Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions:

Related Party Transactions

NOTE 3 -       RELATED PARTY TRANSACTIONS

Related Party Debt

Cognitive Associates Limited Partnership

LKA owes Cognitive Associates Limited Partnership $56,828 in unpaid principal from a note dated December 31, 1986.  The note is unsecured, due upon demand, and accrues interest at 10% per annum.  No payments have been made during the nine months ended Sepember 30, 2012.  Accrued interest related to this note totaled $79,653 and $76,337 as of September 30, 2012 and December 31, 2011, respectively.

LKA owes Cognitive Intelligence Limited Partnership $5,975 in unpaid principal from a note dated October 1, 1987.  The note is unsecured, due upon demand, and accrues interest at 10% per annum.  No payments have been made during the nine months ended September 30, 2012.  Accrued interest related to this note totaled $10,042 and $9,693 as of September 30, 2012 and December 31, 2011, respectively.

PanAmerican Capital Group

On July 2, 2009, LKA issued a promissory note (the Note) to PanAmerican Capital Group, Inc. (PanAmerican), a related party company, in exchange for cash of $545,090.  The Note initially accrued interest at 10% per annum, was secured by a first charge over LKA mining property and claims in Hinsdale County, Colorado and due in five installments, the first due the first business day of January 2010, with the remaining four due in three months intervals through January 2011.  During January 2010, LKA made a partial payment of $92,064 on the Note, of which $16,644 was applied against a related derivative liability, $27,778 was applied against accrued interest and $47,642 was applied to principal.  

Due to delays in mine production, on June 10, 2010 PanAmerica and LKA entered into a Waiver Agreement whereby PanAmerican agreed to allow LKA to defer a portion of the first installment payment due January 4, 2010, April 5, 2010 and July 5, 2010 until August 15, 2010.

As a result of the Waiver Agreement and payment defaults, LKA has reclassified a total of $268,873 in accrued derivative liability related to the past due Note payments to the remaining original $497,448 note principal and began accruing interest at 2% per month per the terms of the Note. 

During the period ended September 30, 2012, PanAmerican sold the Note to an unrelated third party, Brannon Limited Partnership, with no change to the note terms.  As such, LKA has reclassified the presentation of the Note principal and accrued interest as an un-related party debt.

Total accrued interest on the Note and past due note balance was $356,762 and $258,478 at September 30, 2012 and December 31, 2011, respectively.  Interest expense on the Note totaled $107,285 and $137,938 for the nine months ended September 30, 2012 and 2011, respectively.

                        Other Related Party Transactions

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.  LKA owed Abraham & Co. $41,000 and $31,000 in past due amounts as of September 30, 2012 and December 31, 2011, respectively.

At September 30, 2012 and December 31, 2011, LKA owes $25,881 and $36,205, respectively, for purchases made on the personal credit card of LKA’s president, Kye Abraham.  Additionally, LKA owed Kye Abraham $0 and $12,500 for non-interest bearing, short-term operating loans to LKA at September 30, 2012 and December 31, 2011, respectively, and $163,662 and $166,567 in unpaid salary at September 30, 2012 and December 31, 2011, respectively.