Attached files
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| EX-32.1 - CERTIFICATIONS PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 - MUSTANG ALLIANCES, INC. | f10q0311ex32i_mustang.htm |
| EX-31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 - MUSTANG ALLIANCES, INC. | f10q0311ex31i_mustang.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2011
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 333-148431
MUSTANG ALLIANCES, INC.
(Exact name of small business issuer as specified in its charter)
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Nevada
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74-3206736
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(State of incorporation)
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(IRS Employer ID Number)
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410 Park Avenue, 15th Floor
(Address of principal executive offices)
(888) 251-3422
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 17, 2011, 98,540,000 shares of common stock, par value $0.0001 per share, were issued and outstanding.
TABLE OF CONTENTS
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Page
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PART I
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1
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Item 1. Financial Statements
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1
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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7
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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13
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Item 4T. Controls and Procedures
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13
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PART II
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14
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Item 1. Legal Proceedings
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14
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Item IA. Risk Factors
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14
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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14
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Item 3. Defaults Upon Senior Securities
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14
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Item 4. Removed and Reserved
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14
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Item 5. Other Information
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14
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Item 6. Exhibits
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14
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
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ASSETS
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March 31, 2011
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December 31, 2010
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(Unaudited)
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Current Assets:
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Cash
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$ | 37,883 | $ | 6,767 | ||||
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Prepaid Expenses
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2,500 | - | ||||||
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Total Current Assets
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40,383 | 6,767 | ||||||
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Other Assets:
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Mining Leases
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5,000 | 2,500 | ||||||
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Total Other Assets
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5,000 | 2,500 | ||||||
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Total Assets
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$ | 45,383 | $ | 9,267 | ||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
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Current Liabilities:
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Accrued Expenses
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$ | 128,995 | $ | 39,111 | ||||
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Note Payable
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56,400 | 56,400 | ||||||
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Convertible Debt, Net of Discount of $19,290
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5,710 | - | ||||||
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Loans Payable
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23,471 | 23,471 | ||||||
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Due to Shareholder
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- | 6,000 | ||||||
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Total Current Liabilities
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214,576 | 124,982 | ||||||
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Long-Term Debt
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75,000 | 25,000 | ||||||
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Total Liabilities
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289,576 | 149,982 | ||||||
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Commitments and Contingencies
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Stockholders’ Deficiency:
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Preferred Stock, $.0001 par value; 5,000,000 shares
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authorized, none issued and outstanding
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- | - | ||||||
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Common Stock, $.0001 par value; 500,000,000 shares
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authorized, 97,260,000 shares issued and outstanding
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at March 31, 2011 and 107,200,000 December 31, 2010
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9,726 | 10,720 | ||||||
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Additional Paid-In Capital
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81,761 | 43,544 | ||||||
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Deficit Accumulated During the Development Stage
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(335,680 | ) | (194,979 | ) | ||||
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Total Stockholders’ Deficiency
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(244,193 | ) | (140,715 | ) | ||||
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Total Liabilities and Stockholders’ Deficiency
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$ | 45,383 | $ | 9,267 | ||||
The accompanying notes are an integral part of these financial statements.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
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For the Period
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For the Quarter Ended
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February 22, 2007
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March 31,
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(Inception) to
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2011
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2010
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March 31, 2011
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Net Revenues
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$ | - | $ | - | $ | - | ||||||
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Costs and Expenses:
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Professional and Consulting Fees
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20,571 | 8,279 | 189,667 | |||||||||
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General and Administrative Expenses
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46,709 | 325 | 57,286 | |||||||||
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Start Up Costs
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- | - | 1,145 | |||||||||
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Mining and Exploration Costs
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70,522 | - | 70,522 | |||||||||
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Total Costs and Expenses
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137,802 | 8,604 | 318,620 | |||||||||
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Operating Loss
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(137,802 | ) | (8,604 | ) | (318,620 | ) | ||||||
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Other (Expense):
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Interest Expense
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(2,466 | ) | (1,308 | ) | (16,627 | ) | ||||||
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Amortization of Debt Discount
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(433 | ) | - | (433 | ) | |||||||
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Total Other (Expense)
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(2,899 | ) | (1,308 | ) | (17,060 | ) | ||||||
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Net Loss
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$ | (140,701 | ) | $ | (9,912 | ) | $ | (335,680 | ) | |||
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Basic and Diluted Loss Per Share
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$ | (0.00 | ) | $ | (0.00 | ) | ||||||
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Weighted Average Common Shares Outstanding
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115,313,778 | 87,200,000 | ||||||||||
The accompanying notes are an integral part of these financial statements.
MUSTANG ALLIANCES, INC..
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO MARCH 31, 2011
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Deficit
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Additional
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Accumulated
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Common Stock
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Paid-In
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During the
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Shares
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Amount
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Capital
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Development Stage
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Total
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Balance, February 22 2007
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- | $ | - | $ | - | $ | - | $ | - | |||||||||||
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Common Stock Issued to Founders at
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$.0000125 Per Share, February 22, 2007
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64,000,000 | 6,400 | (5,600 | ) | - | 800 | ||||||||||||||
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Net Loss for the Period
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- | - | - | (4,498 | ) | (4,498 | ) | |||||||||||||
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Balance, December 31, 2007
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64,000,000 | 6,400 | (5,600 | ) | -4,498 | (3,698 | ) | |||||||||||||
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Common Stock Issued to Investors at $.002 Per
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Share, Net of Offering Costs, February 20, 2008
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22,400,000 | 2,240 | 42,724 | - | 44,964 | |||||||||||||||
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Common Stock Issued for Services at $.0075
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Per Share, February 25, 2008
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800,000 | 80 | 5,920 | - | 6,000 | |||||||||||||||
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Net Loss for the Year Ended December 31, 2008
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- | - | - | (91,106 | ) | (91,106 | ) | |||||||||||||
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Balance, December 31, 2008
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87,200,000 | 8,720 | 43,044 | (95,604 | ) | (43,840 | ) | |||||||||||||
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Net Loss for the Year Ended December 31, 2009
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- | - | - | (29,939 | ) | (29,939 | ) | |||||||||||||
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Balance, December 31, 2009
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87,200,000 | 8,720 | 43,044 | (125,543 | ) | (73,779 | ) | |||||||||||||
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Common Stock Issued for Mining Lease at $.000125
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Per Share, December 15, 2010
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20,000,000 | 2,000 | 500 | - | 2,500 | |||||||||||||||
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Net Loss for the Year Ended December 31, 2010
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- | - | - | (69,436 | ) | (69,436 | ) | |||||||||||||
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Balance, December 31, 2010
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107,200,000 | 10,720 | 43,544 | (194,979 | ) | (140,715 | ) | |||||||||||||
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Common Stock Issued for Mining Lease at $.000125
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Per Share, February 22, 2011 (Unaudited)
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20,000,000 | 2,000 | 500 | - | 2,500 | |||||||||||||||
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Sale of Stock and Warrants at $.25 Per Share,
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March 28, 2011 (Unaudited)
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60,000 | 6 | 14,994 | - | 15,000 | |||||||||||||||
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Retirement of 30,000,000 Shares of Common Stock
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as Contributed Capital on March 31, 2011 by Chief
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Executive Officer (Unaudited)
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(30,000,000 | ) | (3,000 | ) | 3,000 | - | - | |||||||||||||
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Discount on Convertible Debt (Unaudited)
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- | - | 19,723 | - | 19,723 | |||||||||||||||
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Net Loss for the Three Months Ended
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March 31, 2011 (Unaudited)
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- | - | - | (140,701 | ) | (140,701 | ) | |||||||||||||
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Balance, March 31, 2010 (Unaudited)
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97,260,000 | $ | 9,726 | $ | 81,761 | $ | (335,680 | ) | $ | (244,193 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
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For the Period
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For the Quarter Ended
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February 22, 2007
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March 31,
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(Inception) to
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2011
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2010
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March 31, 2011
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Cash Flows from Operating Activities:
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Net Loss
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$ | (140,701 | ) | $ | (9,912 | ) | $ | (335,680 | ) | |||
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Common Stock Issued for Services
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- | - | 6,000 | |||||||||
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Adjustments to Reconcile Net Loss to Net
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Cash Used in Operating Activities:
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Amortization of Debt Discount
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433 | - | 433 | |||||||||
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Changes in Assets and Liabilities:
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Increase in Prepaid Expenses
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(2,500 | ) | - | (2,500 | ) | |||||||
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Increase in Accrued Expenses
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89,884 | 9,387 | 128,995 | |||||||||
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Net Cash Used in Operating Activities
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(52,884 | ) | (525 | ) | (202,752 | ) | ||||||
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Cash Flows from Investing Activities:
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- | - | - | |||||||||
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Cash Flows from Financing Activities:
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Proceeds of Borrowings
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75,000 | 525 | 185,871 | |||||||||
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Proceeds from Sale of Common Stock
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and Warrants
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15,000 | - | 85,800 | |||||||||
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Payments of Deferred Offering Costs
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- | - | (25,000 | ) | ||||||||
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Expenses of Offering
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- | - | (36 | ) | ||||||||
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Repayment of Due to Shareholder
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(6,000 | ) | - | (6,000 | ) | |||||||
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Net Cash Provided by Financing Activities
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84,000 | 525 | 240,635 | |||||||||
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Increase in Cash
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31,116 | - | 37,883 | |||||||||
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Cash – Beginning of Period
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6,767 | 604 | - | |||||||||
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Cash – End of Period
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$ | 37,883 | $ | 604 | $ | 37,883 | ||||||
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Supplemental Disclosures of Cash Flow Information:
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Interest Paid
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$ | - | $ | - | $ | - | ||||||
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Income Taxes Paid
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$ | - | $ | - | $ | - | ||||||
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Supplemental Schedule of Non-Cash Investing and
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Financing Activities:
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Deferred Offering Costs Charged to Additional
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Paid-In Capital
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$ | - | $ | - | $ | 25,000 | ||||||
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Deferred Offering Costs Recorded in Accounts
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Payable
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$ | - | $ | - | $ | 7,500 | ||||||
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Common Stock Issued for Mining Lease
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$ | 2,500 | $ | - | $ | 5,000 | ||||||
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Common Stock Retired as Contributed Capital
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$ | 3,000 | $ | - | $ | 3,000 | ||||||
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Discount on Convertible Debt
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$ | 19,723 | $ | - | $ | 19,723 | ||||||
The accompanying notes are an integral part of these financial statements.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - Organization and Basis of Presentation
Mustang Alliances, Inc. (“the Company”) was incorporated on February 22, 2007 under the laws of the State of Nevada.
The Company has not yet generated revenues from planned principal operations and is considered a development stage company. The Company originally intended to market and sell anti-lock braking systems produced in China to the auto parts and auto manufacturing market in the United States. The Company has since abandoned its business plan and was seeking an operating company with which to merge or acquire. Currently, we are no longer a blank check company as we have a specific business plan. We are an exploration-stage mining company and as a result of the execution and delivery of the lease agreements, we are now in the business of exploring mineral properties. There is no assurance, however, that the Company will achieve its objectives or goals.
In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. These financial statements are condensed and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.
NOTE 2 - Going Concern
The Company is a development stage company with its mining operation is in the exploration stage. The Company had no revenues and has incurred a net loss of $140,701 for the three months ended March 31, 2011 and a cumulative net loss of $335,680 for the period February 22, 2007 (inception) to March 31, 2011. In addition, the Company had a working capital deficiency of $174,193 and a stockholders' deficiency of $244,193 at March 31, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.
The Company is attempting to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof. During the quarter ended March 31, 2011 the Company borrowed $75,000 for working capital purposes and received $15,000 proceeds from the sale of units consisting of common stock and warrants. There can be no assurances that the Company will be able to raise the additional funds it requires.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 2 - Going Concern (Continued)
The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 3 - Mining Leases
On December 13, 2010 the Company entered into a lease agreement to explore certain mining concessions in Honduras. The Company issued 20,000,000 shares of common stock, valued at $2,500 for this lease (see Note 11).
On February 22, 2011 the Company entered into a second lease agreement to explore certain mining concessions in Honduras. The Company issued 20,000,000 shares of common stock, valued at $2,500 for this lease (see Note 11).
NOTE 4 - Note Payable
Note payable consists of the following:
| March 31, 2011 | December 31, 2010 | |||||||
| (Unaudited) | ||||||||
| Note payable, due December 5, 2011, | ||||||||
| bearing interest at 8% per annum | $ | 56,400 | $ | 56,400 | ||||
NOTE 5 - Convertible Debt
The Company has issued for aggregate consideration of $25,000 a convertible note. This note bears interest at the imputed IRS rate of .0054% per annum and is due September 28, 2011. The note is convertible into common stock of the Company at the rate of $.25 per share. In addition, upon conversion at maturity date, the Company will issue a 2-year warrant to purchase 100,000 shares of the Company's common stock at an exercise price of $.50 per share. The Company has recorded a debt discount in the amount of $19,723 to reflect the value of the warrants as a reduction to the carrying amount of the convertible debt and a corresponding increase to additional paid-in capital. Such discount will be amortized over the term of the debt. Amortization for the quarter ended March 31, 2011 was $433.
NOTE 6 - Long-Term Debt
Long-term debt consists of the following:
| March 31, 2011 | December 31, 2010 | |||||||
| (Unaudited) | ||||||||
| Note payable, due November 22, 2012, | ||||||||
| bearing interest at 5% per annum | $ | 25,000 | $ | 25,000 | ||||
| Note payable, due January 10, 2013, | ||||||||
| bearing interest at 5% per annum | 50,000 | - | ||||||
| $ | 75,000 | $ | 25,000 | |||||
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 7 - Loans Payable
Loans payable consist of various advances made to the Company, bearing interest at 8% per annum and payable on demand. These loans were made by the holder of the Company's promissory note in the amount of $56,400 (see Note 4).
NOTE 8 - Common Stock
In February 2007 the Company issued 64,000,000 shares of common stock at $.0000125 per share to the Founders of the Company for $800.
In February 2008 the Company sold 22,400,000 shares of common stock at $.002 per share pursuant to its public offering. The Company received net proceeds of $44,964.
In February 2008 the Company issued 800,000 shares of common stock valued at $.0075 per share for services rendered. The Company recorded stock based compensation expense of $6,000 in connection with this issuance.
On December 15, 2010, Mustang (the "Company") notified the FINRA of its intention to implement a 1 for 8 share dividend or forward stock split of its issued and outstanding common stock to the holders of record as of December 27, 2010 (the “Shareholders”). The forward stock split became effective as of the start of business on January 3, 2011. All share and per share data have been retroactively restated to reflect this recapitalization.
On December 13, 2010 the Company issued 20,000,000 shares of common stock as payment for certain mining leases in Honduras.
On February 22, 2011 the Company issued 20,000,000 shares of common stock as payment for certain additional mining leases in Honduras.
On March 28, 2011 the Company sold 60,000 units consisting of 60,000 shares of common stock and 30,000 warrants for $15,000. The warrants are exercisable at $.50 per share and have a two year term.
On March 31, 2011 the Company's CEO retired 30,000,000 shares of his common stock of the Company as additional paid-in capital.
NOTE 9 - Preferred Stock
The Company’s Board of Directors may, without further action by the Company’s stockholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of the common stock. Furthermore, the board of directors could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of the common stock.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 - Related Party Transactions
Included in accrued expenses is approximately $18,000 owed to the Company's CEO for reimbursable expenses incurred on behalf of the Company and $30,000 owed to two of the Company's officers for accrued compensation. Also included in accrued expenses is approximately $8,000 owed to Mayan Gold for mining and exploration expenses incurred by Mayan Gold on behalf of the Company.
NOTE 11 - Commitment and Contingencies
Lease Commitment
On December 13, 2010, the Company entered into a Lease Agreement (the "Lease Agreement") with Compania Minera Cerros Del Sur, S.A., a corporation organized under the laws of Honduras (“Cerros”) and Mayan Gold, Inc., a Nevada corporation (“Mayan Gold”) pursuant to which Cerros, the registered owner of the Corpus I, II, III and IV mining concessions and the Potosi concession, leased us the exclusive right to prospect, explore and mine for minerals in Corpus IV. The Lease Agreement continues until the Honduras government grants Cerros the right to assign the Corpus IV mining concession to the Company, at which time Cerros will transfer title to the mining concession to the Company. In consideration for such rights, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of a 100% interest in Corpus IV. The shares issued by the Company to Mayan Gold represent approximately 18.66% of the then issued and outstanding shares of the Company. As further consideration for the right granted, we agreed to pay Cerros an annual sum of $1,500 no later than April 1st of each year, beginning April 1, 2011.
Cerros also granted the Company an option to acquire the exclusive rights to properties known as Corpus I, II, and III mining concessions and the Potosi concession. If we desire to exercise such option, the Company must send written notice to Cerros and Mayan Gold on or before December 31, 2010. The consideration for the exercise of the option is an additional 20,000,000 shares of the Company’s common stock to be issued to Mayan Gold no later than 30 days after the date we receive all the requested documentation from Cerros in connection with the exercise of the option.
On February 22, 2011, Company entered into a Lease Agreement (the "Lease Agreement") with Cerros and Mayan Gold pursuant to which the Company exercised its option to acquire the exclusive rights to properties known as Corpus I, II, and III mining concessions and the Potosi concession and the Potosi ground lease (collectively, referred to herein as the “Property”), with the subsequent right to participate in the development of minerals from the remaining mining concessions.
The Lease Agreement continues until the Honduras government grants Cerros the right to assign the Property to the Company, at which time Cerros will transfer title to the mining concession to us. In consideration for such right, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of a 100% interest in Property. The shares issued by the Company to Mayan Gold represent an additional interest of 15.72% of the then issued and outstanding shares of the Company. As further consideration for the rights granted, we agreed to pay Cerros an annual sum of $3,200 no later than April 1st of each year with the first payment due on April 1, 2011.
MUSTANG ALLIANCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 11 - Commitment and Contingencies (Continued)
Employment Agreements
On March 22, 2011, the Company entered into a two year employment agreement with Mendel Mochkin, pursuant to which he will be employed on a part time basis. Mr. Mochkin shall work at least one hundred (100) hours per month on behalf of the Company as the Company's Vice President. Pursuant to the agreement, his compensation will be $120,000 annually, which shall accrue from the date of the agreement and to be paid at such time when the Company has adequate capital.
On March 22, 2011, the Company entered into a two year employment agreement with Leonard Sternheim, pursuant to which he will be employed on a part time basis. Mr. Sternheim shall work at least one hundred fifty (150) hours per month on behalf of the Company as its Chief Executive Officer. Pursuant to the agreement, his compensation will be $120,000 annually, which shall accrue from the date of the agreement and to be paid at such time when the Company has adequate capital.
NOTE 12 - Change of Management and Control
On November 29, 2010, Joseph Levi, the principal shareholder of the Company entered into a stock purchase agreement which provided for the sale of 60,000,000 shares of common stock of the Company (the "Purchased Shares") to Leonard Sternheim (the Purchaser). The consideration paid for the Purchased Shares, which represented at the time of the transaction 68.81% of the issued and outstanding shares of the Company was $7,500. The Purchaser used his personal funds to purchase the purchased shares.
On November 29, 2010, in connection with the acquisition of the purchased shares, Leonard Sternheim was appointed as a director, and as President, Chief Executive Officer and Chief Financial Officer of the Company, effective simultaneous with the sale of Mr. Levi's shares to Mr. Sternheim.
On November 29, 2010, in connection with the acquisition of the Purchased Shares, Joseph Levi resigned from his positions as officer and director of the Company.
On December 24, 2010 Mr. Sternheim sold 10,000,000 of the Purchased Shares to Zegal & Ross Capital LLC.
On March 17, 2011 Eleizer Oppenheimer resigned from his position as a director of the Company.
In March 2011 the Board of Directors elected Mark Holcombe and Mendel Mochkin as Members of the Board. The Board also elected Mr. Mochkin as Vice President of the Company.
NOTE 13 - Subsequent Events
During April and May 2011 the Company sold 1,280,000 units, consisting of 1,280,000 shares of common stock and 640,000 warrants for proceeds of $320,000. The warrants are exercisable of $.50 per share and have a two year term.
On April 29, 2011 the $25,000 convertible note of March 28, 2011 was paid in full and the prepayment conversion feature of the note was waived by the payee (see Note 5).
Item 2. Management’s Discussion and Analysis or Plan of Operations.
As used in this Form 10-Q, references to the “Mustang,” the “Company,” “we,” “our” or “us” refer to Mustang Alliances, Inc. Unless the context otherwise indicates.
Forward-Looking Statements
The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Business Overview
On December 2, 2010, we executed a Lease Agreement with Compania Minera Cerros Del Sur, S.A., a corporation organized under the laws of Honduras (“Cerros”), and Mayan Gold, Inc., a Nevada corporation (“Mayan Gold”) pursuant to which Cerros, the registered owner of Corpus IV, leased us the exclusive right to prospect, explore and mine for minerals in this property in Hondorus. The Lease Agreement continues until the Honduran government grants Cerros the right to assign the property's mining concessions to the Company, at which time Cerros will transfer title to the mining concessions to us. In consideration for such rights, we issued an aggregate of 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of 100% interest in Corpus IV. In accordance with the Lease Agreements, as further consideration for the rights granted, we agreed to pay Cerros $1,500 no later than April 1st of each year. Cerros also granted us an option to acquire exclusive rights to properties known as Corpus I, II, and III concessions and the Potosi concession.
Prior to February 9, 2010, Cerros was a wholly owned subsidiary of Mayan Gold. When Mayan Gold sold all of its shares in Cerros to Razor on such date, Mayan Gold retained all mining rights to the Properties and certain other assets that were in the name of Cerros. As a part of the sales transaction, Cerros and Razor entered into an agreement pursuant to which Cerros is contractually obligated to transfer those concessions and the other assets to transferees as directed by Mayan Gold from time to time. Since Razor is the title owner of all the shares of Cerros, Razor was required to represent to Mayan Gold and us that it has absolutely no direct or indirect title or interest in any of the Properties or any of the shares being issued to Mayan Gold.
On February 22, 2011, we entered into another Lease Agreement with Cerros and Mayan Gold pursuant to which we exercised our option to acquire the exclusive rights to the properties known as Corpus I, II, and III concessions and the Potosi concession and the Potosi ground lease. The Lease Agreement continues until the Honduras government grants Cerros the right to assign these properties to the Company, at which time Cerros will transfer title to the mining concession to us. In consideration for such right, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of 100% interest in these properties. As further consideration for the rights granted, we agreed to pay Cerros an annual sum of $3,200 no later than April 1st of each year with the first payment due on April 1, 2011. The payments have been paid to Mayan by us and Mayan paid Cerros.
Plan of Operation
We are dependent upon making a gold deposit discovery at the properties. Should we be able to make an economic find, we would then be solely dependent upon the mining operation for our revenue and profits, if any. The probability that reserves that meet SEC guidelines will be discovered on the property is undeterminable at this time. The Properties presently do not have any mineral resources or reserves. There is currently no mining plant or equipment located within the property boundaries. Currently, there is no power supply to the mineral claims. A great deal of work is required on our property before a determination as to the economic and legal feasibility of a mining venture on it can be made.
Results of Operations
Comparison of Three Months Ended March 31, 2011 and 2010
Revenues
During the three months ended March 31, 2011, we had no revenues. We did not generate any revenues during the three months ended March 31, 2010.
Selling, general and administrative expenses
Costs and expenses for the three months ended March 31, 2011increased to $137,802 , as compared to selling, general and administrative expenses for the three months ended March 31, 2010 of $8,604. These expenses are comprised of mining and exploration expenses of $70,522, general and administrative expenses of $46,709 and professional and consulting fees of $20,571.
Net loss
As a result of the foregoing, for the three months ended March 31, 2011, net loss increased by $130,789, or 1300%, to a loss of $140,701, compared to a net loss of $9,912 during the three months ended March 31, 2010.
Liquidity and Capital Resources
On March 31, 2011, we had a working capital deficiency of $174,193, a stockholders' deficiency of $244,193, as compared to a working capital deficiency of $118,215 and a stockholders' deficiency of $140,715 at December 31, 2010. The increase in working capital deficiency was primarily due to additional borrowings made by the Company during the quarter ended March 31, 2011.
On April 29, 2011, the Company paid the $25,000 loan made to it from Zegal & Ross Capital LLC in March 2011.
We will require additional capital to mine and explore the property in Honduras and estimate that within the next 12 months we will need approximately $1,000,000.
As a result of the sale of common stock and warrants, we currently have cash on hand of approximately $180,000. Current cash on hand is insufficient for all of the Company’s commitments for the next 12 months. We anticipate that the additional funding that we require will be in the form of equity financing from the sale of our units, consisting of a share of common stock and warrants. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of these units to fund our expenses. We do not have any arrangements in place for any other financings.
We cannot be certain that the required additional financing will be available or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If adequate funds are not available or not available on acceptable terms, we may be unable to fund our operations.
Going Concern Consideration
The Company is a development stage company and has no revenues. The Company incurred a net loss of $140,701 for the three months ended March 31, 2011 and a cumulative net loss of $335,680 from inception through March 31, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
There can be no assurance that sufficient funds will be generated during the next year or thereafter from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital could force the Company to curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.
The Company is attempting to address its lack of liquidity by raising additional funds through the issuance of the units described above. There can be no assurances that the Company will be able to raise the additional funds it requires.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive officer and principal financial and accounting officers have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e) and 15(d)-15(e)) within the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our principal executive officer and principal financial officer.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 1A. Risk Factors
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On March 31, 2011 we sold 60,000 units to Bank Gutenberg AG in consideration of $15,000 consisting of 60,000 shares of common stock and 30,000 warrants. Each warrant allows Bank Gutenberg the right to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and Bank Gutenberg is a non-US person.
On April 12, 2011 we sold 1,000,000 units to The K2 Principal Fund LP in consideration of $250,000 consisting of 1,000,000 shares of common stock and 500,000 warrants. Each warrant allows The K2 Principal Fund the right to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and The K2 Principal Fund is a non-US person.
On April 20, 2011 we sold 100,000 units to Radiant Offshore Fund LP in consideration of $25,000 consisting of 100,000 shares of common stock and 50,000 warrants. Each warrant allows Radiant Offshore to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and Radiant Offshore Fund is a non-US person.
On April 21, 2011 we sold 100,000 units to Dean Hassan in consideration of $25,000 consisting of 100,000 shares of common stock and 50,000 warrants. Each warrant allows Mr. Hassan the right to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and Mr. Hassan is a non-US person.
On May 6, 2011 we sold 60,000 units to Dynamic Assets in consideration of $15,000 consisting of 60,000 shares of common stock and 30,000 warrants. Each warrant allows Dynamic Assets to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and Dynamic Assets is a non-US person.
On May 11, 2011 we sold 20,000 units to MIA Investments in consideration of $5,000 consisting of 20,000 shares of common stock and 10,000 warrants. Each warrant allows MIA Investments to purchase one additional share of common stock at a price of $0.50 per share for two years. As of the date hereof, no warrants have been exercised. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and MIA Investments is a non-US person.
Purchases of equity securities by the issuer and affiliated purchasers
None.
Use of Proceeds
The proceeds of the Company's private offering is being used for working capital; however, $25,000 was used to pay the $25,000 convertible note due to Zegal & Ross and $29,506.47 was paid to Mayan Gold, an owner of approximately 41% of the common stock of the Company as of May 17, 2011, for mining exploration expenses.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Removed and Reserved
Item 5. Other Information
On April 29, 2011 Leonard Sternheim, our president and chief executive officers, sold 2,000,000 of his shares to MEM Mining Partners LLC, a New York limited liability company owned and managed by Mendel Mochkin, our vice president and a director. The consideration for such sale was $2,000.
No Current Report on Form 8-K was filed in connection with such transaction.
Item 6. Exhibits
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Exhibit No.
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Description
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31.1
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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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.
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MUSTANG ALLIANCES, INC.
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Dated: May 20, 2011
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By
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/s/ Leonard Sternheim
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Name: Leonard Sternheim
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Title: President, Chief Executive Officer, Chief Financial Officer and Chairman (Principal Executive, Financial and Accounting Officer)
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