U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


For the
Year Ended December 31, 2009


Commission
File Number: 1-12401





WITS BASIN PRECIOUS MINERALS
INC.


(Exact
Name of Small Business Issuer as Specified in its Charter)





MINNESOTA
                84-1236619(State
      or Other Jurisdiction of
                (I.R.S.
      Employer Identification Number)Incorporation
      or Organization)





900 IDS CENTER, 80 SOUTH
EIGHTH STREET, MINNEAPOLIS, MINNESOTA 55402-8773


(Address
of Principal Executive Offices)





Issuer’s
telephone number including area code: (612) 349-5277





Securities
registered under Section 12(b) of the Exchange Act:  None





Securities
registered under Section 12(g) of the Exchange Act:





COMMON STOCK, $0.01 PAR
VALUE


Title of
Class





Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes  ̈     No
x





Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. Yes  ̈     No
x





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).  Yes  ̈     No
 ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  ̈.





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):


Large
      accelerated filer
             ̈
            Accelerated
      filer
             ̈Non-accelerated
      filer
             ̈
            Smaller
      reporting company
            x





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





The
Registrant’s revenues for its most recent fiscal year: None.





The
aggregate market value of the Registrant’s common stock held by non-affiliates
as of June 30, 2009 was approximately $12,500,000, based on the closing sale
price of $0.09 per share as reported on the OTCBB for the Company’s common stock
on June 30, 2009.





On April
13, 2010, there were 169,112,367 shares of common stock issued and outstanding,
which is the Registrant’s only class of voting stock.





Documents
Incorporated by Reference: None.





WITS
BASIN PRECIOUS MINERALS INC.





Annual
Report on Form 10-K


For the
Year Ended December 31, 2009


Table of
Contents


PagePART
      IItem
      1.
                Description
      of Business
                4Item
      1A.
                Risk
      Factors
                13Item
      2.
                Description
      of Properties
                17Item
      3.
                Legal
      Proceedings
                17PART
      IIItem
      4.
                Market
      for Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities
                18Item
      6.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                19Item
      7.
                Financial
      Statements and Supplementary Data
                25Item
      8.
                Changes
      and Disagreements with Accountants on Accounting and Financial
      Disclosure
                25Item
      8A(T).
                Controls
      and Procedures
                26Item
      8B.
                Other
      Information
                28PART
      IIIItem
      9.
                Directors,
      Executive Officers and Corporate Governance
                29Item
      10.
                Executive
      Compensation
                30Item
      11.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
                35Item
      12.
                Certain
      Relationships, Related Transactions and Director
    Independence
                36Item
      13.
                Principal
      Accountant Fees and Services
                37Item
      14.
                Exhibits
      and Financial Statement Schedules
                38Signatures
                
                45





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
Annual Report on Form 10-K contains both historical statements and statements
that are forward-looking in nature. Historical statements are based on events
that have already happened. Certain of these historical events provide some
basis to our management, with which assumptions are made relating to events that
are reasonably expected to happen in the future. Management also relies on
information and assumptions provided by certain third party operators of our
projects as well as assumptions made with the information currently available to
predict future events. These future event predictions, or forward-looking
statements, include (but are not limited to) 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. You
can identify forward-looking statements by terminology such as “may,” “could,”
“should,” “anticipate,” “believe,” “estimate,” “continue,” “expect,” “intend,”
“plan,” “predict,” “potential” and similar expressions and their variants. These
forward-looking statements reflect our judgment as of the date of this Annual
Report with respect to future events, the outcome of which is subject to risks,
which may have a significant impact on our business, operating results and/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 PART I
Item 1A, among others, may impact forward-looking statements contained in this
Annual Report.


3


PART
I





ITEM
1.  BUSINESS





OVERVIEW





Wits
Basin Precious Minerals Inc. (with its subsidiaries “we,” “us,” “our,” “Wits
Basin” or the “Company”) is a minerals exploration and development company based
in Minneapolis, Minnesota.  As of December 31, 2009, we hold (i) a
majority equity interest of approximately 94% of Standard Gold, Inc. (f/k/a
Princeton Acquisitions, Inc.) which owns a past producing gold mine in Colorado
(the “Bates-Hunter Mine”), (ii) a 50% equity interest in China Global Mining
Resources (BVI) Ltd., which owns a producing  iron ore mine and
processing plant in the People’s Republic of China, (the “PRC”), (iii) a 35%
equity interest in Kwagga Gold (Barbados) Limited, which holds prospecting
rights in South Africa (the “FSC Project”) and (iv) certain rights in the Vianey
Concession in Mexico. The following is a summary of these projects:





·
            On
      June 12, 2008, we transferred our right to purchase the Bates-Hunter Mine,
      a prior producing gold mine located in Central City, Colorado, to a newly
      created wholly owned subsidiary of ours, the Hunter Bates Mining
      Corporation (the “Hunter Bates”). Concurrent with this transfer, Hunter
      Bates completed the acquisition of the Bates-Hunter Mine. On September 29,
      2009, Standard Gold, Inc., a Colorado corporation (“Standard Gold”)
      (formerly known as Princeton Acquisitions, Inc., a public shell
      corporation at the time) completed a reverse acquisition via a share
      exchange with Hunter Bates and all of its shareholders, whereby the
      holders of capital securities of Hunter Bates exchanged all of their
      capital securities, on a share-for-share basis, into similar capital
      securities of Standard Gold (the “Share Exchange”). Accordingly, the Share
      Exchange represented a change in control (reverse merger) and Hunter Bates
      became a wholly owned subsidiary of Standard Gold. We hold an aggregate of
      21,513,544 shares of Standard Gold common stock (or approximately 94% of
      the issued and outstanding shares of common stock) and thus, Standard Gold
      is a majority owned subsidiary of ours. Standard Gold’s common stock is
      quoted on the OTCBB under the symbol
“SDGR.”





·
            On
      March 17, 2009, we entered into a joint venture with London Mining, Plc, a
      United Kingdom corporation (“London Mining”) for the purpose of acquiring
      the processing plant of Nanjing Sudan Mining Co. Ltd (“Sudan”) and the
      iron ore mine of Xiaonanshan Mining Co. Ltd (“Xiaonanshan”) (the Sudan and
      Xiaonanshan collectively are referred to as the “PRC Properties”).
      Pursuant to that certain Amended and Restated Subscription Agreement,
      dated March 17, 2009 by and between London Mining and the Company, London
      Mining purchased 100 ordinary A Shares of China Global Mining Resources
      (BVI) Ltd, a British Virgin Islands corporation and at the time a wholly
      owned subsidiary of ours (“CGMR (BVI)”) for $38.75 million, which A Shares
      constitute a 50% equity interest in CGMR (BVI). We hold the remaining 50%
      equity interest in the form of 100 ordinary B Shares. The A Shares carry a
      preference with respect to return of capital and distributions (A Shares
      are entitled to 99%) until London Mining receives an aggregate of $44.5
      million in return of capital or distributions and certain other conditions
      are met. On March 17, 2009, CGMR (BVI), through its wholly owned
      subsidiary China Global Mining Resources Limited, a Hong Kong corporation
      (“CGMR HK”), acquired the PRC Properties. At that time, we deconsolidated
      CGMR (BVI) as a subsidiary of
ours.


4


·
            We
      hold a 35% equity interest in Kwagga Gold (Barbados) Limited (“Kwagga
      Barbados”), which, through its wholly owned subsidiary Kwagga Gold
      (Proprietary) Limited, a South African entity (“Kwagga Pty”), holds
      mineral exploration rights in South Africa. This project is referred to as
      the “FSC Project” and is located adjacent to the historic Witwatersrand
      Basin. From October 2003 through August 2005, we completed only two
      range-finding drillholes (our $2,100,000 investment to acquire the 35%
      equity was utilized to fund the drillholes) and we have not performed any
      further exploration activities since. On December 12, 2007, we entered
      into an agreement with AfriOre International (Barbados) Limited
      (“AfriOre”), the holder of the other 65% of Kwagga Barbados, whereby we
      may acquire all of AfriOre’s interest of Kwagga Barbados, which agreement
      required completion on or before June 30, 2009. Documentation has been
      submitted to obtain the consent of South Africa’s Minister of Minerals and
      Energy, who oversees the Department of Minerals and Energy (the “DME”) to
      allow for the sale of the controlling interest in Kwagga Pty to a U.S.
      company, all of which is still under review. We have a verbal agreement
      from AfriOre regarding an extension to obtain consent from the DME. Other
      than limited maintenance of the prospecting rights, no other activities
      will be conducted until consent is issued by the
  DME.





·
            In
      October 2007, we executed an amendment to 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 and a wholly
      owned subsidiary of Journey. Pursuant to the terms of the amendment, we
      own a 50% undivided beneficial interest in “located mineral claims” in the
      property known as the Vianey Mine Concession located in the State of
      Guerrero, Mexico (“Vianey”). Based on our further due diligence on the
      Vianey, we have determined that it is necessary to increase the size of
      the land package in order for this project to be a viable exploration
      endeavor. Inquiries and communications have been disseminated to the
      adjacent properties, regarding possible purchase of land, rights or some
      type of further joint venture to accomplish an increased footprint. Due to
      the limited possibility of return on capital and since we do not
      anticipate providing any significant funding for the foreseeable future,
      we have deemed this project immaterial to our project
      portfolio.  If any significant event should occur relating to
      the Vianey after the date of this report, we will report it accordingly,
      otherwise this project will not be commented on in the
    future.





As of
December 31, 2009, 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. As of the date of this Annual
Report, we do not claim to have any mineral reserves at the Bates-Hunter Mine,
the FSC Project or the Vianey.





OUR
HISTORY





We were
originally incorporated under Colorado law in December 1992 under the name
Meteor Industries, Inc.  In conjunction with our April 2001 merger
with activeIQ Technologies Inc, we reincorporated under Minnesota law and
changed our name to Active IQ Technologies, Inc. In June 2003, following our
transaction to acquire the rights to the FSC Project, we changed our name to
Wits Basin Precious Minerals Inc., in order to further associate our corporate
name with our new business model of minerals exploration.





Effective
May 1, 2003, we became an exploration stage company due to the sale of our prior
business models and we will continue reporting as an exploration stage company
until such time as one of our exploration projects provides recordable revenues
or we otherwise complete an acquisition or joint venture with business models
that have operating revenues.


5


OUR EXPLORATION
PROJECTS





BATES-HUNTER
MINE





Overview





On
January 21, 2005, Wits Basin acquired an option to purchase all of the
outstanding capital stock of the Hunter Gold Mining Corp. (a corporation
incorporated under the laws of British Columbia, Canada) who held all of the
assets of the Bates-Hunter Mine.  On July 21, 2006, Wits Basin
executed a stock purchase agreement to supersede the option agreement. On
September 20, 2006, Wits Basin executed an Asset Purchase Agreement to
purchase the Bates-Hunter Mine on different economic terms than previously
agreed upon in the stock purchase agreement or option. On June 12, 2008, Wits
Basin entered into a fifth amendment to the Asset Purchase Agreement to, among
other changes, reflect its assignment of its rights in the Asset Purchase
Agreement to Hunter Bates and thereby allowing Hunter Bates to complete the
acquisition of the Bates-Hunter Mine. The acquisition of the assets (which
included land, buildings, equipment, mining claims and permits) of the
Bates-Hunter Mine was completed on June 12, 2008.





The Asset
Purchase Agreement was financed through a limited recourse promissory note of
Hunter Bates payable to Mr. Otten in the principal amount of Cdn$6,750,000
($6,736,785 US as of June 12, 2008) and the issuance of 3,620,000 shares of Wits
Basin common stock with a fair value of $0.205 per share (the closing sale price
on June 11, 2008) totaling $742,100. Furthermore, the Asset Purchase Agreement
requires the following additional compensation: (i) a 2% net smelter return
royalty on all future production, with no limit; (ii) a 1% net smelter return
royalty (up to a maximum payment of $1,500,000); and (iii) a fee of $300,000 to
be paid in cash. Wits Basin incurred acquisition costs of $380,698.





The
Bates-Hunter Mine is located about 35 miles west of Denver, Colorado and is
located within the city limits of Central City. The Central City mining district
lies on the east slope of the Front Range where elevations range from 8,000 feet
in the east to 9,750 feet in the west. Local topography consists of gently
rolling hills with local relief of as much as 1,000 feet.





The mine
site is located in the middle of a residential district within the city limits
of Central City and is generally zoned for mining or industrial use. The
Bates-Hunter Mine shaft is equipped with an 85 foot tall steel headframe and a
single drum hoist using a one inch diameter rope to hoist a two ton skip from
approximately 1,000 feet deep. A water treatment plant has been constructed
adjacent to the mine headframe. This is a significant asset given the mine site
location and current gold prices.











Geology





The
regional geology of the Central City district is not “simple” but the economic
geology is classically simple. The Precambrian granites and gniesses in the area
were intensely fractured during a faulting event resulting in the emplacement of
many closely spaced and roughly parallel veins. The veins are the result of
fracture filling by fluids that impregnated a portion of the surrounding
gneisses and granites with lower grade gold concentrations “milling ore” and
usually leaving a high grade “pay streak” of high grade gold sulphides within a
quartz vein in the fracture. There are two vein systems present, one striking
east-west and the other striking sub parallel to the more predominant east-west
set. These veins hosted almost all of the gold in the camp. The veins vary from
2 to 20 feet in width and dip nearly vertical. Where two veins intersect, the
intersection usually widens considerably and the grade also increases, sometimes
to bonanza grades. In the Timmins camp, this same feature was described as a
“blow out” and resulted in similar grade and thickness increases. The Bates vein
in the area of the Bates-Hunter Mine has been reported to have both sets of
veins and extremely rich “ore” where the two veins intersected. These veins
persist to depth and consist of gold rich sulphides that include some
significant base metal credits for copper and silver.


6


Previous Exploration
Efforts





The
following is based on the information from a report titled “Exploration and
Development Plan for the Bates-Hunter Project,” prepared by Glenn R. O’Gorman,
P. Eng., dated March 1, 2004.





Lode gold
was first discovered in Colorado in 1859 by John H. Gregory.  The
first veins discovered were the Gregory and the Bates. This discovery started a
gold rush into the area with thousands of people trying to stake their
claims.  The Central City mining district is the most important mining
district in the Front Range mineral belt.  Since 1859, more than
4,000,000 ounces of gold have been mined from this district. Over 25% of this
production has come from the area immediately surrounding the Bates-Hunter
Project.  Although the Bates vein was one of the richest and most
productive in the early history of the area, it was never consolidated and mined
to any great depth.





The
majority of production on the claims occurred during the period prior to
1900.  Technology at that time was very primitive in comparison to
today's standards. Hand steel and hand tramming was the technology of the day.
The above limitations coupled with limited claim sizes generally restricted
mining to the top few hundred feet on any one claim.





During
the early 1900’s cyanidation and flotation recovery technologies were developed
along with better hoists and compressed air operated drills. Consolidation of
land was a problem. Production rates were still limited due to the lack of
mechanized mucking and tramming equipment. Issues that were major obstacles
prior to the 1900’s and 1930’s are easily overcome with modern
technology.





Colorado
legislated their own peculiar mining problem by limiting claim sizes to 500 feet
in length by 50 feet wide and incorporated the Apex Law into the system as
well.  A typical claim was 100 to 200 feet long in the early days.
This resulted in making it extremely difficult for any one owner to consolidate
a large group of claims and benefit from economies of scale. The W.W.II
Production Limiting Order # 208 effectively shut down gold mining in the area
and throughout Colorado and the United States in mid 1942.





Historical
production records indicate that at least 350,000 ounces of gold were recovered
from about half of the Bates Vein alone to shallow depths averaging about 500
feet below surface.





GSR
Goldsearch Resources drilled two reverse circulation holes on the property in
1990. The first hole did not intersect the Bates Vein. However, the second
drilled beneath the Bates-Hunter shaft bottom intersected the Bates Vein at
about 900 feet below surface. The drill cuttings graded 0.48 oz. Au/ton over 10
feet. This drillhole intersected three additional veins as well with significant
gold assays.





Through
August 2008, over 12,000 feet of drilling was accomplished, which provided
detailed data, which has been added to the existing 3-D map of the region.
Several narrow intervals of potential ore grade gold values were intersected,
which require further exploration efforts to delineate any
valuation.





Our Exploration
Plans





With what
has been compiled so far, including surface drill results, underground and
surface geologic mapping and sampling, assay testing, detailed surface surveys
of mineral claims and outcropping veins, research of structural geology of the
vein systems and computer modeling with three-dimensional software, Standard
Gold is continuing to define what possible next steps can be implemented and
what those steps will require in funding. No further exploration activities will
be conducted at the Bates-Hunter Mine until such time as Standard Gold can
obtain sufficient funds. Standard Gold has taken measures to secure the property
while it remains inactive.


7





KWAGGA
GOLD (BARBADOS) LIMITED AND THE FSC PROJECT





Overview





By
September 2004, we invested $2,100,000 to acquire a 35% equity interest in
Kwagga Gold (Barbados) Limited (“Kwagga Barbados”), which, through its wholly
owned subsidiary Kwagga Gold (Proprietary) Limited, holds mineral exploration
rights in South Africa (pursuant to an August 27, 2004 “Shareholders
Agreement”).  We refer to this as the “FSC Project” and it is located
adjacent to the historic Witwatersrand Basin. In December 2007, we entered into
a new agreement, the “Sale of Shares Agreement” with AfriOre International
(Barbados) Limited (“AfriOre”), the holder of the other 65% of Kwagga Barbados,
whereby we have the option to acquire all of AfriOre’s interest in Kwagga
Barbados. Our ownership in Kwagga Barbados was facilitated through a transaction
with Hawk Uranium Inc. (“Hawk”) in 2003. H. Vance White, an officer and director
of Hawk served on our board of directors until July 10, 2009.





In order
for us to acquire the remaining 65% interest pursuant to the Sale of Shares
Agreement, all of the following must occur: (1) South Africa’s Minister of
Minerals and Energy, who oversees the Department of Minerals and Energy (the
“DME”), must consent in writing to the change in the controlling interest in
Kwagga (Proprietary) as per South African law; (2) we must incur exploration
expenditures in the aggregate amount of at least $1.4 million; and (3) we must
pay to AfriOre an amount equal to $1.162 million within three months following
the final date of the completion of the required $1.4 million exploration
expenditures. The closing of this transaction will occur three business days
following the receipt of the DME consent (provided certain other conditions have
then been satisfied), at which time we will acquire the remaining 65% interest
and simultaneously grant to AfriOre a security interest in that 65% interest as
collateral for the performance of our obligations under the Sale of Shares
Agreement. Such security interest will not be released by AfriOre until such
time as we incur the exploration expenditures described above and make the
$1.162 million payment to AfriOre. As additional consideration for entering into
the Sale of Shares Agreement, AfriOre will be entitled to a 2% gross royalty on
all sales of gold and any other minerals by us relating to the FSC Project. We
may buy back 1% of the 2% gross royalty for a one-time cash payment of $2
million upon delivery of a bankable feasibility study.





Should
consent be issued by the DME, then the 2004 Shareholders Agreement will be
superseded by the Sale of Shares Agreement. Under the terms of the Sale of
Shares Agreement, as amended, consent was to be obtained by the DME on or before
June 30, 2009. We have continued its verbal discussion with AfriOre regarding an
extension of the termination date of the Sale of Shares Agreement. Should
consent be denied by the DME or should AfriOre not provide any further
extensions of the termination date, then the Sale of Shares Agreement will lapse
and the 2004 Shareholders Agreement shall remain in full force and effect.
Furthermore, we have been in communications with the DME with respect to our
application for such consent.





In
November 2008, AfriOre informed us that they would not be providing any
additional funding and that it was our responsibility to maintain the permits
and land claims of the FSC Project. Therefore, in November 2008, we entered into
a bridge financing arrangement with Hawk, whereby Hawk made a loan to the
Company of $60,000 in consideration of a 90-day promissory note in order to
provide temporary funding to Kwagga. We recorded these proceeds as an investment
in Kwagga and will recognize 100% of the expenses (attributable to a loss in
subsidiary) related to such permit and land claim maintenance
expenditures.  The Hawk loan was satisfied on December 24,
2009.





Previous Exploration
Efforts





The
geological model was developed by AfriOre, affiliates of AfriOre and academic
geologists from Witwatersrand University.





In
October 2003, AfriOre commissioned the first drillhole, which was completed on
June 8, 2004. This drillhole, BH47, was drilled in the western structural block
to a depth of 2,984 meters (approximately 9,800 feet) and intersected a well
developed succession of lower Proterozoic rocks before it was terminated in a
zone of shearing.  Although BH47 was not successful in intersecting
any gold bearing mineralization reefs to the depths drilled, it did confirm the
existence of the overlying cover rock stratigraphies, similar to those in the
main Witwatersrand Basin, thereby confirming the initial geological
model.


8


The
second drillhole, BH48 (which was completed in August 2005) was drilled to a
depth of 2,559 meters (approximately 8,400 feet) and intersected over 600 meters
of quartzites, below cover rocks which included a relatively thin succession of
Transvaal Supergroup sedimentary rocks (160 meters) and Ventersdorp Supergroup
lavas (132 meters) below the Karoo Supergroup rocks. The quartzites have been
positively identified as Witwatersrand rocks, both through stratigraphic
correlation and age dating analysis. Although the age dating determinations
indicated an age of the quartzites in accordance with that of the Witwatersrand
Supergroup, expert consultants engaged by AfriOre correlated the quartzites with
the West Rand Group of the Witwatersrand Supergroup. Also identified in BH48
were a number of bands of pyrite mineralization which, while returning assays
results with negligible amounts of gold, nevertheless were consistent with
similar features encountered throughout the rocks in the main Witwatersrand
Basin.











Our Exploration
Plans





The FSC
Project is significant because for the first time all the historical data
previously held by independent sources has been acquired and interpreted
together. Part of the data that AfriOre has acquired and compiled from
independent sources includes:


·
            Government
      aeromagnetic and gravimetric data.


·
            An
      AfriOre commissioned detailed aeromagnetic survey covering 1531 km2.


·
            66
      regional drillholes of which 37 define the greater FSC basin and 7
      intersected Witwatersrand rocks within the FSC
  basin.


·
            785
      line kilometers of seismic
data.


9





Six
potential sites for proposed future drilling have been identified for
consideration. Based on inquiries made in December 2008, preliminary estimates
for drilling a single 2,000 meter drillhole was estimated at $750,000. Also, it
has been recommended that additional seismic and drillhole information be
purchased from a third party to enhance the interpretation of the potential six
exploration sites. Any of these costs would qualify for our minimum exploration
expenditures of $1,400,000 required under the Sale of Shares Agreement.
Therefore, in order to move this project to its next phase of exploration, we
would need to raise at least $2,562,000 in dedicated funds. We will continue to
seek financing arrangements from sources that have interests in the gold fields
of South Africa in order to move this project to its next phase.





VIANEY
MINE CONCESSION





In
October 2007, we executed an amendment to the 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 and a wholly owned
subsidiary of Journey. Pursuant to the terms of the amendment, we own a 50%
undivided beneficial interest in “located mineral claims” in the property known
as the Vianey Mine Concession located in the State of Guerrero, Mexico
(“Vianey”).  Through September 2007, we paid an aggregate of $600,000
and issued an aggregate of 2.6 million shares of our unregistered common stock
(valued at $685,000) to Journey for our interest. The book value of our interest
in Vianey was $0 at December 31, 2007. We recorded no expenditures during 2009
on this project.





Based on
our further due diligence on the Vianey, we have determined that it is necessary
to increase the size of the land package in order for this project to be a
viable exploration endeavor. Inquiries and communications have been disseminated
to the adjacent properties, regarding possible purchase of land, rights or some
type of further joint venture to accomplish an increased footprint. Journey
remains the operator of the project and has other specific tasks to be
performed.





Due to
the limited possibility of return on capital and since we do not anticipate
providing any significant funding for the foreseeable future, we have deemed
this project immaterial to our project portfolio.  If any significant
event should occur relating to the Vianey after the date of this report, we will
report it accordingly, otherwise this project will not be commented on in the
future.





TRANSACTIONS
IN THE PEOPLE’S REPUBLIC OF CHINA





During
2007, we made a direct $5 million investment through one of our wholly owned
subsidiaries to the sellers of the iron ore PRC Properties (the processing plant
of Nanjing Sudan Mining Co. Ltd and the iron ore mine of Xiaonanshan Mining Co.
Ltd), which secured our right to purchase these assets and provided the sellers
with working capital. The original heads of agreement, that certain Equity and
Asset Transfer Heads of Agreement, dated May 4, 2007, went through a series of
amendments and assignments. As of December 31, 2008, we only held the rights to
acquire these iron ore mining properties and, therefore, we continued to record
the $5 million as an advanced payment for the eventual purchase of the iron ore
properties until such time as we had some type of resolution.





On
December 17, 2008, we created a new British Virgin Islands corporation and
wholly owned subsidiary of ours under the name of China Global Mining Resources
(BVI) Limited (“CGMR (BVI)”) to serve as the joint venture entity proposed with
London Mining. On December 23, 2008, we sold our 100% equity ownership of China
Global Mining Resources Limited, a Hong Kong corporation (“CGMR HK”) to CGMR
(BVI) for $4.8 million, whereby CGMR HK became a wholly owned subsidiary of CGMR
(BVI). CGMR HK was assigned all of our rights to acquire the PRC Properties. Due
to this sale occurring between two commonly controlled entities, no gain ($4.8
million) was recorded by the Company. We still owned 100% of both CGMR’s as of
December 31, 2008.


10


On March
17, 2009, we entered into an amended and restated subscription agreement with
London Mining (the “LM Subscription Agreement”), whereby they acquired a 50%
equity interest in CGMR (BVI) by paying an aggregate of $38.75 million for 100 A
Shares. We hold the remaining 50% equity interest in CGMR (BVI) in the form of
100 ordinary B Shares. All shares have equal voting rights and the board of
directors was split equally between the two equity owners as well.
Contemporaneously, CGMR (BVI) (through CGMR HK) completed the acquisition of the
PRC Properties. Pursuant to the LM Subscription Agreement, we entered into a
shareholders’ agreement with London Mining (the “LM Shareholders’ Agreement”)
setting forth certain preferences of the A Shares and governance terms
applicable to CGMR (BVI).  The A Shares carry a preference with
respect to return of capital and distributions until such time as an aggregate
of $44.5 million (which includes the subscription amount of $38.75 million and
$5.75 million in the form of a loan made to us) is returned or distributed to
the holders of the A Shares (the “Repayment”). The A Shares preference entitles
the holders of the A Shares to 99% of the distributions of CGMR (BVI) until
Repayment, while the B Shares that we hold will receive a 1% distribution until
such time London Mining’s investment is returned. After Repayment, London Mining
will be entitled to 60% of the distributions and the Company 40% until the PRC
Properties achieve an annual production output of 850,000 tons of iron ore. Upon
achievement of such production, the respective holders of the A Shares and the B
Shares, each as a class, will be entitled to 50% of the distributions.
Additionally, London Mining is entitled under the LM Shareholders’ Agreement to
a management fee in the amount of $5.5 million for the first year following the
acquisition, and $4.5 million annually thereafter until Repayment.  In
the event Repayment occurs within three years, we may be entitled to receive a
portion of the aggregate management fee paid to London Mining.  Under
the LM Shareholders’ Agreement, we will be required to indemnify London Mining
in the event certain events occur prior to Repayment, including (i) certain
payments made under the consulting agreement with Mr. Lu (the seller of the PRC
Properties) that are to be deferred, (ii) failure to complete the acquisition of
the Matang iron ore deposit located in the Anhui Province of the PRC, (iii)
payments incurred in developing Matang in accordance with the business plan
relating to the operation of the PRC Properties, or (iv) a material deviation
from the business plan relating to the operation of the PRC Properties. Our
indemnification, if any, would be satisfied by the transfer of a number of our B
Shares, having a fair market value equal to the indemnified amount as determined
under the LM Shareholders’ Agreement. The LM Shareholders’ Agreement further
provides for transfer restrictions agreed between the parties, including rights
of first refusal, drag along and tag along rights.





Subject
to the provisions of the LM Shareholders’ Agreement, the Company has a 50%
equity interest, equal voting rights and an equal representation on the
board.  Therefore, the Company can exercise influence over the
operations and financial policies of the joint venture but does not exercise
control.





CGMR
(BVI)’s current activities relate to processes that will optimize the extraction
levels at the Xiaonanshan iron ore open mine and to increase recoveries and
concentrate grade at the Sudan processing plant. Furthermore, CGMR (BVI) has
undertaken a program to define the existing resource and to acquire further deep
mining rights at Xiaonanshan, to provide payments to the seller in accordance
with the original acquisition agreement and is investigating its options in
order to raise the funding necessary to assist in acquiring certain adjacent
operations in order to form the basis for future expansion plans.





Effective
with the consummation of the joint venture, the $5 million advance was not
considered a partial payment on the iron ore properties purchase price but
rather an advance still due back from the sellers. This accounting treatment,
however, was subject to different interpretation by the joint venture partners
and therefore, for the year ended December 31, 2009, the Company impaired the $5
million to $0.





INDUSTRY
BACKGROUND





The
exploration for and development of mineral deposits involves significant capital
requirements. While the discovery of an ore body may result in substantial
rewards, few properties are ultimately developed into producing
mines.  Some of the factors involved in determining whether a mineral
exploration project will be successful include, without limitation:





·
            competition;


·
            financing
      costs;


·
            availability
      of capital;


·
            proximity
      to infrastructure;


11





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


·
            political
      risks, particularly in some emerging third world countries;
      and


·
            governmental
      regulations, particularly regulations relating to prices, taxes,
      royalties, infrastructure, land use, importing and exporting of gold,
      environmental protection matters, property title, rights and options of
      use, and license and permitting
obligations.





All of
which leads to a speculative endeavor of very high risk. Even with the formation
of new theories and new methods of analysis, unless the minerals are simply
lying exposed on the surface of the ground, exploration will continue to be a
“hit or miss” process.





PRODUCTS AND
SERVICES





As of
December 31, 2009, we hold (i) an equity interest of approximately 94% of
Standard Gold, Inc. (f/k/a Princeton Acquisitions, Inc.) which owns a past
producing gold mine in Colorado (Bates-Hunter Mine), (ii) a 50% equity interest
in China Global Mining Resources (BVI) Ltd., which owns a producing iron ore
mine and processing plant in the PRC, (iii) a 35% equity interest in Kwagga Gold
(Barbados) Limited, which holds prospecting rights in South Africa (FSC Project)
and (iv) certain rights in the Vianey Concession in Mexico.





EXPLORATION AND DEVELOPMENT
EXPENSES





If we
acquire a project that has no revenue, exploration expenses will be charged to
expense as incurred.





EMPLOYEES





As of
December 31, 2009, we employ three individuals under the Wits Basin parent
corporation – our chief executive officer, our president and our chief financial
officer. Standard Gold (a majority owned subsidiary) employs one mine related
employee at the Bates-Hunter Mine. None of our employees are represented by a
labor union and we consider our employee relations to be good.





FINANCIAL INFORMATION IN
INDUSTRY SEGMENTS





During
the year ended December 31, 2009, our continuing operations included one
reportable segment: that of minerals exploration.





AVAILABLE
INFORMATION





We make
available free of charge, through our Internet web site www.witsbasin.com, our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we
electronically file such material, or furnish it to the Securities and Exchange
Commission. You can also request a free copy of the above filings by writing or
calling us at:





Wits
Basin Precious Minerals Inc.


Attention:
Mark D. Dacko, Secretary


900 IDS
Center, 80 South 8th
Street


Minneapolis,
Minnesota 55402-8773


(612)
349-5277


12


ITEM 1A. 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.





A
SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK ARE HELD IN RESERVE FOR VARIOUS
AGREEMENTS AND THEIR ISSUANCE COULD DEPRESS THE PRICE OF OUR
SECURITIES.





The
issuance of a substantial number of shares of our common stock in the public
market could adversely affect the market price for our common stock and make it
more difficult for you to sell our securities at times and prices that you feel
are appropriate. As of April 13, 2010, we had 169,112,367 shares of common stock
issued and outstanding. Furthermore, we have reserved for issuance (i)
15,643,500 shares of common stock issuable upon the exercise of outstanding
stock options, (ii) 78,046,403 shares of common stock issuable upon the exercise
of outstanding warrants and (iii) an aggregate of 29,513,304 shares of common
stock issuable under outstanding convertible debt agreements.





RISKS
RELATING TO OUR FINANCIAL CONDITION





WE
CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND OPERATIONS, DEBT REDUCTION OR
POTENTIAL ACQUISITIONS DURING 2010.





As of
April 14, 2010, we had only approximately $113,000 of cash and cash equivalents
on hand.  Since we do not expect to generate any revenue from
operations in 2010, we will be required to raise additional capital in financing
transactions in order to satisfy our expected cash expenditures. Included in the
expected cash expenditures is approximately $13,500,000 in debt that will become
due during 2010, assuming some or all of such debt is not converted into equity
prior to such date. Accordingly, we will require additional funds during
2010.


13


We
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 requires 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 VERY LIMITED ASSETS IN OPERATION.





After we
sold all of our prior business models in 2003, we became an exploration stage
company and do not anticipate having any revenues from operations until an
economic mineral deposit is put into production or unless we complete other
acquisitions or joint ventures with business models that produce such revenues.
As of April 13, 2010, we hold (i) an equity interest of approximately 94% of
Standard Gold, Inc. (f/k/a Princeton Acquisitions, Inc.) which owns a past
producing gold mine in Colorado (Bates-Hunter Mine), (ii) a 35% equity interest
in Kwagga Gold (Barbados) Limited, which holds prospecting rights in South
Africa (FSC Project) and (iii) certain rights in the Vianey Concession in
Mexico. None of these properties may ever produce any significant mineral
deposits.





With
respect to our equity interest in CGMR (BVI), due to the disproportionate
distributions stipulated in the LM Shareholders’ Agreement, our proportional 1%
return on CGMR (BVI) assets utilized in the operations at the mine and
processing plant, provides little return to the Company at this time and there
can be no guarantees that it may ever result in significant returns to the
Company.





WE
ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE.





Since
becoming an exploration stage company in May 2003 through December 31, 2009, we
have incurred an aggregate net loss of $67,654,919.  We expect
operating losses to continue for the foreseeable future and may never be able to
operate profitably.





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





We have
had net losses for each of the years ended December 31, 2009 and 2008, and we
have an accumulated deficit as of December 31, 2009. 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 from operations for the foreseeable future, our ability to continue as
a going concern is dependent on our ability to raise the required additional
capital or debt financing to meet short and long-term operating requirements. We
believe that private placements of equity capital and debt financing may be
adequate to fund our long-term operating requirements. We may also encounter
business endeavors that require significant cash commitments or unanticipated
problems or expenses that could result in a requirement for additional cash. If
we raise additional funds through the issuance of equity or convertible debt
securities, the percentage ownership of our current shareholders could be
reduced, and such securities might have rights, preferences or privileges senior
to our common stock. Additional financing may not be available upon acceptable
terms, or at all.  If adequate funds are not available or are not
available on acceptable terms, we may not be able to take advantage of
prospective business endeavors or opportunities, which could significantly and
materially restrict our operations. We are continuing to pursue external
financing alternatives to improve our working capital position. If we are unable
to obtain the necessary capital, we may have to cease
operations.


14





CERTAIN
OF OUR AGREEMENTS REQUIRE PAYMENTS IN FOREIGN CURRENCIES AND ARE SUBJECT TO
EXCHANGE RATE FLUCTUATIONS.





Certain
of our acquisition agreements (including certain of those we hold in our
subsidiaries) and other agreements we have entered require payments in foreign
currencies, including the Canadian Dollar and the South African Rand. It is
possible that we will enter into other agreements for future acquisitions or
work relating to our various mining interests that will require payment in
currencies other than the U.S. Dollar. Fluctuations in exchange rates, in
particular between the U.S. Dollar and other currencies, can affect the actual
amounts of these payments and potentially may be in excess of the amounts we
have budgeted for payment of these fees and other payments.





RISKS
RELATING TO OUR BUSINESS





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





Substantial
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 significant 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 2010.”





OUR
PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN MINERAL PRICES.





The
profitability of the exploration projects could be significantly affected by
changes in the market price of minerals. Demand for minerals can be influenced
by economic conditions, attractiveness as an investment vehicle and the relative
strength of the U.S. 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.





In
particular, mine production and the willingness of third parties such as central
banks to sell or lease gold affects the supply of gold. Worldwide production
levels also affect mineral prices. In addition, the price of gold, silver and
iron ore have 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.





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.


15





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 or other mineral deposit will become 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 and environmental
      protection.





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





CERTAIN
OF OUR DIRECTORS AND OFFICERS MAY HAVE CONFLICTS OF INTEREST WITH REGARD TO
CERTAIN TRANSACTIONS TO WHICH WE OR OUR AFFILIATES MAY BE PARTIES.





Stephen
D. King, our Chief Executive Officer, is a director of CGMR (BVI) and Dr. Clyde
Smith, our President, is a representative on the CGMR (BVI) Management
Committee.  Additionally, Messrs. King and Smith serve as paid
consultants to CGMR (BVI). As a result of Messrs. King and Smith’s affiliation
with CGMR (BVI) and its subsidiaries, conflicts of interest may arise with the
Company.





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





We expect
that Kwagga (Barbados), Kwagga (Proprietary), Journey and CGMR (BVI) 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.





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.





Holders
of old-order mining rights are required to apply for conversion of their old
order rights into new order mining rights in terms of the Act. 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. We will be
required to apply for new order rights before we can further explore in South
Africa and at this time, can not estimate the costs involved to
proceed.





DUE
TO LEGISLATION ENACTED IN SOUTH AFRICA, KWAGGA (PROPRIETARY) 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 (Proprietary) must sell 26% of its capital stock
at fair market value to a Black Economic Empowerment investor by
2014.  Any investment by such a group will dilute our ownership of
Kwagga (Proprietary) and, accordingly, the right to receive profits generated
from the FSC Project, if any.


16





DOING
BUSINESS IN CHINA





The
Chinese economy differs from the economies of most developed countries in many
respects, including:





·
            the
      amount of government involvement;


·
            the
      level of development;


·
            the
      growth rate;


·
            the
      control of foreign exchange; and


·
            the
      allocation of resources.





The PRC
government has implemented various measures to encourage economic growth and
guide the allocation of resources. Some of these measures benefit the overall
Chinese economy, but may also have a negative effect on us and CGMR (BVI). For
example, CGMR (BVI)’s ability to make distributions may be adversely affected by
government control over capital investments or changes in applicable tax
regulations. The PRC government also exercises significant control over Chinese
economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies.





RESTRICTIONS
ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND USE ANY REVENUES
EFFECTIVELY.





Foreign
exchange transactions by companies under China’s capital account continue to be
subject to significant foreign exchange controls and require the approval of PRC
governmental authorities. There may be restrictions for us to receive any funds
from the PRC iron ore joint venture.





ITEM
2.  PROPERTIES





Our
corporate office is located at 900 IDS Center, 80 South Eighth Street,
Minneapolis, Minnesota 55402-8773, in which we occupy approximately 160 square
feet of office space, together with the use of related adjacent common areas,
pursuant to a lease agreement that expires May 31, 2010, which requires monthly
payments of $1,261.  We believe that our current corporate facilities
are adequate for our current needs.





On June
12, 2008, Hunter Bates completed the acquisition of the Bates-Hunter Mine
located in Central City, Colorado, which includes a water treatment plant,
headframe building and the land, financed through a limited recourse promissory
note. Hunter Bates incurs no rent expenses at the mine site, but does incur the
basic heat, light and water operating expenses. We do not claim to have any
mineral reserves at the Bates-Hunter Mine and further development is contingent
upon available funds.





ITEM 3.  LEGAL
PROCEEDINGS





We are
not currently involved in any material legal proceedings out of the ordinary
course of our business.


17


PART
II





ITEM 4.   MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES





PRICE RANGE OF COMMON
STOCK





Our
common stock is quoted on the OTCBB under the symbol “WITM.”  As of
April 13, 2010 the last closing bid price of our common stock as reported by
OTCBB was $0.07 per share. The following table sets forth for the periods
indicating the range of high and low bid prices of our common
stock:





Period
                  
                  High
                  
                  
                  LowQuarter
      Ended March 31, 2008
                  
                  $
                  0.33
                  
                  
                  $
                  0.18Quarter
      Ended June 30, 2008
                  
                  $
                  0.25
                  
                  
                  $
                  0.14Quarter
      Ended September 30, 2008
                  
                  $
                  0.21
                  
                  
                  $
                  0.10Quarter
      Ended December 31, 2008
                  
                  $
                  0.15
                  
                  
                  $
                  0.05Quarter
      Ended March 31, 2009
                  
                  $
                  0.13
                  
                  
                  $
                  0.05Quarter
      Ended June 30, 2009
                  
                  $
                  0.10
                  
                  
                  $
                  0.05Quarter
      Ended September 30, 2009
                  
                  $
                  0.08
                  
                  
                  $
                  0.03Quarter
      Ended December 31, 2009
                  
                  $
                  0.09
                  
                  
                  $
                  0.07Quarter
      Ended March 31, 2010
                  
                  $
                  0.09
                  
                  
                  $
                  0.05





The
quotations from the OTCBB above reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not reflect actual
transactions.





RECORD
HOLDERS





As of
April 13, 2010, there were approximately 195 record holders of our common stock,
excluding shareholders holding securities in “street name.” Based on securities
position listings, we believe that there are approximately 3,100 beneficial
holders of our common stock in “street name.”





DIVIDENDS





We have
never paid cash dividends on our common stock and have no present intention of
doing so in the foreseeable future. Rather, we intend to retain all future
earnings to provide for the growth of our Company. Payment of cash dividends in
the future, if any, will depend, among other things, upon our future earnings,
requirements for capital improvements and financial condition.





RECENT SALES OF UNREGISTERED
SECURITIES





In
addition to the sales of unregistered securities that we reported in Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K during fiscal year ended
2009, we made the following sales of unregistered securities during the quarter
ended December 31, 2009.





In
November 2009, we issued 1,100,000 shares of our common stock to an affiliated
foreign consultant for services related to the CGMR (BVI) joint venture. The
fair value was $99,000.


18





In
December 2009, in consideration of an extension on the maturity date from a note
holder, we issued 300,000 shares of common stock.  The fair value was
$20,661.





During
November and December 2009, we received notices to convert $128,645 of principal
of the Platinum Long Term Growth V, LLC 10% Senior Secured Convertible
Promissory Note into 2,195,329 shares of our common stock, conversion rates
ranging from $0.0573 to $0.0595 per share.





From
October to December 2009, through a private placement, we accepted subscriptions
for 6,300,000 shares of our common stock at a price of $0.05 per share and
received gross proceeds of $315,000 less offering costs of $31,821. As
additional consideration, the Company entered into a private option with each
subscriber, such that for each 200,000 shares of Wits Basin common stock they
purchased in the private placement, they hold an option to purchase from Wits
Basin 20,000 units (“Standard Gold Units”) of Standard Gold, at a price of $0.50
per Standard Gold Unit. Each Standard Gold Unit consists of one share of
Standard Gold common stock and a warrant to purchase a share of Standard Gold
common stock at an exercise price of $1.00 per share.  Wits Basin
purchased 630,000 Standard Gold Units from Standard Gold and is holding the
Standard Gold Units in reserve should the option holders exercise their
option.





Except as
noted above, sales of the securities identified above were made pursuant to
privately negotiated transactions that did not involve a public offering of
securities and, accordingly, we believe that these transactions were exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and rules promulgated thereunder. Based on representations from the
above-referenced investors, we have determined that such investors were
“accredited investors” (as defined by Rule 501 under the Securities Act) and
were acquiring the shares for investment and not distribution, and that they
could bear the risks of the investment and could hold the securities for an
indefinite period of time. The investors received written disclosures that the
securities had not been registered under the Securities Act and that any resale
must be made pursuant to a registration or an available exemption from such
registration. All of the foregoing securities are deemed restricted securities
for purposes of the Securities Act.





ITEM 6.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





The
following discussion should be read in conjunction with the Financial Statements
of the Company and notes thereto included elsewhere in this Annual
Report.  See “—Financial Statements.”





Readers
are cautioned that the following discussion contains certain forward-looking
statements and should be read in conjunction with the “Special Note Regarding
Forward-Looking Statements” appearing at the beginning of this Annual
Report.





As of
December 31, 2009, we hold (i) an equity interest of approximately 94% of
Standard Gold, Inc. (f/k/a Princeton Acquisitions, Inc.) which owns a past
producing gold mine in Colorado (Bates-Hunter Mine), (ii) a 50% equity interest
in China Global Mining Resources (BVI) Ltd., which owns a producing iron ore
mine and processing plant in the PRC, (iii) a 35% equity interest in Kwagga Gold
(Barbados) Limited, which holds prospecting rights in South Africa (FSC Project)
and (iv) certain rights in the Vianey Concession in Mexico.


19


Bates-Hunter
Mine





On June
12, 2008, we transferred our right to purchase the Bates-Hunter Mine, a prior
producing gold mine located in Central City, Colorado, to a newly created wholly
owned subsidiary of ours, the Hunter Bates Mining Corporation (the “Hunter
Bates”). Concurrent with this transfer, Hunter Bates completed the acquisition
of the Bates-Hunter Mine. On September 29, 2009, Standard Gold, Inc., a Colorado
corporation (“Standard Gold”) (formerly known as Princeton Acquisitions, Inc., a
public shell corporation at the time) completed a reverse acquisition via a
share exchange with Hunter Bates and all of its shareholders, whereby the
holders of capital securities of Hunter Bates exchanged all of their capital
securities, on a share-for-share basis, into similar capital securities of
Standard Gold (the “Share Exchange”). Accordingly, the Share Exchange
represented a change in control (reverse merger) and Hunter Bates became a
wholly owned subsidiary of Standard Gold. We hold an aggregate of 21,513,544
shares of Standard Gold common stock (or approximately 94% of the issued and
outstanding shares of common stock) and thus, Standard Gold is a majority owned
subsidiary of ours. Standard Gold’s common stock is quoted on the OTCBB under
the symbol “SDGR.”





Through
August 2008, a total of approximately 12,000 feet of surface drilling has been
accomplished on the Bates-Hunter Mine properties, which provided detailed data,
which has been added to our existing 3-D map of the region. With the surface
drilling program completed in August 2008, no further exploration activities
will be conducted at the Bates-Hunter Mine until such time as sufficient funds
have been acquired to resume exploration activities.





China Global Mining
Resources





On March
17, 2009, we entered into a joint venture with London Mining, Plc, a United
Kingdom corporation (“London Mining”) for the purpose of acquiring the
processing plant of Nanjing Sudan Mining Co. Ltd (“Sudan”) and the iron ore mine
of Xiaonanshan Mining Co. Ltd (“Xiaonanshan”) (the Sudan and Xiaonanshan
collectively are referred to as the “PRC Properties”). Pursuant to that certain
Amended and Restated Subscription Agreement, dated March 17, 2009 by and between
London Mining and the Company, London Mining purchased 100 ordinary A Shares of
China Global Mining Resources (BVI) Ltd, a British Virgin Islands corporation
and at the time a wholly owned subsidiary of ours (“CGMR (BVI)”) for $38.75
million, which A Shares constitute a 50% equity interest in CGMR (BVI). We hold
the remaining 50% equity interest in the form of 100 ordinary B Shares. The A
Shares carry a preference with respect to return of capital and distributions
until London Mining receives an aggregate of $44.5 million in return of capital
or distributions and certain other conditions are met. On March 17, 2009, CGMR
(BVI), through its wholly owned subsidiary China Global Mining Resources
Limited, a Hong Kong corporation (“CGMR HK”), acquired the PRC Properties. Due
to the disproportionate distributions stipulated in the joint venture agreement
and since the joint venture is struggling to have enough cash flow to make the
required payments to the seller under the original terms of the purchase
agreement, our proportional 1% interest has been impaired to $0 as of December
31, 2009.





CGMR
(BVI)’s current activities relate to improving processes that will optimize the
extraction levels at the Xiaonanshan iron ore open mine and to increase
recoveries and concentrate grade at the Sudan processing plant. In the year
ending 2009, the joint venture mined over 1 million tonnes of ore (since April
2009) and produced approximately 273,000 tonnes of magnetite concentrate at an
average grade of 62% Fe. Furthermore, CGMR (BVI) has undertaken a program to
define the existing resource and to acquire further deep mining rights at
Xiaonanshan, to provide payments to the seller in accordance with the original
acquisition agreement and is investigating its options in order to raise the
funding necessary to assist in acquiring certain adjacent operations in order to
form the basis for future expansion plans.





Kwagga Gold
(Barbados)





We hold a
35% equity interest in Kwagga Gold (Barbados) Limited (“Kwagga Barbados”),
which, through its wholly owned subsidiary Kwagga Gold (Proprietary) Limited, a
South African entity (“Kwagga Pty”), holds mineral exploration rights in South
Africa. This project is referred to as the “FSC Project” and is located adjacent
to the historic Witwatersrand Basin. From October 2003 through August 2005, we
completed only two range-finding drillholes (our $2,100,000 investment to
acquire the 35% equity was utilized to fund the drillholes) and we have not
performed any further exploration activities since. On December 12, 2007, we
entered into an agreement with AfriOre International (Barbados) Limited
(“AfriOre”), the holder of the other 65% of Kwagga Barbados, whereby we may
acquire all of AfriOre’s interest of Kwagga Barbados. We have submitted
documentation to obtain the consent of South Africa’s Minister of Minerals and
Energy, who oversees the Department of Minerals and Energy (the “DME”) to allow
for the sale of the controlling interest in Kwagga Pty to a U.S. company, which
is still under review. Other than limited maintenance of the prospecting rights,
no other activities will be conducted until consent is issued by the DME.
Furthermore, we have been in communications with the DME with respect to our
application for such consent.


20


Vianey Mine
Concession





In
October 2007, we executed an amendment to 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 and a wholly owned subsidiary of
Journey. Pursuant to the terms of the amendment, we own a 50% undivided
beneficial interest in “located mineral claims” in the property known as the
Vianey Mine Concession located in the State of Guerrero, Mexico (“Vianey”).
Based on our further due diligence on the Vianey, we have determined that it is
necessary to increase the size of the land package in order for this project to
be a viable exploration endeavor. Inquiries and communications have been
disseminated to the adjacent properties, regarding possible purchase of land,
rights or some type of further joint venture to accomplish an increased
footprint. Due to the limited possibility of return on capital and since we do
not anticipate providing any significant funding for the foreseeable future, we
have deemed this project immaterial to our project portfolio.  If any
significant event should occur relating to the Vianey after the date of this
report, we will report it accordingly, otherwise this project will not be
commented on in the future.





Summary





As of
December 31, 2009, 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. As of the date of this Report,
we do not claim to have any mineral reserves at the Bates-Hunter Mine, the FSC
Project or the Vianey.





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 Barbados, these rights may take the form of ownership interests in
entities holding exploration rights. By completing the Share Exchange, we
anticipate Standard Gold and Hunter Bates will operate as a separate
gold-focused consolidated entity. Previously, our main focus was only in gold
exploration projects, future projects will also involve other minerals, such as
our entry into the Chinese iron ore properties.





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 YEAR ENDED DECEMBER 31, 2009 COMPARED TO THE YEAR ENDED DECEMBER 31,
2008.





Revenues





We had no
revenues from continuing operations for the years ended December 31, 2009 and
2008. 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 allow us to
report such results.


21





Operating
Expenses





General
and administrative expenses were $3,103,517 for 2009 as compared to $7,631,564
for 2008. Of the $3,103,517 recorded for general and administrative expenses in
2009, approximately $1,306,000 relates to non-cash compensation charges for
options, warrants and common stock issuances and/or modifications, approximately
$479,000 relates to public relations services, consulting fees and shareowner
services, approximately $465,000 relates to wages and salaries, we recorded
approximately $325,000 in expenses related to the Share Exchange with Princeton
Acquisitions and approximately $214,000 relates to our due diligence processes
on the China mining properties (travel and visa requirements, site visits and
significant costs with consultants and attorneys). Of the $7,631,564 recorded
for general and administrative expenses in 2008, approximately $2,185,000
relates to our due diligence processes on the China mining properties (travel
and visa requirements, site visits and significant costs with consultants and
attorneys), $1,752,000 relates to public relations services, consulting fees and
shareowner services, approximately $534,000 relates to wages and salaries and
$2,210,000 relates to non-cash compensation charges for options, warrants and
common stock issuances and/or modifications. We anticipate that our operating
expenses will increase over the next fiscal year due to our continued plans to
develop or obtain additional exploration projects.





Exploration
expenses relate to the issuance of stock and warrants for acquiring mining
rights and cash expenditures being reported on the work-in-process from the
various project operators. Exploration expenses were $222,677 for 2009 as
compared to $1,625,018 for 2008. Exploration expenses for 2009 relate to the
Bates-Hunter Mine, our other international projects we are performing due
diligence on and direct costs related to our prior attempt to sell 65% of the
FSC Project to Communications DVR Inc. (“DVR”), a Canadian capital pool company.
DVR terminated its intent to purchase our interest in June 2009. Exploration
expenses for 2008 relate primarily to the expenditures at the Bates-Hunter Mine,
which accounted for $1,412,154. For 2010, based on the scenario that dedicated
funding is secured for any project, we anticipate that exploration expenses
would increase over 2009 levels.





Depreciation
for 2009 was $105,723 as compared to $65,142 for 2008, which represents
straight-line depreciation of fixed assets purchased for work being performed at
the Bates-Hunter Mine. We anticipate that depreciation expense will remain at
current levels over the next fiscal year.





Immediately
prior to the completion of the Share Exchange, pursuant to the terms of that
certain Stock Purchase Agreement, dated September 29, 2009, by and among certain
shareholders of Standard Gold common stock (collectively, the “Sellers”) and
Wits Basin, Wits Basin purchased from the Sellers an aggregate of 1,383,544
shares of Standard Gold’s common stock for $262,500 and incurred $63,012 in
associated legal and consulting fees. We recorded that aggregate $325,512 as
merger transaction costs since the purchase of those 1,383,544 Standard Gold
shares were required in order to effect the Hunter Bates reverse acquisition
with Standard Gold.





Due to
the disproportionate distributions stipulated in the joint venture agreement
with London Mining and since the joint venture is struggling to produce enough
cash flow to make the required payments to the seller under the original terms
of the purchase agreement, the Company recorded an impairment charge of
$5,770,814 on all of our assets attributable to CGMR (BVI) at December 31,
2009.





In 2008,
we recorded $12,362 in losses related to certain assets that became damaged and
un-repairable, which were being utilized for de-watering at the Bates-Hunter
Mine site.





We
recorded $18,252 and $18,012 in losses from equity investments in
partially-owned affiliates for the years ended December 31, 2009 and 2008,
respectively. We recorded a loss of $11,566 for the year ended December 31, 2009
for Kwagga Barbados and we recorded our 1% loss in CGMR (BVI) of $6,686 for the
period from March 17, 2009 to September 30, 2009. In the fourth quarter of 2009,
we impaired our entire investment in CGMR (BVI) and therefore, have not recorded
our 1% of the joint venture loss, which would have made our investment negative
at December 31, 2009.


22





Other Income and
Expenses





Our other
income and expense consists of interest income, interest expense, gains from
deconsolidation of our wholly owned subsidiaries and non-cash foreign currency
adjustments. Interest income was $19 for 2009 as compared to $813 for 2008. We
anticipate that our interest income will remain on levels similar to 2009
levels.





Interest
expense for 2009 was $6,417,726 and $3,292,448 for 2008, which includes non-cash
charges for 2009 and 2008 of $5,013,452 and $1,958,844, respectively. The
non-cash charges relate to the amortization of debt issuance costs, amortization
of original issue discounts, amortization of discounts relating to warrants and
beneficial conversion features, extensions to debt agreements and additional
rights granted to the promissory note holders. We expect interest expense to
continue to increase during 2010, at amounts greater than previously recorded
due to our existing debt and our continued need for cash.





During
the year ended December 31, 2008, various loans with China Gold, LLC were
refinanced several times, primarily to terminate the conversion feature, combine
the notes into one consolidated note, and extend the terms for an additional 13
months. The refinancings included the issuance of 39,200,000 warrants and were
accounted for as an extinguishment of the old debt and a re-issuance of new
debt, resulting in a net loss on extinguishment of $1,485,558.





In
December 2008, we created a new British Virgin Islands corporation and wholly
owned subsidiary of ours, CGMR (BVI), to serve as the joint venture entity with
London Mining. On March 17, 2009, we entered into a subscription agreement and a
shareholders’ agreement with London Mining, whereby they acquired a 50% equity
interest in CGMR (BVI). We recorded a gain in the deconsolidation of CGMR (BVI)
for the year ended December 31, 2009 of $1,461,078. The gain is comprised
primarily of $1,073,578 in unpaid accrued liabilities assumed by the joint
venture.





With the
consummation of the Bates-Hunter Mine acquisition in June 2008, we are recording
direct non-cash gains and losses due to our dealings with the recourse
promissory note in the amount of Cdn$6,750,000. We recorded a loss of $901,739
for the year ended December 31, 2009, and a gain of $1,222,082 for the year
ended December 31, 2008 due to the exchange rate between the US Dollar and the
Canadian Dollar. We will continue to see gains and losses for foreign currency
in future periods as long as the promissory note is outstanding.





Net Loss attributable to
Non-Controlling Interest (NCI)





On
January 1, 2009, the Company adopted guidance provided by the Financial
Accounting Standards Board with regards to accounting for the non-controlling
interest of a subsidiary. Such guidance establishes new accounting and reporting
standards for the non-controlling interest in a subsidiary and the accounting
for the deconsolidation of a subsidiary. The guidance also clarifies that
changes in a parent’s ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling
financial interest and requires that a parent recognize a gain or loss in net
income when a subsidiary is deconsolidated. The Company recognized a loss of
$25,945 for the non-controlling interest at December 31, 2009 relating to
Standard Gold.





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 securities and
debt financing. We do not anticipate generating sufficient net positive cash
flows from our operations to fund the next twelve months. We had a working
capital deficit of $8,656,847 at December 31, 2009, compared to $4,773,964 at
December 31, 2008. Cash and equivalents were $1,109,544 at December 31, 2009,
representing an increase of $878,815 from the cash and equivalents of $230,729
at December 31, 2008.


23





For the
years ended December 31, 2009 and 2008, we had net cash used in operating
activities of $1,964,522 and $5,134,235, respectively. The primary reasons for
the significant decrease during 2009 is due too our lack of available capital.
For 2009, we recorded interest expense of $322,719, we recorded $325,512 of
expense related to merger of Standard Gold and expended $222,677 towards
exploration efforts.  During 2008, we recorded interest expense of
$1.5 million, we recorded $2.1 million of expense directly related to
acquisition of PRC properties and expended $1.4 million towards exploration
efforts.





For the
years ended December 31, 2009 and 2008, we had net cash used in investing
activities of $390,000 and net cash provided by investing activities of
$1,397,214, respectively. During 2009, we paid $390,000 to a vendor for services
rendered with the PRC Properties purchase on behalf of CGMR (BVI). During 2008,
we terminated the agreement for the nickel mine and received $1.85 million of
the original $2 million invested as a partial refund and spent $364,680 for the
Bates-Hunter Mine purchase.





For the
years ended December 31, 2009 and 2008, we had net cash provided by financing
activities of $3,233,337 and $3,837,269, respectively. During 2009, (i) through
the sale of common stock (net of offering costs related to the private
placements) and the exercise of options and warrants, we raised $283,179, (ii)
we received cash proceeds of $5.3 million from debt financing, (iii) repaid
$476,106 of debt and (iv) $2,000,000 was paid into a restricted escrow account
to pay down debt owed to London Mining in early 2010. During 2008, (i) through
the sale of common stock (net of offering costs related to the private
placements) and the exercise of warrants, we raised $1.5 million, (ii) we
received cash proceeds of $3.0 million from debt financing and (iii) repaid
$555,000 of debt.





The
following table summarizes the Company’s debt as of December 31,
2009:





Outstanding
                        Amount
                    
                    Interest
                        Rate
                    
                    
                    Un-amortized
                        Discounts
                    
                    
                    Accrued
                        Interest
                    
                    Maturity
                        Date
                    
                    Type$
                    71,355
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    3,016
                    
                    February
      11, 2009(1)
                    
                    Convertible
      (2)$
                    50,000
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    1,319
                    
                    February
      11, 2009(1)
                    
                    Convertible
      (2)$
                    1,000,000
                    
                    
                    8.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    103,430
                    
                    August
      22, 2009(1)
                    
                    Convertible
      (3)$
                    117,391
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    24,492
                    
                    February
      15, 2010
                    
                    Convertible
      (4)$
                    110,000
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    7,959
                    
                    February
      15, 2010
                    
                    Conventional$
                    6,009,202
                    
                    
                    12.25
                    %
                    
                    $
                    144,120
                    
                    
                    $
                    28,975
                    
                    February
      15, 2010
                    
                    Conventional$
                    84,628
                    
                    
                    10.00
                    %
                    
                    $
                    25,372
                    
                    
                    $
                    24,390
                    
                    February
      26, 2010
                    
                    Convertible
      (5)$
                    100,000
                    
                    
                    12.25
                    %
                    
                    $
                    —
                    
                    
                    $
                    10,888
                    
                    February
      26, 2010
                    
                    Convertible
      (6)$
                    276,667
                    
                    
                    
                    (7)
                    
                    $
                    33,333
                    
                    
                    $
                    —
                    
                    March
      16, 2010
                    
                    Convertible
      (8)$
                    50,000
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    2,877
                    
                    March
      8, 2010
                    
                    Conventional$
                    50,000
                    
                    
                    2.00
                    %(9)
                    
                    $
                    —
                    
                    
                    $
                    1,585
                    
                    June
      30, 2010
                    
                    Conventional$
                    65,546
                    
                    
                    10.00
                    %
                    
                    $
                    9,454
                    
                    
                    $
                    2,517
                    
                    September
      1, 2010
                    
                    Convertible
      (2)$
                    75,000
                    
                    
                    10.00
                    %
                    
                    $
                    —
                    
                    
                    $
                    1,039
                    
                    November
      10, 2010
                    
                    Conventional$
                    3,094,196
                    
                    
                    
                    (10)
                    
                    $
                    1,905,804
                    
                    
                    $
                    —
                    
                    February
      14, 2011
                    
                    Conventional$
                    464,923
                    
                    
                    12.00
                    %
                    
                    $
                    46,667
                    
                    
                    $
                    41,712
                    
                    April
      27, 2012
                    
                    Convertible
      (5)$
                    5,750,000
                    
                    
                    
                    (11)
                    
                    $
                    —
                    
                    
                    $
                    243,524
                    
                    January
      31, 2014
                    
                    Conventional$
                    6,189,768
                    
                    
                    
                    (12)
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    December
      31, 2015
                    
                    Conventional$
                    30,000
                    
                    
                    
                    (13)
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    (14)
                    Conventional





1.
              Currently
      past due; original terms apply in the default
  period.


2.
              Convertible
      at the lesser of $0.18 per share or 85% of the lowest VWAP
      (volume-weighted average price) for the 10 trading days preceding the
      conversion notice date.


3.
              Convertible
      at $0.10 per share.


4.
              Convertible
      at the lesser of $0.18 per share or 85% of the lowest VWAP
      (volume-weighted average price) for the 10 trading days preceding the
      conversion notice date, with a floor of
$0.01.


5.
              Convertible
      at $0.20 per share.


6.
              Convertible
      at the greater of (i) the current Fair Market Value (the closing sale
      price as reported on the date of conversion) and (ii) $0.05 per
      share.


7.
              Promissory
      note was issued with an initial $30,000 OID and further incurred a $40,000
      OID and accrues no
interest.


24





8.
              Convertible
      (at a rate equal to the greater of fair market value and $0.05 per share)
      into a maximum of 6,200,000
shares.


9.
              Effective
      January 1, 2010, interest rate increases to
10%.


10.
              Promissory
      note was issued with an initial $1,000,000
OID.


11.
              Interest
      at a rate equal to the prime rate plus 2% per annum (subject to a cap of
      8%). As of December 31, 2009,
5.25%.


12.
              Interest
      of 6% does not begin accruing until January 1,
  2010.


13.
              Zero
      percent interest with preferential repayment from any Chilean
      projects.


14.
              Preferential
      repayment from any Chilean
projects.





Summary





Our
existing sources of liquidity will not provide enough 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 to be approximately
$17,000,000 (which includes approximately $13,500,000 for repayment of debt,
assuming some or all of such notes are not converted into equity prior to
maturity). Additionally, should any projects or mergers be completed during
2010, 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.





Foreign Exchange
Exposure





Since our
entrance into the metals and 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.





Off-Balance Sheet
Arrangements





During
the year ended December 31, 2009, we did not engage in any off balance sheet
arrangements as defined in item 303(a)(4) of the SEC’s Regulation
S-K.





ITEM 7.  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA





The
Financial Statements of the Company, the accompanying notes and the report of
independent registered public accounting firm are included as part of this Form
10-K beginning on page F-1, which follows the signature page.





ITEM
      8.
              CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.


25





ITEM
8A(T).  CONTROLS AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures





We
maintain disclosure controls and procedures designed to provide reasonable
assurance that information required to be disclosed in our reports filed
pursuant to the Securities Exchange Act of 1934, as amended (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 that
such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer as appropriate, to allow
timely decisions regarding required disclosures. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance the objectives of the control system are met.





As of
December 31, 2009, our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, carried out an evaluation of the
effectiveness of our disclosure controls and procedures as such term is defined
in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were not effective as of December
31, 2009, because of the identification of the material weaknesses in internal
control over financial reporting described below. Notwithstanding the material
weaknesses that existed as of December 31, 2009, our Chief Executive Officer and
Chief Financial Officer have each concluded that the consolidated financial
statements included in this Annual Report on Form 10-K present fairly, in all
material respects, the financial position, results of operations and cash flows
of the Company and its subsidiaries in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). We continue to
evaluate the potential steps to remediate such material weakness as described
below.





Since we
do not have a formal audit committee, our 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.





Management’s Report on
Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is a
set of processes designed by, or under the supervision of, a company’s principal
executive and principal financial officers, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that:





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect our transactions and dispositions of our
      assets;





·
            Provide
      reasonable assurance our transactions are recorded as necessary to permit
      preparation of our financial statements in accordance with GAAP, and that
      receipts and expenditures are being made only in accordance with
      authorizations of our management and directors;
  and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. It should be noted that any system of internal
control, however well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system will be met. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.


26





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an assessment of the
effectiveness of our internal control over financial reporting based on criteria
established in “Internal Control-Integrated Framework” issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), as of December
31, 2009.





As a
result of our continued material weaknesses described below, management has
concluded that, as of December 31, 2009, our internal control over financial
reporting was not effective based on the criteria in “Internal
Control-Integrated Framework” issued by COSO.





Material Weakness in
Internal Control over Financial Reporting





As
disclosed in our annual report on Form 10-K for the fiscal year ended
December 31, 2008, management identified certain material weaknesses in our
internal control over financial reporting. A material weakness is a control
deficiency, or combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of annual or interim financial
statements will not be prevented or detected. In connection with the assessment,
management continues to identify the following control deficiencies that
represent material weaknesses at December 31, 2009, which were identified in
previous years:





·
            Management
      did not design and maintain effective control relating to the quarter end
      closing and financial reporting process due to lack of evidence of review
      surrounding various account reconciliations and properly evidenced journal
      entries.  Due to the Company’s limited resources, the Company
      has insufficient personnel resources and technical accounting and
      reporting expertise to properly address all of the accounting matters
      inherent in the Company’s global financial
      transactions.  Numerous GAAP audit adjustments were made to the
      financial statements for the year ended December 31, 2009. This material
      weakness was identified in 2007 and 2008, and has not been corrected at
      this time due to resource constraints. Additionally, the Company does not
      have a formal audit committee with a financial expert, and thus the
      Company lacks the board oversight role within the financial reporting
      process. Management continues to search for additional board members that
      are independent and can add financial expertise, in an effort to remediate
      part of this material weakness.





·
            The
      Company’s small size and “one-person” office prohibits the segregation of
      duties and the timely review of financial data and banking
      information.  The Company has very limited review procedures in
      place.  This material weakness was not corrected during
      2009.  Management plans to establish a more formal review
      process by the board members in an effort to reduce the risk of fraud and
      financial misstatements.





·
            During
      2007, the Company entered into several material acquisition transactions
      without timely obtaining the appropriate signed agreements, stock
      certificates and board approval prior to releasing cash funds called for
      by the transaction. There were no formal policy changes made in 2008 or
      2009 because no similar transactions were encountered during 2008 and
      2009.  Management believes the approval process currently in
      place is sufficient to alleviate any misappropriation of funds and will
      change procedures if and when circumstances indicate they are
      needed.





We
understand that we continue to have internal control material weaknesses, but
due to the Company’s limited funds and inability to add certain staff personnel,
there were no changes to our internal control system in
2009.  Management continues to discuss additional entity-level
controls it can establish in an effort to address the current lack of
segregation of duties.  There were no additional material weaknesses
noted during 2009.





This
Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this annual
report.


27





Changes in Internal Control
over Financial Reporting





During
the fiscal quarter ended December 31, 2009, there was no change in our internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





ITEM 8B.  OTHER
INFORMATION





None.


28


PART
III





ITEM
      9.
              DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE
GOVERNANCE





Set forth
below are the names of all directors and executive officers of the Company,
their respective ages and all positions and offices with the Company held by
each person as of April 13, 2010:





Name
                      
                      Age
                      
                      Positions with the
  CompanyStephen
      D. King
                      
                      53
                      
                      Chief
      Executive Officer and DirectorDr.
      Clyde L. Smith
                      
                      73
                      
                      President
      and DirectorMark
      D. Dacko
                      
                      58
                      
                      Chief
      Financial Officer and SecretaryNorman
      D. Lowenthal
                      
                      72
                      
                      DirectorJoseph
      Mancuso
                      
                      68
                      
                      DirectorDonald
      Stoica
                      
                      52
                      
                      Director





Stephen
D. King was appointed Chief Executive Officer effective September 15, 2006 and
has served as a director since July 8, 2004. Mr. King also served as our
President from May 15, 2006 to September 15, 2006. Since April 2008, Mr. King
has served as Chief Executive Officer and a director of Standard Gold, Inc., a
majority owned subsidiary of the Company.  Since March 2009, Mr. King
has also served as the Chief Executive Officer and a director of CGMR (BVI) in
which the Company holds a 50% equity interest. Since October 2000, Mr. King has
served as President of SDK Investments, Inc., a private investment firm located
in Atlanta, Georgia specializing in corporate finance and
investing.





Dr. Clyde
L. Smith was appointed President effective September 15, 2006 and was appointed
to our board of directors on July 13, 2009. Since October 2009, Dr. Smith has
also served as a director of Standard Gold, Inc., a majority owned subsidiary of
the Company. Since 1970, Dr. Smith has been sole owner and operator of CL Smith
Consultants, an independent geological consulting firm.  Dr. Smith
holds a B.A. from Carleton College, a M.Sc. from the University of British
Columbia, and a Ph.D. from the University of Idaho. Dr. Smith is a registered
Professional Engineer with the Association of Professional Engineers and
Geoscientists of British Columbia.  Dr. Smith has founded or
co-founded five exploration companies and is responsible for the discovery of
four deposits: the Jason lead-zinc-silver deposit, Yukon Territory, Canada; the
Santa Fe gold deposit, Nevada; the North Lake gold deposit, Saskatchewan,
Canada; and the Solidaridad gold-silver-copper deposit, Mexico.





Mark D.
Dacko has served as our Chief Financial Officer and Secretary since March 2003
and he served as our Controller from February 2001 to March 2003. Mr. Dacko
served as a board member from June 2003 until April 10, 2008. Since April 2008,
Mr. Dacko has served as Chief Financial Officer and a director (until September
29, 2009) of Standard Gold, Inc., a majority owned subsidiary of the Company.
Prior to joining the Company, Mr. Dacko served as company controller for various
public reporting companies since November 1994. Mr. Dacko has no prior
experience in the mineral exploration or mining industry.





Norman D.
Lowenthal was appointed to our board of directors on September 4,
2003.  Mr. Lowenthal is the past Chairman of the Johannesburg Stock
Exchange, for the years 1997 to 2000.  Since April 1997 to the
present, he has served as a member of the Securities Regulation Panel of South
Africa.  Mr. Lowenthal was the Chairman of SSC Mandarin Financial
Services Ltd for the period 2001 to 2007. Mr. Lowenthal is Vice-Chairman of the
Taylor Companies, a private bank located in Washington, D.C., serving since
2002.  Mr. Lowenthal has been involved in the mining industry since
1960. He has served as chairman of several listed companies in this field,
including in particular, gold and diamond producing companies.





Joseph
Mancuso was appointed to our board of directors on September 22, 2007. In 1977,
Mr. Mancuso founded The Chief Executive Officers Club, Inc, a non-profit
organization with chapters in the United States and abroad that is dedicated to
the continuing education of entrepreneurial managers, and has served as its
Chief Executive Officer since that time. In 1977, Mr. Mancuso also founded the
Center for Entrepreneurial Management, Inc, a non-profit organization. Mr.
Mancuso received a Ph. D. in Educational Administration from Boston University,
an MBA from the Harvard Business School, and a degree in Electrical Engineering
degree from Worcester Polytechnic Institute in Massachusetts.


29





Donald
Stoica was appointed to our board of directors on April 10, 2008. Since October
2009, Mr. Stoica has also served as a director of Standard Gold, Inc., a
majority owned subsidiary of the Company. In February 1999, Mr. Stoica founded
SSR Engineering, Inc, which is a privately held corporation based in Anaheim,
California that develops high performance radar systems for use in security,
navigation, defense and related applications. Mr. Stoica has served as President
and Chief Executive Officer of SSR Engineering since its inception. From
1975-1998, Mr. Stoica worked at Hughes Aircraft Company, including a Technical
Director. Mr. Stoica received his B.S. in Electrical Engineering from California
Polytechnic State University in Pomona, California and his Masters Degree in
Electrical Engineering from the University of Southern California in Los
Angeles, California. Mr. Stoica is also a principle in Pacific Dawn Capital LLC,
a company which we have had various financing transactions with since
2005.





There is
no family relationship between any director and executive officer of the
Company.





CODE
OF ETHICS





We have
adopted a Code of Ethics that applies to our principal executive officer,
principal financial officer and persons performing similar functions. The Code
of Ethics is available on our website at www.witsbasin.com.  If we
make any substantive amendments to the Code of Ethics or grant any waiver from a
provision of the Code of Ethics to an executive officer or director, we will
promptly disclose the nature of the amendment or waiver by filing with the SEC a
current report on Form 8-K.





SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
directors and persons who own more than 10% of our outstanding common stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish copies of these reports to us. Based solely
on a review of the copies of the Forms 3, 4 and 5 and amendments that we have
received, we believe that no such forms required during 2009 were filed
late.





AUDIT
COMMITTEE AND FINANCIAL EXPERT





The
Company does not have a formal audit committee with a financial expert;
therefore our Board of Directors as a group acts in the capacity as the audit
committee. There were no audit committee meetings held during 2009. Financial
information relating to quarterly reports was disseminated to all board members
for review. The audited financial statements for the years ended December 31,
2009 and 2008 were provided to each member of the board in which any concerns by
the members were directed to management and the auditors.





ITEM
10.  EXECUTIVE COMPENSATION





SUMMARY
COMPENSATION TABLE





The
following table summarizes the compensation of each name executive for the
fiscal years ended December 31, 2009 and 2008 awarded to or earned by (i) each
individual serving as our principal executive officer and principal financial
officer of the Company and (ii) each individual that served as an executive
officer of the Company at the end of such fiscal years who received compensation
in excess of $100,000.


30





Annual CompensationOption
              
              
              All OtherName and Principal Position
              
              Year
              
              Salary
              
              
              Bonus
              
              
              Awards (1)
              
              
              Compensation
              
              
              Total ($)Chief
      Executive OfficerStephen
      D. King
              
              2009
              
              $
              60,000
              
              
              $
              —
              
              
              $
              —
              
              
              $
              423,819
              (2)
              
              $
              483,8192008
              
              $
              60,000
              
              
              $
              —
              
              
              $
              373,198
              
              
              $
              367,500
              (3)
              
              $
              800,698PresidentDr.
      Clyde Smith
              
              2009
              
              $
              120,000
              
              
              $
              —
              
              
              $
              —
              
              
              $
              225,360
              (4)
              
              $
              345,3602008
              
              $
              120,000
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              120,000Chief
      Financial OfficerMark
      D. Dacko
              
              2009
              
              $
              135,000
              
              
              $
              25,000
              (5)
              
              $
              —
              
              
              $
              —
              
              
              $
              160,0002008
              
              $
              130,875
              
              
              $
              —
              
              
              $
              123,867
              
              
              $
              —
              
              
              $
              254,742





(1)
            The
      amounts shown are the aggregate grant date fair values of these awards
      computed in accordance with Financial Accounting Standards Board (“FASB”)
      guidance now codified as Accounting Standards Codification (“ASC”) FASB
      ASC Topic 718, “Stock Compensation” (formerly under FASB Statement No.
      123(R)). The assumptions and methodologies used to calculate these amounts
      are discussed in Note 17 in the Notes to Financial Statements contained
      elsewhere in this Annual Report. The SEC’s disclosure rules previously
      required that we present stock award and option award information for 2008
      based on the amount recognized during the corresponding year for financial
      statement reporting purposes with respect to these awards (which meant, in
      effect, that in any given year we could recognize for financial statement
      reporting purposes amounts with respect to grants made in that year as
      well as with respect to grants from past years that vested in or were
      still vesting during that year). However, recent changes in the SEC’s
      disclosure rules require that we now present the stock award and option
      award amounts in the applicable columns in the table above with respect to
      2008 on a similar basis as the 2009 presentation using the grant date fair
      value of the awards granted during the corresponding year, regardless of
      the period over which the awards are scheduled to vest. Since this
      requirement differs from the SEC’s past disclosure rules, the amounts
      reported in the table above for stock awards and option awards for 2008
      differ from the amounts previously reported in our Summary Compensation
      Table for that year. As a result, to the extent applicable, each named
      executive officer’s total compensation amount for 2008 may differ from the
      amount previously reported in our Summary Compensation Table for that
      year.


(2)
            Includes
      the following compensation: (i) pursuant to the employment agreement with
      Mr. King, he is entitled to receive up to $75,000 annually in lieu of any
      employee benefits, of which $75,000 was paid during 2009, (ii) $165,000
      paid to Corporate Resource Management, Inc, an entity wholly owned by Deb
      King, the spouse of Mr. King, pursuant to an amended and restated
      consulting agreement with Corporate Resource Management, executed in
      November 2008 relating to services provided to the Company, and (iii)
      $183,819 directly from CGMR (BVI) for consulting services. Since March
      2009, Mr. King has served as the Chief Executive Officer and a director of
      CGMR (BVI), our joint venture entity with London
  Mining.


(3)
            Includes
      the following compensation: (i) pursuant to the employment agreement with
      Mr. King, he is entitled to receive up to $75,000 annually in lieu of any
      employee benefits, of which $68,750 was paid during 2008, (ii) $153,750
      paid to Corporate Resource Management, Inc, an entity wholly owned by Deb
      King, the spouse of Mr. King, pursuant to an amended and restated
      consulting agreement with Corporate Resource Management, executed in
      November 2008 relating to services provided to the Company and (iii)
      $145,000 (calculated using the Black Scholes pricing model) related to the
      extension of two warrants held by Mr. King’s spouse, such extension was
      negotiated as part of his employment
agreement.


(4)
            Dr.
      Smith received $225,360 directly from CGMR (BVI) for consulting
      services.


(5)
            Mr.
      Dacko was awarded an annual bonus for 2009, which was paid in
      2010.


31





EXECUTIVE
EMPLOYMENT AGREEMENTS





We have
entered into employment agreements with certain of our executives which include
provisions that entitle those executives to receive severance payments in
specified cases of termination without cause or change of control of the
Company. In the event that our executives qualify for severance payments, such
payments would be made on a monthly basis.





Stephen D.
King





On May
29, 2008, we entered into an employment agreement with Mr. King, our Chief
Executive Officer.  The term of the agreement is for a period of three
years, with automatic one-year renewals, subject to either party’s right to
terminate upon 30-day written notice.  Mr. King is entitled to a base
salary of $5,000 per month, and is eligible for an annual bonus at the
discretion of the Company’s compensation committee.  Mr. King is
further entitled to up to $75,000 annually in lieu of any employee benefits,
such amount to be payable in monthly installments and to be used by Mr. King in
his discretion.  In the event Mr. King is terminated by the Company
for any reason other than death or for “Cause” (as defined in the agreement), he
will be entitled to receive his accrued and unpaid compensation to the time of
the termination plus: (i) in the event the termination occurs prior to the first
anniversary of the agreement, $56,250 in cash; (ii) in the event the termination
occurs on or after the first anniversary of the agreement but prior to the
second anniversary, $112,500 in cash; (iii) in the event the termination occurs
on or after the second anniversary of the agreement but prior to the third
anniversary, $168,750 in cash; or (iv) in the event the termination occurs on or
after the third anniversary of this agreement, $225,000 in cash.  The
agreement includes standard confidentiality provisions, as well as a
non-competition and non-solicitation provision that runs for three months in the
event his employment with the Company is terminated prior to the first
anniversary of the agreement, and increases by a period of three months for each
additional year of service under the agreement to a maximum of one year in the
event the agreement is terminated on or following the three-year anniversary of
the agreement.





Pursuant
to the agreement on May 29, 2009, we issued Mr. King a ten-year option to
purchase 2,000,000 shares of our common stock at an exercise price of $0.20 per
share. The option shall vest in three equal annual installments commencing on
the first anniversary of the date of grant. The vesting of the option shall
accelerate (i) at such time the closing price of the Company’s common stock (as
quoted on the OTCBB or an exchange) remains at or above $1.00 per share for 30
trading days, (ii) upon Mr. King’s death, (iii) upon the occurrence of a change
of control or (iv) upon the Company’s termination of Mr. King’s employment for
any reason other than Cause (and there was no acceleration due to (i) through
(iv) as of December 31, 2009). Effective May 29, 2008, Mr. King transferred the
option agreement into the name of his spouse, Deborah King.





Furthermore
and in consideration of the parties’ entry into the employment agreement, the
Company entered into an Amended and Restated Stock Option Agreement (the
“Amended Option Agreement”) with Deborah King dated May 29, 2008, amending the
terms of an option agreement originally entered into with Mr. King dated March
9, 2007 (the “Original Option”) but subsequently transferred to Deborah King on
March 12, 2007.  The Amended Option Agreement amends the terms of the
option to purchase 3,000,000 shares of our common stock at an exercise price of
$1.02 per share to change the vesting schedule to provide for vesting in three
equal annual installments commencing March 9, 2008. Additionally, the
Amended Option Agreement provides that the vesting of the option shall
accelerate (i) at such time the closing price of the Company’s common stock (as
quoted on the OTCBB or an exchange) remains at or above $1.00 per share for 30
trading days, (ii) upon Mr. King’s death, (iii) upon the occurrence of a change
of control or (iv) upon the Company’s termination of Mr. King’s employment for
any reason other than Cause (there was no acceleration due to (i) through (iv)
as of December 31, 2009).




32




Mark D.
Dacko


On April
10, 2008, we entered into an employment agreement with Mr. Dacko, our Chief
Financial Officer.  The term of the agreement is for a period of three
years, with automatic one-year renewals, subject to either party’s right to
terminate upon 30-day written notice.  Mr. Dacko is entitled to a base
salary of $11,250 per month and is eligible for an annual bonus at the
discretion of the Company’s compensation committee.  In the event Mr.
Dacko’s employment is terminated by the Company without “Cause” (as defined in
the agreement) or he voluntarily terminates his employment within 6 months
following a “Change in Control” (as defined in the agreement), he will be
entitled to receive his accrued and unpaid compensation to the time of the
termination plus a severance payment equal to his base salary for 9 months,
payable in accordance with the Company’s normal payroll over such period. The
agreement includes standard confidentiality provisions, as well as a one-year
non-solicitation provision.





Pursuant
to the agreement dated April 10, 2008, we issued to Mr. Dacko a ten-year stock
option to purchase up to 600,000 shares of our common stock at an exercise price
of $0.21, the closing price of the Company’s common stock on the day prior to
the grant.  The option shall vest in equal quarterly installments of
50,000 shares over three years, with the first 50,000 vesting on April 10,
2008.





Except as
reported above, we have not entered into any severance or change of control
provisions with any of our executive officers.





OUTSTANDING
EQUITY AWARDS TABLE





No
options were exercised by our named executive officers during the year ended
December 31, 2009.  The following table sets forth information of
outstanding option awards held by named executive officers as of December 31,
2009.





Name
                  
                  Number of
                      Securities
                      Underlying
                      Unexercised
                      Options
                      Exercisable
                  
                  
                  Number of
                      Securities
                      Underlying
                      Unexercised
                      Options
                      Unexercisable
                  
                  
                  Equity Incentive
                      Plan Awards;
                      Number of
                      Securities
                      Underlying
                      Unexercised
                      Unearned Options
                  
                  
                  Option
                      Exercise
                      Price
                  
                  Option
                      Exercise
                      DateStephen
      King(1)
                  
                  
                  250,000
                  (2)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.40
                  
                  07/08/14250,000
                  (3)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.26
                  
                  05/02/15200,000
                  (4)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.15
                  
                  10/20/152,000,000
                  (5)
                  
                  
                  1,000,000
                  (5)
                  
                  
                  —
                  
                  
                  $
                  1.02
                  
                  03/09/17666,667
                  (6)
                  
                  
                  1,333,333
                  (6)
                  
                  
                  —
                  
                  
                  $
                  0.20
                  
                  05/29/18Clyde
      Smith
                  
                  
                  1,200,000
                  (7)
                  
                  
                  300,000
                  (7)
                  
                  
                  —
                  
                  
                  $
                  0.31
                  
                  09/15/16300,000
                  (8)
                  
                  
                  —
                  
                  
                  
                  200,000
                  (8)
                  
                  $
                  0.31
                  
                  09/15/16Mark
      Dacko
                  
                  
                  40,000
                  (9)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  2.75
                  
                  02/05/11350,000
                  (10)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.56
                  
                  07/09/13125,000
                  (11)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.23
                  
                  12/29/14250,000
                  (3)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.26
                  
                  05/02/15200,000
                  (4)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  0.15
                  
                  10/20/15350,000
                  (12)
                  
                  
                  250,000
                  (12)
                  
                  
                  —
                  
                  
                  $
                  0.21
                  
                  04/10/18





(1)
            All
      options have been transferred into the name of Mr. King’s
      spouse.


(2)
            Options
      vested in portions of 125,000, 62,500 and 62,500 on July 8, 2004, January
      8, 2005 and July 8, 2005,
respectively.


(3)
            Options
      vested in their entirety on May 2,
2005.


(4)
            Options
      vested in their entirety on October 20,
2005.


(5)
            Effective
      with Mr. King’s May 29, 2008 employment agreement, the options vest in
      equal portions of 1,000,000 annually commencing on March 9, 2008 pursuant
      to that certain Amended and Restated Option Agreement, which provides for
      acceleration to the vesting schedule of the remaining options under
      certain conditions.


(6)
            Options
      vest in portions of 666,667, 666,667 and 666,666 annually commencing on
      May 29, 2009, with any portion subject to acceleration immediately upon
      completion of certain material
events.


(7)
            Options
      vest in equal portions of 300,000 annually commencing on September 15,
      2006.


33





(8)
            Options
      vest in equal portions of 100,000 annually commencing on September 15,
      2007 subject to the achievement of objective criteria determined by the
      Board of Directors from time to time with respect to each year prior to
      the commencement of such year.


(9)
            Options
      vested in portions of 10,000, 15,000 and 15,000 on May 5, 2001, February
      5, 2002 and February 5, 2003,
respectively.


(10)
            Options
      vested in portions of 175,000, 87,500 and 87,500 on July 9, 2003, January
      9, 2004 and July 9, 2004.


(11)
            Options
      were granted by our Board of Directors for Mr. Dacko’s voluntary deferment
      of salary for a six-month period during 2004.  Options vested
      December 29, 2004.


(12)
            Options
      vest in equal quarterly installments of 50,000 shares commencing on April
      10, 2008.





DIRECTOR
COMPENSATION





Members
of our board who are also employees of ours receive no compensation for their
services as directors. Non-employee directors are reimbursed for all reasonable
and necessary costs and expenses incurred in connection with their duties as
directors.  In addition, we issue options to our directors as
determined from time to time by the Board.





In
consideration of Mr. Mancuso’s agreement to serve on the board, and his future
service on the board, on September 24, 2007, we awarded Mr. Mancuso a ten-year
option to purchase up to 2,000,000 shares of our common stock at an exercise
price of $0.30 per share, the closing price of our common stock on the prior
business day. The option vests in equal biannual installments of 250,000 shares
each over four years, the first installment vested March 24, 2008.





In
consideration of Mr. Stoica’s agreement to serve on the board, and his future
service on the board, on April 10, 2008, we awarded Mr. Stoica a ten-year option
to purchase up to 400,000 shares of our common stock at an exercise price of
$0.21 per share, the closing price of our common stock on the prior business
day. The option vests in equal semiannual installments of 100,000 shares each
over two years, with the first installment vesting June 30, 2008.





The
following table sets forth the compensation earned by each of our non-employee
directors for the years ended December 31, 2009 and 2008:





Name
              
              Year
              
              Option Awards (1)
              
              
              Fees Earned or
                  Paid in Cash
              
              
              All Other
                  Compensation
              
              
              TotalNorman
      D. Lowenthal
              
              2009
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —2008
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —Joseph
      Mancuso
              
              2009
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —2008
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —Donald
      S. Stoica
              
              2009
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —2008
              
              $
              82,578
              
              
              $
              —
              
              
              $
              —
              
              
              $
              82,578





(1)
              Amount
      reflects the aggregate grant date fair value for stock option awards
      granted during the applicable year computed in accordance with FASB ASC
      Topic 718. The Company calculates fair value in accordance with the
      assumptions identified in Note 17 to our financial statements for the year
      ended December 31, 2009 included elsewhere in this Annual
      Report.


34


ITEM
      11.
              SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
      MATTERS





The
following information sets forth the number and percentage of shares of the
Company’s common stock owned beneficially, as of April 13, 2010, by any person,
who is known to the Company to be the beneficial owner of 5% or more of the
Company’s common stock, and, in addition, by each director and each executive
officer of the Company, and by all directors and executive officers as a group.
Information as to beneficial ownership is based upon statements furnished to the
Company by such persons.





Name and Address
                                                
                                                Amount of Beneficial Ownership (1)
                                                
                                                
                                                Percentage of ClassStephen
      D. King
                                                
                                                
                                                7,033,334
                                                (2)
                                                
                                                
                                                4.080
      South 8th
      Street, Suite 900Minneapolis,
      MN  55402Mark
      D. Dacko
                                                
                                                
                                                1,415,000
                                                (3)
                                                
                                                
                                                *80
      South 8th
      Street, Suite 900Minneapolis,
      MN  55402Clyde
      L. Smith
                                                
                                                
                                                2,000,000
                                                (4)
                                                
                                                
                                                1.280
      South 8th
      Street, Suite 900Minneapolis,
      MN  55402Norman
      D. Lowenthal
                                                
                                                
                                                1,000,000
                                                (5)
                                                
                                                
                                                *Private
      Bag X60Saxonwold,
      2132 South AfricaJoseph
      Mancuso
                                                
                                                
                                                1,277,200
                                                (6)
                                                
                                                
                                                *80
      South 8th
      Street, Suite 900Minneapolis,
      MN  55402Donald
      S. Stoica
                                                
                                                
                                                7,608,976
                                                (7)
                                                
                                                
                                                4.480
      South 8th
      Street, Suite 900Minneapolis,
      MN  55402All
      directors and officers as a group
                                                
                                                
                                                20,334,510
                                                
                                                
                                                
                                                11.0(6
      persons)





*
represents less than 1%.





(1)
            Except
      as otherwise indicated, each person possesses sole voting and investment
      power with respect to the shares shown as beneficially
    owned.


(2)
            Includes
      5,033,334 shares issuable upon the exercise of options that are currently
      exercisable or will be exercisable within 60 days and 2,000,000 shares
      issuable upon exercise of certain warrants.  All options and
      warrants have been transferred into the name of Mr. King’s
      spouse.


(3)
            Represents
      shares issuable upon the exercise of options that are currently
      exercisable or will be exercisable within 60
  days.


(4)
            Represents
      shares issuable upon the exercise of options that are currently
      exercisable. Effective March 10, 2010, the Company’s board of directors,
      with the recommendation of the Company’s compensation committee, reduced
      the exercise price of Dr. Smith’s 2,000,000 options from $0.31 to $0.20
      per share and accelerated the remaining unvested 500,000 options to be
      vested.


(5)
            Includes
      700,000 shares issuable upon the exercise of options that are currently
      exercisable and 100,000 shares issuable upon exercise of certain
      warrants.


(6)
            Includes
      1,250,000 shares issuable upon the exercise of options that are currently
      exercisable. All options have been transferred into the name of Mr.
      Mancuso’s daughter.


(7)
            Includes
      400,000 shares issuable upon the exercise of options that are currently
      exercisable. Also includes 4,502,309 shares of common stock and 2,666,667
      shares issuable upon the exercise of certain warrants held by Pacific Dawn
      Capital, LLC, of which Mr. Stoica is a
  principal.


35





EQUITY
COMPENSATION





The
following table sets forth certain information regarding equity compensation
plan information as of December 31, 2009:




Number of securitiesremaining available forfuture issuance underequity compensationNumber of securities to
                                  
                                  
                                  Weighted-average
                                  
                                  
                                  plans (excludingbe issued upon exercise
                                  
                                  
                                  exercise price of
                                  
                                  
                                  securities reflected inPlan category
                                  
                                  of outstanding options
                                  
                                  
                                  outstanding options
                                  
                                  
                                  column (a))(a)
                                  
                                  
                                  
                                  
                                  
                                  (b)Equity
      compensationplans approved bysecurity
      holders
                                  
                                  
                                  5,343,500
                                  
                                  
                                  $
                                  0.39
                                  
                                  
                                  
                                  1,214,000Equity
      compensation plans not approved bysecurity
      holders
                                  
                                  
                                  10,300,000
                                  
                                  
                                  $
                                  0.51
                                  
                                  
                                  
                                  450,000
                                  (1)Total
                                  
                                  
                                  15,643,500
                                  
                                  
                                  $
                                  0.47
                                  
                                  
                                  
                                  1,664,000





(1) These
450,000 securities were added to the 2000 Director Stock Option Plan in July
2003 (a Plan previously approved by shareholders) but not yet presented for
shareholder approval.





ITEM
      12.
              CERTAIN
      RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE





The
following describes certain relationships and related transactions that we have
with persons deemed to be affiliates of ours. We believe that each of the
transactions described below were on terms at least as favorable to our Company
as we would have expected to negotiate with unaffiliated third
parties.





Stephen D.
King





Stephen
D. King is our Chief Executive Officer and a member of our Board of
Directors.





Pursuant
to certain secured convertible promissory notes with Pacific Dawn Capital, LLC
and Andrew Green entered into during 2005, Mr. King, who only served as a board
member at that time, provided personal guaranties for the repayment of these
notes. In exchange for the guaranties, we issued two warrants to purchase up to
an aggregate of 2,000,000 shares of our common stock, with an exercise price of
$0.15 per share. Mr. King subsequently assigned both of the warrants to his
spouse.  The warrants had expiration dates of October 13 and November
4, 2007. In October 2007, our board of directors authorized an extension of the
expiration dates, granting a one-year extension. In September 2008, our board of
directors authorized an additional extension of the expiration dates, granting a
two-year extension, until October 13 and November 4, 2010.  The
warrant modifications resulted in non-cash compensation expense of $145,000 and
$139,054 for the years ended December 31, 2008 and 2007,
respectively.





Since
March 2009, Mr. King has served as the Chief Executive Officer and a director of
CGMR (BVI) CGMR (BVI), our joint venture entity with London Mining. During 2009,
Mr. King received $183,819 directly from CGMR (BVI) for consulting services in
2009.


36





Corporate Resource
Management, Inc.





On
November 12, 2008, we entered into an amended and restated consulting agreement
with Corporate Resource Management, Inc, a Minnesota corporation (“CRM”). CRM is
an entity wholly owned by Deborah King, the spouse of Stephen D. King (our Chief
Executive Officer and a member of our Board of Directors).  CRM
provides the Company with investment banking services relating to the purchase
and sale of mining related assets. Pursuant to the agreement, CRM is entitled to
a fee of $13,750 per month, plus reimbursement of normal out-of-pocket
expenses.  The term of the agreement is for one year, with automatic
renewals unless either party provides notice of termination.  Each
party has the right to terminate the agreement with a 30-day written notice,
provided that CRM is entitled to a $75,000 termination fee if the agreement is
terminated by the Company without cause. The amended agreement superseded in its
entirety the terms of the prior consulting agreement with CRM dated May 15,
2006.  Pursuant to the amendment, the Company eliminated a provision
for potential payment of commissions of up to 2% of the value of any asset
transactions completed during the term of the agreement and for a period of one
year following termination. For the years ended December 31, 2009 and 2008, we
paid $165,000 and $153,750, respectively, pursuant to the terms of the
consulting agreement.





Clyde
Smith





Clyde
Smith is our President and a member of our Board of Directors. Dr. Smith
received $225,360 directly from CGMR (BVI) for consulting services in
2009.





DIRECTOR
INDEPENDENCE





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.’s senior management, the Board
has determined that only Joseph Mancuso is currently independent within the
meaning of the applicable listing standard of AMEX.





ITEM
      13.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





Our Board
of Directors ratified the engagement of Carver Moquist & O’Connor, LLC to
audit our financial statements for the year ended December 31, 2008 and again
ratified the engagement of Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
(formerly known as Carver Moquist & O’Connor, LLC) (“MTK”) to audit our
financial statements for the year ended December 31, 2009.





AUDIT
FEES:


The
aggregate fees billed for professional services rendered by MTK for the audit of
the Company's annual financial statements and review of financial statements
included in the Company's Form 10-K and 10-Q for 2009 and 2008, and services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements was $142,724 for the year ended December 31,
2009 and $102,890 for the year ended December 31, 2008.





AUDIT
RELATED FEES:


There
were no fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit or review of the Company's financial
statements.


37





TAX
FEES:


There
were no fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning.





ALL
OTHER FEES:


There
were no other fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
above.





POLICY
ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS





At
present, we do not have an audit committee, but rather our entire Board of
Directors performs the functions of the audit committee.  Our Board
approves each engagement for audit or non-audit services that we engage our
independent auditor to provide those services. The Board has not established any
pre-approval policies or procedures that would allow our management to engage
our independent auditor to provide any specified services with only an
obligation to notify the audit committee of the engagement for those services.
None of the services provided by our independent auditors for fiscal 2009 was
obtained in reliance on the waiver of the pre-approval requirement afforded in
SEC regulations.





ITEM 14.  EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES





The
following exhibits are filed as part of this Annual Report on Form 10-K, or are
incorporated herein by reference.




3.1
            Amended
      and Restated Articles of Incorporation, effective September 24, 2007,
      (incorporated by reference to Exhibit 3.1 to the Company’s Current Report
      on Form 8-K filed on September 27,
2007).




3.2
            By-Laws
      (incorporated by reference to Exhibit 3.2 to Form 10-KSB for the year
      ended December 31, 2004).




4.1
            Form
      of Common Stock certificate (incorporated by reference to Exhibit 4.1 to
      the Company’s Form S-2 filed on November 26, 2003 (File No.
      333-110831)).




4.2
            Warrant
      dated February 11, 2008 to Purchase 2,500,000 Shares of the Company’s
      common stock issued in favor of Platinum Long Term Growth V, LLC
      (incorporated by reference to Exhibit 4.1 to the Company’s Current Report
      on Form 8-K filed on February 20,
2008).




4.3
            Warrant
      dated July 1, 2009 in favor of Hawk Uranium Inc. (incorporated by
      reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed
      on July 9, 2009).




4.4**
            Warrant
      dated December 14, 2009 to purchase 16,000,000 Shares of the Company’s
      common stock issued in favor of Kenglo One
Ltd.




4.5**
            Amended
      and Restated Warrant dated December 17, 2009 to purchase 882,000 Shares of
      the Company’s common stock issued in favor of China Gold,
    LLC.




4.6**
            Amended
      and Restated Warrant dated December 17, 2009 to purchase 38,200,000 Shares
      of the Company’s common stock issued in favor of China Gold,
      LLC.




4.7**
            Warrant
      dated December 17, 2009 to purchase 1,600,000 Shares of the Company’s
      common stock issued in favor of China Gold,
LLC.




4.8**
            Warrant
      dated December 17, 2009 to purchase 2,000,000 Shares of the Company’s
      common stock issued in favor of Pioneer Holdings,
  LLC.


38




4.9**
            Warrant
      dated December 17, 2009 to purchase 3,000,000 Shares of the Company’s
      common stock issued in favor of Pioneer Holdings,
  LLC.




4.10**
            Warrant
      dated December 17, 2009 to purchase 2,000,000 Shares of the Company’s
      common stock issued in favor of Pioneer Holdings,
  LLC.




10.1
            1999
      Employee Stock Option Plan, as amended (incorporated by reference to
      Exhibit 10.1 of the Company’s Form 8-K filed September 18,
      2006).




10.2
            2000
      Director Stock Option Plan, as amended (incorporated by reference to
      Exhibit 4.1 to Company’s Form S-8 filed November 19, 2003 (File No.
      333-110590)).




10.3
            2001
      Employee Stock Option Plan, as amended (incorporated by reference to
      Exhibit 10.2 to the Company’s Form 8-K filed January 18,
      2006).




10.4
            2003
      Director Stock Option Plan (incorporated by reference to Exhibit 4.2 to
      Company’s Form S-8 filed November 19, 2003 (File No.
      333-110590)).




10.5
            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).




10.6
            Shareholders
      Agreement by and among AfriOre International (Barbados) Limited, the
      Company, and Kwagga Gold (Barbados) Limited, dated August 27, 2004
      (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed
      September 1, 2004).




10.7
            Amendment
      to Shareholders Agreement by and among AfriOre International (Barbados)
      Limited, the Company, and Kwagga Gold (Barbados) Limited, dated August 30,
      2004 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K
      filed September 1, 2004).




10.8
            NI
      43-101 Technical Report Pertaining To: The Vianey Mine – Guerrero State,
      Mexico (dated of October 18, 2004 and revised March 10, 2005) prepared by
      Rodney A. Blakestad J.D., C.P.G. (incorporated by reference to Exhibit
      10.2 of the Company’s Form 8-K filed June 30,
  2006).




10.9
            Employment
      Offer Letter by and among the Company and Dr. Clyde L. Smith dated
      September 14, 2006 (incorporated by reference to Exhibit 10.2 of the
      Company’s Form 8-K filed September 18,
2006).




10.10
            Employee
      Stock Option Vesting Correction Letter by and among the Company and Dr.
      Smith dated September 21, 2006 (incorporated by reference to Exhibit 10.1
      of the Company’s Amendment to Form 8-K filed September 21,
      2006).




10.11
            Asset
      Purchase Agreement by and among the Company and Hunter Gold Mining
      Corporation, a British Columbia corporation, Hunter Gold Mining Inc., a
      Colorado corporation, Central City Consolidated Mining Corp., a Colorado
      corporation and George Otten, a resident of Colorado, dated September 20,
      2006, (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K
      filed September 25, 2006).




10.12
            Joint
      Venture Agreement dated December 18, 2006, by and among the Company,
      Journey Resources Corp., and Minerales Jazz S.A. De C.V. (incorporated by
      reference to Exhibit 10.1 of the Company’s Form 8-K filed December 19,
      2006).




10.13
            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).


39




10.14
            Convertible
      Notes Purchase Agreement dated April 10, 2007 by and between the Company
      and China Gold, LLC (incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K filed on April 16,
    2007).




10.15
            Amendment
      to Convertible Notes Purchase Agreement, dated June 19, 2007, by and
      between the Company and China Gold, LLC (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25,
      2007).




10.16
            Form
      of Secured Convertible Note of the Company to be issued pursuant to
      Convertible Notes Purchase Agreement dated April 10, 2007 (incorporated by
      reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed on April 16, 2007).




10.17
            Equity
      Transfer Heads of Agreement dated May 4, 2007 by and among China Global
      Mining Resources Limited, Lu Benzhao, Lu Nan and Jin Yao Hui (incorporated
      by reference to Exhibit 10.45 to Form 10-K for the year ended December 31,
      2007).




10.18
            Equity
      Transfer Heads of Agreement dated May 4, 2007 by and among China Global
      Mining Resources Limited, Lu Benzhao, Lu Nan, Nanjing Sudan Mining Co.,
      Ltd., Maanshan Zhaoyuan Mining Co., Ltd. and Xiaonanshan Mining Co. Ltd
      (incorporated by reference to Exhibit 10.46 to Form 10-K for the year
      ended December 31, 2007).




10.19
            Amendment
      to Joint Venture Agreement dated October 31, 2007 by and among the
      Company, Journey Resources Corp., and Minerales Jazz S.A. De C.V., whereby
      we issued 1,600,000 shares of common stock in lieu of the $400,000
      exploration work payment (incorporated by reference to Exhibit 10.3 to
      Form 10-QSB for the quarter ended September 30,
  2007).




10.20
            Letter
      Agreement dated October 31, 2007 by and among the Company and China Gold,
      LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on November 5,
2007).




10.21
            Sale
      of Shares Agreement between and among the Company, AfriOre International
      (Barbados) Limited and Kwagga Gold (Barbados) Limited, dated December 12,
      2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on December 18,
2007).




10.22
            Operating
      Agreement between the Company and Kwagga Gold (Proprietary) Limited, dated
      December 12, 2007 (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed on December 18,
      2007).




10.23
            Fourth
      Amendment to Asset Purchase Agreement dated January 14, 2008 by and among
      the Company, Central City Mining Corp., George Otten, Hunter Gold Mining
      Corp. and Hunter Gold Mining Inc (incorporated by reference to Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed on February 6,
      2008).




10.24
            Note
      and Warrant Purchase Agreement dated February 11, 2008 by and between the
      Company and Platinum Long Term Growth V, LLC (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February
      20, 2008).




10.25
            10%
      Senior Secured Convertible Promissory Note of the Company dated February
      11, 2008 in the principal amount of $1,020,000 issued in favor of Platinum
      Long Term Growth V, LLC (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed on February 20,
      2008).




10.26
            Updated
      Payment Schedule dated January 25, 2008 by and between the Company, China
      Global Mining Resources Limited (BVI) and Lu Ben-Zhao (incorporated by
      reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31,
      2008).


40




10.27
            Iron
      Ore Contract Amendment dated March 14, 2008 by and between the Company,
      China Global Mining Resources Limited (BVI) and Lu Ben-Zhao +++
      (incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter
      ended March 31, 2008).




10.28
            Supplement
      Agreement to the Assets Transfer and the Liabilities of Breach executed on
      March 14, 2008 by and between the Company, China Global Mining Resources
      Limited (BVI) and Lu Ben-Zhao (incorporated by reference to Exhibit 10.9
      to Form 10-Q for the quarter ended March 31,
  2008).




10.29
            Employment
      Agreement with Mark Dacko dated April 10, 2008 (incorporated by reference
      to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April
      15, 2008).




10.30
            Letter
      Amendment entered into with China Gold, LLC dated May 20, 2008
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on May 21, 2008).




10.31
            Employment
      Agreement between the Company and Stephen D. King dated May 29, 2008
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on June 4, 2008).




10.32
            Stock
      Option Agreement between the Company and Stephen D. King dated
      May 29, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed on June 4,
    2008).




10.33
            Amended
      and Restated Stock Option Agreement between the Company and Deborah King
      dated May 29, 2008 (incorporated by reference to Exhibit 10.3 to the
      Company’s Current Report on Form 8-K filed on June 4,
    2008).




10.34
            Fifth
      Amendment to Asset Purchase Agreement by and among the Company, Hunter
      Gold Mining Corp, Hunter Gold Mining Inc., George E. Otten and Central
      City Consolidated, Corp. d/b/a Central City Consolidated Mining Co.,
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on June 18,
2008).




10.35
            Limited
      Recourse Promissory Note of Hunter Bates Mining Corp issued in favor of
      George E. Otten (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed on June 18,
    2008).




10.36
            Deed
      of Trust and Security Agreement of Hunter Bates Mining Corp issued in
      favor of Gilpin County Public Trustee (incorporated by reference to
      Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 18,
      2008).




10.37
            Letter
      Amendment entered into with China Gold, LLC dated July 24, 2008
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on July 30,
2008).




10.38
            Equity
      Transfer Agreement (for the Nanjing Sudan Mining Co., Ltd.) by and among
      Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited, dated
      August 11, 2008 (incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K filed on August 22,
      2008).




10.39
            Equity
      Transfer Agreement (for the Maanshan Xiaonanshan Mining Co., Ltd.) by and
      among Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited,
      dated August 11, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed on August 22,
      2008).


41




10.40
            Equity
      Transfer Agreement (for the Maanshan Zhaoyuan Mining Co., Ltd.) by and
      among Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited,
      dated August 11, 2008 (incorporated by reference to Exhibit 10.3 to the
      Company’s Current Report on Form 8-K filed on August 22,
      2008).




10.41
            Consulting
      Agreement dated August 11, 2008 by and between Wits Basin (BVI) Ltd.
      (f/k/a China Global Mining Resources Limited, a British Virgin Islands
      corporation) and Mr. Lu Benzhao (incorporated by reference to Exhibit
      10.55 to Form 10-K for the year ended December 31,
  2008).




10.42
            Convertible
      Promissory Note of the Company dated August 22, 2008 in the principal
      amount of $1,000,000 issued in favor of London Mining, Plc. (incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed on August 29, 2008).




10.43
            Secured
      Promissory Note of the Company dated October 28, 2008 in the principal
      amount of $441,000 issued in favor of China Gold, LLC (incorporated by
      reference to Exhibit 10.10 to Form 10-Q for the quarter ended September
      30, 2008).




10.44
            Assignment
      and Amendment Agreement On The Equity Transfer Of Sudan between Lu
      Benzhao, Lu Tinglan, Maanshan Global Mining Resources Limited, China
      Global Mining Resources Limited and the Company dated October 29, 2008
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on November 4,
2008).




10.45
            Supplementary
      and Amendment Agreement On The Equity Transfer Of XNS between Lu Benzhao,
      Lu Tinglan, Maanshan Global Mining Resources Limited, China Global Mining
      Resources Limited and the Company dated October 29, 2008 (incorporated by
      reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed on November 4, 2008).




10.46
            Amendment
      No. 2 to Convertible Notes Purchase Agreement dated November 10, 2008 by
      and between the Company and China Gold, LLC (incorporated by reference to
      Exhibit 10.11 to Form 10-Q for the quarter ended September 30,
      2008).




10.47
            Amended
      and Restated Promissory Note of the Company dated November 10, 2008 in the
      principal amount of $9,800,000 issued in favor of China Gold, LLC
      (incorporated by reference to Exhibit 10.12 to Form 10-Q for the quarter
      ended September 30, 2008).




10.48
            Amended
      and Restated Consulting Agreement by and between the Company and Corporate
      Resource Management, Inc dated November 12, 2008 (incorporated by
      reference to Exhibit 10.13 to Form 10-Q for the quarter ended September
      30, 2008).




10.49
            Promissory
      Note of the Company dated November 12, 2008 in the principal amount of
      $60,000 issued in favor of Hawk Uranium Inc (incorporated by reference to
      Exhibit 10.14 to Form 10-Q for the quarter ended September 30,
      2008).




10.50
            Amendment
      No. 3 to Convertible Notes Purchase Agreement dated December 22, 2008 by
      and between the Company and China Gold, LLC (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December
      29, 2008).




10.51
            Second
      Amended and Restated Promissory Note of the Company dated December 22,
      2008 in the principal amount of $9,800,000 issued in favor of China Gold,
      LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current
      Report on Form 8-K filed on December 29,
2008).




10.52
            Amended
      and Restated Security Agreement dated December 22, 2008 by and between the
      Company and China Gold, LLC (incorporated by reference to Exhibit 10.3 to
      the Company’s Current Report on Form 8-K filed on December 29,
      2008).


42




10.53
            Second
      Amended and Restated Pledge Agreement dated December 22, 2008 by and
      between the Company and China Gold, LLC (incorporated by reference to
      Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December
      29, 2008).




10.54
            Transfer
      Agreement Relating to the Entire Issued Share Capital of China Global
      Mining Resources Limited (Hong Kong) dated December 23, 2008 by and
      between the Company and China Global Mining Resources (BVI) Limited
      (incorporated by reference to Exhibit 10.68 to Form 10-K for the year
      ended December 31, 2008).




10.55
            Agreement
      on Amendment dated January 13, 2009 by and between Wits Basin (BVI) Ltd.
      (f/k/a China Global Mining Resources Limited, a British Virgin Islands
      corporation) and Mr. Lu Benzhao (incorporated by reference to Exhibit
      10.69 to Form 10-K for the year ended December 31,
  2008).




10.56
            Novation
      Agreement dated January 13, 2009 by and between Wits Basin (BVI) Ltd.
      (f/k/a China Global Mining Resources Limited, a British Virgin Islands
      corporation), China Global Mining Resources (BVI) Limited and Mr. Lu
      Benzhao (incorporated by reference to Exhibit 10.70 to Form 10-K for the
      year ended December 31, 2008).




10.57
            Subscription
      Agreement by and between the Company and London Mining Plc, dated March
      17, 2009 (incorporated by reference to Exhibit 10.1 to Form 10-Q for the
      quarter ended March 31, 2009).




10.58
            Shareholders
      Agreement by and between the Company and London Mining Plc, dated March
      17, 2009 (incorporated by reference to Exhibit 10.2 to Form 10-Q for the
      quarter ended March 31, 2009).




10.59
            Loan
      Agreement between the Company and London Mining Plc in the principal
      amount of $5,750,000, dated March 17, 2009 (incorporated by reference to
      Exhibit 10.3 to Form 10-Q for the quarter ended March 31,
      2009).




10.60
            Convertible
      Debenture between Cabo Drilling (America) Inc. and the Company and Hunter
      Bates Mining Corporation dated April 27, 2009 (incorporated by reference
      to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May
      1, 2009).




10.61
            Deed
      of Trust to Public Trustee, Mortgage, Security Agreement, Assignment of
      Production and Proceeds, Financing Statement and Fixture Filing from
      Hunter Bates Mining Corporation to The Public Trustee of Gilpin County,
      Colorado for the benefit of Cabo Drilling (America) Inc. dated April 27,
      2009 (incorporated by reference to Exhibit 10.2 to the Company’s Current
      Report on Form 8-K filed on May 1,
2009).




10.62
            Letter
      Agreement with Hawk Uranium Inc dated July 1, 2009 (incorporated by
      reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed on July 10, 2009).




10.63
            Form
      of unsecured promissory note of the Company (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 15,
      2009).




10.64
            Stock
      Purchase Agreement dated September 29, 2009 by and among certain
      Shareholders of Princeton Acquisitions, Inc., and the Company
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on October 8,
2009).




10.65**
            Loan
      Agreement between the Company and Kenglo One Ltd., dated December 14,
      2009.




10.66**
            Secured
      Promissory Note between the Company and Kenglo One Ltd. in the principal
      amount of $5,000,000, dated December 14,
2009.




10.67**
            Security
      Agreement between the Company and Kenglo One Ltd. in the principal amount
      of $5,000,000, dated December 14,
2009.


43




10.68**
            Private
      Option Agreement between the Company and Kenglo One Ltd., dated December
      14, 2009.




10.69**
            Amendment
      No. 4 to Convertible Notes Purchase Agreement dated December 17, 2009 by
      and between the Company and China Gold,
LLC.




10.70**
            Third
      Amended and Restated Promissory Note of the Company dated December 17,
      2009 in the principal amount of $6,153,321 issued in favor of China Gold,
      LLC.




10.71**
            Second
      Amended and Restated Security Agreement dated December 17, 2009 by and
      between the Company and China Gold,
LLC.




10.72**
            Third
      Amended and Restated Pledge Agreement dated December 17, 2009 by and
      between the Company and China Gold,
LLC.




10.73**
            Amended
      and Restated 10% Senior Secured Convertible Promissory Note of the Company
      dated December 17, 2009 in the principal amount of $117,391 issued in
      favor of China Gold, LLC.




10.74**
            Amended
      and Restated 10% Senior Secured Promissory Note of the Company dated
      December 17, 2009 in the principal amount of $110,000 issued in favor of
      China Gold, LLC.




10.75**
            Letter
      agreement dated December 17, 2009 with Pioneer Holdings, LLC with respect
      projects in Chile.





21**
            Subsidiaries
      of the Registrant.





23.1**
            Consent
      of Moquist Thorvilson Kaufmann Kennedy & Pieper
  LLC.





24**
            Power
      of Attorney (included on the signature page
  hereto).





31.1**
            Certification
      by Chief Executive Officer.





31.2**
            Certification
      by Chief Financial Officer.





32.1**
            Certification
      by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.





32.2**
            Certification
      by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.





** Filed
herewith electronically





+++
Confidential treatment granted as to certain portions of this exhibit pursuant
to Rule 24b-2 of the Exchange Act of 1934, as amended.


44


SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





WITS
      BASIN PRECIOUS MINERALS INC.(“COMPANY”)Dated:
      April 15, 2010
                By:
                /s/ Stephen D. KingStephen
      D. KingChief
      Executive Officer





Each
person whose signature to this Annual Report appears below hereby constitutes
and appoints Stephen D. King and Mark D. Dacko as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his or
her behalf individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments to this Annual Report and
any and all instruments or documents filed as part of or in connection with this
Annual Report or the amendments thereto and each of the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitutes,
shall do or cause to be done by virtue hereof.





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Company, in the capacities and
dates indicated.





Name
                                    
                                    Title
                                    
                                    Date/s/ Stephen D. King
                                    
                                    Chief
      Executive Officer and Director
                                    
                                    April
      15, 2010Stephen
      D. King
                                    
                                    (principal
      executive officer)/s/ Dr. Clyde Smith
                                    
                                    President
      and Director
                                    
                                    April
      14, 2010Dr.
      Clyde Smith/s/ Mark D. Dacko
                                    
                                    Chief
      Financial Officer and Secretary
                                    
                                    April
      15, 2010Mark
      D. Dacko
                                    
                                    (principal
      financial and accounting officer)/s/ Norman D. Lowenthal
                                    
                                    Director
                                    
                                    April
      14, 2010Norman
      D. Lowenthal/s/ Joseph Mancuso
                                    
                                    Director
                                    
                                    April
      14, 2010Joseph
      Mancuso/s/ Donald S. Stoica
                                    
                                    Director
                                    
                                    April
      13, 2010Donald
      S. Stoica


45


ITEM
8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA





Table of
Contents




PageReport
      of Independent Registered Public Accounting Firm of Moquist Thorvilson
      Kaufmann Kennedy & Pieper LLC
                  
                  F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                  
                  F-3Consolidated
      Statements of Operations for the Years Ended December 31, 2009 and
      2008
                  
                  F-4Consolidated
      Statements of Shareholders’ Deficit for the Years Ended December 31, 2009
      and 2008
                  
                  F-5Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
                  
                  F-9Notes
      to Consolidated Financial Statements
                  
                  F-11





REPORT
OF INDEPENDENT REGISTERED


PUBLIC
ACCOUNTING FIRM





To the
Board of Directors and Shareholders of


Wits
Basin Precious Minerals Inc. and subsidiaries (an exploration stage
company)





We have
audited the accompanying consolidated balance sheets of Wits Basin Precious
Minerals Inc. and subsidiaries (an exploration stage company) as of December 31,
2009 and 2008, and the related consolidated statements of operations,
shareholders’ deficit and cash flows for the years ended December 31, 2009 and
2008, and the period from May 1, 2003 (inception of exploration stage) to
December 31, 2009. Wits Basin Precious Minerals Inc.’s management is responsible
for these financial statements. Our responsibility is to express an opinion on
these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Wits Basin Precious Minerals Inc.
as of December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years ended December 31, 2009 and 2008, and the period from May 1,
2003 (inception of exploration stage) to December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, the Company had net losses for the
years ended December 31, 2009 and 2008 and had an accumulated deficit at
December 31, 2009. These conditions raise substantial doubt about its ability to
continue as a going concern.  Management’s plans regarding those
matters are also described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.





/s/
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC





Minneapolis,
Minnesota


April 15,
2010


F-2


WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED BALANCE
SHEETS





December 31,2009
              
              
              2008AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              1,109,544
              
              
              $
              230,729Prepaid
      expenses
              
              
              10,986
              
              
              
              89,813Total
      current assets
              
              
              1,120,530
              
              
              
              320,542Property,
      plant and equipment, net
              
              
              1,536,408
              
              
              
              2,047,222Mineral
      properties and development costs
              
              
              5,660,726
              
              
              
              5,255,635Advance
      payments on equity investments
              
              
              —
              
              
              
              5,000,000Restricted
      cash escrowed for debt repayment
              
              
              2,000,000
              
              
              
              —Investment
      in partially-owned equity affiliates
              
              
              44,853
              
              
              
              41,988Debt
      issuance costs, net
              
              
              546,381
              
              
              
              7,514Total
      assets
              
              $
              10,908,898
              
              
              $
              12,672,901Liabilities
      and Shareholders’ DeficitCurrent
      liabilities:Short-term
      notes payable, net of original issue discount
              
              $
              315,000
              
              
              $
              212,140Current
      portion of convertible notes payable, net of original issue
      discount
              
              
              1,915,587
              
              
              
              1,871,628Current
      portion of long-term notes payable
              
              
              6,009,202
              
              
              
              204,248Accounts
      payable
              
              
              214,626
              
              
              
              252,215Accrued
      interest
              
              
              529,326
              
              
              
              121,617Other
      accrued expenses
              
              
              793,636
              
              
              
              2,432,658Total
      current liabilities
              
              
              9,777,377
              
              
              
              5,094,506Long-term
      liabilities:Convertible
      note payable, long-term portion
              
              
              314,923
              
              
              
              —Long-term
      notes payable, net of discount
              
              
              15,033,964
              
              
              
              13,493,131Other
      liability
              
              
              205,933
              
              
              
              —Total
      liabilities
              
              
              25,332,197
              
              
              
              18,587,637Commitments
      and contingenciesShareholders’
      deficit:Common
      stock, $0.01 par value, 300,000,000 shares authorized: 166,182,703 and
      142,180,749 shares issued and outstanding at December 31, 2009 and 2008,
      respectively
              
              
              1,661,827
              
              
              
              1,421,807Additional
      paid-in capital
              
              
              67,362,825
              
              
              
              59,910,010Warrants
      outstanding
              
              
              7,243,688
              
              
              
              7,961,908Accumulated
      deficit
              
              
              (22,932,460
              )
              
              
              (22,932,460
              )Deficit
      accumulated during the exploration stage, subsequent to April 30,
      2003
              
              
              (67,654,919
              )
              
              
              (52,276,001
              )Total
      Wits Basin shareholders’ deficit
              
              
              (14,319,039
              )
              
              
              (5,914,736
              )Non-controlling
      interest
              
              
              (104,260
              )
              
              
              —Total
      shareholders’ deficit
              
              
              (14,423,299
              )
              
              
              (5,914,736
              )Total
      liabilities and shareholders’ deficit
              
              $
              10,908,898
              
              
              $
              12,672,901





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


F-3


WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS





May 1, 2003
                  (inception)December 31,
                
                
                To Dec. 31,2009
                
                
                2008
                
                
                2009Revenues
                
                $
                —
                
                
                $
                —
                
                
                $
                —Operating
      expenses:General
      and administrative
                
                
                3,103,517
                
                
                
                7,631,564
                
                
                
                29,569,085Exploration
      expenses
                
                
                222,677
                
                
                
                1,625,018
                
                
                
                12,213,436Depreciation
      and amortization
                
                
                105,723
                
                
                
                65,142
                
                
                
                647,179Merger
      transaction costs
                
                
                325,512
                
                
                
                —
                
                
                
                1,564,131Loss
      on impairment of assets
                
                
                5,770,814
                
                
                
                —
                
                
                
                7,870,814Stock
      issued as penalty
                
                
                —
                
                
                
                —
                
                
                
                2,152,128Loss
      on sale of mining properties
                
                
                —
                
                
                
                —
                
                
                
                571,758Loss
      on disposal of assets
                
                
                —
                
                
                
                12,362
                
                
                
                13,995Loss
      from equity investments in partially-owned affiliates
                
                
                18,252
                
                
                
                18,012
                
                
                
                36,264Total
      operating expenses
                
                
                9,546,495
                
                
                
                9,352,098
                
                
                
                54,638,790Loss
      from operations
                
                
                (9,546,495
                )
                
                
                (9,352,098
                )
                
                
                (54,638,790
                )Other
      income (expense):Other
      income (expense), net
                
                
                19
                
                
                
                813
                
                
                
                104,296Interest
      expense
                
                
                (6,417,726
                )
                
                
                (3,292,448
                )
                
                
                (13,707,307
                )Loss
      on debt extinguishment, net
                
                
                —
                
                
                
                (1,485,558
                )
                
                
                (1,485,558
                )Gain
      on deconsolidation of subsidiary, net
                
                
                1,461,078
                
                
                
                —
                
                
                
                1,461,078Foreign
      currency gains (losses)
                
                
                (901,739
                )
                
                
                1,222,082
                
                
                
                320,343Total
      other income (expense)
                
                
                (5,858,368
                )
                
                
                (3,555,111
                )
                
                
                (13,307,148
                )Loss
      from operations before income taxes and discontinued
      operations
                
                
                (15,404,863
                )
                
                
                (12,907,209
                )
                
                
                (67,945,938
                )Income
      tax benefit (provision)
                
                
                —
                
                
                
                —
                
                
                
                243,920Loss
      from continuing operations
                
                
                (15,404,863
                )
                
                
                (12,907,209
                )
                
                
                (67,702,018
                )Discontinued
      operations:Gain
      from discontinued operations
                
                
                —
                
                
                
                —
                
                
                
                21,154Loss
      after discontinued operations
                
                
                (15,404,863
                )
                
                
                (12,907,209
                )
                
                
                (67,680,864
                )Net
      loss attributable to non-controlling interest
                
                
                25,945
                
                
                
                —
                
                
                
                25,945Net
      loss attributable to Wits Basin
                
                $
                (15,378,918
                )
                
                $
                (12,907,209
                )
                
                $
                (67,654,919
                )Basic
      and diluted net loss per common share attributable to Wits
      Basin:Continuing
      operations
                
                $
                (0.10
                )
                
                $
                (0.10
                )
                
                $
                (0.79
                )Discontinued
      operations
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss per common share attributable to Wits Basin
                
                $
                (0.10
                )
                
                $
                (0.10
                )
                
                $
                (0.79
                )Basic
      and diluted weighted average common shares outstanding
                
                
                152,024,653
                
                
                
                129,674,425
                
                
                
                85,450,923





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




F-4




WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





AdditionalCommon stock
                
                
                paid-inShares
                
                
                Amount
                
                
                capital
                
                
                WarrantsBALANCE,
      December 31, 2007
                
                
                113,982,533
                
                
                $
                1,139,825
                
                
                $
                51,147,313
                
                
                $
                5,710,383Issuance
      of 7,781,666 shares of common stock in private placements from $0.15 to
      $0.25 per share (net of offering costs of $68,130)
                
                
                7,781,666
                
                
                
                77,817
                
                
                
                992,827
                
                
                
                154,598Exercise
      of warrants with cash (net of $1,500 of costs)
                
                
                6,000,000
                
                
                
                60,000
                
                
                
                1,087,655
                
                
                
                (949,155
                )Cash-less
      exercise of warrants
                
                
                3,770,931
                
                
                
                37,709
                
                
                
                629,150
                
                
                
                (666,859
                )Issuance
      of 3,620,000 shares of common stock and a warrant to purchase 100,000
      shares of common stock in connection with purchase of Bates-Hunter
      Mine
                
                
                3,620,000
                
                
                
                36,200
                
                
                
                705,900
                
                
                
                16,019Issuance
      and modification of warrants related to extensions and extinguishment of
      convertible debt and notes payable, including recording a beneficial
      conversion feature
                
                
                —
                
                
                
                —
                
                
                
                496,633
                
                
                
                4,200,382Conversion
      of $197,650 of principal on convertible notes payable into common stock,
      including additional beneficial conversion charges for conversion price
      reductions totaling $294,994
                
                
                2,573,030
                
                
                
                25,730
                
                
                
                466,914
                
                
                
                —Common
      stock issued in lieu of cash for debt, interest, and accrued
      expenses
                
                
                532,589
                
                
                
                5,326
                
                
                
                111,636
                
                
                
                —Issuance
      of 2,920,000 shares of common stock and 6,000,000 warrants to consultants
      for services and exploration rights
                
                
                2,920,000
                
                
                
                29,200
                
                
                
                544,400
                
                
                
                963,966Exercise
      of Right-to-Purchase option provided under the terms of 2006 note payable
      with a price modification in 2008
                
                
                1,000,000
                
                
                
                10,000
                
                
                
                50,000
                
                
                
                —Stock
      option/warrant compensation expense
                
                
                —
                
                
                
                —
                
                
                
                2,065,156
                
                
                
                145,000Warrants
      that expired during 2008 without exercise
                
                
                —
                
                
                
                —
                
                
                
                1,612,426
                
                
                
                (1,612,426
                )Net
      loss attributable to Wits Basin
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss attributable to non-controlling interest
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      December 31, 2008
                
                
                142,180,749
                
                
                
                1,421,807
                
                
                
                59,910,010
                
                
                
                7,961,908Conversion
      of $621,842 of principal and $1,897 of accrued interest on convertible
      notes payable into common stock, including additional beneficial
      conversion charges for conversion price reductions totaling
      $1,825,372
                
                
                12,583,076
                
                
                
                125,831
                
                
                
                2,323,280
                
                
                
                —Issuance
      of 6,300,000 shares of common stock in private placements at $0.05 per
      share, net of offering costs of $31,821 and net of $97,759 allocated to a
      liability tied to an option to purchase Standard Gold’s common
      stock
                
                
                6,300,000
                
                
                
                63,000
                
                
                
                122,420
                
                
                
                —


F-5





AdditionalCommon stock
                  
                  
                  paid-inShares
                  
                  
                  Amount
                  
                  
                  capital
                  
                  
                  WarrantsIssuance
      of 500,000 shares of common stock related to Bates-Hunter Mine Limited
      Recourse Promissory Note under a standstill agreement
                  
                  
                  500,000
                  
                  
                  
                  5,000
                  
                  
                  
                  35,000
                  
                  
                  
                  —Issuance
      of common stock and modification of warrants related to extensions of
      convertible debt and notes payable
                  
                  
                  300,000
                  
                  
                  
                  3,000
                  
                  
                  
                  17,661
                  
                  
                  
                  114,029Issuance
      of warrants and modifications to existing warrants and beneficial
      conversion charge with obtaining new debt
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  12,604
                  
                  
                  
                  1,898,806Issuance
      of common stock in lieu of cash payments for management services fees due
      to Hawk Uranium earned during 2008 and 2009
                  
                  
                  3,218,878
                  
                  
                  
                  32,189
                  
                  
                  
                  256,510
                  
                  
                  
                  —Issuance
      of 1,100,000 shares to a consultant for services provided to CGMR
      (BVI)
                  
                  
                  1,100,000
                  
                  
                  
                  11,000
                  
                  
                  
                  88,000
                  
                  
                  
                  —Stock
      option/warrant compensation expense
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,306,298
                  
                  
                  
                  —Warrants
      that expired during 2009without
      exercise
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,731,055
                  
                  
                  
                  (2,731,055
                  )Equity
      adjustments in our majority owned subsidiary (Standard
      Gold):Increase
      in equity due to Standard Gold issuing common stock to 3rd
      parties
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  598,911
                  
                  
                  
                  —Decrease
      in equity from Wits Basin purchasing additional Standard Gold common
      stock
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (38,924
                  )
                  
                  
                  —Net
      loss attributable to Wits Basin
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Net
      loss attributable to non-controlling interest
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —BALANCE,
      December 31, 2009
                  
                  
                  166,182,703
                  
                  
                  $
                  1,661,827
                  
                  
                  $
                  67,362,825
                  
                  
                  $
                  7,243,688





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


F-6


WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





Accumulated
                  deficit
                
                
                Deficit
                  accumulated
                  (1)
                
                
                Non-controlling
                  interest
                
                
                TotalBALANCE,
      December 31, 2007
                
                $
                (22,932,460
                )
                
                $
                (39,368,792
                )
                
                $
                —
                
                
                $
                (4,303,731
                )Issuance
      of 7,781,666 shares of common stock in private placements from $0.15 to
      $0.25 per share (net of offering costs of $68,130)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,225,242Exercise
      of warrants with cash (net of $1,500 of costs)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                198,500Cash-less
      exercise of warrants
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Issuance
      of 3,620,000 shares of common stock and a warrant to purchase 100,000
      shares of common stock in connection with purchase of Bates-Hunter
      Mine
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                758,119Issuance
      and modification of warrants related to extensions and extinguishment of
      convertible debt and notes payable, including recording a beneficial
      conversion feature
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                4,697,015Conversion
      of $197,650 of principal on convertible notes payable into common stock,
      including additional beneficial conversion charges for conversion price
      reductions totaling $294,994
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                492,644Common
      stock issued in lieu of cash for debt, interest, and accrued
      expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                116,962Issuance
      of 2,920,000 shares of common stock and 6,000,000 warrants to consultants
      for services and exploration rights
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,537,566Exercise
      of Right-to-Purchase option provided under the terms of 2006 note payable
      with a price modification in 2008
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                60,000Stock
      option/warrant compensation expense
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,210,156Warrants
      that expired during 2008 without exercise
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss attributable to Wits Basin
                
                
                —
                
                
                
                (12,907,209
                )
                
                
                —
                
                
                
                (12,907,209
                )Net
      loss attributable to non-controlling interest
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —BALANCE,
      December 31, 2008
                
                
                (22,932,460
                )
                
                
                (52,276,001
                )
                
                
                —
                
                
                
                (5,914,736
                )Conversion
      of $621,842 of principal and $1,897 of accrued interest on convertible
      notes payable into common stock, including additional beneficial
      conversion charges for conversion price reductions totaling
      $1,825,372
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2,449,111Issuance
      of 6,300,000 shares of common stock in private placements at $0.05 per
      share, net of offering costs of $31,821 and net of $97,759 allocated to a
      liability tied to an option to purchase Standard Gold’s common
      stock
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                185,420


F-7





Accumulated
                    deficit
                  
                  
                  Deficit
                    accumulated
                    (1)
                  
                  
                  Non-controlling
                    interest
                  
                  
                  TotalIssuance
      of 500,000 shares of common stock related to Bates-Hunter Mine Limited
      Recourse Promissory Note under a standstill agreement
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  40,000Issuance
      of common stock and modification of warrants related to extensions of
      convertible debt and notes payable
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  134,690Issuance
      of warrants and modifications to existing warrants and beneficial
      conversion charge with obtaining new debt
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,911,410Issuance
      of common stock in lieu of cash payments for management services fees due
      to Hawk Uranium earned during 2008 and 2009
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  288,699Issuance
      of 1,100,000 shares to a consultant for services provided to CGMR
      (BVI)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  99,000Stock
      option/warrant compensation expense
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,306,298Warrants
      that expired during 2009without
      exercise
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Equity
      adjustments in our majority owned subsidiary (Standard
      Gold):Increase
      in equity due to Standard Gold issuing common stock to 3rd
      parties
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (117,239
                  )
                  
                  
                  481,672Decrease
      in equity from Wits Basin purchasing additional Standard Gold common
      stock
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  38,924
                  
                  
                  
                  —Net
      loss attributable to Wits Basin
                  
                  
                  —
                  
                  
                  
                  (15,378,918
                  )
                  
                  
                  —
                  
                  
                  
                  (15,378,918
                  )Net
      loss attributable to non-controlling interest
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (25,945
                  )
                  
                  
                  (25,945
                  )BALANCE,
      December 31, 2009
                  
                  
                  (22,932,460
                  )
                  
                  $
                  (67,654,919
                  )
                  
                  $
                  (104,260
                  )
                  
                  $
                  (14,423,299
                  )





(1)
            Deficit
      accumulated during the exploration stage, subsequent to April 30,
      2003.





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


F-8


WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS





May 1, 2003(inception) toDecember 31,
                
                
                Dec. 31,2009
                
                
                2008
                
                
                2009OPERATING
      ACTIVITIES:Net
      loss
                
                $
                (15,404,863
                )
                
                $
                (12,907,209
                )
                
                $
                (67,680,864
                )Adjustments
      to reconcile net loss to cash flows from operating
    activities:Depreciation
      and amortization
                
                
                105,723
                
                
                
                65,142
                
                
                
                647,179Loss
      (gain) on disposal of miscellaneous assets
                
                
                —
                
                
                
                12,362
                
                
                
                (51,585
                )Loss
      from investment in partially-owned equity affiliate
                
                
                18,252
                
                
                
                18,012
                
                
                
                36,264Loss
      (gain) on sale of mining projects
                
                
                —
                
                
                
                —
                
                
                
                571,758Gain
      on deconsolidation of subsidiary, net
                
                
                (1,461,078
                )
                
                
                —
                
                
                
                (1,461,078
                )Loss
      (gain) on foreign currency
                
                
                901,739
                
                
                
                (1,222,082
                )
                
                
                (320,343
                )Issuance
      of common stock and warrants for exploration rights
                
                
                —
                
                
                
                185,282
                
                
                
                5,885,372Issuance
      of common stock and warrants for services
                
                
                99,000
                
                
                
                246,797
                
                
                
                2,447,737Amortization
      of prepaid consulting fees related to issuance and modifications of
      warrants and issuance of common stock
                
                
                55,109
                
                
                
                1,086,121
                
                
                
                6,649,899Amortization
      of debt issuance costs
                
                
                127,132
                
                
                
                76,374
                
                
                
                378,844Amortization
      of original issue discount & beneficial conversion
    feature
                
                
                4,886,320
                
                
                
                1,882,470
                
                
                
                8,965,680Compensation
      expense related to stock options and warrants
                
                
                1,306,298
                
                
                
                2,210,156
                
                
                
                4,799,278Loss
      on debt extinguishment
                
                
                —
                
                
                
                1,485,558
                
                
                
                1,485,558Issuance
      of common stock and warrants for interest expense
                
                
                40,000
                
                
                
                —
                
                
                
                1,213,420Loss
      on impairment of assets
                
                
                5,770,814
                
                
                
                —
                
                
                
                7,870,814Issuance
      of common stock as penalty related to private placement
                
                
                —
                
                
                
                —
                
                
                
                2,152,128Contributed
      services by an executive
                
                
                —
                
                
                
                —
                
                
                
                274,500Non-cash
      loss on nickel property (exploration)
                
                
                —
                
                
                
                150,000
                
                
                
                150,000Gain
      from discontinued operations
                
                
                —
                
                
                
                —
                
                
                
                (21,154
                )Changes
      in operating assets and liabilities:Accounts
      receivable, net
                
                
                —
                
                
                
                —
                
                
                
                18,017Prepaid
      expenses
                
                
                23,718
                
                
                
                20,583
                
                
                
                (209,761
                )Accounts
      payable
                
                
                (37,589
                )
                
                
                22,923
                
                
                
                144,345Accrued
      expenses
                
                
                1,604,903
                
                
                
                1,533,276
                
                
                
                4,225,660Net
      cash used in operating activities
                
                
                (1,964,522
                )
                
                
                (5,134,235
                )
                
                
                (21,828,332
                )INVESTING
      ACTIVITIES:Purchases
      of property and equipment
                
                
                —
                
                
                
                (28,106
                )
                
                
                (143,629
                )Purchase
      of Bates-Hunter Mine (acquisition costs)
                
                
                —
                
                
                
                (364,680
                )
                
                
                (364,680
                )Advance
      to partially-owned equity affiliate
                
                
                (390,000
                )
                
                
                (60,000
                )
                
                
                (450,000
                )Proceeds
      from sale of mining projects
                
                
                —
                
                
                
                —
                
                
                
                220,820Proceeds
      from sale of miscellaneous assets
                
                
                —
                
                
                
                —
                
                
                
                89,639Purchases
      of investments
                
                
                —
                
                
                
                —
                
                
                
                (2,244,276
                )Refunds
      and (advance payments) on equity investments
                
                
                —
                
                
                
                1,850,000
                
                
                
                (5,150,000
                )Net
      cash provided by (used in) investing activities
                
                
                (390,000
                )
                
                
                1,397,214
                
                
                
                (8,042,126
                )


F-9


WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS, continued





May 1, 2003(inception) toDecember 31,
                
                
                Dec. 31,2009
                
                
                2008
                
                
                2009FINANCING
      ACTIVITIES:Payments
      on short-term and long-term debt
                
                
                (476,106
                )
                
                
                (555,000
                )
                
                
                (3,790,751
                )Restricted
      cash escrowed for debt repayment
                
                
                (2,000,000
                )
                
                
                —
                
                
                
                (2,000,000
                )Cash
      proceeds from issuance of common stock, net of offering
    costs
                
                
                283,179
                
                
                
                1,285,242
                
                
                
                7,977,228Cash
      proceeds from exercise of stock options
                
                
                —
                
                
                
                —
                
                
                
                199,900Cash
      proceeds from exercise of warrants
                
                
                —
                
                
                
                198,500
                
                
                
                6,724,547Cash
      proceeds from short-term debt
                
                
                760,000
                
                
                
                2,976,000
                
                
                
                16,115,000Cash
      proceeds from long-term debt
                
                
                4,500,000
                
                
                
                —
                
                
                
                5,150,000Capital
      contributed by non-controlling interest
                
                
                231,672
                
                
                
                —
                
                
                
                231,672Debt
      issuance costs
                
                
                (65,408
                )
                
                
                (67,473
                )
                
                
                (324,634
                )Net
      cash provided by financing activities
                
                
                3,233,337
                
                
                
                3,837,269
                
                
                
                30,282,962INCREASE
      IN CASH AND EQUIVALENTS
                
                
                878,815
                
                
                
                100,248
                
                
                
                412,504CASH
      AND EQUIVALENTS, beginning of period
                
                
                230,729
                
                
                
                130,481
                
                
                
                697,040CASH
      AND EQUIVALENTS, end of period
                
                $
                1,109,544
                
                
                $
                230,729
                
                
                $
                1,109,544Supplemental
      cash flow information:Cash
      paid for interest
                
                $
                322,719
                
                
                $
                1,472,805
                
                
                $
                1,871,580Cash
      paid for income taxes
                
                $
                —
                
                
                $
                —
                
                
                $
                —Disclosure
      of non-cash investing and financing activities:Issuance
      of common stock, warrants and options for prepaid consulting
      fees
                
                $
                —
                
                
                $
                1,105,487
                
                
                $
                5,807,065Issuance
      of common stock in lieu of cash for debt, interest, accounts payable and
      accrued expenses
                
                $
                288,699
                
                
                $
                116,962
                
                
                $
                444,661Conversion
      of debt principal and accrued interest to common stock
                
                $
                623,739
                
                
                $
                197,650
                
                
                $
                821,389Issuance
      of debt and warrants for financing costs
                
                $
                600,591
                
                
                $
                —
                
                
                $
                600,591Debt
      paid through issuance of Standard Gold stock
                
                $
                250,000
                
                
                $
                —
                
                
                $
                250,000Current
      liabilities converted to debt
                
                $
                1,472,043
                
                
                $
                180,107
                
                
                $
                1,652,150Issuance
      of common stock and warrants for purchase of Bates-Hunter
    Mine
                
                $
                —
                
                
                $
                758,119
                
                
                $
                758,119Long-tern
      debt incurred for purchase of Bates-Hunter Mine
                
                $
                —
                
                
                $
                6,156,250
                
                
                $
                6,156,250Accrued
      expenses incurred in connection with purchase of Bates-Hunter
      Mine
                
                $
                —
                
                
                $
                307,500
                
                
                $
                307,500Short-term
      debt refinanced into long-term debt
                
                $
                5,284,041
                
                
                $
                9,800,000
                
                
                $
                15,084,041





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




F-10




WITS
BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES


(AN
EXPLORATION STAGE COMPANY)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009 and 2008





NOTE 1 – NATURE OF
BUSINESS





Wits
Basin Precious Minerals Inc. (with its subsidiaries “we,” “us,” “our,” “Wits
Basin” or the “Company”) is a minerals exploration and development company based
in Minneapolis, Minnesota.  As of December 31, 2009, we hold (i) an
equity interest of approximately 94% of Standard Gold, Inc. (f/k/a Princeton
Acquisitions, Inc.) which owns a past producing gold mine in Colorado (the
“Bates-Hunter Mine”), (ii) a 50% equity interest in China Global Mining
Resources (BVI) Ltd., which owns a producing iron ore mine and processing plant
in the People’s Republic of China, (the “PRC”), (iii) a 35% equity interest in
Kwagga Gold (Barbados) Limited, which holds prospecting rights in South Africa
(the “FSC Project”) and (iv) certain rights in the Vianey Concession in Mexico.
The following is a summary of these projects:





Standard
Gold, Inc.


On June
12, 2008, we transferred our right to purchase the Bates-Hunter Mine, a prior
producing gold mine located in Central City, Colorado, to a newly created wholly
owned subsidiary of ours, the Hunter Bates Mining Corporation (the “Hunter
Bates”). Concurrent with this transfer, Hunter Bates completed the acquisition
of the Bates-Hunter Mine. On September 29, 2009, Standard Gold, Inc., a Colorado
corporation (“Standard Gold”) (formerly known as Princeton Acquisitions, Inc., a
public shell corporation at the time) completed a reverse acquisition via a
share exchange with Hunter Bates and all of its shareholders, whereby the
holders of capital securities of Hunter Bates exchanged all of their capital
securities, on a share-for-share basis, into similar capital securities of
Standard Gold (the “Share Exchange”). Accordingly, the Share Exchange
represented a change in control (reverse merger) and Hunter Bates became a
wholly owned subsidiary of Standard Gold. We hold an aggregate of 21,513,544
shares of Standard Gold common stock as of December 31, 2009 (or approximately
94% of the issued and outstanding shares of common stock) and Standard Gold is
now a majority owned subsidiary of ours. Standard Gold’s common stock is quoted
on the OTCBB under the symbol “SDGR.”





China
Global Mining Resources (BVI) Ltd.


On March
17, 2009, we entered into a joint venture with London Mining, Plc, a United
Kingdom corporation (“London Mining”) for the purpose of acquiring the
processing plant of Nanjing Sudan Mining Co. Ltd (“Sudan”) and the iron ore mine
of Xiaonanshan Mining Co. Ltd (“Xiaonanshan”) (the Sudan and Xiaonanshan
collectively are referred to as the “PRC Properties”). Pursuant to that certain
Amended and Restated Subscription Agreement, dated March 17, 2009 by and between
London Mining and the Company, London Mining purchased 100 ordinary A Shares of
China Global Mining Resources (BVI) Ltd, a British Virgin Islands corporation
and at the time a wholly owned subsidiary of ours (“CGMR (BVI)”) for $38.75
million, which A Shares constitute a 50% equity interest in CGMR (BVI). We hold
the remaining 50% equity interest in the form of 100 ordinary B Shares. The A
Shares carry a preference with respect to return of capital and distributions
until London Mining receives an aggregate of $44.5 million in return of capital
or distributions and certain other conditions are met (99% to London Mining and
1% to Wits Basin). On March 17, 2009, CGMR (BVI), through its wholly owned
subsidiary China Global Mining Resources Limited, a Hong Kong corporation (“CGMR
HK”), acquired the PRC Properties. At that time, we deconsolidated CGMR (BVI) as
a subsidiary of ours.


F-11


Kwagga
Gold (Barbados) Limited


We hold a
35% equity interest in Kwagga Gold (Barbados) Limited (“Kwagga Barbados”),
which, through its wholly owned subsidiary Kwagga Gold (Proprietary) Limited, a
South African entity (“Kwagga Pty”), holds mineral exploration rights in South
Africa. This project is referred to as the “FSC Project” and is located adjacent
to the historic Witwatersrand Basin. From October 2003 through August 2005, we
completed only two range-finding drillholes (our $2,100,000 investment to
acquire the 35% equity was utilized to fund the drillholes) and we have not
performed any further exploration activities since. On December 12, 2007, we
entered into an agreement with AfriOre International (Barbados) Limited
(“AfriOre”), the holder of the other 65% of Kwagga Barbados, whereby we may
acquire all of AfriOre’s interest of Kwagga Barbados. We have submitted
documentation to obtain the consent of South Africa’s Minister of Minerals and
Energy, who oversees the Department of Minerals and Energy (the “DME”) to allow
for the sale of the controlling interest in Kwagga Pty to a U.S. company, which
is still under review. Other than limited maintenance of the prospecting rights,
no other activities will be conducted until consent is issued by the
DME.





Vianey
Mine Concession


In
October 2007, we executed an amendment to 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 and a wholly owned subsidiary of
Journey. Pursuant to the terms of the amendment, we own a 50% undivided
beneficial interest in “located mineral claims” in the property known as the
Vianey Mine Concession located in the State of Guerrero, Mexico (“Vianey”).
Based on our further due diligence on the Vianey, we have determined that it is
necessary to increase the size of the land package in order for this project to
be a viable exploration endeavor. Inquiries and communications have been
disseminated to the adjacent properties, regarding possible purchase of land,
rights or some type of further joint venture to accomplish an increased
footprint.





As of
December 31, 2009, 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. As of the date of this
financial statement, we do not claim to have any mineral reserves at the
Bates-Hunter Mine, the FSC Project or the Vianey.





Going
Concern





The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
assuming we will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of
business.  For the year ended December 31, 2009, we incurred losses
from continuing operations of $15,404,863. At December 31, 2009, we had an
accumulated deficit of $90,587,379 and a working capital deficit of
$8,656,847.  Our ability to continue as a going concern is dependent
on our ability to raise the required additional capital or debt to meet short
and long-term operating requirements. We believe that private placements of
equity capital and debt financing may be adequate to fund our long-term
operating requirements. We may also encounter business endeavors that require
significant cash commitments or unanticipated problems or expenses that could
result in a requirement for additional cash. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our current shareholders could be reduced, and such securities
might have rights, preferences or privileges senior to our common stock.
Additional financing may not be available upon acceptable terms, or at
all.  If adequate funds are not available or are not available on
acceptable terms, we may not be able to take advantage of prospective business
endeavors or opportunities, which could significantly and materially restrict
our operations. We are continuing to pursue external financing alternatives to
improve our working capital position.  If we are unable to obtain the
necessary capital, we may have to cease operations.





NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Principles of
Consolidation





The
consolidated financial statements include the accounts of Wits Basin Precious
Minerals Inc., and our majority owned subsidiary of Standard Gold, Inc. (and its
wholly owned subsidiaries). All significant intercompany transactions and
balances have been eliminated in consolidation.


F-12


Foreign
Currencies





All
dollar amounts expressed in this financial statement are in US Dollars ($),
unless specifically noted, as certain transactions are denominated in the
Canadian Dollar (“Cdn$”).





Cash and Cash
Equivalents





We
include as cash equivalents: (a) certificates of deposit, and (b) all other
investments with maturities of three months or less, which are readily
convertible into known amounts of cash. We maintain our cash in high-quality
financial institutions. The balances, at times, may exceed federally insured
limits.





Property and
Equipment





Property
and equipment are recorded at cost and depreciated using the straight-line
method over estimated useful lives as follows:


YearsBuildings
                  
                  20Equipment
                  
                  2-7





Maintenance
and repairs are charged to expense as incurred; major renewals and betterments
are capitalized. As items of property or equipment are sold or retired, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in operating income.





Mineral
Properties





Mineral
property acquisition costs are recorded at cost and are deferred until the
viability of the property is determined. No properties have reached the
development stage at this time. Exploration, mineral property evaluations,
option payments, related acquisition costs for mineral properties acquired under
an option agreement, general overhead, administrative and holding costs to
maintain a property on a care and maintenance basis are expensed in the period
they are incurred. When reserves are determined for a property and a bankable
feasibility study is completed, subsequent exploration and development costs on
the property would be capitalized. If a project were to be put into production,
capitalized costs would be depleted on the unit of production
basis.





Management
reviews the net carrying value of each mineral property as changes may
materialize with a property or at a minimum, on an annual basis. Where
information and conditions suggest impairment, estimated future net cash flows
from each property are calculated using estimated future prices, proven and
probable reserves and value beyond proven and probable reserves, and operating,
capital and reclamation costs on an undiscounted basis. If it is determined that
the future cash flows are less than the carrying value, a write-down to the
estimated fair value is made with a charge to loss for the period. Where
estimates of future net cash flows are not available and where other conditions
suggest impairment, management assesses if the carrying value can be
recovered.





Management's
estimates of gold prices, recoverable reserves, probable outcomes, operating
capital and reclamation costs are subject to risks and uncertainties that may
affect the recoverability of mineral property costs.





Although
the Company has taken steps to verify title to mineral properties in which it
has an interest, these procedures do not guarantee the Company's title. Such
properties may be subject to prior undetected agreements or transfers and title
may be affected by such defects.


F-13


Investment in
partially-owned equity affiliates





Investments
in companies over which the Company exercises significant influence, but does
not consolidate are accounted for using the equity method, whereby the
investment is carried at the Company's original cost plus its proportionate
share of undistributed earnings/losses. The excess carrying value of the
Company's investment over its underlying equity in the net assets is included in
the consolidated balance sheet as “Investment in Partially-Owned Equity
Affiliates.”





Long-Lived
Assets





We will
periodically evaluate the carrying value of long-lived assets to be held and
used, including but not limited to, mineral properties, capital assets and
intangible assets, when events and circumstances warrant such a
review.  The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value.  In that
event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. Fair value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved.  Losses on long-lived assets to be disposed of
are determined in a similar manner, except that fair values are reduced for the
cost to dispose. During 2009, the Company impaired its equity investment in
China Global Mining Resources (see Note – 9 Investment in partially-owned equity
affiliates for further information). There were no impairment charges during the
year ended December 31, 2008.





Segment
Reporting





We have a
single operating segment of minerals exploration.





Revenue Recognition and
Deferred Revenue





As of
December 31, 2009, none of our projects provided any revenues and we do not
expect them to generate revenues for the foreseeable future. Due to the
disproportionate distributions stipulated in the joint venture agreement with
London Mining regarding the CGMR (BVI) entity and the requirement to retire
London Mining’s entire initial investment prior to any such distribution, the
likelihood of our proportional 1% interest having any recordable revenue for the
foreseeable future seems unlikely.





Use of
Estimates





Preparing
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.





Stock Based
Compensation





The
Company recognizes the cost of stock-based compensation arrangements in the
statement of operations on a straight line basis over the service periods of the
awards.  The Company estimates the fair value of share-based payment
awards on the date of grant using an option-pricing model.





Off Balance Sheet
Arrangements





As of
December 31, 2009, we did not have any off-balance sheet activities (including
the use of structured finance or special purpose entities) or any trading
activities in non-exchange traded commodity contracts that have a current or
future effect on our financial condition, changes in the financial condition,
revenues or expenses, results of operation, liquidity, capital expenditures or
capital resources that are material to our investors.


F-14


Financial
Instruments





The
carrying amounts for all financial instruments approximates fair value. The
carrying amounts for cash and cash equivalents, accounts payable and accrued
liabilities approximated fair value because of the short maturity of these
instruments. The fair value of short-term debt approximated the carrying amounts
based upon our expected borrowing rate for debt with similar remaining
maturities and comparable risk.  The fair value of long-term debt was
assumed to approximate the carrying amount as most of the debt was incurred
recently.





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.





Income
Taxes





Income
taxes are provided for using the asset and liability method of
accounting.  Accordingly, deferred tax assets and liabilities arise
from the difference between the tax basis of an asset or liability and its
reported amount in the financial statements.  Deferred tax amounts are
determined using the tax rates expected to be in effect when the taxes will
actually be paid or refunds received, as provided under currently enacted tax
law.  Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.  Income tax
expense or benefit is the tax payable or refundable, respectively, for the
period plus or minus the change in deferred tax assets and liabilities during
the period.




Current
accounting guidance prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to
be recognized, a tax position must be more-likely-than not to be sustained upon
examination by taxing authorities. The Company believes its income tax filing
positions and deductions will be sustained upon examination and, accordingly, no
reserves, or related accruals for interest and penalties has been recorded at
December 31, 2009 and 2008. In accordance with the guidance, the Company has
adopted a policy under which, if required to be recognized in the future,
interest related to the underpayment of income taxes and any related penalties
will be put into their respective accounts. The Company's remaining open tax
years subject to examination include the years ended December 31, 2005 through
2009.





The
Company has recorded a full valuation allowance against the net deferred tax
assets due to the uncertainty of realizing the related benefits.





Recent Accounting
Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance codifying generally accepted accounting principles in the United States
(“GAAP”). While the guidance was not intended to change GAAP, it did change the
way the Company references these accounting principles in the Notes to the
Consolidated Financial Statements.  This guidance was effective for
interim and annual reporting periods ending after September 15,
2009.  The Company’s adoption of this authoritative guidance as of
September 30, 2009 changed how it references GAAP in its
disclosures.





In June
2009, the FASB issued authoritative guidance that eliminates the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity and requires on-going qualitative reassessments of
whether an enterprise is the primary beneficiary of a variable interest
entity.  This guidance is effective for fiscal years beginning after
November 15, 2009. The Company does not expect the adoption of this
authoritative guidance to have any current impact on the consolidated financial
statements.


F-15


NOTE 3 – PREPAID
EXPENSES





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





During
2008, we entered into five consulting agreements with unaffiliated third party
consultants and issued: (i) an aggregate of 2,020,000 shares of un-registered
common stock, with an aggregate value of $378,600 based on the closing sale
price of our common stock on the issuance date and (ii) two two-year warrants to
purchase up to an aggregate of 5,000,000 shares of common stock, with exercise
prices from $0.01 to $0.20 per share (valued at $726,887 using the Black-Scholes
pricing model).





Components
of prepaid expenses at December 31 are as follows:





2009
                    
                    
                    2008Prepaid
      consulting fees
                    
                    $
                    —
                    
                    
                    $
                    55,109Other
      prepaid expenses
                    
                    
                    10,986
                    
                    
                    
                    34,704$
                    10,986
                    
                    
                    $
                    89,813





NOTE 4 – ACQUISITION OF
BATES-HUNTER MINE





On June
12, 2008, Wits Basin entered into a fifth amendment to that certain Asset
Purchase Agreement dated September 20, 2006 by and among Wits Basin and the
Sellers (Hunter Gold Mining Corp, a British Columbia corporation, Hunter Gold
Mining Inc., a Colorado corporation, George E. Otten, a resident of Colorado and
Central City Consolidated, Corp. d/b/a Central City Consolidated Mining Co., a
Colorado corporation) to, among other changes, reflect the assignment by Wits
Basin of its rights in the Asset Purchase Agreement to Hunter
Bates.





Pursuant
to the terms of the Asset Purchase Agreement, Wits Basin and Hunter Bates
completed the acquisition of the Bates-Hunter Mine properties, which included
land, buildings, equipment, mining claims and permits, financed through a
limited recourse promissory note of Hunter Bates payable to Mr. Otten (on behalf
of all of the Sellers) in the principal amount of Cdn$6,750,000 ($6,736,785 US
as of June 12, 2008) and Wits Basin issued 3,620,000 shares of its common stock
with a fair value of $742,100. We also incurred acquisition costs of $380,698.
Additionally, the following net smelter royalties were granted: (i) a two
percent net smelter return royalty on all future production, with no limit and
(ii) a one percent net smelter return royalty (up to a maximum payment of
$1,500,000).





A summary
of the total purchase price is as follows:





Promissory
      note payable
                      
                      $
                      6,736,785Common
      stock issued
                      
                      
                      742,100Acquisition
      costs
                      
                      
                      380,698Less
      discounts on the note
                      
                      
                      (580,534
                      )Total
      purchase price
                      
                      $
                      7,279,049




The
following table summarizes the initial allocation of the purchase price, in US
Dollars, of the assets acquired in the transaction along with the subsequent
changes to the underlying assets based on a more formal assessment of fair
market value. These changes had no material effect on depreciation. The US
Dollar values reflect a discount ($580,534) relating to the Otten recourse note
being non-interest bearing until January 1, 2010.


F-16





December 31,2009
                    
                    
                    2008Land
                    
                    $
                    329,280
                    
                    
                    $
                    610,423Buildings
                    
                    
                    1,206,954
                    
                    
                    
                    1,330,902Equipment
                    
                    
                    82,089
                    
                    
                    
                    82,089Mining
      claims
                    
                    
                    5,657,383
                    
                    
                    
                    5,252,292Mining
      permits
                    
                    
                    3,343
                    
                    
                    
                    3,343Total
      purchase price
                    
                    $
                    7,279,049
                    
                    
                    $
                    7,279,049





NOTE 5 – PROPERTY, PLANT AND
EQUIPMENT





Prior to
our acquisition of the Bates-Hunter Mine in June 2008, we made purchases of
various pieces of equipment necessary to operate and de-water the Bates-Hunter
Mine property. After the acquisition, we now have additional assets of land,
buildings and other additional equipment all related to the Bates-Hunter Mine.
Depreciation on allowable assets is calculated on a straight-line method over
the estimated useful life, presently ranging from two to twenty
years.  Components of our property, plant and equipment are as
follows:





December 31,2009
                    
                    
                    2008Land
                    
                    $
                    329,280
                    
                    
                    $
                    610,423Buildings
                    
                    
                    1,206,954
                    
                    
                    
                    1,330,902Equipment
                    
                    
                    199,694
                    
                    
                    
                    199,694Less
      accumulated depreciation
                    
                    
                    (199,520
                    )
                    
                    
                    (93,797
                    )$
                    1,536,408
                    
                    
                    $
                    2,047,222





NOTE 6 – MINERAL PROPERTIES
AND DEVELOPMENT COSTS





As noted
in Note 4, a more formal valuation assessment was done with the Hunter-Bates
Mine purchase in 2009. Our initial allocation of the purchase price to the
mining claims and permits acquired in the Bates-Hunter Mine transaction has been
adjusted accordingly to the final valuation study. Since the purchase, we have
not commenced any mining operations due to the lack of funding and therefore, we
have not recorded any amortization expense and we have determined that no
impairment has occurred for the period ended December 31, 2009. Components of
our mineral properties and development costs are as follows:





December 31,2009
                    
                    
                    2008Mining
      claims (1)
                    
                    $
                    5,657,383
                    
                    
                    $
                    5,252,292Mining
      permits (2)
                    
                    
                    3,343
                    
                    
                    
                    3,343$
                    5,660,726
                    
                    
                    $
                    5,255,635





(1)
            We
      acquired some surface rights and some mining rights to 22 parcels located
      in Gilpin County, Colorado.


(2)
            We
      acquired various mining, special use, water discharge, stormwater and
      drilling permits, all of which require renewal at various
      times.





NOTE 7 – ADVANCE PAYMENTS ON
EQUITY INVESTMENTS





During
2007, we made a direct $5 million investment through one of our wholly owned
subsidiaries to the sellers of the iron ore PRC Properties, which secured our
right to purchase these assets and provided the sellers with working capital.
The original heads of agreement, that certain Equity and Asset Transfer Heads of
Agreement dated May 4, 2007, went through a series of amendments and
assignments. On March 17, 2009, we entered into a joint venture with London
Mining, whereby the joint venture acquired the PRC Properties from the sellers.
The joint venture vehicle was our previously wholly owned subsidiary of China
Global Mining Resources (BVI) Ltd, a British Virgin Islands
corporation.


F-17


As of
December 31, 2008, we only held the rights to acquire these iron ore mining
properties and, therefore, we continued to record the $5 million as an advanced
payment for the eventual purchase of the iron ore properties until such time as
we had some type of resolution. Effective with the consummation of the joint
venture on March 17, 2009, we still considered this $5 million advance to be an
advance still due back from the sellers and not a partial payment on the
purchase of the iron ore properties. We have since decided, due to the
voluminous amendments and transfers of rights and the joint venture’s delay in
making the additional payments required to the seller under the purchase
agreement, that the re-payment of this $5 million, in any event, will be a
long-term event. Since we could not obtain certification as to the assurance of
the repayment, we made the assessment that an impairment was appropriate and
therefore, we impaired this original advance to $0 at December 31,
2009.





NOTE 8 – RESTRICTED CASH
ESCROWED FOR DEBT REPAYMENT





On
December 16, 2009, London Mining negotiated terms with us to reduce our
outstanding debt with London Mining. In connection with the agreement, we paid
$2,000,000 to be held in escrow until final terms were negotiated on which debt
to apply it against. The funds were released out of an escrow account held by
legal counsel of London Mining on January 7, 2010.





NOTE 9 – INVESTMENT IN
PARTIALLY-OWNED EQUITY AFFILIATES





Kwagga
Gold (Barbados) Limited


We hold a
35% interest in Kwagga Barbados which is accounted for under the equity method.
Kwagga Gold (Proprietary) Limited, a wholly owned subsidiary of Kwagga Barbados,
holds the mineral exploration rights in the FSC Project. Through December 31,
2007, our previous investment of $2,100,000 was impaired to $0.





In an
effort to maintain the permits and land claims of the FSC Project, we entered
into a bridge financing arrangement with Hawk Uranium, Inc. (“Hawk”) in 2008,
whereby Hawk made a loan to us of $60,000, which was then advanced to Kwagga
Barbados. AfriOre, the majority owner (65%) of Kwagga Barbados, has decided not
to commit any further resources to this project at this time.  Under
current accounting guidance, we will recognize 100% of this $60,000 advance as a
loss from investments in partially-owned affiliates to coincide with the funds
being dispersed by Kwagga Barbados over time. Since the losses relate to
exploration activities, an integral part of our operations, the losses are shown
in operations under the caption, “Loss from equity investments in
partially-owned affiliates.”





Other
than maintenance of property and prospecting rights and our submission to the
DME, no other exploration activities will be conducted until a consent is issued
by the DME. For the year ended December 31, 2009, the Company recognized a net
unrealized gain of $2,865 and for the year ended December 31, 2008, the Company
recognized a loss of $18,012.





China
Global Mining Resources (BVI) Ltd.


On
December 17, 2008, we created a new British Virgin Islands corporation and
wholly owned subsidiary of ours under the name of China Global Mining Resources
(BVI) Limited (“CGMR (BVI)”) to serve as the joint venture entity with London
Mining. On December 23, 2008, we sold our 100% equity ownership of China Global
Mining Resources Limited, a Hong Kong corporation (“CGMR HK”) to CGMR (BVI) for
$4.8 million, whereby CGMR HK became a wholly owned subsidiary of CGMR (BVI).
CGMR HK was assigned all of our rights to acquire the PRC iron ore properties of
the Sudan, Xiaonanshan and Matang. Due to this sale occurring between two
commonly controlled entities, no gain ($4.8 million) was recorded by the
Company.  As of December 31, 2008, we owned 100% of both
CGMR’s.


F-18


On March
17, 2009, we entered into an amended and restated subscription agreement with
London Mining (the “LM Subscription Agreement”), whereby they acquired a 50%
equity interest in CGMR (BVI) by paying an aggregate of $38.75 million for 100 A
Shares.  We hold the remaining 50% equity interest in CGMR (BVI) in
the form of 100 ordinary B Shares.  All shares have equal voting
rights and the board of directors was split equally between the two equity
owners as well, subject to the terms of a shareholders’ agreement with London
Mining (the “LM Shareholders’ Agreement”). Contemporaneously, CGMR (BVI)
(through CGMR HK) completed the acquisition of the PRC Properties. Pursuant to
the LM Subscription Agreement, we entered into the LM Shareholders’ Agreement
setting forth certain preferences of the A Shares and governance terms
applicable to CGMR (BVI).  The A Shares carry a preference with
respect to return of capital and distributions until such time as an aggregate
of $44.5 million (which includes the subscription amount of $38.75 million and
$5.75 million in the form of a loan made to us) is returned or distributed to
the holders of the A Shares (the “Repayment”).  The A Shares
preference entitles them to 99% of the distributions of CGMR (BVI) until
Repayment, while the B Shares that we hold will receive a 1% distribution, after
which time London Mining will be entitled to 60% of the distributions and the
Company 40% until the PRC Properties achieve an annual production output of
850,000 tons of iron ore. Upon achievement of such production, the respective
holders of the A Shares and the B Shares, each as a class, will be entitled to
50% of the distributions.  Additionally, London Mining is entitled
under the LM Shareholders’ Agreement to a management fee in the amount of $5.5
million for the first year following the acquisition, and $4.5 million annually
thereafter until Repayment.  In the event Repayment occurs within
three years, we may be entitled to receive a portion of the aggregate management
fee paid to London Mining.  Under the LM Shareholders’ Agreement, we
will be required to indemnify London Mining in the event certain events occur
prior to Repayment, including (i) certain payments made under the consulting
agreement with Mr. Lu that are to be deferred, (ii) payments incurred in
developing Matang, (iii) failure to complete the acquisition of Matang in
accordance with the business plan relating to the operation of the PRC
Properties, or (iv) a material deviation from the business plan relating to the
operation of the PRC Properties. Our indemnification, if any, would be satisfied
by the transfer of a number of our B Shares, having a fair market value equal to
the indemnified amount as determined under the LM Shareholders’ Agreement. The
LM Shareholders’ Agreement further provides for transfer restrictions agreed
between the parties, including rights of first refusal, drag along and tag along
rights.




In
conjunction with the joint venture and under the current
accounting guidance for Noncontrolling Interests in
Consolidated Financial Statements, we deconsolidated CGMR (BVI) and
recorded our retained interest at fair value, estimated to be $387,500. As part
of the deconsolidation process, an intercompany note receivable of $4.8 million
is no longer eliminated in the consolidated financial statements. Therefore, the
$4.8 million unrecognized gain mentioned above is, in effect, realized due to
CGMR (BVI) no longer being controlled by the Company. However, due to the
distribution ordering rules contained in the aforementioned LM Shareholders’
Agreement, collectability of the $4.8 million note receivable cannot be
reasonably assured and will be allowed for as a doubtful account until
collection can be reasonably assured. When the fair value of the retained
interest ($387,500) is compared to the historical carrying value (negative
$1,073,578), the deconsolidation results in a gain of
$1,461,078.  The $4.8 million note receivable will continue to be
carried on the Company’s books at $0, until collectability of the amount can be
more reasonably assured.





The
Company has a 50% equity interest, equal voting rights and an equal
representation on the board.  Therefore, the Company can exercise
significant influence over the operations and financial policies of the joint
venture but does not exercise control.  Accordingly, the investment is
accounted for under the equity method of accounting.  However, because
of the aforementioned preferential distribution allocation of 99% to 1%, the
Company will continue to record only their 1% proportionate share of income and
losses until the preferential distribution to LM is entirely made. 
Additionally, in 4th quarter 2009, the Company made the determination to impair
their entire investment in CGMR (BVI) for the following reasons:  (i)
the joint venture has a current 2009 loss, (ii) the joint
venture missed a significant additional purchase price payment due the
seller because of cash flow shortages from operations and 
(iii) the Company is not certain when, and if they will
receive their limited distribution of 1%.   
Therefore, the Company has impaired the fair value of their retained interest of
$387,500 less allocated losses of $6,686 for the period from March 17, 2009 to
September 30, 2009 for a net impairment of $380,814.  The Company has
discontinued recording any further operating losses in 4th quarter 2009 and
beyond since their basis cannot go below zero.


F-19


The
following table summarizes our investment in partially-owned equity
affiliates:





Balance
      at December 31, 2007
                    
                    $
                    —Advance
      to Kwagga
                    
                    
                    60,000Losses
      recorded during 2008 from Kwagga
                    
                    
                    (18,012
                    )Balance
      at December 31, 2008
                    
                    
                    41,988Current
      year advances
                    
                    
                    —Net
      loss recorded during 2009 from Kwagga
                    
                    
                    (11,566
                    )2009
      unrealized foreign currency gain
                    
                    
                    14,431Loss
      recorded for CGMR (BVI) activity from March 17, 2009 to September 30,
      2009
                    
                    
                    (6,686
                    )Deconsolidation
      of CGMR (BVI) & HK
                    
                    
                    387,500Impairment
      of CGMR (BVI) & HK
                    
                    
                    (380,814
                    )Balance
      at December 31, 2009
                    
                    $
                    44,853





NOTE 10 – DEBT ISSUANCE
COSTS





We
recorded debt issuance costs with respect to legal services and promissory notes
relating to debt issued during 2009 and 2008.  The following table
summarizes the amortization of debt issuance costs:





December 31,2009
                    
                    
                    2008Debt
      issuance costs, net, beginning of period
                    
                    $
                    7,514
                    
                    
                    $
                    16,415Add:
      additional debt issuance costs
                    
                    
                    665,999
                    
                    
                    
                    67,473Less:
      amortization of debt issuance costs
                    
                    
                    (127,132
                    )
                    
                    
                    (76,374
                    )Debt
      issuance costs, net, end of period
                    
                    $
                    546,381
                    
                    
                    $
                    7,514





NOTE 11 – SHORT-TERM NOTES
PAYABLE





The
following table summarizes the Company’s short-term notes payable:





December
      31,2009
                
                
                2008Loan
      from former board member; $60,000 face amount net of unamortized discount
      of $7,860 at December 31, 2008; interest rate of 10%, paid in full in
      2009.
                
                $
                —
                
                
                $
                52,140Original
      Platinum V secured loan; interest rate of 10%; accrued interest of $7,959
      and $5,349 at December 31, 2009 and 2008, respectively; due February 15,
      2010.
                
                
                110,000
                
                
                
                110,000Promissory
      note of $50,000 issued as a debt issuance cost; interest rate of 10%,
      accrued interest of $2,877 at December 31, 2009; secured by personal
      guaranty of Mr. King, our Chief Executive Officer; due March 8,
      2010.
                
                
                50,000
                
                
                
                —Unsecured
      loan of $50,000; original interest rate of 2%, lender extended maturity
      date in exchange of new interest rate of 10% effective January 1, 2010;
      accrued interest of $1,585 and $564 at December 31, 2009 and 2008,
      respectively; due June 30, 2010.
                
                
                50,000
                
                
                
                50,000Unsecured
      promissory note of $75,000 issued as a debt issuance cost; interest rate
      of 10%; accrued interest of $1,039 at December 31, 2009; due November 10,
      2010.
                
                
                75,000
                
                
                
                —Unsecured
      $30,000 loan; interest rate of 0%, repayment of loan is tied to any
      potential future projects conducted in Chile including, (i) a 50/50
      distribution of earnings, profits and/or cash for the first $540,000 in
      aggregate distributions and, (ii) a 2% non-dilutive net smelter right to
      the lender (subject to the Company’s right to repurchase at terms to be
      agreed upon).
                
                
                30,000
                
                
                
                —Totals
                
                $
                315,000
                
                
                $
                212,140





F-20




The
weighted average interest rate at December 31, 2009 was 9%.





Summary





The
following table summarizes the short-term notes payable balances:





Balance
      at December 31, 2007
                    
                    $
                    234,220Add:
      gross proceeds of 2008
                    
                    
                    966,000Add:
      refinancing of China Gold Promissory Notes
                    
                    
                    9,800,000Less:
      original issue discount at time of issuance
                    
                    
                    (10,000
                    )Less:
      value assigned to warrants
                    
                    
                    (308,116
                    )Add:
      amortization of original issue discount
                    
                    
                    304,430Less:
      principal payments
                    
                    
                    (565,000
                    )Less:
      refinancing of short-term China Gold Notes into long-term
                    
                    
                    (10,209,394
                    )Balance
      at December 31, 2008
                    
                    
                    212,140Add:
      gross proceeds of 2009
                    
                    
                    580,000Less:
      original issue discount
                    
                    
                    (35,000
                    )Less:
      value assigned to warrants and re-pricing of warrants
                    
                    
                    (463,770
                    )Add:
      amortization of original issue discount
                    
                    
                    506,630Less:
      principal payments
                    
                    
                    (485,000
                    )Balance
      at December 31, 2009
                    
                    $
                    315,000





NOTE 12 – CONVERTIBLE NOTES
PAYABLE





The
following table summarizes the Company’s convertible notes:





December
      31,2009
                
                
                2008London
      Mining unsecured convertible loan; interest rate 8%; accrued interest of
      $103,430 and $23,653 at December 31, 2009 and 2008, respectively;
      convertible at $0.10 per share; due August 22, 2009, currently past due,
      original terms apply in the default period.
                
                $
                1,000,000
                
                
                $
                1,000,000Original
      $1.02 million Platinum secured convertible loan net of unamortized
      discount of $0 and $60,722 at December 31, 2009 and 2008,
      respectively;  stated interest rate of 10%; accrued interest of
      $28,827 and $48,072 at December 31, 2009 and 2008, respectively; see
      following description for other terms and changes.
                
                
                238,746
                
                
                
                761,628Cabo
      $511,590 secured convertible debenture net of unamortized discount of
      $46,667 at December 31, 2009; stated interest rate of 12% with an initial
      effective rate of 18.5%; accrued interest of $41,712 at December 31, 2009;
      convertible at $0.20 per share; $150,000 payments due April 28, 2010 and
      2011 with balance due April 28, 2012. The debenture is secured by the
      Hunter-Bates Mine.
                
                
                464,923
                
                
                
                —Burnham
      $310,000 unsecured convertible loan net of unamortized discount of $33,333
      at December 31, 2009; stated interest rate of 0% with an initial effective
      rate of 58.8%; convertible at the greater of fair market value or $0.05;
      due March 16, 2010; see following description for additional
      information.
                
                
                276,667
                
                
                
                —Other
      convertible notes; see following description for terms and
      changes.
                
                
                250,174
                
                
                
                110,000Totals
                
                
                2,230,510
                
                
                
                1,871,628Less
      current portion
                
                
                (1,915,587
                )
                
                
                (1,871,628
                )Long-term
      portion
                
                $
                314,923
                
                
                $
                —





F-21




Platinum V Senior Secured
Convertible Promissory Note





On
February 13, 2008, we entered into a Note and Warrant Purchase Agreement (the
“Platinum Agreement”) dated February 11, 2008 with Platinum Long Term Growth V,
LLC (“Platinum”), pursuant to which we issued to Platinum a 10% Senior Secured
Convertible Promissory Note in the principal amount of $1,020,000 with an
original maturity date of February 11, 2009 (the “Platinum Note”). The Platinum
Note is convertible at any time into shares of our common stock at an initial
conversion price of $0.18 per share.  The conversion price is further
subject to weighted-average anti-dilution adjustments in the event we issue
equity or equity-linked securities at a price below the then-applicable
conversion price. After August 11, 2008, if the seven trailing trading day
volume-weighted average price (“VWAP”) of our common stock is less than $0.30
per share (as appropriately adjusted for any splits, combinations or like events
relating to the common stock), the holder shall have the option to: (i) require
us to prepay in cash all or any portion of the Platinum Note at a price equal to
115% of the aggregate principal amount to be repaid together with accrued and
unpaid interest (“Option 1”) or (ii) demand that all or a portion of the
Platinum Note be converted into common stock at a conversion price equal to the
lesser of the then-applicable conversion price or 85% of the lowest VWAP for the
10 trading days preceding such demand (“Option 2”).





Pursuant
to the Platinum Agreement, we issued Platinum a five-year warrant to purchase up
to 2.5 million shares of our common stock at an exercise price of $0.35 per
share, which contains a cashless exercise provision beginning any time after
August 11, 2008, and further provides for a weighted-average anti-dilution
adjustment to the exercise price in the event we issue equity or equity-linked
securities at a price below the then-applicable exercise price.





As
additional consideration pursuant to the terms of the Platinum Agreement, we
agreed to accelerate the vesting of a previously issued warrant (to MHG
Consultant LLC, an affiliate of Platinum) to purchase up to 3 million shares of
our common stock that was transferred to Platinum at closing, such that the
remaining 2.25 million unvested shares underlying such warrant became
immediately vested and exercisable. We provided Platinum piggy-back registration
rights relating to the shares of common stock issuable upon conversion of the
Note and exercise of the warrants. The Platinum Agreement and other transaction
documents contain standard representations, warranties, and covenants of the
parties.





The
recording of the Platinum Note is considered to be conventional convertible debt
and resulted in the proceeds of the loan being allocated based on the relative
fair value of the debt and warrants. Using the Black-Scholes pricing model to
value the 2.5 million warrant issued with the loan and the accelerated vesting
of the 2.25 million warrant transferred from MHG to Platinum during the three
month period ended March 31, 2008, the relative fair value allocated to the
warrants and recorded as a debt discount was $523,367.  Furthermore,
due to the reduced relative fair value assigned to the convertible debt, the
debt had a beneficial conversion feature that was “in-the-money” on the
commitment date which totaled $496,633.


F-22


In June
2009, Platinum sold its rights to the Platinum Agreement, including the Platinum
Note (along with its $110,000 10% Senior Secured Promissory Note, as described
in Note 11 – Short-term Notes Payable), to China Gold. China Gold then resold an
aggregate of $400,000 out of its Platinum Note during the remainder of 2009,
which retained the original terms as the Platinum Note. On December 17, 2009, we
entered into amendments with China Gold on the Platinum Note, whereby the
maturity date was amended to be due and payable on demand on or after February
15, 2010 and limited the conversion price, as adjusted, with a floor price of
$0.01 per share.





·
            China
      Gold’s remaining convertible principal balance on its portion of the
      original Platinum Note is $117,391 (along with $24,492 of accrued
      interest) as of December 31, 2009.


·
            Of
      the aggregate $400,000 China Gold sold out of the Platinum Note (in three
      tranches: $100,000, which was fully converted by December 31, 2009,
      $150,000 and $150,000) there remains a convertible balance of (i) $71,355
      (along with $3,016 of accrued interest) and (ii) $50,000 (along with
      $1,319 of accrued interest) as of December 31,
  2009.





The sale
to China Gold by Platinum of its secured convertible note, results in China Gold
holding a security interest in all assets of the Company, Hunter Bates and
Gregory Gold (a wholly owned subsidiary of Hunter bates), subject to certain
priority liens and matters of record.





During
the year ended December 31, 2009, we received notices from all holders of the
Platinum Note to convert $621,842 of principal and $1,897 of interest into
12,583,076 shares of our common stock at conversion rates from $0.04029 to
$0.07300 (a) resulting in additional beneficial conversion charges of $1,825,372
(b).





During
the year ended December 31, 2008, we received notices from the holder of the
Platinum Note to convert $197,650 of principal into 2,573,030 shares of our
common stock at conversion prices from $0.051000 to $0.092905 (a) resulting in
beneficial conversion charges of $294,994 (b).





(a)
            The
      conversion prices were calculated pursuant to Option 2 that became
      effective after August 11, 2008 as described
  above.


(b)
            Because
      the reset feature occurred resulting in additional shares being issued, an
      additional beneficial conversion charge was recorded as interest expense
      and credited to additional paid in
capital.





As of
December 31 2009, all discounts to the debt for the issuance of warrants and
initial beneficial conversion feature have been fully amortized to interest
expense.





Burnham Securities and
Broadband Capital Management





In April
2008, we engaged Burnham Securities and Broadband Capital Management through
respective letter agreements to collectively provide financial advisory and
investment banking services to assist in raising the finances for the
acquisitions of the PRC Properties, with both companies sharing an equal
percentage of the service fee due from a successful closing. At the closing of
the joint venture with London Mining on March 17, 2009, Burnham received a
partial payment for services rendered.  Broadband was not compensated
at such time, with an accrued balance to be paid by the joint venture entity,
CGMR (BVI).





On
September 16, 2009, Burnham Securities, Broadband Capital and the Company
executed a termination agreement (the “Broadband Termination Agreement”),
pursuant to which we were required to make a  $350,000 payment and
issue 7,500,000 shares of our unregistered common stock to Broadband Capital in
full settlement of our obligations under their April 2008 letter agreement with
Broadband Capital, and we received from Broadband Capital a release of any
claims and further obligations under the letter agreement with it. Pursuant to
the Broadband Termination Agreement, we redeemed the 7,500,000 shares with a
payment of $150,000 on December 21, 2009.


F-23


In order
to satisfy the $350,000 payment, CGMR (BVI) paid $110,000 in cash and we
borrowed $240,000 from Burnham Securities in consideration of an unsecured
convertible promissory note with Burnham Securities (the “Burnham Convertible
Note”). The Burnham Convertible Note (i) has a face value of $270,000, requiring
the recording of a discount fee of $30,000 (which was fully amortized to
interest expense by December 16, 2009), (ii) bears no interest, (iii) is
convertible (at a rate equal to the greater of fair market value and $0.05 per
share) into a maximum of 6,200,000 shares of our common stock, and (iv) since
the Burnham Convertible Note was not paid by December 16, 2009, the principal
amount increased to $310,000 and become payable upon demand at any time after
March 16, 2010. We recorded an additional $40,000 discount fee on December 16,
2009 and will amortize over the remainder of the note period.





Since the
fair market value of our common stock was greater than $0.05 per share on the
date of issuance, no beneficial conversion charge existed.





Other Third
Parties





As of
December 31, 2009, other convertible notes consist of the following: total of
$285,000 net of unamortized discounts of $34,826; stated interest rates of 10%
to 12.25%; accrued interest of $37,795; convertible at $0.01 to $0.08 per share;
all notes are due in 2010.





As of
December 31, 2008, other convertible notes consist of the following: total of
$110,000; stated interest rate of 10%; accrued interest of $11,651; convertible
at $0.20 per share; due March 31, 2009.





Summary of All Convertible
Notes





The
following table summarizes the convertible notes balances:





Balance
      at December 31, 2007
                  
                  $
                  9,843,283Add:
      gross proceeds of 2008
                  
                  
                  2,020,000Less:
      value assigned to original beneficial conversion feature and
      warrants
                  
                  
                  (1,020,000
                  )Less:
      value assigned to additional beneficial conversion feature and
      warrants
                  
                  
                  (314,994
                  )Add:
      amortization of original issue discount and beneficial conversion
      feature
                  
                  
                  1,340,989Less:
      conversion of principal to common stock
                  
                  
                  (197,650
                  )Less:
      principal payments
                  
                  
                  —Less:
      refinancing of the four China Gold Notes
                  
                  
                  (9,800,000
                  )Balance
      at December 31, 2008
                  
                  
                  1,871,628Add:
      gross proceeds received during 2009
                  
                  
                  545,000Add:
      conversion of accrued expenses to principal
                  
                  
                  489,828Less:
      original issue discount at time of issuance of notes
                  
                  
                  (130,000
                  )Less:
      conversion of principal to common stock
                  
                  
                  (621,842
                  )Less:
      value assigned to additional beneficial conversion feature and
      warrants
                  
                  
                  (2,052,697
                  )Add:
      amortization of original issue discount and beneficial conversion
      feature
                  
                  
                  2,128,593Less:
      principal payments
                  
                  
                  —Balance
      at December 31, 2009, net of remaining discounts of
    $114,826
                  
                  
                  2,230,510Less:
      current portion
                  
                  
                  (1,915,587
                  )Long-term
      portion at December 31, 2009
                  
                  $
                  314,923





Convertible
debt has the following scheduled annual maturities for the years ending December
31:


2010
                  
                  $
                  1,983,7462011
                  
                  
                  150,0002012
                  
                  
                  211,5902013
                  
                  
                  —2014
                  
                  
                  —Thereafter
                  
                  
                  —Total
                  
                  $
                  2,345,336


F-24


NOTE 13 – OTHER ACCRUED
EXPENSES





The
Company has recorded a number of expenses relating to its transactions for the
acquisition of various global mining properties, consulting agreements and
general and administrative expenses. The following table summarizes the ending
balances of other accrued expenses by relevant transaction:





December
      31,2009
                      
                      
                      2008China
      related transactions (1)
                      
                      $
                      39,473
                      
                      
                      $
                      1,115,234Bates-Hunter
      Mine (2)
                      
                      
                      360,185
                      
                      
                      
                      790,519Hawk
      Uranium’s management services agreements (3)
                      
                      
                      —
                      
                      
                      
                      200,000FSC
      Project
                      
                      
                      123,849
                      
                      
                      
                      96,804Other
      expenses
                      
                      
                      270,129
                      
                      
                      
                      230,101$
                      793,636
                      
                      
                      $
                      2,432,658





(1)
            The
      decrease from December 31, 2008 to December 31, 2009 is due primarily to
      the deconsolidation of CGMR (BVI). See Note 9 – Investments in
      Partially-Owned Equity Method Affiliates, China Gold Mining Resources
      (BVI) Limited for details.


(2)
            The
      decrease from December 31, 2008 to December 31, 2009 is due primarily to
      the issuance of a convertible debenture to Cabo Drilling (America) Inc.,
      in satisfaction of an outstanding payable totaling
    $451,590.


(3)
            Effective
      July 3, 2009, the Company and Hawk entered into a Letter Agreement
      relating to the payment by the Company of certain management services fees
      owed to Hawk and the extension of a promissory note issued by the Company
      in favor of Hawk.  H. Vance White is an officer and director of
      Hawk and served as our Chairman of our Board of Directors until June 10,
      2009.  Pursuant to the Letter Agreement, we agreed to issue Hawk
      3,218,878 unregistered shares of our common stock to satisfy in full an
      aggregate of $200,000 in management services fees that were payable to
      Hawk pursuant to the terms of certain management services agreements
      entered into with Hawk in August 2007 and January
  2008.





NOTE 14 – LONG-TERM NOTES
PAYABLE





The
following table summarizes the Company’s long-term notes payable:





December
      31,2009
                    
                    
                    2008Note
      payable - Otten
                    
                    $
                    6,189,768
                    
                    
                    $
                    5,139,637Note
      payable – China Gold
                    
                    
                    6,009,202
                    
                    
                    
                    8,557,742Note
      payable – London Mining
                    
                    
                    5,750,000
                    
                    
                    
                    —Note
      payable - Kenglo
                    
                    
                    3,094,196
                    
                    
                    
                    —Totals
                    
                    
                    21,043,166
                    
                    
                    
                    13,697,379Less
      current portion
                    
                    
                    (6,009,202
                    )
                    
                    
                    (204,248
                    )Long-term
      portion
                    
                    $
                    15,033,964
                    
                    
                    $
                    13,493,131


F-25


Long-term limited recourse
promissory note – Otten





On June
12, 2008, Hunter Bates completed the acquisition of the Bates-Hunter Mine
properties, which included land, buildings, equipment, mining claims and
permits, financed through a limited recourse promissory note of Hunter Bates
payable to Mr. George Otten (on behalf of all of the Sellers) in the principal
amount of Cdn$6,750,000 (the “Otten Note”). The Otten Note required an initial
payment of Cdn$250,000 due by December 1, 2008, which was subsequently extended
multiple times. On June 1, 2009, the parties entered into a standstill letter
agreement, whereby the Sellers agreed they would not, prior to August 1, 2009,
take any enforcement actions or exercise any rights of default under the Otten
Note and extend the initial payment of Cdn$250,000 to July 31,
2009.  In consideration for entering into the standstill agreement,
two principal payments of Cdn$12,500 were made in June and July 2009. By
November 13, 2009, the complete Cdn$250,000 payment was recorded against the
Otten Note by paying the remaining balance of $225,000. As of December 31, 2009,
the outstanding principal balance is Cdn$6,500,000 (approximately $6,189,768
US).





Commencing
on April 1, 2010, a quarterly installment of accrued interest plus a Production
Revenue Payment (as defined below) becomes payable. The Otten Note is
interest-free until January 1, 2010, and from such date shall bear interest at a
rate of 6% per annum, with a maturity date of December 31, 2015.  The
Otten Note balance reflected a discount (valued at $580,534 and is fully
amortized to interest expense as of December 31, 2009) relating to the recourse
note being non-interest bearing until the first payment in 2010. Hunter Bates’
payment obligations under the Otten Note is secured by a deed of trust relating
to all of the property acquired in favor of Gilpin County Public Trustee for the
benefit of Mr. Otten. Hunter Bates is required to make quarterly principal
repayments (each a “Production Revenue Payment”) beginning April 1, 2010, which
payment(s) shall equal:





1.
            For
      all calendar quarters March 31, 2010 to December 31, 2012, 75% of the
      profit realized by Hunter Bates for the immediately preceding calendar
      quarter, and


2.
            For
      calendar quarters ending after December 31, 2012, the greater of (a) 75%
      of the profit realized by Hunter Bates for the relevant calendar quarter
      and (b) Cdn$300,000.





Furthermore,
if Hunter Bates has not been obligated to make a Production Revenue Payment by
December 31, 2012, then beginning on April 1, 2013 and continuing on each
payment date until Hunter Bates has become obligated to make a Production
Revenue Payment, Hunter Bates shall make principal repayments in the amount of
Cdn$550,000. Upon Hunter Bates becoming obligated to make a Production Revenue
Payment at anytime after April 1, 2013, Hunter Bates shall make Production
Revenue Payments in accordance with #2 above.





The
following table summarizes the Otten long-term limited recourse promissory note
in US Dollars:





Otten
      limited recourse note converted into US Dollar equivalent
                  
                  $
                  6,736,785Less:
      initial discount for imputed interest of the Otten limited recourse
      note
                  
                  
                  (580,534
                  )Less:
      unrealized foreign currency gain from the Otten limited recourse
      note
                  
                  
                  (1,222,082
                  )Add:
      amortization of imputed interest discount
                  
                  
                  205,468Balance
      at December 31, 2008
                  
                  
                  5,139,637Add:
      unrealized foreign currency loss from the Otten limited recourse
      note
                  
                  
                  916,170Add:
      amortization of original issue discount
                  
                  
                  375,067Less:
      principal payments
                  
                  
                  (241,106
                  )Balance
                  
                  
                  6,189,768Less:
      current portion
                  
                  
                  —Balance
      at December 31, 2009
                  
                  $
                  6,189,768


F-26


Second Amended and Restated
Promissory Note with China Gold, LLC





On
December 22, 2008, we entered into Amendment No. 3 to Convertible Notes Purchase
Agreement (“Amendment No. 3”) with China Gold. Pursuant to Amendment No. 3, the
parties consolidated that certain Secured Promissory Note dated October 28, 2008
in the principal amount of $441,000 and that certain Amended and Restated
Promissory Note dated November 10, 2008 in the principal amount of $9.8 million
into a Second Amended and Restated Promissory Note in the aggregate principal
amount of $10,421,107 (the “Consolidated Note”), which reflected the outstanding
principal and accrued interest under the existing notes. This refinancing was
accounted for as an extinguishment of debt, which resulted in a discount to the
Consolidated Note of $1,894,948 in December 2008.  The discount is
being amortized over the life of the Consolidated Note through February 15,
2010, using the effective interest method.





Pursuant
to the Consolidated Note, we received an extension on the maturity dates
relating to the prior notes from December 31, 2008 to February 15, 2010. The
Consolidated Note accrues interest at a rate of 12.25% per annum with the
principal and interest due on demand at any time on or after February 15,
2010.





On March
17, 2009 and contemporaneously with the closing of the joint venture with London
Mining, we: (i) made a prepayment to China Gold under the Consolidated Note in
the amount of $5.6 million, which included principal of $5,284,041 and accrued
interest of $315,959 (China Gold returned $100,000 of the $5.6 million to us
resulting in a net amount of $5,184,041 being applied to the outstanding
principal balance) and (ii) reduced the exercise price of two warrants to
purchase up to an aggregate of 40,082,000 shares of our common stock issued to
China Gold to $0.075 per share (from $0.15 and $0.11 under the respective
warrants) in consideration for China Gold consenting to a security interest
granted to London Mining for a loan made to the Company, which resulted in an
additional fair value of $86,200 recorded as a discount to the remaining debt,
which is being amortized over the remaining term of the debt to interest
expense.





In June
2009, September 2009 and November 2009, we received an additional $100,000,
$150,000 and $150,000, respectively, from China Gold under the terms of the
existing Consolidated Note.





On
December 17, 2009, we entered into Amendment No. 4 (“Amendment No. 4”) to the
Convertible Notes Purchase Agreement, pursuant to which the parties (i)
consolidated certain loan obligations of ours with China Gold into a Third
Amended and Restated Promissory Note dated December 17, 2009 in the principal
amount of $6,153,322 (the “Third Amended Note”), which reflected the outstanding
principal and interest under such consolidated loan obligations, (ii) amended
and modified certain security agreements between the parties to consolidate the
security interests of China Gold, (iii) extend and make certain other
modifications to Platinum Note and the short-term Platinum $110,000 note, and
(iv) reflect certain other agreements between the parties in consideration of
certain accommodations made to us by China Gold, from time to time, including
without limitation China Gold’s consent to our grant to Kenglo (see further
details below) of a security interest that was pari passu to that of China
Gold.





Pursuant
to Amendment No. 4, the parties consolidated our payment obligations under that
certain Second Amended and Restated Promissory Note dated December 22, 2008 in
the principal amount of $10,421,107 (the “Prior Note”) and certain other loans
made by China Gold to us in the aggregate principal amount of $400,000 into the
Third Amended Note.  The Third Amended Note accrues interest at a rate
equal to 12.25% per annum with the principal and interest due on demand at any
time on or after February 15, 2010.  The Prior Note and the other loan
obligations were cancelled as of the issuance of the Third Amended
Note.





China
Gold’s security interest under the Purchase Agreement was principally governed
by the terms of that certain Amended and Restated Security Agreement dated
December 22, 2008 (the “Prior Security Agreement”) and that certain Second
Amended and Restated Pledge Agreement dated December 22, 2008 (the “Prior Pledge
Agreement”).  With the acquisition of the February Note and July Note
from a third-party lender in April 2009, China Gold also acquired a security
interest in certain other assets of the Wits Basin, Hunter Bates and Gregory
Gold, principally pursuant to the terms of that certain Security Agreement dated
February 11, 2008 by and between China Gold (as a successor-in-interest), Wits
Basin, Hunter Bates and Gregory Gold (the “Platinum Security Agreement”).
Pursuant to Amendment No. 4, the parties consolidated the security interests
held by China Gold under the Prior Security Agreement and Prior Pledge Agreement
with those held pursuant to the Platinum Security Agreement into that certain
Second Amended and Restated Security Agreement (the “Amended Security
Agreement”) and Third Amended and Restated Pledge Agreement (the “Amended Pledge
Agreement”), each dated December 17, 2009 and entered into by and between China
Gold, Wits Basin, Hunter Bates and Gregory Gold, resulting in a security
interest in all assets of Wits Basin, Hunter Bates and Gregory Gold, subject to
certain priority liens and matters of record.  Pursuant to the Amended
Pledge Agreement, Wits Basin pledged its equity interest in 18,584,544 shares of
Standard Gold (constituting approximately 81% of the equity interest in Standard
Gold), its 35% equity interest in Kwagga Gold (Barbados) Ltd., and its 50%
equity interest in CGMR (BVI), and Hunter Bates pledged its 100% equity interest
in Gregory Gold. Pursuant to the terms of a consent to the Kenglo financing as
referenced above, China Gold agreed to permit Wits Basin to grant a similar
security interest to Kenglo that is pari passu to the security
interests set forth in the Amended Security Agreement and Amended Pledge
Agreement.


F-27


As
consideration for entering into Amendment No. 4 and certain other accommodations
that China Gold made to the Company from time to time, including without
limitation China Gold’s consent to the Company’s grant to Kenglo of a security
interest that is pari
passu to the security interest held by China Gold to secure China Gold’s
right to repayment of approximately $6,500,000 in obligations of the Company,
the Company issued China Gold a five-year warrant to purchase 1,600,000 shares
of the Company’s common stock at an exercise price of $0.01, and agreed to
modify the terms of that certain warrant to purchase 38,200,000 shares of the
Company’s common stock issued on November 10, 2008 (the “November Warrant”) and
that certain warrant to purchase 882,000 shares of the Company’s common stock
issued on October 28, 2008 (the “October Warrant”) to reduce the exercise price
of such Warrants from $0.075 per share to $0.01 per share.  The
October Warrant was further modified to extend the expiration date from October
28, 2010 to October 28, 2013 as originally intended by the parties. The fair
value of the warrants issued, extended and repriced were valued at $400,591 and
was recorded as a debt issuance cost in connection with the Kenglo One
promissory note more fully discussed below.





As of
December 31, 2009, the outstanding principal balance of the China Gold note is
$6,153,322 with an unamortized discount balance of $144,120.





Promissory Note with London
Mining Plc





Pursuant
to the LM Subscription Agreement, London Mining made a loan to us in the
aggregate amount of $5.75 million (the “WB Loan Agreement”).  The WB
Loan Agreement provides for interest at a rate equal to the prime rate plus 2%
per annum (subject to a cap of 8%), and the obligation matures on the earlier of
January 31, 2014 or upon termination of the LM Shareholders’ Agreement. We used
the proceeds of the loan to make: (i) a $5.6 million payment towards our
obligation under the China Gold Consolidated Note (as described above) and (ii)
reductions in our accounts payable. As of December 31, 2009, the note has
accrued interest of $243,524 with an interest rate of 5.25%.





Promissory Note with Kenglo
One, Ltd.





On
December 14, 2009, we entered into a loan agreement with Kenglo One, Ltd.
(“Kenglo”) whereby we issued to Kenglo a secured promissory note in the face
amount of $5,000,000 (the “Kenglo Note”) in consideration of a loan of
$4,000,000. The Kenglo Note was issued with an original issue discount of
$1,000,000, and otherwise bears no interest.  The maturity date of the
Kenglo Note is February 14, 2011.





As
additional consideration for the loan, we issued Kenglo (i) a five-year warrant
to purchase 16,000,000 shares of our common stock at an exercise price of $0.10
per share (the “Kenglo Warrant”) and (ii) a third-party option to purchase from
Wits Basin 1,299,000 shares of common stock of Standard Gold, Inc. held by the
Company at a price per share of $1.00. The Kenglo Warrant contains standard
anti-dilution rights, and includes a net exercise right on behalf of Kenglo. The
fair value of the warrant was $868,215 based on the Black Scholes pricing model
and is being amortized over the term of the loan.





As of
December 31, 2009, the outstanding principal balance of the Kenglo Note is
$5,000,000 with an unamortized discount balance of $1,905,804.


F-28


Summary





The
following table summarizes the long-term notes payable balances:





Balance
      at December 31, 2007
                  
                  $
                  —Second
      Amended and Restated China Gold Note
                  
                  
                  10,421,107Less:
      discount on China Gold Note
                  
                  
                  (1,894,948
                  )Otten
      limited recourse note converted into US Dollar equivalent
                  
                  
                  6,736,786Less:
      discount for imputed interest of the Otten limited recourse
      note
                  
                  
                  (580,535
                  )Less:
      unrealized foreign currency gain from the Otten limited recourse
      note
                  
                  
                  (1,222,082
                  )Add:
      amortization of OID
                  
                  
                  237,051Balance
      at December 31, 2008
                  
                  
                  13,697,379Add:
      gross proceeds received during 2009
                  
                  
                  10,784,041Add:
      current liabilities converted to principal
                  
                  
                  982,215Less:
      original issue discount
                  
                  
                  (1,000,000
                  )Less:
      discount value assigned to re-pricing of warrants
                  
                  
                  (1,062,589
                  )Less:
      unrealized foreign currency loss from the Otten limited recourse
      note
                  
                  
                  916,170Add:
      amortization of original issue discount
                  
                  
                  2,251,097Less:
      principal payments
                  
                  
                  (5,525,147
                  )Balance,
      net of remaining discounts of $2,049,924
                  
                  
                  21,043,166Less:
      current portion
                  
                  
                  (6,009,202
                  )Balance
      at December 31, 2009
                  
                  $
                  15,033,964





Long-term
debt has the following scheduled annual maturities for the years ending December
31:





2010
                  
                  $
                  6,153,3222011
                  
                  
                  5,000,0002012
                  
                  
                  —2013
                  
                  
                  2,095,0002014
                  
                  
                  7,845,000Thereafter
                  
                  
                  1,999,768Total
                  
                  $
                  23,093,090





NOTE 15 – OTHER
LIABILITY





During
2009, the Company in connection with a private placement offering of our common
stock and a debt financing transaction, granted the participating investors
certain options to purchase Standard Gold (majority owned subsidiary) equity
securities from the Company.  The Standard Gold options were used as
incentives to entice the investors to invest in the Company.  The
following options were granted:





·
            Kenglo
      Promissory Note (see Note 14 – Long-term Notes Payable) – includes an
      option to purchase from the Company 1,299,000 shares of common stock of
      Standard Gold, Inc. at a price of $1.00 per
  share.


·
            Private
      Placement of Wits’ Common Stock (see Note 18 – Shareholders’ Equity) –
      includes an option to purchase from the Company 630,000 units of Standard
      Gold, Inc. at a price of $0.50 per unit. Each unit consists of one share
      of Standard Gold’s common stock and a warrant to purchase a share of
      Standard Gold common stock at an exercise price of $1.00 per
      share.


F-29


Since
these Standard Gold options were not directly and closely related to the equity
of the Company, the estimated total fair value for both of these options was
$205,933 and was recorded as a liability classified as “Other Liability” in the
balance sheet. This liability will reverse through the statement of operations
upon exercise of the options or when the options expire in five
years.





NOTE 16 – COMMITMENTS AND
CONTINGENCIES





Operating
Leases





We
currently occupy approximately 160 square feet of office space, together with
the use of related adjacent common areas, in Minneapolis, Minnesota pursuant to
a lease agreement that expires May 31, 2010.  Under the lease, we are
required to make monthly payments of $1,261 through May 2010. Total rent expense
under the operating lease for the years ended December 31, 2009 and 2008, was
$15,746 and $15,140, respectively.  Future minimum operating lease
commitments for 2010 is approximately $6,305.





NOTE 17 – LEGAL
MATTERS





The
Company is subject to legal proceedings in the normal course of business.
Management believes these proceedings will not have a material adverse effect on
the financial statements.





NOTE 18 – SHAREHOLDERS’
EQUITY





Common Stock
Issuances





During
fiscal 2008, we issued the following shares of our unregistered common
stock:





(1)
            We
      issued 5,000,000 shares through the exercise of warrants at prices ranging
      from $0.01 to $0.15 per share and we received net proceeds of
      $188,500.


(2)
            We
      entered into agreements with six third party consultants for services in
      public and investor relations and issued an aggregate of 2,920,000 shares
      at prices ranging from $0.14 to $0.27 per share, valued at
      $573,600.


(3)
            We
      issued an aggregate of 272,321 shares in lieu of cash payments for debt
      and accrued expenses totaling
$62,908.


(4)
            We
      issued 3,620,000 shares at $0.205 per share pursuant to the acquisition of
      the Bates-Hunter Mine totaling
$742,100.


(5)
            We
      issued 1,000,000 shares pursuant to Pacific Dawn Capital’s
      right-to-purchase option, re-priced to $0.06 per share and we received net
      proceeds of $60,000.


(6)
            Through
      private placements:


(a)
            We
      sold 6,456,666 shares of our common stock at $0.15 per share, resulting in
      net proceeds of $900,894;


(b)
            We
      sold 125,000 shares of our common stock at $0.20 per share, resulting in
      net proceeds of $24,348; and


(c)
            We
      sold 1,200,000 units (which included one common share and one warrant) at
      $0.25 per share, resulting in net proceeds of
  $300,000.


(7)
            Platinum
      Long Term Growth V, LLC received an aggregate of 7,604,229 shares as
      follows:


(a)
            We
      issued Platinum 260,268 shares at $0.20 per share in lieu of its interest
      payment due on June 30, 2008 under its senior secured convertible
      promissory note (valued at
$52,053);


(b)
            We
      issued Platinum 1,000,000 shares through the exercise of a warrant at
      $0.01 per share and we received net proceeds of
  $10,000;


(c)
            Platinum
      exercised certain warrants and received 3,770,931 shares of our common
      stock by surrendering 266,333 of its available shares to pay for the
      exercise, via the cashless exercise provision;
  and


F-30





(d)
            Platinum
      converted $197,650 of its senior secured convertible promissory note into
      2,573,030 shares at conversion rates ranging from $0.051 to
      $0.093.





During
fiscal 2009, we issued the following shares of our unregistered common
stock:





(1)
              In
      June 2009, pursuant to a standstill agreement with the sellers of the
      Bates-Hunter Mine, we issued 500,000 shares of our common stock to Mr.
      Otten, as partial compensation for an agreement not to pursue any
      enforcement actions with respect to our delay in making a Cdn$250,000
      principal payment. The fair value of our common stock was
      $40,000.


(2)
            In
      July 2009, we issued Hawk 3,218,878 shares of our common stock to satisfy
      in full an aggregate of $250,000 in management services fees plus accrued
      interest that were payable to Hawk pursuant to the management services
      agreements. We valued the issuance at
  $288,699.


(3)
            We
      issued 1,100,000 shares of our common stock to a consultant for services
      related to the CGMR (BVI) joint venture. The fair value of our common
      stock was $99,000.


(4)
            In
      consideration of an extension on the maturity date from a note holder, we
      issued 300,000 shares of common stock.  The fair value of our
      common stock was $20,661.


(5)
            During
      the year, we received notices to convert $623,739 of principal and
      interest of the original Platinum Long Term Growth V, LLC 10% Senior
      Secured Convertible Promissory Note and notes recently sold to secondary
      lenders into 12,583,076 shares of our common stock, conversion rates
      ranging from $0.04029 to $0.073 per
share.


(6)
            During
      2009, in a private placement, we accepted subscriptions for 6,300,000
      shares of our common stock at a price of $0.05 per share and received
      gross proceeds of $315,000. As additional consideration, the Company
      entered into a private option with each subscriber, such that for each
      200,000 shares of Wits Basin common stock they purchased in the private
      placement, they hold an option to purchase from Wits Basin 20,000 units
      (“Standard Gold Units”) of Standard Gold, at a price of $0.50 per Standard
      Gold Unit. Each Standard Gold Unit consists of one share of Standard Gold
      common stock and a warrant to purchase a share of Standard Gold common
      stock at an exercise price of $1.00 per share.  Wits Basin
      purchased 630,000 Standard Gold Units from Standard Gold and is holding
      the Standard Gold Units in reserve should the option holders exercise
      their option.





Stock Purchase Warrant
Grants





For
warrants granted to non-employees in exchange for services, we recorded the fair
value of the equity instrument using the Black-Scholes pricing model unless the
value of the services is more reliably measurable.





During
fiscal 2008, we granted the following warrant issuances:





(1)
              Relating
      to the acquisition of the Bates-Hunter
Mine:


(a)
              We
      entered into a common stock purchase agreement with Kenneth Swaisland who
      previously assigned us certain rights relating to the Bates-Hunter
      Mine and held the right to receive a warrant to purchase up to 1 million
      shares of our common stock, which would be granted upon closing of our
      purchase of the Bates-Hunter Mine. That purchase agreement allowed him the
      right-to-purchase 125,000 shares of our unregistered common stock at $0.20
      per share and provided for the issuance of a new three-year warrant to
      purchase up to 875,000 shares of our common stock at $0.20 per share in
      exchange for the termination of his right to receive the 1 million share
      warrant and thereby provide the Company with cash.  In February
      2008, Mr. Swaisland purchased the 125,000 shares for $25,000 and we
      finalized the agreement by issuing a three-year warrant to purchase up to
      875,000 shares with an exercise price of $0.20 per share.  Since
      the ratio of shares to warrants exceeded our customary terms pursuant to
      other private placements that we have conducted, we allocated only 125,000
      of the 875,000 warrant to the purchase price of the 125,000 shares. The
      balance of the 750,000 warrant was valued (utilizing the same assumptions
      for the 125,000 allocated portion of the warrant issued) at $185,282 and
      was recorded as a non-cash mining expense, as were all previous
      transactions with Mr. Swaisland that related to the Bates-Hunter
      Mine.  We received net proceeds of $24,348 (less the $652 of
      offering costs), which were allocated between the common stock and the
      125,000 share warrant based on the relative fair value of the securities
      at the time of issuance;
and


F-31




(b)
              We
      issued a two-year warrant to purchase up to 100,000 shares of our common
      stock at $0.20 per share to an unaffiliated third party as compensation
      for introductions relating to the Bates-Hunter Mine, negotiated during
      2006.  The fair value of the warrant totaled $16,019 and was
      recorded as an acquisition cost.
 (2)
              We
      issued two-year warrants to two consultants to purchase an aggregate of
      5,000,000 shares of common stock as follows: a warrant to purchase up to
      1,000,000 shares at $0.20 per share, which includes a cash-less exercise
      provision, valued at $126,887 and a warrant to purchase up to 4,000,000 at
      $0.01 per share, valued at $600,000, which was exercised for
      $40,000.
 (3)
              We
      issued a five-year warrant to purchase up to 1,200,000 shares of our
      common stock through a private placement of units of our securities (each
      unit consisting of one share of our common stock and a five-year warrant
      to purchase one share of common stock at an exercise price of $0.25 per
      share). The fair value of the warrant totaled
  $143,398.
 (4)
              Relating
      to loans made to the Company:
 (a)
              We
      entered into a Note and Warrant Purchase Agreement with Platinum Long Term
      Growth V, LLC, pursuant to a 10% Senior Secured Convertible Promissory
      Note in the principal amount of $1,020,000 and issued a five-year warrant
      to purchase up to 2,500,000 shares of our common stock at an exercise
      price of $0.35 per share, which contains a cashless exercise provision and
      further provides for a weighted-average anti-dilution adjustment to the
      exercise price in the event we issue equity or equity-linked securities at
      a price below the then-applicable exercise price. The fair value of the
      warrant totaled $262,135;
 (b)
              In
      consideration of a $160,000 loan, we issued a two-year warrant to purchase
      up to 160,000 shares of our common stock at $0.15 per share, which
      includes a cash-less exercise provision. The fair value of the warrant
      totaled $22,297;
 (c)
              In
      consideration of a $50,000 loan, we issued a two-year warrant to purchase
      up to 50,000 shares of our common stock at $0.20 per share. The fair value
      of the warrant totaled $7,139;
 (d)
              In
      consideration of a $100,000 loan, we issued a two-year warrant to purchase
      up to 100,000 shares of our common stock at $0.15 per share, which
      includes a cashless exercise provision. The fair value of the warrant
      totaled $9,674;
 (e)
              In
      consideration of a secured loan of $441,000, we issued a two-year warrant
      to purchase up to 882,000 shares of our common stock at $0.11 per share.
      The fair value of the warrant totaled
$62,063;
 (f)
              We
      entered into a second amendment with China Gold, LLC relating to the
      Convertible Notes Purchase Agreement, whereby the four Notes were
      cancelled and we issued an Amended and Restated Promissory Note in the
      aggregate principal amount of $9,800,000 and in consideration we issued a
      five-year warrant to purchase up to 39,200,000 shares of the our common
      stock at an exercise price of $0.15 per share.  The fair value
      of the warrant totaled $3,528,000;
 (g)
              In
      consideration of a $60,000 loan, we issued a five-year warrant to purchase
      up to 250,000 shares of our common stock at $0.125 per share to Hawk
      Uranium, Inc. The fair value of the warrant totaled $16,842;
      and
 (h)
              In
      consideration of extensions on maturity dates from various note holders,
      we issued:
 (i)
              a
      warrant to purchase up to 200,000 shares of our common stock at $0.20 per
      share for the maturity date extension on a $110,000
  loan;
 (ii)
              a
      warrant to purchase up to 100,000 shares of our common stock at $0.15 per
      share for the maturity date extension on a $50,000 loan;
    and
 (iii)
              the
      aggregate fair value of the warrants totaled
  $31,000.
 
 During
fiscal 2009, we granted the following warrant issuances:
 
 (1)
              In
      consideration of a maturity date extension pursuant to the November 2008
      $60,000 loan from Hawk, we issued a five-year warrant to purchase up to
      50,000 shares of our common stock at $0.20 per share, which includes a
      cash-less exercise provision. The fair value of the warrant totaled
      $2,903.
  F-32
  (2)
              In
      consideration of an additional extension to the Hawk loan in #1 above, we
      issued to Hawk a five-year warrant to purchase up to 150,000 shares of
      common stock at an exercise price of $0.15 per share. The fair value of
      the warrant totaled $10,217.
 (3)
              In
      consideration of our issuance of a secured promissory note in the face
      amount of $5,000,000, we issued a five-year warrant to purchase up to
      16,000,000 shares of our common stock at $0.10 per share. The fair value
      of the warrant totaled $868,215.
 (4)
              In
      consideration of China Gold, LLC providing, from time to time,
      accommodations to debt instruments, we issued a five-year warrant to
      purchase up to 1,600,000 shares of common stock at an exercise price of
      $0.01 per share. The fair value of the warrant totaled
      $144,000.
 (5)
              In
      consideration of certain loan accommodations made to us by Pioneer
      Holdings, LLC, an affiliate of China Gold, LLC, from time to time, we
      issued to Pioneer five-year warrants to purchase an aggregate of 7,000,000
      shares of common stock at an exercise price of $0.01 per share. The
      aggregate fair value of the warrants totaled
  $630,000.




Using the
Black-Scholes pricing model, the following assumptions were used to calculate
the fair value of the stock purchase warrants granted, for which the fair value
of the services were not more reliably measurable: (i) during 2009: dividend
yield of 0%, risk-free interest rate of 1.9% to 2.8%, expected life equal to the
contractual life between two and five years, and volatility of 145% to 149% and
(ii) during 2008: dividend yield of 0%, risk-free interest rate of 2.0% to 3.1%,
expected life equal to the contractual life between two and five years, and
volatility of 147% to 152%.





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





Number
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Range
                      of
                      Exercise
                      Price
                    
                    Weighted
                      Remaining
                      Contractual
                      LifeOutstanding
      at December 31, 2007
                    
                    
                    27,430,238
                    
                    
                    $
                    0.53
                    
                    
                    $
                    0.01
      – $7.15Granted
                    
                    
                    50,617,000
                    
                    
                    
                    0.15
                    
                    
                    
                    0.01 – 0.35Cancelled
      or expired
                    
                    
                    (6,258,800
                    )
                    
                    
                    1.39
                    
                    
                    
                    0.12 – 7.15Exercised
      (1)
                    
                    
                    (10,037,264
                    )
                    
                    
                    0.02
                    
                    
                    
                    0.01 – 0.15Outstanding
      at December 31, 2008
                    
                    
                    61,751,174
                    
                    
                    
                    0.21
                    
                    
                    
                    0.01 – 1.50Granted
                    
                    
                    24,800,000
                    
                    
                    
                    0.07
                    
                    
                    
                    0.01 – 0.20Cancelled
      or expired
                    
                    
                    (8,504,771
                    )
                    
                    
                    0.50
                    
                    
                    
                    0.20 – 1.50Exercised
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at December 31, 2009
                    
                    
                    78,046,403
                    
                    
                    $
                    0.06
                    
                    
                    $
                    0.01
      – $0.35
                    
                    3.9
      yearsWarrants
      exercisable at December 31, 2009
                    
                    
                    78,046,403
                    
                    
                    $
                    0.06
                    
                    
                    $
                    0.01
      – $0.35





(1)
Pursuant to a cashless exercise provision, Platinum surrendered 266,333 of its
available shares to pay for its cashless exercise of 3,770,931 shares, with an
exercise price of $0.01 per share, during 2008.





Option
Grants





We have
five stock option plans: the 1999 Stock Option Plan, the 2000 and 2003 Director
Stock Option Plans, the 2001 Employee Stock Option Plan and the 2007 Stock
Incentive Plan.  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. Additionally, we have two non-plans,
each titled “Non-Plan Stock Options” which are outside of the five plans listed
above.  As of December 31, 2009, an aggregate of 21,250,000 shares of
our common stock were originally available to be granted under our plans and
non-plans as determined by the board of directors, of which 1,664,000 are
available for future issuances.


F-33


On April
10, 2008, we entered into an employment agreement and stock option agreement
with our Chief Financial Officer, Mark D. Dacko, whereby we issued Mr. Dacko a
ten-year stock option to purchase up to 600,000 shares of our common stock at an
exercise price of $0.21, the closing price on the day prior to the
grant.  The option shall vest in equal quarterly installments of
50,000 shares over three years, with the first 50,000 vesting on April 10,
2008.





On April
10, 2008, we appointed Donald S. Stoica, to serve as a member of our board of
directors. In consideration of Mr. Stoica’s agreement to serve on the board, we
awarded Mr. Stoica a ten-year option to purchase up to 400,000 shares of our
common stock at an exercise price of $0.21 per share, the closing price on the
prior business day.  The option vests in equal semiannual installments
of 100,000 shares each over two years, with the first installment vesting June
30, 2008.





On May
29, 2008, we entered into an employment agreement and a stock option agreement
with Stephen D. King, whereby we issued Mr. King a ten-year option to purchase
up to 2,000,000 shares of our common stock at an exercise price of $0.20 per
share (the “2008 Option”).  The 2008 Option shall vest in three equal
annual installments commencing on the first anniversary of the date of the
grant.  Effective May 29, 2008, Mr. King transferred the 2008 Option
into the name of his spouse, Deborah King.  As further consideration
of the employment agreement, we entered into an amended and restated stock
option agreement with Mrs. King to purchase up to 3,000,000 shares of our common
stock at an exercise price of $1.02 per share (the “2007 Option”), amending the
terms of an option agreement originally entered into with Mr. King dated March
9, 2007, but subsequently transferred to Mrs. King on March 12,
2007.  The 2007 Option amends the terms of the vesting schedule,
whereby the vesting is reduced from six years to provide for vesting in three
equal annual installments commencing March 9, 2008.  The vesting
of both the 2008 Option and the 2007 Option shall accelerate (i) at such time
the closing price of our common stock (as quoted on the OTCBB or an exchange)
remains at or above $1.00 per share for 30 trading days, (ii) upon Mr. King’s
death, (iii) upon the occurrence of a change of control or (iv) upon our
termination of Mr. King’s employment for any reason other than
Cause.





No stock
options were granted in 2009.





The
Company uses the Black-Scholes pricing model as a method for determining the
estimated fair value for employee stock awards. Compensation expense for
employee stock awards is recognized on a straight-line basis over the vesting
period of service awards and for performance based awards, the Company
recognizes the expense when the performance condition is probable of being
met.





In
determining the compensation cost of the options granted during fiscal 2008, the
fair value of each option grant had 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:





2009
                        
                        
                        2008Risk-free
      interest rate
                        
                        
                        N/A
                        
                        
                        
                        3.13%Expected
      volatility factor
                        
                        
                        N/A
                        
                        
                        
                        150%
      - 151%Expected
      dividend
                        
                        
                        N/A
                        
                        
                        
                        —Expected
      option term
                        
                        
                        N/A
                        
                        
                        10
      years





The
weighted average Black-Scholes fair value of options granted during 2008 was
$0.20. We recorded $1,306,298 and $2,065,156 related to employee stock
compensation expense for the years ended December 31, 2009 and 2008,
respectively, relating to share options granted and modifications to existing
options. All stock compensation expense is included in general and
administrative expense. There was no tax benefit from recording this non-cash
expense due to our income tax valuation allowance and due to a portion of the
options being incentive stock options. The compensation expense had a $0.01 and
$0.02 per share impact on the loss per share for the years ended December 31,
2009 and 2008, respectively. As of December 31, 2009, approximately $796,000 of
total unrecognized compensation expense is expected to be recognized over a
period of approximately two years.


F-34





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





Number of
                      Options
                    
                    
                    Weighted
                      Average
                      Exercise
                      PriceOptions
      outstanding - December 31, 2007
                    
                    
                    13,659,500
                    
                    
                    $
                    0.53Granted
                    
                    
                    3,000,000
                    
                    
                    
                    0.20Canceled
      or expired
                    
                    
                    (16,000
                    )
                    
                    
                    4.25Exercised
                    
                    
                    —
                    
                    
                    
                    —Options
      outstanding - December 31, 2008
                    
                    
                    16,643,500
                    
                    
                    
                    0.47Granted
                    
                    
                    —
                    
                    
                    
                    —Canceled
      or expired
                    
                    
                    (1,000,000
                    )
                    
                    
                    0.43Exercised
                    
                    
                    —
                    
                    
                    
                    —Options
      outstanding - December 31, 2009
                    
                    
                    15,643,500
                    
                    
                    $
                    0.47Options
      exercisable - December 31, 2009
                    
                    
                    11,560,167
                    
                    
                    $
                    0.48





The
following tables summarize information about stock options outstanding at
December 31, 2009:





Options OutstandingRange of
                        Exercise Prices
                    
                    Number
                        Outstanding
                    
                    Weighted
                        Remaining
                        Contractual
                        Life
                    
                    Weighted
                        Average
                        Exercise
                        Price
                    
                    
                    Aggregate
                        Intrinsic
                        Value(1)$0.15
      to $0.30
                    
                    
                    7,025,000
                    
                    6.9
      years
                    
                    $
                    0.23
                    
                    
                    $
                    —$0.31
      to $0.43
                    
                    
                    3,850,000
                    
                    5.5
      years
                    
                    $
                    0.36
                    
                    
                    $
                    —$0.56
      to $1.02
                    
                    
                    4,706,000
                    
                    4.0
      years
                    
                    $
                    0.87
                    
                    
                    $
                    —$2.75
      to $3.00
                    
                    
                    62,500
                    
                    1.2
      years
                    
                    $
                    2.84
                    
                    
                    $
                    —$0.15
      to $3.00
                    
                    
                    15,643,500
                    
                    5.7
      years
                    
                    $
                    0.47
                    
                    
                    $
                    —





Options ExercisableRange of
                        Exercise Prices
                    
                    Number
                        Exercisable
                    
                    Weighted
                        Remaining
                        Contractual
                      Life
                    
                    Weighted
                        Average
                        Exercise
                        Price
                    
                    
                    Aggregate
                        Intrinsic Value(1)$0.15
      to $0.30
                    
                    
                    4,441,667
                    
                    7.2
      years
                    
                    $
                    0.23
                    
                    
                    $
                    —$0.31
      to $0.43
                    
                    
                    3,350,000
                    
                    5.8
      years
                    
                    $
                    0.37
                    
                    
                    $
                    —$0.56
      to $1.02
                    
                    
                    3,706,000
                    
                    3.0
      years
                    
                    $
                    0.83
                    
                    
                    $
                    —$2.75
      to $3.00
                    
                    
                    62,500
                    
                    1.2
      years
                    
                    $
                    2.84
                    
                    
                    $
                    —$0.15
      to $3.00
                    
                    
                    11,560,167
                    
                    5.4
      years
                    
                    $
                    0.48
                    
                    
                    $
                    —





(1)  The
aggregate intrinsic value in the table represents the difference between the
closing stock price on December 31, 2009 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 December 31, 2009. No
options were exercised during 2009 or 2008.


F-35


NOTE 19 – RELATED PARTY
TRANSACTIONS





Stephen D.
King





Stephen
D. King is our Chief Executive Officer and a member of our Board of
Directors.





Pursuant
to certain secured convertible promissory notes with Pacific Dawn Capital, LLC
and Andrew Green entered into during 2005, Mr. King, who only served as a board
member at that time, provided personal guaranties for the repayment of these
notes. In exchange for the guaranties, we issued two warrants to purchase up to
an aggregate of 2,000,000 shares of our common stock, with an exercise price of
$0.15 per share. Mr. King subsequently assigned both of the warrants to his
spouse.  The warrants had expiration dates of October 13 and November
4, 2007. In October 2007, our board of directors authorized an extension of the
expiration dates, granting a one-year extension. In September 2008, our board of
directors authorized an additional extension of the expiration dates, granting a
two-year extension, until October 13 and November 4, 2010.  The
warrant modifications resulted in non-cash compensation expense of $145,000 and
$139,054 for the years ended December 31, 2008 and 2007,
respectively.





Corporate Resource
Management, Inc.





On
November 12, 2008, we entered into an amended and restated consulting agreement
with Corporate Resource Management, Inc, a Minnesota corporation (“CRM”). CRM is
an entity wholly owned by Deborah King, the spouse of Stephen D. King (our Chief
Executive Officer and a member of our Board of Directors).  CRM
provides the Company with investment banking services relating to the purchase
and sale of mining related assets. Pursuant to the agreement, CRM is entitled to
a fee of $13,750 per month, plus reimbursement of normal out-of-pocket
expenses.  The term of the agreement is for one year, with automatic
renewals unless either party provides notice of termination.  Each
party has the right to terminate the agreement with a 30-day written notice,
provided that CRM is entitled to a $75,000 termination fee if the agreement is
terminated by the Company without cause. The amended agreement superseded in its
entirety the terms of the prior consulting agreement with CRM dated May 15,
2006.  Pursuant to the amendment, the Company eliminated a provision
for potential payment of commissions of up to 2% of the value of any asset
transactions completed during the term of the agreement and for a period of one
year following termination. For the years ended December 31, 2009 and 2008, we
paid $165,000 and $153,750, respectively, pursuant to the terms of the
consulting agreement.





Hawk Uranium
Inc.





H. Vance
White is an officer and director of Hawk and served as our Chairman of our Board
of Directors until June 10, 2009.





In August
2007, we entered into a management services agreement with Hawk, which agreement
expired on December 31, 2007 and required a $100,000 payment, which was accrued
but not paid as of December 31, 2008. In January 2008, we entered into a new
management services agreement with Hawk, which agreement expired on December 31,
2008 and required a $100,000 payment, which was also accrued but not paid as of
December 31, 2008.





In
November 2008, we entered into a bridge financing arrangement with Hawk, whereby
Hawk made a loan to the Company of $60,000 in consideration of a 90-day
promissory note, which bore interest at a rate of 10%. The proceeds of the
financing are being expressly used to maintain the permits and land claims of
the FSC Project. In consideration of the loan, we issued a five-year warrant to
purchase up to 250,000 shares of our common stock. In March 2009, we received an
extension until April 20, 2009 on the maturity date and for such extension we
reduced the exercise price of the five-year warrant from $0.125 per share to
$0.0625 per share. The Hawk loan was satisfied on December 24,
2009.


F-36


On July
3, 2009, the Company and Hawk entered into a Letter Agreement relating to the
payment by the Company of management services fees owed to Hawk and the
extension of a promissory note issued by the Company in favor of Hawk. Pursuant
to the Letter Agreement, we agreed to issue Hawk 3,218,878 unregistered shares
of our common stock to satisfy in full an aggregate of $200,000 in management
services fees that were payable to Hawk pursuant to the terms of management
services agreements.





NOTE 20 – INCOME
TAXES





The
Company estimates that at December 31, 2009 it had cumulative net operating loss
carryforwards for tax purposes of approximately $11,924,000 for both federal and
state purposes.  These carryforwards, if not used, will begin to
expire in 2023. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax
purposes.  During 2009, the Company had a change of ownership as
defined under IRC Section 382.  Although the Company has not performed
a formal Section 382 study, it appears that the NOL carryforwards from 2008
would be limited to approximately $390,000 per year. Due to the Section 382
ownership change, the $18,807,000 NOL carryforward from 2008 is being reduced to
$7,800,000 of useable carryforward.  Future ownership changes could
significantly further limit the use of the NOL. In addition, a number of the
Company's deferred tax assets will likely be considered capital assets and
therefore, if the transactions result in a loss, they would create a capital
loss. Capital losses have a five year carryforward and can only be offset by
capital gains.  There can be no assurance of future capital gain
income to offset any potential capital losses.





Significant
components of the Company’s estimated deferred tax assets and liabilities at
December 31:





Deferred
      tax assets:
                    
                    2009
                    
                    
                    2008Net
      operating loss carryforwards
                    
                    $
                    4,889,000
                    
                    
                    $
                    7,711,000Exploration
      rights
                    
                    
                    5,640,000
                    
                    
                    
                    3,274,000Expenses
      related to warrants and options
                    
                    
                    3,113,000
                    
                    
                    
                    2,168,000Accrued
      liabilities and other
                    
                    
                    1,699,000
                    
                    
                    
                    1,632,000Total
      deferred tax asset
                    
                    
                    15,341,000
                    
                    
                    
                    14,785,000Valuation
      allowance
                    
                    
                    (15,341,000
                    )
                    
                    
                    (14,785,000
                    )$
                    —
                    
                    
                    $
                    —





The
income tax provision consists of the following for the years ended December
31:





2009
                  
                  
                  2008Current
      tax provision
                  
                  $
                  —
                  
                  
                  $
                  —Deferred
      tax provision
                  
                  
                  (556,000
                  )
                  
                  
                  (3,424,000
                  )Valuation
      allowance
                  
                  
                  556,000
                  
                  
                  
                  3,424,000Total
      income tax provision
                  
                  $
                  —
                  
                  
                  $
                  —





Reconciliation
between the statutory rate and the effective tax rate for the years ended
December 31:





2009
                    
                    
                    2008Federal
      statutory tax rate
                    
                    
                    (35.0
                    )%
                    
                    
                    (35.0
                    )%State
      taxes, net of federal benefit
                    
                    
                    (6.0
                    )%
                    
                    
                    (6.0
                    )%Permanent
      differences
                    
                    
                    10.5
                    %
                    
                    
                    14.0
                    %382
      adjustment
                    
                    
                    29.2
                    %
                    
                    
                    —Valuation
      allowance
                    
                    
                    1.3
                    %
                    
                    
                    27.0
                    %Effective
      tax rate
                    
                    
                    —
                    
                    
                    
                    —





At
December 31, 2009, the Company fully reserved its net deferred tax assets
totaling $15,341,000, recognizing that the Company has incurred losses since
inception of exploration stage and there is no assurance that future years will
be profitable.


F-37


NOTE 21 –
EARNINGS (LOSS) PER SHARE





The
following table provides a reconciliation of the numerators and denominators
used in calculating basic and diluted earnings per share for the years ended
December 31:





2009
                    
                    
                    2008Basic
      earnings (loss) per share calculation:Net
      income (loss) attributable to Wits Basin common
    shareholders
                    
                    $
                    (15,378,918
                    )
                    
                    $
                    (12,907,209
                    )Weighted
      average of common shares outstanding
                    
                    
                    152,024,653
                    
                    
                    
                    129,674,425Basic
      net earnings (loss) per share
                    
                    $
                    (0.10
                    )
                    
                    $
                    (0.10
                    )Diluted
      earnings (loss) per share calculation:Net
      income (loss) attributable to Wits Basin common
    shareholders
                    
                    $
                    (15,378,918
                    )
                    
                    $
                    (12,907,209
                    )Basic
      weighted average common shares outstanding
                    
                    
                    152,024,653
                    
                    
                    
                    129,674,425Options,
      convertible debentures and warrants
                    
                    
                    
                    (1)
                    
                    
                    
                    (2)Diluted
      weighted average common shares outstanding
                    
                    
                    152,024,653
                    
                    
                    
                    129,674,425Diluted
      net income (loss) per share
                    
                    $
                    (0.10
                    )
                    
                    $
                    (0.10
                    )





(1)
            As
      of December 31, 2009, we had (i) 15,643,500 shares of common stock
      issuable upon the exercise of outstanding stock options, (ii) 78,046,403
      shares of common stock issuable upon the exercise of outstanding warrants
      and (iii) reserved an aggregate of 29,513,304 shares of common stock
      issuable under outstanding convertible debt agreements. These 123,203,207
      shares, which would be reduced by applying the treasury stock method, were
      excluded from diluted weighted average outstanding shares amount for
      computing the net loss per common share, because the net effect would be
      antidilutive for the period
presented.


(2)
            As
      of December 31, 2008, we had (i) 16,643,500 shares of common stock
      issuable upon the exercise of outstanding stock options, (ii) 61,751,174
      shares of common stock issuable upon the exercise of outstanding warrants
      and (iii) reserved an aggregate of 19,547,528 shares of common stock
      issuable under outstanding convertible debt agreements.  These
      97,942,202 shares, which would be reduced by applying the treasury stock
      method, were excluded from diluted weighted average outstanding shares
      amount for computing the net loss per common share, because the net effect
      would be antidilutive for the period
presented.





NOTE
22 – SUBSEQUENT EVENTS





On
December 16, 2009, London Mining negotiated terms with us to reduce our
outstanding debt with London Mining. In connection with the agreement, we paid
$2,000,000 to be held in escrow until final terms were negotiated on which debt
to apply it against. The funds were released out of an escrow account held by
legal counsel of London Mining on January 7, 2010.





In
January 2010, the secondary holder of a portion of the Platinum long-term
convertible promissory note converted $50,000 plus $1,586 of accrued interest
into 776,072 shares of our common stock.





In March
2010, Burnham Securities converted $100,000 of principal (of its $310,000
convertible promissory note) into 1,250,000 shares of our common
stock.


F-38


In March
2010, the Company issued 833,592 shares of its common stock to a lender as
payment in lieu of cash on a $50,000 June 9, 2009 short-term promissory note,
which included $3,708 of accrued interest.





Effective
March 10, 2010, the Company’s board of directors, with the recommendation of the
compensation committee, reduced the exercise price of Clyde Smith’s, the
Company’s President, 2,000,000 options from $0.31 to $0.20 per share and
accelerated the remaining unvested 500,000 options to be
vested.


F-39