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Form 10-Q Desert Hawk Gold Corp. For: Jun 30

August 15, 2022 6:31 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended June 30, 2022

 

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)

 

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

 

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

 

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

 

Yes ☒ No ☐

 

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

 

Yes ☒ No ☐

 

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

 

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

 

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

 

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

 

Yes ☐ No

 

Indicate the number of shares outstanding of the issuer’s common stock, as of August 15, 2022: 26,831,603.

 

 

 

 

 

 

DESERT HAWK GOLD CORP.

Form 10-Q

June 30, 2022

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 1
   
Item 1. Financial Statements 1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
   
Item 4. Controls and Procedures 16
   
PART II – OTHER INFORMATION 17
   
Item 3. Defaults Upon Senior Securities 17
   
Item 4. Mine Safety Disclosures 17
   
Item 6. Exhibits 17
   
SIGNATURES 18

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

DESERT HAWK GOLD CORP.

CONDENSED INTERIM BALANCE SHEETS (UNAUDITED)

 

   June 30,
2022
   December 31,
2021
 
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents  $1,166,356   $424,629 
Accounts receivable   36,799    270,108 
Inventories (NOTE 4 )   3,903,664    4,673,189 
Prepaid expenses and other current assets   49,113    45,983 
TOTAL CURRENT ASSETS   5,155,932    5,413,909 
INVENTORIES (NOTE 4 )   843,868    1,081,425 
PROPERTY AND EQUIPMENT, net (NOTE 5)   4,551,730    4,928,280 
MINERAL PROPERTIES AND INTERESTS, net (NOTE 6)   3,616,493    3,679,652 
RECLAMATION BONDS (NOTE 3)   1,036,172    947,116 
TOTAL ASSETS  $15,204,195   $16,050,382 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
CURRENT LIABILITIES:          
Accounts payable and accrued liabilities  $128,667   $255,010 
Royalties and upside participation payable (NOTE 7)   2,522,538    1,977,633 
Accrued interest, prepaid forward gold contract   353,505    120,989 
Accrued liabilities – officers and other wages (NOTE 11)   127,159    111,159 
Notes payable, current portion (NOTE 8)   143,190    427,413 
Settlement of consulting contract payable (NOTE 10)   200,000    200,000 
Prepaid forward gold contract liability (NOTE 7)   8,262,715    10,263,438 
Due to PDK in lieu of gold deliveries (NOTE 7)   9,231,500    5,771,000 
TOTAL CURRENT LIABILITIES   20,969,274    19,126,642 
LONG-TERM LIABILITIES          
Notes payable, net of current portion (NOTE 8)   -    116,098 
Asset retirement obligation (NOTE 9)   1,429,365    1,362,294 
TOTAL LONG-TERM LIABILITIES   1,429,365    1,478,392 
TOTAL LIABILITIES   22,398,639    20,605,034 
COMMITMENTS AND CONTINGENCIES (NOTES 3, 6 AND 12)   
 
    
 
 
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred Stock, $.001 par value; 10,000,000 shares authorized, none issued or outstanding   
-
    
-
 
Common Stock, $.001 par value; 100,000,000 shares authorized; 26,831,603 and 26,831,603 shares issued and outstanding, respectively   26,833    26,833 
Additional paid-in capital   9,666,275    9,666,275 
Accumulated deficit   (16,887,552)   (14,247,760)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)   (7,194,444)   (4,554,652)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $15,204,195   $16,050,382 

 

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

 

1

 

 

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENTS OF OPERATIONS (UNAUDITED)

For the three and six months ended June 30, 2022 and 2021

 

 

   Three months ended June 30,   Six months ended June 30, 
   2022   2021   2022   2021 
REVENUE                
Concentrate sales  $1,242,095   $940,151   $2,035,029   $2,311,281 
Contract processing income   497,241    675,640    971,429    1,436,495 
Total revenue   1,739,336    1,615,791    3,006,458    3,747,776 
                     
OPERATING EXPENSES                    
General production and project costs   1,422,412    850,840    2,650,138    2,959,742 
Contract processing costs   30,509    65,196    71,214    143,144 
Depreciation and amortization   179,433    237,424    494,121    494,230 
Other operating costs   148,815    102,557    263,730    135,161 
Exploration expense   -    4,997    -    4,997 
Legal and professional   23,150    41,005    90,921    113,436 
Officers and directors fees   84,658    78,371    172,547    167,665 
General and administrative   69,121    120,966    180,901    195,545 
Loss on disposal of equipment   18,468    30,081    18,468    234,164 
Forward gold contract expense (NOTE 7)   883,333    576,444    1,459,777    1,281,550 
TOTAL OPERATING EXPENSES   2,859,899    2,107,881    5,401,817    5,729,634 
LOSS FROM OPERATIONS   (1,120,563)   (492,090)   (2,395,359)   (1,981,858)
OTHER INCOME (EXPENSE)                    
Interest and other income   30    40    56    40 
Interest expense – equipment financing   (5,224)   (29,415)   (11,515)   (52,878)
Interest expense - other   (176,808)   (3,612)   (232,974)   (34,845)
TOTAL OTHER INCOME (EXPENSE)   (182,002)   (32,987)   (244,433)   (87,683)
NET LOSS BEFORE INCOME TAX   (1,302,565)   (525,077)   (2,639,792)   (2,069,541)
Provision (benefit) for income tax   
-
    
-
    
-
    
-
 
NET LOSS  $(1,302,565)  $(525,077)  $(2,639,792)  $(2,069,541)
Basic and diluted loss per share
  $(0.05)  $(0.02)  $(0.10)  $(0.08)
Basic and diluted weighted average number of shares outstanding
   26,831,603    26,831,603    26,831,603    26,831,603 

 

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

 

2

 

 

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENT OF CHANGES IN

STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

For the three and six months ended June 30, 2022 and 2021 

 

 

   Common Stock           Total  
   Shares
Issued
   Par Value
$.001 per share
   Additional
Paid in Capital
   Accumulated
Deficit
   Stockholders’
Equity (Deficit)
 
                     
BALANCE, December 31, 2020   26,831,603   $26,833   $9,666,275   $(11,291,811)  $(1,598,703)
Net loss   -    
-
    
-
    (1,544,464)   (1,544,464)
BALANCE, March 31, 2021   26,831,603    26,833    9,666,275    (12,836,275)   (3,143,167)
Net loss   -    -    
-
    (525,077)   (525,077)
BALANCE, June 30, 2021   26,831,603   $26,833   $9,666,275   $(13,361,352)  $(3,668,244)
                          
BALANCE, December 31, 2021   26,831,603   $26,833   $9,666,275   $(14,247,760)  $(4,554,652)
Net loss   -    
-
    
-
    (1,337,227)   (1,337,227)
BALANCE, March 31, 2022   26,831,603    26,833    9,666,275    (15,584,987)   (5,891,879)
Net loss   -    -    
-
    (1,302,565)   (1,302,565)
BALANCE, June 30, 2022   26,831,603   $26,833   $9,666,275   $(16,887,552)  $(7,194,444)

 

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

 

3

 

 

DESERT HAWK GOLD CORP.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)

 

   Six months ended June 30, 
   2022   2021 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(2,639,792)  $(2,069,541)
Adjustments to reconcile net loss to net cash provided (used) by operating activities          
Depreciation and amortization   494,121    494,230 
Accretion of asset retirement obligation   67,071    60,974 
Write down of inventory to net realizable value   1,235,568    108,993 
Loss on disposal of equipment   18,468    234,164 
Changes in operating assets and liabilities:          
Accounts receivable   233,309    (9,305)
Inventories   (228,486)   1,085,329 
Prepaid expenses and other current assets   (3,130)   3,984 
Accounts payable and accrued liabilities   (126,343)   (925,843)
Royalties and upside participation payable (NOTE 7)   544,905    577,585 
Accrued interest, prepaid forward gold contract   232,516    - 
Accrued liabilities – officer and other wages   16,000    40,462 
Due to PDK in lieu of gold deliveries (NOTE 7)   3,460,500    3,038,000 
Prepaid forward gold contract liability (NOTE 7)   (2,000,723)   (1,756,450)
Net cash provided by operating activities   1,303,984    882,582 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions to property and equipment   (117,880)   (118,887)
Proceeds from sale of equipment   45,000    
-
 
Payments on reclamation bonds   (89,056)   (189,040)
Net cash used by investing activities   (161,936)   (307,927)

CASH FLOWS FROM FINANCING ACTIVITIES:

          
Payment of notes payable   (400,321)   (540,567)
Net cash used by financing activities   (400,321)   (540,567)
Net increase in cash and cash equivalents   741,727    34,088 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   424,629    173,287 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $1,166,356   $207,375 
           
NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Equipment acquired with notes payable – equipment  $
-
   $426,751 
Land and building purchased with note payable and accrued rent  $
-
   $158,000 

 

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

 

4

 

 

DESERT HAWK GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Desert Hawk Gold Corp. (the “Company”), a Nevada Corporation, was incorporated on November 5, 1957. The Company commenced its current mining activities on May 1, 2009.

 

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company (“Clifton”), the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah.  In 2011, the Company entered into an agreement with DMRJ Group, (a Platinum Partners related entity), which allowed for long term funding of the Kiewit project and helped to provide cash flow for operations during the period from 2009 until 2014 while the permitting process was ongoing. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete on September 30, 2014. Revenue from the heap leach operation began in October 2014 with the first sales of gold concentrate.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods reported. The condensed balance sheet at December 31, 2021 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. Operating results for the three- and six-month period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.

 

These unaudited condensed interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”). These unaudited condensed interim financial statements should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 31, 2022.

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to U.S. GAAP and have been consistently applied in the preparation of the financial statements.

 

Reclassifications

 

Certain reclassifications have been made to conform prior periods’ amounts to the current presentation. These reclassifications have no effect on the results of operations, stockholders’ equity (deficit), and cash flows as previously reported.

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net earnings (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company.

 

For the three and six months ended June 30, 2022 and 2021, common stock equivalents of 2,400,000 associated with the Company’s outstanding stock options were excluded from the calculation of diluted earnings per share because they were anti-dilutive due to the net loss for the periods then ended.

 

5

 

 

Going Concern

 

As shown in the accompanying financial statements, the Company had an accumulated deficit of $16,887,552 through June 30, 2022 and net loss of $2,639,792 for the six-month period ended June 30, 2022, along with negative working capital of $15,813,342 which raises substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company has not delivered gold ounces as scheduled on its prepaid forward gold contract and could be subject to default provisions within the related agreement (see Note 7). The condensed interim financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Although production restarted in 2019, it has not yet reached optimum levels. The timing and amount of capital requirements will depend on a number of factors, including demand for products, metals market pricing, and the availability of opportunities for expansion through affiliations and other business relationships. Management continues to seek new capital from equity securities issuances or other business arrangements to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

 

COVID -19

 

The Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States and elsewhere, causing disruptions to the Company’s business operations and management. These disruptions are most evident in the Company’s ability to retain and house employees and properly manage them while maintaining proper social distancing and with delays in obtaining materials and supplies. There has also been a reduction in the availability of equipment financing. These disruptions continue to hamper operations. It is management’s belief that disruptions relating to COVID will be mitigated in the future as a large percent of the population becomes vaccinated.

 

The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced availability of contractors and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including its ability to conduct operations.

 

The Company has taken steps to mitigate the potential risks to suppliers and employees posed by the spread of COVID-19, including work from home policies where appropriate. The Company will continue to monitor developments affecting both its workforce and contractors and will take additional precautions as necessary. The ultimate impact of COVID-19 depends on factors beyond management’s knowledge or control, including its duration and third-party actions to contain its spread and mitigate its public health effects. Therefore, the Company cannot estimate the potential future impact to its financial position, results of operations and cash flows, but the impacts could be material.

 

New Accounting Pronouncements

 

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

NOTE 3 – RECLAMATION BONDS

 

At June 30, 2022 and December 31, 2021, the Company has a surety bond of $674,000 in an escrow account with the bonding company for reclamation of its property. This escrowed amount is held at Bank of New York, Mellon for the Company’s benefit. It may not be released to the Company without the prior consent of the surety bondholder. The escrowed amount does not earn interest.

 

On March 31, 2022, the Company’s bond was increased $89,000 by the Utah Division of Oil, Gas and Mining to provide for the escalation of the existing large mine permit through 2026.

 

Total reclamation bonds posted at June 30, 2022 and December 31, 2021 are $1,036,172 and $947,116, respectively, which consists of the above escrowed amount along with certificate of deposits held with the state of Utah for the remaining bonds on the property, including exploration bonds.

 

6

 

 

NOTE 4 – INVENTORIES

 

Inventories at June 30, 2022 and December 31, 2021 consists of the following:

 

   June 30,   December 31, 
   2022   2021 
Ore on leach pad  $4,276,789   $5,488,902 
Carbon column in process   199,967    119,461 
Finished goods   270,776    146,251 
    4,747,532    5,754,614 
Less long-term portion   (843,868)   (1,081,425)
Total  $3,903,664   $4,673,189 

 

Inventories at June 30, 2022 and December 31, 2021 were valued at net realizable value because production costs were greater than the amount the Company expected to receive on the sale of the estimated gold ounces contained in inventories.

 

The adjustment to inventory was $1,235,568 and $108,993 for the six-month periods ended June 30, 2022, and June 30, 2021, respectively.

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

The following is a summary of property and equipment at June 30, 2022 and December 31, 2021:

 

   June 30,   December 31, 
   2022   2021 
Equipment  $6,422,853   $6,461,263 
Furniture and fixtures   6,981    6,981 
Electronic and computer equipment   50,587    50,587 
Vehicles   361,481    348,535 
Buildings   100,000    100,000 
Land and improvements   93,340    76,569 
    7,035,242    7,043,935 
Less accumulated depreciation   (4,092,641)   (3,802,265)
    2,942,601    3,241,670 
           
Kiewit property facilities   2,497,436    2,497,436 
Less accumulated amortization   (888,307)   (810,826)
    1,609,129    1,686,610 
Total  $4,551,730   $4,928,280 

 

For the Kiewit property facilities, amortization based on total units of production was $6,617 and $5,627 for the three months ended June 30, 2022 and 2021, respectively. For the Kiewit property facilities, amortization based on total units of production was $77,481 and $17,758 for the six months ended June 30, 2022 and 2021, respectively.

 

Depreciation expense on property and equipment for the three months ended June 30, 2022 and 2021 was $160,274 and $217,274 respectively. Depreciation expense on property and equipment for the six months ended June 30, 2022 and 2021 was $352,842 and $435,533 respectively.

 

During the six months ended June 30, 2021, the Company was required to return a CAT 740 Haul truck to Wheeler Machinery because the Company was 5 payments delinquent in its obligation on this note payable. The net carrying value of the equipment was $290,889 and the outstanding note payable balance was $86,806. A loss on disposal of equipment of $204,083 was recognized. The truck was purchased by a related party who in February began renting the truck to the Company on a month-to-month rental. See Note 11.

 

During the six months ended June 30, 2021, the Company acquired a new HP4 crushing system in exchange for its HP3 crushing system which was returned to ICM Solutions, Inc.(“ICM”). Prior to the acquisition, the Company had been renting the HP4 crushing system from ICM and had an accrued rent payable of $158,000. ICM financed the acquisition of the new HP4 crushing system with a new note of $215,510 for the cost of the new equipment, plus accrued rent payable, less the trade-in value of the HP3 crushing system.

 

7

 

 

NOTE 6 – MINERAL PROPERTIES AND INTERESTS

 

Mineral properties and interests as of June 30, 2022 and December 31, 2021 are as follows:

 

   June 30,   December 31, 
   2022   2021 
Kiewit and all other sites  $3,700,000   $3,700,000 
JJS property   250,000    250,000 
   3,950,000    3,950,000 
Less accumulated amortization   (852,000)   (864,436)
    3,098,000    3,085,564 
Asset retirement obligation assets          
Kiewit Site   725,122    725,122 
Kiewit Exploration   28,377    28,377 
JJS property   31,016    31,016 
Total   784,515    784,515 
Less accumulated amortization   (266,022)   (190,427)
    518,493    594,088 
           
Total  $3,616,493   $3,679,652 

 

The Company is required to pay a 4% net smelter royalty (“NSR”) to PDK Utah Holdings, LP (“PDK”) on revenues of gold and silver from the Kiewit gold property and the JJS properties. See Note 7.

 

NOTE 7 – PREPAID FORWARD GOLD CONTRACT LIABILITY

 

In 2019, the Company entered into and closed a Pre-Paid Forward Gold Purchase Agreement (the “Purchase Agreement”) with PDK for the sale and purchase by PDK of gold produced from the Company’s mining property. Under the terms of the Purchase Agreement, as amended, PDK agreed to purchase a total of 47,045 ounces of gold from the Company. The Company agreed to deliver ounces of gold produced from the Kiewit property to PDK and the Company would then receive proceeds from PDK at the then current spot price less a discount specified in the Purchase Agreement. The Company has the option of paying cash to PDK for the number of ounces scheduled to be delivered each month at a rate of $500 per ounce. The Company received a net amount of $13,600,000 in 2019 for the future delivery of these gold ounces. Under the terms of the Purchase Agreement, as amended, the Company is obligated to deliver gold in the following quantities:

 

 

Months

  Gold Ounces per Month  

Total Gold
Ounces

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

 

In addition, under the Purchase Agreement, PDK may reduce the required number of ounces to be sold in exchange for up to 8,000 common shares of the Company. To date, PDK has not elected this option.

 

8

 

 

As security for the obligations of the Company under the Purchase Agreement, the Company has granted PDK a security interest in all of the assets of the Company. The Purchase Agreement contains representations and warranties, as well as affirmative and negative covenants customary to a transaction of this nature.

 

To date, no gold has been delivered under the contract. As of June 30, 2022 and December 31, 2021, a cumulative of 18,463 and 11,542 ounces, respectively, were scheduled to be delivered to PDK under the terms of the Purchase Agreement. The ounces due but unpaid to PDK at June 30, 2022 have been reflected in “Due to PDK in lieu of gold deliveries” on the balance sheet based on the Company’s option to pay cash in lieu of delivery at $500 per ounce. The forward gold contract balance as of June 30, 2022 and December 21, 2021 is as follows:

 

   June 30,   December 31, 
   2022   2021 
Total ounces to be delivered   18,463    11,542 
Contractual payment per ounce in lieu of delivery  $500   $500 
Amount due to PDK  $9,231,500   $5,771,000 

 

For the three and six months ended June 30, 2022 and 2021, the expense related to the forward gold contract is as follows:

 

   For the three months ended June 30, 
   2022   2021 
Prepaid forward gold contract liability balance at beginning of period  $9,473,383   $12,633,606 
Forward gold contract balance associated with ounces to be delivered during period   883,332    576,444 
Reduction in prepaid forward gold contract liability balance   (2,094,000)   (1,366,500)
Prepaid forward gold contract liability balance at end of period  $8,262,715   $11,843,550 

 

   For the six months ended June 30, 
   2022   2021 
Prepaid forward gold contract liability balance at beginning of period  $10,263,439   $13,600,000 
Forward gold contract balance associated with ounces to be delivered during period   1,459,776    1,281,550 
Reduction in prepaid forward gold contract liability balance   (3,460,500)   (3,038,000)
Prepaid forward gold contract liability balance at end of period  $8,262,715   $11,843,550 

 

As of June 30, 2022, and through the issuance of these financial statements, PDK has sent invoices to the Company for the deliveries and payments due. The failure to make gold deliveries and make additional payments as described below provides PDK with certain remedies, including termination of the agreement, demand for early payment of the entire delivery obligations, and enforcement of foreclosure rights against the assets pledged as security under the agreement. Due to the delinquent status of the deliveries and PDK’s rights under the default provisions of the Purchase Agreement, the Company has classified the entire liability balance owing as current on the balance sheets. The Company has received no notice of default on the Purchase Agreement from PDK.

 

In addition to the delivery of gold ounces, the Purchase Agreement contains a royalty provision whereby royalties of 4% are due to PDK on gold and silver recovered from mining operations at the Kiewit site and sold by the Company to a third party. Royalties are payable within 30 days following the end of each fiscal quarter. To date, none has been remitted to PDK. Under the Purchase Agreement, the Company also pays a 5% withholding tax to the state of Utah on the PDK royalty payments.

 

The Purchase Agreement contains a participation payment whereby PDK receives a portion of the proceeds from gold sold by the Company to a third party. The payment due to PDK is based upon a percentage of proceeds over a set gold price per ounce. The upside participation amounts are payable within four days following each sale. To date, none has been remitted to PDK.

 

9

 

 

The following is a summary of royalties and upside participation payable:

 

   June 30,   December 31, 
   2022   2021 
Royalties payable  $511,643   $403,388 
Royalties withholding payable   26,931    23,396 
Upside participation payable   1,983,964    1,550,849 
Total  $2,522,538   $1,977,633 

 

The Purchase Agreement provides for the Company to pay default interest (calculated at the rate of LIBOR plus 2%) on outstanding amounts due to PDK. The balance of accrued interest payable to PDK is $353,505 and $120,989 at June 30, 2022 and December 31, 2021, respectively.

 

NOTE 8 – NOTES PAYABLE

 

The following is a summary of the notes payable:

 

   June 30,   December 31, 
   2022   2021 
Note payable to Miller, collateralized by land and two buildings, due in 11 monthly installments of $7,000, beginning December 1, 2021, and a balloon payment of $3,000 due on October 1, 2022, non-interest bearing.   $
-
   $66,000 
Note payable to Epiroc, collateralized by a used Epiroc drill due in 36 monthly payments of $14,679 including interest at 5.2%.    143,190    226,115 
Note payable to Wheeler Machinery, collateralized by a used D8T dozer, due in monthly installments of $19,125, beginning August 2019, including interest at 9%.    
-
    102,368 
Note payable to Wheeler Machinery, collateralized by a used CAT 740 Haul Truck, due in 14 monthly installments of $14,475, beginning in July 2021, including interest at 7.48%.
   -    130,128 
Note payable to Goodfellow, collateralized by a JM Conveyor, due in 19 monthly installments of $4,675, beginning in February 2021 including interest at 15%.
   -    18,900 
    143,190    543,511 
Current portion   (143,190)   (427,413)
Long term portion  $-   $116,098 

 

In February 2021, Wheeler CAT requested the return of the CAT 740 Haul truck (SN2293) because the Company was five payments delinquent in its obligation on the related note payable. This truck was then purchased from Wheeler CAT by a related party who in February began leasing the truck to the Company on a month-to-month rental. This arrangement relieved the Company of any other financial obligation on this note.

 

The current portion of debt of $143,190 will be repaid over the next ten months.

 

10

 

 

NOTE 9 –ASSET RETIREMENT OBLIGATION

 

Changes in the asset retirement obligation for the three and six months ended June 30, 2022 and 2021 are as follows:

 

   Three months ended 
   June 30,   June 30, 
   2022   2021 
Asset retirement obligation, beginning of period  $1,395,830   $1,270,834 
Accretion expense   33,535    30,487 
Asset retirement obligation, end of period  $1,429,365   $1,301,321 

 

   Six months ended 
   June 30,   June 30, 
   2022   2021 
Asset retirement obligation, beginning of period  $1,362,294   $1,233,514 
Obligation incurred:  Kiewit properties   
-
    6,833 
Accretion expense   67,071    60,974 
Asset retirement obligation, end of period  $1,429,365   $1,301,321 

 

NOTE 10 – SETTLEMENT OF CONSULTING CONTRACT

 

On March 29, 2018, the Company entered into a five-year Agency Agreement (the “Agency Agreement”) with H&H Metals Corp., a New York corporation (“H&H”). Under the terms of the Agency Agreement, H&H agreed to provide certain advisory services in regard to natural resources activities and to assist in securing purchasers for minerals produced from its mining properties. The Company negotiated a settlement in 2019 with H&H resulting in the Company owing a balance of $200,000 due in July 2020 to H&H. This payment has not yet been paid and is classified as a current liability at both June 30, 2022 and December 31, 2021.

 

NOTE 11 – RELATED PARTY TRANSACTIONS

 

The Company has a month-to-month lease agreement for its office space with RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. The Company recognized rent expense of $4,500 and $4,500 for three months ended June 30, 2022 and 2021, respectively. The Company recognized rent expense of $9,000 and 9,000 for the six months ended June 30, 2022 and 2021, respectively. At June 30, 2022 and December 31, 2021, no amounts were due to RMH Overhead, LLC for rent.

 

On February 1, 2021, RMH Overhead, LLC. (“RMH”) an entity owned by Rick Havenstrite, President of the Company, purchased a CAT 740B Articulated Haul Truck from Wheeler CAT. This truck had previously been owned by the Company with an associated note payable to Wheeler CAT. See Note 5. Beginning February 1, 2021, the Company began renting this truck from RMH at a rate of $10,000 per month on a month-to-month rental. At June 30, 2022, $5,000 is due to RMH for rent of this equipment, and this amount is included in accounts payable and accrued expenses on the balance sheet. Effective June 1, 2022, rental for this haul truck will be temporarily reduced to $5,000 per month to recognize the minimal use of the truck while the Company awaits approval of the modification to the operating permit, currently expected late in 2022.

 

Employment Agreements

 

The Company has an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement, as amended, requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $144,000 plus an auto allowance and certain performance compensation upon fulfillment of established goals. The agreement allows the board of directors to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

 

11

 

 

For the three months ended June 30, 2022 and 2021, the Company paid Mr. Havenstrite $40,255 and $38,769, respectively. For the six months ended June 30, 2022 and 2021, the Company paid Mr. Havenstrite $74,760 and $60,623, respectively.

 

The amounts accrued at June 30, 2022 and December 31, 2021, is due to the officers of the Company as follows:

 

   June 30,   December 31, 
   2022   2021 
Rick Havenstrite, President  $37,697   $37,697 
Marianne Havenstrite, Treasurer and Principal Financial Officer   18,462    18,462 
Total  $56,159   $56,159 

 

The Company compensates directors for their contributions to the management of the Company, with one director receiving fees of $6,000 per month and another director receiving $5,000 per quarter. At June 30, 2022 and December 31, 2021, accrued compensation due to directors was $71,000 and $55,000 respectively.

 

NOTE 12– COMMITMENTS AND CONTINGENCIES

 

Mining Leases

 

Annual claims fees are currently $165 per claim plus administrative and school trust land fees. Total paid for claims fees paid during the three and six months ended June 30, 2022 and 2021 were $Nil and $Nil, respectively. Claims fees are due in August for the year beginning in September of that year.

 

NOTE 13 - CAPITAL STOCK

 

Common Stock

 

The Company is authorized to issue 100,000,000 shares of common stock. All shares have equal voting rights and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

 

During the six months ended June 30, 2022 and 2021, the Company had no transactions relating to common stock.

 

Preferred Stock

 

The Company's Articles of Incorporation authorized 10,000,000 shares of $0.001 par value Preferred Stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as the Board of Directors may determine.

 

NOTE 14 - STOCK OPTIONS

 

The Company has reserved 2,400,000 shares under its 2018 Stock Incentive Plan (the “Plan”). The Plan was adopted by the board of directors on March 28, 2018 as a vehicle for the recruitment and retention of qualified employees, officers, directors, consultants, and other service providers. The Plan is administered by the Board of Directors. The Company may issue, to eligible persons, restricted common stock, incentive and non-statutory options, stock appreciation rights and restricted stock units. The terms and conditions of awards under the Plan will be determined by the Board of Directors.

 

Outstanding and vested options at June 30, 2022 and December 31, 2021 were 2,400,000. These options have an exercise price of $0.40, a remaining life of .65 years, and no intrinsic value. No options were granted, expired, or were exercised during the three- and six- months ended June 30, 2022 nor 2021.

 

12

 

 

NOTE 15 – REVENUE

 

Product sales for the three- and six- months ended June 30, 2022 and 2021 are shown below:

 

   Three months ended June 30,   Six months ended June 30, 
   2022   2021   2022   2021 
Concentrate sales                
Gold  $1,627,611   $1,234,979   $2,671,540   $2,983,188 
Silver   20,724    19,168    34,852    46,507 
Total concentrate sales   1,648,335    1,254,147    2,706,392    3,029,695 
Less: deductions to concentrate sales                    
Royalties   (69,404)   (52,806)   (113,953)   (127,566)
Upside participation payments   (266,503)   (191,415)   (433,115)   (451,540)
Outside processing   (70,333)   (69,775)   (124,295)   (139,308)
Subtotal – deductions to concentrate sales   (406,240)   (313,996)   (671,363)   (718,414)
Net concentrate sales   1,242,095    940,151    2,035,029    2,311,281 
                     
Processing income   497,241    684,609    971,429    1,462,195 
Less: outside processing charges   
-
    (8,969)   
-
    (25,700)
Net processing income   497,241    675,640    971,429    1,436,495 
TOTAL REVENUE  $1,739,336   $1,615,791   $3,006,458   $3,747,776 

 

For the three- and six- months ended June 30, 2022 and 2021, all revenue from Concentrate sales was from concentrate sold to Asahi Refining. At June 30, 2022 and December 31, 2021, the balance due from Asahi Refining is $Nil and $265,444, respectively.

 

For the three- and six- months ended June 30, 2022 and 2021, all revenue from Contract processing income was received from the outside company whose concentrate sales are to Asahi Refining. As of June 30, 2022 and December 31, 2021, the balance due from contract processing income was $36,799 and $Nil, respectively.

 

NOTE 16– SUBSEQUENT EVENTS

 

The Company anticipates modification to its operating permit in Fall 2022 which will require an increase in our bond deposit of approximately $600,000 at that time.

 

13

 

  

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

 

The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 and with the unaudited financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. 

 

Forward-looking statements

 

The statements contained in this report that are not historical facts, including, but not limited to, statements found in the section entitled “Risk Factors,” are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

 

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

 

environmental hazards;
   
metallurgical and other processing problems;
   
unusual or unexpected geological formations;
   
need for additional funding to continue operations;
   
global economic and political conditions;
   
staffing considerations in remote locations;
   
disruptions in credit and financial markets;
   
global productive capacity
   
changes in existing mining laws or regulations;
   
changes in product costing;
   
competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, flooding, landslides, power outages, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities); and
   
disruptions due to global pandemics, supply chain delays, or civil unrest.

 

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

 

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

 

Overview

 

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

 

14

 

 

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

 

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

 

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

 

During the first six months of 2022 we crushed 82,900 tons of mineralized material and hauled 183,900 tons of waste from the open-pit Kiewit Pit. Using the funds from the PDK transaction, in January 2020 we commenced a drilling program on the Kiewit and JJS mining claims to determine the definition of the mineralized body and resource classification of the resources in connection with the proposed completion of a technical report on the claims. Our drilling plan included drilling 30 holes for a total footage of 7,500 feet. Although drilling has commenced on the JJS property, permitting has not been completed and production has not yet begun. We intend to continue our drilling program during 2022 at a further cost of approximately $250,000. We also intend to continue extraction of mineralized material and to upgrade and expand the current facilities, as resource expansion dictates.

 

Since securing funding in March 2019, we have recommenced mining operations. Revenues of approximately $16,767,000 from sales of gold and other metals have been received through June 30, 2022, bringing total revenue from metals sales from the inception of the processing in 2014 to $23,068,000.

 

Results of Operations for the three and six months Ended June 30, 2022 and 2021.

 

During the quarters ended June 30, 2022 and 2021, we had net losses of $1,302,565 and $525,077 respectively. This represents an increase in net loss of $777,488 for the quarter ended June 30, 2022 over the quarter ended June 30, 2021. For the six months ended June 30, 20221 and 2021, the Company had net losses of $2,639,792 and $2,069,541, respectively.

 

The operating loss of $1,120,563 for the three months ended June 30, 2022 as compared to the operating loss of $492,090 for the three months ended June 30, 2021 represents increased operating loss of $628,473 for the period. The operating loss of $2,395,359 for the six months ended June 30, 2022 as compared to the operating loss of 1,981,858 for the six months ended June 2021 represents increased operating losses in the amount of $413,501. Increased losses are primarily due to the increase in forward gold contract expense.

 

Liquidity and Cash Flow

 

Net cash provided by operating activities $1,303,984 during the six-month period ended June 30, 2022, compared with cash used by operating activities of $882,582 during the six-month period ended June 30, 2021. This $421,402 increase in cash provided is primarily attributable to the decrease in inventories and the increase in the amount due to PDK in lieu of gold deliveries during the six months ended June 30, 2022.

 

Net cash used by investing activities was $161,936 during the six-month period ended June 30, 2022 compared to $307,927 cash used during the six-month period ended June 30, 2021. This decrease of cash used of $145,991 during the six-month period ended June 30, 2022 was due to the reduction in payments on reclamation bonds.

 

Net cash used by financing activities was $400,321 during the six-month period ended June 30, 2022, compared with $540,567 cash used by financing activities during the six-month period ended June 30, 2021. The decrease of $140,246 was due primarily to the decrease in payments made on notes payable.

 

As a result of the above, cash increased by $741,727 during the six-month period ended June 30, 2022 over the cash balance at December 31, 2021, leaving us with a cash balance of $1,166,356 as of June 30, 2022.

 

15

 

 

Going Concern

 

As shown in the accompanying financial statements, the Company had an accumulated deficit of $16,887,552 and negative working capital of $15,813,342 at June 30, 2022, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Although production restarted in 2019, it has not yet reached optimum levels. The timing and amount of capital requirements will depend on a number of factors, including demand for products, metals market pricing, and the availability of opportunities for expansion through affiliations and other business relationships. Management continues to seek new capital from equity securities issuances or other business arrangements to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

 

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

 

Critical Accounting Policies

 

There have been no significant changes to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Control and Procedures

 

Our Chief Executive Officer, who serves as our principal executive officer; and our Treasurer, who serves as our principal financial officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). The Chief Executive Officer and Treasurer have concluded that as of the Evaluation Date, due to the existence of material weaknesses, our disclosure controls and procedures were not effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

16

 

 

PART II – OTHER INFORMATION

 

Item 3. Defaults Upon Senior Securities 

 

During the first quarter of 2019, the Company entered into and closed a Prepaid Forward Gold Purchase Agreement (the “Purchase Agreement”) with PDK Utah Holdings L.P. (“PDK”) for the sale and purchase by PDK of gold produced from the Company’s mining property. On October 31, 2019, the Company and PDK amended the Purchase Agreement and entered into the Amended Prepaid Forward Agreement (the “Amended Agreement”) to reduce the total number of ounces of gold subject to the Purchase Agreement and to revise other provisions therein. The first gold delivery under the Amended Agreement was due on December 24, 2020, and recurring deliveries are due on the fourth business day prior to the last calendar day of each scheduled delivery month. We have failed to make the monthly gold deliveries beginning December 2020 through July 2022 and anticipate that we will be unable to make deliveries until at least the beginning of the next fiscal year. . The failure to make gold deliveries under the Amended Agreement provides PDK with certain remedies, including termination of the agreement, demand for early payment of the entire delivery obligations, and enforcement of foreclosure rights against the assets pledged as security under the agreement. As of the filing date of this report, we are obligated to deliver to PDK 19,859 ounces of gold, plus default interest of approximately $353,505 (calculated at the rate of LIBOR plus 2%), under the Amended Agreement. We are involved in ongoing discussions with representatives of PDK in an attempt to resolve these late payments and to renegotiate the gold delivery agreement.

 

Item 4. Mine Safety Disclosures

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this quarterly report.

 

Item 6. Exhibits

 

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

 

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

 

17

 

 

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: August 15, 2022 By: /s/ Rick Havenstrite
    Rick Havenstrite, Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 15, 2022 By: /s/ Marianne Havenstrite
    Marianne Havenstrite, Treasurer
    (Principal Accounting and Financial Officer)

 

18

 

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Exhibit 31.1

 

Certification

 

I, Rick Havenstrite, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Desert Hawk Gold Corp. for the quarter ended June 30, 2022;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 15, 2022

 

/s/ Rick Havenstrite  
Rick Havenstrite, President  
(Principal Executive Officer)  

 

Exhibit 31.2

 

Certification

 

I, Marianne Havenstrite, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Desert Hawk Gold Corp. for the quarter ended June 30, 2022;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 15, 2022

 

/s/ Marianne Havenstrite  
Marianne Havenstrite, Treasurer  
(Principal Financial and Accounting Officer)  

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Desert Hawk Gold Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal executive officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 15, 2022

 

/s/ Rick Havenstrite  
Rick Havenstrite, President  
(Principal Executive Officer)  

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Desert Hawk Gold Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal executive officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 15, 2022

 

/s/ Marianne Havenstrite  
Marianne Havenstrite, Treasurer  
(Principal Financial and Accounting Officer)  

 

Exhibit 95

 

Mine Safety Disclosure Data

 

For the quarter ended June 30, 2022, there were two violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine health hazard under section 104 of the Federal Mine Safety and Health Act of 1977 (the “Act”). The total assessment by the Mine Safety and Health Administration for all violations under the Act was $12,742, which has been paid. The hazards listed in the citations have been eliminated.

 

We certify that no orders were issued under section 104(b) of such Act, no citations or orders were issued for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of such Act, and there were no flagrant violations under section 110(b)(2) of the Act.

 

We certify that we had no mining-related fatalities during the quarter ended June 30, 2022.

 

We have not received an imminent danger order under Section 107(a) of the Federal Mine Safety and Health Act of 1977.

 

We have not received any notices of a pattern of violations, or of the potential to have such a pattern, of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health and safety hazards.

 

We have no pending legal actions before the Federal Mine Safety and Health Review Commission as of June 30, 2022 and have not instituted any legal actions during the quarter ended June 30, 2022.



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