10-Q 1 lkaiq1junfourteen.htm LKAI 10Q JUNE 30, 2014 lkaiq1junfourteen.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
____________________

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

For the quarterly period ended June 30, 2014

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

For the transition period from ____________ to____________

Commission File No. 000-17106

LKA GOLD INCORPORATED
(An Exploration Stage Company)
(Exact name of registrant as specified in its charter)
Delaware
91-1428250
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
3724 47th Street Ct. N.W.
Gig Harbor, Washington 98335
(Address of principal executive offices)
 
(253) 514-6661
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year,
if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer [  ]      Accelerated filer [  ]       Non-accelerated filer [  ]      Smaller reporting company [X]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Not applicable.
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  August 14, 2014,  15,515,152 shares of common stock.
 
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PART I

Item 1.  Financial Statements

The Financial Statements of LKA Gold Incorporated (an Exploration Stage Company), a Delaware corporation (the “Registrant,” the “Company” or “LKA”) required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.


 


 
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LKA GOLD INCORPORATED
Consolidated Balance Sheets
 
 

 
ASSETS
 
   
June 30, 2014
   
December 31, 2013
 
   
(Unaudited)
       
CURRENT ASSETS
           
     Cash
  $ 15,594     $ 8,740  
     Restricted cash
    -       42,907  
     Accounts receivable
    -       38,638  
          Total Current Assets
    15,594       90,285  
                 
FIXED ASSETS
               
     Land, equipment and mining claims
    807,085       807,085  
     Accumulated depreciation
    (310,805 )     (292,856 )
          Total Fixed Assets, Net of Accumulated Depreciation
    496,280       514,229  
                 
OTHER NON-CURRENT ASSETS
               
     Reclamation bonds
    123,597       123,597  
                 
          TOTAL ASSETS
  $ 635,471     $ 728,111  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
                 
CURRENT LIABILITIES
               
     Accounts payable
  $ 229,792     $ 272,579  
     Accounts payable – related party
    77,242       102,497  
     Note payable
    10,000       10,000  
     Accrued wages and advances payable to officer
    182,892       161,866  
          Total Current Liabilities
    499,926       546,942  
                 
NON-CURRENT LIABILITIES
               
     Asset retirement obligation
    129,580       127,310  
          Total Liabilities
    629,506       674,252  
                 
Commitments and Contingencies
               
                 
STOCKHOLDERS’ EQUITY
               
   Preferred stock; $0.001 par value, 50,000,000 shares authorized, 0 and 1,800 shares issued and outstanding, respectively
    -       2  
   Common stock, $0.001 par value, 50,000,000 shares authorized, 15,494,187 and 14,976,556 shares issued and 10,950,563 and 10,432,932 shares outstanding, respectively
    15,515       14,977  
Additional paid-in capital
    16,653,813       16,428,239  
   Treasury stock; 43,624 and 43,624 shares at cost, respectively
    (86,692 )     (86,692 )
   Accumulated deficit
    (16,576,671 )     (16,302,667 )
          Total Stockholders’ Equity
    5,965       53,859  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 635,471     $ 728,111  
                 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 


 
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LKA GOLD INCORPORATED
Consolidated Statements of Operations
(Unaudited)

 

 
   
For the Three Months Ended June 30,
   
For the Six Months Ended June 30,
 
   
2014
   
2013
   
2014
   
2013
 
REVENUES
                       
Sales – precious metals
  $ 257,047     $ 213,601     $ 441,083     $ 502,627  
                                 
EXPLORATION COSTS
    (176,642 )     (232,015 )     (325,273 )     (449,526 )
                                 
GROSS MARGIN
    80,405       (18,414 )     115,810       53,101  
                                 
OPERATING EXPENSES
                               
Professional and consulting
    26,243       21,917       226,786       72,480  
Officer salaries
    37,500       37,500       75,000       75,000  
General and administrative
    31,882       48,064       83,811       80,962  
     Total Operating Expenses
    95,625       107,481       385,597       228,442  
                                 
GROSS PROFIT
    (15,220 )     (125,895 )     (269,787 )     (175,341 )
                                 
OTHER INCOME (EXPENSE)
                               
Stock based expense for shares not subject to reverse split
    -       -       -       (2,756,000 )
Interest expense
    (2,317 )     (1,121 )     (4,219 )     (1,952 )
Interest income
    -       -       2       2  
     Total Other Income (Expense)
    (2,317 )     (1,121 )     (4,217 )     (2,757,950 )
                                 
NET LOSS
  $ (17,537 )   $ (127,016 )   $ (274,004 )   $ (2,933,291 )
                                 
BASIC NET LOSS PER SHARE
  $ (0.00 )   $ (0.01 )   $ (0.02 )   $ (0.02 )
                                 
BASIC WEIGHTED AVERAGE
                               
NUMBER OF SHARES OUTSTANDING
    15,449,187       14,816,033       15,346,810       14,813,956  
                                 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 


 
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LKA GOLD INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)

 

 
   
For the Six Months Ended June 30,
 
   
2014
   
2013
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (274,004 )   $ (2,933,291 )
Items to reconcile net loss to net cash provided (used) by operating activities:
               
     Accretion of asset retirement obligation
    2,270       2,112  
     Depreciation and amortization
    17,949       17,948  
     Common stock warrants issued  for services
    1,684       20,556  
     Common stock issued for services
    181,909       -  
     Common stock issued for expenses
    9,125       -  
     Stock based expense for shares not subject to reverse split
    -       2,756,000  
Changes in operating assets and liabilities
               
     Decrease in accounts receivable
    38,638       54,572  
     Increase in prepaid and other assets
    -       (3,336 )
     Decrease in accounts payable and accounts payable - related party
    (31,542 )     (6,410 )
     Increase in accrued expenses
    21,025       4,520  
                 
          Net Cash Used by Operating Activities
    (32,946 )     (87,329 )
   
CASH FLOWS FROM INVESTING ACTIVITIES
               
     Change in Restricted Cash
    42,907       -  
Net Cash Used by Investing Activities
    42,907       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
     Payment of preferred stock dividends
    (3,107 )     -  
Net Cash Used by Financing Activities
    (3,107 )     -  
                 
DECREASE IN  CASH
    6,854       (87,329 )
                 
CASH AT BEGINNING OF PERIOD
    8,740       87,329  
                 
CASH AT END OF PERIOD
  $ 15,594     $ -  
CASH PAID FOR:
               
     Interest
  $ 600     $ 600  
     Income Taxes
  $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
               
     Stock issued to settle related party accounts payable
  $ 36,500     $ -  
     Conversion of preferred shares to common shares
  $ 44     $ -  
     Common stock  issued for warrant settlement fee
  $ 6,080     $ -  
                 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 


 
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LKA GOLD INCORPORATED
Notes to the Consolidated Unaudited Financial Statements
June 30, 2014

NOTE 1 -        ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

LKA Gold Incorporated (Formerly LKA International, Inc.)  (“LKA” or the “Company”) is currently engaged in efforts to expand mine production and continues to seek additional investment opportunities.  LKA is an exploration stage company and has no proven reserves.  LKA generates revenues from the sale of gold bearing vein material.  As such, there can be no basis of reliance upon the continuing generation of revenue.  Exploration costs related to locating and evaluating mineral and ore deposits, as well as determining the economic mineability of such deposits, are expensed as incurred.  All costs related to mine exploration have been expensed to-date due to there being no proven and probable reserves. LKA’s costs of goods sold and gross profit are not comparable to those of revenue-generating gold mining companies in the production stage as LKA is not permitted to capitalize certain costs.

The accompanying unaudited condensed consolidated financial statements have been prepared by LKA pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim condensed consolidated financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with LKA’s most recent audited financial statements.  Operating results for the six months ended June 30 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
 
Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 -        RELATED PARTY TRANSACTIONS

Related Party Debt – Office Space

LKA pays Abraham & Co., Inc, a company owned by an officer and shareholder, $1,500 per month for office services, rent and expenses.   LKA owed Abraham & Co. $24,000 and $51,500 as of June 30, 2014 and December 31, 2013, respectively.  During February 2014, LKA issued 108,631 shares, valued at $45,625, to settle accrued payables of $36,500 and expenses of $9,125.  Abraham & Co. is a FINRA member and registered investment advisor that also executes LKA’s securities transactions and manages its investment portfolio.  

Related Party Debt – Accounts and Wages Payable

At June 30, 2014 and December 31, 2013, LKA owes $53,242 and $50,997, respectively, for purchases made on the personal credit card of LKA’s President, Kye Abraham.  Additionally, LKA owed Kye Abraham $182,892 and $161,866 in unpaid salary at June 30, 2014 and December 31, 2013, respectively.

NOTE 3 -        SIGNIFICANT EVENTS

Precious Metals Sales

During January through June 2014, LKA delivered a total of approximately 134.11 dry short tons of gold bearing vein material (“shipments”) for processing with a net revenue value of $441,083.   Approximately 194 tons of crushed vein material remained unsold at June 30, 2014.  At June 30, 2014 and December 31, 2013, LKA had receivables from shipments of $0 and $38,638, respectively.
 
 
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LKA GOLD INCORPORATED
Notes to the Consolidated Unaudited Financial Statements
June 30, 2014

NOTE 4 -        COMMON STOCK AND COMMON STOCK OPTIONS AND WARRANTS

Common Stock

During January 2014, LKA issued 25,000 shares of common stock for services to a consultant.  LKA recognized $12,748 in non-cash consulting expense, or $0.51 per share.

During February 2014, LKA issued a total of 339,000 shares of common stock for services to four consultants.  LKA recognized $169,161 in non-cash consulting expense

During February 2014, LKA issued 108,631 shares of common stock for accrued office space rent to Abraham & Co., Inc., a related party entity, valued at $45,625, for accrued amounts of $36,500 and expense of $9,125.

During February 2014, the holder of 1,800 shares of Preferred Stock elected to convert all of the Preferred Stock into 45,000 shares of common stock.

During June 2014, LKA issued 20,965 shares of common stock to Abraham & Co.for commissions related to the issuance of convertible preferred stock.  The value of the common shares was recorded as convertible preferred stock issuance costs at June 30, 2014.

Common Stock Options and Warrants

During April 2011, LKA entered into an interim consulting agreement with Francois Viens to act as a special advisor to the LKA board of directors, with the election of being appointed to a position on the LKA board in the future.  As an initial incentive compensation for his services, LKA issued Mr. Viens warrants to purchase up to 250,000 shares of LKA stock in three tranches on a three-year vesting.  Each warrant has a term of two and one-half years. In the event the shares underlying the warrants, and the closing price of the common stock of the Company has been $6.00 per share or higher for 10 trading days within a 30 day trading period subject to minimum trading volumes, LKA shall be able to redeem the Warrants at $0.001 per warrant.  The value of the warrants was recognized as expense ratably over the vesting term.  During the six months ended June 30 2013, LKA expensed $7,573 related to the warrant vesting.

During February 2012, LKA entered into an agreement with Rauno Perttu to act as Chief Geologist and special advisor to the LKA board of directors, with the election of being appointed to a position on the LKA board in the future.  As an initial incentive compensation for his services, LKA agreed to issue Mr. Perttu warrants to purchase up to 250,000 shares of LKA stock in three tranches on a three-year vesting schedule.  Each warrant has a term of two and one-half years.  In the event the shares underlying the warrants, and the closing price of the common stock of the Company has been $6.00 per share or higher for 10 trading days within a 30 day trading period subject to minimum trading volumes, LKA shall be able to redeem the Warrants at $0.001 per warrant.  The value of the warrants was recognized as expense ratably over the vesting term.  During the six months ended June 30 2014 and 2013, LKA expensed $1,684 and $3,369 related to the warrants, respectively.

 
 
 

 
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LKA GOLD INCORPORATED
Notes to the Consolidated Unaudited Financial Statements
June 30, 2014

NOTE 5 -        NOTIFICATION OF POSSIBLE ENVIRONMENTAL REMEDIATION

In 2002 the Federal Bureau of Land Management (the "BLM") advised LKA of its desire to extend to the Ute-Ulay Property certain environmental clean-up (“remediation”) activities that it is conducting on neighboring properties that LKA does not own.  The BLM commissioned and obtained three engineering evaluation and cost analysis ("EE/CA") studies/reports on the Ute-Ulay and the neighboring public lands in 2002-2006.  These EE/CA studies analyzed the current environmental state of the Ute-Ulay property and other properties in the area.  The studies identified a large volume of mine tailings and metals loading of shallow ground water, with elevated levels of arsenic, cadmium and lead being present.  The BLM’s most recent study, “Value Engineering Study on the Ute Ulay Mine/Mill Site – Final Report” dated January 5, 2006, projected the costs of remediation and property stabilization on the Ute-Ulay property to be approximately $2.1 million.  Based upon management’s on-going and most recent discussions with Hinsdale County Colorado officials, the Federal Environmental Protection Agency’s (the “EPA”) regional manager, and legal counsel, the actual costs associated with this effort are expected to be approximately $1.2 million; substantially below previous BLM estimates. Under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the EPA may either require a property owner to perform the necessary cleanup or the agencies may perform the work and seek recovery of costs against the property owner and previous owners.  While it cannot be determined with absolute certainty until the project is completed, LKA’s status as a “de minimis” participant and the fact that remediation activities are focused on property located largely outside of LKA’s permitted operating area, LKA management expects this project will have a negligible impact on the LKA’s financial condition.  Accordingly, pursuant to Generally Accepted Accounting Principles, LKA management believes it is a remote possibility there will be a material impact to its financial statements and no liability for this project has been recorded as of the period ended June 30, 2014.

NOTE 6 -        GOING CONCERN

LKA's consolidated financial statements are prepared using Generally Accepted Accounting Principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.   As of June 30, 2014, LKA has accumulated significant losses and had negative working capital. These factors raise substantial doubt about its ability to continue as a going concern.  Management's plans to alleviate the adverse financial conditions that create substantial doubt about the LKA's ability to continue as a going concern are as follows:

LKA is currently engaged in an exploration program at the Golden Wonder mine with the objective of returning the mine to a commercial producing status. The exploration program, which began in November, 2008, has involved extensive sampling/assaying for the purpose of identifying possible new production zones within the mine. During this evaluation period, sampling and analysis of exposed veins yielded encouraging results and some precious metals revenues. While encouraging, no conclusion can be drawn at this time about the commercial viability of the mine and LKA continues to evaluate potential merger, joint venture or lease agreements for the property.

In order to support continued operation of the mine, LKA plans on raising additional funding during 2014 to support the continued exploration of the Golden Wonder mine and complete a capital funding raise in August 2011 (see Note7).  If LKA is not successful in the resumption of mine operations which produce positive cash flows from operations, LKA may be forced to continue to raise additional equity or debt financing to fund its ongoing obligations or risk ceasing doing business.  

There can be no assurance that LKA will be able to achieve its business plans, raise any more required capital or secure the financing necessary to achieve its current operating plan.  The ability of LKA to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 
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LKA GOLD INCORPORATED
Notes to the Consolidated Unaudited Financial Statements
June 30, 2014

NOTE 7 -        SUBSEQUENT EVENTS

During August 2014, LKA finalized a private placement of 7,200,000 shares of common stock with Koski Family Limited Partnership ("KFLP") at a price of $0.25 per share, or $1,800,000.  The financing arrangement also required LKA to purchase 4,200,000 LKA common shares held by the Brannon Limited Partnership ("Brannon") for $300,000 in cash and 650,000 shares of LKA common stock. LKA subsequently cancelled the remaining 3,550,000 common shares.



 

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

Forward-looking Statements

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, international gold prices, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Results of Operations

LKA is an exploration stage company and has no proven reserves.  LKA currently generates revenues from the sale of gold bearing vein material extracted during the exploration process.  As such, there can be no basis of reliance upon the continuing generation of revenue. Exploration costs related to locating and evaluating mineral and ore deposits, as well as determining the economic mineability of such deposits, are expensed as incurred.  All costs related to mine exploration have been expensed to-date due to there being no proven and probable reserves. LKA’s costs of goods sold and gross profit are not comparable to those of revenue-generating gold mining companies in the production stage as LKA is not permitted to capitalize certain costs.

For The Six months ended June 30 2014 Compared to The Six months ended June 30 2013

During the six months ended June 30, 2014,  LKA recognized revenue of $441,083 from the sale of gold bearing vein material, compared to $502,627 in the six months ended June 30, 2013, a decrease of approximately 12%.  Gold bearing vein material sales result from exploration activities at the Golden Wonder mine.  

Exploration expenses decreased from $449,526 in the six months ended June 30, 2013, to $325,273 in the six months ended June 30, 2014, or approximately 28%.  

Professional fees increased by $154,306, or approximately 213%, mainly due to the recognition of $183,593 in non-cash equity compensation expense to consultants during the six months ended June 30, 2014.

General and administrative expenses increased by $2,849, or approximately 4% in the six months ended June 30, 2014.

We incurred gross losses of $269,787 during the six months ended June 30, 2014, as compared to a gross loss of $175,341 in the six months ended June 30, 2013. The increase is mainly due to the recognition of $181,909 in non-cash equity compensation expense to consultants during the six months ended June 30, 2014.


 
- 10 -

 
 

Our total other expenses decreased to $4,217 during the six months ended June 30, 2014, as compared to $2,757,950 in the six months ended June 30, 2013, mainly as a result of $2,756,000 in one-time non-cash stock based expenses recognized during the six months ended June 30, 2013.  

Interest expense increased to $4,219 during the six months ended June 30, 2014, as compared to $1,952 in the six months ended June 30, 2013.

Net loss totaled $274,004, or $0.02 per share, in the six months ended June 30, 2014, compared to a net loss of $2,933,291, or $0.20 per share, in the six months ended June 30, 2013.

Approximately 194 tons of crushed vein material remained unsold at June 30, 2014.

For The Three months ended June 30 2014 Compared to The Three months ended June 30 2013

During the three months ended June 30, 2014, we recognized revenue of $257,047 from the sale of gold bearing vein material, compared to $213,061 in the three months ended June 30, 2013, an increase of approximately 21%.  Gold bearing vein material sales result from our exploration activities at the Golden Wonder mine.  

Exploration expenses decreased from $232,015 in the three months ended June 30, 2013, to $176,642 in the three months ended June 30, 2014, or approximately 24%.  

Professional fees increased from $21,917 in the three months ended June 30, 2013, to $26,243 in the three months ended June 30, 2014, or approximately 20%.  

General and administrative expenses decreased by $16,182, or approximately 34% in the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

We incurred gross loss of $15,220 during the three months ended June 30, 2014, as compared to gross loss of $125,895 in the three months ended June 30, 2013. The decrease is mainly due to the decrease of $55,373 in exploration costs, increase of $43,986 in revenue and $16,182 decrease in general and administrative expenses during the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.

Interest expenses increased to $2,317 during the three months ended June 30, 2014, as compared to $1,121 in the three months ended June 30, 2013.  

Net loss totaled $17,537, or $0.00 per share, in the three months ended June 30, 2014, compared to a net loss of $127,016, or $0.01 per share, in the three months ended June 30, 2013.
   
Liquidity

Current assets at June 30, 2014 totaled $15,594 in cash, as compared to $8,740 in cash, $42,907 in restricted cash, and $38,638 in accounts receivable at December 31, 2013.

During the six months ended June 30, 2014, our operating activities provided net cash of $9,961, compared to cash used of $87,329 in the comparable 2013 period.  Financing activities used $3,107 during the six months ended June 30, 2014, compared to no cash used by financing activities during the six months ended June 30, 2013.

At June 30, 2014, the Company had a working capital deficit of $484,332, as compared to working capital deficit of $456,657 at December 31, 2013.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not required.

 
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Item 4.  Controls and Procedures.

Evaluation of disclosure controls and procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q.  In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2014, our disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable 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 Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

Our management, with the participation of the chief executive officer and chief financial officer, has concluded that there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None; not applicable.

Item 1A.  Risk Factors.

Not required.

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

During January 2014, LKA issued 25,000 shares of common stock for services to a consultant.  LKA recognized $12,748 in non-cash consulting expense, or $0.51 per share.

During February 2014, LKA issued a total of 339,000 shares of common stock for services to four consultants.  LKA recognized $169,161 in non-cash consulting expense

During February 2014, LKA issued 108,631 shares of common stock for accrued office space rent to Abraham & Co., Inc., a related party entity, valued at $45,625, for accrued amounts of $36,500 and expense of $9,125.

During February 2014, the holder of 1,800 shares of Preferred Stock elected to convert all of the Preferred Stock into 45,000 shares of common stock.

On or about August 11, 2014, 7,200,000 were issued to one entity in exchange for investment proceeds in the amount of $1,800,000.

 
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On or about August 11, 2014, 650,000 shares were issued in exchange for the cancellation of certain contract rights.  This issuance was exempt from the registration requirements of Section 5 of the Act pursuant to Section 3(a)(10) of the Act.

All shares issued as described in this Item 2 were exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the “Act”) because they were issued pursuant to Section 4(2) of the Act since there was no public offering of the shares.

Item 3. Defaults Upon Senior Securities.

None; not applicable

Item 4. Mine Safety Disclosures.

None, not applicable.

Item 5. Other Information.

During the six months ended June 30, 2014, there were no material changes to the procedures by which security holders may recommend nominees to the Registrant’s Board of Directors.

 
 

 
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Item 6. Exhibits.

Exhibit No.                         Identification of Exhibit

31.1
 
31.2
 
32.1
Certification of Kye Abraham Pursuant to Section 302 of the Sarbanes-Oxley Act.
 
Certification of Nanette Abraham Pursuant to Section 302 of the Sarbanes-Oxley Act.
 
Certification of Kye Abraham Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2  Certification of Nanette Abraham Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101.INS
XBRL Instance Document*
101.PRE.
XBRL Taxonomy Extension Presentation Linkbase*
101.LAB
XBRL Taxonomy Extension Label Linkbase*
101.DEF
XBRL Taxonomy Extension Definition Linkbase*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
101.SCH
XBRL Taxonomy Extension Schema*

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under these sections.  101 XBRL Instant Documents (IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS.)



 

 
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SIGNATURES

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

Date:
August  14, 2014
 
By:
/s/Kye Abraham
       
Kye Abraham, President, Chairman of the Board and Director
         
Date:
August  14, 2014
 
By:
/s/Nanette Abraham
       
Nanette Abraham, Secretary, Treasurer and Director


 
 

 
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