Attached files
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| EXCEL - IDEA: XBRL DOCUMENT - LKA GOLD Inc /DE/ | Financial_Report.xls |
| EX-31.2 - EX 31.2 - LKA GOLD Inc /DE/ | exthirtyonetwo.htm |
| EX-31.1 - EX 31.1 - LKA GOLD Inc /DE/ | exthirtyoneone.htm |
| EX-32 - EX 32 - LKA GOLD Inc /DE/ | exthirtytwo.htm |
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, 2014
[ ] 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)
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Delaware
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91-1428250
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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3724 47th Street Ct. N.W.
Gig Harbor, Washington 98335
(Address of principal executive offices)
(253) 514-6661
(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 [ ] Smaller reporting company [X]
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 14, 2014 – 15,494,240 shares of common stock.
- 1 -
PART I
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.
- 2 -
LKA GOLD INCORPORATED
Consolidated Balance Sheets
ASSETS
| March 31, 2014 | December 31, 2013 | ||||||||
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CURRENT ASSETS
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(Unaudited)
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||||||||
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Cash
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$ | 3,741 | $ | 8,740 | |||||
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Restricted cash
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- | 42,907 | |||||||
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Accounts receivable
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34,580 | 38,638 | |||||||
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Total Current Assets
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38,321 | 90,285 | |||||||
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FIXED ASSETS
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||||||||
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Land, equipment and mining claims
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807,085 | 807,085 | ||||||
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Accumulated depreciation
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(301,831 | ) | (292,856 | ) | ||||
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Total Fixed Assets, Net of Accumulated Depreciation
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505,254 | 514,229 | ||||||
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OTHER NON-CURRENT ASSETS
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||||||||
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Reclamation bonds
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123,597 | 123,597 | ||||||
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TOTAL ASSETS
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$ | 667,172 | $ | 728,111 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
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||||||||
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Accounts payable
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$ | 254,667 | $ | 272,579 | ||||
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Accounts payable – related party
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69,999 | 102,497 | ||||||
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Note payable
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10,000 | 10,000 | ||||||
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Accrued wages and advances payable to officer
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180,559 | 161,866 | ||||||
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Total Current Liabilities
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515,225 | 546,942 | ||||||
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NON-CURRENT LIABILITIES
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Asset retirement obligation
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128,445 | 127,310 | ||||||
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Total Liabilities
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643,670 | 674,252 | ||||||
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Commitments and Contingencies
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STOCKHOLDERS' EQUITY
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Preferred stock; $0.001 par value, 50,000,000 shares authorized, 0 and
1,800 shares issued and outstanding, respectively
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- | 2 | ||||||
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Common stock, $0.001 par value, 50,000,000 shares authorized,
15,494,187 and 14,976,556 shares issued and 10,950,563 and 10,432,932
shares outstanding, respectively
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15,494 | 14,977 | ||||||
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Additional paid-in capital
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16,653,834 | 16,428,239 | ||||||
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Treasury stock; 43,624 and 43,624 shares at cost, respectively
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(86,692 | ) | (86,692 | ) | ||||
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Accumulated deficit
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(16,559,134 | ) | (16,302,667 | ) | ||||
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Total Stockholders' Equity
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23,502 | 53,859 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 667,172 | $ | 728,111 | ||||
.The accompanying notes are an integral part of these unaudited consolidated financial statements.
- 3 -
LKA GOLD INCORPORATED
Consolidated Statements of Operations
(Unaudited)
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For the Three Months Ended
March 31,
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2014
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2013
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REVENUES
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Sales - precious metals
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$ | 184,036 | $ | 289,026 | ||||
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EXPLORATION COSTS
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(148,631 | ) | (217,511 | ) | ||||
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GROSS MARGIN
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35,405 | 71,515 | ||||||
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OPERATING EXPENSES
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General and administrative
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51,929 | 32,899 | ||||||
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Officer salaries
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37,500 | 37,500 | ||||||
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Professional and consulting
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200,543 | 50,563 | ||||||
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Total Operating Expenses
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289,972 | 120,962 | ||||||
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OPERATING LOSS
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(254,567 | ) | (49,447 | ) | ||||
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OTHER INCOME (EXPENSE)
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Stock based expense for shares not subject to reverse split
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- | (2,756,000 | ) | |||||
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Interest expense
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(1,902 | ) | (831 | ) | ||||
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Interest income
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2 | 2 | ||||||
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Total Other Income (Expense)
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| (1,900 | ) | (2,756,829 | ) | |||||
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NET LOSS
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$ | (256,467 | ) | (2,806,276 | ) | |||
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BASIC NET LOSS PER SHARE
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$ | (0.02 | ) | $ | (0.19 | ) | ||
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BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
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15,197,796 | 14,816,023 | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
- 4 -
LKA GOLD INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
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For the Three Months Ended
March 31,
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net loss
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$ | (256,467 | ) | $ | (2,806,276 | ) | ||
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Items to reconcile net loss to net cash provided (used) by operating activities:
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Accretion of asset retirement obligation
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1,135 | 1,056 | ||||||
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Depreciation and amortization
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8,975 | 8,974 | ||||||
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Common stock and warrants issued for services
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183,593 | 14,663 | ||||||
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Common shares issued for expenses
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9,125 | - | ||||||
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Stock based expense for shares not subject to reverse split
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- | 2,756,000 | ||||||
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Changes in operating assets and liabilities
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Decrease in accounts receivable
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4,058 | 16,779 | ||||||
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Increase in prepaid and other assets
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- | (9,284 | ) | |||||
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Decrease in accounts payable and accounts payable – related party
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(13,910 | ) | (57,680 | ) | ||||
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Increase in accrued expenses
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18,692 | 7,175 | ||||||
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Net Cash Used by Operating Activities
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(44,799 | ) | (68,593 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Restricted cash
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42,907 | - | ||||||
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Net Cash Provided by Investing Activities
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42,907 | - | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Payment of preferred stock dividends
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(3,107 | ) | - | |||||
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Net Cash Used by Financing Activities
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(3,107 | ) | - | |||||
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DECREASE IN CASH
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(4,999 | ) | (68,593 | ) | ||||
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CASH AT BEGINNING OF PERIOD
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8,740 | 87,329 | ||||||
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CASH AT END OF PERIOD
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$ | 3,741 | $ | 18,736 | ||||
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CASH PAID FOR:
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Interest
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$ | 300 | $ | 300 | ||||
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Income taxes
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- | - | ||||||
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
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Stock issued to settle AP
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$ | 36,500 | $ | - | ||||
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Conversion of preferred shares to common shares
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44 | - | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
- 5 -
LKA GOLD INCORPORATED
Notes to the Consolidated Unaudited Financial Statements
March 31, 2014
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
LKA Gold Incorporated (Formerly 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, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
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. LKA owed Abraham & Co. $19,500 and $51,500 as of March 31, 2014 and December 31, 2013, respectively. During February 2014, LKA issued 108,631 shares, valued at $45,625, to settle accrued payables of $36,500 and expense of $9,125.
Related Party Debt – Accounts and Wages Payable
At March 31, 2014 and December 31, 2013, LKA owes $50,499 and $50,997, respectively, for purchases made on the personal credit card of LKA’s President, Kye Abraham. Additionally, LKA owed Kye Abraham $180,559 and $161,866 in unpaid salary at March 31, 2014 and December 31, 2013, respectively.
NOTE 3 - SIGNIFICANT EVENTS
Precious Metals Sales
During January through March 2014, LKA delivered a total of approximately 91.31 dry short tons of precious metals ore for processing at a net revenue value of $184,036. At March 31, 2014 and December 31, 2013, LKA had metal sales receivables of $34,580 and $38,638, respectively.
- 6 -
NOTE 4 - COMMON STOCK AND COMMON STOCK OPTIONS AND WARRANTS
Common Stock
During January 2014, LKA issued 25,000 shares of common stock for services to a consultant. LKA recognized $12,748 in non-cash consulting expense, or $0.51 per share.
During February 2014, LKA issued a total of 339,000 shares of common stock for services to four consultants. LKA recognized $169,161 in non-cash consulting expense
During February 2014, LKA issued 108,631 shares of common stock for accrued office space rent to Abraham & Company, a related party entity, valued at $45,625, for accrued amounts of $36,500 and expense of $9,125.
During February 2014, the holder of 1,800 shares of Preferred Stock elected to convert all of the Preferred Stock into 45,000 shares of common stock.
Common Stock Options and Warrants
During April 2011, LKA entered into an interim consulting agreement with Francois Viens to act as a 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 an initial incentive compensation for his services, LKA issued Mr. Viens warrants to purchase up to 250,000 shares of LKA stock in three tranches on a three-year vesting. Each warrant has 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 $6.00 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. The value of the warrants was recognized as expense ratably over the vesting term. During the three months ended March 31, 2013, LKA expensed $7,573 related to the warrant vesting.
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 an initial incentive compensation for his services, LKA agreed to issue Mr. Perttu warrants to purchase up to 250,000 shares of LKA stock in three tranches on a three-year vesting schedule. Each warrant has 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 $6.00 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. The value of the warrants was recognized as expense ratably over the vesting term. During the three months ended March 31, 2014 and 2013, LKA expensed $1,684 and $3,369 related to the warrants, respectively.
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NOTE 5 - 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, 2013, and plans on raising additional funding during 2014 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, 2014 Compared to The Three Months Ended March 31, 2013
During the three months ended March 31, 2014, we recognized revenue of $184,036 from the sale of gold ore, compared to $289,026 in the three months ended March 31, 2013, a decrease of approximately 36%. Ore sales result from our exploration activities at the Golden Wonder mine.
Exploration expenses decreased from to $217,511 in the three months ended March 31, 2013, to $148,631 in the three months ended March 31, 2014, or approximately 32%.
Professional fees increased by $149,980, or approximately 297%, mainly due to the recognition of $183,593in non-cash equity compensation expense to consultants during the three months ended March 31, 2014.
General and administrative expenses increased by $19,030, or approximately 58% in the three months ended March 31, 2014, mainly due to a $24,471 increase in investor relations expenses during the three months ended March 31, 2014 compared to the three months ended March 31, 2013.
We incurred an operating loss of $254,567 during the three months ended March 31, 2014, as compared to an operating loss of $49,447 in the three months ended March 31, 2013. The increase is mainly due to the recognition of $183,593 in non-cash equity compensation expense to consultants during the three months ended March 31, 2014.
Our total other expenses decreased to $1,900 during the three months ended March 31, 2014, as compared to $2,756,829 in the three months ended March 31, 2013, mainly as a result of $2,756,000 in one-time non-cash stock based expenses recognized during the three months ended March 31, 2013.
Interest expense increased to $1,902 during the three months ended March 31, 2014, as compared to $831 in the three months ended March 31, 2013.
Net loss totaled $256,467, or $0.02 per share, in the three months ended March 31, 2014, compared to a net loss of $2,806,279, or $0.19 per share, in the three months ended March 31, 2013.
- 9 -
Liquidity
Current assets at March 31, 2014 totaled $38,321. As of that date, we had $3,741 in cash and $34,580 in accounts receivable, as compared to $8,740 in cash, $42,907 in restricted cash, and $35,638 in accounts receivable at December 31, 2013.
During the three months ended March 31, 2014, our operating activities used net cash of $44,799, compared to $68,593 in the comparable 2013 period. Investing activities provided cash of $42,907 from changes in restricted cash during the period ended March 31, 2014, compared to $0 in the comparable 2013 period. Financing activities used $3,107 during the three months ended March 31, 2014, compared to no cash used by financing activities during the three months ended March 31, 2013.
At March 31, 2014, the Company had a working capital deficit of $476,904, as compared to working capital deficit of $456,657 at December 31, 2013.
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, 2013, 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 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.
- 10 -
PART II - OTHER INFORMATION
None; not applicable.
Item 1A. Risk Factors.
Not required.
During January 2014, LKA issued 25,000 shares of common stock for services to a consultant. LKA recognized $12,748 in non-cash consulting expense, or $0.51 per share.
During February 2014, LKA issued a total of 339,000 shares of common stock for services to four consultants. LKA recognized $169,161 in non-cash consulting expense
During February 2014, LKA issued 108,631 shares of common stock for accrued office space rent to Abraham & Company, a related party entity, valued at $45,625, for accrued amounts of $36,500 and expense of $9,125.
During February 2014, the holder of 1,800 shares of Preferred Stock elected to convert all of the Preferred Stock into 45,000 shares of common stock.
All shares issued as described in this Item 2 were exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the “Act”) because they were issued pursuant to Section 4(2) of the Act since there was no public offering of the shares.
None; not applicable
None, not applicable.
During the three months ended March 31, 2014, there were no material changes to the procedures by which security holders may recommend nominees to the Registrant’s Board of Directors.
- 11 -
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31.1
31.2
32
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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.
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101.INS
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XBRL Instance Document*
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101.PRE.
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XBRL Taxonomy Extension Presentation Linkbase*
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101.LAB
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XBRL Taxonomy Extension Label Linkbase*
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase*
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase*
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101.SCH
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XBRL Taxonomy Extension Schema*
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*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 GOLD INCORPORATED
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Date:
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May 20, 2014
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By:
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/s/Kye Abraham
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Kye Abraham, President, Chairman of the Board and Director
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Date:
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May 20, 2014
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By:
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/s/Nanette Abraham
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Nanette Abraham, Secretary, Treasurer and Director
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