Quarterly Report (10-q)

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 March 31, 2019

[  ] 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

(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 47 ^th Street Ct. N.W.

Gig Harbor, Washington 98335

(Address of principal executive offices)

[phone]

(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 [X] Smaller reporting company [X] Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected to not use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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:  May 20, 2019 – 27,741,361 shares of common stock.

 

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PART I

Item 1.  Financial Statements

The Financial Statements of LKA Gold Incorporated, 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

(Unaudited)

ASSETS

		March 31, 2019				December 31, 2018
CURRENT ASSETS
Cash		$	26,412			$	61,696
Prepaid expenses			11,000				833
Total Current Assets			37,412				62,529
FIXED ASSETS
Land, equipment, mining claims and asset retirement liabilities			849,140				849,140
Accumulated deprecation			(401,041	)			(398,884	)
Total Fixed Assets, Net of Accumulated Depreciation			448,099				450,256
OTHER NON-CURRENT ASSETS
Reclamation bonds			149,156				149,156
TOTAL ASSETS		$	634,667			$	661,941

 

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

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LKA GOLD INCORPORATED

Consolidated Balance Sheets (Continued)

(Unaudited)

LIABILITIES AND STOCKHOLDERS' DEFICIT

		March 31, 2019				December 31, 2018
CURRENT LIABILITIES
Accounts payable		$	185,430			$	184,096
Accounts payable – related party			10,726				6,670
Note Payable – related party			12,702				12,702
Wastewater discharge liability			99,974				99,974
Derivative liability			52,188				54,653
Convertible note payable			50,000				50,000
Note payable			10,000				10,000
Accrued interest payable			9,511				5,882
Accrued wages and advances payable to officer			87,489				49,989
Total Current Liabilities			518,020				473,966
LONG-TERM LIABILITIES
Convertible note payable, net of $45,083 and $50,718 in debt issuance costs and debt discount, respectively			84,917				79,282
Asset retirement obligation			122,950				122,950
Total Liabilities			725,887				676,198
STOCKHOLDERS' DEFICIT
Preferred stock; $0.001 par value, 50,000,000 shares authorized, 0 and   0 shares issued and outstanding, respectively			-				-
Common stock, $0.001 par value, 50,000,000 shares authorized, 27,741,308 and 27,697,684 shares issued and 27,741,308 and 27,697,684        shares outstanding, respectively			27,741				27,741
Additional paid-in capital			19,959,183				19,959,183
Treasury stock; 43,624 and 43,624 shares at cost, respectively			(86,692	)			(86,692	)
Accumulated deficit			(19,991,452	)			(19,914,489	)
Total Stockholders' Deficit			(91,220	)			(14,257	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	634,667			$	661,941

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 March 31,
		2019				2018
OPERATING EXPENSES
Exploration and related costs		$	36			$	-
General and administrative			15,798				20,060
Officer salaries			37,500				238,925
Professional and consulting			16,510				2,775
Total Operating Expenses			69,844				261,760
OPERATING LOSS			(69,844	)			(261,760	)
OTHER INCOME (EXPENSES)
Loss on debt conversion			-				(309,406	)
Derivative gain (loss)			2,465				(3,031	)
Interest expense, net			(9,584	)			(571,013	)
Total Other Income (Expenses)			(7,119	)			(883,450	)
NET LOSS		$	(76,963	)		$	(1,145,210	)
NET LOSS PER SHARE - BASIC AND DILUTED		$	(0.00	)		$	(0.06	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED			27,741,308				19,681,608

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

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LKA GOLD INCORPORATED

Unaudited Consolidated Statements of Stockholders' Equity (Deficit)

For the Three Months Ended March 31, 2018 and 2019

(Unaudited)

		Preferred Stock								Common Stock								Treasury Stock								Additional				Accumulated				Total Stockholders'
		Shares				Amount				Shares				Amount				Shares				Amount				Paid-In Capital				Deficit				Equity (Deficit)
Balance, December 31, 2017			-			$	-				19,261,717			$	19,262				43,624			$	(86,692	)		$	18,020,363			$	(18,324,756	)		$	(371,823	)
Common stock issued for related party payable, accrued wages and accrued interest			-				-				601,898				602				-				-				119,778				-				120,380
Common stock issued for related party convertible debt and accrued interest			-				-				3,224,990				3,225				-				-				951,179				-				954,404
Common stock issued for officer bonus			-				-				1,750,000				1,750				-				-				199,675				-				201,425
Retirement of derivative			-				-				-				-				-				-				263,325				-				263,325
Net loss for the three months ended March 31, 2018			-				-				-				-				-				-				-				(1,145,210	)			(1,145,210	)
Balance, March 31, 2018			-			$	-				24,838,605			$	24,839				43,624			$	(86,692	)		$	19,554,320			$	(19,469,966	)		$	22,501
Balance, December 31, 2018			-			$	-			$	27,741,308			$	27,741				43,624			$	(86,692	)		$	19,959,183			$	(19,914,489	)		$	(14,257	)
Net loss for the three months ended March 31, 2019			-				-				-				-				-				-				-				(76,963	)			(76,963	)
Balance, March 31, 2019			-			$	-				27,741,308			$	27,741				43,624			$	(86,692	)		$	19,959,183			$	(19,991,452	)		$	(91,220	)

 

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 Three Months Ended March 31,
		2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(76,963	)		$	(1,145,210	)
Items to reconcile net loss to net cash used by operating activities:
Depreciation and amortization			2,157				2,158
Amortization of debt issuance costs			-				9,176
Amortization of debt discount			5,635				538,720
(Gain) loss on derivative			(2,465	)			3,031
Loss on debt conversion			-				309,406
Common stock issued for compensation expenses			-				201,425
Changes in operating assets and liabilities
Increase in prepaid expenses and other assets			(10,167	)			(7,500	)
Increase in accounts payable and accrued expenses			4,963				25,868
Increase in accounts payable – related party			4,056				7,769
Increase in accrued wages			37,500				37,500
Net Cash Used in Operating Activities			(35,284	)			(17,657	)
CASH FLOWS FROM INVESTING ACTIVITIES			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft			-				(343	)
Proceeds from notes payable, related party			-				18,000
Net Cash Provided by Financing Activities			-				17,657
INCREASE (DECREASE) IN CASH			(35,284	)			-
CASH AT BEGINNING OF PERIOD			61,696				-
CASH AT END OF PERIOD		$	26,412			$	-
CASH PAID FOR:
Interest		$	300			$	200
Income taxes		$	-			$	-
NON-CASH TRANSACTIONS
Common stock issued for convertible debt and interest		$	-			$	644,998
Common stock issued for related party payable and accrued wages		$	-			$	120,379
Derivative liability retired to equity upon conversion		$	-			$	263,325

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

 

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LKA GOLD INCORPORATED

Notes to the Unaudited Consolidated Financial Statements

March 31, 2019

 

NOTE 1 -   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements presented are those of LKA Gold, Incorporated, a Delaware corporation and its wholly owned subsidiary LKA International, Inc., a Nevada corporation ("LKA" or the "Company") . LKA was incorporated on March 15, 1988, under the laws of the State of Delaware. LKA is currently engaged in efforts to expand mine production and continues to seek additional investment opportunities.

The accompanying unaudited 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 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 consolidated financial statements be read in conjunction with LKA's most recent audited financial statements. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

In February 2016, the FASB issued ASC 842, Leases ("ASC 842"). ASC 842 related to leases to increase transparency and comparability among organizations by requiring the recognition of right of use assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The Company elected to early adopt ASC 842 effective January 1, 2018 and have elected all available practical expedients. The standard did not have a material impact on our financial statements as we have no outstanding leases.

Net Income (Loss) per Common Share

 

Basic net income (loss) per share is computed on the basis of the weighted average number of common shares outstanding during each year. Diluted net income (loss) per share is computed similar to basic net income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

For the three months ended March 31, 2019 and 2018, the Company realized net losses, resulting in outstanding warrants, and outstanding convertible debt having an antidilutive effect.

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The following table summarizes the potential shares of common stock that were excluded from the computation of basic and diluted net loss per share for the three months ended March 31, 2019 and 2018 as such shares would have had an anti-dilutive effect:

		For the Three Months Ended March 31,
		2019				2018
Convertible debt			460,000				400,000
Common stock warrants			20,834				20,834
Total			480,834				420,834

NOTE 2 -   RELATED PARTY TRANSACTIONS

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. LKA owes Abraham & Co., Inc. $9,448 and $6,447 as of March 31, 2019 and December 31, 2018, respectively.

Related Party Payables – Notes, Accounts and Wages Payable

At March 31, 2019 and December 31, 2018, LKA owes $1,278 and $223, respectively, for purchases made on the personal credit card of LKA's President, Kye Abraham.  

At March 31, 2019 and December 31, 2018, LKA owes an entity controlled by LKA's President and Chairman, Kye Abraham, $12,702 and $12,702, respectively, for short-term loans that do not accrue interest, are unsecured and due upon demand.

NOTE 3 -   CONVERTIBLE DEBENTURES

During October 2015, LKA issued a convertible debenture for $50,000 in cash.  The convertible debenture accrues interest at 7.5% per annum, is unsecured, due in three years from the date of issuance and is 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. During December 2018, LKA entered into a one-year extension agreement through October 20, 2019 in exchange for a reduction of the conversion price to a fixed $0.25 per share. The modification of this note was not deemed substantial.

During April 2016, LKA issued two $50,000 Convertible Debentures for $100,000 in cash.  The Convertible Debentures accrue interest at 7.5% per annum due in semi-annual payments, are unsecured, due in five 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.

On April 26, 2017, LKA issued a convertible debenture in the amount of $50,000 for cash. Principal on the Convertible Debenture is due April 26, 2020. 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 semiannual basis. During April 2018, the holder of the convertible note elected to convert a total of $20,000 in convertible debt principal, leave a principal balance of $30,000 at March 31, 2019 and December 31, 2018. 

For all the above noted convertible debentures, 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 reset provision in the conversion price, the conversion options embedded in these instruments are classified as a liability in accordance with ASC 815 and were recognized as a debt discount on the date these notes were issued along with $12,500 of debt issuance costs.

During the three months ended March 31, 2019 and 2018, LKA recognized $5,635 and $9,988 of interest expense from the amortization of the debt discount, respectively.

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NOTE 4 -   DERIVATIVE LIABILITY

LKA analyzed the conversion options embedded in the convertible debentures for derivative accounting consideration under ASC 815, Derivative and Hedging , and determined that the instruments embedded in the above referenced convertible notes should be classified as liabilities and recorded at fair value due to reset provisions in the conversion prices.

During the three months ended March 31, 2019, LKA recorded a gain of $2,465 and d uring the three months ended March 31, 2018 , LKA recorded a loss of $3,031 on mark-to-market of the conversion options.

The following table summarizes the derivative liabilities included in the consolidated balance sheets at March 31, 2019:

Balance, December 31, 2018		$	54,653
Gain on change in fair value			(2,465	)
Balance, March 31, 2019		$	52,188

The Company valued its derivatives liabilities using the Black-Scholes option-pricing model.  Assumptions used during the three months ended March 31, 2019 include (1) risk-free interest rates of 2.48% - 2.88%, (2) lives of between 1.9 and 2.1 years, (3) expected volatility between 261% - 287%, (4) zero expected dividends, (5) conversion prices as set forth in the related instruments, and (6) the common stock price of the underlying share on the valuation dates.

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 discussions with Hinsdale County, Colorado officials, Colorado Department of Public Health & Environment Ute-Ulay project supervisor, 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, and all discussions with the above named agencies to date, LKA management believes it is unlikely there will be a material impact to its financial statements and no liability for this project has been recorded as of March 31, 2019. Actual completion of remediation work at the site was completed in late 2014 by the EPA. The EPA has not yet issued its notice of final determination.

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NOTE 6 -   WASTEWATER DISCHARGE LIABILITY

During the fourth quarter of 2014, LKA received a Notice of Violation (NOV) from the Colorado Department of Health and Environment (CDPHE) for failure to meet certain requirements of the Company's wastewater discharge permit. During 2016, the Company undertook all corrective actions specified in the NOV, under CDPHE oversight, and believes it is in compliance with the terms of its permit. Work is required to modify and upgrade the mine's water treatment process in 2019 to meet regulatory requirements and bring LKA back into compliance with its discharge permit requirements. Until this work is completed to the satisfaction of CDPHE, the Company is considered to be in a "non-compliance" status with the terms of its discharge permit and additional penalties could be assessed beyond those described (anticipated) above. Engineering and lab testing is ongoing and further modifications (upgrades) to the Company's water treatment system is scheduled for late spring or early summer of 2019. Once completed, LKA expects improvements to its water treatment system will meet or exceed regulatory requirements. It is currently expected that any financial penalty assessed and any further corrective actions will not likely cost less than $75,000 but not more than $150,000. If LKA is unsuccessful in achieving full compliance with permit requirements, it may be subject to additional penalties or revocation of its discharge permit. As a result, LKA has accrued a liability of $99,974 and $99,974 as of March 31, 2019 and December 31, 2018, respectively, as there is no better estimate of the amount of loss within this range.

NOTE 7 -                        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.  However, LKA has recently accumulated significant losses,   has a working capital deficit and has negative cash flows from operations, which raise substantial doubt about its ability to continue as a going concern.  Management's plans with respect to alleviating the adverse financial conditions that caused management to express 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 completed a $500,000 capital funding raise in April 2018 and will need raise additional funds to support operations during 2019. 

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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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

For The Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018

LKA had no revenues during the three months ended March 31, 2019 and 2018.

Exploration expenses were minimal in the three months ended March 31, 2019 and none during the three months ended March 31, 2018 as e xploration was temporarily ceased in late 2017 .

Professional fees increased by $13,735 during the three months ended March 31, 2019 to $16,510 compared to the three months ended March 31, 2018.

General and administrative expenses decreased by $4,262 in the three months ended March 31, 2019 to $15,798 compared to the three months ended March 31, 2018.

Officer salaries and bonuses decreased $201,425, or 84% during the three months ended March 31, 2019, compared to $238,925 during the three months ended March 31, 2018. The decrease is due to the valuation of 1,750,000 shares of common stock issued to our President and Chairman as a bonus valued at $201,425 during the three months ended March 31, 2018, we had no such charges during the current period.

We incurred an operating loss of $69,844 during the three months ended March 31, 2019, as compared to an operating loss of $261,760 in the three months ended March 31, 2018. The $191,916, or approximately 73% decrease, is mainly due to the decrease in officer salaries and bonuses during the three months ended March 31, 2019, partially offset by increases in professional fees as compared to the prior period.

We incurred total other expense of $7,119 during the three months ended March 31, 2019, as compared to $883,450 in other expenses in the three months ended March 31, 2018. The $876,331, or approximately 99% increase, is mainly due to a $561,429 decrease in interest expense in the three months ended March 31, 2019 as compared to 2018, as well as the recognition of a one-time loss on debt conversion of $309,406 during the three months ended March 31, 2018. The decreases were partially offset by a $5,496 decrease in the loss on derivative.  The decrease in interest expense is mainly due the recognition of $547,896 in debt issuance and discount amortization during the three months ended March 31, 2018 related to the conversion of several convertible notes prior to expiration.

Net loss totaled $76,963, or $0.00 per share, in the three months ended March 31, 2019, compared to a net loss of $1,145,210, or $0.06 per share in the three months ended March 31, 2018.

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Liquidity

Current assets at March 31, 2018 totaled $26,412 in cash and $11,000 in prepaid expenses, as compared to $61,696 in cash and $833 in prepaid expenses at December 31, 2018.

During the three months ended March 31, 2019, our operating activities used net cash of $35,284 compared to $17,657 in the comparable 2018 period.  No cash was provided by investing activities in either period, while financing activities provided no cash in the three months ended March 31, 2019 and $17,657 during the three months ended March 31, 2018 from the issuance of related party debt.

At March 31, 2019, the Company had a working capital deficit of $480,608, as compared to $411,437 at December 31, 2018.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not required.

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 March 31, 2019, our disclosure controls and procedures were not effective as the Company lacks appropriate segregation of duties and has an insufficient number of employees responsible for the accounting and financial reporting functions.  A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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.

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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.

None; not applicable

Item 3. Defaults Upon Senior Securities.

None; not applicable

Item 4. Mine Safety Disclosures.

The Company is the owner of the Golden Wonder Mine (the "Mine") located near Lake City, Colorado. The Mine is subject to the jurisdiction and regulation of the Mine Safety and Health Administration, ("MSHA") a division of the U.S. Department of Labor. As of the date of this report, the Mine is in compliance with all mine safety requirements of MSHA.

Item 5. Other Information.

During the three months ended March 31, 2019, there were no material changes to the procedures by which security holders may recommend nominees to the Registrant's Board of Directors.

Item 6. Exhibits.

Exhibit No.                         Identification of Exhibit

31.1   31.2   32	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 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.  These exhibits will be added in a future amended filing.

 

 

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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:	May 20, 2019		By:	/s/Kye Abraham
				Kye Abraham, President, Chairman of the Board and Director
Date:	May 20, 2019		By:	/s/Nanette Abraham
				Nanette Abraham, Secretary, Treasurer and Director

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