UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________to___________________________

Commission File Number: 333-169701

Desert Hawk Gold Corp.

(Exact name of registrant as specified in its charter)

Nevada		82-0230997
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1290 Holcomb Ave. Reno, NV		89502
(Address of principal executive offices)		(Zip Code)

(775) 337-8057
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting Company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of the issuer’s common stock, as of May 16, 2022: 26,831,603.

DESERT HAWK GOLD CORP.

Form 10-Q

March 31, 2022

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1

Item 1. Financial Statements	1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3. Quantitative and Qualitative Disclosures About Market Risk	15

Item 4. Controls and Procedures	15

PART II – OTHER INFORMATION	16

Item 3. Defaults Upon Senior Securities	16

Item 4. Mine Safety Disclosures	16

Item 6. Exhibits	16

SIGNATURES	17

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESERT HAWK GOLD CORP.

CONDENSED INTERIM BALANCE SHEETS (UNAUDITED)

	March 31, 2022			December 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	594,496		$	424,629
Accounts receivable		16,084			270,108
Inventories (NOTE 4)		4,656,095			4,673,189
Prepaid expenses and other current assets		42,854			45,983
TOTAL CURRENT ASSETS		5,309,529			5,413,909
INVENTORIES (NOTE 4)		815,177			1,081,425
PROPERTY AND EQUIPMENT, net (NOTE 5)		4,729,220			4,928,280
MINERAL PROPERTIES AND INTERESTS, net (NOTE 6)		3,629,036			3,679,652
RECLAMATION BONDS (NOTE 3)		1,036,142			947,116
TOTAL ASSETS	$	15,519,104		$	16,050,382

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	348,710		$	255,010
Royalties and upside participation payable (NOTE 7)		2,186,631			1,977,633
Accrued interest, prepaid forward gold contract		177,155			120,989
Accrued liabilities – officers and other wages (NOTES 11 and 12)		117,159			111,159
Notes payable, current portion (NOTE 8)		360,003			427,413
Settlement of consulting contract payable (NOTE 10)		200,000			200,000
Prepaid forward gold contract liability (NOTE 7)		9,473,382			10,263,438
Due to PDK in lieu of gold deliveries (NOTE 7)		7,137,500			5,771,000
TOTAL CURRENT LIABILITIES		20,000,540			19,126,642
LONG-TERM LIABILITIES
Notes payable, net of current portion (NOTE 8)		14,613			116,098
Asset retirement obligation (NOTE 9)		1,395,830			1,362,294
TOTAL LONG-TERM LIABILITIES		1,410,443			1,478,392
TOTAL LIABILITIES		21,410,983			20,605,034
COMMITMENTS AND CONTINGENCIES (NOTES 3, 6 AND 12)
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock, $.001 par value; 10,000,000 shares authorized, none issued or outstanding		-			-
Common Stock, $.001 par value; 100,000,000 shares authorized; 26,831,603 and 26,831,603 shares issued and outstanding, respectively		26,833			26,833
Additional paid-in capital		9,666,275			9,666,275
Accumulated deficit		(15,584,987	)		(14,247,760	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(5,891,879	)		(4,554,652	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	15,519,104		$	16,050,382

The accompanying notes are an integral part of these financial statements

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENTS OF OPERATIONS (UNAUDITED)

For the three months ended March 31, 2022 and 2021

	Three months ended March 31,
	2022			2021
REVENUE
Concentrate sales	$	792,934		$	1,371,130
Contract processing income		474,188			760,855
Total revenue		1,267,122			2,131,985

OPERATING EXPENSES
General production and project costs		1,227,726			2,108,902
Contract processing costs		40,705			77,948
Depreciation and amortization		314,688			256,806
Other operating costs		114,915			32,604
Legal and professional		67,771			72,431
Officers and directors fees		87,889			89,294
General and administrative		111,780			74,579
Loss on disposal of equipment		-			204,083
Forward gold contract expense (NOTE 7)		576,444			705,106
TOTAL OPERATING EXPENSES		2,541,918			3,621,753
LOSS FROM OPERATIONS		(1,274,796	)		(1,489,768	)
OTHER INCOME (EXPENSE)
Interest and other income		26			-
Interest expense – equipment financing		(6,291	)		(23,463	)
Interest expense - other		(56,166	)		(31,233	)
TOTAL OTHER INCOME (EXPENSE)		(62,431	)		(54,696	)
NET LOSS BEFORE INCOME TAX		(1,337,227	)		(1,544,464	)
Provision (benefit) for income tax		-			-
NET LOSS	$	(1,337,227	)	$	(1,544,464	)
Basic and diluted loss per share	$	(0.05	)	$	(0.06	)
Basic and diluted weighted average number of shares outstanding		26,831,603			26,831,603

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

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENT OF CHANGES IN

STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

For the three months ended March 31, 2022 and 2021

	Common Stock
	Shares Issued		Par Value $.001 per share		Additional Paid in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)

BALANCE, December 31, 2020		26,831,603	$	26,833	$	9,666,275	$	(11,291,811	)	$	(1,598,703	)
Net loss		-		-		-		(1,544,464	)		(1,544,464	)
BALANCE, March 31, 2021		26,831,603	$	26,833	$	9,666,275	$	(12,836,275	)	$	(3,143,167	)

BALANCE, December 31, 2021		26,831,603	$	26,833	$	9,666,275	$	(14,247,760	)	$	(4,554,652	)
Net loss		-		-		-		(1,337,227	)		(1,337,227	)
BALANCE, March 31, 2022		26,831,603	$	26,833	$	9,666,275	$	(15,584,987	)	$	(5,891,879	)

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

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three months ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,337,227	)	$	(1,544,464	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		314,689			256,806
Accretion of asset retirement obligation		33,536			30,487
Write down of inventory to net realizable value		680,319			392,820
Loss on disposal of equipment		-			204,083
Changes in operating assets and liabilities:
Accounts receivable		254,024			(197,496	)
Inventories		(396,976	)		692,508
Prepaid expenses and other current assets		3,128			(804	)
Accounts payable and accrued liabilities		93,700			(633,191	)
Royalties and upside participation payable (NOTE 7)		208,998			334,884
Accrued interest, prepaid forward gold contract		56,166			120,989
Accrued liabilities – officer and other wages		6,000			82,000
Due to PDK in lieu of gold deliveries (NOTE 7)		1,366,500			1,671,500
Prepaid forward gold contract liability (NOTE 7)		(790,056	)		(966,394	)
Net cash provided by operating activities		492,801			443,728

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(65,013	)		(5,094	)
Payments on reclamation bonds		(89,026	)		(189,000	)
Net cash used by investing activities		(154,039	)		(194,094	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable		(168,895	)		(211,637	)
Net cash used by financing activities		(168,895	)		(211,637	)
Net increase in cash and cash equivalents		169,867			37,997
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		424,629			173,287
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	594,496		$	211,284

NON-CASH FINANCING AND INVESTING ACTIVITIES:
Equipment acquired with notes payable – equipment	$	-		$	215,510
Land and building purchased with note payable and accrued rent	$	-		$	158,000

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

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Desert Hawk Gold Corp. (the “Company”), a Nevada Corporation, was incorporated on November 5, 1957. The Company commenced its current mining activities on May 1, 2009.

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company (“Clifton”), the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah. In 2011, the Company entered into an agreement with DMRJ Group, (a Platinum Partners related entity), which allowed for long term funding of the Kiewit project and helped to provide cash flow for operations during the period from 2009 until 2014 while the permitting process was ongoing. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete on September 30, 2014. Revenue from the heap leach operation began in October 2014 with the first sales of gold concentrate.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of the Company, the accompanying unaudited condensed interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2022, and its results of operations for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. The condensed balance sheet at December 31, 2021 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. Operating results for the three-month period ended March 31, 2022, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.

These unaudited condensed interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”). These unaudited condensed interim financial statements should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 31, 2022.

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to U.S. GAAP and have been consistently applied in the preparation of the financial statements.

Reclassifications

Certain reclassifications have been made to conform prior periods’ amounts to the current presentation. These reclassifications have no effect on the results of operations, stockholders’ equity (deficit), and cash flows as previously reported.

Earnings (Loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net earnings (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company.

For the three months ended March 31, 2022 and 2021, common stock equivalents of 2,400,000 associated with the Company’s outstanding stock options were excluded from the calculation of diluted earnings per share because they were anti-dilutive due to the net loss for the periods then ended.

Going Concern

As shown in the accompanying financial statements, the Company had an accumulated deficit of $15,584,987 through March 31, 2022 and net loss of $1,337,227 for the three-month period ended March 31, 2022, along with negative working capital of $14,691,011 which raises substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company has not delivered gold ounces as scheduled on its prepaid forward gold contract and could be subject to default provisions within the related agreement (see Note 7). The condensed interim financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Although production restarted in 2019, it has not yet reached optimum levels. The timing and amount of capital requirements will depend on a number of factors, including demand for products, metals market pricing, and the availability of opportunities for expansion through affiliations and other business relationships. Management continues to seek new capital from equity securities issuances or other business arrangements to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

COVID -19

The Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and elsewhere, causing disruptions to the Company’s business operations and management. These disruptions are most evident in the Company’s ability to retain and house employees and properly manage them while maintaining proper social distancing and with delays in obtaining materials and supplies. There has also been a reduction in the availability of equipment financing. These disruptions continue to hamper operations. It is management’s belief that disruptions relating to COVID will be mitigated in the future as a large percent of the population becomes vaccinated.

The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced availability of contractors and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including its ability to conduct operations.

The Company has taken steps to mitigate the potential risks to suppliers and employees posed by the spread of COVID-19, including work from home policies where appropriate. The Company will continue to monitor developments affecting both its workforce and contractors and will take additional precautions as necessary. The ultimate impact of COVID-19 depends on factors beyond management’s knowledge or control, including its duration and third-party actions to contain its spread and mitigate its public health effects. Therefore, the Company cannot estimate the potential future impact to its financial position, results of operations and cash flows, but the impacts could be material.

New Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

NOTE 3 – RECLAMATION BONDS

At March 31, 2022 and December 31, 2021, the Company has a surety bond of $674,000 in an escrow account with the bonding company for reclamation of its property. This escrowed amount is held at Bank of New York, Mellon for the Company’s benefit. It may not be released to the Company without the prior consent of the surety bondholder. The escrowed amount does not earn interest.

On March 31, 2022, the Company remitted $89,000 to the Utah Division of Oil, Gas and Mining to provide for the escalation of the existing large mine permit through 2026.Total reclamation bonds posted at March 31, 2022 and December 31, 2021 are $1,036,142 and $947,116, respectively, which consists of the above escrowed amount along with certificate of deposits held with the state of Utah for the remaining bonds on the property, including exploration bonds.

NOTE 4 – INVENTORIES

Inventories at March 31, 2022 and December 31, 2021 consists of the following:

	March 31,			December 31,
	2022			2021
Ore on leach pad	$	4,857,770		$	5,488,902
Carbon column in process		211,654			119,461
Finished goods		401,848			146,251
		5,471,272			5,754,614
Less long-term portion		(815,177	)		(1,081,425	)
Total	$	4,656,095		$	4,673,189

Inventories at March 31, 2022 and December 31, 2021 were valued at net realizable value because production costs were greater than the amount the Company expected to receive on the sale of the estimated gold ounces contained in inventories. The adjustment to inventory, which is included in general production and project costs on the statements of operations, was $680,319 and $392,820 for the three-month periods ended March 31, 2022, and March 31, 2021, respectively.

NOTE 5 - PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at March 31, 2022 and December 31, 2021:

	March 31,			December 31,
	2022			2021
Equipment	$	6,513,332		$	6,461,263
Furniture and fixtures		6,981			6,981
Electronic and computer equipment		50,587			50,587
Vehicles		361,480			348,535
Buildings		100,000			100,000
Land and improvements		76,569			76,569
		7,108,949			7,043,935
Less accumulated depreciation		(3,995,475	)		(3,802,265	)
		3,113,474			3,241,670

Kiewit property facilities		2,497,436			2,497,436
Less accumulated amortization		(881,690	)		(810,826	)
		1,615,746			1,686,610
Total	$	4,729,220		$	4,928,280

For the Kiewit property facilities, amortization based on total units of production was $70,864 and $12,131 for the three months ended March 31, 2022 and 2021, respectively.

Depreciation expense on property and equipment for the three months ended March 31, 2022 and 2021 was $193,210 and $218,259 respectively.

During the three months ended March 31, 2021, the Company was required to return a CAT 740 Haul truck to Wheeler Machinery because the Company was 5 payments delinquent in its obligation on this note payable. The net carrying value of the equipment was $290,889 and the outstanding note payable balance was $86,806. A loss on disposal of equipment of $204,083 was recognized. The truck was purchased by a related party who in February began renting the truck to the Company on a month-to-month rental. See Note 11.

During the three months ended March 31, 2021, the Company acquired a new HP4 crushing system in exchange for its HP3 crushing system which was returned to ICM Solutions, Inc.(“ICM”). Prior to the acquisition, the Company had been renting the HP4 crushing system from ICM and had an accrued rent payable of $158,000. ICM financed the acquisition of the new HP4 crushing system with a new note of $215,510 for the cost of the new equipment, plus accrued rent payable, less the trade-in value of the HP3 crushing system.

NOTE 6 – MINERAL PROPERTIES AND INTERESTS

Mineral properties and interests as of March 31, 2022 and December 31, 2021 are as follows:

	March 31,			December 31,
	2022			2021
Kiewit and all other sites	$	3,700,000		$	3,700,000
JJS property		250,000			250,000
		3,950,000			3,950,000
Less accumulated amortization		(841,536	)		(864,436	)
		3,108,464			3,085,564
Asset retirement obligation assets
Kiewit Site		725,122			725,122
Kiewit Exploration		28,377			28,377
JJS property		31,016			31,016
Total		784,515			784,515
Less accumulated amortization		(263,943	)		(190,427	)
		520,572			594,088

Total	$	3,629,036		$	3,679,652

The Company is required to pay a 4% net smelter royalty (“NSR”) to PDK Utah Holdings, LP (“PDK”) on revenues of gold and silver from the Kiewit gold property and the JJS properties. See Note 7.

NOTE 7 – PREPAID FORWARD GOLD CONTRACT LIABILITY

In 2019, the Company entered into and closed a Pre-Paid Forward Gold Purchase Agreement (the “Purchase Agreement”) with PDK for the sale and purchase by PDK of gold produced from the Company’s mining property. Under the terms of the Purchase Agreement, as amended, PDK agreed to purchase a total of 47,045 ounces of gold from the Company. The Company agreed to deliver ounces of gold produced from the Kiewit property to PDK and the Company would then receive proceeds from PDK at the then current spot price less a discount specified in the Purchase Agreement. The Company has the option of paying cash to PDK for the number of ounces scheduled to be delivered each month at a rate of $500 per ounce. The Company received a net amount of $13,600,000 in 2019 for the future delivery of these gold ounces. Under the terms of the Purchase Agreement, as amended, the Company is obligated to deliver gold in the following quantities:

Months	Gold Ounces per Month		Total Gold Ounces
December 2020		655		655
January 2021 to March 2021		896		2,688
April 2021 to March 2022		911		10,932
April 2022 to March 2023		1,396		16,752
April 2023 to December 2023		1,753		15,777
January 2024		241		241
				47,045

In addition, under the Purchase Agreement, PDK may reduce the required number of ounces to be sold in exchange for up to 8,000 common shares of the Company. To date, PDK has not elected this option.

As security for the obligations of the Company under the Purchase Agreement, the Company has granted PDK a security interest in all of the assets of the Company. The Purchase Agreement contains representations and warranties, as well as affirmative and negative covenants customary to a transaction of this nature.

To date, no gold has been delivered under the contract. As of March 31, 2022, and December 31, 2021, a cumulative of 14,275 and 11,542 ounces, respectively, were scheduled to be delivered to PDK under the terms of the Purchase Agreement. The ounces due but unpaid to PDK at March 31, 2022 have been reflected in “Due to PDK in lieu of gold deliveries” on the balance sheet based on the Company’s option to pay cash in lieu of delivery at $500 per ounce. The forward gold contract balance and the related contract expense for the three months ended March 31, 2022 are as follows:

	March 31,		December 31,
	2022		2021
Total ounces to be delivered		14,275		11,542
Contractual payment per ounce in lieu of delivery	$	500	$	500
Amount due to PDK at March 31, 2022	$	7,137,500	$	5,771,000

	For the three months ended March 31,
	2022			2021
Prepaid forward gold contract liability balance at beginning of period	$	10,263,439			13,600,000
Forward gold contract balance associated with ounces to be delivered during period		576,444			705,106
Reduction in prepaid forward gold contract liability balance		(1,366,500	)		(1,932,788	)
Prepaid forward gold contract liability balance at end of period	$	9,473,383		$	12,372,318

As of March 31, 2022, and through the issuance of these financial statements, PDK has sent invoices to the Company for the deliveries and payments due. The failure to make gold deliveries and make additional payments as described below provides PDK with certain remedies, including termination of the agreement, demand for early payment of the entire delivery obligations, and enforcement of foreclosure rights against the assets pledged as security under the agreement. Due to the delinquent status of the deliveries and PDK’s rights under the default provisions of the Purchase Agreement, the Company has classified the entire liability balance owing as current on the balance sheet. The Company has received no notice of default on the Purchase Agreement from PDK.

In addition to the delivery of gold ounces, the Purchase Agreement contains a royalty provision whereby royalties of 4% are due to PDK on gold and silver recovered from mining operations at the Kiewit site and sold by the Company to a third party. Under the Purchase Agreement, the Company also pays a 5% withholding tax to the state of Utah on the PDK royalty payments. Royalties are payable within 30 days following the end of each fiscal quarter.

The Purchase Agreement contains a participation payment whereby PDK receives a portion of the proceeds from gold sold by the Company to a third party. The payment due to PDK is based upon a percentage of proceeds over a set gold price per ounce. The upside participation amounts are payable within four days following each sale. To date, none has been remitted to PDK.

The following is a summary of royalties and upside participation payable:

	March 31,		December 31,
	2022		2021
Royalties payable	$	445,710	$	403,388
Royalties withholding payable		23,460		23,396
Upside participation payable		1,717,461		1,550,849
Total	$	2,186,631	$	1,977,633

The Purchase Agreement provides for the Company to pay 2.2% interest on outstanding amounts due to PDK. The balance of accrued interest payable to PDK is $177,155 and $120,989 at March 31, 2022 and December 31, 2021, respectively.

NOTE 8 – NOTES PAYABLE

The following is a summary of the notes payable:

	March 31,			December 31,
	2022			2021
Note payable to Miller, collateralized by land and two buildings, due in 11 monthly installments of $7,000, beginning December 1, 2021, and a balloon payment of $3,000 due on October 1, 2022, non-interest bearing.	$	45,000		$	66,000
Note payable to Epiroc, collateralized by a used Epiroc drill due in 36 monthly payments of $14,679 including interest at 5.2%.		184,945			226,115
Note payable to Wheeler Machinery, collateralized by a used D8T dozer, due in monthly installments of $19,125, beginning August 2019, including interest at 9%, until paid in full.		46,565			102,368
Note payable to Wheeler Machinery, collateralized by a used CAT 740 Haul Truck, due in 14 monthly installments of $14,475, beginning in July 2021, including interest at 7.48%, with a balloon payment due in August 2022 of $18,185.		88,712			130,128
Note payable to Goodfellow, collateralized by a JM Conveyor, due in 19 monthly installments of $4,675, beginning in February 2021 including interest at 15%.		9,394			18,900
		374,616			543,511
Current portion		(360,003	)		(427,413	)
Long term portion	$	14,613		$	116,098

Principal payments due are as follows for the years ended:
March 31, 2023	$	360,003
March 31, 2024		14,613
Total	$	374,616

In February 2021, Wheeler CAT requested the return of the CAT 740 Haul truck (SN2293) because the Company was five payments delinquent in its obligation on the related note payable. This truck was then purchased from Wheeler CAT by a related party who in February began leasing the truck to the Company on a month-to-month rental. This arrangement relieved the Company of any other financial obligation on this note.

NOTE 9 –ASSET RETIREMENT OBLIGATION

Changes in the asset retirement obligation for the three months ended March 31, 2022 and 2021 are as follows:

	March 31,		March 31,
	2022		2021
Asset retirement obligation, beginning of period	$	1,362,294	$	1,233,514
Obligation incurred: Kiewit properties		-		6,833
Accretion expense		33,536		30,487
Asset retirement obligation, end of period	$	1,395,830	$	1,270,834

NOTE 10 – SETTLEMENT OF CONSULTING CONTRACT

On March 29, 2018, the Company entered into a five-year Agency Agreement (the “Agency Agreement”) with H&H Metals Corp., a New York corporation (“H&H”). Under the terms of the Agency Agreement, H&H agreed to provide certain advisory services in regard to natural resources activities and to assist in securing purchasers for minerals produced from its mining properties. The Company negotiated a settlement in 2019 with H&H resulting in the Company owing a balance of $200,000 due in July 2020 to H&H. This payment has not yet been paid and is classified as a current liability at both March 31, 2022 and December 31, 2021.

NOTE 11 – RELATED PARTY TRANSACTIONS

The Company has a month-to-month lease agreement for its office space with RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. The Company recognized rent expense of $4,500 and $4,500 for three months ended March 31, 2022 and 2021. At March 31, 2022 and December 31, 2021, no amounts were due to RMH Overhead, LLC for rent.

On February 1, 2021, RMH Overhead, LLC. (“RMH”) an entity owned by Rick Havenstrite, President of the Company, purchased a CAT 740B Articulated Haul Truck from Wheeler CAT. This truck had previously been owned by the Company with an associated note payable to Wheeler CAT. See Note 5. Beginning February 1, 2021, the Company began renting this truck from RMH at a rate of $10,000 per month on a month-to-month rental. At March 31, 2022, $10,000 is due to RMH for rent of this equipment, and this amount is included in accounts payable and accrued expenses on the balance sheet.

The Company compensates directors for their contributions to the management of the Company, with one director receiving fees of $6,000 per month and another director receiving $5,000 per quarter. At March 31, 2022 and December 31, 2021, accrued compensation due to directors was $61,000 and $55,000 respectively.

NOTE 12– COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement, as amended, requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $144,000 plus an auto allowance and certain performance compensation upon fulfillment of established goals. The agreement allows the board of directors to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

The amounts accrued at March 31, 2022 and December 31, 2021, is due to the officers of the Company as follows:

	March 31,		December 31,
	2022		2021
Rick Havenstrite, President	$	37,697	$	37,697
Marianne Havenstrite, Treasurer and Principal Financial Officer		18,462		18,462
Total	$	56,159	$	56,159

Mining Leases

Annual claims fees are currently $165 per claim plus administrative and school trust land fees. Total paid for claims fees paid during the three months ended March 21, 2022 and 2021, were $Nil and $Nil, respectively. Claims fees are due in August for the year beginning in September of that year.

NOTE 13 - CAPITAL STOCK

Common Stock

The Company is authorized to issue 100,000,000 shares of common stock. All shares have equal voting rights and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

During the three months ended March 31, 2022 and 2021 the Company had no transactions relating to common stock.

Preferred Stock

The Company's Articles of Incorporation authorized 10,000,000 shares of $0.001 par value Preferred Stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as the Board of Directors may determine.

NOTE 14 - STOCK OPTIONS

The Company has reserved 2,400,000 shares under its 2018 Stock Incentive Plan (the “Plan”). The Plan was adopted by the board of directors on March 28, 2018, retroactive to February 23, 2018, as a vehicle for the recruitment and retention of qualified employees, officers, directors, consultants, and other service providers. The Plan is administered by the Board of Directors. The Company may issue, to eligible persons, restricted common stock, incentive and non-statutory options, stock appreciation rights and restricted stock units. The terms and conditions of awards under the Plan will be determined by the Board of Directors.

Outstanding and vested options at March 31, 2022 and December 31, 2021 were 2,400,000. These options have an exercise price of $0.40, a remaining life of .90 years, and no intrinsic value. No options were granted, expired, or were exercised during the three months ended March 31, 2022 nor 2021.

NOTE 15 – REVENUE

Product sales for the three months ended March 31, 2022 and 2021 are shown below:

	March 31,			March 31,
	2022			2021
Concentrate sales
Gold	$	1,043,929		$	1,748,208
Silver		14,128			27,339
Total concentrate sales		1,058,057			1,775,547
Less: Royalties		(44,550	)		(74,760	)
Upside participation payments		(166,612	)		(260,125	)
Outside processing charges		(53,961	)		(69,533	)
		(265,123	)		(404,418	)
Net concentrate sales		792,934			1,371,129
Contract processing income		474,188			760,856
Total revenue	$	1,267,122		$	2,131,985

For the three months ended March 31, 2022 and 2021, all revenue from Concentrate sales was from concentrate sold to Asahi Refining. For the three months ended March 31, 2022 and 2021, all revenue from Contract processing income was received from the outside company whose concentrate sales are to Asahi Refining. The balance due from Asahi Refining is $16,084 and $265,644 which is included in accounts receivable at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022 and December 30, 2021, the Company had a receivable balance from Contract processing income of $ Nil and $ Nil. Contract processing income is proceeds received for ore processed for another company.

NOTE 16– SUBSEQUENT EVENTS

The Company anticipates modification to its operating permit in Fall 2022 which will require an increase in our bond deposit of approximately $640,000 at that time.

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

The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 and with the unaudited financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.

Forward-looking statements

The statements contained in this report that are not historical facts, including, but not limited to, statements found in the section entitled “Risk Factors,” are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this 10-Q. While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the following:

●

environmental hazards;

●

metallurgical and other processing problems;

●

unusual or unexpected geological formations;

●

need for additional funding to continue operations;

●

global economic and political conditions;

●

staffing considerations in remote locations;

●

disruptions in credit and financial markets;

●

global productive capacity

●

changes in existing mining laws or regulations;

●

changes in product costing;

●

competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, flooding, landslides, power outages, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities); and

●

disruptions due to global pandemics, supply chain delays, or civil unrest.

Mining operations are subject to a variety of existing laws and regulations relating to exploration, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent, and costly to comply with. Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

These risk factors could cause our results to differ materially from those expressed in forward-looking statements.

Overview

We are a mineral exploration company located in the Gold Hill Mining District in Tooele County, Utah. We are currently focused on exploration and development of our Kiewit claims and operation of a heap leach processing facility.

We were originally incorporated in the State of Idaho on November 5, 1957. For several years we bought and sold mining leases and claims, but in 1995 we ceased all principal business operations. In 2008, we changed our corporate domicile from the State of Idaho to the State of Nevada. In May 2009, we raised funds to recommence mining activities. In July 2009, we entered into agreements to commence exploration activities on mining claims in the Gold Hill Mining District located in Tooele County, Utah. We hold leasehold interests within the Gold Hill Mining District consisting of 66 unpatented mining claims and 30 patented claims. From these claims we have centered our exploration activities on the Kiewit site.

During 2018 we settled our outstanding debt with DMRJ Group I, LLC and repurchased and retired all outstanding preferred shares issued to them under the 2010 Investment Agreement with them.

During 2019 we secured funding of $13,600,000 (net) from PDK Utah Holdings LP under the terms of the Pre-Paid Forward Gold Purchase Agreement dated March 7, 2019. We also renegotiated our lease with Clifton Mining and released all but the current unpatented and patented mining claims. We also reacquired the existing royalties from Clifton and its affiliates and issued a royalty to PDK equal to 4% of the net smelter returns from our mine. An additional 20 claims, known as the JJS Property, were also acquired.

During the first quarter of 2022 we crushed 46,000 tons of mineralized material and hauled 135,000 tons of waste from the open-pit Kiewit Pit. Using the funds from the PDK transaction, in January 2020 we commenced a drilling program on the Kiewit and JJS mining claims to determine the definition of the mineralized body and resource classification of the resources in connection with the proposed completion of a technical report on the claims. Our drilling plan included drilling 30 holes for a total footage of 7,500 feet. Although drilling has commenced on the JJS property, permitting has not been completed and production has not yet begun. We intend to continue our drilling program during 2022 at a further cost of approximately $175,000. We also intend to continue extraction of mineralized material and to upgrade and expand the current facilities, as resource expansion dictates.

Since securing funding in March 2019, we have recommenced mining operations. Revenues of approximately $15,525,000 from sales of gold and other metals have been received through March 31, 2022, bringing total revenue from metals sales from the inception of the processing in 2014 to $21,826,000.

Results of Operations for the Three months Ended March 31, 2022 and 2021.

During the quarters ended March 31, 2022 and 2021, we had net losses of $1,337,227 and $1,544,464, respectively. This represents a decrease in net loss of $207,237 for the quarter ended March 31, 2022 over the quarter ended March 31, 2021.

The operating loss of $1,274,796 for the three months ended March 31, 2022 as compared to the operating loss of 1,489,768 for the quarter ended March 2021 represents decreased operating losses in the amount of $214,972. Decreased losses are primarily due to the decrease in general production and project costs due to lower production as well as a loss on disposal of equipment.

Liquidity and Cash Flow

Net cash provided by operating activities was $492,801 during the three-month period ended March 31, 2022, compared with cash used by operating activities of $443,728 during the three-month period ended March 31, 2021. This $49,023 increase in cash used is primarily attributable to the decrease in inventories and the amount due to PDK in lieu of gold deliveries during the three months ended March 31, 2022, and changes in the forward gold contract liability.

Net cash used by investing activities was $154,039 during the three-month period ended March 31, 2022 compared to $194,094 during the three-month period ended March 31, 2021. This decrease of $40,055 during the three-month period ended March 31, 2022 was due to the reduction in payments on reclamation bonds offset by an increase in additions to property and equipment.

Net cash used by financing activities was $168,895 during the three-month period ended March 31, 2022, compared with $211,637 cash used by financing activities during the three-month period ended March 31, 2021. The decrease was due primarily to the decrease in payments made on notes payable.

As a result of the above, cash increased by $169,867 during the three-month period ended March 31, 2022 over the cash balance at December 31, 2021, leaving us with a cash balance of $594,496 as of March 31, 2022.

Going Concern

As shown in the accompanying financial statements, the Company had an accumulated deficit of $15,584,987 and negative working capital of $14,691,011 through March 31, 2022, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

Critical Accounting Policies

There have been no significant changes to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Control and Procedures

Our Chief Executive Officer, who serves as our principal executive officer; and our Treasurer, who serves as our principal financial officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). The Chief Executive Officer and Treasurer have concluded that as of the Evaluation Date, due to the existence of material weaknesses, our disclosure controls and procedures were not effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 3. Defaults Upon Senior Securities

During the first quarter of 2019, the Company entered into and closed a Prepaid Forward Gold Purchase Agreement (the “Purchase Agreement”) with PDK Utah Holdings L.P. (“PDK”) for the sale and purchase by PDK of gold produced from the Company’s mining property. On October 31, 2019, the Company and PDK amended the Purchase Agreement and entered into the Amended Prepaid Forward Agreement (the “Amended Agreement”) to reduce the total number of ounces of gold subject to the Purchase Agreement and to revise other provisions therein. The first gold delivery under the Amended Agreement was due on December 24, 2020, and recurring deliveries are due on the fourth business day prior to the last calendar day of each scheduled delivery month. On December 1, 2020, we notified PDK that we would not be able to make our December delivery and elected to use one of the delivery postponement options under the Amended Agreement. This provision permits us to delay delivery by up to 30 days by delivering the amount of gold due on the previous month’s due date, plus interest calculated at the default interest rate. At the end of this 30-day extension period we were unable to deliver the December payment. We have also failed to make the monthly gold deliveries beginning January through November of 2021 and anticipate that we will be unable to make deliveries until at least the beginning of the next fiscal year. The failure to make gold deliveries under the Amended Agreement provides PDK with certain remedies, including termination of the agreement, demand for early payment of the entire delivery obligations, and enforcement of foreclosure rights against the assets pledged as security under the agreement. As of the filing date of this report, we are obligated to deliver to PDK 9,720 ounces of gold, plus default interest of approximately $177,155 (calculated at the rate of LIBOR plus 2%), under the Amended Agreement. We are involved in ongoing discussions with representatives of PDK in an attempt to resolve these late payments and to renegotiate the gold delivery schedule.

Item 4. Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this quarterly report.

Item 6. Exhibits

Exhibit No.		Description
31.1		Rule 15d-14(a) Certification by Principal Executive Officer
31.2		Rule 15d-14(a) Certification by Principal Financial Officer
32.1		Section 1350 Certification of Principal Executive Officer
32.2		Section 1350 Certification of Principal Financial Officer
95		Mine Safety Disclosure
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

In accordance with Rule 402 of Regulation S-T, the XBRL information included in Exhibit 101 to this Form 10-Q shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

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

	Desert Hawk Gold Corp.

Date: May 16, 2022	By:	/s/ Rick Havenstrite
		Rick Havenstrite, Chief Executive Officer
		(Principal Executive Officer)

Date: May 16, 2022	By:	/s/ Marianne Havenstrite
		Marianne Havenstrite, Treasurer
		(Principal Accounting and Financial Officer)

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Desert Hawk Gold Corp. 10-Q