0001213900-18-011816.txt : 20180828 0001213900-18-011816.hdr.sgml : 20180828 20180828131027 ACCESSION NUMBER: 0001213900-18-011816 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20180828 DATE AS OF CHANGE: 20180828 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Desert Hawk Gold Corp. CENTRAL INDEX KEY: 0001168081 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 820230997 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-169701 FILM NUMBER: 181041051 BUSINESS ADDRESS: STREET 1: 1290 HOLCOMB AVE. CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: (775) 322-4621 MAIL ADDRESS: STREET 1: 1290 HOLCOMB AVE. CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: LUCKY JOE MINING CO DATE OF NAME CHANGE: 20020222 10-Q 1 f10q0917_deserthawkgold.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2017.

 

or

 

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

 

 For the transition period from _______________________ to ___________________________

 

Commission File Number: 333-169701

 

Desert Hawk Gold Corp.
(Exact name of registrant as specified in its charter)

 

Nevada   82-0230997
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
1290 Holcomb Ave. Reno, NV   89502
(Address of principal executive offices)   (Zip Code)
     
(775) 337-8057
(Registrant’s telephone number, including area code)

 

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

Yes  ☐  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  ☒  No  ☐

 

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

 

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

Smaller reporting Company

Emerging growth company  

 

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

 

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

Yes  ☐  No  ☒

 

Indicate the number of shares outstanding of the issuer’s common stock, as of August 28, 2018: 20,581,603.

 

 

 

 

 

DESERT HAWK GOLD CORP.

Form 10-Q

September 30, 2017

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 1
   
Item 1. Financial Statements 1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
   
Item 4. Controls and Procedures 21
   
PART II – OTHER INFORMATION 22
   
Item 3. Defaults Upon Senior Securities. 22
   
Item 4. Mine Safety Disclosures 22
   
Item 5. Other Information 22
   
Item 6. Exhibits 22
   
SIGNATURES 23

 

i

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

DESERT HAWK GOLD CORP

BALANCE SHEETS

 

   September 30,   December 31, 
   2017   2016 
ASSETS  (unaudited)     
CURRENT ASSETS        
Cash  $35,369   $657,944 
Inventories (Note 4)   500,000    142,921 
Prepaid expenses and other current assets   137,813    132,747 
Total Current Assets   673,182    933,612 
           
INVENTORIES, non-current (Note 4)   2,748,474    2,951,011 
PROPERTY AND EQUIPMENT, net (Note 5)   3,730,190    4,039,887 
MINERAL PROPERTIES AND INTERESTS, net (Note 6)   1,114,675    1,096,482 
RECLAMATION BONDS (Note 6)   752,923    752,754 
           
TOTAL ASSETS  $9,019,444   $9,773,746 
           
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $642,531   $744,943 
Accrued liabilities-officer and other wages (Note 12 and 13)   646,577    495,808 
Interest payable - related parties (Notes 7 and 8)   280,770    192,842 
Interest payable - related party (Note 10)   8,947,028    7,239,610 
Convertible debt - related parties (Note 7)   1,028,000    850,000 
Obligation under capital lease - related party (Note 8)   84,110    120,461 
Short term note payable - related parties   -    34,500 
Notes payable - equipment, current portion (Note 9)   557,010    813,818 
Notes payable - related parties (Note 10)   15,554,552    14,610,492 
Total Current Liabilities   27,740,578    25,102,474 
           
LONG-TERM LIABILITIES          
Asset retirement obligation (Note 11)   1,028,493    974,109 
Obligation under capital lease - related party (Note 8)   -    51,714 
Notes payable - equipment (Note  9)   58,734    453,276 
    1,087,227    1,479,099 
TOTAL LIABILITIES   28,827,805    26,581,573 
           
COMMITMENTS AND CONTINGENCIES (Notes 6, 11, 12 and 14)          
           
STOCKHOLDERS’ (DEFICIT) (Note 3)          
Preferred Stock, $0.001 par value, 10,000,000 shares authorized          
Series A:  958,033 shares issued and outstanding   958    958 
Series A-1: No shares issued and outstanding   -    - 
Series A-2: 180,000  shares issued and outstanding   180    180 
Series B: 444,530 shares issued and outstanding   444    444 
Common stock,  $0.001 par value, 100,000,000  shares authorized; 13,656,603 and 13,656,603 shares issued and outstanding   13,528    13,528 
Additional paid-in capital   9,131,718    9,131,718 
Accumulated deficit   (28,955,189)   (25,954,655)
Total Stockholders’ (Deficit)   (19,808,361)   (16,807,827)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)  $9,019,444   $9,773,746 

 

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

 

 1 

 

DESERT HAWK GOLD CORP

STATEMENTS OF OPERATIONS (unaudited)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2017   2016   2017   2016 
                 
REVENUE:                
Concentrate sales  $80,485   $245,873   $162,763   $1,041,006 
                     
EXPENSES:                    
General project costs   74,938    433,585    502,435    1,215,703 
Exploration expense   -    8,960    -    18,640 
Consulting   1,498    3,877    36,289    15,939 
Officers and directors fees   58,000    45,000    185,537    135,000 
Legal and professional   14,952    2,158    55,009    47,666 
General and administrative   49,215    71,905    192,827    255,185 
Abandonment of mineral property   -    137,766    -    137,766 
Loss on exchange of equipment   -    -    -    51,222 
Depreciation and amortization   110,954    126,016    322,182    432,005 
    309,557    829,267    1,294,279    2,309,126 
                     
OPERATING LOSS   (229,072)   (583,394)   (1,131,516)   (1,268,120)
                     
OTHER INCOME (EXPENSE)                    
Interest and other income   12    60    36    1,055 
Interest and financing expense   (16,558)   (34,528)   (52,273)   (140,280)
Interest expense - related party   (621,440)   (468,589)   (1,816,781)   (1,485,962)
    (637,986)   (503,057)   (1,869,018)   (1,625,187)
                     
LOSS BEFORE INCOME TAXES   (867,058)   (1,086,451)   (3,000,534)   (2,893,307)
INCOME TAXES   -    -    -    - 
                     
NET LOSS  $(867,058)  $(1,086,451)  $(3,000,534)  $(2,893,307)
                     
                     
BASIC AND DILUTED NET LOSS PER SHARE  $(0.06)  $(0.08)  $(0.22)  $(0.22)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED   13,656,603    13,356,603    13,656,603    13,356,603 

 

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

 

 2 

 

DESERT HAWK GOLD CORP

STATEMENTS OF CASH FLOWS (unaudited)    

 

   Nine Months Ended 
   September 30,   September 30, 
   2017   2016 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(3,000,534)  $(2,893,307)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation and amortization   322,182    432,004 
Loss on exchange of equipment   -    51,222 
Accretion of asset retirement obligation   54,384    54,384 
Abandonment of mineral property   -    137,766 
Changes in operating assets and liabilities:          
Inventories   (154,542)   (599,031)
Prepaid expenses and other current assets   (5,066)   (122,146)
Accounts payable and accrued expenses   (102,412)   234,879 
Accrued liabilities - officer wages   150,769    132,692 
Interest payable - related parties   87,928    67,500 
Interest payable - related party   1,707,418    1,485,962 
Net cash used by operating activities   (939,873)   (1,018,075)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
           
Additions to property and equipment   (30,678)   (17,644)
Refund of reclamation bonds   -    674,000 
Increase in reclamation bonds   (169)   (1,014)
Net cash provided (used) by investing activities   (30,847)   655,342 
           
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from (payment on) short term note payable   (34,500)   50,000 
Proceeds from note payable - related party   944,060    1,620,000 
Proceeds from convertible debt - related parties   178,000    - 
Payment on note payable - related party   -    (900,000)
Payment of obligation under capital lease - related party   (88,065)   (6,680)
Payment of note payable - equipment   (651,350)   (510,619)
Net cash provided by financing activities   348,145    252,701 
           
NET (DECREASE) IN CASH   (622,575)   (110,032)
CASH, BEGINNING OF PERIOD   657,944    132,509 
           
CASH, END OF PERIOD  $35,369   $22,477 
           
NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Equipment acquired with note payable - equipment  $-   $28,992 
Equipment acquired under capital lease   -    185,618 
Accounts payable satisfied through exchange of equipment   -    36,000 

 

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

 

 3 

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company. On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada. Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada). On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result, the Company has no subsidiaries.

 

The Company never successfully generated any revenue and eventually abandoned the mining business, remaining dormant until it recommenced its mining activities on May 1, 2009.

 

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

 

Production commenced and revenues of over $6,000,000 from sales of gold concentrate have been received through the period ending September 30, 2018. Ongoing undercapitalization has continued to hamper the Company’s ability to operate. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds (DMRJ and PPCO) and finalized an agreement which closed on March 8, 2018. See Footnote 14. The Company has been temporarily shut down due to this development since third quarter of 2017, and is seeking further capitalization to be able to resume production in 2018.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited interim balance sheets and 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 September 30, 2017, and the results of its operations and its cash flows for the nine months ended September 30, 2017 and 2016. The operating and financial results for the Company for the nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

 

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 financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on June 29, 2018.

 

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

 4 

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

Inventories

 

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

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of September 30, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

 

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At September 30, 2017 and 2016, common stock equivalents outstanding are as follows:

 

   September 30,
2017
   September 30,
2016
 
         
Convertible debt   3,036,498    1,092,850 
Convertible preferred stock   47,211,002    47,211,002 
           
Total   50,247,500    48,303,852 

 

 5 

 

The convertible debt conversion shares include 1,815,080 and 1,092,850 shares for the periods ended June 30, 2017 and June 30, 2016, respectively, for conversion of the two notes dated November 18, 2009, along with the interest on these notes and for conversion of the two $125,000 notes dated October 2016 and the interest thereon.. On February 28, 2018, the terms of these notes were changed and the conversion feature was eliminated for the 2009 notes.

 

However, the diluted earnings (loss) 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 has an accumulated deficit and negative working capital through September 30, 2017, 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. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these 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.

 

NOTE 3 - CAPITAL STOCK

 

Common Stock

 

2017 Activity

 

No shares of common stock were issued during the first nine months of 2017.

 

2016 Activity

 

No shares of common stock were issued during the first nine months of 2016.

 

Preferred Stock

 

2017 Activity

 

No shares of preferred stock were issued during the first nine months of 2017. See Note 14 – Subsequent Events, regarding the return of DMRJ Group’s equity shares as part of a reorganization with court appointed trustees.

 

2016 Activity

 

No shares of preferred stock were issued during the first nine months of 2016.

 

NOTE 4 – INVENTORIES

 

The following table provides the components of inventories:

 

   September 30,
2017
   December 31,
2016
 
Ore on leach pad  $3,248,474   $3,051,766 
Carbon columns in process   -0-    31,214 
Dore finished goods   -0-    10,952 
Total   3,248,474    3,093,932 
           
Less: current portion   (500,000)   (142,921)
           
Non-current inventories  $2,748,474   $2,951,011 

 

 6 

 

Inventories at September 30, 2017 are split between current and non-current based on estimated expected sales for the year ending September 30. 2018. Inventories are valued at the lower of cost or net realizable value which at September 30, 2017 is cost.

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

The following is a summary of property, equipment, and accumulated depreciation at September 30, 2017 and December 31, 2016:

 

   September 30,   December 31, 
   2017   2016 
Equipment  $3,077,482   $3,046,803 
Furniture and fixtures, temporary housing   6,981    6,981 
Electronic and computerized equipment   52,874    52,874 
Vehicles   67,115    67,115 
    3,204,452    3,173,773 
Less accumulated depreciation   (1,484,483)   (1,144,108)
    1,719,969    2,029,665 
           
Kiewit property facilities   2,497,435    2,497,436 
Less accumulated amortization   (487,214)   (487,214)
    2,010,221    2,010,222 
           
Total  $3,730,190   $4,039,887 

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. See Note 9.

 

NOTE 6 – MINERAL PROPERTIES AND INTERESTS; RECLAMATION BONDS

 

Mineral properties and interests as of September 30, 2017 and December 31, 2016 are as follows:

 

   September 30,
2017
   December 31,
2016
 
Initial lease fee          
Kiewit, Cactus Mill and all other sites  $600,000   $600,000 
           
Asset retirement obligation          
Kiewit Site   789,026    789,026 
Kiewit Exploration   10,780    10,780 
Cactus Mill   16,133    16,133 
Total   815,939    815,939 
Accumulated amortization   (301,264)   (319,457)
    514,675    496,482 
           
Total  $1,114,675   $1,096,482 

 

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

 

On January 6, 2014, the Company obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  The bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.   Funds of $92,705 were received in April 2014, by the Company, for these refunded reclamation bonds.

 

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond for the same amount. A condition of the surety bond was the deposit of 50% of the bond amount into an escrow account with the bonding company. An escrow account was established with the bonding company and $674,000 (50% of the original cash bond) was deposited by the Company. The surety bond carries an annual bonding fee of $40,400. Total reclamation bonds posted are $752,923 and $752,754 at September 30, 2017 and December 31, 2016, respectively.  

 

 7 

 

On September 12, 2016, the Yellow Hammer mineral property was returned to the lessor, Moeller Family Trust, and the Company recognized a loss on abandonment in the amount of $175,000 less the accumulated amortization of $37,234, for a net loss of $137,766.

  

NOTE 7 – CONVERTIBLE DEBT – RELATED PARTIES

 

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders, for a total of $600,000. The notes bore interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes are convertible at a rate of $0.70 per share. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

 

The Company failed to repay the loan in full on the November 30, 2012, 2013, 2014, 2015 and 2016 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. In 2014, 2015 and 2016, the stock was valued at an estimated $0.04 (total $12,000) and was accounted for as financing expense. As part of this agreement, the due date of the notes was extended each year and has now been extended to November 30, 2018. Interest was paid with shares of common stock through November 30, 2014 and was to be paid in cash thereafter. Interest has not been paid since November 2014 and accrued interest payable on these notes at September 30, 2017 and December 31, 2016 is $255,000 and $187,500 respectively. Per the terms of these notes, interest is not convertible to common stock.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $0.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Note), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and quarterly thereafter. Accrued interest payable on these notes at September 30, 2017 and December 31, 2016 was $24,042 and $5,342, respectively. Interest on these notes is convertible to common stock.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. At September 30, 2017 a total of $178,000 of these funds had been advanced. The balance of the $500,000 was advanced over the next several months with the final advance dated February 9, 2018. Accrued interest payable on these notes at September 30, 2017 and December 31, 2016 is $1,730 and $0, respectively. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On November 15, 2016, a short-term loan in the amount of $25,000 was obtained from West C Street, one of the Company’s convertible debt holders. Funds were used for operating capital. This amount was repaid to West C Street on January 18, 2017 along with accrued interest of $438.

 

NOTE 8 – OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

 

A capital lease was entered into on June 20, 2016 with RMH Overhead, LLC for the purchase of mining and crushing equipment. RMH Overhead, LLC is an entity owned by the Company’s President, Rick Havenstrite. For the periods ended September 30, 2017 and December 31, 2016, equipment includes assets under capital lease amounting to $185,618 and $185,618, respectively. The lease is being amortized over the estimated useful life of the equipment. Accumulated amortization at September 30, 2017 and December 31, 2016 was $33,147 and $13,258, respectively. At September 30, 2017, the estimated future minimum lease payments under the capital lease were as follows:

 

Year ending September 30, 2018  $90,000 
      
Total   90,000 
Less: Implied interest   (5,890)
Net present value   84,110 
Less: Capital lease obligation-current portion   (84,110)
Long-term capital lease obligation  $-0- 

 

 8 

 

NOTE 9 – NOTES PAYABLE – EQUIPMENT

 

The following is a summary of the equipment notes payable:

 

   September 30,
2017
   December 31, 2016 
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%.  $53,546   $73,203 
           
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.   -0-    9,668 
 Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%. The equipment has since been returned to CAT. See note below.   369,762    881,894 
           
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.   182,919    282,675 
 Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.   9,517    19,654 
    615,744    1,267,094 
Current portion   (557,010)   (813,818)
Long term portion  $58,734   $453,276 
           
Principal payments are as follows for the twelve months ended September 30,          
2018  $557,010      
2019   58,734      
Total  $615,744      

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $372,129, for a net carrying value of $1,128,759. The note payable due to CAT at the time of disposition was $960,585. The CAT contract did not legally release the Company from liability in the case of a repossession thus an extinguishment has not occurred and the debt and assets were not derecognized.

 

Note Payable – CAT Equipment

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for a net carrying value of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of August 3, 2018, seven of those payments have been made. The loss on impairment of equipment in the amount of $147,214 was recognized in the 4th quarter of 2016. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

 

 9 

 

NOTE 10 – NOTE PAYABLE - RELATED PARTY

 

DMRJ Group beneficially owned approximately 75% of the Company (on a fully-diluted basis) with Series A, A-2 and B preferred shares convertible to 47,211,002 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ Group. The Agreement has been modified numerous times and at September 30, 2017 operated under the Fourteenth Amendment to the Investment Agreement dated December 22, 2016. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.

 

The total due to DMRJ Group at September 30, 2017 and December 31, 2016 is as follows:

 

   September 30,   December 31, 
   2017   2016 
Principal, due within one year  $15,554,552   $14,610,492 
Interest payable, current   8,947,028    7,239,610 
   $24,501,580   $21,850,102 

 

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

 

Incurring any indebtedness except in limited circumstances;
Creating any significant liens on any of our properties or assets;
Enter into any sale and lease-back transaction involving any of our properties;
Make any investments in or loans or advances to other parties;
Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
Declare or pay any dividends, except for dividends to DMRJ Group;
Engage in any business transactions with affiliates;
Make capital expenditures except as permitted in the agreement pertaining to our current mining business;
Create any lease obligations;
Amend, supplement or modify any existing indebtedness;
Enter into any swap, forward, future or derivative transaction;
Make any change in our accounting policies or reporting practices;
Form additional subsidiaries; or
Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

 

At September 30, 2017, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

2017 Activity

 

At September 30, 2017, DMRJ continued to operate through the direction of its court appointed trustees (see 2016 Activity below). Funds in the amount of $944,060 were drawn from the trustees during the nine months ended September 30, 2017 to help fund ongoing expenses. See Note 14.

 

2016 Activity

 

At December 31, 2016, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended. See Note 14.

 

Several term loan advances were received from DMRJ Group by the Company between February 9, 2016 and December 29, 2016 totaling $2,470,000. A loan payment of $900,000 was made to DMRJ on July 8, 2016. The advances bear interest at 15% per annum and became due on October 31, 2016 with the remainder of the note due to DMRJ Group. These funds were used for working capital and equipment debt repayment.

 

A Fourteenth Amendment to the Investment Agreement was entered into on December 22, 2016 which allowed for additional funding in the amount of up to $600,000 from DMRJ Group and its affiliated fund managers. This $600,000 was drawn on December 29, 2016 which brought the total funds drawn from DMRJ Group and its affiliates for 2016 to $2,470,000.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and the management of the DMRJ Group. DMRJ Group would effectively own 75% of stock of the Company (on a fully diluted basis). See Note 14 – Subsequent Events.

 

 10 

 

NOTE 11 –ASSET RETIREMENT OBLIGATION

 

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

 

Changes in the asset retirement obligation for the periods ended September 30, 2017 and December 31, 2016 are as follows:

 

   Nine months ended September 30,
2017
   Year ended December 31,
2016
 
Asset retirement obligation, beginning of period  $974,109   $901,597 
           
Accretion expense   54,384    72,512 
Asset retirement obligation, end of period  $1,028,493   $974,109 

 

NOTE 12 – RELATED PARTY TRANSACTIONS

 

In addition to transactions disclosed in Notes 7, 8 and 10, the Company had the following related party transactions.

 

The Company recognized rent expense for rental of office space of $9,000 for the nine months ended September 30, 2017 and 2016, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $9,000 during the nine months ended March 31, 2017 and 2016, respectively, in addition to $4,000 in rents from prior years, leaving a total of $13,750 and $17,750 remaining in accounts payable at September 30, 2017 and December 31, 2016, respectively, which represents amounts due from prior years.

 

In addition, a short-term loan totaling $9,500, also for working capital, was obtained from our President, Rick Havenstrite, with draws on multiple dates in November and December 2016. This loan was repaid in full on January 3, 2017 with no interest paid.

 

As of September 30, 2017 and December 31, 2016, accrued compensation of $646,577 and $486,577 was due to directors and officers. Of the amounts accrued at September 30, 2017 and December 31, 2016, accrued compensation of $461,692 and $372,692 is due to Rick Havenstrite and $155,885 and $113,885 is due to Marianne Havenstrite, Treasurer and Principal Financial Officer. In addition, $29,000 and $-0- was due to other directors at September 30, 2017 and December 31, 2016, respectively.

 

During the nine months ended September 30, 2017 and 2016, the Company recognized general project cost expense of $0 and $6,667, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. At both September 30, 2017 and December 31, 2016, $39,367 remains unpaid to Mr. Havenstrite. These amounts are included in accounts payable at those dates.

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Mineral Property Payments

 

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three-year period, it will be required to make annual penalty payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property penalty payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun. Royalty expense of $9,785 and $61,631 was recognized during the nine months ended September 30, 2017 and 2016, respectively, with these amounts fully paid at September 30, 2017.

 

 11 

 

A letter of default on the Clifton Shears properties dated September 19, 2016 was received by the Company with a 30-day period for curing the default. On October 17, 2016, past due royalties and the $50,000 penalty payments for each of 2015 and 2016 were paid to Clifton Mining, who then acknowledged the cure of default.

 

Mining severance tax in the amount of $0, based on production, was accrued at September 30, 2017.

 

Personal property tax due to Tooele County, Utah in the amount of $160,131 including interest and penalties, was accrued and past due at September 30, 2017. This amount due has not yet been paid.

 

Employment Agreements

 

In September 2010, the Company entered into an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $120,000 plus certain performance compensation upon fulfillment of established goals. The agreement allows the Board to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

 

NOTE 14 – SUBSEQUENT EVENTS

 

Note Payable – Wheeler Machinery

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract in the amount of $273,067 was finalized and the first of 7 equal monthly payments of $39,009 were to be made.  As of August 27, 2018, two of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

Convertible Debt – Related Parties

 

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. In addition, as per the terms of the notes, 300,000 penalty shares for both 2017 and 2016 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2017 and 2016.

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On July 3, 2018, a short-term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.

 

Note Payable – Related Party

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, were received and the agreement was finalized on March 8, 2018.

 

 12 

 

Revenue

 

On July 6, 2018, the Company negotiated an arrangement for a one-time sale of gold concentrate to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold, and silver byproduct.

 

Stock Offering

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company’s Common Stock and various loan concessions on existing convertible debt.

 

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 2018. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

 

Stock Plan

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. Shares issued under this plan will fully vest upon issuance. The aggregate Fair Market Value of the Common stock becoming exercisable for the first time during any calendar year shall not exceed $100,000 per optionee.

 

On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which expire February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.

 

 13 

 

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

 

The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 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:

 

  default of outstanding secured obligations;
  maintaining necessary mining permits;
  a decline in metal prices;
  environmental hazards;
  metallurgical and other processing problems;
  unusual or unexpected geological formations;
  global economic and political conditions;
  disruptions in credit and financial markets;
  global productive capacity;
  changes in product costing; and
  competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, flooding, landslides, power outages, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities).

 

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

 

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

 

 14 

 

Overview

 

Desert Hawk Gold Corp., a Nevada corporation (the “Company”), is engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced. In addition, we are currently producing gold and silver at the Kiewit property and had our first sales from the property in October 2014. None of our mining properties has any known reserves and our proposed programs on these properties are exploratory in nature. Our projects are located in the Gold Hill Mining District in Tooele County, Utah.

 

We 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.

 

On January 6, 2014, we obtained the final permit necessary to commence construction and development of the Kiewit property. The reclamation bond was posted in February 2014 in the amount of $1,348,000. Development of the project was essentially completed in 2014 using funding provided by DMRJ Group I, LLC, a Delaware limited liability company (“DMRJ Group”). DMRJ Group is a Platinum Partners’ related entity managed by the Platinum Partners’ Credit Fund (“PPCO”). The property is located in a historical mining district that has existing disturbances and mine wastes and is in a very arid, desolate area. The property is also adjacent to, and uphill from, the Dugway Proving Grounds and Air Force Gunnery Range that is deemed an environmentally insensitive area, with low water quality. Management believes that through our leased patented claims we have adequate private land for process facilities. There is no material access from any metropolitan area or community.

 

On July 7, 2016, we replaced the $1,348,000 cash reclamation bond with a surety bond in the same amount. A condition of the surety bond was the deposit of 50% of the bond amount ($674,000) into an escrow account with the bonding company. The surety bond carries an annual bonding fee of $40,400.  

 

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 claims are known as the Yellow Hammer property. As part of this agreement, if we did not place the Yellow Hammer property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to the Moeller Family Trust of $50,000 to retain our rights to this property.

 

In September of 2016 we received a notice of default regarding the $50,000 annual penalty payment on these claims. The Yellow Hammer agreement was terminated at that time with no payment made and we no longer have rights to any of the claims on the Yellow Hammer property.

 

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 Cane Springs property was released back to Clifton Mining in 2013.

 

We currently hold leasehold interests within the Gold Hill Mining District consisting of 247 unpatented mining claims, including an unpatented mill site claim, and two Utah state mineral leases located on state trust lands, all covering approximately 10 square miles. We intend to concentrate our activities on the Kiewit project. Mineral extraction activities on the property currently are open-pit.

 

 15 

 

In July 2010, we entered into an Investment Agreement with DMRJ Group. DMRJ Group is a Platinum Partners’ related entity managed by the PPCO. The agreement has been modified numerous times and currently operates under the Fourteenth Amendment to the Investment Agreement. The Amendments have provided for extensions of payment dates, increased funding and other modifications to the agreement.

 

On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment provided for funding of construction of the heap leach pad and process facility, mining development, and operations through a series of monthly term loan advances totaling a maximum of $5,700,000 over five months.  A total of $5,500,000 of this allotment was eventually loaned to us. As a part of this amendment, on February 19, 2014, we issued to DMRJ Group 249,603 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During 2014, financing expense in the amount of $998,412 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.04.

 

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

 

In connection with the Tenth Amendment, we also amended the Certificates of Designation for the Series A Preferred Stock and the Series A-1 and A-2 Preferred Stock to eliminate the mandatory dividends payable to the holders of the Series A Preferred Stock and to exclude the issuances of certain securities from triggering adjustments.

 

An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates which were then revised with the Twelfth, Thirteenth and Fourteenth Amendments to the Investment Agreement.

 

The Twelfth Amendment to the Investment Agreement was entered into on June 5, 2015 and allowed for additional funding in the amount of $850,000 for the purpose of additional working capital, financing of the expansion into the east extension of the current pit boundary and to provide for crushing equipment to allow crushing to be done in-house.

 

The Thirteenth Amendment to the Investment Agreement was entered into on August 31, 2015 and allowed for additional funding of up to $525,000 for operating capital and to provide the ability for crushing operations to be performed in-house. This funding was used for working capital and to prepare for a drilling program within the existing boundary of the Kiewit Exploration Permit.

 

As part of this amendment, we issued to DMRJ Group 185,194 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. As a result of this issuance, DMRJ Group owned approximately 77% of our Company (on a fully-diluted basis) with shares convertible into 47,211,002 of common stock. DMRJ Group is considered a related party.

 

The total due to DMRJ at September 30, 2017 and December 31, 2016 is as follows:

 

   September 30,   December 31, 
   2017   2016 
Principal        
Current  $15,554,552   $14,610,492 
Long-term   -    - 
Total   15,554,552    14,610,492 
Interest payable          
Current   8,947,028    7,239,610 
Long-Term   -    - 
   $24,501,580   $21,850,102 
           

 

 16 

 

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

 

  Incurring any indebtedness except in limited circumstances;
  Creating any significant liens on any of our properties or assets;
  Enter into any sale and lease-back transaction involving any of our properties;
  Make any investments in or loans or advances to other parties;
  Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
  Declare or pay any dividends, except for dividends to DMRJ Group;
  Engage in any business transactions with affiliates;
  Make capital expenditures except as permitted in the agreement pertaining to our current mining business;
  Create any lease obligations;
  Amend, supplement or modify any existing indebtedness;
  Enter into any swap, forward, future or derivative transaction;
  Make any change in our accounting policies or reporting practices;
  Form additional subsidiaries; or
  Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

 

At September 30, 2017, we have failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the defaults and has indicated it has no present intent to declare an event of default under the Investment Agreement.

 

The Thirteenth Amendment also established new minimum principal and interest payment dates beginning in June 2016 as follows:

 

June 30, 2016  $500,000 
September 30, 2016   800,000 
December 31, 2016   600,000 
February 28, 2017   500,000 
May 31, 2017   2,250,000 
August 31, 2017   2,250,000 
      
Total  $6,900,000 

 

We failed to make the minimum payments due on all of the above payment dates. The Fourteenth Amendment to the Investment Agreement with DMRJ Group was entered into on December 22, 2016 and allowed for December 2016 Term Loan Advances in an amount up to $600,000. The advance was drawn in full.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging Defendants with a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owned 75% of stock of the Company (on a fully diluted basis). Funds in the amount of $944,060 were drawn from the receivers during the first two quarters of 2017 to help fund ongoing expenses.

 

For most of 2017 and, until an agreement was finalized in 2018, we were working towards a reorganization and recapitalization with the trustees of the two funds and finalized the Assignment and Assumption Agreement dated February 13, 2018. This agreement discharged all of the debt owed by us to DMRJ Group and its related affiliates and returned all of their equity to us in exchange for $625,000. The debt and equity were retired and cancelled by us. The owners of the convertible debt agreed to fund this payment in full, and they also agreed to certain concessions on their outstanding notes with us, in exchange for 4,500,000 shares of our Common Stock. All signatures from the court appointed trustees, and funding by us, have been received and the agreement was closed on March 8, 2018. Due to this development, our mining operations have been temporarily shut down since third quarter of 2017 but, if financing is successfully secured, we plan on commencing full mining operations in 2018.

 

 17 

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $0.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

The Company issued to one of the convertible debt holders two short-term loans which were subsequently repaid. On September 29, 2016, $50,000 was loaned at no interest and was repaid to the debtholder on October 14, 2016. On November 5, 2016, an additional $25,000 was loaned to the Company at 10% interest and was repaid including interest of $438 on January 18, 2017. These loan funds were used for operating capital. A third short term loan in the amount of $100,000 with 10% interest and a loan initiation fee of 2% was issued to one of the convertible debt holders on July 3, 2018. This loan has not yet been paid.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $0.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Notes), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and is payable quarterly thereafter.

 

On August 7, 2017, the convertible debt holders funded an additional aggregate of $500,000 under similar terms. These funds were used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. Advances on these loans were taken beginning August 8, 2017 through February 9, 2018. On February 28, 2018 both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

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 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 received the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce. At September 30, 2017, conversion proceeds due to shareholders are $151,406 for all 130,000 conversion shares. 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. Payment of these funds due to investors has not yet begun, due to limited cash flow, and is included in accounts payable and liabilities. The amount owed to the shareholders in excess of $1,000 per ounce for redemptions through September 30, 2017 is $21,406. This amount has been recorded as an administrative expense.

 

On June 20, 2016, we entered into an agreement with a related party, RMH Overhead, LLC, to lease certain mining and crushing equipment, some of which was previously owned by us. We have recorded this liability as a capital lease and the liability is reflected on the balance sheet as ‘obligation under capital lease – related party’. The terms of the lease are 24 monthly payments of $9,212 which include interest at 15%. At any time during the lease term, the equipment may be purchased by us for the balance due. 16 of the 24 payments have been made as of August 3, 2018.

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for an adjusted balance of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of July 31, 2018, seven of those payments have been made. These financial statements as of September 30, 2017, reflect the loss on impairment of equipment in the amount of $147,214 which was recognized in 2016, and the terms of the agreement finalized on July 31, 2017. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

 

 18 

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract was arrived at and the first of seven monthly payments of $39,009 was made.  As of August 3, 2018, two of those payments have been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company’s Common Stock and various loan concessions on existing convertible debt.

 

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 2018. At September 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

 

On July 6, 2018, the Company negotiated an arrangement for a sale of gold and silver byproduct to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold and silver byproduct. A second advance in the amount of $70,700 was received on August 15, 2018 representing an advance against a future sale of metals with similar terms.

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which terminate February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.

 

Historically, we have incurred net losses for the years ended December 31, 2016 and 2015 and have also incurred a loss for the nine months ended September 30, 2017.

 

Our financial statements were prepared assuming that we would continue as a going concern. Our significant cumulative losses from operations as of September 30, 2017 raise substantial doubt about our ability to continue as a going concern. If the going-concern assumption was not appropriate for our financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. During 2017, we continued to experience losses from operations. We will require additional funding to complete much of our planned mining exploration and operations. Except for potential proceeds from the sale of equity in offerings by us, the issuance of debt, and revenue from existing operations, which has been minimal, we have no other source for additional funding. Our continued net operating losses and stockholders’ deficiency increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

 

Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016.

 

The operating losses of $229,072 and $1,131,516 for the three and nine months ended September 30, 2017 as compared to the operating losses of $583,394 and $1,268,120 for the three and nine months ended September 30, 2016 represents decreased losses in the amount of $354,322 and $136,604. Decreased losses are due to curtailment of operations in 2017 and the abandonment of mineral property which was recorded in 2016. Other expense for the three and nine months ended September 30, 2017 was $637,986 and $1,869,018, consisting of interest and financing expense, increased by $134,929 and $243,831as compared to the other expense amounts of $503,057 and $1,625,187 for the three and nine months ended September 30, 2016. The increases were due to increased interest on related party debt. These changes result in a net decreased loss for the three months ended September 30, 2017 of $219,393 and a net increased loss of $107,227 for the nine months ended September 30, 2017 as compared to the same periods ending September 30, 2016.

 

 19 

 

Liquidity and Cash Flow

 

Net cash used by operating activities was $939,873 during the nine-month period ended September 30, 2017, compared with cash used by operating activities of $1,018,075 during the nine-month period ended September 30, 2016. This $78,202 decrease in the amount of cash used in operating activities is primarily attributable to restrictions caused by insufficient working capital and reduced production.

 

Net cash used by investing activities was $30,847 during the nine-month period ended September 30, 2017, compared to $655,342 cash provided by investing activities during the nine month-period ended September 30, 2016. This increase in cash used by investing activities of $686,189 is due to the investment in property and equipment.

 

Net cash provided by financing activities was $348,145 during the nine-month period ended September 30, 2017, compared with $252,701 cash provided by financing activities during the nine-month period ended September 30, 2016. The increase of $95,444 in cash provided by financing activities during the nine-month period ended September 30, 2017 was due to payments made on equipment purchase notes.

 

As a result of the above, cash decreased by $622,575 during the nine-month period ended September 30, 2017, leaving us with a cash balance of $35,369 as of September 30, 2017.

 

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.

 

Revenue Recognition

 

Sales of all metals products are recorded as revenues when title and risk of loss transfer to the purchaser. Sales to the purchaser are recorded at gross sales price, with charges for treatment, refining, smelting and other charges included as part of general project costs.

 

Mineral Exploration and Development Costs

 

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

 

Inventories

 

Inventories consist of estimated gold on the heap leach pad and in the carbon process system and are valued at the lower of production cost or market value. Gold on the heap leach pad is estimated to be 80% complete for cost purposes and gold in the process system is estimated at 95% complete.

 

Mineral Properties

 

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

 

 20 

 

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 Chief Executive Officer, who serves as our principal executive officer; and our Treasurer, who serves as our principal financial and accounting officer, 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 accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. However, due to financial considerations, we were unable to timely file this Quarterly Report on Form 10-Q and, thus, our disclosure controls and procedures were not effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 21 

 

PART II – OTHER INFORMATION

 

Item 3. Defaults Upon Senior Securities.

 

As has been disclosed above, we are currently in default of the Investment Agreement, as amended and the Note with DMRJ Group.

 

Item 4. Mine Safety Disclosures

 

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

 

Item 5. Other Information

 

On August 7, 2018, we entered into the Note Purchase Agreement with Ibearhouse LLC and West C Street LLC pursuant to which we issued to each of Ibearhouse and West C Street 10% Senior Secured Convertible Promissory Notes in the principal amounts of $250,000. Each of the notes accrues interest at 10% per annum and matures on July 31, 2019. Interest payments on each of the notes is deferred until August 7, 2018 and are then made quarterly until maturity. The notes may be prepaid and are convertible at the rate equal to the lesser of $0.25 per share or the price of any convertible debt or equity financing. The notes are secured by all of the assets of the Company thorough the Security Agreement.

 

Item 6. Exhibits

 

Exhibit No.   Description
31.1   Rule 15d-14(a) Certification by Principal Executive Officer
31.2   Rule 15d-14(a) Certification by Principal Financial Officer
32.1   Section 1350 Certification of Principal Executive Officer
32.2   Section 1350 Certification of Principal Financial Officer
95   Mine Safety Disclosure
101.INS   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

 

 22 

 

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 28, 2018 By: /s/ Rick Havenstrite
    Rick Havenstrite, Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 28, 2018 By: /s/ Marianne Havenstrite
    Marianne Havenstrite, Chief Financial Officer
    (Principal Accounting and Financial Officer)

 

 23 

 

EX-31.1 2 f10q0917ex31-1_deserthawk.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION

 

I, Rick Havenstrite, certify that:

 

1. I have reviewed this Form 10-Q quarterly report of Desert Hawk Gold Corp. for the quarter ended September 30, 2017;

 

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 28, 2018

 

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

EX-31.2 3 f10q0917ex31-2_deserthawk.htm CERTIFICATION

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 September 30, 2017;

 

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 28, 2018

 

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

 

EX-32.1 4 f10q0917ex32-1_deserthawk.htm CERTIFICATION

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 September 30, 2017, 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 28, 2018

 

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

 

EX-32.2 5 f10q0917ex32-2_deserthawk.htm CERTIFICATION

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 September 30, 2017, 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 28, 2018

 

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

 

EX-95 6 f10q0917ex95_deserthawk.htm MINE SAFETY DISCLOSURE

Exhibit 95

 

Mine Safety Disclosure Data

 

There have been NO violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine health hazard under section 104.

 

We certify that we had no mining-related fatalities during the quarterly period ended September 30, 2017.

 

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

 

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

 

We have no pending legal actions before the Federal Mine Safety and Health Review Commission as of September 30, 2017, and have not instituted any legal actions during the quarterly period ended September 30, 2017.

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The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of September 30, 2017, the Company had a limited operating history and actual results only over that short period of time. 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The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. 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The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company&#8217;s Common Stock. 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The offering expired on June 30, 2018. 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The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of September 30, 2017, the Company had a limited operating history and actual results only over that short period of time. 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The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. 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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2017
Aug. 27, 2018
Document and Entity Information    
Entity Registrant Name Desert Hawk Gold Corp.  
Entity Central Index Key 0001168081  
Trading Symbol DHGC  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q3  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   20,581,603
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Balance Sheets - USD ($)
Sep. 30, 2017
Dec. 31, 2016
CURRENT ASSETS    
Cash $ 35,369 $ 657,944
Inventories (Note 4) 500,000 142,921
Prepaid expenses and other current assets 137,813 132,747
Total Current Assets 673,182 933,612
INVENTORIES, non-current (Note 4) 2,748,474 2,951,011
PROPERTY AND EQUIPMENT, net (Note 5) 3,730,190 4,039,887
MINERAL PROPERTIES AND INTERESTS, net (Note 6) 1,114,675 1,096,482
RECLAMATION BONDS (Note 6) 752,923 752,754
TOTAL ASSETS 9,019,444 9,773,746
CURRENT LIABILITIES    
Accounts payable and accrued expenses 642,531 744,943
Accrued liabilities-officer and other wages (Note 12 and 13) 646,577 495,808
Interest payable - related parties (Notes 7 and 8) 280,770 192,842
Interest payable - related party (Note 10) 8,947,028 7,239,610
Convertible debt - related parties (Note 7) 1,028,000 850,000
Obligation under capital lease - related party (Note 8) 84,110 120,461
Short term note payable - related parties 34,500
Notes payable - equipment, current portion (Note 9) 557,010 813,818
Notes payable - related parties (Note 10) 15,554,552 14,610,492
Total Current Liabilities 27,740,578 25,102,474
LONG-TERM LIABILITIES    
Asset retirement obligation (Note 11) 1,028,493 974,109
Obligation under capital lease - related party (Note 8) 51,714
Notes payable - equipment (Note 9) 58,734 453,276
Total Long-Term Liabilities 1,087,227 1,479,099
TOTAL LIABILITIES 28,827,805 26,581,573
COMMITMENTS AND CONTINGENCIES (Notes 6, 11, 12 and 14)
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized
Common stock, $0.001 par value, 100,000,000 shares authorized; 13,656,603 and 13,656,603 shares issued and outstanding 13,528 13,528
Additional paid-in capital 9,131,718 9,131,718
Accumulated deficit (28,955,189) (25,954,655)
Total Stockholders' (Deficit) (19,808,361) (16,807,827)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) 9,019,444 9,773,746
Series A Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized 958 958
Series A-1 Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized
Series A-2 Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized 180 180
Series B Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized $ 444 $ 444
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Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2017
Dec. 31, 2016
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 13,656,603 13,656,603
Common stock, shares outstanding 13,656,603 13,656,603
Series A Preferred Stock    
Preferred stock, shares issued 958,033 958,033
Preferred stock, shares outstanding 958,033 958,033
Series A-1 Preferred Stock    
Preferred stock, shares issued
Preferred stock, shares outstanding
Series A-2 Preferred Stock    
Preferred stock, shares issued 180,000 180,000
Preferred stock, shares outstanding 180,000 180,000
Series B Preferred Stock    
Preferred stock, shares issued 444,530 444,530
Preferred stock, shares outstanding 444,530 444,530
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Statements of Operations (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
REVENUE:        
Concentrate sales $ 80,485 $ 245,873 $ 162,763 $ 1,041,006
EXPENSES:        
General project costs 74,938 433,585 502,435 1,215,703
Exploration expense 8,960 0 18,640
Consulting 1,498 3,877 36,289 15,939
Officers and directors fees 58,000 45,000 185,537 135,000
Legal and professional 14,952 2,158 55,009 47,666
General and administrative 49,215 71,905 192,827 255,185
Abandonment of mineral property 137,766 137,766
Loss on exchange of equipment 51,222
Depreciation and amortization 110,954 126,016 322,182 432,005
Total Expenses 309,557 829,267 1,294,279 2,309,126
OPERATING LOSS (229,072) (583,394) (1,131,516) (1,268,120)
OTHER INCOME (EXPENSE)        
Interest and other income 12 60 36 1,055
Interest and financing expense (16,558) (34,528) (52,273) (140,280)
Interest expense - related party (621,440) (468,589) (1,816,781) (1,485,962)
Total Other Income (Expense) (637,986) (503,057) (1,869,018) (1,625,187)
LOSS BEFORE INCOME TAXES (867,058) (1,086,451) (3,000,534) (2,893,307)
INCOME TAXES
NET LOSS $ (867,058) $ (1,086,451) $ (3,000,534) $ (2,893,307)
BASIC AND DILUTED NET LOSS PER SHARE $ (0.06) $ (0.08) $ (0.22) $ (0.22)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED 13,656,603 13,356,603 13,656,603 13,356,603
XML 17 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,000,534) $ (2,893,307)
Adjustments to reconcile net loss to net cash used by operating activities:    
Depreciation and amortization 322,182 432,004
Loss on exchange of equipment 51,222
Accretion of asset retirement obligation 54,384 54,384
Abandonment of mineral property 137,766
Changes in operating assets and liabilities:    
Inventories (154,542) (599,031)
Prepaid expenses and other current assets (5,066) (122,146)
Accounts payable and accrued expenses (102,412) 234,879
Accrued liabilities - officer wages 150,769 132,692
Interest payable - related parties 87,928 67,500
Interest payable - related party 1,707,418 1,485,962
Net cash used by operating activities (939,873) (1,018,075)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to property and equipment (30,678) (17,644)
Refund of reclamation bonds 674,000
Increase in reclamation bonds (169) (1,014)
Net cash provided (used) by investing activities (30,847) 655,342
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from (payment on) short term note payable (34,500) 50,000
Proceeds from note payable - related party 944,060 1,620,000
Proceeds from convertible debt - related parties 178,000
Payment on note payable - related party (900,000)
Payment of obligation under capital lease - related party (88,065) (6,680)
Payment of note payable - equipment (651,350) (510,619)
Net cash provided by financing activities 348,145 252,701
NET (DECREASE) IN CASH (622,575) (110,032)
CASH, BEGINNING OF PERIOD 657,944 132,509
CASH, END OF PERIOD 35,369 22,477
NON-CASH FINANCING AND INVESTING ACTIVITIES:    
Equipment acquired with note payable - equipment 28,992
Equipment acquired under capital lease 185,618
Accounts payable satisfied through exchange of equipment $ 36,000
XML 18 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization and Description of Business
9 Months Ended
Sep. 30, 2017
Organization and Description of Business [Abstract]  
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. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result, the Company has no subsidiaries.

 

The Company never successfully generated any revenue and eventually abandoned the mining business, remaining dormant until it recommenced its mining activities on May 1, 2009.

 

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

 

Production commenced and revenues of over $6,000,000 from sales of gold concentrate have been received through the period ending September 30, 2018. Ongoing undercapitalization has continued to hamper the Company’s ability to operate. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds (DMRJ and PPCO) and finalized an agreement which closed on March 8, 2018. See Footnote 14. The Company has been temporarily shut down due to this development since third quarter of 2017, and is seeking further capitalization to be able to resume production in 2018.

XML 19 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2017
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited interim balance sheets and 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 September 30, 2017, and the results of its operations and its cash flows for the nine months ended September 30, 2017 and 2016. The operating and financial results for the Company for the nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

 

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 financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on June 29, 2018.

 

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

Inventories

 

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

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of September 30, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

 

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At September 30, 2017 and 2016, common stock equivalents outstanding are as follows:

 

    September 30,
2017
    September 30,
2016
 
             
Convertible debt     3,036,498       1,092,850  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     50,247,500       48,303,852  

 

The convertible debt conversion shares include 1,815,080 and 1,092,850 shares for the periods ended June 30, 2017 and June 30, 2016, respectively, for conversion of the two notes dated November 18, 2009, along with the interest on these notes and for conversion of the two $125,000 notes dated October 2016 and the interest thereon.. On February 28, 2018, the terms of these notes were changed and the conversion feature was eliminated for the 2009 notes.

 

However, the diluted earnings (loss) 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 has an accumulated deficit and negative working capital through September 30, 2017, 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. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these 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.

XML 20 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Capital Stock
9 Months Ended
Sep. 30, 2017
Capital Stock [Abstract]  
CAPITAL STOCK

NOTE 3 - CAPITAL STOCK

 

Common Stock

 

2017 Activity

 

No shares of common stock were issued during the first nine months of 2017.

 

2016 Activity

 

No shares of common stock were issued during the first nine months of 2016.

 

Preferred Stock

 

2017 Activity

 

No shares of preferred stock were issued during the first nine months of 2017. See Note 14 – Subsequent Events, regarding the return of DMRJ Group’s equity shares as part of a reorganization with court appointed trustees.

 

2016 Activity

 

No shares of preferred stock were issued during the first nine months of 2016.

XML 21 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2017
Inventories [Abstract]  
INVENTORIES

NOTE 4 – INVENTORIES

 

The following table provides the components of inventories:

 

    September 30, 
2017
    December 31, 
2016
 
Ore on leach pad   $ 3,248,474     $ 3,051,766  
Carbon columns in process     -0-       31,214  
Dore finished goods     -0-       10,952  
Total     3,248,474       3,093,932  
                 
Less: current portion     (500,000 )     (142,921 )
                 
Non-current inventories   $ 2,748,474     $ 2,951,011  

 

Inventories at September 30, 2017 are split between current and non-current based on estimated expected sales for the year ending September 30. 2018. Inventories are valued at the lower of cost or net realizable value which at September 30, 2017 is cost.

XML 22 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment
9 Months Ended
Sep. 30, 2017
Property and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 - PROPERTY AND EQUIPMENT

 

The following is a summary of property, equipment, and accumulated depreciation at September 30, 2017 and December 31, 2016:

 

    September 30,     December 31,  
    2017     2016  
Equipment   $ 3,077,482     $ 3,046,803  
Furniture and fixtures, temporary housing     6,981       6,981  
Electronic and computerized equipment     52,874       52,874  
Vehicles     67,115       67,115  
      3,204,452       3,173,773  
Less accumulated depreciation     (1,484,483 )     (1,144,108 )
      1,719,969       2,029,665  
                 
Kiewit property facilities     2,497,435       2,497,436  
Less accumulated amortization     (487,214 )     (487,214 )
      2,010,221       2,010,222  
                 
Total   $ 3,730,190     $ 4,039,887  

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. See Note 9.

XML 23 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Interests; Reclamation Bonds
9 Months Ended
Sep. 30, 2017
Mineral Properties and Interests; Reclamation Bonds [Abstract]  
MINERAL PROPERTIES AND INTERESTS; RECLAMATION BONDS

NOTE 6 – MINERAL PROPERTIES AND INTERESTS; RECLAMATION BONDS

 

Mineral properties and interests as of September 30, 2017 and December 31, 2016 are as follows:

 

    September 30, 
2017
    December 31, 
2016
 
Initial lease fee                
Kiewit, Cactus Mill and all other sites   $ 600,000     $ 600,000  
                 
Asset retirement obligation                
Kiewit Site     789,026       789,026  
Kiewit Exploration     10,780       10,780  
Cactus Mill     16,133       16,133  
Total     815,939       815,939  
Accumulated amortization     (301,264 )     (319,457 )
      514,675       496,482  
                 
Total   $ 1,114,675     $ 1,096,482  

 

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

 

On January 6, 2014, the Company obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  The bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.   Funds of $92,705 were received in April 2014, by the Company, for these refunded reclamation bonds.

 

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond for the same amount. A condition of the surety bond was the deposit of 50% of the bond amount into an escrow account with the bonding company. An escrow account was established with the bonding company and $674,000 (50% of the original cash bond) was deposited by the Company. The surety bond carries an annual bonding fee of $40,400. Total reclamation bonds posted are $752,923 and $752,754 at September 30, 2017 and December 31, 2016, respectively.  

 

On September 12, 2016, the Yellow Hammer mineral property was returned to the lessor, Moeller Family Trust, and the Company recognized a loss on abandonment in the amount of $175,000 less the accumulated amortization of $37,234, for a net loss of $137,766.

XML 24 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Debt - Related Parties
9 Months Ended
Sep. 30, 2017
Convertible Debt - Related Parties [Abstract]  
CONVERTIBLE DEBT - RELATED PARTIES

NOTE 7 – CONVERTIBLE DEBT – RELATED PARTIES

 

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders, for a total of $600,000. The notes bore interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes are convertible at a rate of $0.70 per share. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

 

The Company failed to repay the loan in full on the November 30, 2012, 2013, 2014, 2015 and 2016 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. In 2014, 2015 and 2016, the stock was valued at an estimated $0.04 (total $12,000) and was accounted for as financing expense. As part of this agreement, the due date of the notes was extended each year and has now been extended to November 30, 2018. Interest was paid with shares of common stock through November 30, 2014 and was to be paid in cash thereafter. Interest has not been paid since November 2014 and accrued interest payable on these notes at September 30, 2017 and December 31, 2016 is $255,000 and $187,500 respectively. Per the terms of these notes, interest is not convertible to common stock.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $0.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Note), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and quarterly thereafter. Accrued interest payable on these notes at September 30, 2017 and December 31, 2016 was $24,042 and $5,342, respectively. Interest on these notes is convertible to common stock.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. At September 30, 2017 a total of $178,000 of these funds had been advanced. The balance of the $500,000 was advanced over the next several months with the final advance dated February 9, 2018. Accrued interest payable on these notes at September 30, 2017 and December 31, 2016 is $1,730 and $0, respectively. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On November 15, 2016, a short-term loan in the amount of $25,000 was obtained from West C Street, one of the Company’s convertible debt holders. Funds were used for operating capital. This amount was repaid to West C Street on January 18, 2017 along with accrued interest of $438.

XML 25 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party
9 Months Ended
Sep. 30, 2017
Obligation Under Capital Lease - Related Party [Abstract]  
OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

NOTE 8 – OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

 

A capital lease was entered into on June 20, 2016 with RMH Overhead, LLC for the purchase of mining and crushing equipment. RMH Overhead, LLC is an entity owned by the Company’s President, Rick Havenstrite. For the periods ended September 30, 2017 and December 31, 2016, equipment includes assets under capital lease amounting to $185,618 and $185,618, respectively. The lease is being amortized over the estimated useful life of the equipment. Accumulated amortization at September 30, 2017 and December 31, 2016 was $33,147 and $13,258, respectively. At September 30, 2017, the estimated future minimum lease payments under the capital lease were as follows:

 

Year ending September 30, 2018   $ 90,000  
         
Total     90,000  
Less: Implied interest     (5,890 )
Net present value     84,110  
Less: Capital lease obligation-current portion     (84,110 )
Long-term capital lease obligation   $ -0-
XML 26 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment
9 Months Ended
Sep. 30, 2017
Notes Payable - Equipment [Abstract]  
NOTES PAYABLE - EQUIPMENT

NOTE 9 – NOTES PAYABLE – EQUIPMENT

 

The following is a summary of the equipment notes payable:

 

    September 30, 
2017
    December 31, 2016  
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%.   $ 53,546     $ 73,203  
                 
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.     -0-       9,668  
 Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%. The equipment has since been returned to CAT. See note below.     369,762       881,894  
                 
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.     182,919       282,675  
 Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.     9,517       19,654  
      615,744       1,267,094  
Current portion     (557,010 )     (813,818 )
Long term portion   $ 58,734     $ 453,276  
                 
Principal payments are as follows for the twelve months ended September 30,                
2018   $ 557,010          
2019     58,734          
Total   $ 615,744          

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $372,129, for a net carrying value of $1,128,759. The note payable due to CAT at the time of disposition was $960,585. The CAT contract did not legally release the Company from liability in the case of a repossession thus an extinguishment has not occurred and the debt and assets were not derecognized.

 

Note Payable – CAT Equipment

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for a net carrying value of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of August 3, 2018, seven of those payments have been made. The loss on impairment of equipment in the amount of $147,214 was recognized in the 4th quarter of 2016. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

XML 27 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party
9 Months Ended
Sep. 30, 2017
Note Payable - Related Party [Abstract]  
NOTE PAYABLE - RELATED PARTY

NOTE 10 – NOTE PAYABLE - RELATED PARTY

 

DMRJ Group beneficially owned approximately 75% of the Company (on a fully-diluted basis) with Series A, A-2 and B preferred shares convertible to 47,211,002 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ Group. The Agreement has been modified numerous times and at September 30, 2017 operated under the Fourteenth Amendment to the Investment Agreement dated December 22, 2016. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.

 

The total due to DMRJ Group at September 30, 2017 and December 31, 2016 is as follows:

 

    September 30,     December 31,  
    2017     2016  
Principal, due within one year   $ 15,554,552     $ 14,610,492  
Interest payable, current     8,947,028       7,239,610  
    $ 24,501,580     $ 21,850,102  

 

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

 

Incurring any indebtedness except in limited circumstances;
Creating any significant liens on any of our properties or assets;
Enter into any sale and lease-back transaction involving any of our properties;
Make any investments in or loans or advances to other parties;
Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
Declare or pay any dividends, except for dividends to DMRJ Group;
Engage in any business transactions with affiliates;
Make capital expenditures except as permitted in the agreement pertaining to our current mining business;
Create any lease obligations;
Amend, supplement or modify any existing indebtedness;
Enter into any swap, forward, future or derivative transaction;
Make any change in our accounting policies or reporting practices;
Form additional subsidiaries; or
Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

 

At September 30, 2017, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

2017 Activity

 

At September 30, 2017, DMRJ continued to operate through the direction of its court appointed trustees (see 2016 Activity below). Funds in the amount of $944,060 were drawn from the trustees during the nine months ended September 30, 2017 to help fund ongoing expenses. See Note 14.

 

2016 Activity

 

At December 31, 2016, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended. See Note 14.

 

Several term loan advances were received from DMRJ Group by the Company between February 9, 2016 and December 29, 2016 totaling $2,470,000. A loan payment of $900,000 was made to DMRJ on July 8, 2016. The advances bear interest at 15% per annum and became due on October 31, 2016 with the remainder of the note due to DMRJ Group. These funds were used for working capital and equipment debt repayment.

 

A Fourteenth Amendment to the Investment Agreement was entered into on December 22, 2016 which allowed for additional funding in the amount of up to $600,000 from DMRJ Group and its affiliated fund managers. This $600,000 was drawn on December 29, 2016 which brought the total funds drawn from DMRJ Group and its affiliates for 2016 to $2,470,000.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and the management of the DMRJ Group. DMRJ Group would effectively own 75% of stock of the Company (on a fully diluted basis). See Note 14 – Subsequent Events.

XML 28 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Asset Retirement Obligation
9 Months Ended
Sep. 30, 2017
Asset Retirement Obligation Disclosure [Abstract]  
ASSET RETIREMENT OBLIGATION

NOTE 11 –ASSET RETIREMENT OBLIGATION

 

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

 

Changes in the asset retirement obligation for the periods ended September 30, 2017 and December 31, 2016 are as follows:

 

    Nine months ended September 30,
2017
    Year ended December 31, 
2016
 
Asset retirement obligation, beginning of period   $ 974,109     $ 901,597  
                 
Accretion expense     54,384       72,512  
Asset retirement obligation, end of period   $ 1,028,493     $ 974,109  
XML 29 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 12 – RELATED PARTY TRANSACTIONS

 

In addition to transactions disclosed in Notes 7, 8 and 10, the Company had the following related party transactions.

 

The Company recognized rent expense for rental of office space of $9,000 for the nine months ended September 30, 2017 and 2016, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $9,000 during the nine months ended March 31, 2017 and 2016, respectively, in addition to $4,000 in rents from prior years, leaving a total of $13,750 and $17,750 remaining in accounts payable at September 30, 2017 and December 31, 2016, respectively, which represents amounts due from prior years.

 

In addition, a short-term loan totaling $9,500, also for working capital, was obtained from our President, Rick Havenstrite, with draws on multiple dates in November and December 2016. This loan was repaid in full on January 3, 2017 with no interest paid.

 

As of September 30, 2017 and December 31, 2016, accrued compensation of $646,577 and $486,577 was due to directors and officers. Of the amounts accrued at September 30, 2017 and December 31, 2016, accrued compensation of $461,692 and $372,692 is due to Rick Havenstrite and $155,885 and $113,885 is due to Marianne Havenstrite, Treasurer and Principal Financial Officer. In addition, $29,000 and $-0- was due to other directors at September 30, 2017 and December 31, 2016, respectively.

 

During the nine months ended September 30, 2017 and 2016, the Company recognized general project cost expense of $0 and $6,667, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. At both September 30, 2017 and December 31, 2016, $39,367 remains unpaid to Mr. Havenstrite. These amounts are included in accounts payable at those dates.

XML 30 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Mineral Property Payments

 

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three-year period, it will be required to make annual penalty payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property penalty payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun. Royalty expense of $9,785 and $61,631 was recognized during the nine months ended September 30, 2017 and 2016, respectively, with these amounts fully paid at September 30, 2017.

 

A letter of default on the Clifton Shears properties dated September 19, 2016 was received by the Company with a 30-day period for curing the default. On October 17, 2016, past due royalties and the $50,000 penalty payments for each of 2015 and 2016 were paid to Clifton Mining, who then acknowledged the cure of default.

 

Mining severance tax in the amount of $0, based on production, was accrued at September 30, 2017.

 

Personal property tax due to Tooele County, Utah in the amount of $160,131 including interest and penalties, was accrued and past due at September 30, 2017. This amount due has not yet been paid.

 

Employment Agreements

 

In September 2010, the Company entered into an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $120,000 plus certain performance compensation upon fulfillment of established goals. The agreement allows the Board to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

XML 31 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS

 

Note Payable – Wheeler Machinery

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract in the amount of $273,067 was finalized and the first of 7 equal monthly payments of $39,009 were to be made.  As of August 27, 2018, two of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

Convertible Debt – Related Parties

 

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. In addition, as per the terms of the notes, 300,000 penalty shares for both 2017 and 2016 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2017 and 2016.

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On July 3, 2018, a short-term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.

 

Note Payable – Related Party

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, were received and the agreement was finalized on March 8, 2018.

 

Revenue

 

On July 6, 2018, the Company negotiated an arrangement for a one-time sale of gold concentrate to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold, and silver byproduct.

 

Stock Offering

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company’s Common Stock and various loan concessions on existing convertible debt.

 

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 2018. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

 

Stock Plan

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. Shares issued under this plan will fully vest upon issuance. The aggregate Fair Market Value of the Common stock becoming exercisable for the first time during any calendar year shall not exceed $100,000 per optionee.

 

On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which expire February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.
XML 32 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2017
Summary of Significant Accounting Policies [Abstract]  
New Accounting Pronouncements

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Inventories

Inventories

 

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

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of September 30, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

Revenue Recognition

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

Earnings (loss) Per Share

Earnings (Loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At September 30, 2017 and 2016, common stock equivalents outstanding are as follows:

 

    September 30,
2017
    September 30,
2016
 
             
Convertible debt     3,036,498       1,092,850  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     50,247,500       48,303,852  

 

The convertible debt conversion shares include 1,815,080 and 1,092,850 shares for the periods ended June 30, 2017 and June 30, 2016, respectively, for conversion of the two notes dated November 18, 2009, along with the interest on these notes and for conversion of the two $125,000 notes dated October 2016 and the interest thereon.. On February 28, 2018, the terms of these notes were changed and the conversion feature was eliminated for the 2009 notes.

 

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

Going Concern

Going Concern

 

As shown in the accompanying financial statements, the Company has an accumulated deficit and negative working capital through September 30, 2017, 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. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these 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.

XML 33 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2017
Summary of Significant Accounting Policies [Abstract]  
Schedule of common stock equivalents outstanding
    September 30,
2017
    September 30,
2016
 
             
Convertible debt     3,036,498       1,092,850  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     50,247,500       48,303,852
XML 34 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Tables)
9 Months Ended
Sep. 30, 2017
Inventories [Abstract]  
Schedule of components of inventories
    September 30, 
2017
    December 31, 
2016
 
Ore on leach pad   $ 3,248,474     $ 3,051,766  
Carbon columns in process     -0-       31,214  
Dore finished goods     -0-       10,952  
Total     3,248,474       3,093,932  
                 
Less: current portion     (500,000 )     (142,921 )
                 
Non-current inventories   $ 2,748,474     $ 2,951,011
XML 35 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
9 Months Ended
Sep. 30, 2017
Property and Equipment [Abstract]  
Summary of property, equipment, and accumulated depreciation
    September 30,     December 31,  
    2017     2016  
Equipment   $ 3,077,482     $ 3,046,803  
Furniture and fixtures, temporary housing     6,981       6,981  
Electronic and computerized equipment     52,874       52,874  
Vehicles     67,115       67,115  
      3,204,452       3,173,773  
Less accumulated depreciation     (1,484,483 )     (1,144,108 )
      1,719,969       2,029,665  
                 
Kiewit property facilities     2,497,435       2,497,436  
Less accumulated amortization     (487,214 )     (487,214 )
      2,010,221       2,010,222  
                 
Total   $ 3,730,190     $ 4,039,887  
XML 36 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Interests; Reclamation Bonds (Tables)
9 Months Ended
Sep. 30, 2017
Mineral Properties and Interests; Reclamation Bonds [Abstract]  
Schedule of mineral properties and interests
    September 30, 
2017
    December 31, 
2016
 
Initial lease fee                
Kiewit, Cactus Mill and all other sites   $ 600,000     $ 600,000  
                 
Asset retirement obligation                
Kiewit Site     789,026       789,026  
Kiewit Exploration     10,780       10,780  
Cactus Mill     16,133       16,133  
Total     815,939       815,939  
Accumulated amortization     (301,264 )     (319,457 )
      514,675       496,482  
                 
Total   $ 1,114,675     $ 1,096,482
XML 37 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Tables)
9 Months Ended
Sep. 30, 2017
Obligation Under Capital Lease - Related Party [Abstract]  
Schedule of estimated future minimum lease payments under the capital lease
Year ending September 30, 2018   $ 90,000  
         
Total     90,000  
Less: Implied interest     (5,890 )
Net present value     84,110  
Less: Capital lease obligation-current portion     (84,110 )
Long-term capital lease obligation   $ -0-
XML 38 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Tables)
9 Months Ended
Sep. 30, 2017
Notes Payable - Equipment [Abstract]  
Schedule of the equipment notes payable
    September 30, 
2017
    December 31, 2016  
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%.   $ 53,546     $ 73,203  
                 
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.     -0-       9,668  
 Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%. The equipment has since been returned to CAT. See note below.     369,762       881,894  
                 
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.     182,919       282,675  
 Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.     9,517       19,654  
      615,744       1,267,094  
Current portion     (557,010 )     (813,818 )
Long term portion   $ 58,734     $ 453,276  
Schedule of principal payments
Principal payments are as follows for the twelve months ended September 30,                
2018   $ 557,010          
2019     58,734          
Total   $ 615,744          
XML 39 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Tables)
9 Months Ended
Sep. 30, 2017
Note Payable - Related Party [Abstract]  
Schedule of due to DMRJ
    September 30,     December 31,  
    2017     2016  
Principal, due within one year   $ 15,554,552     $ 14,610,492  
Interest payable, current     8,947,028       7,239,610  
    $ 24,501,580     $ 21,850,102
XML 40 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Asset Retirement Obligation (Tables)
9 Months Ended
Sep. 30, 2017
Asset Retirement Obligation Disclosure [Abstract]  
Schedule of asset retirement obligations
    Nine months ended September 30,
2017
    Year ended December 31, 
2016
 
Asset retirement obligation, beginning of period   $ 974,109     $ 901,597  
                 
Accretion expense     54,384       72,512  
Asset retirement obligation, end of period   $ 1,028,493     $ 974,109  
XML 41 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization and Description of Business (Details)
9 Months Ended
Sep. 30, 2017
Organization and Description of Business (Textual)  
Revenues from sales of gold concentrate, description
Production commenced and revenues of over $6,000,000 from sales of gold concentrate have been received through the period ending September 30, 2018. Ongoing undercapitalization has continued to hamper the Company’s ability to operate. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds (DMRJ and PPCO) and finalized an agreement which closed on March 8, 2018.
XML 42 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details) - shares
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]    
Convertible debt 3,036,498 1,092,850
Convertible preferred stock 47,211,002 47,211,002
Total 50,247,500 48,303,852
XML 43 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details Textual) - USD ($)
1 Months Ended 9 Months Ended
Oct. 31, 2016
Sep. 30, 2017
Sep. 30, 2016
Summary of Significant Accounting Policies (Textual)      
Convertible debt conversion shares   1,815,080 1,092,850
Conversion of notes amount $ 125,000    
XML 44 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Capital Stock (Details) - shares
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
Capital Stock [Line Items]      
Common stock, shares issued 13,656,603 13,656,603  
2016 Activity [Member]      
Capital Stock [Line Items]      
Common stock, shares issued    
Preferred stock, shares issued    
2017 Activity [Member]      
Capital Stock [Line Items]      
Common stock, shares issued    
Preferred stock, shares issued    
XML 45 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Inventories [Abstract]    
Ore on leach pad $ 3,248,474 $ 3,051,766
Carbon columns in process 0 31,214
Dore finished goods 0 10,952
Total 3,248,474 3,093,932
Less: current portion (500,000) (142,921)
Non-current inventories $ 2,748,474 $ 2,951,011
XML 46 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Total $ 3,730,190 $ 4,039,887
Property, Plant and Equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 3,204,452 3,173,773
Less accumulated depreciation (1,484,483) (1,144,108)
Property and equipment, Total 1,719,969 2,029,665
Property, Plant and Equipment [Member] | Equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 3,077,482 3,046,803
Property, Plant and Equipment [Member] | Furniture and fixtures, temporary housing [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 6,981 6,981
Property, Plant and Equipment [Member] | Electronic and computerized equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 52,874 52,874
Property, Plant and Equipment [Member] | Vehicles [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 67,115 67,115
Finite-Lived Intangible Assets [Member] | Kiewit property facilities [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 2,497,435 2,497,436
Less accumulated depreciation (487,214) (487,214)
Property and equipment, Total $ 2,010,221 $ 2,010,222
XML 47 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Interests; Reclamation Bonds (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Initial lease fee    
Kiewit, Cactus Mill and all other sites $ 600,000 $ 600,000
Asset retirement obligation    
Kiewit Site 789,026 789,026
Kiewit Exploration 10,780 10,780
Cactus Mill 16,133 16,133
Total 815,939 815,939
Accumulated amortization (301,264) (319,457)
Mineral properties after accumulated depletion 514,675 496,482
Total $ 1,114,675 $ 1,096,482
XML 48 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Interests; Reclamation Bonds (Details Textual) - USD ($)
9 Months Ended
Sep. 12, 2016
Jul. 07, 2016
Sep. 30, 2017
Dec. 31, 2016
Apr. 30, 2014
Feb. 20, 2014
Mineral Properties and Interests; Reclamation Bonds (Textual)            
Claims fees (per claim)     $ 155      
Kiewit reclamation bond, amount           $ 1,348,000
Refunded reclamation bonds         $ 92,705  
Total reclamation bonds posted amount     752,923 $ 752,754    
Accumulated amortization     $ 301,264 $ 319,457    
Bond deposit   $ 674,000        
Annual bonding fee   $ 40,400        
Percentage of deposit bond into escrow account   50.00%        
Yellow Hammer mineral property [Member]            
Mineral Properties and Interests; Reclamation Bonds (Textual)            
Recognized loss on abandonment amount $ 175,000          
Accumulated amortization 37,234          
Net loss $ 137,766          
XML 49 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Debt - Related Parties (Details) - USD ($)
9 Months Ended 12 Months Ended
Oct. 14, 2016
Nov. 18, 2009
Sep. 30, 2017
Dec. 31, 2016
Aug. 07, 2017
Jan. 18, 2017
Nov. 30, 2016
Nov. 15, 2016
Dec. 31, 2015
Nov. 30, 2015
Dec. 31, 2014
Nov. 30, 2014
Nov. 30, 2013
Nov. 30, 2012
Convertible Debt - Related parties (Textual)                            
Convertible debt   $ 600,000 $ 1,028,000 $ 850,000                    
Interest payable   15.00%                        
Periodic payment of interest   $ 7,500                        
Conversion price (per shares)   $ 0.70                        
Additional shares of common stock issued to debt holders             300,000     300,000   300,000 300,000 300,000
Accrued interest payable     255,000 187,500                    
Short-term loan     $ 34,500                    
Share price per share       $ 0.04         $ 0.04   $ 0.04      
Loan maturity date       Nov. 30, 2018                    
Financing expense       $ 12,000                    
Convertible Debt [Member]                            
Convertible Debt - Related parties (Textual)                            
Convertible debt $ 125,000                          
Interest payable 10.00%                          
Conversion price (per shares) $ 0.25                          
Accrued interest payable     24,042 5,342                    
Common stock and principal and interest were initially due date Sep. 30, 2018                          
West C Street [Member]                            
Convertible Debt - Related parties (Textual)                            
Accrued interest payable           $ 438                
Short-term loan               $ 25,000            
DMRJ Group Debt [Member]                            
Convertible Debt - Related parties (Textual)                            
Convertible debt     178,000   $ 500,000                  
Accrued interest payable     $ 1,730 $ 0                    
Convertible debt, description     The balance of the $500,000 was advanced over the next several months with the final advance dated February 9, 2018.                      
XML 50 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Obligation Under Capital Lease - Related Party [Abstract]    
Year ending September 30, 2018 $ 90,000  
Total 90,000  
Less: Implied interest (5,890)  
Net present value 84,110  
Less: Capital lease obligation-current portion (84,110) $ (120,461)
Long-term capital lease obligation $ 51,714
XML 51 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Details Textual) - RMH Overhead, LLC [Member] - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Obligation Under Capital Lease - Related Party (Textual)    
Equipment includes assets under capital lease amount $ 185,618 $ 185,618
Accumulated amortization $ 33,147 $ 13,258
XML 52 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Note payable $ 615,744 $ 1,267,094
Current portion (557,010) (813,818)
Long term portion 58,734 453,276
Komatsu Financial, collateralized by a Komatsu Telehandler lift [Member]    
Debt Instrument [Line Items]    
Note payable 53,546 73,203
Komatsu Financial, uncollateralized [Member]    
Debt Instrument [Line Items]    
Note payable 0 9,668
CAT Financial, Collateralized by Five Pieces of used Mining Equipment [Member]    
Debt Instrument [Line Items]    
Note payable 369,762 881,894
Komatsu Financial, Collateralized by a Komatsu D275 Dozer [Member]    
Debt Instrument [Line Items]    
Note payable 182,919 282,675
Star Capital, LLC, Collateralized by a 2009 Multiquip Generator [Member]    
Debt Instrument [Line Items]    
Note payable $ 9,517 $ 19,654
XML 53 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details 1) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Schedule of principal payments    
2018 $ 557,010  
2019 58,734  
Total $ 615,744 $ 1,267,094
XML 54 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details Textual)
1 Months Ended 3 Months Ended 9 Months Ended
Jul. 31, 2017
Dec. 31, 2016
USD ($)
Sep. 30, 2017
USD ($)
Installments
Nov. 30, 2016
USD ($)
Nov. 18, 2009
Notes Payable - Equipment (Textual)          
Interest rate         15.00%
Net carrying value   $ 4,039,887 $ 3,730,190    
Mining equipment financed, description A new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017        
Komatsu Financial, collateralized by a Komatsu Telehandler lift [Member]          
Notes Payable - Equipment (Textual)          
Number of installment (in monthly) | Installments     48    
Note payable amount (remaining installments)     $ 2,441    
Interest rate     4.99%    
Komatsu Financial, uncollateralized [Member]          
Notes Payable - Equipment (Textual)          
Note payable amount (first installment)     $ 3,223    
Number of installment (in monthly) | Installments     12    
Interest rate     1.16%    
CAT Financial, Collateralized by Five Pieces of used Mining Equipment [Member]          
Notes Payable - Equipment (Textual)          
Number of installment (in monthly) | Installments     36    
Note payable amount (remaining installments)     $ 960,585    
Interest rate     4.68%    
Equipment original cost       $ 1,500,888  
Accumulated depreciation       372,129  
Net carrying value       1,128,759  
Komatsu Financial, Collateralized by a Komatsu D275 Dozer [Member]          
Notes Payable - Equipment (Textual)          
Note payable amount (first installment)     $ 21,000    
Number of installment (in monthly) | Installments     47    
Note payable amount (remaining installments)     $ 11,674    
Interest rate     2.99%    
Star Capital, LLC, Collateralized by a 2009 Multiquip Generator [Member]          
Notes Payable - Equipment (Textual)          
Note payable amount (first installment)     $ 1,412    
Number of installment (in monthly) | Installments     24    
Interest rate     11.40%    
Note payable - CAT equipment [Member]          
Notes Payable - Equipment (Textual)          
Equipment original cost       1,500,888  
Accumulated depreciation       339,487  
Net carrying value       1,161,402  
Note payable due to CAT       $ 960,585  
Loss on impairment of equipment   $ 147,214      
XML 55 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]    
Principal, due within one year $ 15,554,552 $ 14,610,492
Interest payable, current 8,947,028 7,239,610
Total $ 24,501,580 $ 21,850,102
XML 56 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Details Textual) - USD ($)
1 Months Ended 9 Months Ended 11 Months Ended 12 Months Ended
Dec. 29, 2016
Dec. 22, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 29, 2016
Dec. 31, 2016
Note Payable - Related Party (Textual)            
Proceeds from notes payable     $ 944,060 $ 1,620,000    
Notes payable due date           Nov. 30, 2018
DMRJ Group [Member]            
Note Payable - Related Party (Textual)            
Convertible shares of common stock     47,211,002      
Ownership percentage of stock on a fully-diluted basis     75.00%      
Additional funding amount     $ 944,060      
Total amount drawn $ 600,000          
Investment Agreement [Member]            
Note Payable - Related Party (Textual)            
Additional funding amount   $ 600,000        
Convertible Notes Payable [Member] | DMRJ Group [Member]            
Note Payable - Related Party (Textual)            
Percentage of interest rate         15.00%  
Total amount drawn         $ 2,470,000  
Notes payable due date         Oct. 31, 2016  
Loan payment         $ 900,000  
XML 57 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Asset Retirement Obligation (Details) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Asset Retirement Obligation Disclosure [Abstract]      
Asset retirement obligation, beginning of period $ 974,109 $ 901,597 $ 901,597
Accretion expense 54,384 $ 54,384 72,512
Asset retirement obligation, end of period $ 1,028,493   $ 974,109
XML 58 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Asset Retirement Obligation (Details Textual)
9 Months Ended
Sep. 30, 2017
Maximum [Member]  
Asset Retirement Obligation (Textual)  
Risk free interest rate 10.00%
Estimated useful lives of mine property 12 years
Minimum [Member]  
Asset Retirement Obligation (Textual)  
Risk free interest rate 8.00%
Estimated useful lives of mine property 5 years
XML 59 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Nov. 30, 2016
Related Party Transactions (Textual)        
Terms of the lease In addition to $4,000 in rents from prior years.      
Accrued compensation $ 646,577   $ 486,577  
Rick Havenstrite [Member]        
Related Party Transactions (Textual)        
Accounts payable 39,367   39,367  
Additional, short-term loan totaling     9,500 $ 9,500
Accrued compensation 461,692   372,692  
Other Directors [Member]        
Related Party Transactions (Textual)        
Accrued compensation 29,000   0  
RMH Overhead, LLC [Member]        
Related Party Transactions (Textual)        
Rent expense for rental of office space 9,000 $ 9,000    
Accounts payable 13,750   17,750  
Marianne Havenstrite [Member]        
Related Party Transactions (Textual)        
Accrued compensation 155,885   $ 113,885  
Stuart Havenstrite [Member]        
Related Party Transactions (Textual)        
Recognized general project cost expense $ 0 $ 6,667    
XML 60 R48.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2010
Dec. 31, 2009
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Commitments and Contingencies (Textual)            
Percentage of royalty payments   4.00%        
Royalty expense     $ 9,785 $ 61,631 $ 50,000 $ 50,000
Mining severance amount     0      
Base annual salary $ 120,000          
Interest and penalties     $ 160,131      
Moeller Family Trust [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Annual payments to trust amount   $ 50,000        
Percentage of royalty payments   6.00%        
Moeller Family Trust [Member] | Minimum [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Percentage of royalty payments   2.00%        
Moeller Family Trust [Member] | Maximum [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Percentage of royalty payments   15.00%        
XML 61 R49.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details) - USD ($)
1 Months Ended 12 Months Ended
Jul. 06, 2018
Mar. 08, 2018
Aug. 27, 2018
Jul. 03, 2018
Jun. 30, 2018
Jun. 06, 2018
Feb. 28, 2018
Feb. 23, 2018
Nov. 30, 2017
Nov. 30, 2016
Dec. 31, 2016
Sep. 30, 2017
Aug. 07, 2017
Subsequent Events (Textual)                          
Short term loan                     $ 34,500  
Expired date                     Nov. 30, 2018    
Convertible debt [Member]                          
Subsequent Events (Textual)                          
Additional aggregate convertible debt                         $ 500,000
Penalty shares issued to convertible debt                   300,000      
Subsequent Event [Member] | Convertible debt [Member]                          
Subsequent Events (Textual)                          
Penalty shares issued to convertible debt                 300,000        
Forecast [Member] | Stock Offering [Member]                          
Subsequent Events (Textual)                          
Convertible debt holders shares             2,250,000            
Convertible debt received             $ 312,500            
Sale of common stock per share               $ 0.40          
Sale of common stock shares raised               $ 1,600,000          
Expired date               Jun. 30, 2018          
Shares of stock issued offering         2,125,000                
Funds raised through offering stock         $ 850,000                
Forecast [Member] | 2018 Stock Incentive Plan [Member]                          
Subsequent Events (Textual)                          
Option authorized               2,400,000          
Aggregate fair market value of the common stock becoming exercisable               $ 100,000          
Grant of an aggregate options               2,400,000          
Exercisable per share               $ 0.40          
Expired date               Feb. 23, 2023          
Forecast [Member] | Revenue [Member]                          
Subsequent Events (Textual)                          
Proceeds received an advance $ 68,785                        
Percentage of revenue product 90.00%                        
Forecast [Member] | Convertible debt [Member]                          
Subsequent Events (Textual)                          
Convertible debt holders shares   4,500,000                      
Convertible promissory notes, description            
The terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.
           
Convertible debt received   $ 625,000                      
Note payable payments terms     Two of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company.                    
Short term loan       $ 100,000                  
Short term loan terms       A short-term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.                  
Forecast [Member] | Note payable - Wheeler Machinery [Member]                          
Subsequent Events (Textual)                          
Payment of first seven month rental equipment           $ 39,009              
Rental equipment to a purchase contract           $ 273,067              
Forecast [Member] | Rick Havenstrite [Member] | 2018 Stock Incentive Plan [Member]                          
Subsequent Events (Textual)                          
Grant of an aggregate options               1,000,000          
Forecast [Member] | Howard Crosby [Member] | 2018 Stock Incentive Plan [Member]                          
Subsequent Events (Textual)                          
Grant of an aggregate options               1,000,000          
Forecast [Member] | John Ryan [Member] | 2018 Stock Incentive Plan [Member]                          
Subsequent Events (Textual)                          
Grant of an aggregate options               200,000          
Forecast [Member] | Linde Havenstrite [Member] | 2018 Stock Incentive Plan [Member]                          
Subsequent Events (Textual)                          
Grant of an aggregate options               200,000          
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