UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172019

[  ] 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)

3724 47^th Street Ct. N.W.

(Address of principal executive offices)

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Not applicable.

APPLICABLE ONLY TO CORPORATE ISSUERS

PART I

LKA GOLD INCORPORATED

Consolidated Balance Sheets

(Unaudited)

LKA GOLD INCORPORATED

Consolidated Balance Sheets (Continued)

(Unaudited)

LKA GOLD INCORPORATED

Consolidated Statements of Operations

(Unaudited)

LKA GOLD INCORPORATED

Consolidated Statements of Cash Flows

(Unaudited)

LKA GOLD INCORPORATED

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 ninesix months ended SeptemberJune 30, 20172019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2019.

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 and six months ended June 30, 2019 and 2018 as such shares would have been reclassified to conform to the current year presentation.had an anti-dilutive effect:

NOTE 2 -       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. During the nine months ended September 30, 2017,LKA owes Abraham & Co., Inc. agreed to exchange $25,500 in outstanding accounts payable for 56,818 shares of LKA common stock valued at the market price on the grant date$7,947 and recognized $25,500 in accounts payable extinguishment and $10,863 in expense related to market discount. LKA owed Abraham & Co. $19,305 and $31,500$6,447 as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.

At SeptemberJune 30, 20172019 and December 31, 2016,2018, LKA owes $0$2,378 and $5,500, respectively, for short-term operating capital notes payable to LKA's President, Kye Abraham.  During the nine months ended September 30, 2017, LKA borrowed an additional $1,100 and repaid the entire $6,600.

During the nine months ended SeptemberAt June 30, 2017, LKA's President, Kye Abraham agreed to convert $150,000 in accrued unpaid salary into a convertible debenture. At September 30, 20172019 and December 31, 2016,2018, LKA owed Kye Abraham $75,757 and $163,257 in unpaid salary, respectively.

NOTE 3 -        CONVERTIBLE DEBENTURES

During October 2015, LKA issued a 7.5% Convertible Debentureconvertible debenture for $50,000 in cash.  The Convertible Debentureconvertible debenture accrues interest at 7.5% per annum, due in semi-annual payments, 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 threefive 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, 2021.2020. 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 semi-annual basis and LKA is required to retain a reserve amountsemiannual basis. During April 2018, the holder of the proceedsconvertible note elected to payconvert a total of $20,000 in convertible debt principal, leave a principal balance of $30,000 at June 30, 2019 and December 31, 2018. 

For the first two semi-annualOctober 2015 convertible debenture, if any event of default occurs, the interest payments, which, ifrate increases to 15% per annum.  During the Convertible Debentures are converted within one year, will be paiddefault period, the convertible note holder shall hold voting power equal to the Convertible Debenture holders. Asvoting power of the number of common shares of the Company into which the note is convertible at the default conversion rate. Also, during the default period the holders of all 7.5% convertible debentures as a class may appoint a representative that shall be an observer to the Board of Directors until such LKA has designated $3,750time as restricted cash at September 30, 2017.the default conditions no longer exist.

During the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, LKA recognized 8,659$7,606 and $3,107$27,901 of interest expense from the amortization of the debt discount.discount, respectively.

NOTE 4 -       DERIVATIVE LIABILITY

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

During April 2019, as a result of default on a $50,000 convertible note, the previously variable conversion prices.  

During the ninesix months ended SeptemberJune 30, 20172019, LKA recorded a loss of $20,930 and during the six months ended June 30, 2018, $494,995LKA recorded a gain of gain was recorded$2,339 on mark-to-market of the conversion options, respectively.options.

The following table summarizes the derivative liabilities included in the consolidated balance sheets at SeptemberJune 30, 2017 and December 31, 2016:2019:

The Company valued its derivatives liabilities using the Black-Scholes option-pricing model.  Assumptions used during the ninesix months ended SeptemberJune 30, 20172019 include (1) risk-free interest rates of between 1.31% and 1.93%1.75% - 2.38%, (2) lives of between 1.010.84 and 4.061.99 years, (3) expected volatility between 214%258% - 446%386%, (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.

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 SeptemberJune 30, 2017.2019. Actual completion of remediation work at the site was completed in late 20132014 by the EPA. The EPA has not yet issued its notice of final determination.

NOTE 6 -        WASTEWATER DISCHARGE LIABILITYCOMMITMENTS AND CONTINGENCIES

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. Additional workWork is going to be required to modify and upgrade the mine's water treatment process in 20172019 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 2019. Once completed, LKA expects improvements to its water treatment system will meet or exceed regulatory requirements. It is currently expected that discussions with the CDPHE will be concluded by the end of 2017 and 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 isin 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 $120,416$99,182 and $75,000$99,974 as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively, as there is no better estimate of the amount of loss within this range.

During November 2018, LKA was served with a vendor lawsuit, resulting in a judgement against the Company in the amount of approximately $141,000, including attorney fees. As a result, LKA accrued a total of $141,000 in accounts payable as of December 31, 2018 to cover the full amount of the judgement. During the ninesix months ended SeptemberJune 30, 2017, due2019, LKA believes it has incurred an additional $9,000 in expenses related to the ultimate settlement and accordingly accrued an increaseadditional $9,000 in estimated costs to meet proposed corrective actions, LKA increase the accrual by $75,000. During the nine months ended Septemberaccounts payable as of June 30, 2017, LKA spent approximately $29,5842019. The amount accrued in remediation expensesaccounts payable was $141,000 and the liability balance is $120,416 at September$150,000 as of December 31, 2018 and June 30, 2017.2019, respectively.

NOTE 7 -     MINE EXPLORATION AND OPTION AGREEMENT

LKA's consolidated financial statements are prepared using Generally Accepted Accounting Principlesgenerally 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:

In order to support continued operation of the mine, LKA completed a $200,000 capital fundingwill need to raise in March 2017, an additional $50,000 in April 2017 andfunds to support operations during July 2017, entered into a limited private offering of its common stock to sell to certain accredited investors, "Units" priced at $0.48 each with a minimum investment of $10,000 with additional investment in increments of $5,000. Each Unit consists of one share of LKA Gold common stock and a "Warrant" to purchase an additional LKA Gold share of common at $.60 (exercise price) for a period of two years from date of original subscription. During September, in conjunction with the termination of the Kinross exploration agreement, LKA terminated the limited private offering (see Note 7).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.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Item 4.  Controls and Procedures.

PART II - OTHER INFORMATION

Exhibit No.                         Identification of Exhibit

SIGNATURES

LKA GOLD INCORPORATED