UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period endedJune 30, 20152016.

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

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 X  ☐  No  .☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 X  ☒  No  .☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“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 X.  ☒

Indicate the number of shares outstanding of the issuer’s common stock, as of August 14, 2015: 13,056,603.April 24, 2018: 19,956,603.

DESERT HAWK GOLD CORP.

Form 10-Q

June 30, 20152016

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESERT HAWK GOLD CORP

BALANCE SHEETS

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

DESERT HAWK GOLD CORP

STATEMENTS OF OPERATIONS (unaudited)

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

DESERT HAWK GOLD CORP

STATEMENTS OF CASH FLOWS (unaudited)

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

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company. On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada. Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada). On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result, the Company has no subsidiaries.

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company, 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 groupGroup, a Platinum Partners related entity managed by Platinum Partners’ Credit Fund (PPCO), 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.ongoing (see Note 10). 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 at September 30, 2014. Revenue from the Kiewit heap leach operation began in October 2014 with the first sales of gold and silver.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited interim balance sheets and statements of operations and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of June 30, 2015,2016, and the results of its operations and its cash flows for the three and six months ended June 30, 20152016 and 2014.2015. The operating and financial results for the Company for the three and six months ended June 30, 20152016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.2016.

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”) and are presented in U.S. dollars. 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 reportAnnual Report on Form 10-K for the year ended December 31, 20142015 filed with the Securities and Exchange Commission on March 31, 2015.April 14, 2016.

Mineral Exploration and Development Costs

The Company accounts for mineral exploration and development costs in accordance with ASC Topic 930Extractive Activities - Mining.  All exploration expenditures are expensed as incurred, previously capitalized costs are expensed in the period the property is abandoned.  Expenditures to develop new mines, to define further mineralization in existing bodies of mineralized material, and to expand the capacity of operating mines are capitalized and will be amortized on units of production basis over proven and probable reserves.

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, ore in carbon column in process and gold doré, at average production cost per gold ounce, 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; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. 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 June 30, 2015,2016, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

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 12-18 months.

PropertyRevenue

Sales of all metals products are recorded as revenues when title and Equipmentrisk of loss transfer to the purchaser. Sales to the purchaser are recorded at gross sales price, with charges for treatment, refining, smelting and other charges included as part of general project costs.

Property and equipment are stated at cost.  Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years, or units of production over estimated ounces to be produced.  The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.  Maintenance and repairs are charged to operations as incurred. Replacements and betterments that extend the useful life of the property and equipment are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

Mineral Properties and Leases

The Company capitalizes costs for acquiring mineral properties and ongoing mineral lease payments and expenses costs to maintain mineral rights.  Upon reaching the production stage, the capitalized costs are amortized using the units-of-production method on the basis of periodic estimates of ounces to be produced.  Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment.  If a property is abandoned or sold, its capitalized costs are charged to operations.  Mine property costs include the building of infrastructure of the processing facility including the heap leach pad and the carbon in column process plant along with water wells, roads and fencing.  These costs are capitalized until ready for their intended use at which time they are amortized using the units of production method based on projected units of production which approximates the estimated life of the facility.  Additionally, interest is capitalized to mine development until such assets are ready for their intended use.  The Company does not have proven and probable reserves at this time.  See Note 6.

Reclamation and Remediation

The Company’s operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies.  The Company records the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets.  A corresponding asset is also recorded and depreciated over the life of the asset.  After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation.  Determination of any amounts recognized upon adoption is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates.

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

Earnings (loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At June 30, 20152016 and June 30, 2014,2015, common stock equivalents outstanding are as follows:

However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit incurred through June 30, 2015,2016, 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.

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 at September 30, 2014. The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

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.

Reclassifications

Certain reclassifications have been made to conform data from prior periods to the current presentation.  These reclassifications have no effect on the results of operations or stockholders’ deficit.

New Accounting Pronouncement

In July 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-11,Simplifying the Measurement of Inventory, which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the issuance of the standard, inventory was measured at the lower of cost or market.  Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for preparers. The new guidance will be effective for in fiscal years beginning after December 15, 2016, including interim periods within those years.  Management believes that this new standard will have minimal impact on its financial statements.

NOTE 3 -– 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.2016 Activity

No shares of common stock have been issued during the first six months of 2015.2016.

The Company issued a total of 117,854 shares of stock to the note holders of the convertible debt for interest expense through November 30, 2014.  These shares were valued at a fair value of $82,500 based upon the stated interest rate contained in the debt agreements.  2015 Activity

The Company failed to repay the convertible debt loan in full on the November 30, 20142015 maturity date, sodate. Under the terms of debt agreements (see Note 7), the Company was required to issue an additionalissued a total of 300,000 shares of common stock to these debt holders.the note holders on December 2, 2015. This issuance was valued at $0.04 per share ($12,000) which was determined by management to be the fair value of a share of common stock based onupon a 2014third party valuation analysis performed by a consultant.  The consultant determined that the fair value of the common stock of the Company on a non-controlling, non-marketable basis to be $0.04 per share. Management assessed the consultant’s valuation and found the methodology to be appropriate for the Company and concluded that the fair value of common shares is $0.04.in 2014. The issuance was accounted for as financing expense during the fourth quarter 2014.  As part of this agreement, the due date of the notes was extended to November 30, 2015, with interest to be paid in cash after November 30, 2014.  See Note 7.expense.

On May 1, 2014, the Company issued 3,137,066 shares to its president, Rick Havenstrite, as a management incentive.  Also, as a part of this agreement, Mr. Havenstrite agreed to forgive $40,000 of accrued but unpaid wages.  The issued shares were valued at $0.04 per share as determined by the consultant (see above).  Based on this rate, the fair value of the shares issued to Mr. Havenstrite was determined to be $125,483.  Of this amount, $85,483 was recognized as officers and directors fees during the year ended December 31, 2014 and $40,000 was recognized as a reduction of accrued officer wages.

Preferred Stock

On February 19, 2014, the Company agreed to the terms of a TenthThirteenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment providesGroup, a fund owned by Platinum Partners’ Credit fund (PPCO), (see Note 10), dated August 2015, contained provisions for fundingshares of constructioncommon stock to be issued to the Company’s President, Rick Havenstrite, if he operates within 10% of the heap leach pad and process facility, mining development, and operations throughapproved operating budget over twelve months from the date of the amendment. The number of shares to potentially be issued to the Company’s President will be equal to 2.5% of the amount of fully outstanding shares of the Company on a seriesfully diluted basis. These shares have not been issued.

Preferred Stock

2016 Activity

No shares of monthly term loan advances totaling a maximumpreferred stock have been issued during the first six months of $5,700,000 over five months.  As a2016. See Note 15 – Subsequent Events regarding the return of DMRJ Group’s equity shares as part of this amendment, on February 19, 2014,a reorganization with court appointed trustees.

2015 Activity

On August 31, 2015, as part of the Thirteenth Amendment to the Investment Agreement with DMRJ Group (see Note 10), the Company issued to DMRJ Group 249,603185,194 shares of Series B Preferred Stock.Stock to DMRJ Group. The conversion rateissuance of these shares was determined to meet the Series B Preferred Stock is 100 sharesrequirements of common stocka substantial modification and thus was accounted for each share of Series B Preferred Stock.using debt extinguishment accounting guidelines. During the quarteryear ended MarchDecember 31, 2014,2015, financing expense in the amount of $1,248,015$740,776 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.05.  During the quarter ended June 30, 2014, the Company revised the estimated fair value of the equivalent common shares to be $998,412 based upon a fair value of $0.04 per share.  Thus a reduction to financing expense of $249,603 was recorded in the second quarter 2014.

$0.04. As a result of this issuance, DMRJ Group beneficially ownsowned approximately 67%77% of the Company (on a fully-diluted basis) with shares convertible into 27,718,333 shares of common stock.. DMRJ Group is considered a related party.

In connection with this amendment,the 300,000 shares of common stock issued to note holders of convertible debt (see above), the Company amended the Certificatesissued 9,733 shares of Designation for the Series A Preferred Stock and the Series A-1 and A-2B Preferred Stock to eliminatesatisfy the mandatory dividends payable toanti-dilution provisions associated with Series B Preferred Stock. During the holdersyear ended December 31, 2015, financing expense in the amount of $38,930 was recorded in association with this share issuance, using an estimated fair value of the Series A Preferred Stock and to exclude from the definition of convertible securities theequivalent shares of all preferred stock previously issued to$0.04. This issuance maintains the current 77% beneficial ownership of the Company by DMRJ Group, and any future issuances of anywith total preferred shares convertible into 47,211,002 shares of Series A, Series, B, and Series A-1 and A-2 to DMRJ Group or any of its affiliates.common stock.

NOTE 4 – INVENTORIES

The following table provides the components of inventories:

Inventories are valued at the lower of cost or net realizable value, which at June 30, 20152016 is cost.

NOTE 5 -– PROPERTY AND EQUIPMENT

The following is a summary of property, equipment, and accumulated depreciation at June 30, 20152016 and December 31, 2014:2015:

NOTE 6 – MINERAL PROPERTIES AND INTERESTS

Mineral properties and interests as of June 30, 20152016 and December 31, 20142015 are as follows:

The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 247 unpatented claims, including the unpatented mill site claim, and two Utah state mineral leases located on state trust lands. Annual claims fees are currently $155 per claim plus administrative fees.

On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  This newly calculated bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.  As such, the asset retirement obligation for these sites was absorbed by the new bond. Funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds.  Total reclamation bonds posted at June 30, 20152016 and December 31, 20142015 are $1,416,862$1,419,029 and $1,412,804,$1,418,070, respectively.  

On March 20, 2013, the Confederated Tribes of the Goshute Reservation (“Tribes”) sent a letter to the Bureau of Land Management (“BLM”) outlining their review of the Kiewit Mine Project Draft Environmental Assessment.  The letter alleged the Environmental Assessment is flawed in the development and analysis of alternatives, conformance with applicable BLM land use plans, and disclosure, analysis and mitigation of impacts on cultural resources, Native American values, and many other environmental resources.  On February 6, 2014 the Tribes filed an appeal of the permit with the BLM.  On April 10, 2014, the BLM was granted an extension of time to May 7, 2014 to answer the appeal and on May 8, 2014 an additional extension of time was granted to the BLM to June 6, 2014 to answer the appeal.  On June 6, 2014 the BLM submitted their response to the appeal.  On August 14, 2014, the BLM rejected the Tribe’s request for a stay.

NOTE 7 – CONVERTIBLE DEBT

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders for a total of $600,000. The notes bear interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes were originally convertible at any time at a rate of $1.50 per share, but on July 14, 2010 the promissory notes were amended thereby reducing the conversion price to $0.70 due to the note holders’ agreement to subordinate their debt to DMRJ Group (see Note 10). The notes are convertible into potentially 857,143857,142 shares of common stock and principal and interest were initially due November 30, 2012.

On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash. Interest was paid with stock through November 30, 2014 and it was agreed that interest will be paid in cash thereafter, however, no cash payments for interest have been made. Accrued interest payable at June 30, 2016 and 2015 includes $142,500 and $97,500, respectively, for these notes.

The Company failed to repay the loan in full on the November 30, 2012, November 30, 2013, November 30, 2014 and November 30, 20142015 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. As part

NOTE 8 – OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

A capital lease was entered into on June 20, 2016 with RMH Overhead, LLC for the purchase of this agreement,mining and crushing equipment. RMH Overhead, LLC is an entity owned by the due dateCompany’s president, Rick Havenstrite. For the periods ended June 30, 2016 and December 31, 2015, equipment includes assets under capital lease amounting to $185,618 and $0, respectively. The lease is being amortized over the estimated useful life of the note was extended each year and has now been extended to November 30, 2015. Interest was paid with stock through November 30, 2014 and will be paid in cash thereafter.  Accrued interest payableequipment. Accumulated amortization at June 30, 2016 and December 31, 2015 was $0. At June 30, 2016, the estimated future minimum lease payments under the capital lease was as follows:

NOTE 9 – NOTES PAYABLE – EQUIPMENT

The following is a summary of the equipment notes payable:

During first quarter 2015, an accounts payable balance of $150,375 relating to lease costs for equipment was converted to Notes payable – equipment, when the Company acquired the equipment.

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and 2014 includes $52,500 and $-0-, respectively,accumulated depreciation of $366,288, for these notes.an adjusted balance of $1,134,600. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made as explained in Note 15 - Subsequent Events.

NOTE 810 – NOTE PAYABLE - RELATED PARTY

DMRJ Group beneficially owns approximately 67%77% of the Company (on a fully-diluted basis) with shares convertible to 27,718,33347,211,002 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ.DMRJ Group. The Agreement has been modified numerous times and currently operatesat June 30, 2016 operated under the TwelfthThirteenth Amendment to the Investment Agreement dated June 5,August 31, 2015. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.

The total due to DMRJ Group at June 30, 20152016 and December 31, 20142015 is as follows:

The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities:

·

Incurring any indebtedness except in limited circumstances;

·

Creating any significant liens on any of our properties or assets;

·

Enter into any sale and lease-back transaction involving any of our properties;

·

Make any investments in or loans or advances to other parties;

·

Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;

·

●

Incurring any indebtedness except in limited circumstances;

●

Creating any significant liens on any of our properties or assets;

●

Enter into any sale and lease-back transaction involving any of our properties;

●

Make any investments in or loans or advances to other parties;

●

Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;

●

Declare or pay any dividends, except for dividends to DMRJ Group;

●

Engage in any business transactions with affiliates;

●

Make capital expenditures except as permitted in the agreement pertaining to our current mining business;

●

Create any lease obligations;

●

Amend, supplement or modify any existing indebtedness;

●

Enter into any swap, forward, future or derivative transaction;

●

Make any change in our accounting policies or reporting practices;

●

Form additional subsidiaries; or

●

Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

At June 30, 2016, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

2016 Activity

Several term loan advances were received from DMRJ Group by the Company between February 9, 2016 and June 20, 2016 totaling $1,020,000. These advances bear interest at 15% per annum and become due on October 31, 2016 (see Note 15) with the remainder of the note due to DMRJ Group;Group. These funds were used for working capital and equipment debt repayment.

·

Engage in any business transactionsIn the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. DMRJ Group is a fund managed by Platinum-related entities. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging Defendants with affiliates;a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owns 77% of stock of the Company (on a fully diluted basis). See Note 15 – Subsequent Events for additional details of this development.

·

Make capital expenditures except as permitted in the agreement pertaining to our current mining business;

·

Create any lease obligations;

·

Amend, supplement or modify any existing indebtedness;

·

Enter into any swap, forward, future or derivative transaction;

·

Make any change in our accounting policies or reporting practices;

·

Form additional subsidiaries; or

·

Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

2015 Activity

An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates which were then revised with the Twelfth Amendmentand Thirteenth Amendments to the Investment Agreement. The Twelfth Amendment was entered into on June 5, 2015 and allowed for additional funding in the amount of $250,000 which$850,000 for the purpose of additional working capital, financing of the expansion into the east extension of the current pit boundary and to provide for crushing equipment to allow crushing to be done in-house.

The Thirteenth Amendment to the Investment Agreement was received byentered into on August 31, 2015 and allowed for additional funding of up to $525,000. In 2015, a total of $925,000 had been loaned to the Company in Maypursuant to the Twelfth and June 2015Thirteenth Amendments. This funding was used for working capital and to prepare for a drilling program within the existing boundary of the Kiewit Exploration Permit. The Thirteenth Amendment also established new minimum principal and interest payment dates beginning in August 2015June 2016 as follows:

Management anticipates thatfollows, with the August 31, 2015 payment will not be made.  Discussions are currently underway with DMRJ to provide additional funding to finance the purchase of crushing plant equipment to allow for in-house crushing, additional working capital and to finance the expansion into the east extension of the pit.  The equipment purchase is anticipated to reduce crushing costs by as much as $100,000 per month.  This funding will be provided through the use of the provisional funds established in the Twelfth Amendment to the Investment Agreement as well as additional fundingremaining balance to be provided for in a future amendment to the Investment Agreement.  New funding is expected to be approximately $675,000 during July and August 2015.

2014 Activity

In January 2014,due thereafter, pursuant to the Ninth Amendment to the Investment Agreement, a third term loan advance was taken in the amount of $25,000.  The January 31, 2014 loan payment that was due was not made.

On February 19, 2014, the Company agreed to the terms of athe Tenth Amendment, whereby all funds in excess of $200,000 working capital, are to be remitted on a quarterly basis in payment of the Investment Agreement withremaining loan payable:

Regardless of the above minimum payment schedule, the loan from DMRJ Group. The Tenth Amendment provides for fundingGroup has a due date of mining operations through a series of advances (the “Monthly Term Loan Advances”) totaling a maximum of $5,700,000 over five months.  A total of $5,500,000 was drawn.  As a provision of this amendment, the maturity date for the entire loan was moved to October 31, 2016. The interest rate on the loan balance was reduced from 24% to 15%Company did not meet this payment date and minimum principal and interest payment amounts were established.  The first minimum payment, due February 28, 2015, was not made.    Payment terms were changedis in 2015 pursuant to the Eleventh and Twelfth Amendments (see 2015 Activity).

The Company’s ability to meet these minimum payments will be dependent upon a number of factors including production variables, metals market pricing, demand for products and services, and the availability of opportunities for expansion through affiliations and other business relationships.   

In 2014, the first Monthly Term Loan, in the amount of $2,000,000, was used in part to fund the postingdefault of the reclamation bond associated with the Kiewit Project Large Mining Permit.  A total of $5,525,000 was drawn during the year ended December 31, 2014 in connection with the Tenth Amendment Monthly Term Loan Advances.  In addition, on February 19, 2014, the Company issued to DMRJ Group 249,603 shares of Series B Preferred Stock. SeeInvestment Agreement (see Note 3.  Onsite construction of the project is essentially complete at December 31, 2014.  If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate the Company’s mining leases and other assets.15).

NOTE 9 – NOTES PAYABLE – EQUIPMENT

The following is a summary of the equipment notes payable:

During the first quarter 2015, accounts payable balance of $150,375 relating to lease costs for equipment was converted to notes payable – equipment when the Company acquired the equipment.

NOTE 10 – REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

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.  The Company uses assumptions about future costs, capital costs and reclamation costs.  Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates.  In calculating the present value of the asset retirement obligation the Company used a credit adjusted risk free interest rate of 8% to 10% and projected mine lives of five to 12 years, depending on the site.  On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.  

Changes in the reclamation liability for the periods ended June 30, 2015 and December 31, 2014 are as follows:

NOTE 11 – STOCK REDEEMABLE WITH GOLD PROCEEDS

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of the Company’s common stock. This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of the Company’s common stock. Under the terms of this offering, the shares can be redeemed for cash generated from the sale of gold for a period of 12 months after commencement of operations at the Kiewit project. Proceeds from 5% of the gold produced during the first year of production will be allocated to fund this option. Shares will be converted on whole ounces only. Each investor received the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce. Due to the redemption feature of these shares, management has concluded that the conversion shares should be recorded as a liability and not as equity.

Once sales of concentrate began in 2014, all investors in this equity financing had the option to convert their shares for cash from 5% of the gold sales, and all parties chose to convert. Amounts due to these shareholders are disclosed in the following table. The share conversion is complete at June 30, 2015 and amounts due to shareholders are past due. These amounts are expected to be paid to shareholders in 2015.

NOTE 12– COMMITMENTS

Mining Properties

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Moeller Family Trust for the lease of the Trust’s Yellow Hammer propertyreflected in the Gold Hill Mining District of Utah.  Pursuant to the agreement, if the Company does not place the Yellow Hammer property into commercial production within a three-year period it will be required to make annual payments to the Trust of $50,000.  The Yellow Hammer operated for several months in 2011.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 6% net smelter royalty on the production of base metalsfinancial statements with ‘Accounts payable and a net smelter royalty on gold and silver based on a sliding scale of between 2% and 15% based on the price of gold and silver, as applicable.  There were no sales and no royalty expense to date for the Yellow Hammer in 2015 or in 2014.  No payment has been made on this property and no official forfeiture notice has been received regarding this nonpayment.accrued expenses’.

Also, during the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable. The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property. Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual payments to Clifton Mining in the amount of $50,000 per location. The annual payments due on July 24, 2014 were made on July 22, 2014 and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property began in the fourth quarter 2014.

Royalties of 6% are due to Clifton Mining on sales of gold and silver.  Royalties due to Clifton Mining at June 30, 2015 and December 31, 2014 from production at the Kiewit property are $87,980 and $ -0-, respectively. Royalty payments are past due and are expected to be paid in 2015.  Royalty expense for the quarter and six months ended June 30, 2015 is $50,276 and $123,289, respectively.

Employment Agreements

In September 2010, the Company entered into employment agreements with its Chief Executive Officer (“CEO”) and its President and entered into a consulting agreement with one of its directors.  Each agreement was for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year.  Termination agreements have been reached with the former CEO and one director, providing for payment of accrued compensation and consulting payable over several months commencing with the funding of the Kiewit project.  These payments began in February 2014.  As of June 30, 2015 and December 31, 2014 accrued compensation of $253,000 and $247,500, and consulting fees payable of $-0- and $15,000, respectively, were due to directors and officers.  Of the $253,000 due at June 30, 2015, accrued compensation of $192,700 is due to Rick Havenstrite, President, $42,300 to Marianne Havenstrite, Treasurer, and $18,000 remains to be paid pursuant to the termination agreements.  In addition, as part of a management incentive award on May 1, 2014, Rick Havenstrite was awarded 3,137,066 shares of common stock.  As part of this award, Mr. Havenstrite agreed to forgive $40,000 in accrued compensation.  See Note 3.

NOTE 12 – REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

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. The Company uses assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates. In calculating the present value of the asset retirement obligation the Company used a credit adjusted risk free interest rate of 8% to 10% and projected mine lives of five to 12 years, depending on the site. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

Changes in the reclamation liability for the periods ended June 30, 2016 and December 31, 2015 are as follows:

NOTE 13 – RELATED PARTY TRANSACTIONS

The Company recognized rent expense for rental of office space of $3,000$6,000 for the six months endingended June 30, 20152016 and 2014,2015, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s presidentPresident and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $6,000 and $5,000 induring the first six months ofended June 30, 2016 and 2015, and 2014, respectively, leaving a balancetotal of $13,850$13,750 remaining in accounts payable at June 30, 2015 and 2014.  In addition, the Company purchased equipment for $3,500 and $16,5002016 which represents amounts due from Overhead Door Co. of SNR, another company owned by Rick Havenstrite, during the periods ended June 30, 2015 and December 31, 2014.prior years.

During the six months ended June 30, 20152016 and June 30, 2014,2015, the Company recognized wage expense of $13,846 and $5,538,$30,000, respectively, for office and accounting services performed by Marianne Havenstrite, wife of Rick Havenstrite, who became an officer of the Company during 2013. $42,300Part of these amounts, in combination with amounts from prior years, totaling $86,192 and $28,500 of accrued wages remains$56,192 remained unpaid at June 30, 20152016 and December 31, 20142015, respectively and is reflected in accrued liabilities.   liabilities – officer wages.

During the six months ended June 30, 20152016 and 2014,2015, the Company recognized general project cost expense of $3,105$10,627 and $12,827,$3,105, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. $18,276$39,367 and $21,649$28,740 remain unpaid to Mr. Havenstrite at June 30, 20152016 and December 31, 2014.2015. These amounts are included in accounts payable at those dates. Payments were also made to other family members of Rick and Marianne Havenstrite for the six months ended June 30, 20152016 and 2014December 31, 2015 for accounting and engineering services in the amount of $42,001$38,055 and $22,892.$44,538, respectively.

On June 20, 2016, the Company entered into an equipment lease agreement with RMH Overhead, LLC, a company owned by Rick Havenstrite. RMH Overhead, LLC agreed to lease to the Company several pieces of crushing equipment, including a screen plant and four conveyor belts, along with a trackhoe previously owned by the Company. The terms of the lease are payments of $9,212 per month for 24 months, with an effective interest rate of 15%, after which the Company will take ownership of the equipment. The equipment can be purchased from RMH Overhead, LLC at any time without penalty. At June 30, 2016 and December 31, 2015, the remaining amount payable on leased equipment liability is $185,618 and $-0-.

The Thirteenth Amendment to the Investment Agreement with DMRJ Group, a fund owned by Platinum Partners’ Credit fund (PPCO), (see Note 10), dated August 2015, contained provisions for shares of common stock to be issued to the Company’s President, Rick Havenstrite, if he operates within 10% of the approved operating budget over twelve months from the date of the amendment. The number of shares to potentially be issued to the Company’s President will be equal to 2.5% of the amount of fully outstanding shares of the Company on a fully diluted basis. These shares have not been issued.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Mining Properties

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Moeller Family Trust for the lease of the Trust’s Yellow Hammer property in the Gold Hill Mining District of Utah.  Pursuant to the agreement, if the Company does not place the Yellow Hammer property into commercial production within a three-year period it will be required to make annual penalty payments to the Trust of $50,000.  The Yellow Hammer operated for several months in 2011.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 6% net smelter royalty on the production of base metals and a net smelter royalty on gold and silver based on a sliding scale of between 2% and 15% based on the price of gold and silver, as applicable.  There were no sales and no royalty expense on this property to date in 2016 or in 2015. See Note 15.

Also during the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah. Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual penalty payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property penalty payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun. Royalty expense of $29,748 and $46,907 was recognized during the quarters ended June 30, 2016 and 2015 with $118,160 still payable to Clifton Mining Company at June 30, 2016. See Note 15.

Mining severance tax in the amount of $4,024, based on production, was accrued at June 30, 2016.

Personal property tax due to Tooele County, Utah in the amount of $74,710, based on income projections, was accrued and past due at June 30, 2016. This amount has not yet been paid.

Employment Agreements

In September 2010, the Company entered into an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement 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 $120,000 plus certain performance compensation upon fulfillment of established goals. The agreement allows the Board to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

As of June 30, 2016, and December 31, 2015, accrued compensation of $398,885 and $308,885, were due to directors and officers. Of the amounts accrued at June 30, 2016 and December 31, 2015, accrued compensation of $312,692 and $252,692 is due to Rick Havenstrite and $86,192 and $56,192 is due to Marianne Havenstrite, respectively.

NOTE 15 – SUBSEQUENT EVENTS

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the Notes. As per terms of the Investment Agreement, DMRJ Group was informed of this default and had indicated it had no intent to declare an event of default under the Investment Agreement. In addition, as per the terms of the notes, 300,000 penalty shares per year for 2016 and 2017 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2016 and 2017.

In addition, DMRJ Group (see Note 10) had previously agreed to subordinate to these debtholders Platinum’s interest in the collateral for the Senior Notes, as well as the principal and accrued but unpaid interest on the prior convertible debt (see Note 7) and on the amounts due on the gold loan redemptions (see Note 11). As part of the agreement for this loan, DMRJ Group agreed to waive the anti-dilution clause of their agreement with the Company.

The Fourteenth Amendment to the Investment Agreement with DMRJ Group was entered into on December 22, 2016 and allowed for December 2016 Term Loan Advances in an amount up to $600,000. The advance was drawn in full.

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging defendants with a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owned 77% of stock of the Company (on a fully diluted basis). Funds in the amount of $944,060 were drawn from the receivers during the first two quarters of 2017 to help fund ongoing expenses.

The Company was working toward a reorganization and recapitalization with the trustees of the two funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, have been received and the agreement was finalized on March 7, 2018. The Company has been temporarily shut down due to this development since third quarter of 2017. The Company expects to release an offering in the near future to fund short-term operations while preparing to re-open the operation.

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total amount due of $600,000, were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

One of the convertible debt holders issued two short-term loans to the Company which were subsequently repaid. On September 29, 2016, $50,000 was loaned at no interest and was repaid to the debtholder on October 14, 2016. On November 5, 2016, an additional $25,000 was loaned to the Company at 10% interest and was repaid including interest of $438 on January 18, 2017. These loan funds were used for operating capital.

On October 14, 2016, the Company issued convertible promissory notes to its two convertible debt holders in the amount of $125,000 each (Senior Notes), at 10% interest, convertible at $.25 per share, due in full on September 30, 2018. Interest is payable on September 30, 2017 and is payable quarterly thereafter.

On August 7, 2017, the convertible debt holders funded an additional aggregate of $500,000 under similar terms. These funds were used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018 both of these notes were amended to allow for the maturity date and payment date for accrued interest to be changed to May 31, 2019.

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $366,288, for an adjusted balance of $1,134,600. The note payable due to CAT at the time of disposition was $960,585. The cost of the equipment and the corresponding note payable was reflected on the balance sheet until final disposition of the equipment. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. At this time four of those payments have been made. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Moeller Family Trust for the lease of the Trust’s Yellow Hammer property in the Gold Hill Mining District of Utah.  Pursuant to the agreement, if the Company does not place the Yellow Hammer property into commercial production within a three-year period it will be required to make annual non-performance payments to the Trust of $50,000.  The Yellow Hammer operated for several months in 2011.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 6% net smelter royalty on the production of base metals and a net smelter royalty on gold and silver based on a sliding scale of between 2% and 15% based on the price of gold and silver, as applicable.  There were no sales and no royalty expense on this property to date in 2016 or in 2015.

A letter of default was received from the Moeller Family Trust in September 2016 demanding the past due non-performance payment for the Yellow Hammer property. The payment was not made and the property was returned to the Moeller Family Trust. The mineral property lease, in the amount of $175,000, less accumulated amortization of $37,214, was recognized as a loss on abandonment in the amount of $137,766 at September 30, 2016.

Also during the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual non-performance payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. Non-performance payments for the Clifton Shears-Smelter Tunnel property were not made by the due dates in 2015 or 2016. The Cane Springs property non-performance payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun.

A letter of default on the Clifton Shears properties dated September 19, 2016 was received by the Company with a 30 day period for curing the default. On October 17, 2016, past due royalties of $128,868 and the $50,000 non-performance payments for each of 2015 and 2016 on the Clifton Shears-Smelter Tunnel property were paid to Clifton Mining, who then acknowledged the cure of default.

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond in the same amount. A condition of the surety bond was the deposit of 50% ($674,000) of the bond amount into an escrow account with the bonding company. The surety bond carries an annual bonding fee of $40,400.  

On April 3, 2017, two directors of the Company stepped down from their positions, leaving Rick Havenstrite and Howard Crosby as directors. On April 6, 2017, the Board reduced the number of authorized directors to three and appointed John P. Ryan as a director. In addition, Howard Crosby stepped down from his position as CEO and Rick Havenstrite was appointed to fill the position of CEO.

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which terminate February 23, 2023 in the amounts and to the following:

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 consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 20142015 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

Forward-looking statements

The statements contained in this report that are not historical facts 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, need for financing, 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. 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 quarterly report. While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the following:

·

maintaining necessary mining permits;

·

a decline in metal prices;

·

environmental hazards;

·

metallurgical and other processing problems;

·

unusual or unexpected geological formations;

·

global economic and political conditions;

·

disruptions in credit and financial markets;

·

global productive capacity;

·

changes in product costing; and

·

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).

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

Desert Hawk Gold Corp., a Nevada corporation (the “Company”), is an exploration stage company, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced. In addition, we are currently producing gold and silver at the Kiewit property and had our first sales from the property in October 2014. None of our mining properties has any known reserves and our proposed programs on these properties are exploratory in nature. Our projects are located in the Gold Hill Mining District in Tooele County, Utah.  We are currently producing gold and silver at the Kiewit property and had our first sales from the property in October 2014.

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 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.

On January 6, 2014, we obtained the final permit necessary to commence construction and development of the Kiewit property. The reclamation bond was posted in February 2014 in the amount of $1,348,000. Development of the project was essentially completed in 2014 using funding provided by DMRJ Group.Group I, LLC, a Delaware limited liability company (“DMRJ Group”). The property is located in a historical mining district that has existing disturbances and mine wastes and is in a very arid, desolate area. The property is also adjacent to, and uphill from, the Dugway Proving Grounds and Air Force Gunnery Range that is deemed an environmentally insensitive area, with low water quality. Management believes that through our leased patented claims we have adequate private land for process facilities. There is no material access from any metropolitan area or community.

On March 20, 2013, the Confederated Tribes of the Goshute Reservation (“Tribes”) sent a letter to the Bureau of Land Management (“BLM”) outlining their review of the Kiewit Mine Project Draft Environmental Assessment.  The letter alleged the Environmental Assessment is flawed in the development and analysis of alternatives, conformance with applicable BLM land use plans, and disclosure, analysis and mitigation of impacts on cultural resources, Native American values, and many other environmental resources.  On February 6, 2014 the Tribes filed an appeal of the permit with the BLM.  On April 10, 2014, the BLM was granted an extension of time to May 7, 2014 to answer the appeal and on May 8, 2014 an additional extension of time was granted to the BLM to June 6, 2014 to answer the appeal.  On June 6, 2014 the BLM submitted their response to the appeal.  On August 14, 2014, the BLM rejected the Tribe’s request for a stay.

On July 24, 2009, we entered into a Joint Venture Agreement with the Clifton Mining Company and Woodman Mining Company under which Clifton Mining granted to us exclusive possession of certain patented and unpatented mining claims and an unpatented mill site claim and certain Utah state mineral leases covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. Woodman Mining also granted us the same rights in certain of these patented mining claims owned jointly with Clifton Mining. Also, on July 24, 2009, we entered into a Joint Venture Agreement with the Jeneane C. Moeller Family Trust under which the Trusttrust granted to us exclusive possession of four patented mining claims covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. These propertiesclaims are known as the Yellow Hammer claims.  No payments have been made to keepproperty. As part of this agreement, currentif we did not place the Yellow Hammer property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to the Moeller Family Trust of $50,000 to retain our rights to this property.

In September of 2016 we received a notice of default regarding the $50,000 annual penalty payment on these claims. The Yellow Hammer agreement was terminated at that time with no payment made and we no formal forfeiture notification has been received.longer have rights to any of the claims on the Yellow Hammer property.

Prior to July 1, 2010, we notified Clifton Mining that we would surrender certain of the mining claims and leases originally obtained in our lease agreement with it. Also, in 2010 and in 2012, certain amendments were made to the lease agreements. As part of these agreements, if we did not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to Clifton Mining of $50,000 per property to retain our rights to those properties. The

In September of 2016 we received a notice of default from Clifton Shears-Smelter TunnelMining regarding the payment of the $50,000 per year penalty payment on the Clifton Shears property for two annual periods. A payment has not yet beenof $100,000 was made forto Clifton Mining in October of 2016 to cure this year.default. The property payment is not due on the Kiewit property as it has been placed into production and royalties are generated. Past due royalties in the amount of $128,868 were paid to Clifton Mining as part of the resolution of the default notice in September 2016. There are currently no past due royalties to be paid. The Cane Springs property was released back to Clifton Mining in 2013.

We currently hold leasehold interests within the Gold Hill Mining District consisting of 247 unpatented mining claims, including an unpatented mill site claim, and two Utah state mineral leases located on state trust lands, all covering approximately 3310 square miles. Initial paymentPayment for the claims fees for 2015-2016 will bewas made in August 2015. We intend to concentrate our activities on the Kiewit project. Mineral extraction activities on the property at this time will beare open-pit.

In July 2010, we entered into an Investment Agreement with DMRJ.DMRJ Group. DMRJ Group is a Platinum Partners’ related entity managed by the Platinum Credit Fund (PPCO). The Agreement hasagreement had been modified numerous times and currently operatesoperated most recently under the TwelfthFourteenth Amendment to the Investment Agreement. The Amendments havehad provided for extensions of payment dates, increased funding and other modifications to the debt agreement.

On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment providesprovided for funding of construction of the heap leach pad and process facility, mining development, and operations through a series of monthly term loan advances totaling a maximum of $5,700,000 over five months.  A total of $5,500,000 of this allotment was eventually loaned to us. As a part of this amendment, on February 19, 2014, we issued to DMRJ Group 249,603 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During 2014, financing expense in the amount of $998,412 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.04.

As a result of this issuance, DMRJ Group beneficially ownsowned approximately 67% of the Company (on a fully-diluted basis) with shares convertible into 27,718,333 shares of common stock.  DMRJ is considered a related party.

In connection with this amendment,the Tenth Amendment, we also amended the Certificates of Designation for the Series A Preferred Stock and the Series A-1 and A-2 Preferred Stock to eliminate the mandatory dividends payable to the holders of the Series A Preferred Stock and to exclude the issuances of certain securities from triggering adjustments.

An Eleventh Amendment to the definitionInvestment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates which were then revised with the Twelfth and Thirteenth Amendments to the Investment Agreement.

The Twelfth Amendment to the Investment Agreement was entered into on June 5, 2015 and allowed for additional funding in the amount of convertible securities$850,000 for the sharespurpose of all preferred stock previouslyadditional working capital, financing of the expansion into the east extension of the current pit boundary and to provide for crushing equipment to allow crushing to be done in-house.

The Thirteenth Amendment to the Investment Agreement was entered into on August 31, 2015 and allowed for additional funding of up to $525,000 for operating capital and to provide the ability for crushing operations to be performed in-house. A total of $1,020,000 was loaned to us during the first two quarters of 2016. This funding was used for working capital and to prepare for a drilling program within the existing boundary of the Kiewit Exploration Permit. These advances bear interest at 15% per annum and become due on October 31, 2016 with the remainder of the note due to DMRJ Group. These funds were used for working capital and equipment debt repayment.

As part of this amendment, we issued to DMRJ Group and any future issuances.185,194 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During the quarter ended September 30, 2015, financing expense in the amount of $740,775 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.04. As a result of this issuance, DMRJ Group owns approximately 77% of our Company (on a fully-diluted basis) with shares convertible into 47,211,002 of common stock. DMRJ is considered a related party.

The total due to DMRJ Group at June 30, 20152016 and December 31, 20142015 is as follows:

The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities:

·At June 30, 2016, we have failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the defaults and has indicated it has no present intent to declare an event of default under the Investment Agreement.

Incurring any indebtedness except

The Thirteenth Amendment also established new minimum principal and interest payment dates beginning in limited circumstances;June 2016 as follows:

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