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 JuneSeptember 30, 2021

or

☐ 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

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

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.

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 August 23,November 16, 2021: 26,831,603.

DESERT HAWK GOLD CORP.

Form 10-Q

JuneSeptember 30, 2021

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESERT HAWK GOLD CORP.

CONDENSED BALANCE SHEETS (UNAUDITED)

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

DESERT HAWK GOLD CORP.

STATEMENTS OF OPERATIONS (UNAUDITED)

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

DESERT HAWK GOLD CORP.

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

DESERT HAWK GOLD CORP.

STATEMENTS OF CASH FLOWS (UNAUDITED)

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

DESERT HAWK GOLD CORP.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

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

DESERT HAWK GOLD CORP.

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 management, the accompanying unaudited interim balance sheets and statements of operations, cash flows and stockholders’ equity (deficit) contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of JuneSeptember 30, 2021, and the results of its operations and its cash flows for the three- and six-monthnine-month periods ended JuneSeptember 30, 2021 and 2020. The operating and financial results for the Company for the sixnine months ended JuneSeptember 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited 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 interim financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore 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, 2020 filed with the Securities and Exchange Commission on April 19, 2021.

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.

Accounting Method

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with U.S. GAAP.

Accounting for Stock Options and Stock Awards Granted to Employees and Nonemployees

All transactions in which goods or services are received for the issuance of shares of the Company’s common stock or options to purchase shares of common stock are accounted for based on the fair value of the equity interest issued. The Company estimates the fair value of stock-based compensation using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of the fair value of stock-based compensation.

Risks and Uncertainties

As a mining company, the revenue, profitability and future rate of growth of the Company are substantially dependent on the prevailing prices for gold and silver. The prices of these metals are volatile and affected by many factors beyond the Company’s control, including prevailing interest rates and returns on other asset classes, expectations regarding inflation, speculation, currency values, governmental decisions regarding precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors. A substantial or extended decline in commodity prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows, access to capital and the quantities of resources that the Company can economically produce. Further, the carrying value of the Company’s property and equipment, net; mineral properties and interest, net; inventories and ore on leach pads are particularly sensitive to the outlook for commodity prices. A decline in the Company’s price outlook from current levels could result in material impairment charges related to these assets.

DESERT HAWK GOLD CORP.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ materially from those estimates.

The more significant areas requiring the use of management estimates and assumptions relate to metal prices and material resources that are the basis for future cash flow estimates utilized in impairment calculations and units-of-production amortization calculations, environmental, reclamation and closure obligations, estimates of recoverable silver and gold in leach pad inventories, fair value of common stock issued and valuation allowances for deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from the amounts estimated in these 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.

Inventories

The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting “pregnant” solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, solution in carbon columns in process and gold concentrate, at average production cost per gold ounce equivalent, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; amortization of property, equipment, and mineral properties; and mine administrative expenses. Costs are removed from ore on leach pads as ounces are recovered, based on the average cost per recoverable ounce of gold on the leach pad.

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of JuneSeptember 30, 2021, the Company had a limited operating history and actual results only over a short period of time.

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12 to 24 months. Inventory is stated at the lower of cost or net realizable value which for JuneSeptember 30, 2021 is net realizable value. A portion of the JuneSeptember 30, 2021 inventory has been classified as non-current. This classification has been made based on the amount of gold expected to be sold over the next twelve months based on annualized ounces sold year to date. See Note 5.4.

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.

DESERT HAWK GOLD CORP.

For the three and sixnine months ended JuneSeptember 30, 2021 and 2020, 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.

DESERT HAWK GOLD CORP.

Revenue Recognition

Revenue Recognition

Concentrate Sales: The Company’s product consists of gold bearing carbon which is shipped offsite to be turned into an unrefined gold concentrate, which is then further refined to become gold and silver bullion. The Company’s performance obligation in these transactions is generally the transfer of concentrate to the customer. Management has determined the performance obligation is met when the gold concentrate has been processed into an unrefined gold concentrate and is ready to be shipped to the refinery and recognizes revenue at that time. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer, and when the transaction price and number of ounces can be determined or reasonably estimated.

Processing Income: The Company processes ore for another company. Once processed, the unrefined gold concentrate is shipped to a refinery where it is refined into gold and silver bullion. The Company receives a percentage of the proceeds from the sale of the gold and silver concentrate which is paid to the Company by the seller within two days after the sale. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer, and when the transaction price and number of ounces can be determined or reasonably estimated.

Sales and accounts receivable for sales are recorded net of charges from the customer which represent components of the transaction price. Charges are estimated by management upon transfer of risk based on contractual terms, and actual charges typically do not vary materially from management’s estimates. Revenue from the sale of concentrate may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts. Revenue proceeds from concentrate sales are recorded net of the impact of royalties and participation agreements.

Going Concern

As shown in the accompanying financial statements, the Company had an accumulated deficit of $13,361,352$13,693,297 through JuneSeptember 30, 2021 and net loss of $2,069,541$2,401,486 for the six-monthnine-month period ended JuneSeptember 30, 2021, along with negative working capital of $13,149,076$13,643,983 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 3)7). 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.

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.

New Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The update was adopted as of January 1, 2021, and its adoption did not have a material impact on the Company’s financial statements.

DESERT HAWK GOLD CORP.

Accounting standards that have been issued or proposed by 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 – PREPAID FORWARD GOLD CONTRACT LIABILITYRECLAMATION BONDS

During 2019,At September 30, 2021 and December 31, 2020, the Company entered into and closedhas a Pre-Paid Forward Gold Purchase Agreement (the “Purchase Agreement”)surety bond of $674,000 in an escrow account with PDK Utah Holdings L.P. (“PDK”)the bonding company for reclamation of its property. This escrowed amount is held at Bank of New York, Mellon for the sale and purchase by PDK of gold produced fromCompany’s benefit. It may not be released to the Company’s mining property. UnderCompany without the termsprior consent of the original Purchase Agreement, as amended, PDK agreed to purchase a total of 47,045 ounces of gold from the Company.surety bondholder. 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 to be delivered each month at a rate of $500 per ounce. The Company received a netescrowed amount of $13,600,000 in 2019 for the future delivery of these gold ounces.does not earn interest.

The Purchase Agreement contains a royalty provision whereby royaltiesIn December 2020, the Company was notified by the Utah Department of 4% are due to PDK on gold and silver recovered from mining operations atNatural Resources that the reclamation cost estimate for the Kiewit siteproperties had been escalated from $1,348,000 to $1,537,000, an increase of $189,000. The amount was remitted to the Utah Division of Oil, Gas and sold byMining on March 11, 2021.

Total reclamation bonds posted at September 30, 2021 and December 31, 2020 are $947,084 and $758,011, respectively, which consists of the Company to a third party. Under the Purchase Agreement, the Company also pays a 5% withholding tax toabove escrowed amount along with certificate of deposits held with the state of Utah for the remaining bonds on the PDK royalty payments. Royalties are payable withinproperty, including exploration bonds.

NOTE 4 – INVENTORIES

Inventories at September 30, days following2021 and December 31, 2020 consists of the end of each fiscal quarter. PDK-related royalties and royalty withholding payablefollowing:

Inventories at JuneSeptember 30, 2021 and December 31, 2020 were $347,942 and $221,897, respectively. The June 30, 2021 balance includes royalties payable forvalued at net realizable value because production costs were greater than the second, third and fourth quarters of 2020 andamount the first and second quarters of 2021.

The Purchase Agreement contains a participation payment whereby PDK receives a portionCompany expected to receive on the sale of the proceeds fromestimated gold sold by the Companyounces contained in inventories. The adjustment 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. The Juneinventory was $1,265,018 and $204,127 at September 30, 2021 and December 31, 2020, upside participation payable is $1,027,900 and $576,360, respectively. The JuneA portion of the September 30, 2021 balance includes participation payments payable forinventory has been classified as non-current. This classification has been made based on the third and fourth quartersamount of 2020 and the first and second quarters of 2021.

In addition, under the Purchase Agreement, PDK may reduce the required number of ouncesgold expected to be sold in exchange for upover the next twelve months based on annualized ounces sold year to 8,000 common shares of the Company. 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 and has issued and recorded a Leasehold Deed of Trust, Assignment of Leases, Rents, As Extracted Collateral and Contracts, Security Agreement and Fixture Filing. The Purchase Agreement contains representations and warranties, as well as affirmative and negative covenants customary to a transaction of this nature.

Under the terms of the Purchase Agreement, as amended, the Company is obligated to deliver gold in the following quantities:

date.

DESERT HAWK GOLD CORP.

No gold has been delivered under the contract. As of June 30, 2021 and December 31, 2020, a cumulative of 6,076 and 655 ounces, respectively, were scheduled to be delivered to PDK under the terms of the Purchase Agreement. The ounces due but unpaid to PDK at June 30, 2021 have been reflected in current liabilities at the amount calculated 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 six-month period ended June 30, 2021 are as follows:

On December 1, 2020, the Company notified PDK that it would not be able to make the December delivery of gold and elected to use one of the delivery postponement options under the Purchase Agreement, as amended. This provision permits the Company to delay delivery by up to 30 days by delivering the amount of gold due within 30 days, plus interest calculated at the default interest rate, thereby causing the December ounces to be come due in January 2021. At the end of this 30-day extension period the Company was unable to deliver the December payment and the amount became due on January 25, 2021.

As of June 30, 202,1 and through the issuance of these financial statements, PDK has sent invoices to the Company for the deliveries and payments due. However, no notice of default on the Purchase Agreement has been received from PDK. The failure to make gold deliveries under the Purchase Agreement, as amended, 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. The Company is in ongoing negotiations with PDK in an effort to re-negotiate the terms of 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 June 30, 2021 balance sheet.

NOTE 4 – RECLAMATION BONDS5 - PROPERTY AND EQUIPMENT

At JuneThe following is a summary of property and equipment at September 30, 2021 and December 31, 2020, 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.2020:

In December 2020, the Company was notified by the Utah Department of Natural Resources that the reclamation cost estimate for the Kiewit properties had been escalated from $1,348,000 to $1,537,000, an increase of $189,000. The amount was remitted to the Utah Division of Oil, Gas and Mining on March 11, 2021.

Total reclamation bonds posted at June 30, 2021 and December 31, 2020 are $947,051 and $758,011, 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 5 – INVENTORIES

Inventories at June 30, 2021 and December 31, 2020 consists of the following:

DESERT HAWK GOLD CORP.

Inventories at June 30, 2021 and December 31, 2020 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 was ($108,993) and $204,127 at June 30, 2021 and December 31, 2020, respectively. A portion of the June 30, 2021 inventory has been classified as non-current. This classification has been made based on the amount of gold expected to be sold over the next twelve months based on annualized ounces sold year to date. See Note 2.

NOTE 6 - PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at June 30, 2021 and December 31, 2020:

For the Kiewit property facilities, amortization based on total units of production was $5,627$20,412 and $26,194$28,817 for the three months ended JuneSeptember 30, 2021 and 2020, respectively. For the Kiewit property facilities, amortization based on total units for production was $17,758$38,170 and $54,457$83,965 for the sixnine months ended JuneSeptember 30, 2021 and 2020, respectively.

Depreciation expense on property and equipment was $217,274$222,804 and $203,739$231,824 for the three months ended JuneSeptember 30, 2021 and 2020, respectively. Depreciation expense on property and equipment was $435,533$658,337 and $421,629$653,453 and for the sixnine months ended JuneSeptember 30, 2021 and 2020, respectively.

During the sixnine months ended JuneSeptember 30, 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 sixnine months ended JuneSeptember 30, 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 September 30, 2021 and December 31, 2020 are as follows:

DESERT HAWK GOLD CORP.

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

NOTE 7 – MINERAL PROPERTIES AND INTERESTSPREPAID FORWARD GOLD CONTRACT LIABILITY

Mineral propertiesDuring 2019, the Company entered into and interestsclosed a Pre-Paid 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. Under the terms of the original Purchase Agreement, as amended, PDK agreed to purchase a total of June 30, 202147,045 ounces of gold from the Company. The Company agreed to deliver ounces of gold produced from the Kiewit property to PDK and December 31, 2020 are as follows: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 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.

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

DESERT HAWK GOLD CORP.

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.

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. 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 and has issued and recorded a Leasehold Deed of Trust, Assignment of Leases, Rents, As Extracted Collateral and Contracts, Security Agreement and Fixture Filing. The Purchase Agreement contains representations and warranties, as well as affirmative and negative covenants customary to a transaction of this nature.

Under the terms of the Purchase Agreement, as amended, the Company is obligated to deliver gold in the following quantities:

No gold has been delivered under the contract. As of September 30, 2021 and December 31, 2020, a cumulative of 8,809 and 655 ounces, respectively, were scheduled to be delivered to PDK under the terms of the Purchase Agreement. The ounces due but unpaid to PDK at September 30, 2021 have been reflected in “due to PDK in lieu of gold deliveries’ at the amount calculated 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 nine-month period ended September 30, 2021 are as follows:

On December 1, 2020, the Company notified PDK that it would not be able to make the December delivery of gold and elected to use one of the delivery postponement options under the Purchase Agreement, as amended. This provision permits the Company to delay delivery by up to 30 days by delivering the amount of gold due within 30 days, plus interest calculated at the default interest rate, thereby causing the December ounces to be come due in January 2021. At the end of this 30-day extension period the Company was unable to deliver the December payment and the amount became due on January 25, 2021.

As of September 30, 2021, and through the issuance of these financial statements, PDK has sent invoices to the Company for the deliveries and payments due. However, no notice of default on the Purchase Agreement has been received from PDK. The failure to make gold deliveries under the Purchase Agreement, as amended, 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. The Company is in ongoing negotiations with PDK in an effort to re-negotiate the terms of 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 September 30, 2021 balance sheet. Accrued interest of $65,792 and $ Nil is in included in accounts payable and accrued liabilities as of September 30, 2021 and December 31, 2020, respectively.

DESERT HAWK GOLD CORP.

The September 30, 2021 balance includes royalties payable for the second, third and fourth quarters of 2020 and the first, second and third quarters of 2021. The September 30, 2021 balance includes participation payments payable for the third and fourth quarters of 2020 and the first, second and third quarters of 2021. The following is a summary of royalties, upside participation and interest payable:

NOTE 8 – NOTES PAYABLE – EQUIPMENT

The following is a summary of the equipment notes payable:

Arrangements have been made with Wheeler CAT and ICM Solutions, LLC to accelerate the payment schedules of their notes for the first few months of 2021, with no additional penalties other than interest, thereby allowing for the accounts to become current by May 2021.

DESERT HAWK GOLD CORP.

NOTE 9 –ASSET RETIREMENT OBLIGATION

Changes in the asset retirement obligation for the six-monthnine-month periods ended JuneSeptember 30, 2021 and 2020 are as follows:

In the first quarter of 2021 and 2020, the Company updated the asset retirement obligation to reflect a plan for reclamation and closure of the mine at the end of its life. The asset retirement asset and obligation increased by $6,833 and $125,363, respectively, as a result of a change in the estimated timing of costs and the impact of discounting the costs to present value.

The estimated reclamation costs were discounted using credit adjusted, risk-free interest rate of 10% from the time the Company incurred the obligation to the time we expect to pay the retirement obligation.

NOTE 10 - 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 six-month periodsnine-month period ended JuneSeptember 30, 2021 and 2020, the Company had no transactions relating to common stock. During the nine-month period ended September 30, 2020, the Company sold 200,000 shares of common stock at a price of $1 per share.

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 11 – RELATED PARTY TRANSACTIONS

In addition to transactions disclosed in Note 13, the Company had the following 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 the three months ended JuneSeptember 30, 2021 and 2020. The Company recognized rent expense of $9,000$13,500 and $8,000$12,500 for the six-monthnine-month periods ended JuneSeptember 30, 2021 and 2020. At JuneSeptember 30, 2021 and December 31, 2020, there are no amounts due to RMH Overhead, LLC for rent.rent of $ Nil and $ Nil , respectively, are included in accounts payable and accrued expenses on the balance sheet.

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 6.5. 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 JuneSeptember 30, 2021 and December 31, 2020, amounts of $10,000 and nil,$ Nil, respectively, are due to RMH Overhead, LLC 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 JuneSeptember 30, 2021 and December 31, 2020, accrued compensation due to directors was $56,000$61,000 and $34,000,$11,000 , respectively.

DESERT HAWK GOLD CORP.

NOTE 12 – REVENUE

At JuneSeptember 30, 2021 and December 30, 2020, the Company had a receivable balance from processing salesincome of $9,305$59,675 and $ nilNil. Processing sales are received for ore processed for another company.

Product sales for the three-month periods ended JuneSeptember 30, 2021 and JuneSeptember 30, 2020 are shown below:

Product sales for the six-monthnine-month periods ended JuneSeptember 30, 2021 and JuneSeptember 30, 2020 are shown below:

For the three and sixnine months ended JuneSeptember 30, 2021 and 2020, all salesrevenue from concentrate sales was sold to Asahi Refining. For the three and sixnine months ended JuneSeptember 30, 2021, all salesrevenue from processing income was received from the outside company whose concentrate sales are to Asahi Refinery.Refinery.

DESERT HAWK GOLD CORP.

NOTE 13– COMMITMENTS AND CONTINGENCIES

In addition to commitments disclosed in Notes 4 and 7, the Company had the following commitments and contingencies.

Personal property tax and other accrued liabilities

Personal property tax for Tooele County, Utah, is billed and becomes due on November 30 of each year. At JuneSeptember 30, 2021 and December 31, 2020, the amount due to Tooele County for 2020 is $ Nil and $35,568, respectively.

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 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.

At JuneSeptember 30, 2021 and December 31, 2020 accrued compensation due to officers of the Company was $56,159 and $37,697, respectively. Of the amounts accrued at JuneSeptember 30, 2021 and December 31, 2020, accrued compensation of $37,698$37,697 and $26,621$26,620 is due to Rick Havenstrite and $18,461$18,462 and $11,076$11,077 is due to Marianne Havenstrite, Treasurer and Principal Financial Officer.

Director’sDirectors’ Fees

The Company compensates its directors for their service to the Company. At JuneSeptember 30, 2021 and December 31, 2020, accrued compensation due to directors was $56,000$61,000 and $34,000.

Finder’s Agreement

On May 11, 2018, the Company entered into an agreement with Mount Royal Consultants (Mount Royal) to assist in finding prospective investors. Mount Royal would receive a finder’s fee of 7% for a connection with a company that resulted in a qualified investment consisting of equity securities or a fee of 3% for a connection with a company that resulted in a purchase of debt securities.

Future amounts to be received from investors could also be subject to this agreement. During the three -month period ended JuneSeptember 30, 2021, the Company recognized no consulting expense relating to this agreement.

Mining Leases

Annual claims fees are currently $155 per claim plus administrative and school trust land fees. Total paid for claims fees paid during the three -and six- monththree- and nine-month periods ended JuneSeptember 30, 2021 and 2020, were nil each period.are $15,199 and $11,025. Claims fees are due in August for the year beginning in September of that year.

NOTE 14– SUBSEQUENT EVENTS

The Utah Division of Oil, Gas & Mining has granted conditional approval of an operating and reclamation permit for the Company’s mining properties pending calculation of the surety bond. The Company expects this permit to be finalized in December and at that time must provide additional bonding in the amount of about $550,000 in advance of the pit expansion work. An additional amount of approximately $400,000 will be due when the heap leach expansion takes place. The Company expects to begin the pit expansion in January 2022 with the heap leach expansion taking place later in 2022 or 2023.

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, 2020 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, the effects of competition, and the effects of future legislation or regulations.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:

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 secondthird quarter of 2021 we mined and crushed 24,17266,600 tons of mineralized material and 57,874111,550 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 the third quarter of 20212022 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.

We suspended our mining operations in June 2016 because of depressed metal prices and lack of funds. We resumed operations in Spring 2018 and again suspended operations in October 2018 for lack of funding. Since securing funding in March 2019, we have recommenced mining operations. Revenues of approximately $12,700,000$14,500,000 from sales of gold and other metals have been received through JuneSeptember 30, 2021, bringing total revenue from metals sales from the inception of the processing in 2014 to $18,900,000.$20,700,000.

Results of Operations for the Six MonthsNine months Ended JuneSeptember 30, 2021 and 2020.

The operating loss of $1,981,858$2,401,486 for the sixnine months ended JuneSeptember 30, 2021, as compared to the operating loss of $1,249,961$1,753,518 for the sixnine months ended JuneSeptember 30, 2020 represents increased losses in the amount of $731,897.$647,968 Increased losses are primarily due to the loss on impairmentdisposal of equipment and to forward gold contract expense.

During the quarters ended JuneSeptember 30, 2021 and 2020, we had net losses of $525,077$331,945 and $208,078,$455,250, respectively. This represents an increasea decrease in net loss of $ 316,999$123,305 for the quarter ended JuneSeptember 30, 2021, over the quarter ended JuneSeptember 30, 2020.

Liquidity and Cash Flow

Net cash provided by operating activities was $882,582$1,577,284 during the six-monthnine-month period ended JuneSeptember 30, 2021, compared with cash used by operating activities of $1,491,415$1,647,372 during the six-monthnine-month period ended JuneSeptember 30, 2020. This $2,373,997$3,224,656 increase in the amount of cash provided by operating activities is primarily attributable to the decrease in inventories during the sixnine months ended JuneSeptember 30, 2021, and changes in the forward gold contract liability and the amount due to PDK in lieu of cash balances.

Net cash used by investing activities was $307,927$374,444 during the six-monthnine-month period ended JuneSeptember 30, 2021 compared to $459,687$545,572 during the six-monthnine-month period ended JuneSeptember 30, 2020. This decrease of $151,760$171,128 during the six-monthnine-month period ended JuneSeptember 30, 2021 was due the reduction in additions to property and equipment offset by the increase in reclamation bonds.

Net cash used by financing activities was $540,567$904,284 during the six-monthnine-month period ended JuneSeptember 30, 2021, compared with $172,188$163,693 cash provided by financing activities during the six-monthnine-month period ended JuneSeptember 30, 2020. The increasedecrease of $712,755$1,067,977 in cash used byfrom financing activities in the six-monthnine-month period ended JuneSeptember 30, 2021 was due primarily to the increase in payments made on equipment notes payable. For the nine-months ended September 30, 2020, the Company received $463,497 from proceeds of an SBA note and $200,000 from the issuance of its common stock.

As a result of the above, cash increased by $34,088$298,556 during the six-monthnine-month period ended JuneSeptember 30, 2021 over the cash balance at December 31, 2020, leaving us with a cash balance of $207,375$471,843 as of JuneSeptember 30, 2021.

Critical Accounting Policies

The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed. Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules, and the use of judgment, to the specific set of circumstances existing in our business. Discussed below are the accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. See Note 2, “Summary of Significant Accounting Policies,” in our attached unaudited financial statements for a discussion of those policies.

Revenue Recognition

Sales of all metal products are recorded as revenues when title and risk of loss transfer to the purchaser. Sales to the purchaser are recorded at gross sales price less charges for treatment, refining, smelting and other sales charges. Processing income is recorded as revenues when the unrefined gold concentrate is shipped to the refinery where it is refined into gold and silver bullion.

Mineral Exploration and Development Costs

We account for mineral exploration costs in accordance with ASC 932 Extractive Activities. All exploration expenditures are expensed as incurred, previously capitalized costs are expensed in the period the property is abandoned. Expenditures to explore new mines, to define further mineralization in existing bodies of mineralized material, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

Inventories

Inventories consist of estimated gold on the heap leach pad and in the carbon process system and are valued at the lower of production cost or market value. Gold on the heap leach pad is estimated to be 80% complete for cost purposes and gold in the process system is estimated at 95% complete.

Mineral Properties

We account for mineral properties in accordance with ASC 930 Extractive Activities-Mining. Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Mineral properties are periodically assessed for impairment of value and any diminution in value.

Reclamation and Remediation

Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. We use assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on our current mining plan and the best available information for making such estimates.

For non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and that they are reasonably estimable. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed.

Financial Instruments

The Company’s financial instruments include cash and cash equivalents as well as various notes payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity and interest rates of these financial instruments, approximates fair value at JuneSeptember 30, 2021 and 2020. 

Going Concern

As shown in the accompanying financial statements, the Company had an accumulated deficit of $13,361,352 ,$13,693,297 and negative working capital of $13,149,076$13,643,983 through JuneSeptember 30, 2021, 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.

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.

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.

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 JuneSeptember 30, 2021, 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 JulyNovember of 2021 and anticipate that we will be unable to make deliveries until at least third quarterthe beginning of thisthe 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 6,9879,720 ounces of gold, plus default interest in the amount of $42,995(calculatedapproximately $65,792 (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

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.