Note 2 - Related Party Transactions

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

2

-        RELATED PARTY TRANSACTIONS

Related Party Debt – Office Space

LKA pays a company owned by an officer and shareholder

$1,500

per month for office rent and expenses. The affiliated company (Abraham & Co., Inc. a FINRA member and registered investment advisor) also executes LKA's securities transactions and manages its investment portfolio. During the

three

months ended

March

31,

2017,

Abraham & Co., Inc. agreed to exchange

$25,500

in outstanding accounts payable for

56,818

shares of LKA common stock valued at the market price on the grant date and recognized

$25,500

in accounts payable extinguishment and

$10,863

in expense related to market discount. LKA owed Abraham & Co.

$10,500

and

$31,500

as of

March

31,

2017

and

December

31,

2016,

respectively.

Related Party Debt – Notes, Accounts and Wages Payable

At

March

31,

2017

and

December

31,

2016,

LKA owes

$6,600

and

$5,500,

respectively, for short-term operating capital notes payable to LKA's President, Kye Abraham.  

At

March

31,

2017

and

December

31,

2016,

LKA owes

$11,106

and

$8,595,

respectively, for purchases made on the personal credit card of LKA's President, Kye Abraham.  

During the

three

months ended

March

31,

2017,

Kye Abraham agreed to convert

$150,000

in accrued unpaid salary into a convertible debenture. At

March

31,

2017

and

December

31,

2016,

LKA owed Kye Abraham

$50,757

and

$163,257

in unpaid salary, respectively.

Convertible Debentures

On

September

29,

2015,

LKA issued

two

convertible debentures (Convertible Debentures), each in the amount of

$125,000

,

or a total of

$250,000

to members of the Koski family, the Company's largest shareholders. Principal on the Convertible Debentures is due

September

29,

2018.

Interest accrues at

7.5%

per annum and interest is due on a semi-annual basis. The Convertible Debentures are convertible at any time into shares of LKA common stock at

$0.50

per share.

On

March

15,

2017,

LKA issued a convertible debenture in the amount of

$150,000

to members of the Koski family, the Company's largest shareholders. Principal on the Convertible Debenture is due

March

15,

2021.

The Convertible Debenture accrues interest at

7.5%

and is convertible at any time into shares of LKA common stock at

$0.50

per share. Interest is due on a semi-annual basis and LKA is required to retain a reserve amount of the proceeds to pay the

first

two

semi-annual interest payments, which, if the Convertible Debentures are converted within

one

year, will be paid to the Convertible Debenture holders. As such, LKA has designated

$11,250

as restricted cash at

March

31,

2017.

On

March

17,

2017,

LKA issued a convertible debenture in the amount of

$150,000

to its President and Chairman, Kye Abraham in exchange for

$150,000

in accrued and unpaid wages. Principal on the Convertible Debenture is due

March

17,

2021.

The Convertible Debenture accrues interest at

7.5%

and is convertible at any time into shares of LKA common stock at

$0.50

per share. Interest is due on a semi-annual basis and LKA is required to retain a reserve amount of the proceeds to pay the

first

two

semi-annual interest payments, which, if the Convertible Debentures are converted within

one

year, will be paid to the Convertible Debenture holders. As such, LKA has designated

$11,250

as restricted cash at

March

31,

2017.

On

March

31,

2017,

LKA issued a convertible debenture in the amount of

$50,000

to an entity controlled by by LKA's President and Chairman, Kye Abraham. Principal on the Convertible Debenture is due

March

31,

2021.

The Convertible Debenture accrues interest at

7.5%

and is convertible at any time into shares of LKA common stock at

$0.50

per share. Interest is due on a semi-annual basis and LKA is required to retain a reserve amount of the proceeds to pay the

first

two

semi-annual interest payments, which, if the Convertible Debentures are converted within

one

year, will be paid to the Convertible Debenture holders. As such, LKA has designated

$3,750

as restricted cash at

March

31,

2017.

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 option embedded in this instrument is classified as a liability in accordance with Accounting Series Codification Topic

815,

"Derivatives and Hedging" (ASC

815)

on the date of issuance and during the

three

months ended

March

31,

2017,

LKA recognized debt discounts totaling

$350,000.

During the

three

months ended

March

31,

2017

and

2016,

LKA recognized

$2,654

and

$261

of interest expense from the amortization of the debt discounts, respectively.

LKA incurred

$12,500

in debt issuance costs on the convertible debenture issuances in

September

2015.

The debt issuance costs are being amortized over the

three

year term of the convertible debenture. During the

three

months ended

March

31,

2017

and

2016,

LKA recognized

$1,026

and

$970

of interest expense from the amortization of debt issuance costs, respectively.