expense and other expense. Interest income for the three months ended March 31, 2007 was $2,716 compared to $0 for the same period in 2006. Interest expense for the three months ended March 31, 2007 was $215,896 compared to $674,036 for the same period in 2006. The 2007 and 2006 interest expense relates to promissory notes payable. With the possible acquisition of mining properties in the People’s Republic of China (the “PRC”), we anticipate that interest expense may increase in fiscal 2007, if any such acquisitions occur.

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, 2007 and 2006, we had net cash used in operating activities of $1,405,355 and $509,479, respectively.

We had working capital of $295,979 at March 31, 2007, compared to a working capital deficit of $40,333 at December 31, 2006. Cash and equivalents were $368,384 at March 31, 2007, representing an increase of $282,474 from the cash and equivalents of $85,910 at December 31, 2006.

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 commission of $22,750.

On January 21, 2005, we completed the acquisition of an option to purchase all of the outstanding capital stock of the Hunter Gold Mining Corporation (a corporation incorporated under the laws of British Columbia, Canada) including its wholly owned subsidiary Hunter Gold Mining, Inc., (a corporation incorporated under the laws of Colorado). On July 21, 2006, we executed a stock purchase agreement intended to supersede the option agreement. On September 20, 2006, we executed a formal asset purchase agreement (the “Bates Asset Purchase Agreement”) to purchase the Bates-Hunter Mine on different economic terms than previously agreed upon. The Bates Asset Purchase Agreement is by and among Wits Basin and Hunter Gold Mining Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining Corp., a Colorado corporation and George Otten, a resident of Colorado (collectively the “Sellers”) for the purchase of the following assets: the Bates-Hunter Mine, Golden Gilpin Mill and the associated real and personal property assets. The closing of the transaction contemplated by the Bates Asset Purchase Agreement is anticipated to occur sometime during mid-2007. If a formal closing occurs, we shall deliver to the Sellers (i) the sum of $250,000 Canadian Dollars (or approximately $225,000 US as of March 31, 2007), (ii) a note payable to Sellers in the original principal amount of $6,500,000 Canadian Dollars, (iii) a deed of trust with George Otten as trustee for the Sellers securing the note payable, and (iv) 3,620,000 shares of our unregistered and restricted $0.01 par value common capital stock. The Bates Asset Purchase Agreement would still require us to provide the following additional compensation to non-affiliate third parties: (i) a warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price equal to the average prior 30-day sale price of our common stock; (ii) a two percent net smelter return royalty on all future production, with no limit; (iii) a one percent net smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a fee of $300,000, payable in cash or common stock at our election to an unrelated third party.

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 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. Prior to the expiration of the agreements on March 31, 2006, an aggregate of 695,450 warrants were exercised into common stock and we received net proceeds of $139,090.

As of April 1, 2006, we had promissory notes in the aggregate principal amount of $1,100,000 payable to three lenders. We entered into amendments to the arrangements with each of the note holders, extending the maturity of each of the notes for an additional 30 days. In consideration of these extensions, we (i) issued an aggregate of 110,000 shares of our common stock to the note holders and (ii) entitled each note holder, at any time on or prior to August 31, 2006, to acquire a number of shares of our common stock, at a price per share of $0.20, equal to the maximum amount of principal drawn against their respective promissory notes divided by $0.20. With the warrant exercises as described below, we paid the obligations under the three promissory notes in May 2006, which required an aggregate of $1,100,000 in cash principal payments. The notes had accumulated an aggregate of $69,239 in interest payable. We paid $3,353 in cash to one note holder and paid the remaining $65,886 by the issuance of 329,432 shares (valued at $0.20 per share) of our common stock. In August 2006, we extended the August 31, 2006 option date to March 31, 2007 for two of the note holders (Pacific Dawn Capital and Andrew Green, each as discussed below) upon their execution of standby joint venture financing agreements, each of which contemplates participation in joint venture or financing arrangements by such holder for the purposes of financing future mineral exploration projects. The standby agreements sets forth basic terms of any such future joint venture or financing arrangements, including terms relating to the payment of proceeds from any exploration project for which a joint venture or financing arrangement has been entered, but may be subject to written agreements relating to specific projects.

On April 28, 2006, we completed a round of financing through the exercise of issued and outstanding warrants (the “Exercise Offer”) to certain warrant holders who qualified as accredited investors. For each two warrants exercised by a warrant holder, the warrant holder received two shares of common stock and a new three-year warrant (Class C Redeemable 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. We accepted subscription agreements to exercise 15,577,401 common stock purchase warrants and received approximately $3.84 million in cash (which includes $307,600 for which we accepted, in lieu of cash, a secured promissory note, which accrued interest of five percent per annum, was due December 29, 2006 and is secured by the stock issued). The secured promissory note was paid in February 2007 along with the $10,323 of interest receivable. No placement agents or broker/dealers were utilized.

On December 18, 2006, we entered into a formal joint venture agreement (pursuant to an earlier option agreement dated June 28, 2006) with Journey, whereby the partners interest in certain mining claims of the Vianey are defined. We have provided $500,000 for exploration work by the required December 31, 2006 due date and must further provide an additional $500,000 on or before September 30, 2007.

By December 31, 2006, we had received subscription exercise forms with a total value of $515,000 from 11 shareholders who held 2,060,000 stock purchase warrants, all with an exercise price of $0.25 per share, issued in connection with our private placement of 16,600,000 units of January 2005, all with an expiration date of December 31, 2006. All of these shareholders paid their respective subscription subsequent to December 31, 2006.

In December 2006, a consultant exercised a stock option held into shares of common stock. The 200,000 stock option was issued in October 2005 with an exercise price of $0.15 per share. The $30,000 cash exercise amount was paid in February 2007.

During 2006, other investors exercised on an aggregate of 1,475,000 stock purchase warrants with an exercise price of $0.25 per share and received 1,475,000 shares of common stock. We received $368,750 in proceeds.

On February 23, 2007, in consideration of a $700,000 loan to the Company from Andrew Green, a significant shareholder of the Company, the Company issued a promissory note in the principal amount of $700,000 to Mr. Green. The promissory note had a maturity date of March 31, 2007, and bore interest at a rate of 6% per annum. The promissory note was paid in full by March 29, 2007 along with the accrued interest of $3,912. Under the terms of the promissory note, and as additional consideration for the loan, the Company reduced the exercise price of certain warrants to purchase an aggregate of 3,550,000 shares of our common stock from $0.12 to $0.09125 and extended the expiration date of an outstanding right to purchase up to 3,000,000 shares of the Company’s common stock at a price per share of $0.20 from March 31, 2007 to December 31, 2007.

In January 2007, Mr. Green exercised 1,250,000 stock purchase warrants with an exercise price of $0.12 per share and received 1,250,000 shares of common stock and we received $150,000 in proceeds. Then in March 2007, he exercised his remaining outstanding warrants to purchase 3,550,000 shares of the Company’s common stock, with the reduced exercise price of $0.09125 per share and we received $323,937 in proceeds. Additionally, he exercised his right-to-purchase option to purchase 1,450,000 shares (of the available 3,000,000) of the Company’s common stock at $0.20 per share and we further received $290,000 in proceeds.

During the three months ended March 31, 2007, five investors exercised on an aggregate of 2,030,000 stock purchase warrants with exercise prices ranging from $0.12 to $0.40 per share and received 2,030,000 shares of common stock. We received $509,600 in proceeds.

In March 2007, we issued 323,935 shares of our common stock to a consultant, who, pursuant to a cashless exercise clause, surrendered 226,065 of the available shares to pay for the exercise. We previously issued five two-year warrants to the consultant to purchase 550,000 shares of our common stock during fiscal 2005 and 2006, with a range of exercise prices from $0.25 to $0.75 per share.

In March 2007, a consultant exercised a warrant to purchase 100,000 shares of common stock with an exercise price of $0.29 per share. The $29,000 cash exercise amount was paid in April 2007, at which time the shares were delivered to the consultant.

Our existing sources of liquidity will not provide cash to fund operations for the next twelve months. As of the date of this report, we have estimated our cash needs over the next twelve months, relating to our general and administrative needs along with the Bates-Hunter, Vianey and Kwagga FSC projects, to be approximately $4,800,000 (to include $1,250,000 for the Bates-Hunter, $1,000,000 for Vianey and $1,400,000 for Kwagga). Additionally, should any projects or mergers be completed during 2007, additional funds will be required. 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.

RISK FACTORS

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 2007.

As of May 11, 2007, we had only approximately $250,000 of cash and cash equivalents on hand. Since we do not expect to generate any revenue from operations in 2007, we will be required to raise additional capital in financing transactions in order to satisfy our expected cash expenditures. We will also continue to seek additional opportunities relating to our mining operations, and our ability to seek out such opportunities, perform due diligence, and, if successful, acquire such properties or opportunities would require additional capital. We expect to raise such additional capital by selling shares of our capital stock or by borrowing money. However, we currently have only a limited number of available shares of common stock authorized for issuance, and will require shareholder approval to increase our authorized capitalization to raise such additional capital. Additionally, such additional capital may not be available to us at acceptable terms or at all. Further, if we increase our capitalization and 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 cease our search for additional business opportunities, 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, 2007 we hold certain rights in five projects: the Bates-Hunter Mine in Colorado, the Vianey Concession in Mexico, the FSC Project located in South Africa and two immaterial projects in Canada. 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, 2007, we have incurred an aggregate net loss of $29,752,331. We expect operating losses to continue for the foreseeable future and may never be able to operate profitably.

OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have had net losses for each of the years ended December 31, 2006 and 2005, and we have an accumulated deficit as of March 31, 2007. 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 significant 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. Even though we may not record direct losses due to our dealings with market risk, we have an associated reduction in the productivity of our assets.

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 explored their options and monitored the implementation and interpretation of the Act and the progress of other ancillary regulations and legislation closely. We anticipate Lonmin PLC to continue in this manner, but there can be no assurance that it will.

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 OFFICERS AND DIRECTORS.

We are substantially dependent on the expertise and industry knowledge of certain of our officers and directors: H. Vance White, the Chairman of our Board of Directors, Norman D. Lowenthal, a director, and Dr. Clyde Smith, our President. The loss of their respective services could have an adverse effect on us and we do not currently have key person insurance with respect to these individuals.

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

H. Vance White, who is the Chairman of our Board of Directors, 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. Additionally, Norman D. Lowenthal has held certain interests in SSC Mandarin Financial Services based in Hong Kong, which has various interests in mining properties. As a result of their positions with other companies that may, from time to time, compete with us, Messrs. White and Lowenthal may have conflicts of interest to the extent the other companies with which they are affiliated acquire rights in exploration projects that may be suitable for us to acquire.

WE DO NOT BELIEVE THAT WE HAVE ANY INDEPENDENT DIRECTORS.

In determining whether the members of our Board are independent, we have elected to use the definition of “independence” set forth by Section 121 of the Listing Standards for the American Stock Exchange (“AMEX”), although we are not currently listed on AMEX, whereby a majority of the members of a listed company’s board of directors must qualify as “independent” as determined by the board. Consistent with these considerations, and after review of all relevant transactions or relationships between each director, or any of his family members, and Wits Basin Precious Minerals Inc., its senior management and its independent registered public accounting firm, the Board has determined that none of our directors are currently independent within the meaning of the applicable listing standard of AMEX.

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, and its parent, Lonmin PLC. In the event Afriore becomes insolvent or otherwise unable to carry out its obligations of exploration, or elected not to pursue the projet further, 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, Hunter Gold and Journey 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 our projects. 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 current exploration programs underway 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 2007.”

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

Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-QSB to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

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

Kenneth Swaisland, an individual who previously assigned us certain rights relating to the Bates-Hunter property, has indicated to us his frustration with our delay in closing the purchase of the Bates-Hunter property as well as certain issues concerning the development of the property. Mr. Swaisland has requested additional consideration from us and, absent such consideration, has threatened to pursue action against the Company to require the reassignment to him of our rights to the Bates-Hunter property as provided in the purchase agreement. We have reviewed the terms of the underlying documents with Mr. Swaisland, and believe his potential claims against us are without merit, and that his rights under the purchase agreement are limited to the consideration that he is entitled in the event the purchase is completed. The Company is in discussions with Mr. Swaisland regarding this matter.

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

In January 2007, we issued 500,000 shares of our common stock to Journey Resources Corporation, a corporation duly organized pursuant to the laws of the Providence of British Columbia, relating to our option to earn up to an undivided 50 percent interest in certain mining claims comprising the Vianey Mine located in Mexico. In connection with this issuance, we relied upon the exemptions from registration provided by Section 4(2) of the Securities Act of 1933 and Rules 505 and 506 promulgated thereunder, since this was a private transaction, not involving any general solicitation and not constituting a public offering.

In January 2007, we issued Relevant Marketing, a consultant, 300,000 shares of common stock pursuant to its exercise of a stock option at $0.15 per share. 200,000 of these shares are being held as collateral until the remaining $30,000 of the exercise price is paid. Relevant Marketing employs Deb Kramer, the spouse of our CEO, Stephen D. King.

In January 2007, we issued Andrew Green 1,250,000 shares of our common stock upon his exercise of stock purchase warrants at an exercise price of $0.12 per share. In March 2007, we issued an additional 3,550,000 shares to Mr. Green upon his exercise of additional warrants at $0.09125 per share. Also in March 2007, we issued an additional 1,450,000 shares of common stock to Mr. Green upon his exercise of a right-to-purchase option of our common stock at $0.20 per share.

During the three months ended March 31, 2007, we issued an aggregate of 2,030,000 shares of common stock to five investors upon exercise of outstanding warrants.

In March 2007, we issued a consultant 100,000 shares of common stock upon exercise of a warrant at an exercise price of $0.29 per share.

Item 6. Exhibits

Exhibit		Description
10.1		Employment Agreement between the Company and William Green dated February 19, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 23, 2007)

10.2		Stock Option Agreement between the Company and William Green dated February 19, 2007 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 23, 2007)

10.3		Promissory Note dated February 23, 2007 issued in favor of Andrew Green (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 23, 2007)

10.4		2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 15, 2007)

10.5		Stock Option Agreement between the Company and Stephen D. King dated March 9, 2007 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 15, 2007)

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 17, 2007	By:	/s/ Stephen D. King
		Stephen D. King
		Chief Executive Officer


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