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, 2015

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)

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)

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.

Large accelerated filer		Accelerated filer	.
Non-accelerated filer	(Do not check if a smaller reporting company)	Smaller reporting company	X

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 15, 2015: 13,056,603.

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DESERT HAWK GOLD CORP.

Form 10-Q

March 31, 2015

TABLE OF CONTENTS

		Page
Part I-Financial Information		3
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4	Controls and Procedures	22
Part II-Other Information		22
Item 6	Exhibits	22
Signatures		23

2

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PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

DESERT HAWK GOLD CORP
BALANCE SHEETS
				March 31,			December 31,
				2015			2014
ASSETS				(unaudited)
CURRENT ASSETS
	Cash		$	157,116		$	161,645
	Inventories (Note 4)			1,662,712			1,745,377
	Prepaid expenses and other current assets			75,271			142,825
	Total Current Assets			1,895,099			2,049,847
PROPERTY AND EQUIPMENT, net (Note 5)				4,828,207			3,190,156
MINERAL PROPERTIES AND INTERESTS, net (Note 6)				1,206,734			1,372,887
RECLAMATION BONDS				1,416,385			1,412,804
TOTAL ASSETS			$	9,346,425		$	8,025,694
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$	544,679		$	813,559
	Accrued liabilities-officer wages (Note 13)			229,500			247,500
	Interest payable (Notes 7 and 9)			3,849,254			3,383,152
	Convertible debt (Note 7)			600,000			600,000
	Notes payable - equipment (Note 10)			699,299			146,171
	Note payable - related party (Note 9)			3,150,746			2,124,348
	Redemption of gold proceeds payable (Note 12)			119,356			56,609
	Stock redeemable with gold proceeds (Note 12)			28,000			82,000
	Total Current Liabilities			9,220,834			7,453,339
LONG-TERM LIABILITIES
	Asset retirement obligation (Note 11)			755,251			740,268
	Notes payable - equipment (Note  10)			1,549,430			372,388
	Note payable - related party (Note 9)			8,638,746			9,665,144
				10,943,427			10,777,800
TOTAL LIABILITIES				20,164,261			18,231,139
COMMITMENTS  (Note 13)
STOCKHOLDERS' (DEFICIT) (Note 3)
	Preferred Stock, $0.001 par value, 10,000,000 shares authorized
	Series A:  958,033 shares issued and outstanding			958			958
	Series A-1: No shares issued and outstanding			-			-
	Series A-2: 180,000  shares issued and outstanding			180			180
	Series B: 249,603 shares issued and outstanding			250			250
	Common stock,  $0.001 par value, 100,000,000  shares authorized; 13,056,603 and 13,056,603 shares issued and outstanding, respectively			12,928			12,928
	Additional paid-in capital			8,328,806			8,328,806
	Accumulated deficit			(19,160,958)			(18,548,567)
	Total Stockholders' (Deficit)			(10,817,836)			(10,205,445)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)			$	9,346,425		$	8,025,694

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DESERT HAWK GOLD CORP
STATEMENTS OF OPERATIONS (unaudited)
						Three Months Ended
						March 31,		March 31,
						2015		2014
REVENUE:
	Concentrate sales				$	1,239,869	$	-
EXPENSES
	General project costs					1,026,593		76,222
	Exploration expense					5,904		16,530
	Officers and directors fees					41,538		34,385
	Legal and professional					25,925		42,184
	General and administrative					136,810		55,891
	Depreciation and amortization					141,336		399
						1,378,106		225,611
OPERATING LOSS						(138,237)		(225,611)
OTHER INCOME (EXPENSE)
	Interest  and other income					380		-
	Change in fair value of derivatives					-		6,673
	Financing expense					-		(1,248,015)
	Interest expense					(474,534)		(367,566)
						(474,154)		(1,608,908)
LOSS BEFORE INCOME TAXES						(612,391)		(1,834,519)
INCOME TAXES						-		-
NET LOSS					$	(612,391)	$	(1,834,519)
BASIC AND DILUTED NET LOSS PER SHARE					$	(0.05)	$	(0.19)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED						13,056,603		9,502,040

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DESERT HAWK GOLD CORP
STATEMENTS OF CASH FLOWS (unaudited)
				Three Months Ended
				March 31,		March 31,
				2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(612,391)	$	(1,834,519)
	Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation and amortization		270,909		399
		Common stock issued for interest expense		-		22,500
		Preferred stock issued for financing expense		-		1,248,015
		Accretion of asset retirement obligation		14,983		11,344
		Loss on sale of equipment		1,008		-
		Change in fair value of derivatives		-		(6,673)
		Loss on stock redeemed with gold proceeds		8,748		-
	Changes in operating assets and liabilities:
		Inventories		82,665		-
		Prepaid expenses and other current assets		67,554		(64,592)
		Accounts payable and accrued expenses		(118,505)		5,140
		Accrued liabilities - officer wages		(18,000)		9,500
		Interest payable, net of amount capitalized		466,102		348,288
	Net cash provided (used) by operating activities			163,073		(260,598)
CASH FLOWS FROM INVESTING ACTIVITIES:
		Additions to property and equipment		(128,731)		(210,835)
		Acquisition of reclamation bonds		(3,581)		(1,348,000)
		Proceeds from sale of equipment		9,192		-
	Net cash (used) by investing activities			(123,120)		(1,558,835)
CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from note payable-related party		-		3,025,000
		Payment of note payable - equipment		(44,482)		-
	Net cash provided (used) by financing activities			(44,482)		3,025,000
NET INCREASE (DECREASE) IN CASH				(4,529)		1,205,567
CASH, BEGINNING OF PERIOD				161,645		8,523
CASH, END OF PERIOD			$	157,116	$	1,214,090
NON-CASH FINANCING AND INVESTING ACTIVITIES:
	Equipment acquired with notes payable - equipment		$	1,624,276	$	-
	Accounts payable converted to notes payable - equipment			150,376		-
	Addition to redemption of gold proceeds payable			62,748
	Preferred stock issued in connection with debt amendment			-		1,248,015
	Fair value of cancelled conversion option			-		164,140

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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.  On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc.  As a result the Company has no subsidiaries.

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company, the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah.  In 2011 the Company entered into an agreement with DMRJ group 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 at September 30, 2014.  Revenue from the Kiewit heap leach operation began in October 2014 with the first sales of gold and silver.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited interim 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, 2015, and the results of its operations and its cash flows for the three months ended March 31, 2015 and 2014. The operating and financial results for the Company for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

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 included in the Company’s annual report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015.

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 bodies of mineralized material, and to expand the capacity of operating mines are capitalized and will be amortized on units of production basis over proven and probable reserves.

Inventories

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

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type).  The nature of the leaching process inherently limits the ability to precisely monitor inventory levels.  As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time.  As of March 31, 2015, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

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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 months.

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, or units of production over estimated reserves.  The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.  Maintenance and repairs are charged to operations as incurred. Replacements and betterments that extend the useful life of the property and equipment are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.  

Mineral Properties and Leases

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

Reclamation and Remediation

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

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

Earnings (loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company.  At March 31, 2015 and March 31, 2014, common stock equivalents outstanding are as follows:

		March 31, 2015		March 31, 2014
Convertible debt		857,143		857,143
Convertible preferred stock		27,718,333		27,718,333
Total		28,575,476		28,575,476

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

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Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit incurred through March 31, 2015, which raises substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014.  Construction at the site was substantially complete at September 30, 2014.  The Company will need significant funding to continue operations and increase development through the next fiscal year.  This funding is expected to come via sales revenues, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.  

If the going concern assumption were not appropriate for these 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.

No shares of stock have been issued during the first quarter 2015.

The Company issued a total of 117,854 shares of stock to the note holders of the convertible debt for interest expense through November 30, 2014.  These shares were valued at a fair value of $82,500 based upon the stated interest rate contained in the debt agreements.  The Company failed to repay the loan in full on the November 30, 2014 maturity date, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders.  This issuance was valued at $0.04 per share ($12,000) which was determined by management to be the fair value of a share of common stock based on a 2014 valuation analysis performed by a consultant.  The consultant determined that the fair value of the common stock of the Company on a non-controlling, non-marketable basis to be $0.04 per share. Management assessed the consultant’s valuation and found the methodology to be appropriate for the Company and concluded that the fair value of common shares is $0.04.  The issuance was accounted for as financing expense during the fourth quarter 2014.  As part of this agreement, the due date of the notes was extended to November 30, 2015, with interest to be paid in cash after November 30, 2014.  See Note 10.

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

Preferred Stock

On February 19, 2014, the Company agreed to the terms of a 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.  The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During the quarter ended March 31, 2014, 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 $0.05.  During the quarter ended June 30, 2014, the Company revised the estimated fair value of the equivalent common shares to be $998,412 based upon a fair value of $0.04 per share.  Thus a reduction to financing expense of $249,603 was recorded in the second quarter 2014.

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As a result of this issuance, DMRJ beneficially owns 67% of the Company (on a fully-diluted basis) with shares convertible to 27,718,333 shares of common stock.

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.

NOTE 4 – INVENTORIES

The following table provides the components of inventories:

		March 31, 2015		December 31, 2014
Ore on leach pad	$	1,479,614	$	1,508,761
Carbon column in process		18,145		211,115
Dore finished goods		164,953		25,501
Total	$	1,662,712	$	1,745,377

 

Inventories are valued at the lower of cost or market value, which at March 31, 2015 is cost.  

NOTE 5 - PROPERTY AND EQUIPMENT

Construction and development of the project began with the establishment of the reclamation bond on February 20, 2014.  The following is a summary of property, equipment, and accumulated depreciation at March 31, 2015 and December 31, 2014:

	March 31,			December 31,
	2015			2014
Equipment	$	3,090,105		$	1,465,827
Furniture and fixtures, temporary housing		10,781			10,781
Electronic and computerized equipment		48,831			19,011
Vehicles		53,330			65,330
		3,203,047			1,560,949
Less accumulated depreciation		(433,641)			(357,983)
		2,769,406			1,202,966
Kiewit property facilities		2,274,348			2,153,411
Less accumulated amortization		(215,547)			(166,221)
		2,058,801			1,987,190
Total	$	4,828,207		$	3,190,156

Depreciation and amortization for the periods ended March 31, 2015 and March 31, 2014 was $243,611 and $399, respectively.  

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NOTE 6 – MINERAL PROPERTIES AND INTERESTS

Mineral properties and interests as of March 31, 2015 and December 31, 2014 are as follows:

			March 31, 2015		December 31, 2014
Initial lease fee
Yellow Hammer Site		$	175,000	$	175,000
Kiewit, Cactus Mill and all other sites			600,000		600,000
Total			775,000		775,000
Asset retirement obligation
Kiewit Site			687,475		687,475
Kiewit Exploration			10,780		10,780
Cactus Mill			16,133		16,133
Total			714,388		714,388
Accumulated amortization			(282,654)		(116,501)
Total		$	1,206,734	$	1,372,887

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

On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility.  On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  This newly calculated bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.  As such, the asset retirement obligation for these sites was absorbed by the new bond. Funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds.  Total reclamation bonds posted at March 31, 2015 and December 31, 2014 are $1,416,385 and $1,412,804, respectively.  

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

NOTE 7 – CONVERTIBLE DEBT

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders for a total of $600,000.  The notes bear interest at 15% per annum.  Interest-only is payable in equal monthly installments of $7,500.  The notes were originally convertible at any time at a rate of $1.50 per share, but on July 14, 2010 the promissory notes were amended thereby reducing the conversion price to $0.70 due to the note holders’ agreement to subordinate their debt to DMRJ Group (see Note 11).  The notes are convertible into potentially 857,143 shares of common stock and principal and interest were initially due November 30, 2012.

On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

The Company failed to repay the loan in full on the November 30, 2012, November 30, 2013 and November 30, 2014 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. As part of this agreement, the due date of the note was extended each year and has now been extended to November 30, 2015. Interest was paid with stock through November 30, 2014 and will be paid in cash thereafter.  Accrued interest payable at March 31, 2015 and 2014 includes $30,000 and $-0-, respectively, for these notes.

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NOTE 8 – DERIVATIVE LIABILITIES

On February 19, 2014, in connection with the Tenth Amendment to the Investment Agreement with DMRJ Group (Note 9), 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 for the quarter ended March 31, 2014.

NOTE 9 – NOTE PAYABLE - RELATED PARTY

DMRJ beneficially owns approximately 67% of the Company (on a fully-diluted basis) with shares convertible to 27,718,333 shares of common stock (See Note 3).  They are considered a related party.  In July 2010, the Company entered into an Investment Agreement with DMRJ.  The Agreement has been modified numerous times and currently operates under the Eleventh Amendment to the Investment Agreement.  The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.  

The total due to DMRJ at March 31, 2015 and December 31, 2014 is as follow:

		March 31,		December 31,
		2015		2014
Principal
Current	$	3,150,746	$	2,124,348
Long-term		8,638,746		9,665,144
Total		11,789,492		11,789,492
Interest payable - current		3,849,254		3,375,652
	$	15,638,746	$	15,165,144

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

·

Incurring any indebtedness except in limited circumstances;

·

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

·

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

·

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

·

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

·

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

·

Engage in any business transactions with affiliates;

·

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

·

Create any lease obligations;

·

Amend, supplement or modify any existing indebtedness;

·

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

·

Make any change in our accounting policies or reporting practices;

·

Form additional subsidiaries; or

·

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

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2015 Activity

An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates beginning in May 2015 as follows:

May 31, 2015	$	500,000
August 31, 2015		1,000,000
November 30, 2015		4,000,000
February 28, 2016		1,500,000
May 31, 2016		750,000
August 31, 2016		3,000,000
October 31, 2016		3,000,000
Total	$	13,750,000

2014 Activity

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

On February 19, 2014, the Company agreed to the terms of 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 five months.  A total of $5,500,000 was drawn.  As a provision of this amendment, the maturity date for the entire loan was moved to October 31, 2016.  The interest rate on the loan balance was reduced from 24% to 15% and minimum principal and interest payment amounts were established.  The first minimum payment, due February 28, 2015, was not made.    Payment terms were changed in 2015 pursuant to the Eleventh Amendment (see 2015 Activity).

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

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

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NOTE 10 – NOTES PAYABLE – EQUIPMENT

The following is a summary of the equipment notes payable:

		March 31, 2015		December 31, 2014
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,424 including interest at 4.99%.	$	105,286	$	-
Note payable to CAT Financial, collateralized by five pieces of used mining equipment, including three haul trucks, a loader and a grader, due in 36 monthly installments of $49,242 including interest at 4.68%.		1,650,913		-
Note payable to HCE Funding, collateralized by a Perkins Elmer AA machine, due in one installment of $7,600 and 22 installments of $520, including interest at 5.00%.		9,855		-
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,594 including interest at 2.99%.		461,805		492,955
Note payable to Komatsu Financial, collateralized by a Komatsu PC400 Excavator, due in 24 monthly installments of $1,629 including interest at 1.75%.		20,870		25,604
		2,248,729		518,559
Current portion		(699,299)		(146,171)
Long Term portion	$	1,549,430	$	372,388
Principal payments are as follows for the twelve months ended March 31,
2016			$	699,299
2017				711,934
2018				737,894
2019				99,602

During the first quarter 2015, accounts payable balance of $150,376 relating to lease costs for equipment was converted to notes payable – equipment when the Company acquired the equipment.

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NOTE 11 – REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

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

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

		March 31, 2014		December 31, 2014
Reclamation and remediation liability, beginning of year	$	740,268	$	69,920
Obligation incurred		-		656,567
Accretion expense		14,983		13,781
Reclamation and remediation liability, end of year	$	755,251	$	740,268

NOTE 12 – STOCK REDEEMABLE WITH GOLD PROCEEDS

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

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

		Conversion Shares Due based on $1,000 Gold Price		Additional Amount Based on Actual Gold Sales  Price		Total Due to Shareholders at March 31, 2015
Original Conversion Liability		130,000
Less Conversion:
December 31, 2014		48,000		8,609		56,609
March 31, 2015		54,000		8,748		62,748
Total	$	102,000	$	17,357	$	119,356
Remaining balance to be redeemed at March 31, 2015					$	28,000

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NOTE 13– 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 2015 or in 2014.  No payment has been made on this property and no official forfeiture notice has been received regarding this nonpayment.

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

Royalties of 6% are due to Clifton Mining on sales of gold and silver.  Royalties due to Clifton Mining at March 31, 2015 and December 31, 2014 from production at the Kiewit property are $51,646 and $ -0-, respectively. Royalty expense for the quarter ended March 31, 2015 is $73,013.   

Employment Agreements

In September 2010, the Company entered into employment agreements with its Chief Executive Officer (“CEO”) and its President and entered into a consulting agreement with one of its directors.  Each agreement was for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year.  Termination agreements have been reached with the CEO and one director, providing for payment of accrued compensation and consulting payable over several months commencing with the funding of the Kiewit project.  These payments began in February 2014.  As of March 31, 2015 and December 31, 2014 accrued compensation of $229,500 and $247,500, and consulting fees payable of $-0- and $15,000, respectively, were due to directors and officers.  Of the $229,500 due at March 31, 2015, accrued compensation of $165,000 is due to Rick Havenstrite, President, $28,500 to Marianne Havenstrite, Treasurer, and $36,000 remains to be paid pursuant to the termination agreements.  In addition, as part of a management incentive award on May 1, 2014, Rick Havenstrite was awarded 3,137,066 shares of common stock.  As part of this award, Mr. Havenstrite agreed to forgive $40,000 in accrued compensation.  See Note 3.

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NOTE 14 – RELATED PARTY TRANSACTIONS

The Company recognized rent expense for rental of office space of $3,000 and $2,000 for the quarters ending March 31, 2015 and 2014, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s president and a director.  Of the amounts recognized as expense, RMH Overhead, LLC was paid $3,000 and $1,000 in the first quarters of 2015 and 2014, respectively, leaving a balance of $13,850 remaining in accounts payable at March 31, 2015 and 2014.  In addition, the Company purchased equipment for $16,500 from Overhead Door Co. of SNR, another company owned by Rick Havenstrite, during the year ending December 31, 2014.

During the quarters ended March 31, 2015 and March 31, 2014, the Company recognized wage expense of $13,846 and $5,538, respectively, for office and accounting services performed by Marianne Havenstrite, wife of Rick Havenstrite, who became an officer of the Company during 2013. $28,500 of accrued wages remains unpaid at December 31, 2015 and 2014 and is reflected in accrued liabilities.   

During the quarters ended March 31, 2015 and 2014, the Company recognized general project cost expense of $3,105 and $12,827, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. A total of $21,649 remains unpaid to Mr. Havenstrite at December 31, 2014 and is included in accounts payable at that date.  Payments were also made to other family members in the quarters ending March 31, 2015 and 2014 for accounting and engineering services in the amount of $19,384 and 1,385.

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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, 2014 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:

·

unexpected delays in obtaining and maintaining necessary mining permits;

·

a decline in metal prices;

·

environmental hazards;

·

metallurgical and other processing problems;

·

unusual or unexpected geological formations;

·

global economic and political conditions;

·

disruptions in credit and financial markets;

·

global productive capacity;

·

changes in product costing; and

·

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

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

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

Overview

Desert Hawk Gold Corp. 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 has any known reserves and our proposed programs on these properties are exploratory in nature.  Our projects are located in the Gold Hill Mining District in Tooele County, Utah.  We are currently producing gold and silver at the Kiewit property and had our first sales from the property in October 2014.  

We were originally incorporated in the State of Idaho on November 5, 1957.  For several years we bought and sold mining leases and claims, but in 1995 we ceased all principal business operations.  In 2008, we changed our domicile from the State of Idaho to the State of Nevada.  In May 2009, we raised funds to recommence mining activities.  In July 2009, we entered into agreements to commence exploration activities on mining claims in the Gold Hill Mining District.

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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.  Development of the project was essentially completed in 2014 using funding provided by DMRJ Group.  The property is located in a historical mining district that has existing disturbances and mine wastes and is in a very arid, desolate area.  The property is also adjacent to, and uphill from, the Dugway Proving Grounds and Air Force Gunnery Range that is deemed an environmentally insensitive area, with low water quality.  Management believes that through our leased patented claims we have adequate private land for process facilities.  There is no material access from any metropolitan area or community.

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

On July 24, 2009, we entered into a Joint Venture Agreement with the Clifton Mining Company and Woodman Mining Company under which Clifton Mining granted to us exclusive possession of certain patented and unpatented mining claims and an unpatented mill site claim and certain Utah state mineral leases covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. Woodman Mining also granted us the same rights in certain of these patented mining claims owned jointly with Clifton Mining. Also, on July 24, 2009, we entered into a Joint Venture Agreement with the Jeneane C. Moeller Family Trust under which the 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.  No payments have been made to keep this agreement current and no formal forfeiture notification has been received.

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. Annual holding fee payments were due July 24, 2014 and payments on the Kiewit and Clifton Shears properties were made on July 22, 2014 and accepted.  The Cane Springs property was released back to Clifton Mining in 2013.  

We currently hold leasehold interests within the Gold Hill Mining District consisting of 247 unpatented mining claims, including an unpatented mill site claim, and two Utah state mineral leases located on state trust lands, all covering approximately 33 square miles.  Notice was timely given for the claims we no longer wished to maintain.  Initial payment for the claims fees for 2014 were made and accepted by Clifton Mining on July 22, 2014.  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.  

In July 2010, we entered into an Investment Agreement with DMRJ.  The Agreement has been modified numerous times and currently operates under the Eleventh Amendment to the Investment Agreement.  The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.  

On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment 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, we issued to DMRJ Group 249,603 shares of Series B Preferred Stock.  The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During the quarter ended March 31, 2014, 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 $0.05.  During the quarter ended June 30, 2014, the Company revised the estimated fair value of the equivalent common shares to be $998,412 based upon a fair value of $0.04 per share.  Thus a reduction to financing expense of $249,603 was recorded in the second quarter 2014.

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

In connection with this amendment, we 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.

The total due to DMRJ at March 31, 2015 and December 31, 2014 is as follow:

		March 31,		December 31,
		2015		2014
Principal
Current	$	3,150,746	$	2,124,348
Long-term		8,638,746		9,665,144
Total		11,789,492		11,789,492
Interest payable - current		3,849,254		3,375,652
	$	15,638,746	$	15,165,144

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

·

Incurring any indebtedness except in limited circumstances;

·

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

·

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

·

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

·

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

·

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

·

Engage in any business transactions with affiliates;

·

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

·

Create any lease obligations;

·

Amend, supplement or modify any existing indebtedness;

·

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

·

Make any change in our accounting policies or reporting practices;

·

Form additional subsidiaries; or

·

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

An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum payment dates beginning in May 2015 as follows:

May 31, 2015	$	500,000
August 31, 2015		1,000,000
November 30, 2015		4,000,000
February 28, 2016		1,500,000
May 31, 2016		750,000
August 31, 2016		3,000,000
October 31, 2016		3,000,000
Total	$	13,750,000

Management anticipates that we will not be able to make the May 31, 2015 payment; however, although no discussions are currently being held with DMRJ, management anticipates negotiating an extension of the May 31, 2015 payment with DMRJ. If DMRJ fails to grant an extension, it could foreclose on our assets.

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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.  At March 31, 2015, conversion proceeds due to shareholders is $119,356 for conversion shares of $102,000.  The remaining balance of conversion shares to be redeemed based on $1,000 gold price is $28,000.   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.  The amount owed to the shareholders in excess of $1,000 per ounce for redemptions through March 31, 2015 is $17,357.  This amount has been recorded as an administrative expense.

Historically, we have incurred net losses for the years ended December 31, 2014 and 2013, and have also incurred a loss for the three months ended March 31, 2015.

Our financial statements were prepared assuming that we would continue as a going concern. Our significant cumulative losses from operations as of March 31, 2015, raise substantial doubt about our ability to continue as a going concern. If the going-concern assumption were not appropriate for our 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. During 2015, we have continued to experience losses from operations. We will require additional funding to complete much of our planned mining exploration. Except for potential proceeds from the sale of equity in offerings by us, the issuance of debt, and revenue from existing operations, which has been minimal, we have no other source for additional funding. Our continued net operating losses and stockholders’ deficiency increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

Results of Operations for the Three Months Ended March 31, 2015 and 2014

The operating loss of $138,237 for the three months ended March 31, 2015 as compared to the operating loss of $225,611 for the three months ended March 31, 2014 represents a decrease in loss of $87,374.  This decreased loss is due to the onset of production and the revenue from metals sales.  Other expense for the three months ended March 31, 2015 was $474,154 that consisted mainly of interest, decreased $1,134,754 as compared to the other expense amount of $1,608,908 for the three months ended March 31, 2014 that consisted mainly of financing costs in association with the stock issuance to DMRJ Group.  The net overall decrease in net loss for the three months ended March 31, 2015 compared to March 31, 2014 was $1,222,128.

Liquidity and Cash Flow

Net cash provided by operating activities was $163,073 during the three month period ended March 31, 2015, compared with cash used by operating activities of $260,598 during the three month period ended March 31, 2014.  This $423,671 change in the amount of cash from operating activities is primarily attributable to the onset of production and sales revenue in late 2014.

 

Net cash used by investing activities was $123,120 during the three month period ended March 31, 2015, compared to $1,558,835 cash used by investing activities during the three month period ended March 31, 2014.  This decrease of $1,435,715 in cash used for investing activities is due to investment in reclamation bonds in the first three months of 2014.

Net cash used for financing activities was $44,482 during the three month period ended March 31, 2015, compared with $3,025,000 cash provided during the three month period ended March 31, 2014.  Cash used for financing for the three month period ended March 31, 2015 consisted of payments on equipment loans while the cash provided in the first quarter of 2014 was provided with proceeds from the financing agreement with DMRJ Group.

As a result of the above, cash decreased by $4,529 during the three month period ended March 31, 2015, leaving us with a cash balance of $157,116 as of March 31, 2015.

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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 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 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.

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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.

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, 2015, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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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 15, 2015,

By: /s/ Rick S. Havenstrite      

Rick S. Havenstrite, President

(Principal Executive Officer)

Date: May 15, 2015

By: /s/ Marianne Havenstrite     

Marianne Havenstrite, Treasurer

(Principal Financial Officer)

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