PART I

Item 1.  Financial Statements

The Financial Statements of LKA International, Inc., 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 INTERNATIONAL, INC.

Consolidated Balance Sheets

(Unaudited)

ASSETS

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

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LKA INTERNATIONAL, INC.

Consolidated Balance Sheets (Continued)

(Unaudited)

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

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

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LKA INTERNATIONAL, INC.

Consolidated Statements of Operations

(Unaudited)

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

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LKA INTERNATIONAL, INC.

Consolidated Statements of Cash Flows

(Unaudited)

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

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LKA INTERNATIONAL, INC.

Notes to the Consolidated Unaudited Financial Statements

March 31, 2012

NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

LKA International, Inc. (“LKA” or the “Company”) is currently engaged in efforts to expand mine production and continues to seek additional investment opportunities.

The accompanying unaudited condensed 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 condensed 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 condensed consolidated financial statements be read in conjunction with LKA’s most recent audited financial statements.  Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.  

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 -

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 three months ended March 31, 2012.  Accrued interest related to this note totaled $77,758 and $76,337 as of March 31, 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 three months ended March 31, 2012.  Accrued interest related to this note totaled $9,842 and $9,963 as of March 31, 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 accrues interest at 10% per annum, is secured by a first charge over LKA mining property and claims in Hinsdale County, Colorado and is 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.  The amount of the payments are to be determined as the higher of either (i) the value of 140 ounces of gold as determined by the closing spot price on the Commodity  Exchange, Inc. (COMEX) on the business day immediately preceding the installment due date, or (ii) one-fifth (1/5) of the total principal amount, together with accrued interest thereon.

During January 2010, LKA made a partial payment of $92,064 on the Note, of which $16,644 was applied against the derivative liability, $27,778 was applied against accrued interest and $47,642 was applied to principal.  

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LKA INTERNATIONAL, INC.

Notes to the Consolidated Unaudited Financial Statements

March 31, 2012

NOTE 2 -

RELATED PARTY TRANSACTIONS (CONTINUED)

PanAmerican Capital Group (Continued)

Due to delays in mine production, PanAmerica agreed to allow LKA to defer a portion of the first installment payment due January 4, 2010. The second installment payment due April 5, 2010 and third installment due on July 5, 2010, were also deferred until August 15, 2010. In consideration for these payment deferrals LKA agreed to make certain additional interest payments and to provide additional collateral/security on any unpaid balances due as of August 15, 2010. LKA and PanAmerican entered into a Waiver Agreement on June 10, 2010 whereby PanAmerican waived its Enforcement Rights with respect to the delinquent payments on the Note in consideration for the following:

(a)

LKA must pay all amounts payable in respect of the installment payments otherwise due under the Note on January 4, 2010, April 5, 2010 and July 5, 2010 to PanAmerican on or before August 15, 2010;

(b)  on or before August 15, 2010, LKA must pay to PanAmerican, in addition to the amounts otherwise payable under subsection (a) above, an amount equal to 2% per month of any unpaid installment payments, calculated with respect to any such unpaid installment payment, from the date such installment payment was otherwise due; and

(c)  (i) LKA must issue to PanAmerican one unregistered and restricted share of LKA common stock for each dollar of unpaid installment payments otherwise due as of the date of the Waiver Agreement; and (ii) on July 5, 2010, issue to the PanAmerican one unregistered and restricted share of LKA common stock for each dollar of the installment payment otherwise due as of July 5, 2010.  The shares are to be held by PanAmerican as security and are to be surrendered to LKA for cancellation upon satisfaction of the Borrower of the obligations set forth in (a) and (b) above. In circumstances where such obligations are not satisfied the Holder shall be entitled to retain such Shares as beneficial owner thereof provided that such retention shall not otherwise relieve the Borrower from its obligations under the Note or the Waiver Agreement.

As a result of LKA’s failure to pay the required installment payment on August 15, 2010, 220,453 and 169,652 shares of LKA common stock were surrendered to PanAmerican with a fair value of $358,897.  The fair value of these shares was recorded as debt default expense for the year ended December 31, 2010.   

LKA failed to make the required final note installment payment due January 4, 2011.  To-date, PanAmerican has not made any demands on the past due installments and LKA continues to pursue a resolution with the debt holder. 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.  Total accrued interest on the Waiver Agreement and past due note balance was $304,457 and $258,478 at March 31, 2012 and December 31, 2011, respectively.  Interest expense on the Note totaled $45,980 and $45,980 for the three months ended March 31, 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. $35,500 and $31,000 in past due amounts as of March 31, 2012 and December 31, 2011, respectively.

At March 31, 2012 and December 31, 2011, LKA owes $40,260 and $36,205, respectively, for purchases made on the personal credit card of LKA’s president, Kye Abraham.  Additionally, LKA owed Kye Abraham $12,500 and $12,500 for non-interest bearing, short-term operating loans to LKA at March 31, 2012 and December 31, 2011, respectively, and $170,112 and $166,567 in unpaid salary at March 31, 2012 and December 31, 2011, respectively,

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LKA INTERNATIONAL, INC.

Notes to the Consolidated Unaudited Financial Statements

March 31, 2012

NOTE 3 -

SIGNIFICANT EVENTS

Precious Metals Sales

During January 2012, LKA delivered a total of approximately 85.8 dry short tons of precious metals ore for processing at a value of $193,893.  

Common Stock Warrants

During February 2012, LKA entered into an agreement with Rauno Perttu to act as Chief Geologist and special advisor to the LKA board of directors, with the election of being appointed to a position on the LKA board in the future.  As part of the consulting agreement, Mr. Perttu is to be paid consulting fees for any work done on projects pre-approved by the LKA board of directors.  An initial incentive compensation for his services, LKA agreed to issue Mr. Perttu warrants to purchase up to 500,000 shares of LKA stock in three tranches on a three-year vesting schedule as follows:

Warrant I for 200,000 shares exercisable at $0.40 per share, to be issued as of March 1, 2012.

Warrant II for 150,000 shares exercisable at $0.60 per share, to be issued one year later, or March 1, 2013.

Warrant III for 150,000 shares exercisable at $0.80 per share, to be issued one year later, or March 1, 2014.

Each warrant will have a term of two and one-half years.  In the event the shares underlying the warrants, and the closing price of the common stock of the Company has been $3.00 per share or higher for 10 trading days within a 30 day trading period subject to minimum trading volumes, LKA shall be able to redeem the Warrants at $0.001 per warrant. Such redemption notification shall be provided to warrant holders 20 days prior to redemption upon which Investors may exercise warrants.

The Warrant I - III tranches were valued at $44,791, $29,769 and $26,947 using the Black-Scholes option fair value pricing model using the following assumptions:

During the period ended March 31, 2012, LKA expensed $44,791 related to Warrant I, $3,721 and $1,684 for Warrants II and III, respectively, related to the Perttu warrants. The value of Warrants II and II are being recognized ratably over the vesting term of one and two years, respectively.  

During the period ended March 31, 2012, LKA expensed $16,239 and $7,573 for Warrants II and III, respectively, issued to Francois Viens in April 2011. The value of Warrants II and II are being recognized ratably over the vesting term of one and two years, respectively.  

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LKA INTERNATIONAL, INC.

Notes to the Consolidated Unaudited Financial Statements

March 31, 2012

NOTE 4 -

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 and has negative working capital.  All of these items 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 intensive exploration program at the Golden Wonder mine with the objective of returning the mine to a 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 pursue potential third party operator or lease agreements for the property.

In order to support continued operation of the mine, LKA entered into several financing transactions during the year ended December 31, 2011 and plans on raising additional funding during 2012 to support the continued exploration of the Golden Wonder mine.  If LKA is not successful in the resumption of mine operations which produce positive cash flows from operations, LKA may be forced to continue to raise additional equity or debt financing to fund its ongoing obligations or risk ceasing doing business.  

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, 2012 Compared to The Three Months Ended March 31, 2011.

During the quarterly period ended March 31, 2012, we received $193,893 from gold ore sales vs. $136,736 in the period ended March 31, 2011. This increase in sales was due to the Company’s shift in emphasis, from a focus on underground drilling and reduced mining activity in the year-ago period to a re-emphasis on mining activity in the 2012 period.  Currently, mining (exploratory) and related operations have resumed to normal and expected levels. First quarter ore sales were derived from ore processed and shipped, but not settled, during the fourth quarter of 2011.

Ore shipments made during the current quarter yielded 344 ounces vs. 122 ounces delivered/sold during the first quarter of 2011. These shipments remained unsettled as of March 31, 2012 and were recorded “settled” in the subsequent quarter. The gross value of gold ore delivered was $575,462 before processing and milling charges. This represents a 215% increase over the same period a year ago. Average ore grades from first quarter ore deliveries were 2.48 ounces (70.31 grams) gold per ton, which significantly exceeded the 2011 full-year average grade of 1.46 ounces (41.39 grams). This is partially attributed to the sporadic but increasing occurrence of high-grade ore pockets encountered as crews advance along the Golden Wonder vein structure beyond the previously known production zones.

First quarter 2012 ore shipments were made to Kinross' Kettle River milling facility in Republic, Washington.

Operating expenses increased from $356,079 in the quarterly period ended March 31, 2011, to $447,321 in the current quarter. This increase was mainly due to a $89,650 increase in exploration and related costs for the Golden Wonder Mine. Exploration and related costs increased to $264,829 in the quarter ended March 31, 2012, from $175,179 in the year-ago quarter.  Professional and consulting fees increased to $99,146 in the three months ended March 31, 2012, compared to $85,262 in the 2011 period.  General and administrative expenses decreased to $35,565 from $46,587 in the quarterly periods ended March 31, 2012, and 2011, respectively.  Royalty expenses decreased from $11,551 in the quarterly period ended March 31, 2011, to $10,281 in the quarterly period ended March 31, 2012.  Officer salaries remained $37,500 in both of these three month periods.  We realized operating loss of $253,438 during the quarter ended March 31, 2012, as compared to operating loss of $219,343 in the comparable period in 2011.

Interest expense totaled $57,429 and $60,681 in the quarterly periods ended March 31, 2012, and 2011, respectively.  Interest income was $8 in the three months ended March 31, 2012, and $0 in the three months ended March 31, 2011.

Net loss totaled $310,849, or $0.02 per share, in the three months ended March 31, 2012, compared to a net loss of $280,024, or $0.02 per share, in the three months ended March 31, 2011.

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Liquidity

Current assets at March 31, 2012, totaled $440.  As of that date, we had $440 in cash, as compared to $143,331 at December 31, 2011.

During the three months ended March 31, 2012, our operating activities used net cash of $142,891.  In the comparable 2011 period, by contrast, operating activities used net cash of $18,848.  Investing activities and financing activities had no effect on our cash flows in the three months ended March 31, 2012, or the three months ended March 31, 2011.

At March 31, 2012, the Company had a working capital deficit of $1,957,575, as compared to working capital deficit of $1,731,057 at December 31, 2011.

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, 2012, our disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

Our management, with the participation of the chief executive officer and chief financial officer, has concluded 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None; not applicable.

Item 1A.  Risk Factors.

Not required.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In February, 2012, LKA granted to Rauno Perttu warrants to purchase up to 500,000 “unregistered” and “restricted” shares of common stock as compensation for his services as Chief Geologist and special advisor to the LKA Board of Directors. The warrants vest in three tranches on a three-year vesting schedule as follows:

Warrant I for 200,000 shares exercisable at $0.40 per share, to be issued as of March 1, 2012.

Warrant II for 150,000 shares exercisable at $0.60 per share, to be issued one year later, or March 1, 2013.

Warrant III for 150,000 shares exercisable at $0.80 per share, to be issued one year later, or March 1, 2014.

Each warrant will have a term of two and one-half years.  In the event the shares underlying the warrants, and the closing price of the common stock of the Company has been $3.00 per share or higher for 10 trading days within a 30 day trading period subject to minimum trading volumes, LKA shall be able to redeem the warrants at $0.001 per warrant. Such redemption notification shall be provided to the warrant holder 20 days prior to redemption upon which the warrants may be exercised.

Item 3. Defaults Upon Senior Securities.

As of the date of this Quarterly Report, PanAmerican Capital Group, Inc. has not made any demands on the past due installments on its promissory note, and LKA continues to pursue a resolution with PanAmerican.  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.  Total accrued interest on the Waiver Agreement and past due note balance was $304,457 and $258,478 at March 31, 2012, and December 31, 2011, respectively. Interest expense on the Note totaled $45,980 and $45,980 for the three months ended March 31, 2012 and 2011, respectively.

On June 18, 2011, the Company received formal written notice from C.K. Cooper & Company, Inc., that C.K. Cooper considered the  Company’s convertible promissory notes in the principal amounts of $56,000 and $168,000 to be in default. On June 23, 2011, the Company filed a Current Report on Form 8-K with respect to this matter.

None, not applicable.

Item 5. Other Information.

During the quarterly period ended March 31, 2012, 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

*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.

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 INTERNATIONAL, INC.

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