Note 4 - Related Party Transactions

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 4 -     RELATED PARTY TRANSACTIONS

Office Space

LKA pays a company owned by an officer and shareholder $1,500 per month for office rent, equipment, services and expenses. The affiliated Company, (Abraham & Co., Inc. a Financial Industry Regulatory Authority member and registered investment advisor) also executes LKA’s securities transactions and manages its investment portfolio. At December 31, 2015 and 2014, LKA owes Abraham & Co $15,000 and $6,000 on this obligation

, respectively.

During February 2014, LKA issued 108,631 shares of common stock to Abraham & Co., Inc. for payment of $36,500 in amounts payable from LKA. LKA recognized a loss on settlement of debt of $9,125 as a result of the value of the stock issued being greater than the debt extinguished.

Accounts and Wages Payable

At December 31, 2015 and 2014, LKA owes $309 and $533, respectively, for purchases made on the personal credit card of LKA’s president, Kye Abraham. Additionally, LKA owed Kye Abraham $75,757 and $76,067 in unpaid salary at December 31, 2015 and 2014, respectively.

Convertible Notes Payable

During September 2015, LKA issued two 7.5% Convertible Debentures (Debentures) for a total of $250,000 in cash to beneficial owners of more than 10% of the voting interests in LKA common stock. The Debentures accrue interest at 7.5% per annum, are unsecured, due in three years from the dates of issuance and are convertible into shares of LKA common stock at any time at the option of the holder at a rate of $0.50 per share. Interest is due in semi-annual payments and LKA is required to maintain a reserve of proceeds equal to the first two semi-annual payments. As such, LKA has designated $18,750 as restricted cash at December 31, 2015.

If any event of default occurs, the interest rate increases to 15% per annum and the conversion rate shall be decreased to $0.25 per share. As a result of the potential variable conversion rate, the conversion options embedded in these instruments are classified as liabilities in accordance with ASC 815 and LKA recognized a debt discount of $250,000 (see Note 6).

LKA incurred $12,500 in debt issuance costs on the Debenture issuances. The debt issuance costs are being amortized over the three year terms of the Debentures. During the year ended December 31, 2015, LKA recognized $821 of interest expense from the amortization of debt issuance costs.

LKA’s convertible notes payable consist of the following at December 31, 2015:

7.5% Convertible Debenture, interest at 7.5% per annum, unsecured, due September 29, 2018	$	125,000
7.5% Convertible Debenture, interest at 7.5% per annum, unsecured, due September 29, 2018		125,000
Total	$	250,000

Maturities under the Debentures are as follows at December 31, 2015:

2016	$	-
2017		-
2018		250,000
2019		-
2020		-
Thereafter		-
Total	$	250,000