10-Q

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 June 30, 2013

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) 787-8198
(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 August 14, 2013: 9,137,399.

DESERT HAWK GOLD CORP.

Form 10-Q

June 30, 2013

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3
Item 1.  Financial Statements	3
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.  Controls and Procedures	17
PART II – OTHER INFORMATION	18
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 6.  Exhibits	18
SIGNATURES	18

2

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

DESERT HAWK GOLD CORP
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
			June 30,		December 31,
			2013		2012
ASSETS			(unaudited)
CURRENT ASSETS
	Cash	$	50,736	$	12,300
	Prepaid expenses and other current assets		46,155		138,382
	Total Current Assets		96,891		150,682
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $186,413 and $153,394			259,668		285,338
MINERAL PROPERTIES AND LEASES (Note 4)			835,556		835,556
RECLAMATION BONDS			152,923		152,923
TOTAL ASSETS		$	1,345,038	$	1,424,499
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
	Accounts payable and accrued expenses	$	213,880	$	141,263
	Accrued liabilities-officer wages (Note 9)		260,000		131,000
	Derivative liability-conversion option (Notes 6 and 7)		302,545		140,798
	Interest payable (Note 7)		1,020,283		337,400
	Note payable (Note 7)		6,064,492		5,876,698
	Convertible debt (Note 5)		600,000		600,000
	Total Current Liabilities		8,461,200		7,227,159
LONG-TERM LIABILITIES
	Common stock payable		150,000		-
	Stock redeemable with gold proceeds (Note 8)		130,000		130,000
	Asset retirement obligation		66,754		63,584
	Total Long-Term Liabilities		346,754		193,584
TOTAL LIABILITIES			8,807,954		7,420,743
COMMITMENTS  (Note 9)
STOCKHOLDERS' (DEFICIT) (Note 3)
	Preferred Stock, $0.001 par value, 10,000,000 shares authorized      Series A:  958,033 shares issued and outstanding      Series A-1: No shares issued and outstanding      Series A-2: 180,000  shares issued and outstanding
			958		958
			-		-
			180		180
	Common stock,  $0.001 par value, 100,000,000  shares authorized;      8,987,399 and 8,923,115 shares issued and outstanding, respectively		8,859		8,795
	Additional paid-in capital		6,455,590		6,410,654
	Accumulated deficit prior to exploration stage		(1,016,591)		(1,016,591)
	Accumulated deficit during exploration stage		(12,911,912)		(11,400,240)
	Total Stockholders' (Deficit)		(7,462,916)		(5,996,244)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)		$	1,345,038	$	1,424,499

3

DESERT HAWK GOLD CORP
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
											Period from
											May 1, 2009
											(Inception of
			Three Months Ended				Six Months Ended				Exploration Stage)
			June 30,		June 30,		June 30,		June 30,		to June 30,
			2013		2012		2013		2012		2013
INCOME EARNED DURING EXPLORATION STAGE
	Concentrate sales	$	-	$	-	$	-	$	-	$	969,905
EXPENSES
	General project costs		56,574		42,025		115,633		103,898		1,785,322
	Exploration expense		18,829		66,328		46,381		159,519		1,698,326
	Consulting		5,999		33,000		9,899		71,940		595,303
	Officers and directors fees		207,000		46,154		277,000		106,923		1,359,858
	Legal and professional		15,464		13,556		42,143		52,410		487,063
	General and administrative		26,158		31,360		60,173		83,460		659,105
	Depreciation		16,617		17,402		33,019		34,615		191,781
			346,641		249,825		584,248		612,765		6,776,758
OPERATING LOSS			(346,641)		(249,825)		(584,248)		(612,765)		(5,806,853)
OTHER INCOME (EXPENSE)
	Interest  and other income		-		-		-		-		64,193
	Income on joint venture agreement		-		-		-		-		200,000
	Change in fair value of derivatives (Note 6)		(9,000)		17,558		(161,747)		24,389		(167,870)
	Loss on extinguishment of debt  (Note 7)		-		-		-		-		(3,069,404)
	Financing expense		-		(966,099)		-		(1,037,568)		(1,332,311)
	Interest expense		(388,247)		(245,850)		(765,677)		(460,787)		(2,799,667)
			(397,247)		(1,194,391)		(927,424)		(1,473,966)		(7,105,059)
LOSS BEFORE INCOME TAXES			(743,888)		(1,444,216)		(1,511,672)		(2,086,731)		(12,911,912)
INCOME TAXES			-		-		-		-		-
NET LOSS		$	(743,888)	$	(1,444,216)	$	(1,511,672)	$	(2,086,731)	$	(12,911,912)
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.08)	$	(0.17)	$	(0.17)	$	(0.25)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED			8,955,610		8,397,046		8,939,985		8,376,802

4

DESERT HAWK GOLD CORP
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
								Period from
								May 1, 2009
								(Inception of
				Six Months Ended				Exploration Stage)
				June 30,		June 30,		to June 30,
				2013		2012		2013
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(1,511,672)	$	(2,086,731)	$	(12,911,912)
	Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation		33,019		34,615		191,781
		Common stock issued/to be issued for services		150,000		-		680,009
		Common stock issued for interest expense		45,000		45,000		172,500
		Preferred stock issued for financing agreement		-		920,000		300,000
		Accretion of debt-related discounts		-		209,826		1,460,976
		Accretion of asset retirement obligation		3,170		2,880		8,933
		Change in fair value of derivatives		161,747		(24,389)		167,870
		Loss on extinguishment of debt		-		-		3,069,404
		(Gain) on sale of marketable securities		-		-		(2,540)
	Changes in operating assets and liabilities:
		(Increase) decrease in accounts receivable		-		66,883		-
		(Increase) decrease in prepaid expenses and other current assets		92,227		41,691		(46,155)
		Increase (decrease) in accounts payable and accrued expenses		72,617		4,904		210,705
		Increase (decrease) in accrued liabilities - officer wages		129,000		-		219,309
		Increase (decrease) in interest payable		720,677		323,530		1,966,098
	Net cash (used) by operating activities			(104,215)		(461,791)		(4,513,022)
CASH FLOWS FROM INVESTING ACTIVITIES:
		Purchase of property and equipment		(7,349)		-		(435,453)
		Payments on mineral leases		-		-		(250,249)
		Acquisition of reclamation bonds		-		(600)		(110,122)
		Acquisition of notes receivable		-		-		27,500
		Deposit on joint venture		-		100,000		-
		Proceeds from marketable securities		-		-		48,920
	Net cash provided (used) by investing activities			(7,349)		99,400		(719,404)
CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from convertible notes payable		-		-		600,000
		Proceeds from notes payable		150,000		-		3,700,000
		Payment of note payable - equipment		-		-		(15,995)
		Proceeds from issuance of common stock		-		20,150		1,363,833
		Proceeds from issuance of common stock with redemption features						130,000
		Proceeds from issuance of preferred stock		-		-		958
		Financing fees paid		-		-		(521,281)
	Net cash provided by financing activities			150,000		20,150		5,257,515
NET INCREASE (DECREASE) IN CASH				38,436		(342,241)		25,089
CASH, BEGINNING OF PERIOD				12,300		415,090		25,647
CASH, END OF PERIOD			$	50,736	$	72,849	$	50,736
SUPPLEMENTAL CASH FLOW INFORMATION:
	Interest paid in cash		$	-	$	-	$	13,664
NON-CASH FINANCING AND INVESTING ACTIVITIES:
	Common stock issued for mineral lease		$	-	$	-	$	525,000
	Common stock issued as incentive with convertible notes			-		-		510,000
	Common stock issued for reclamation bond			-		-		42,802
	Equipment acquired with note payable			-		-		15,995
	Preferred stock issued in connection with debt amendment					-		1,620,000
	Common stock payable for accrued liabilities-officer wages			150,000		-		281,259
	Common stock issued for accrued interest			-		22,500		22,500
	Interest payable converted to note payable			37,794		-		923,315

5

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company.  On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada.  Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada).  On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp.

The Company was originally incorporated to pursue the mining business through the acquisition of prospective mining claims in the Wallace and Kellogg mining districts of Northern Idaho.  The Company never successfully generated any revenue or joint ventures from any of the activities it pursued and abandoned the mining business as a viable business model when the commodity prices cycled downward.  The Company remained dormant until it recommenced its mining activities and entered the exploration stage on May 1, 2009.  The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in ASC 915-10-05 and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7.

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited interim consolidated balance sheets and consolidated statements of operations, and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of June 30, 2013, and the results of its operations and its cash flows for the three and six months ended June 30, 2013 and 2012. The operating and financial results for the Company for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.

These unaudited interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. These unaudited interim consolidated financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 16, 2013.

Mineral Exploration and Development Costs

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

Mineral Properties and Leases

The Company capitalizes costs for acquiring mineral properties and expenses costs to maintain mineral rights and leases as incurred.  Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves.  Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment.  If a property is abandoned or sold, its capitalized costs are charged to operations.  See Note 4.

Earnings Per Share

Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company.  At June 30, 2013 and June 30, 2012, common stock equivalents outstanding are 857,143 shares into which the convertible debt (Note 5) can be converted and 2,758,033 shares of common stock into which the preferred stock (Note 7) can be converted.  However, the diluted earnings per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

6

Going Concern

As shown in the accompanying financial statements, the Company is in default on its note payable and has an accumulated deficit incurred through June 30, 2013, 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 Company will need significant funding to continue operations and increase development through the next fiscal year.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships.  Management intends to continue to seek new capital from equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.

The final operating permit necessary to begin operations at the Kiewit property is expected to be obtained in 2013.  If this permit is not received, the Company will not be able to move forward with its’ operations plan, which would affect its’ ability to continue as a going concern.

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 prior periods’ data 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.

2013 Activity

The Company issued a total of 64,284 shares of stock to the note holders of the convertible debt for interest expense during the six months ending June 30, 2013.  The shares were valued at $.70 per share.  See Note 5.

On April 30, 2013, a Seventh Amendment to the DMRJ Group funding was agreed upon.  This Amendment became effective on June 27, 2013 and, as a result of the terms of the amendment, 150,000 shares of common stock valued at $1.00 per share were issued to Robert Jorgensen, a former director and officer, on July 11, 2013.  The stock was payable to Mr. Jorgensen at June 30, 2013 and was issued on July 11, 2013.

2012 Activity

In January 2012, an equity financing was completed with the sale of 17,522 shares of common stock in January providing $20,150 in proceeds.  

In September 2012 an equity financing was initiated which resulted in sales of 130,000 shares of common stock during the 4^th quarter of 2012, providing proceeds of $130,000.  Under the terms of this offering, stock could 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.  See Note 8 for further information on the accounting of this issuance.

On December 3, 2012, 321,428 shares of common stock were issued to the two holders of the convertible debt, with 150,000 shares issued to each of the two debt holders as penalty shares for the extension of the due date of the notes.  The due date of the convertible debt was then extended for one year to November 30, 2013.  The remaining 21,348 shares of common stock were issued to the convertible debt note holders as interest for the months of October and November 2012.  The shares were valued at $.70 per share for interest expense.  See Note 5 for further information regarding this issuance.

During 2012, the Company issued a total of 160,710 shares of stock to the note holders of the convertible debt for interest expense for the quarter ending December 31, 2011 and for each quarter ending in 2012.  The shares were valued at $.70 per share.

7

Preferred Stock

In connection with the Fourth Amendment to the DMRJ Group funding, on May 3, 2011, the Company created and designated 2,500,000 shares of its authorized preferred stock as Series A-1 Preferred Stock and 1,000,000 shares as Series A-2 Preferred Stock. During the quarter ended June 30, 2011, 100,000 shares of Series A-2 Preferred Stock were issued. On June 29, 2012, an additional 80,000 shares of Series A-2 Preferred stock were issued in connection with the Forbearance Agreement of the DMRJ Group funding arrangement. These shares are convertible by the holder into 800,000 shares of the Company’s common stock.    At June 30, 2013 and December 31, 2012, a total of 180,000 shares of Series A-2 preferred stock were outstanding.

In addition, as part of the Fourth Amendment, beginning July 1, 2011, quarterly dividends in the amount of 10% of net income are due to all Series A-1 and A-2 preferred stockholders for each quarter that the Company has consolidated net income.  The Company also cannot pay any dividends on the common stock until the preferred dividends are paid.  As of June 30, 2013, no dividends have been paid by the Company because there has been no net income.  

Each share of Series A-1 Preferred Stock and Series A-2 Preferred Stock is convertible at the option of the holder at any time into that number of shares of common stock equal to (i) for the Series A-1 Preferred Stock ten times the Series A-1 Issue Price ($0.70) divided by the conversion price for Series A-1 Preferred and (ii) for the Series A-2 Preferred Stock ten times the Series A-2 Issue Price ($1.00) divided by the conversion price for such Series A-2 Preferred Stock.  The initial conversion price of the Series A-1 preferred stock is $0.70 per share and the initial conversion price of the Series A-2 preferred stock is $1.00.  If the Company issues or sells shares of its common stock, or grant options or other convertible securities which are exercisable or convertible into common shares, at prices less than the conversion price of Series A-1 or A-2 shares, except in certain exempted situations, then the conversion price of the Series A-1 and A-2 shares will be reduced to this lower of sale or conversion price.  The Series A-1 and A-2 shares may not be converted into common shares if the beneficial owner of such shares would thereafter exceed 4.9% of the outstanding common shares.  See Note 7 for further information on the accounting of this issuance.

NOTE 4 – MINERAL PROPERTIES AND LEASES

Mineral properties and leases as of June 30, 2013 and December 31, 2012 are as follows:

		June 30, 2013		December 31, 2012
Yellow Hammer site
Initial lease fee	$	175,000	$	175,000
Asset retirement obligation		30,908		30,908
Total		205,908		205,908
Kiewit, Cactus Mill and all other sites
Initial lease fee		600,000		600,000
Asset retirement obligation		26,913		26,913
Total		626,913		626,913
Blue Fin claims
Initial purchase price		2,735		2,735
Total		2,735		2,735
Total Mineral Properties and Leases	$	835,556	$	835,556

The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 296 unpatented claims, including the unpatented mill site claim, 42 patented claims, and three Utah state mineral leases located on state trust lands.  All but four of these mining claims and leases were obtained under the terms of the Amended and Restated Lease Agreement effective July 24, 2009, with Clifton Mining Company and Woodman Mining Company as lessors.  Rights to the four Yellow Hammer patented claims were obtained under the terms of the Amended and Restated Lease Agreement dated July 24, 2009, with the Jeneane C. Moeller Family Trust.  The properties are located approximately 190 miles west-southwest of Salt Lake City, Utah, and 56 miles south southeast of Wendover, Utah.  Annual lease fees are required on the 296 claims that make up the Company’s Gold Hill property.  Of these, four claims are within the Yellow Hammer site.  Annual claims fees are currently $140 per claim plus administrative fees.

8

On February 7, 2012, we signed a letter of intent with Shoshone Silver/Gold Mining Company (“Shoshone”) whereby Shoshone would have acquired a 50% interest in our mineral properties located in Tooele County, Utah.  Under the terms of the deal, Shoshone had a 120-day exclusive right to provide the $10 million, for which $100,000 was advanced to us as a nonrefundable deposit.  The joint venture had not been finalized as of June 30, 2012 and an additional deposit of $100,000 was agreed to as of June 29, 2012 to extend the agreement to joint venture the property until September 30, 2012.  Although this additional deposit was received, other terms of the extension were not met and effective July 21, 2012, the joint venture agreement was terminated and the $200,000 received was recognized as gain on termination of a joint venture agreement in the third quarter of 2012.  

On March 20, 2013, the Confederated Tribes of the Goshute Reservation outlined in a letter to the BLM 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.  The BLM is working with the Goshute Tribe to bring this permitting process to a conclusion.  

Exploration Expenses

Exploration expenditures incurred by the Company during the three and six months ended June 30, 2013 and 2012 were as follows:

		Three		Three		Six		Six
		Months		Months		Months		Months
		Ended		Ended		Ended		Ended
		June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Assaying	$	-	$	1,133	$	2,156	$	12,602
Permitting		17,779		-		42,125		146,840
Maps and  miscellaneous		1,050		38		2,100		77
Site development		-		65,157		-		-
Total Exploration Expenses	$	18,829	$	66,328	$	46,381	$	159,519

NOTE 5 – CONVERTIBLE DEBT

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders for a total of $600,000.  The notes bear interest at 15% per annum.  Interest is payable in equal monthly installments of $7,500.  The notes 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 $.70 due to the note holders’ agreement to subordinate their debt to DMRJ Group.  See Note 7.  The notes are convertible into potentially 857,143 shares of common stock and principal and interest were due in full 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 note holders were issued 64,284 shares of stock each in 2012 to settle accrued interest for 2012 and have been issued 32,142 shares of common stock each to settle accrued interest for the first two quarters of 2013.

The Company failed to repay the loan in full on the maturity date, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders.  This stock was valued at $1.00, the price of recent stock sales, and was accounted for as financing expense in 2012.  As part of this agreement, the due date of the note was extended to November 30, 2013, with interest continuing to be paid with shares of common stock each quarter.

NOTE 6 – DERIVATIVE LIABILITIES

The fair value of outstanding derivative instruments not designed as hedging instruments on the accompanying Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 for the conversion option on the DMRJ Group debt was $302,545 and $140,798, respectively.

9

A Black-Scholes option-pricing model was used to estimate the fair value, using Level 2 inputs, of the Company’s derivatives using the following assumptions at June 30, 2013 and December 31, 2012:

	Number of Shares	Volatility	Risk- Free Rate	Expected Life (in years)		Stock price
June 30, 2013
Conversion option	440,363	124.71 %	.0200%	2.0	$	1.00
December 31, 2012
Conversion option	437,227	80.91%	0.035%	.18	$	1.00

NOTE 7 – DMRJ GROUP FUNDING

2012 Activity

On June 29, 2012, the Company entered into a forbearance agreement with DMRJ Group which extended the due date of the June 30, 2012 loan payment to September 30, 2012 in exchange for 80,000 shares of Series A-2 Preferred Stock.  The value of this issuance was determined by calculating the number of common shares into which the Series A-2 preferred shares are convertible (800,000 common shares) times the fair value for shares of common stock on the date of issuance ($1.15).  The Company recognized this amount of $920,000 as loss on extinguishment of debt.  Pursuant to the Investment Agreement, on June 30, 2012, the Company had been obligated to repay $1,550,000 of the funds previously loaned by DMRJ Group.  

The Company failed to make the loan payment of $4,495,000 on September 30, 2012, and therefore an event of default occurred under the Investment Agreement.

On October 17, 2012, the Company entered into a Fifth Amendment to the Investment Agreement with DMRJ Group.  The Fifth Amendment provided for the Company to receive up to $100,000 in additional funds in two advances (the “October Term Loan Advances”) of $50,000 each.  Only one of these $50,000 advances was taken in 2012.  In addition, the maturity date of the entire loan balance due to DMRJ was moved from December 31, 2012 to December 15, 2012.  The amount was not paid on December 15, 2012 and remained unpaid at December 31, 2012.

2013 Activity

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

On April 30, 2013, the Company agreed to the terms of a Seventh Amendment to the Investment Agreement with DMRJ Group.  This Amendment become effective on June 26, 2013 and as a result of the terms of the amendment, the maturity date of the entire loan balance due to DMRJ was moved from March 5, 2013 to June 30, 2013.  The Seventh Amendment provides for the Company to receive additional funds in two advances of $50,000.  The first advance, the “April Term Loan Advance”, was received on May 2, 2013 and the second advance, the “May Term Loan Advance” was received on June 26, 2013.  The June 30, 2013 payment was not made and an Eighth Amendment to Investment Agreement was entered into on July 24, 2013.  See Note 10 for the terms of this agreement.   If the Company is unable to repay the outstanding balances the maturity date, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets.  

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NOTE 8 – STOCK REDEEMABLE WITH GOLD PROCEEDS

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of our common stock.  This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of the Company’s common stock.  Under the terms of this offering, 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.  Each investor will receive the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce.  Due to the redemption feature of these shares, management has concluded that the proceeds from these stock sales should be recorded as a liability and not as equity.

NOTE 9– 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 leasing 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 2013 or in 2012.

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 leasing of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit, Clifton Shears/smelter tunnel deposit, and the Cane Springs deposit into commercial production within a three year period, it will be required to make annual payments to Clifton Mining in the amount of $50,000 per location.  The Company did not begin commercial production thus, pursuant to this agreement, the Company made $50,000 annual holding fee payments in 2012 on the Kiewit and the Clifton Shears properties and a partial annual holding fee payment of $10,000 on the Cane Springs property.  Negotiations are ongoing regarding this property.  Property payments for the Kiewit and the Clifton Shears, due on July 24, 2013, were made and accepted by Clifton Mining.  Negotiations are ongoing regarding these properties.

In September 2009, the Company acquired all of the rights and interests of Clifton Mining in a $42,802 reclamation contract and cash surety deposit with the State of Utah Division of Oil Gas and Mining for the property.  As consideration for Clifton Mining selling its interest in the reclamation contract and surety deposit, the Company issued 60,824 shares to Clifton Mining.  For a period of two years the Company had the right to repurchase the shares for $48,000, or during the 180-day period after this two year period, Clifton Mining had the option to put the shares to the Company for $48,000.  The put option expired on March 30, 2012.  

Employment Agreements

In September 2010, the Company entered into employment agreements with its former Chief Executive Officer (“CEO”) and its President and entered into a consulting agreement with one of its directors.  Each agreement is for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year.  The Company owed $131,259 to the CEO at December 31, 2010 for amounts due under the provisions of the September 2010 agreement and prior similar agreements.  On May 3, 2011, this payable was satisfied with the issuance of 138,000 shares of stock to the former CEO.  As of June 30, 2013, compensation has not been paid to these three individuals for several months.

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In connection with the entering into the Seventh Amendment to the Investment Agreement, the Company entered into an agreement on June 18, 2013 with one of its directors to terminate the consulting agreement dated September 1, 2010, as amended on May 3, 2011, between him and the Company.  Under the terms of the termination agreement, the Company has agreed to pay the director a fee of $70,000 at the rate of $5,000 per month beginning with the first month following the date on which the Company receives funding for its mining project after receipt of necessary mining permits.  Because the necessary permits have not been received, this fee has not yet been paid.  The director has agreed to voluntarily resign as a director and any office held by him upon receipt of the funding by the Company.  The effective date of the termination of the consulting agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, the Company has agreed to indemnify the director to the fullest extent provided by Nevada law for his service as a director or consultant.

In connection with the entering into the Seventh Amendment to the Investment Agreement, the Company entered into an agreement on June 24, 2013 with its former CEO and director to terminate the employment agreement dated September 1, 2010, as amended on May 3, 2011, between him and the Company.  Under the terms of the termination agreement, the Company has agreed to pay the former CEO and director a fee of $120,000 at the rate of $6,000 per month beginning with the first month following the date on which the Company receives funding for its mining project after receipt of necessary mining permits.  Because the necessary permits have not been received, this fee has not yet been paid.  The Company also issued 150,000 shares of common stock to this director under the terms of the termination agreement.  This stock was payable on June 30, 2013 and was issued on July 11, 2013.  The stock was valued at $1.00 per share which was the value of the last stock offering prior to this issuance.  The effective date of the termination of the employment agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, the Company has agreed to indemnify the former CEO and director to the fullest extent provided by Nevada law for his service as an officer, director or employee.

Accruals for officers and directors pursuant to termination agreements total $190,000 as of June 30, 2013.  Of this amount, $70,000 in consulting fees and  $2,000 rent payable are included in Accounts payable and $118,000 accrued wages is included in Accrued liabilities-officer wages.  Accrued wages to other officers total $142,000 as of June 30, 2013.   

NOTE 10 – SUBSEQUENT EVENTS

DMRJ Group Loan

On July 24, 2013, the Company entered into an Eighth Amendment to Investment Agreement. As a provision of this Amendment the maturity date of the entire loan balance due to DMRJ was moved from June 30, 2013 to September 30, 2013.  The Eighth Amendment provides for the Company to receive additional funds in two advances. The first advance, the “July Term Loan Advance” in the amount of $100,000, is to be used to fund the annual holding fee payments of $50,000 each on the Kiewit and Clifton Shears properties as per the terms of the Amended and Restated Lease and Sublease Agreement with Clifton Mining Company.  The second advance, the “Additional July Term Loan Advance” is earmarked for working capital and ordinary course business expenses and is expected to be partially used for the payment of the annual claim fees.  

If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets.  

Share Issuance to Former CEO

In connection with the resignation of our former CEO and the termination of his employment agreement, on July 11, 2013, we issued to him 150,000 shares of common stock.  These shares were valued at $1.00 per share, which is the value of the shares sold in the most recent stock offering.  The shares were issued under our 2008 Stock Option-Stock Issuance Plan.

Annual Holding Fees

Annual holding fee payments of $50,000 each were due on each of the Kiewit, Clifton Shears and Cane Springs properties on July 24, 2013 to retain the leases on these properties.  The Eighth Amendment to the Investment Agreement provided for the payment of the holding fees for the coming year for the Kiewit and Clifton Shears properties, as detailed above, and the payments were made on July 25, 2013 and accepted by Clifton Mining.  The payment for the Cane Springs property has not been made.  Negotiations regarding these properties are currently ongoing.

Operating Permit and Environmental Assessment

On March 20, 2013, the Confederated Tribes of the Goshute Reservation outlined in a letter to the BLM 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.  The BLM is working with the Goshute Tribe to bring this permitting process to a conclusion.  

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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, 2012 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 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 have any known reserves and our proposed programs on these properties are exploratory in nature.  Our proposed projects are located in the Gold Hill Mining District in Tooele County, Utah.

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

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We are currently focused primarily on the permitting of the Kiewit and Clifton Shears projects.  Tentative approval of the Notice of Intent (“NOI”) was received from the Utah Division of Oil, Gas and Mining (“DOGM”) on September 28, 2012.  This tentative approval was subject to a 30-day public comment period, which closed November 13, 2012.   Conditional final approval is expected to be issued in 2013 after completion and approval of the National Environmental Protection Act (“NEPA”) process.

On July 24, 2009, we entered into a Joint Venture Agreement with the Clifton Mining Company and Woodman Mining Company under which Clifton Mining granted to us exclusive possession of certain patented and unpatented mining claims and an unpatented mill site claim and certain Utah state mineral leases covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. Woodman Mining also granted us the same rights in certain of these patented mining claims owned jointly with Clifton Mining. Also on July 24, 2009, we entered into a Joint Venture Agreement with the Jeneane C. Moeller Family Trust under which the Trust granted to us exclusive possession of four patented mining claims covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. These properties are known as the Yellow Hammer claims.   

Prior to July 1, 2010, we notified Clifton Mining that we would surrender certain of the mining claims and leases originally obtained in our lease agreement with it. Also, in 2010 and in 2012, certain amendments were made to the lease agreements.  As part of these agreements, if we did not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to Clifton Mining of $50,000 per property, to retain our rights to those properties. The holding fees for the Kiewit and the Clifton Shears-Smelter Tunnel properties were made in accordance with the June 30, 2012 arrangement. A partial payment of $10,000 was made on December 24, 2012 for the Cane Springs payment. Notice was timely given of the claims we no longer wished to maintain and the BLM reimbursement was also timely made.  Current year annual holding fee payments were due July 24, 2013.  Payments on the Kiewit and Clifton Shears properties were made and accepted by Clifton Mining.  The payment for the Cane Springs property has not been made.  Negotiations are ongoing regarding these property payments.

We currently hold leasehold interests within the Gold Hill Mining District consisting of 296 unpatented mining claims, including an unpatented mill site claim, 42 patented claims, and three Utah state mineral leases located on state trust lands, all covering approximately 33 square miles.  We intend to concentrate our activities on the Kiewit project consisting of seven of the unpatented Kiewit claims, the Clifton Shears, Cane Springs, 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.  

We have previously entered into an agreement with DMRJ Group, LLC (“DMRJ Group”) through which we can borrow up to $6,500,000 for our mining operations and our general and administrative expenses.  At June 30, 2013 we have $2,800,000 remaining available to us upon reaching certain milestones.  On April 30, 2013, the Company agreed to the terms of a Seventh Amendment to the Investment Agreement with DMRJ Group.  This Amendment became effective on June 26, 2013 and as a result of the terms of the amendment the maturity date of the entire loan balance due to DMRJ was moved from March 5, 2013 to June 30, 2013.  The June 30, 2013 payment was not made and an Eighth Amendment to Investment Agreement was entered into on July 24, 2013, following the end of the quarter.  In addition, subsequent to quarter end, the maturity date of the note was extended to September 30, 2013.  The amount due to DMRJ Group at June 30, 2013 for principal and accrued interest was $7,084,775.

If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets.  

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

Historically, we have incurred net losses for the years ended December 31, 2012 and 2011, and have also incurred a loss for the six months ended June 30, 2013.  If we are unable to negotiate a long-term funding arrangement, we will not be able to meet our obligations to repay the loan advances to DMRJ Group and will likely lose our interest in all of our assets and mining claims.

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Second Quarter Highlights

The BLM initiated an Environmental Assessment (“EA”) in December 2011 and the initial draft was released for public comment in February 2013.  JBR Consultants of Salt Lake City, Utah, is completing this review on behalf of the BLM.  The EA was subject to a 30-day public comment period which was then extended to 38 days by the BLM and ended on March 21, 2013.  On March 20, 2013, the Confederated Tribes of the Goshute Reservation outlined, in a letter to the BLM, 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.  

The BLM is working with the Goshute Tribe in an effort to bring this permitting process to a conclusion.  The Plan of Operations is deemed to be substantially complete and along with the EA is expected to be completed and issued by the BLM during 2013, after posting of the required reclamation bond in the approximate amount of $1,278,000.  

We have previously entered into an agreement with DMRJ Group, LLC (“DMRJ Group”) through which we can borrow up to $6,500,000 for our mining operations and our general and administrative expenses.  During 2010 to 2012, draw advances totaling $3.5 million were obtained, with another $200,000 advanced to us in 2013.   At June 30, 2013 we have $2,800,000 remaining available to us upon reaching certain milestones.

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

On July 24, 2013, subsequent to the quarter end, the Company entered into an Eighth Amendment to Investment Agreement.  As a provision of this Amendment the maturity date of the entire loan balance due to DMRJ was moved from June 30, 2013 to September 30, 2013.  The Eighth Amendment provides for the Company to receive additional funds in two advances. The first advance, the “July Term Loan Advance” in the amount of $100,000, was used to fund the annual holding fee payments of $50,000 each on the Kiewit and Clifton Shears properties as per the terms of the Amended and Restated Lease and Sublease Agreement with Clifton Mining Company.  The second advance, in the amount of $50,000, called the “Additional July Term Loan Advance” is earmarked for working capital and ordinary course business expenses.  

If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets.  

A proposed agreement has been tentatively approved with DMRJ Group providing for payment of this debt from mining revenues. The formalization of the proposed agreement is contingent upon receipt of all necessary permits, which is projected to occur in 2013. The inability to gain all necessary permits could result in a loss of the mining claims due to foreclosure by DMRJ Group. If we lose our mining leases and other assets to DMRJ Group in foreclosure, we will not be able to continue our business operations as currently planned and any shareholder would lose their entire investment in our common stock.

In September 2010, we entered into employment agreements with Robert E. Jorgensen, our Chief Executive Officer (“CEO”), and entered into a consulting agreement with one of our directors, Eric Moe.  Each agreement was for an initial term of between three months and four years and provided for base salary or fees of $120,000 per year.  The salaries and payments under these contracts were accruing rather than being paid.  

In connection with the entering into the Seventh Amendment to the Investment Agreement (the “Seventh Amendment”), we entered into an agreement on June 18, 2013 with Mr. Moe to terminate his consulting agreement dated September 1, 2010, as amended on May 3, 2011, with us.  Under the terms of the termination agreement, we have agreed to pay a fee of $70,000 at the rate of $5,000 per month beginning with the first month following the date on which we receive funding for our mining project after receipt of necessary mining permits.  Mr. Moe has agreed to voluntarily resign as a director and any office held by him upon receipt of the funding by us.  The effective date of the termination of the consulting agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, we have agreed to indemnify Mr. Moe to the fullest extent provided by Nevada law for his service as a director or consultant.

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Also in connection with the entering into the Seventh Amendment, we entered into an agreement on June 24, 2013 with Mr. Jorgensen to terminate his employment agreement dated September 1, 2010, as amended on May 3, 2011, with us.  Under the terms of the termination agreement, we have agreed to pay Mr. Jorgensen a fee of $120,000 at the rate of $6,000 per month beginning with the first month following the date on which we receive funding for our mining project after receipt of necessary mining permits.  We also issued him 150,000 shares of common stock under the termination agreement, valued at $1.00 per share.  Under the terms of the termination agreement, Mr. Jorgensen also resigned as a director of the Company.  The effective date of the termination of the employment agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, we have agreed to indemnify Mr. Jorgensen to the fullest extent provided by Nevada law for his service as an officer, director or employee.

The total amount accrued as of June 30, 2013 for all officer wages is $248,000 and for director consulting fees is $70,000.

Results of Operations for the Six Months Ended June 30, 2013 and 2012

The operating loss for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012, decreased by $28,517 due to the scaled-back operations while awaiting permit approvals.  Other expense, consisting mostly of interest and financing costs, for the six months ended June 30, 2013 decreased by $546,542 over the six months ending June 30, 2012.  This decrease was due to a reduction in financing expense.  This reduction was partially offset by an increase in the change in the fair value of the derivatives relating to the DMRJ Group loan.  These differences result in an overall decrease in net loss of $575,059 for the six months ended June 30, 2013 in relation to the six months ended June 30, 2012.

Liquidity and Cash Flow

Net cash used by operating activities was $104,215 during the six month period ended June 30, 2013, compared with $461,791 during the six month period ended June 30, 2012.  The decrease in the amount of cash used by operating activities is primarily attributable to the increase in amounts due to others and to the reduction in operations while awaiting permit approvals.

Net cash used by investing activities was $7,349 during the six month period ended June 30, 2013, compared to $99,400 cash provided during the six month period ended June 30, 2012.  The 2012 amount included a $100,000 deposit received on a potential joint venture that was being negotiated in early 2012.

Net cash provided by financing activities was $150,000 during the six month period ended June 30, 2013, compared with $20,150 cash provided during the six month period ended June 30, 2012.  Cash provided from financing for the six month period ended June 30, 2013 was from DMRJ Group loan proceeds while cash provided during the six month period ended June 30, 2012 was from sale of common stock.  Negotiations regarding a future business relationship to fund the DMRJ Group note and provide equity for operations capital are currently ongoing.

As a result of the above, cash increased by $38,436 during the six month period ended June 30, 2013, leaving us with a cash balance of $50,736 as of June 30, 2013.

Critical Accounting Policies

The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed.  Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules, and the use of judgment, to the specific set of circumstances existing in our business.  Discussed below are the accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.  See Note 2, “Summary of Significant Accounting Policies,” in our attached unaudited consolidated financial statements for a discussion of those policies.

Mineral Exploration and Development Costs

We account for mineral exploration costs in accordance with ASC 932 Extractive Activities.  All exploration expenditures are expensed as incurred, previously capitalized costs are expensed in the period the property is abandoned.  Expenditures to explore new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

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Mineral Properties

We account for mineral properties in accordance with ASC 930 Extractive Activities-Mining.  Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims.  Mineral properties are periodically assessed for impairment of value and any diminution in value.

Reclamation and Remediation

Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements.  Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties.  We use assumptions about future costs, capital costs and reclamation costs.  Such assumptions are based on our current mining plan and the best available information for making such estimates.

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

Off-Balance Sheet Arrangements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

Item 4.  Controls and Procedures

Evaluation of Disclosure Control and Procedures

Our President and Treasurer, who serve as our principal executive and principal financial officers, respectively, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

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 June 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

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

On July 5, 2011 we entered into an agreement with West C Street LLC and Ibearhouse LLC, the holders of convertible debt acquired from us in 2009, permitting payment of their monthly interest in stock rather than cash.  During the quarter ended June 30, 2013, we issued a total of 32,142 shares of stock, valued at $.70, to the note holders to convert accrued interest for the quarter.  These shares were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(a)(5) and/or Section 4(a)(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving any public offering.  Each of the note holders was an accredited investor as defined in Regulation D.  Each investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares.  Each investor represented that it had not entered into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting.  Each investor was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction.  No underwriting discounts or commissions were paid in connection with the stock issuance.

Item 6.  Exhibits

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

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 14, 2013

By: /s/ Rick S. Havenstrite

Rick S. Havenstrite, President

(Principal Executive Officer)

Date: August 14, 2013

By: /s/ Marianne Havenstrite

Marianne Havenstrite, Treasurer

(Principal Financial Officer)

18

EX-31.1

Exhibit 31.1

Certification

I, Rick S. Havenstrite, certify that:

1.

I have reviewed this Form 10-Q quarterly report of Desert Hawk Gold Corp. for the quarter ended June 30, 2013;

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(s) 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 14, 2013

/s/ Rick S. Havenstrite

Rick S. Havenstrite, President

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, Marianne Havenstrite, certify that:

1.

I have reviewed this Form 10-Q quarterly report of Desert Hawk Gold Corp. for the quarter ended June 30, 2013;

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(s) 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 14, 2013

/s/ Marianne Havenstrite

Marianne Havenstrite, Treasurer

(Principal Financial Officer)

EX-32.1

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, 2013, 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 14, 2013

/s/ Rick S. Havenstrite

Rick S. Havenstrite, President

(Principal Executive Officer)

EX-32.2

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, 2013, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal financial 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 14, 2013

/s/ Marianne Havenstrite

Marianne Havenstrite, Treasurer

(Principal Financial Officer)

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MINERAL PROPERTIES AND INTERESTS (Tables)

6 Months Ended

Jun. 30, 2013

MINERAL PROPERTIES AND INTERESTS (Tables)

Mineral Properties and Interest

Mineral properties and leases as of June 30, 2013 and December 31, 2012 are as follows:

		June 30, 2013		December 31, 2012
Yellow Hammer site
Initial lease fee	$	175,000	$	175,000
Asset retirement obligation		30,908		30,908
Total		205,908		205,908
Kiewit, Cactus Mill and all other sites
Initial lease fee		600,000		600,000
Asset retirement obligation		26,913		26,913
Total		626,913		626,913
Blue Fin claims
Initial purchase price		2,735		2,735
Total		2,735		2,735
Total Mineral Properties and Leases	$	835,556	$	835,556

Exploration Expenditures

Exploration expenditures incurred by the Company during the three and six months ended June 30, 2013 and 2012 were as follows:

		Three		Three		Six		Six
		Months		Months		Months		Months
		Ended		Ended		Ended		Ended
		June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Assaying	$	-	$	1,133	$	2,156	$	12,602
Permitting		17,779		-		42,125		146,840
Maps and  miscellaneous		1,050		38		2,100		77
Site development		-		65,157		-		-
Total Exploration Expenses	$	18,829	$	66,328	$	46,381	$	159,519

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CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (USD $)	3 Months Ended		6 Months Ended		50 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
INCOME EARNED DURING EXPLORATION STAGE
Concentrate sales	$ 0	$ 0	$ 969,905
EXPENSES
General project costs	56,574	42,025	115,633	103,898	1,785,322
Exploration expense	18,829	66,328	46,381	159,519	1,698,326
Consulting	5,999	33,000	9,899	71,940	595,303
Officers and directors fees	207,000	46,154	277,000	106,923	1,359,858
Legal and professional	15,464	13,556	42,143	52,410	487,063
General and administrative	26,158	31,360	60,173	83,460	659,105
Depreciation	16,617	17,402	33,019	34,615	191,781
TOTAL EXPENSES	346,641	249,825	584,248	612,765	6,776,758
OPERATING LOSS	(346,641)	(249,825)	(584,248)	(612,765)	(5,806,853)
OTHER INCOME (EXPENSE)
Interest and other income	0	0	0	64,193
Income on joint venture agreement	0	0	0	200,000
Change in fair value of derivatives (Note 6)	(9,000)	17,558	(161,747)	24,389	(167,870)
Loss on extinguishment of debt (Note 7)	0	0	0	0	(3,069,404)
Financing expense	0	(966,099)	0	(1,037,568)	(1,332,311)
Interest expense	(388,247)	(245,850)	(765,677)	(460,787)	(2,799,667)
TOTAL OTHER INCOME (EXPENSE)	(397,247)	(1,194,391)	(927,424)	(1,473,966)	(7,105,059)
LOSS BEFORE INCOME TAXES	(743,888)	(1,444,216)	(1,511,672)	(2,086,731)	(12,911,912)
INCOME TAXES	0	0	0	0	0
NET LOSS	$ (743,888)	$ (1,444,216)	$ (1,511,672)	$ (2,086,731)	$ (12,911,912)
BASIC AND DILUTED NET LOSS PER SHARE	$ (0.08)	$ 0.17	$ (0.17)	$ (0.25)	$ 0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED	8,955,610	8,397,046	8,939,985	8,376,802	0.00

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CONVERTIBLE DEBT

6 Months Ended

Jun. 30, 2013

CONVERTIBLE DEBT

CONVERTIBLE DEBT

NOTE 5 – CONVERTIBLE DEBT

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders for a total of $600,000.  The notes bear interest at 15% per annum.  Interest is payable in equal monthly installments of $7,500.  The notes 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 $.70 due to the note holders’ agreement to subordinate their debt to DMRJ Group.  See Note 7.  The notes are convertible into potentially 857,143 shares of common stock and principal and interest were due in full 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 note holders were issued 64,284 shares of stock each in 2012 to settle accrued interest for 2012 and have been issued 32,142 shares of common stock each to settle accrued interest for the first two quarters of 2013.

The Company failed to repay the loan in full on the maturity date, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders.  This stock was valued at $1.00, the price of recent stock sales, and was accounted for as financing expense in 2012.  As part of this agreement, the due date of the note was extended to November 30, 2013, with interest continuing to be paid with shares of common stock each quarter.

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Capital Stock Common Stock Activity during 2012 (Details) (USD $)	Jun. 30, 2013	Jan. 31, 2012
Capital Stock Common Stock Activity during 2012
Number of common stock shares sold	130,000	17,522
Stock could be converted to cash generated from sale of gold for a period in months	12
Percentage of proceeds of gold produced during the first year to be allocated to fund this option	5.00%
Base price of gold per ounce for determining the value of total investment	$ 1,000
Shares of stock issued to the holders of convertible debt as interest on debt for the quarter ending December 21, 2011 and for each quarter ending 2012	160,710

XML

DERIVATIVE LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2013

DERIVATIVE LIABILITIES (Tables)

Derivative Instruments in Consolidated Balance Sheets

A Black-Scholes option-pricing model was used to estimate the fair value, using Level 2 inputs, of the Company’s derivatives using the following assumptions at June 30, 2013 and December 31, 2012:

	Number of Shares	Volatility	Risk- Free Rate	Expected Life (in years)		Stock price
June 30, 2013
Conversion option	440,363	124.71 %	.0200%	2.0	$	1.00
December 31, 2012
Conversion option	437,227	80.91%	0.035%	.18	$	1.00

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Commitments Employment Agreements Parentheticals (Details) (USD $)	Jun. 30, 2013	May 03, 2011
Commitments Employment Agreements Parentheticals
Issue of shares of stock to the CEO	0	138,000
Accrued compensation	$ 191,000	$ 0
Consulting payable due as per agreements	$ 70,000	$ 0

XML

Capital Stock Preferred Stock Convertible Price (Details) (USD $)	Jun. 30, 2013
Capital Stock Preferred Stock Convertible Price
Series A 1 Preferred Stock Issue Price.	$ (0.70)
Series A 2 Preferred Stock Issue Price.	$ (1.00)
Initial conversion price of Series A 1 Preferred stock.	$ 0.70
Initial conversion price of Series A 2 Preferred stock.	$ 1.00
Percentage of beneficial conversion feature.	4.90%
Additional series A 2 Preferred Stock Issued.	80,000
Number of convertible common stock share.	800,000

XML

Capital Stock Preferred Stock Series A 2 (Details)	3 Months Ended
	Jun. 30, 2013
Capital Stock Series A 2 Preferred Stock
Series A 2 Preferred Stock shares issued	100,000
Number of convertible common stock shares	1,000,000

XML

STOCK REDEEMABLE WITH GOLD PROCEEDS (DETAILS) (USD $)	Jun. 30, 2013
STOCK REDEEMABLE WITH GOLD PROCEEDS
Finanicing raised through sales of common stock initiated in September 2012	$ 1,150,000
Finanicing raised through sales of common stock,''	130,000
Number of common stock shares sold,"	130,000
Stock could be converted to cash generated from sale of gold for a period in months	12
Percentage of proceeds of gold produced during the first year to be allocated to fund this option	5.00%
Base price of gold per ounce for determining the value of total investment	$ 1,000

XML

DMRJ Group Funding Forbearance Agreement (Details) (USD $)	Jun. 29, 2012
DMRJ Group Funding Forbearance Agreement
Number of preferred stock shares series A 2 exchanged	80,000
Amount of repayment obligation of previous loan from DMRJ Group	$ 1,550,000
Number of preferred stock shares series A 2 issued to DMRJ Group	80,000
Value of preferred stock shares series A 2	920,000
Obligation to repay funds previously loaned by DMRJ Group.	1,550,000
Convertible common stock shares,.	800,000
Recent sales price of common stock	$ 1.15
Proceeds from equity financing	$ 3,000,000
Percentage of option to require the company to pay of the proceeds over $ 3000000 to DMRJ Group	25

XML

Capital Stock Preferred Stock (Details)	May 03, 2011
Capital Stock Preferred Stock
Designated preferred stock shares series A	0
Preferred stock shares series A issued to DMRJ Group	0
Designated preferred stock shares series A 1	2,500,000
Designated preferred stock shares series A 2	1,000,000

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS

6 Months Ended

Jun. 30, 2013

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company.  On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada.  Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada).  On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp.

The Company was originally incorporated to pursue the mining business through the acquisition of prospective mining claims in the Wallace and Kellogg mining districts of Northern Idaho.  The Company never successfully generated any revenue or joint ventures from any of the activities it pursued and abandoned the mining business as a viable business model when the commodity prices cycled downward.  The Company remained dormant until it recommenced its mining activities and entered the exploration stage on May 1, 2009.  The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in ASC 915-10-05 and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7.

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

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CAPITAL STOCK

6 Months Ended

Jun. 30, 2013

CAPITAL STOCK

CAPITAL STOCK

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.

2013 Activity

The Company issued a total of 64,284 shares of stock to the note holders of the convertible debt for interest expense during the six months ending June 30, 2013.  The shares were valued at $.70 per share.  See Note 5.

On April 30, 2013, a Seventh Amendment to the DMRJ Group funding was agreed upon.  This Amendment became effective on June 27, 2013 and, as a result of the terms of the amendment, 150,000 shares of common stock valued at $1.00 per share were issued to Robert Jorgensen, a former director and officer, on July 11, 2013.  The stock was payable to Mr. Jorgensen at June 30, 2013 and was issued on July 11, 2013.

2012 Activity

In January 2012, an equity financing was completed with the sale of 17,522 shares of common stock in January providing $20,150 in proceeds. 

In September 2012 an equity financing was initiated which resulted in sales of 130,000 shares of common stock during the 4^th quarter of 2012, providing proceeds of $130,000.  Under the terms of this offering, stock could 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.  See Note 8 for further information on the accounting of this issuance.

On December 3, 2012, 321,428 shares of common stock were issued to the two holders of the convertible debt, with 150,000 shares issued to each of the two debt holders as penalty shares for the extension of the due date of the notes.  The due date of the convertible debt was then extended for one year to November 30, 2013.  The remaining 21,348 shares of common stock were issued to the convertible debt note holders as interest for the months of October and November 2012.  The shares were valued at $.70 per share for interest expense.  See Note 5 for further information regarding this issuance.

During 2012, the Company issued a total of 160,710 shares of stock to the note holders of the convertible debt for interest expense for the quarter ending December 31, 2011 and for each quarter ending in 2012.  The shares were valued at $.70 per share.

Preferred Stock

In connection with the Fourth Amendment to the DMRJ Group funding, on May 3, 2011, the Company created and designated 2,500,000 shares of its authorized preferred stock as Series A-1 Preferred Stock and 1,000,000 shares as Series A-2 Preferred Stock. During the quarter ended June 30, 2011, 100,000 shares of Series A-2 Preferred Stock were issued. On June 29, 2012, an additional 80,000 shares of Series A-2 Preferred stock were issued in connection with the Forbearance Agreement of the DMRJ Group funding arrangement. These shares are convertible by the holder into 800,000 shares of the Company’s common stock.    At June 30, 2013 and December 31, 2012, a total of 180,000 shares of Series A-2 preferred stock were outstanding.

In addition, as part of the Fourth Amendment, beginning July 1, 2011, quarterly dividends in the amount of 10% of net income are due to all Series A-1 and A-2 preferred stockholders for each quarter that the Company has consolidated net income.  The Company also cannot pay any dividends on the common stock until the preferred dividends are paid.  As of June 30, 2013, no dividends have been paid by the Company because there has been no net income. 

Each share of Series A-1 Preferred Stock and Series A-2 Preferred Stock is convertible at the option of the holder at any time into that number of shares of common stock equal to (i) for the Series A-1 Preferred Stock ten times the Series A-1 Issue Price ($0.70) divided by the conversion price for Series A-1 Preferred and (ii) for the Series A-2 Preferred Stock ten times the Series A-2 Issue Price ($1.00) divided by the conversion price for such Series A-2 Preferred Stock.  The initial conversion price of the Series A-1 preferred stock is $0.70 per share and the initial conversion price of the Series A-2 preferred stock is $1.00.  If the Company issues or sells shares of its common stock, or grant options or other convertible securities which are exercisable or convertible into common shares, at prices less than the conversion price of Series A-1 or A-2 shares, except in certain exempted situations, then the conversion price of the Series A-1 and A-2 shares will be reduced to this lower of sale or conversion price.  The Series A-1 and A-2 shares may not be converted into common shares if the beneficial owner of such shares would thereafter exceed 4.9% of the outstanding common shares.  See Note 7 for further information on the accounting of this issuance.

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DERIVATIVE LIABILITIES

6 Months Ended

Jun. 30, 2013

DERIVATIVE LIABILITIES

DERIVATIVE LIABILITIES

NOTE 6 – DERIVATIVE LIABILITIES

The fair value of outstanding derivative instruments not designed as hedging instruments on the accompanying Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 for the conversion option on the DMRJ Group debt was $302,545 and $140,798, respectively.

A Black-Scholes option-pricing model was used to estimate the fair value, using Level 2 inputs, of the Company’s derivatives using the following assumptions at June 30, 2013 and December 31, 2012:

	Number of Shares	Volatility	Risk- Free Rate	Expected Life (in years)		Stock price
June 30, 2013
Conversion option	440,363	124.71 %	.0200%	2.0	$	1.00
December 31, 2012
Conversion option	437,227	80.91%	0.035%	.18	$	1.00

XML

MINERAL PROPERTIES AND INTERESTS

6 Months Ended

Jun. 30, 2013

MINERAL PROPERTIES AND INTERESTS

MINERAL PROPERTIES AND INTERESTS

NOTE 4 – MINERAL PROPERTIES AND LEASES

Mineral properties and leases as of June 30, 2013 and December 31, 2012 are as follows:

		June 30, 2013		December 31, 2012
Yellow Hammer site
Initial lease fee	$	175,000	$	175,000
Asset retirement obligation		30,908		30,908
Total		205,908		205,908
Kiewit, Cactus Mill and all other sites
Initial lease fee		600,000		600,000
Asset retirement obligation		26,913		26,913
Total		626,913		626,913
Blue Fin claims
Initial purchase price		2,735		2,735
Total		2,735		2,735
Total Mineral Properties and Leases	$	835,556	$	835,556

The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 296 unpatented claims, including the unpatented mill site claim, 42 patented claims, and three Utah state mineral leases located on state trust lands.  All but four of these mining claims and leases were obtained under the terms of the Amended and Restated Lease Agreement effective July 24, 2009, with Clifton Mining Company and Woodman Mining Company as lessors.  Rights to the four Yellow Hammer patented claims were obtained under the terms of the Amended and Restated Lease Agreement dated July 24, 2009, with the Jeneane C. Moeller Family Trust.  The properties are located approximately 190 miles west-southwest of Salt Lake City, Utah, and 56 miles south southeast of Wendover, Utah.  Annual lease fees are required on the 296 claims that make up the Company’s Gold Hill property.  Of these, four claims are within the Yellow Hammer site.  Annual claims fees are currently $140 per claim plus administrative fees.

On February 7, 2012, we signed a letter of intent with Shoshone Silver/Gold Mining Company (“Shoshone”) whereby Shoshone would have acquired a 50% interest in our mineral properties located in Tooele County, Utah.  Under the terms of the deal, Shoshone had a 120-day exclusive right to provide the $10 million, for which $100,000 was advanced to us as a nonrefundable deposit.  The joint venture had not been finalized as of June 30, 2012 and an additional deposit of $100,000 was agreed to as of June 29, 2012 to extend the agreement to joint venture the property until September 30, 2012.  Although this additional deposit was received, other terms of the extension were not met and effective July 21, 2012, the joint venture agreement was terminated and the $200,000 received was recognized as gain on termination of a joint venture agreement in the third quarter of 2012. 

On March 20, 2013, the Confederated Tribes of the Goshute Reservation outlined in a letter to the BLM 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.  The BLM is working with the Goshute Tribe to bring this permitting process to a conclusion. 

Exploration Expenses

Exploration expenditures incurred by the Company during the three and six months ended June 30, 2013 and 2012 were as follows:

		Three		Three		Six		Six
		Months		Months		Months		Months
		Ended		Ended		Ended		Ended
		June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Assaying	$	-	$	1,133	$	2,156	$	12,602
Permitting		17,779		-		42,125		146,840
Maps and  miscellaneous		1,050		38		2,100		77
Site development		-		65,157		-		-
Total Exploration Expenses	$	18,829	$	66,328	$	46,381	$	159,519

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Mineral Properties And Leases Operating Interests Letter of Intent (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Mineral Properties And Leases Operating Interests Letter of Intent
Percentage of Interest agreed to be acquired by Shoshone in mineral properties located in Tooele County, Utah	50.00%
Non refundable deposit received to provide $10 million 120 day exclusive right by Shoshone	$ 100,000
Additional deposit received to extend the agreement to joint venture the property	100,000
Amount Recognized as gain on termination of joint venture agreement during Sept, 2012	$ 200,000

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DMRJ Group Funding Loan payment (Details) (USD $)	Sep. 30, 2012
DMRJ Group Funding Loan payment
Event of default in repaying the loan amount as per investment agreement	$ 4,495,000

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COMMITMENTS Employment Agreements (Details) (USD $)	Dec. 31, 2010	Sep. 30, 2010
Commitments Employment Agreements
Base salary or fees to CEO and President	$ 0	$ 120,000
Amount owed by the company to the CEO	$ 131,259	$ 0

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CONSOLIDATED BALANCE SHEETS PARENTHETICALS	Jun. 30, 2013	Dec. 31, 2012
Balance sheet parentheticals
Preferred Stock, shares authorized	10,000,000	50,000,000
Preferred Stock Series A, shares issued	958,033	958,033
Preferred Stock Series A, shares outstanding	958,033	958,033
Preferred Stock Series A 1, shares issued	0	0
Preferred Stock Series A 1, shares outstanding	0	0
Preferred Stock Series A-2, shares issued	180,000	180,000
Preferred Stock Series A-2, shares outstanding	100,000	100,000
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	8,987,339	8,955,257
Common Stock, shares outstanding	8,923,115	8,923,115

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COMMITMENTS

6 Months Ended

Jun. 30, 2013

COMMITMENTS

COMMITMENTS

NOTE 9– 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 leasing 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 2013 or in 2012.

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 leasing of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit, Clifton Shears/smelter tunnel deposit, and the Cane Springs deposit into commercial production within a three year period, it will be required to make annual payments to Clifton Mining in the amount of $50,000 per location.  The Company did not begin commercial production thus, pursuant to this agreement, the Company made $50,000 annual holding fee payments in 2012 on the Kiewit and the Clifton Shears properties and a partial annual holding fee payment of $10,000 on the Cane Springs property.  Negotiations are ongoing regarding this property.  Property payments for the Kiewit and the Clifton Shears, due on July 24, 2013, were made and accepted by Clifton Mining.  Negotiations are ongoing regarding these properties.

In September 2009, the Company acquired all of the rights and interests of Clifton Mining in a $42,802 reclamation contract and cash surety deposit with the State of Utah Division of Oil Gas and Mining for the property.  As consideration for Clifton Mining selling its interest in the reclamation contract and surety deposit, the Company issued 60,824 shares to Clifton Mining.  For a period of two years the Company had the right to repurchase the shares for $48,000, or during the 180-day period after this two year period, Clifton Mining had the option to put the shares to the Company for $48,000.  The put option expired on March 30, 2012. 

Employment Agreements

In September 2010, the Company entered into employment agreements with its former Chief Executive Officer (“CEO”) and its President and entered into a consulting agreement with one of its directors.  Each agreement is for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year.  The Company owed $131,259 to the CEO at December 31, 2010 for amounts due under the provisions of the September 2010 agreement and prior similar agreements.  On May 3, 2011, this payable was satisfied with the issuance of 138,000 shares of stock to the former CEO.  As of June 30, 2013, compensation has not been paid to these three individuals for several months.

In connection with the entering into the Seventh Amendment to the Investment Agreement, the Company entered into an agreement on June 18, 2013 with one of its directors to terminate the consulting agreement dated September 1, 2010, as amended on May 3, 2011, between him and the Company.  Under the terms of the termination agreement, the Company has agreed to pay the director a fee of $70,000 at the rate of $5,000 per month beginning with the first month following the date on which the Company receives funding for its mining project after receipt of necessary mining permits.  Because the necessary permits have not been received, this fee has not yet been paid.  The director has agreed to voluntarily resign as a director and any office held by him upon receipt of the funding by the Company.  The effective date of the termination of the consulting agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, the Company has agreed to indemnify the director to the fullest extent provided by Nevada law for his service as a director or consultant.

In connection with the entering into the Seventh Amendment to the Investment Agreement, the Company entered into an agreement on June 24, 2013 with its former CEO and director to terminate the employment agreement dated September 1, 2010, as amended on May 3, 2011, between him and the Company.  Under the terms of the termination agreement, the Company has agreed to pay the former CEO and director a fee of $120,000 at the rate of $6,000 per month beginning with the first month following the date on which the Company receives funding for its mining project after receipt of necessary mining permits.  Because the necessary permits have not been received, this fee has not yet been paid.  The Company also issued 150,000 shares of common stock to this director under the terms of the termination agreement.  This stock was payable on June 30, 2013 and was issued on July 11, 2013.  The stock was valued at $1.00 per share which was the value of the last stock offering prior to this issuance.  The effective date of the termination of the employment agreement was made retroactive to April 30, 2013.  Pursuant to the terms of the termination agreement, the Company has agreed to indemnify the former CEO and director to the fullest extent provided by Nevada law for his service as an officer, director or employee.

Accruals for officers and directors pursuant to termination agreements total $190,000 as of June 30, 2013.  Of this amount, $70,000 in consulting fees and  $2,000 rent payable are included in Accounts payable and $118,000 accrued wages is included in Accrued liabilities-officer wages.  Accrued wages to other officers total $142,000 as of June 30, 2013.  

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CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (USD $)	6 Months Ended		50 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
OPERATING ACTIVITIES
Net loss.	$ (1,511,672)	$ (2,086,731)	$ (12,911,912)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation	33,019	34,615	191,781
Common stock issued for services	150,000	0	680,009
Common stock issued for interest expense	45,000	45,000	172,500
Common stock issued for convertible note extension	0	920,000	300,000
Accretion of debt-related discounts	0	209,826	1,460,976
Accretion of asset retirement obligation	3,170	2,880	8,933
Change in fair value of derivatives	161,747	(24,389)	167,870
Loss on extinguishment of debt	0	0	3,069,404
(Gain) on sale of marketable securities	0	0	(2,540)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	0	66,883	0
(Increase) decrease in prepaid expenses and other current assets	92,227	41,691	(46,155)
Increase (decrease) in accounts payable and accrued expenses	72,617	4,904	210,705
Increase (decrease) in accrued liabilities - officer wages	129,000	0	219,309
Increase (decrease) in interest payable	720,677	323,530	1,966,098
Net cash used by operating activities	(104,215)	(461,791)	(4,513,022)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(7,349)	0	(435,453)
Payments on mineral leases	0	0	(250,249)
Acquisition of reclamation bonds	0	(600)	(110,122)
Acquisition of notes receivable	0	0	27,500
Deposit received on joint venture agreement	0	100,000	0
Proceeds from marketable securities	0	0	48,920
Net cash used by investing activities	(7,349)	99,400	(719,404)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable	0	0	600,000
Proceeds from notes payable	150,000	0	3,700,000
Payment of note payable - equipment	0	0	(15,995)
Proceeds from issuance of common stock	0	20,150	1,363,833
Proceeds from issuance of common stock with redemption features	0	0	130,000
Proceeds from issuance of preferred stock	0	0	958
Financing fees paid	0	0	(521,281)
Net cash provided by financing activities	150,000	20,150	5,257,515
NET INCREASE (DECREASE) IN CASH	38,436	(342,241)	25,089
Cash and Cash Equivalents, at Carrying Value, Beginning Balance	12,300	415,090	25,647
CASH, END OF PERIOD	50,736	72,849	50,736
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid in cash	0	0	13,664
Common stock issued for mineral lease	0	0	525,000
Common stock issued as incentive with convertible notes	0	0	510,000
Equipment acquired with note payable	0	0	15,995
Preferred stock issued in connection with debt amendment	0	0	1,620,000
Common stock issued for accrued liabilities-officer compensation	150,000	0	281,259
Common stock issued for accrued interest	0	22,500	22,500
Interest payable converted to note payable	$ 37,794	$ 0	$ 923,315

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CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash	$ 50,736	$ 12,300
Prepaid expenses and other current assets	46,155	138,382
Total Current Assets	96,891	150,682
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $169,796 and $153,394	259,668	285,338
MINERAL PROPERTIES AND LEASES (Note 4)	835,556	835,556
RECLAMATION BONDS (Note 4 and 9)	152,923	152,923
TOTAL ASSETS	1,345,038	1,424,499
CURRENT LIABILITIES
Accounts payable and accrued expenses	213,880	141,263
Accrued liabilities-officer wages (Note 9)	260,000	131,000
Derivative liability-conversion option (Notes 6 and 7)	302,545	140,798
Interest payable	1,020,283	337,400
Convertible debt (Note 5)	6,064,492	600,000
Note payable (Note 7)	600,000	5,876,698
Total Current Liabilities	8,461,200	7,227,159
LONG-TERM LIABILITIES
Common Stock Payable	150,000	0
Stock redeemable with gold proceeds (Note 8)	130,000	130,000
Asset retirement obligation (Note 4)	66,754	63,584
LONG-TERM LIABILITIES	346,754	193,584
TOTAL LIABILITIES	8,807,954	7,420,743
COMMITMENTS (Note 9)	0	0
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
Preferred Stock, $0.001 par value, 10,000,000 shares authorized Series A-1: No shares issued and outstanding	0	0
Preferred Stock, $0.001 par value, 10,000,000 shares authorized Series A-2: 180,000 shares issued and outstanding	180	180
Common stock, $0.001 par value, 100,000,000 shares authorized; 8,987,399 and 8,923,115 shares issued and outstanding, respectively	8,859	8,795
Additional paid-in capital	6,455,590	6,410,654
Accumulated deficit prior to exploration stage	(1,016,591)	(1,016,591)
Accumulated deficit during exploration stage	(12,911,912)	(11,400,240)
Total Stockholders' (Deficit)	(7,462,916)	(5,996,244)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)	$ 1,345,038	$ 1,424,499

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Derivative Liabilities OutStanding Derivative Instruments (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Derivative Liabilities OutStanding Derivative Instruments
The fair value of outstanding derivative instruments not designed as hedging instruments	$ 302,545	$ 140,798

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Capital Stock Common Stock (Details)	Jun. 30, 2013	Apr. 30, 2013
Capital Stock Common Stock
Common stocks shares authorized,,	100,000,000
Number of common stock shares issued		150,000

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COMMITMENTS Mining Properties (Details) (USD $)	12 Months Ended
	Dec. 31, 2009
Commitments Mining Properties
Number of restricted common stock shares received by Moeller Family Trust	250,000
Annual payments required to the Trust	$ 50,000
Percentage of required to pay of net smelter royalty	6.00%
Percentage of net smelter royalty on gold and silver minimum	2.00%
Percentage of net smelter royalty on gold and silver maximum	15.00%
Percentage of required to pay of net smelter royalty on base metals	0.0400
Annual payments to Clifton Mining per each of the three locations	50,000
Partial payment to the Cane springs property	$ 10,000

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COMMITMENTS Clifton Mining (Details) (USD $)	Sep. 01, 2009
Commitments Clifton Mining
Value of reclamation contract and cash surety deposit	$ 42,802
Value of right to repurchase of shares by the company	48,000
Value of the option to put the shares to the company	$ 48,000
Number of shares recordes as a derivative liability	60,824

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STOCK REDEEMABLE WITH GOLD PROCEEDS

6 Months Ended

Jun. 30, 2013

STOCK REDEEMABLE WITH GOLD PROCEEDS

STOCK REDEEMABLE WITH GOLD PROCEEDS

NOTE 8 – STOCK REDEEMABLE WITH GOLD PROCEEDS

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of our common stock.  This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of the Company’s common stock.  Under the terms of this offering, 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.  Each investor will receive the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce.  Due to the redemption feature of these shares, management has concluded that the proceeds from these stock sales should be recorded as a liability and not as equity.

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Derivative Liability Fair Value (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Derivative Liability Fair Value
Conversion Option Number Of Shares expected life 2 years and 0.2 years	440,363	437,227
Conversion Option Volatility	124.71%	80.91%
Conversion Option risk free rate	2.00%	3.50%
Conversion Option Stock Price	$ 1	$ 1

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ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2013

ACCOUNTING POLICIES

Mineral Exploration and Development Costs

Mineral Exploration and Development Costs

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

Mineral Properties and Leases

Mineral Properties and Leases

The Company capitalizes costs for acquiring mineral properties and expenses costs to maintain mineral rights and leases as incurred.  Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves.  Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment.  If a property is abandoned or sold, its capitalized costs are charged to operations.  See Note 4.

Earnings Per Share, Policy

Earnings Per Share

Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company.  At June 30, 2013 and June 30, 2012, common stock equivalents outstanding are 857,143 shares into which the convertible debt (Note 5) can be converted and 2,758,033 shares of common stock into which the preferred stock (Note 7) can be converted.  However, the diluted earnings per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

Going Concern Policy

Going Concern

As shown in the accompanying financial statements, the Company is in default on its note payable and has an accumulated deficit incurred through June 30, 2013, 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 Company will need significant funding to continue operations and increase development through the next fiscal year.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships.  Management intends to continue to seek new capital from equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.

The final operating permit necessary to begin operations at the Kiewit property is expected to be obtained in 2013.  If this permit is not received, the Company will not be able to move forward with its’ operations plan, which would affect its’ ability to continue as a going concern.

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.

Reclassification, Policy

Reclassifications

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

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DMRJ GROUP FUNDING

6 Months Ended

Jun. 30, 2013

DMRJ GROUP FUNDING

DMRJ GROUP FUNDING

NOTE 7 – DMRJ GROUP FUNDING

2012 Activity

On June 29, 2012, the Company entered into a forbearance agreement with DMRJ Group which extended the due date of the June 30, 2012 loan payment to September 30, 2012 in exchange for 80,000 shares of Series A-2 Preferred Stock.  The value of this issuance was determined by calculating the number of common shares into which the Series A-2 preferred shares are convertible (800,000 common shares) times the fair value for shares of common stock on the date of issuance ($1.15).  The Company recognized this amount of $920,000 as loss on extinguishment of debt.  Pursuant to the Investment Agreement, on June 30, 2012, the Company had been obligated to repay $1,550,000 of the funds previously loaned by DMRJ Group. 

The Company failed to make the loan payment of $4,495,000 on September 30, 2012, and therefore an event of default occurred under the Investment Agreement.

On October 17, 2012, the Company entered into a Fifth Amendment to the Investment Agreement with DMRJ Group.  The Fifth Amendment provided for the Company to receive up to $100,000 in additional funds in two advances (the “October Term Loan Advances”) of $50,000 each.  Only one of these $50,000 advances was taken in 2012.  In addition, the maturity date of the entire loan balance due to DMRJ was moved from December 31, 2012 to December 15, 2012.  The amount was not paid on December 15, 2012 and remained unpaid at December 31, 2012.

2013 Activity

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

On April 30, 2013, the Company agreed to the terms of a Seventh Amendment to the Investment Agreement with DMRJ Group.  This Amendment become effective on June 26, 2013 and as a result of the terms of the amendment, the maturity date of the entire loan balance due to DMRJ was moved from March 5, 2013 to June 30, 2013.  The Seventh Amendment provides for the Company to receive additional funds in two advances of $50,000.  The first advance, the “April Term Loan Advance”, was received on May 2, 2013 and the second advance, the “May Term Loan Advance” was received on June 26, 2013.  The June 30, 2013 payment was not made and an Eighth Amendment to Investment Agreement was entered into on July 24, 2013.  See Note 10 for the terms of this agreement.   If the Company is unable to repay the outstanding balances the maturity date, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets. 

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 June 30, 2013, and the results of its operations and its cash flows for the three and six months ended June 30, 2013 and 2012. The operating and financial results for the Company for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.

These unaudited interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. These unaudited interim consolidated financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 16, 2013.

Mineral Exploration and Development Costs

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

Mineral Properties and Leases

The Company capitalizes costs for acquiring mineral properties and expenses costs to maintain mineral rights and leases as incurred.  Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves.  Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment.  If a property is abandoned or sold, its capitalized costs are charged to operations.  See Note 4.

Earnings Per Share

Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company.  At June 30, 2013 and June 30, 2012, common stock equivalents outstanding are 857,143 shares into which the convertible debt (Note 5) can be converted and 2,758,033 shares of common stock into which the preferred stock (Note 7) can be converted.  However, the diluted earnings per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

Going Concern

As shown in the accompanying financial statements, the Company is in default on its note payable and has an accumulated deficit incurred through June 30, 2013, 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 Company will need significant funding to continue operations and increase development through the next fiscal year.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships.  Management intends to continue to seek new capital from equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.

The final operating permit necessary to begin operations at the Kiewit property is expected to be obtained in 2013.  If this permit is not received, the Company will not be able to move forward with its’ operations plan, which would affect its’ ability to continue as a going concern.

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

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DMRJ Group Funding Sixth Amendment to the Investment Agreement (Details) (USD $)	Jan. 29, 2013
DMRJ Group Funding Sixth Amendment to the Investment Agreement
Addtional Funds agreed to be provided by DMRJ as January Term Loan Advance	$ 50,000
Amount Due under the Sixth Amendment including accrued interest	$ 6,525,643
Interest accruing at a rate percent per month	2.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Earnings Per Share (Details)	Jun. 30, 2013	Jun. 30, 2012
Summary Of Significant Accounting Policies Earnings Per Share
Common stock equivalents outstanding	857,143	857,143
Common stock convertible into debt and preferred stock	2,758,033	2,758,033

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2013

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 10 – SUBSEQUENT EVENTS

DMRJ Group Loan

On July 24, 2013, the Company entered into an Eighth Amendment to Investment Agreement. As a provision of this Amendment the maturity date of the entire loan balance due to DMRJ was moved from June 30, 2013 to September 30, 2013.  The Eighth Amendment provides for the Company to receive additional funds in two advances. The first advance, the “July Term Loan Advance” in the amount of $100,000, is to be used to fund the annual holding fee payments of $50,000 each on the Kiewit and Clifton Shears properties as per the terms of the Amended and Restated Lease and Sublease Agreement with Clifton Mining Company.  The second advance, the “Additional July Term Loan Advance” is earmarked for working capital and ordinary course business expenses and is expected to be partially used for the payment of the annual claim fees. 

If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate our mining leases and other assets. 

Share Issuance to Former CEO

In connection with the resignation of our former CEO and the termination of his employment agreement, on July 11, 2013, we issued to him 150,000 shares of common stock.  These shares were valued at $1.00 per share, which is the value of the shares sold in the most recent stock offering.  The shares were issued under our 2008 Stock Option-Stock Issuance Plan.

Annual Holding Fees

Annual holding fee payments of $50,000 each were due on each of the Kiewit, Clifton Shears and Cane Springs properties on July 24, 2013 to retain the leases on these properties.  The Eighth Amendment to the Investment Agreement provided for the payment of the holding fees for the coming year for the Kiewit and Clifton Shears properties, as detailed above, and the payments were made on July 25, 2013 and accepted by Clifton Mining.  The payment for the Cane Springs property has not been made.  Negotiations regarding these properties are currently ongoing.

Operating Permit and Environmental Assessment

On March 20, 2013, the Confederated Tribes of the Goshute Reservation outlined in a letter to the BLM 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.  The BLM is working with the Goshute Tribe to bring this permitting process to a conclusion. 

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CONVERTIBLE DEBT Promissoy Notes (Details) (USD $)	Nov. 18, 2009
Convertible Debt Promissoy Notes
Convertible promissoy notes to two minority shareholders	$ 600,000
Interest rate of convertible promissoy notes	15.00%
Monthly interest payable	$ 7,500
Conversion price per share	$ 1.50
Reduced conversion price	$ 0.70
Convertible common stock shares	857,143

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Mineral Properties And Leases (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Mineral Properties And Leases
Initial Lease Fee"	$ 175,000	$ 175,000
Asset retirement obligation.	30,908	30,908
Total	205,908	205,908
Initial Lease Fee.	600,000	600,000
Asset retirement obligation'	26,913	26,913
Total'	626,913	626,913
Initial Purchase Price.	2,735	2,735
Total'.	2,735	2,735
Total Mineral Properties and Leases.	$ 835,556	$ 835,556

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 14, 2013
Document and Entity Information
Entity Registrant Name	Desert Hawk Gold Corp.
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Entity Central Index Key	0001168081
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		9,137,399
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Mineral Properties And Leases Exploration Expenditures (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Mineral Properties And Leases Exploration Expenditures
Assaying	$ 0	$ 1,133	$ 2,156	$ 12,602
Permitting	17,779	0	42,125	146,840
Rent	1,050	38	2,100	77
Maps and miscellaneous	0	65,157	0	0
Total Exploration Expenditures	$ 18,829	$ 66,328	$ 46,381	$ 159,519