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 ended March 31, 2014

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

DESERT HAWK GOLD CORP.

(Exact name of registrant as specified in its charter)

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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 May 20, 2014: 9,533,825.

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DESERT HAWK GOLD CORP.

Form 10-Q

March 31, 2014

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

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Item 1.  Financial Statements

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

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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Item 4.  Controls and Procedures

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PART II – OTHER INFORMATION

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

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Item 6.  Exhibits

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SIGNATURES

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PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

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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.

The Company never successfully generated any revenue and eventually abandoned the mining business, remaining dormant until it recommenced its mining activities and entered the exploration stage on May 1, 2009.  The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in ASC 915-10-05 and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7.

Blue Fin Capital, Inc. (“Blue Fin”), a Utah corporation owning mining claims in Arizona, is a wholly-owned subsidiary of the Company and all inter-company accounts have been eliminated.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited interim consolidated balance sheets and consolidated 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 March 31, 2014, and the results of its operations and its cash flows for the three months ended March 31, 2014 and 2013. The operating and financial results for the Company for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

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 consolidated 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 consolidated financial statements for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 14, 2014.

Mineral Exploration and Development Costs

The Company accounts for mineral exploration and development costs in accordance with ASC Topic 930 Extractive 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 ore bodies, and to expand the capacity of operating mines are capitalized and will be amortized on units of production basis over proven and probable reserves.

Property and Equipment

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.  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. Betterments of a major nature are capitalized.  Expenditures for new property, plant, equipment, and improvements that extend the useful life or functionality of the asset 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.  

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Mineral Properties and Leases

The Company capitalizes costs for acquiring mineral properties and expenses costs to maintain mineral rights and leases as incurred.  Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves.  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.  See Note 5.

Earnings Per Share

Basic earnings 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 per share reflect the potential dilution of securities that could share in the earnings of the Company.  At March 31, 2014 and March 31, 2013, common stock equivalents outstanding are as follows:

Diluted earnings per share are not presented because its effect would be anti-dilutive due to the Company’s net losses.

Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit incurred through March 31, 2014, 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 for the Kiewit property was received in January 2014 and construction of the heap leach pad and process facility began in February 2014.  The Company will need significant funding to continue operations and increase development through the next fiscal year.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships.  

If the going concern assumption was not appropriate for these consolidated 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.

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.

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2014 Activity

The Company issued a total of 32,142 shares of stock to the note holders of the convertible debt for interest expense during the three months ended March 31, 2014.  The shares were valued at $.70 per share.  See Note 6.

2013 Activity

On July 5, 2013, a Seventh Amendment to the Investment Agreement with DMRJ Group LLC (“DMRJ Group”) was agreed upon.  The Seventh Amendment became effective on June 27, 2013 and, as a result of the terms of the amendment, 150,000 shares of common stock valued at $1.00 per share were issued to Robert Jorgensen, a former director and officer, on July 11, 2013.

The Company issued a total of 128,488 shares of stock to the note holders of the convertible debt for interest expense during the year ended December 31, 2013.  The shares were valued at $.70 per share.

300,000 shares of common stock, valued at $1.00 per share, were issued to the two holders of convertible debt, with 150,000 shares issued to each of the two debt holders as part of the extension of the due date of the notes.  The due dates of the convertible debt were then extended to November 30, 2014.  

Preferred Stock

In connection with the Fourth Amendment to the DMRJ Group funding, on May 3, 2011, the Company created and designated 2,500,000 shares of its authorized preferred stock as Series A-1 Preferred Stock and 1,000,000 shares as Series A-2 Preferred Stock.

Each share of Series A-1 Preferred Stock and Series A-2 Preferred Stock is convertible at the option of the holder at any time into that number of shares of common stock equal to (i) for the Series A-1 Preferred Stock, ten times the Series A-1 issue price ($0.70) divided by the conversion price for Series A-1 Preferred and (ii) for the Series A-2 Preferred Stock, ten times the Series A-2 issue price ($1.00) divided by the conversion price for such Series A-2 Preferred Stock.  The initial conversion price of the Series A-1 Preferred Stock is $0.70 per share and the initial conversion price of the Series A-2 Preferred Stock is $1.00.  If the Company issues or sells shares of its common stock, or grants options or other convertible securities which are exercisable or convertible into common shares, at prices less than the conversion price of Series A-1 or A-2 shares, except in certain exempted situations, then the conversion price of the Series A-1 and A-2 shares will be reduced to this lower of the sale or conversion price.  The Series A-1 and A-2 shares may not be converted into common shares if the beneficial owner of such shares would thereafter exceed 4.9% of the outstanding common shares.  See Note 8 for further information.

On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment provides 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.  As a part of this amendment, on February 19, 2014, the Company issued to DMRJ Group 249,603 shares of Series B Preferred Stock. Financing expense in the amount of $1,248,015 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $.05.  The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock.  As a result of this issuance, DMRJ now beneficially owns 67% of the Company.

In connection with this amendment, the Company 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 from the definition of convertible securities the shares of all preferred stock previously issued to DMRJ Group and any future issuances of any shares of Series A, Series, B, and Series A-1 and A-2 to DMRJ Group or any of its affiliates.

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NOTE 4 - PROPERTY AND EQUIPMENT

The following is a summary of property, equipment, and accumulated depreciation at March 31, 2014 and December 31, 2013:

Construction of the heap leach pad and process facility began with the establishment of the reclamation bond on February 20, 2014 and expenditures incurred by the Company and capitalized totaled $201,221 during the three months ended March 31, 2014.  Depreciation and amortization as of March 31, 2014 and December 31, 2013 was $16,431 and $16,402, respectively.  Of the March 31, 2014 depreciation, $399 was expensed in general and administrative expenses and $16,032 was capitalized. Capitalized interest for the quarter ended March 31, 2014 was $3,222.  Production is estimated to begin in the fourth quarter 2014.

NOTE 5 – MINERAL PROPERTIES AND LEASES

Mineral properties and leases as of March 31, 2014 and December 31, 2013 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, 42 patented claims, and three Utah state mineral leases located on state trust lands. Annual claims fees are currently $140 per claim plus administrative fees.

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On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility.  The reclamation bond was posted in February 2014.  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 Yellowhammer Small Mine and the Yellowhammer Exploration sites along with the Herat Exploration site.  As such, the asset retirement obligation for these sites will be removed and funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds.  Total reclamation bonds posted at March 31, 2014 and December 31, 2013 are $1,503,316 and $155,316, respectively.  

On March 20, 2013, the Confederated Tribes of the Goshute Reservation (the “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.

NOTE 6 – 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 is payable in equal monthly installments of $7,500.  The notes are convertible into potentially 857,143 shares of common stock.   The note holders were issued 64,284 shares of stock each in 2013 to settle accrued interest for 2013 and have been issued 16,071 shares of common stock each to settle accrued interest for the first quarter of 2014.

NOTE 7 – DERIVATIVE LIABILITIES

On February 19, 2014, in connection with the tenth amendment to the DMRJ Group agreement (Note 8), the ability to convert the DMRJ Group debt into shares of common stock was cancelled.  The fair value of the conversion option on the date of cancellation was calculated to be $164,146 and was recorded as additional paid in capital. The Company recognized a change in fair value of $6,673 and ($152,747) for the periods ended March 31, 2014 and March 31, 2013, respectively.   

A Black-Scholes option-pricing model was used to estimate the fair value, using Level 2 inputs, of the Company’s derivatives using the following assumptions at February 19, 2014 and December 31, 2013.  Because no recent stock sales were available, the fair value of the stock at March 31, 2014 was estimated based on several factors, including a per common share value based on estimated production, current mine life, gold price and estimated production costs.

NOTE 8 – DMRJ GROUP FUNDING

2013 Activity

On January 29, 2013, the Company entered into a Sixth Amendment to the Investment Agreement with DMRJ Group.  The Sixth Amendment provides for the Company to receive additional funds in one advance (the “January Term Loan Advance”) of $50,000. This advance was received in February 2013 and replaced the second October Term Loan Advance, as authorized in the Fifth Amendment to the Investment Agreement, which had never been drawn.  In addition, the maturity date of the entire loan balance due to DMRJ Group was moved from December 15, 2012 to March 5, 2013.  The March 5, 2013 payment was not made.

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On April 30, 2013, the Company agreed to the terms of a Seventh Amendment to the Investment Agreement with DMRJ Group.  This amendment became effective on June 26, 2013 and as a result of the terms of the amendment, the maturity date of the entire loan balance due to DMRJ Group was moved from March 5, 2013 to June 30, 2013.  The Seventh Amendment provides for the Company to receive additional funds in two advances of $50,000.  The first advance (the “April Term Loan Advance”) was received on May 2, 2013 and the second advance (the “May Term Loan Advance”) was received on June 26, 2013.  The June 30, 2013 loan payment was not made.  

On July 24, 2013, the Company agreed to the terms of an Eighth Amendment to the Investment Agreement with DMRJ Group.  This amendment became effective on July 24, 2013 and as a result of the terms of the amendment, the maturity date of the entire loan balance due to DMRJ Group was moved from June 30, 2013 to September 30, 2013.  The Eighth Amendment provided for the Company to receive additional funds in two advances.  The first advance (the “July Term Loan Advance”) in the amount of $100,000, was received on July 24, 2013 and the second advance (the “Additional July Term Loan Advance”) was received on August 23, 2013 in the amount of $50,000.  The September 30, 2013 loan payment was not made.

On October 24, 2013, the Company agreed to the terms of a Ninth Amendment to the Investment Agreement with DMRJ Group.  As a provision of this amendment the maturity date of the entire loan balance due to DMRJ Group was moved from September 30, 2013 to January 31, 2014.  The Ninth Amendment provided for the Company to receive additional funds in four advances of $25,000 each. The advances (the “October 2013 Term Loan Advances”) were to be used for ordinary course general corporate purposes. The advances could be drawn for four successive calendar months commencing in October 2013 in the aggregate principal amount of $25,000 each for an aggregate of up to $100,000.  The interest rate on these advances remains at 2% per month. Two of these advances were drawn in 2013.

2014 Activity

Pursuant to the Ninth Amendment to the Investment Agreement, a third October Term Loan Advance was taken in the amount of $25,000 in January 2014.  The January 31, 2014 loan payment was not made.

On February 19, 2014, the Company agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment provides for funding of mining operations through a series of advances (the “Monthly Term Loan Advances”) totaling a maximum of $5,700,000 over four months.  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% and minimum payment amounts were established beginning in February 2015.  On the last business day of each month, commencing October 31, 2014, we will pay to DMRJ Group an amount equal to 100% of all cash flows from operations for the immediately preceding month, if any, less mutually agreed upon capital expenditures (and if an agreement on capital expenditures is not reached, then 100% of cash flows from operations) subject to a minimum cash balance of $200,000 until such time as the unpaid principal amount of all Term Loan Advances outstanding and all accrued interest has been paid in full.  All payments will be applied first to accrued but unpaid interest and second to outstanding principal.  The first Monthly Term Loan, in the amount of $2,000,000, was used in part to fund the posting of the reclamation bond associated with the Kiewit Project Large Mining Permit.  Onsite construction of the project has since begun. If we are unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets.  A total of $3,000,000 was drawn during the three months ended March 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 (Note 3).

NOTE 9 - REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

Changes in the reclamation liability for the periods ended March 31, 2014 and 2013 are as follows:

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In the three months ended March 31, 2014, the Company recorded additional obligation relating to the construction of the heap leach pad and process facility at the Kiewit site.  In calculating the present value of the new obligation, the Company used a credit adjusted risk free interest rate of 8% and projected live of six years.  On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

NOTE 10 – 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 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 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 to date in 2014 or in 2013.

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, Clifton Shears/smelter tunnel deposit, and the Cane Springs deposit 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 Company did not begin commercial production.  Prior year annual payments on the Kiewit and the Clifton Shears properties, due on July 24, 2013, were made and accepted by Clifton Mining.  The Cane Springs property payment was not made and this claim was released back to Clifton Mining.  

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.  As of March 31, 2014 and December 31, 2013, accrued compensation of $341,500 and $332,000, and consulting fees payable of $60,000 and $70,000, respectively, were due to directors and officers.  Termination agreements have been reached with the 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.

Stock redeemable with gold proceeds

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of our 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, for a period of 12 months after commencement of operations at the Kiewit project, the shares can be redeemed for cash generated from the sale of gold.  Proceeds from 5% of the gold produced during the first year of production will be allocated to fund this option.  Each investor will receive 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 proceeds from these stock sales should be recorded as a liability and not as equity.

NOTE 11 – SUBSEQUENT EVENTS

President Shares in Lieu of Unpaid Salary

On April 28, 2014, the board of directors approved the grant of 3,137,066 shares of the Company’s common stock to Rick Havenstrite, a director and President of the Company, pursuant to the Company’s 2008 Stock Option-Stock Issuance Plan, in lieu of partial unpaid salary.

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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, 2013 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:

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unexpected delays in obtaining necessary mining permits;

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a decline in metal prices;

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environmental hazards;

·

metallurgical and other processing problems;

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unusual or unexpected geological formations;

·

global economic and political conditions;

·

disruptions in credit and financial markets;

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global productive capacity;

·

changes in product costing; and

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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. 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.  None of our mining properties have any known reserves and our proposed programs on these properties are exploratory in nature.  Our proposed projects are located in the Gold Hill Mining District in Tooele County, Utah.

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.

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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.  Construction of the project has begun using funding provided by DMRJ Group.  The property is located in an 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.  Management believes that no previous work by any operator has been contested by regulators or others.  

On March 20, 2013, the Confederated Tribes of the Goshute Reservation (the “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 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 Trust 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 properties are known as the Yellow Hammer claims.   

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. Prior year annual holding fee payments were due July 24, 2013 and payments on the Kiewit and Clifton Shears properties were made and accepted by Clifton Mining.  The payment for the Cane Springs property was not made and this claim was released back to Clifton Mining.  

We currently hold leasehold interests within the Gold Hill Mining District consisting of 247 unpatented mining claims, including an unpatented mill site claim, 42 patented claims, and three Utah state mineral leases located on state trust lands, all covering approximately 33 square miles.  Notice was timely given for the claims we no longer wished to maintain.  Payment of claims fees for the retained claims was made and accepted by Clifton Mining.  We intend to concentrate our activities on the Kiewit project consisting of seven of the unpatented Kiewit claims, the Clifton Shears, Oquirrh Springs, the Frankie, the Rustler, the Lion Vein, and the Lucy L sites.  Each of these is a potential near-term development target.  Mineral extraction activities on the property at this time will be open-pit and we anticipate conducting underground mining exploration in the future.  

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We have previously entered into an agreement with DMRJ Group, LLC (“DMRJ Group”) through which we can borrow up to $6,500,000 for our mining operations and our general and administrative expenses.  On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment provides for funding of mining operations through a series of loan advances (the “Monthly Term Loan Advances”) totaling a maximum of $5,700,000 over five months.  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% and minimum payment amounts were established beginning in February 2015.  On the last business day of each month, commencing October 31, 2014, we will pay to DMRJ Group an amount equal to 100% of all cash flows from operations for the immediately preceding month, if any, less mutually agreed upon capital expenditures (and if an agreement on capital expenditures is not reached, then 100% of cash flows from operations) subject to a minimum cash balance of $200,000 until such time as the unpaid principal amount of all Term Loan Advances outstanding and all accrued interest has been paid in full.  All payments will be applied first to accrued but unpaid interest and second to outstanding principal.  The first Monthly Term Loan, in the amount of $2,000,000, was used in part to fund the posting of the reclamation bond associated with the Kiewit Project Large Mining Permit.  Onsite construction of the project has since begun.  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 our mining leases and other assets.  

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of our stock.  This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of our common stock.  Under the terms of this offering, stock can be converted to 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.  Each investor will receive 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 proceeds from these stock sales should be recorded as a liability and not as equity.

Historically, we have incurred net losses for the years ended December 31, 2013 and 2012, and have also incurred a loss for the three months ended March 31, 2014.

Results of Operations for the Three Months Ended March 31, 2014 and 2013

The operating loss of $225,611 for the three months ended March 31, 2014 as compared to the operating loss of $237,607 for the three months ended March 31, 2013, represents a decrease of $11,996.  This occurred even though construction of the Kiewit property has begun.  Construction and development costs are now capitalized for future amortization over units of production, which causes the reduction in operating loss. Other expense for the three months ended March 31, 2014 in the amount of $1,608,908, consisted mainly of interest and financing costs, as compared to the other expense amount of $530,177 for the three months ended March 31, 2013. This represents an increase in other expense of $1,078,731 as compared to the three months ended March 31, 2013.  This difference was due to the financing costs in association with the stock issuance to DMRJ Group.   These differences result in a net loss of $1,834,519 for the three months ended March 31, 2014 as compared to the net loss of $767,784 for the three months ended March 31, 2013, an overall increased loss of $1,066,735.

Liquidity and Cash Flow

Net cash used by operating activities was $260,598 during the three month period ended March 31, 2014, compared with $37,224 during the three month period ended March 31, 2013.  This $223,374 increase in the amount of cash used by operating activities is primarily attributable to the increase in amounts prepaid for goods and services.  

Net cash used by investing activities was $1,558,835 during the three month period ended March 31, 2014, compared to $4,034 cash used by investing activities during the three month period ended March 31, 2013.  This is due to the increase of $1,348,000 in reclamation bonds and to the capitalization of the construction and development expenses during the quarter ended March 31, 2014.

Net cash provided by financing activities was $3,025,000 during the three month period ended March 31, 2014, compared with $50,000 cash provided during the three month period ended March 31, 2013.  Cash provided from financing for the three month period ended March 31, 2014 was from DMRJ Group loan proceeds provided to fund the ongoing construction of the Kiewit property.  

As a result of the above, cash increased by $1,205,567 during the three month period ended March 31, 2014, leaving us with a cash balance of $1,214,090 as of March 31, 2014.

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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 consolidated financial statements for a discussion of those policies.

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 ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

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 they are reasonably estimable.  Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed.

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 President and Treasurer, who serve as our principal executive and principal financial officers, respectively, after evaluating 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”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

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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 our most recent quarter ended March 31, 2014, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On July 5, 2011 we entered into an agreement with West C Street LLC and Ibearhouse LLC, the holders of convertible debt acquired from us in 2009, permitting payment of their monthly interest in stock rather than cash.  During the quarter ended March 31, 2014, we issued a total of 32,142 shares of stock, valued at $.70, to the note holders to convert accrued interest for the quarter.  These shares were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(a)(5) and/or Section 4(a)(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving any public offering.  Each of the note holders was an accredited investor as defined in Regulation D.  Each investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares.  Each investor represented that it had not entered into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting.  Each investor was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction.  No underwriting discounts or commissions were paid in connection with the stock issuance.

Item 6.  Exhibits

SIGNATURES

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

Desert Hawk Gold Corp.

Date: May 20, 2014

By: /s/ Rick S. Havenstrite                                             

Rick S. Havenstrite, President

(Principal Executive Officer)

Date: May 20, 2014

By: /s/ Marianne Havenstrite                                          

Marianne Havenstrite, Treasurer

(Principal Financial Officer)

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