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 September 30, 2021

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

For the transition period from _______________________to___________________________

Commission File Number: 333-169701

Desert Hawk Gold Corp.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

Yes ☒ No ☐

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

Yes ☒ No ☐

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

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

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

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

Yes ☐ No ☒

Indicate the number of shares outstanding of the issuer’s common stock, as of November 16, 2021: 26,831,603.

DESERT HAWK GOLD CORP.

Form 10-Q

September 30, 2021

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1

Item 1. Financial Statements	1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures About Market Risk	18

Item 4. Controls and Procedures	18

PART II – OTHER INFORMATION	19

Item 3. Defaults Upon Senior Securities	19

Item 4. Mine Safety Disclosures	19

Item 6. Exhibits	19

SIGNATURES	20

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESERT HAWK GOLD CORP.

CONDENSED BALANCE SHEETS (UNAUDITED)

	September 30, 2021			December 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	471,843		$	173,287
Accounts receivable		59,675			-
Inventories (NOTE 4 )		4,269,824			5,341,997
Prepaid expenses and other current assets		32,154			18,713
TOTAL CURRENT ASSETS		4,833,496			5,533,997
INVENTORIES (NOTE 4 )		1,466,297			1,505,020
PROPERTY AND EQUIPMENT, net (NOTE 5)		4,973,976			5,389,660
MINERAL PROPERTIES AND INTERESTS, net (NOTE 6)		3,707,316			3,785,868
RECLAMATION BONDS (NOTE 3)		947,084			758,011
TOTAL ASSETS	$	15,928,169		$	16,972,556

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	306,242		$	1,459,605
Royalties and upside participation payable (NOTE 7)		1,718,150			798,257
Accrued liabilities – officers and other wages (NOTE 13)		117,159			71,697
Notes payable – equipment, current portion (NOTE 8)		677,934			981,759
Settlement of consulting contract payable		200,000			200,000
Prepaid forward gold contract liability, current portion (NOTE 7)		11,053,494			3,336,618
Due to PDK in lieu of gold deliveries (NOTE 7)		4,404,500			-
TOTAL CURRENT LIABILITIES		18,477,479			6,847,936
LONG-TERM LIABILITIES
Note payable – equipment, net of current portion (NOTE 8)		119,071			226,427
Asset retirement obligation (NOTE 9)		1,331,808			1,233,514
Prepaid forward gold contract liability (NOTE 7)		-			10,263,382
TOTAL LONG-TERM LIABILITIES		1,450,879			11,723,323
TOTAL LIABILITIES		19,928,358			18,571,259
COMMITMENTS AND CONTINGENCIES (NOTE 4, 7 AND 13)
STOCKHOLDERS’ EQUITY
Preferred Stock, $.001 par value; 10,000,000 shares authorized, none issued or outstanding		-			-
Common Stock, $.001 par value; 100,000,000 shares authorized; 26,831,603 and 26,831,603 shares issued and outstanding, respectively		26,833			26,833
Additional paid-in capital		9,666,275			9,666,275
Accumulated deficit		(13,693,297	)		(11,291,811	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(4,000,189	)		(1,598,703	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	15,928,169		$	16,972,556

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

DESERT HAWK GOLD CORP.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
REVENUE
Sales (NOTE 12)	$	2,129,790		$	1,499,729		$	5,877,566		$	4,205,776

OPERATING EXPENSES
General production and project costs	$	1,155,365		$	1,154,944		$	4,115,107		$	3,487,428
Processing costs		56,345			-			199,489			-
Depreciation and amortization		287,662			321,075			781,892			911,901
Other operating costs		128,412			181,374			263,573			481,024
Consulting expense		-			65,055			-			65,055
Exploration expense		4,086			-			9,083			342,350
Legal and professional		36,679			14,204			150,115			103,586
Officers and directors fees		89,761			87,615			257,426			259,087
General and administrative		81,502			104,112			277,047			233,794
Loss on disposal of equipment		5,487			-			239,651			162
Forward gold contract expense (NOTE 7)		576,444			-			1,857,994			-
TOTAL OPERATING EXPENSES		2,421,743			1,928,379			8,151,377			5,884,387
LOSS FROM OPERATIONS		(291,953	)		(428,650	)		(2,273,811	)		(1,678,611	)
OTHER INCOME (EXPENSE)
Interest and other income		10,033			5,442			10,073			5,817
Interest expense – equipment financing		(18,994	)		(28,685	)		(71,872	)		(76,514	)
Interest expense - other		(31,031	)		(3,357	)		(65,876	)		(4,210	)
TOTAL OTHER INCOME (EXPENSE)		(39,992	)		(26,600	)		(127,675	)		(74,907	)
NET LOSS BEFORE INCOME TAX		(331,945	)		(455,250	)		(2,401,486	)		(1,753,518	)
Provision (benefit) for income tax		-			-			-			-
NET LOSS	$	(331,945	)	$	(455,250	)	$	(2,401,486	)	$	(1,753,518	)
Basic and diluted loss per share	$	(0.01	)	$	(0.02	)	$	(0.09	)	$	(0.07	)
Basic and diluted weighted average number shares outstanding		26,831,603			26,798,994			26,831,603			26,687,807

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

DESERT HAWK GOLD CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIT)

For the three and nine months ended September 30, 2021 and 2020 (UNAUDITED)

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

BALANCE, December 31, 2019		26,631,603	$	26,633	$	9,466,475	$	(9,451,218	)	$	41,890
Net loss		-		-		-		(1,090,190	)		(1,090,190	)
BALANCE, March 31, 2020		26,631,603		26,633		9,466,475		(10,541,408	)		(1,048,300	)
Net loss		-		-		-		(208,078	)		(208,078	)
BALANCE, June 30, 2020		26,631,603		26,633		9,466,475		(10,749,486	)		(1,256,378	)
Common stock issued for cash at $1.00 per share		200,000		200		199,800		-			200,000
Net loss		-		-		-		(455,250	)		(455,250	)
BALANCE, September 30, 2020		26,831,603	$	26,833	$	9,666,275	$	(11,204,736	)	$	(1,511,628	)

BALANCE, December 31, 2020		26,831,603	$	26,833	$	9,666,275	$	(11,291,811	)	$	(1,598,703	)
Net loss		-		-		-		(1,544,464	)		(1,544,464	)
BALANCE, March 31, 2021		26,831,603		26,833		9,666,275		(12,836,275	)		(3,143,167	)
Net loss		-		-		-		(525,077	)		(525,077	)
BALANCE, June 30, 2021		26,831,603		26,833		9,666,275		(13,361,352	)		(3,668,244	)
Net loss		-		-		-		(331,945	)		(331,945	)
BALANCE, September 30, 2021		26,831,603	$	26,833	$	9,666,275	$	(13,693,297	)	$	(4,000,189	)

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

DESERT HAWK GOLD CORP.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the nine months ended
	September 30, 2021			September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,401,486	)	$	(1,753,518	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities
Depreciation and amortization		781,892			911,901
Accretion of asset retirement obligation		91,461			69,601
Write down of inventory to net realizable value		1,265,018			-
Loss on disposal of equipment		239,651			162
Changes in operating assets and liabilities:
Accounts receivable		(59,675	)		-
Inventories		(154,122	)		(2,073,902	)
Prepaid expenses and other current assets		(13,441	)		144,226
Accounts payable and accrued expenses		(995,363	)		1,033,153
Royalties and upside participation payable (NOTE 7)		919,893			-
Accrued liabilities – officer and other wages		45,462			21,005
Due to PDK in lieu of gold deliveries (NOTE 7)		4,404,500			-
Prepaid forward gold contract liability (NOTE 7)		(2,546,506	)		-
Net cash provided (used) by operating activities		1,577,284			(1,647,372	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(191,371	)		(545,197	)
Payments for collateral on reclamation bonds		(189,073	)		(375	)
Proceeds from sales of property and equipment		6,000			-
Net cash used by investing activities		(374,444	)		(545,572	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable – SBA		-			463,497
Proceeds from issuance of common stock		-			200,000
Payment of notes payable - equipment		(904,284	)		(499,804	)
Net cash provided (used) by financing activities		(904,284	)		163,693
Net increase (decrease) in cash and cash equivalents		298,556			(2,029,251	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		173,287			2,116,432
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	471,843		$	87,181

NON-CASH FINANCING AND INVESTING ACTIVITIES:
Equipment acquired with notes payable – equipment	$	579,909		$	447,650
Accrued rent satisfied with equipment trade-in	$	158,000		$	-

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

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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 September 30, 2021, and the results of its operations and its cash flows for the three- and nine-month periods ended September 30, 2021 and 2020. The operating and financial results for the Company for the nine months ended September 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.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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 September 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 September 30, 2021 is net realizable value. A portion of the September 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 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.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

For the three and nine months ended September 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.

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 $13,693,297 through September 30, 2021 and net loss of $2,401,486 for the nine-month period ended September 30, 2021, along with negative working capital of $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 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.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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 – RECLAMATION BONDS

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.

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 September 30, 2021 and December 31, 2020 are $947,084 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 4 – INVENTORIES

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

	September 30,			December 31,
	2021			2020
Ore on leach pad	$	5,328,635		$	6,583,986
Carbon column in process		225,215			133,640
Finished goods		182,271			129,391
		5,736,121			6,847,017
Less long-term portion		(1,466,297	)		(1,505,020	)
Total	$	4,269,824		$	5,341,997

Inventories at September 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 $1,265,018 and $204,127 at September 30, 2021 and December 31, 2020, respectively. A portion of the September 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.

NOTE 5 - PROPERTY AND EQUIPMENT

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

	September 30,			December 31,
	2021			2020
Equipment	$	6,443,815		$	6,361,808
Furniture and fixtures		6,981			6,981
Electronic and computer equipment		50,587			50,587
Vehicles		322,045			315,905
Land improvements		44,840			44,840
		6,868,268			6,780,121
Less accumulated depreciation		(3,594,707	)		(3,129,046	)
		3,273,561			3,651,075

Kiewit property facilities		2,497,435			2,497,436
Less accumulated amortization		(797,021	)		(758,851	)
		1,700,414			1,738,585

Total	$	4,973,976		$	5,389,660

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

For the Kiewit property facilities, amortization based on total units of production was $20,412 and $28,817 for the three months ended September 30, 2021 and 2020, respectively. For the Kiewit property facilities, amortization based on total units for production was $38,170 and $83,965 for the nine months ended September 30, 2021 and 2020, respectively.

Depreciation expense on property and equipment was $222,804 and $231,824 for the three months ended September 30, 2021 and 2020, respectively. Depreciation expense on property and equipment was $658,337 and $653,453 and for the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 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 nine months ended September 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:

	September 30,			December 31,
	2021			2020
Kiewit and all other sites	$	3,700,000		$	3,700,000
JJS property		250,000			250,000
		3,950,000			3,950,000
Less accumulated amortization		(840,363	)		(770,560	)
		3,109,638			3,179,440
Asset retirement obligation assets
Kiewit Site		725,122			718,289
Kiewit Exploration		28,377			28,377
JJS property		31,016			31,016
Total		784,515			777,682
Less accumulated amortization		(186,837	)		(171,254	)
		597,679			606,428

Total	$	3,707,316		$	3,785,868

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 – PREPAID FORWARD GOLD CONTRACT LIABILITY

During 2019, the Company entered into and closed 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 47,045 ounces of gold from the Company. The Company agreed to deliver ounces of gold produced from the Kiewit property to PDK and the Company would then receive proceeds from PDK at the then current spot price less a discount specified in the Purchase Agreement. The Company has the option of paying cash to PDK for the number of ounces 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.

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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:

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

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:

Total ounces to be delivered through September 30, 2021		8,809
Contractual payment per ounce in lieu of delivery	$	500
Amount due to PDK at September 30, 2021	$	4,404,500
Forward gold contract balance associated with 8,809 ounces		(2,546,506	)
Forward gold contract expense for the nine months ended September 30, 2021	$	1,857,994

Prepaid forward gold contract liability balance at December 31, 2020	$	13,600,000
Forward gold contract balance associated with 8,809 ounces		(2,546,506	)
Prepaid forward gold contract liability balance at September 30, 2021	$	11,053,494

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.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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:

	September 30,		December 31,
	2021		2020
Royalties payable	$	404,316	$	210,802
Royalties withholding payable		19,760		11,095
Upside participation payable		1,294,074		576,360
Interest payable		65,792		5,600
Total	$	1,783,942	$	803,857

NOTE 8 – NOTES PAYABLE – EQUIPMENT

The following is a summary of the equipment notes payable:

	September 30,			December 31,
	2021			2020
Note payable to Wheeler Machinery, collateralized by a 374 DL Excavator, due in 12 monthly installments of $19,575, beginning June 2020, including interest at 8.5%, with a balloon payment due in June 2021 of $150,164. ⁽¹⁾	$	61,759		$	304,845
Note payable to ICM Solutions, LLC, collateralized by an HP4 crushing system, due in 10 monthly payments of $22,300, beginning March 2021, including interest at 9%.		65,909			-
Note payable to ICM Solutions, LLC, collateralized by 3 grasshopper leg conveyor systems, due in 12 monthly installments of $4,365, beginning April 2020, including interest at 9%. ⁽¹⁾		16,976			69,230
Note payable to Wheeler Machinery, collateralized by a used CAT 740 Haul truck (SN2293), originally due in 11 monthly installments of $14,475, beginning May 2019, including interest at 9%, with a balloon payment due in April 2020 of $168,873. ⁽²⁾		-			86,807
Note payable to Epiroc, collateralized by a used Epiroc drill, due in 6 monthly installments of $22,235, beginning October 2019, the balloon amount of $488,317 was refinanced in April 2020, with a new loan in that amount due in 36 monthly payments of $14,679 including interest at 5.2%.		267,168			386,268
Note payable to Wheeler Machinery, collateralized by a used D8T dozer, originally due in 11 monthly installments of $19,125, beginning August 2019, including interest at 9%, with a balloon payment due in July 2020 of $350,281. ⁽¹⁾		157,137			349,761
Note payable to Komatsu Equipment, collateralized by a used PC490 Excavator, due in 11 monthly payments of $10,320, beginning July 2019, including interest at 9%, the balloon amount of $71,372 was refinanced in May 2020 with 1 payment of $28,823 and 12 monthly payments of $1,903 including interest at 4.6%.		-			11,275
Note payable to Wheeler Machinery, collateralized by a used CAT 740 Haul Truck, due in 14 monthly installments of $14,475, beginning in July 2021, including interest at 7.48%, with a balloon payment due in August 2022 of $18,185.		184,252			-
Note payable to Goodfellow, collateralized by a JM Conveyor model 36 x 100 Radial Stacker, due in 19 monthly installments of $4,675, beginning in February 2021 including interest at 15%.		43,804			-
		797,005			1,208,186
Current portion		(677,934	)		(981,759	)
Long term portion	$	119,071		$	226,427
Principal payments due are as follows for the twelve months ended:
September 30, 2022	$	677,934
September 30, 2023		119,071
Total	$	797,005

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.

⁽¹⁾	Wheeler CAT has extended the terms of this 12-month amortization, allowing for continued monthly payments of the same amount until other financing becomes available or until the balance has been paid in full, whichever comes first.

⁽²⁾

In February 2021, Wheeler CAT requested the return of this equipment because the Company was 5 payments delinquent in its obligation on this note payable. This truck was then purchased from Wheeler CAT by a related party who in February began leasing the truck to the Company on a month-to-month rental. See Note 11. This arrangement relieved the Company of any other financial obligation on this note.

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

NOTE 9 –ASSET RETIREMENT OBLIGATION

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

	September 30,		September 30,
	2021		2020
Asset retirement obligation, beginning of period	$	1,233,514	$	826,637
Obligation incurred:
Kiewit properties		6,833		94,347
JJS property		-		31,016
Accretion expense		91,461		69,601
Asset retirement obligation, end of period	$	1,331,808	$	1,021,601

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 nine-month period ended September 30, 2021 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 September 30, 2021 and 2020. The Company recognized rent expense of $13,500 and $12,500 for the nine-month periods ended September 30, 2021 and 2020. At September 30, 2021 and December 31, 2020, amounts due to RMH Overhead, LLC for 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 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 September 30, 2021 and December 31, 2020, amounts of $10,000 and $ 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 September 30, 2021 and December 31, 2020, accrued compensation due to directors was $61,000 and $11,000 , respectively.

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

NOTE 12 – REVENUE

At September 30, 2021 and December 30, 2020, the Company had a receivable balance from processing income of $59,675 and $ Nil. Processing sales are received for ore processed for another company.

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

	Three Months ended September 30, 2021			Three Months ended September 30, 2020
Concentrate sales:
Gold	$	1,784,936		$	1,979,156
Silver		23,246			20,420
		1,808,182			1,999,576
Less: Royalties		(76,134	)		(84,189	)
Upside participation payments		(266,175	)		(332,035	)
Outside processing charges		(89,838	)		(83,623	)
		(432,147	)		(499,847	)
Net concentrate sales		1,376,035			1,499,729

Processing sales, net of charges		753,755			-

Total revenue	$	2,129,790		$	1,499,729

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

	Nine Months ended September 30, 2021			Nine Months ended September 30, 2020
Concentrate sales:
Gold	$	4,768,124		$	5,307,976
Silver		69,753			52,305
		4,837,877			5,360,281
Less: Royalties		(203,700	)		(201,197	)
Upside participation payments		(717,714	)		(742,957	)
Outside processing charges		(229,147	)		(210,351	)
		(1,150,561	)		(1,154,505	)
Net concentrate sales		3,687,316			4,205,776

Processing sales, net of charges		2,190,250			-

Total revenue	$	5,877,566		$	4,205,776

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

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

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 September 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 September 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 September 30, 2021 and December 31, 2020, accrued compensation of $37,697 and $26,620 is due to Rick Havenstrite and $18,462 and $11,077 is due to Marianne Havenstrite, Treasurer and Principal Financial Officer.

Directors’ Fees

The Company compensates its directors for their service to the Company. At September 30, 2021 and December 31, 2020, accrued compensation due to directors was $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 September 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 nine-month periods ended September 30, 2021 and 2020, 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, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

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

●

environmental hazards;

●

metallurgical and other processing problems;

●

unusual or unexpected geological formations;

	●	need for additional funding to continue operations;

	●	global economic and political conditions;

●

staffing considerations in remote locations;

●

disruptions in credit and financial markets;

●

global productive capacity;

	●	changes in existing mining laws or regulations;

	●	changes in product costing;

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

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

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

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

Overview

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

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

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

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

During the third quarter of 2021 we crushed 66,600 tons of mineralized material and 111,550 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 2022 at a further cost of approximately $175,000. We also intend to continue extraction of mineralized material and to upgrade and expand the current facilities, as resource expansion dictates.

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 $14,500,000 from sales of gold and other metals have been received through September 30, 2021, bringing total revenue from metals sales from the inception of the processing in 2014 to $20,700,000.

Results of Operations for the Nine months Ended September 30, 2021 and 2020.

The operating loss of $2,401,486 for the nine months ended September 30, 2021, as compared to the operating loss of $1,753,518 for the nine months ended September 30, 2020 represents increased losses in the amount of $647,968 Increased losses are primarily due to the loss on disposal of equipment and to forward gold contract expense.

During the quarters ended September 30, 2021 and 2020, we had net losses of $331,945 and $455,250, respectively. This represents a decrease in net loss of $123,305 for the quarter ended September 30, 2021, over the quarter ended September 30, 2020.

Liquidity and Cash Flow

Net cash provided by operating activities was $1,577,284 during the nine-month period ended September 30, 2021, compared with cash used by operating activities of $1,647,372 during the nine-month period ended September 30, 2020. This $3,224,656 increase in the amount of cash provided by operating activities is primarily attributable to the decrease in inventories during the nine months ended September 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 $374,444 during the nine-month period ended September 30, 2021 compared to $545,572 during the nine-month period ended September 30, 2020. This decrease of $171,128 during the nine-month period ended September 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 $904,284 during the nine-month period ended September 30, 2021, compared with $163,693 cash provided by financing activities during the nine-month period ended September 30, 2020. The decrease of $1,067,977 in cash from financing activities in the nine-month period ended September 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 $298,556 during the nine-month period ended September 30, 2021 over the cash balance at December 31, 2020, leaving us with a cash balance of $471,843 as of September 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 September 30, 2021 and 2020.

Going Concern

As shown in the accompanying financial statements, the Company had an accumulated deficit of $13,693,297 and negative working capital of $13,643,983 through September 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.

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 September 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 November of 2021 and anticipate that we will be unable to make deliveries until at least the beginning of the next fiscal year. The failure to make gold deliveries under the Amended Agreement provides PDK with certain remedies, including termination of the agreement, demand for early payment of the entire delivery obligations, and enforcement of foreclosure rights against the assets pledged as security under the agreement. As of the filing date of this report, we are obligated to deliver to PDK 9,720 ounces of gold, plus default interest of approximately $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

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

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

SIGNATURES

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

	Desert Hawk Gold Corp.

Date: November 16, 2021	By:	/s/ Rick Havenstrite
		Rick Havenstrite, Chief Executive Officer
		(Principal Executive Officer)

Date: November 16, 2021	By:	/s/ Marianne Havenstrite
		Marianne Havenstrite, Treasurer
		(Principal Accounting and Financial Officer)