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financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory

and technical factors affecting our operations, products, services and prices.

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. LKA does not undertake, and specifically disclaims, any

obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of

such statements.

ITEM 1. BUSINESS

Business Development

LKA International, Inc. was incorporated on March 15, 1988, in the State of Delaware. Since our inception, our

authorized capital has been 100,000,000 shares, consisting of 50,000,000 shares of common stock with a par value

of one mill ($0.001) per share, and 50,000,000 shares of preferred stock, also with a par value of one mill per share.

LKA owns certain real and personal property interests including patented and unpatented mining claims, water

rights, buildings, fixtures, improvements, equipment, and permits situated near Lake City, Colorado, which are

described below. LKA's activities associated with these properties have been sporadic since they were acquired by

its predecessor in December, 1982.

Effective as of July 2, 2009, LKA and PanAmerica Capital Group, a Panama corporation (“PanAmerica”) executed

a Subscription Agreement by which LKA issued to PanAmerica a promissory note in the principal amount of

$545,090, and bearing interest at 10 percent per year (the “Promissory Note”). The outstanding principal and

interest on the Promissory Note are payable in five equal installments. The first installment was due on January 4,

2010, and each subsequent installment was due on the date that was three months after the due date of the

immediately preceding installment. In lieu of the payment of principal and interest as outlined above, PanAmerica

may elect to receive all or a portion of each installment in cash amounts equivalent to the value of 140 troy ounces

of gold as determined by the closing spot price of gold on COMEX on the business day immediately preceding the

due date of such installment. LKA’s obligations under the Promissory Note are secured by the Company’s mining

properties.

As of the date of this Report, the Company has paid 60% of the amount owing to PanAmerica under the first

installment on the Promissory Note. Interest is accumulating on the remaining 40%. LKA is currently delinquent

on all remaining principal and interest payments on the Promissory Note, and as of the date of this Report,

PanAmerica has not declared LKA in default and has refrained from any formal collection or foreclosure efforts.

The Lake City, Colorado Properties.

The Ute-Ule silver mine and milling facility and the Golden Wonder gold mine (respectively, the "Ute-Ule

Property" and the "Golden Wonder Property" or, collectively, the "Properties"), consist of certain patented and

unpatented mining claims and a milling facility located in Hinsdale County, Colorado. In December, 1982, our

predecessor, LKA Holdings, Inc., a Utah corporation ("LKA Utah") acquired a 51% interest in the Properties from

Lake City Mines, Inc., a Colorado corporation ("Lake City Mines"), which retained the remaining 49% interest.

Immediately after the acquisition, LKA Utah assigned 90% of its interest in the future proceeds that it had the right

to receive from the Properties to Caldera Partners Limited Partnership, a Washington limited partnership ("Caldera")

in return for approximately $1.6 million, which LKA used to develop the Properties. As a result, Caldera owned a

45.9% interest in the future proceeds that LKA Utah had the right to receive on the Properties. LKA's President, Kye

A. Abraham, is Caldera's Managing Partner. Subsequent to a bankruptcy filing by Lake City Mines in February

1984, LKA acquired Lake City Mine’s interest in the Properties through a Sheriff’s sale.

On March 1, 2005, the Company completed the acquisition of Caldera's 45.9% interest in the Golden Wonder and

Ute Ule mines. Per the terms of the agreement, the Company agreed to issue Caldera 6,434,042 "unregistered" and

"restricted" shares of common stock in exchange for Caldera's interest in the mines and the full satisfaction of all

receivables due to Caldera from the Company. Caldera was also relieved of any future obligations to contribute

further exploration and and construction funds. For more information on this transaction, see the Company's

Current Report on Form 8-K, dated March 3, 2005, and filed with the Securities and Exchange Commission on

March 4, 2005.

Description of Business

LKA is currently engaged in an intensive 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. Exploration efforts are aimed at extending the zones (veins) within the mine that previously produced over

133,701 ozs. (82% of which came during the period of 2002-2006 at an average ore grade of 16.01 ozs. gold per

ton). As the Golden Wonder vein system typically pinches and swells, horizontally as well as vertically, LKA’s

objective/challenge will be to locate consistent vein widths within these high-grade zones to establish significant

reserves to resume commercial production. Drilling and drifting along the vein structure has been the primary

method of exploration to date. LKA expects to incorporate geochemical analysis, mapping (surface and

underground) and other methods of exploration as its budget permits. Since resuming operations in the first quarter

of 2009, LKA has shipped/sold ten bulk ore samples containing 1,424 ounces of gold derived from exploratory

mining operations. Ore shipments for 2009 and 2010 are as follows:

Tons

Oz/ton

Gold (Oz)

2009

3.82

337

2010

559

1.07

599

TOTAL

647

1.45

936

Ore shipments in transit or process may not result in receivables or finalized payment (“settlement”) at year end.

Details of any such shipments will be reported in the subsequent quarter. Sales of ore have offset a significant

portion of the cost of the current exploration program. To date, all ore shipments have been made to Teck, Yukon-

Nevada Gold and Kinross. Currently there are no established reserves and all LKA efforts are exploratory in nature.

In August, 2010, LKA entered into a Mine Operating Agreement (the “Operating Agreement”) with Coal Creek

Construction (“Coal Creek”). The Operating Agreement calls for Coal Creek to provide mine operating services,

including mining and underground construction, blasting, crushing, bagging, hauling, loading and transporting of

ore and associated waste material to locations specified by LKA. Per the Operating Agreement, Coal Creek is to

pay all Mine Operator Services Expenses and is entitled to reimbursement for such expenses from LKA, provided

LKA has received sufficient monies from ore sales. LKA is responsible for payment of costs associated with

vehicles it provides for the project (including insurance and maintenance) property and production taxes, mining

claim assessments or fees, personnel and consultants hired by LKA, claim and permit filings, and reclamation

bonds. LKA will also pay all liabilities associated with the Golden Wonder Property which were incurred prior to

the date of the Operating Agreement. In exchange for providing Mine Operator Services, Coal Creek is entitled to a

payment equal to twenty percent of the project's net profits, or Net Smelter Receipts less deductions for Mine

Operator Services, Royalties and Project-related Expenses, provided that Coal Creek has performed its service

obligations and is current with its financial obligations and all other terms of its agreement with LKA. During the

calendar year ended December 31, 2010, LKA paid Coal Creek $226,708 in advances toward Mine Operator

Services and accrued an additional $123,931 in estimated remaining reimbursable expense related to its ore

shipment in December 2010.

Principal Products or Services and their Markets

We do not currently have any products or services.

Distribution Methods of the Products or Services

None; not applicable.

Status of any Publicly Announced New Product or Service

None; not applicable.

Competitive Business Conditions and Our Competitive Position in the Industry and Methods of Competition

Management believes that there are literally thousands of non-operating mining companies such as LKA. We

believe that our competitive position in the industry will be very insignificant.

Sources and Availability of Raw Materials and Names of Principal Suppliers

We do not use any raw materials, as we do not directly conduct any material operations.

Dependence on One or a Few Major Customers

From 1998 through the second quarter of 2006, our revenues consisted of production royalties from the commercial

mining activities at the Golden Wonder mine. Mining operations were conducted during this period by Au Mining,

Inc., a private Colorado corporation under the terms of a mine lease agreement with the Company. In the third

quarter of 2006, Au Mining ceased production due to the depletion of the established ore body. Since that time,

LKA’s source of revenue has been the limited sale of ore from its exploration program and investment income.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including

Duration

We have obtained "110d" limited impact permits from the Colorado Division of Reclamation Mining and Safety and

have posted reclamation bonds to ensure the clean-up of environmental disturbances on the Ute-Ule and Golden

Wonder Properties. Storm water and discharge permits have also been issued for the above properties by the

Colorado Department of Public Health and Environment. We are currently in compliance with all applicable permit

and bonding requirements.

Need for any Governmental Approval of Principal Products or Services

None; not applicable.

Effect of Existing or Probable Governmental Regulations on our Business

We are subject to the following regulations of the SEC and applicable securities laws, rules and regulations:

Smaller Reporting Company

We are subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934, as amended (the

“Exchange Act”), and subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting

company.” That designation will relieve us of some of the informational requirements of Regulation S-K applicable

to larger companies.

Sarbanes/Oxley Act

We are also subject to the Sarbanes/Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent

accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor

independence. It also requires steps to enhance the direct responsibility of senior members of management for

financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory

rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates

guidelines for audit committee members’ appointment, compensation and oversight of the work of public

companies’ auditors; management assessment of our internal controls; auditor attestation to management’s

conclusions about internal controls; prohibits certain insider trading during pension fund blackout periods; requires

companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities

fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act has substantially

increased our legal and accounting costs.

future operations at the mill may require additional settling ponds and additional treatment of waste water may be

required to preserve water quality. We do not believe that these requirements would impose an undue burden on us.

Substantial additional funding would be required to make the mill operational. The Company has no current plans in

this regard. The Ute mine and milling facility are currently inactive and the Company has no immediate plans to

resume operations. The status of these properties however could change based upon certain business and regulatory

conditions. Permits for these properties are in a state of “temporary cessation.”

Golden Wonder.

Geology

Physical, structural and petrologic characteristics of this rhyolite intrusion observed in the underground workings of

the Golden Wonder mine demonstrates features characteristic of both an extrusive and intrusive magma, and it is

believed that the workings of the Golden Wonder mine are located in the upper reaches of the rhyolitic intrusion

where it “welled out” from its vent source, gradually becoming more intrusive in character with depth. It

undoubtedly extends downward along its vent source to the original magma chamber from whence it was derived.

As observed in the underground workings of the Golden Wonder mine. Based on extensive underground and field

work, it would appear that the intrusion of the Golden Wonder host rock occurred in a series of pulses. Molten

magma moved upward along the vent structure wherein it was emplaced, and solidified. Oftentimes it appears that

the rock unit was only partially solidified when it was deformed by another upward pulse of magma, thereby

creating very complex flow-banding within the partially solidified rock. In some instances, the rock unit appears to

have been completely solidified, only to have been brecciated by a later pulse of magmatic injection, with fluid

magma flowing around these brecciated fragments. In all instances observed, the composition of the magma

remained essentially the same throughout its entire emplacement, suggesting the vein structure and the

characteristics of the vein mineralization at the Golden Wonder mine is very much different from nearly all the other

base-metal mines of the Lake City area, and even differs from that which apparently existed at the Golden Fleece

mine. Instead of being of the classic fracture-filling type, where a more-or-less well-defined linear fracture, or set of

open fractures, has been filled with ore minerals and gangue, the vein structure at the Golden Wonder mine usually

does not follow a well-defined fracture, but in detail is often quite sinuous, enlarging and contracting along its

course. Very commonly, the vein dies out completely and most often, a similar en echelon vein segment is located a

relatively short distance away. The vein structure typically ranges from only a fraction of an inch thick to several

feet across, but may enlarge significantly within ore shoots.

The Golden Wonder, near Lake City, Colorado, is located in the historic “Colorado Mineral Belt” from which over

25 million ounces of gold have been produced dating back to the mid 1800s.

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History

The Golden Wonder Property consists of three patented and 25 unpatented mining claims located approximately 2-

1/2 miles south of Lake City, Colorado The mine has been worked intermittently since its discovery in 1880. The

mine is at an elevation of 10,323 feet and is situated on a hill slope approximately 1,500 feet above the valley floor.

The initial discovery was made after finding high grade float in the surface containing free gold. A limited body of

ore was mined prior to 1889. The Golden Wonder Property was generally unworked through 1930. From 1930 to

1969, sporadic mining and development efforts were conducted, some of which resulted in the extraction of an

undetermined amount of gold bearing ore.

During the summer of 1969, Southern Union Production Company ("Supron") began an exploration program at the

Golden Wonder. Out of this, the SUPCO winze (a steeply inclined passageway connecting the mine workings) was

started in the winter of 1970-1971 and completed to a depth of approximately 150 feet below the third level of the

mine, with lateral drifting along the course of mineralization off the winze on the fourth level. Work was halted on

the property in 1972, when Supron decided to discontinue all its metallic mineral operations in the western United

States and South America. In 1973, Rocky Mountain Ventures secured a lease on the Property and shipped a small

tonnage of dump material to a mill then operating at Crested Butte, Colorado for processing. Lake City Mines, Inc.

acquired the property from Supron in 1977 and conducted extensive underground work including the driving of the

1,600’ sixth level crosscut. LKA acquired an undivided 51% interest in the property in 1982 and commenced

exploration shortly thereafter. During this exploration program a limited amount of ore was produced and shipped to

the Ute mill for concentrating and later sold to ASARCO as a part of a pilot production program. The mine was shut

down shortly thereafter due to falling gold prices. In 1997, Au Mining leased the mine from LKA and commercially

produced ore through the second quarter of 2006. Upon terminating its relationship with Au Mining LKA received

an $18 million joint venture proposal from Cambior, Inc. to conduct exploration, establish reserves and, assuming

success, resume commercial production. Cambior was acquired by IAM Gold in late 2006 before the joint venture

agreement was finalized. In 2007 LKA was offered and finalized a similar joint venture arrangement ($18 million

for 50% interest) with Richmont Mines, Inc. In 2008 program of underground drilling and drifting was proposed and

commenced but never completed by Richmont due to cost overruns and inconclusive results from initial drilling

efforts. LKA resumed exploration efforts on its own in late 2008 that continues to the present date. Substantial

underground drilling and drifting has been preformed resulting in the sale of limited quantities of ore containing

over 1,400 ounces of gold. Ore sales have been made to Teck Resources, Kinross and Yukon-Nevada Gold. To date,

no commercial reserves have been established. Power for mining operations is generated on site. Unpatented claims

held by LKA (which may vary in number from year to year) are maintained on Bureau of Land Management

property through payment of annual assessment fees.

Commercial Ore Production

The Golden Wonder has been explored and developed by drifts on six different levels, with raises and winzes

connecting the lower levels. In 1984, LKA conducted a five-month pilot production program that resulted in the sale

of approximately $590,000 of gold concentrates to ASARCO. The average grade of the ore produced during the

pilot program was 0.96 ounces of gold per ton and the average gold price at that time was $325 per ounce. The

majority of this production was derived from two stopes on the mine's fourth level, which consistently averaged one

ounce of gold per ton. Commercial quantities of gold were also taken from the mine's fifth level. From 1997 until

the second quarter of 2006, commercial mining operations were conducted by Au Mining, LLC who leased the mine

from LKA. During this period approximately 8,349 tons of ore containing 133,701 ounces of gold were produced

from the mine's fifth, sixth and seventh levels. The average grade of the ore produced during this period was 16.01

ounces of gold per ton. The average gold price during the period in which the ore was sold was $337.76. Total gold

production from the mine under LKA’s ownership has been approximately 137,558 ounces. The average grade of all

ore produced during this period was 14.15 ounces per ton.

Office Space.

We currently lease approximately 750 square feet of office space located at 3724 47th Street Ct. N.W., Gig Harbor,

Washington. Effective as of January 1, 2005, we paid monthly rent of $1,300 to Abraham & Co., Inc. a FINRA

member broker/dealer which is controlled by our President, Kye A. Abraham. This rent includes the use of the office

space, bookkeeping services, telephone, office supplies, utilities, internet, computers and photocopiers. The lease

arrangement is a month-to-month oral lease with Abraham & Co. and the payment amount increased to $1,500 per

month in 2007 to keep pace with increased costs.

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATION

Forward-looking Statements

Statements made in this Form 10-K 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

business of LKA. Such forward-looking statements include those that are 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, in addition to those contained in this Annual Report: general economic or

industry conditions nationally and/or in the communities in which we conduct business; fluctuations in global gold

and silver markets; legislation or regulatory requirements, including environmental requirements; conditions of the

securities markets; competition; our ability to raise capital; changes in accounting principals, policies or guidelines;

financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory

and technical factors affecting our operations, products, services and prices.

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. LKA does not undertake, and specifically disclaims, any

obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of

such statements.

Liquidity and Capital Resources

Current assets at December 31, 2010, totaled $123,809. As of that date, we had $20,084 in cash, $89,384 in

accounts receivable, and $14,341 in prepaid expenses.

During fiscal 2010, our operating activities used net cash of $334,035. In 2009, by contrast, operating activities

used net cash of $597,083. Net cash used by investing activities decreased to $0 in 2010, from $188,077 in the prior

year. Net cash provided for financing activities decreased to $140,714 in 2010, compared to $815,581 in 2009.

At December 31, 2010, the Company had negative working capital of $1,304,136, as compared to $597,948,

negative working capital at December 31, 2009.

Results of Operations

Year Ended December 31, 2010, Compared to Year Ended December 31, 2009

During the calendar year ended December 31, 2010, we received $528,845 from the sale of gold ore, compared to

$236,757 in 2009. These limited ore sales resulted from our exploration activities at the Golden Wonder mine.

Operating expenses decreased from $1,365,277 in 2009 to $927,333 in 2010. Exploration, and related costs

decreased $132,810, professional fees decreased $305,391, royalty expense increased $15,137 and general and

administrative expenses decreased $14,880 in 2010. Officer salaries remained the same at $150,000 in 2010, and

2009. With a combination of increased revenues and decreased operating costs, we had operating loss of $398,488

during the calendar year ended December 31, 2010, as compared to operating loss of $1,128,520 in 2009.

Our total other expense increased to $602,528 in 2010, from $216,248 in the prior year. Loss on derivative was

$99,369 in 2010 compared to $169,692 in 2009. We had debt extension/restructuring expense of $358,897 in 2010.

Interest expense increased to $144,303 in 2010 from $56,106 in 2009. Interest income decreased to $27 in 2010,

from $48 in 2009. We had $0 in unrealized loss on securities, $6 in realized loss on securities and $0 in dividend

and other investment income in 2010. This compares to unrealized gain of $4,046, realized gain of $1,055 and

$4,401 in dividend and other investment income in 2009.

LKA INTERNATIONAL, INC.

Consolidated Statements of Operations

December 31,

2010

2009

REVENUES

Sales - precious metals

528,845

236,757

Total Revenues

528,845

236,757

OPERATING EXPENSES

Exploration, and related costs

497,983

630,793

Professional fees

67,231

372,622

Royalty expense

26,384

11,247

General and administrative

185,735

200,615

Officer salaries

150,000

Total Operating Expenses

927,333

1,365,277

OPERATING INCOME (LOSS)

(398,488)

(1,128,520)

OTHER INCOME (EXPENSE)

Loss on derivative

(99,369)

(169,692)

Debt default expense

(358,897)

Interest expense

(144,303)

(56,106)

Interest income

Unrealized gain on securities

4,046

Realized gain (loss) on securities

(6)

1,055

Dividend and other investment income

4,401

Total Other Income (Expense)

(602,548)

(216,248)

LOSS PRIOR TO INCOME TAX EXPENSE

(1,001,036)

(1,344,768)

INCOME TAX EXPENSE

NET LOSS

(1,001,036)

(1,344,768)

BASIC AND DILUTED NET LOSS PER COMMON SHARE

(0.07)

(0.10)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING - BASIC AND DILUTED

15,141,332

13,871,265

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