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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 nine months ended September 30, 2012
 
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)

 Nevada
 
74-3206736
(State of incorporation)
 
(IRS Employer ID Number)

410 Park Avenue, 15th Floor
(Address of principal executive offices)

(888) 251-3422
(Issuer's telephone number)

________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

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 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer 
o
Accelerated filer
o
Non-accelerated filer 
o
Smaller reporting company
x
(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 November 15, 2012, 104,302,516 shares of common stock, par value $0.0001 per share, were issued and outstanding.
 


 
 

 
TABLE OF CONTENTS

     
Page
 
PART I
   
3
 
           
Item 1.
Financial Statements
   
3
 
Item 2.
Management’s Discussion and Analysis or Plan of Operations
   
20
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
   
24
 
Item 4.
Controls and Procedures
   
24
 
           
PART II
   
26
 
           
Item 1.
Legal Proceedings
   
26
 
Item IA.
Risk Factors
   
26
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
   
26
 
Item 3.
Defaults Upon Senior Securities
   
26
 
Item 4.
Mine Safety Disclosures
   
26
 
Item 5.
Other Information
   
26
 
Item 6.
Exhibits
   
27
 
 
 
2

 
 
PART I
FINANCIAL INFORMATION

Item 1.      Financial Statements.
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED BALANCE SHEET
 
ASSETS
             
   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
             
Current Assets:
           
Cash
  $ 1,475     $ 891  
Prepaid expense
    -       -  
Total current assets     1,475       891  
                 
                 
Property, plant, and equipment, net
    106,000       -  
                 
Total Assets
  $ 107,475     $ 891  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIENCY)
                 
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 381,820     $ 119,988  
Notes payable
    30,000       -  
Notes payable-related party
    40,000       25,000  
Due to shareholder
    150       -  
Total current liabilities     451,970       144,988  
                 
Total Liabilities
    451,970       144,988  
                 
Commitments and contingencies
               
                 
Stockholder's Equity(Deficiency)
               
Preferred stock, $.0001 par value; 5,000,000 shares
               
   authorized, none issued and outstanding
    -       -  
Common stock, $.0001 par value; 500,000,000 shares authorized,
               
  104,302,516 shares issued and 104,537,835 shares outstanding at September 30, 2012,
               
   and 99,920,000 shares issued and 100,217,516 shares outstanding at December 31, 2011
    10,431       9,992  
Common shares issuable 235,318 and 297,516 at September 30, 2012 and December 31, 2011, respectively
    88,000       74,000  
Additional paid in capital
    1,494,865       865,363  
Deficit accumulated during the exploration stage
    (1,937,791 )     (1,093,452 )
                 
Total Stockholders' Equity (Deficiency)
    (344,495 )     (144,097 )
                 
Total Liabilities and Stockholders' Equity(Deficiency)
  $ 107,475     $ 891  
 
The accompanying notes are an integral part of these unaudited condensed financials statements.
 
 
3

 

MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED STATEMENTS' OF OPERATIONS
(UNAUDITED)
 
                           
For the Period
 
                           
February 22, 2007
 
    For the Three Months Ended    
For the Nine Months Ended
   
(Inception) to
 
    September 30,     September 30,    
September 30,
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
                               
Net Revenues
  $ -     $ -     $ -     $ -     $ -  
                                         
Cost and Expenses:
                                       
Professional fees
    2,500       31,016       36,769       69,807       305,147  
Consulting fees
    298,471       269,181       677,272       361,356       1,200,557  
General and administrative expenses
    3,196       19,835       16,987       46,023       96,677  
Mining and exploration costs
    33,223       2,424       111,150       118,314       293,711  
                                         
Total costs and expenses
    337,390       322,456       842,178       595,500       1,896,092  
                                         
Operating Loss
    (337,390 )     (322,456 )     (842,178 )     (595,500 )     (1,896,092 )
                                         
Other (Expenses)
                                       
Interest expense
    (920 )     (407 )     (2,161 )     (5,339 )     (21,976 )
Amortization of debt discount
    -       -       -       (19,723 )     (19,723 )
                                         
Total Other (Expense)
    (920 )     (407 )     (2,161 )     (25,062 )     (41,699 )
                                         
Net Loss
  $ (338,310 )   $ (322,863 )   $ (844,339 )   $ (620,562 )   $ (1,937,791 )
                                         
Basic and Diluted Loss Per Share
  $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.01 )        
                                         
Weighted Average Common Shares Outstanding
    101,942,516       99,505,435       100,885,923       104,361,685          
 
The accompanying notes are an integral part of these unaudited condensed financials statements.
 
 
4

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO SEPTEMBER 30, 2012
(UNAUDITED)
 
   
Common Stock
   
Paid-In
   
Common Shares
   
Accumulated Deficit During the Exploration
       
   
Shares
   
Amount
   
Capital
   
Issuable
   
Stage
   
Total
 
Balance, February 22 2007
    -     $ -     $ -     $ -     $ -     $ -  
                                                 
Common Stock Issued to Founders at $.0000125 Per Share, February 22, 2007
    64,000,000       6,400       (5,600 )             -       800  
                                                 
Net Loss for the Period
    -       -       -               (4,498 )     (4,498 )
Balance, December 31, 2007
    64,000,000       6,400       (5,600 )             (4,498 )     (3,698 )
                                                 
Common Stock Issued to Investors at $.002 Per Share, Net of Offering Costs, February 20, 2008
    22,400,000       2,240       42,724               -       44,964  
                                                 
Common Stock Issued for Services at $.0075 Per Share, February 25, 2008
    800,000       80       5,920               -       6,000  
                                                 
Net Loss for the Year Ended December 31, 2008
    -       -       -               (91,106 )     (91,106 )
Balance, December 31, 2008
    87,200,000       8,720       43,044               (95,604 )     (43,840 )
                                                 
Net Loss for the Year Ended December 31, 2009
    -       -       -               (29,939 )     (29,939 )
Balance, December 31, 2009
    87,200,000       8,720       43,044               (125,543 )     (73,779 )
                                                 
Common Stock Issued for Mining Lease at $.000125 Per Share, December 15, 2010
    20,000,000       2,000       500               -       2,500  
                                                 
Net Loss for the Year Ended December 31, 2010
    -       -       -               (69,436 )     (69,436 )
Balance, December 31, 2010
    107,200,000       10,720       43,544               (194,979 )     (140,715 )
                                                 
Common Stock Issued for Mining Lease at $.000125 Per Share, February 22, 2011
    20,000,000       2,000       500               -       2,500  
                                                 
Sale of Stock and Warrants at $.25 Per Share, March 2011
    60,000       6       14,994               -       15,000  
                                                 
Retirement of 30,000,000 Shares of Common Stock as Contributed Capital on March 31, 2011 by Chief Executive Officer
    (30,000,000 )     (3,000 )     3,000               -       -  
                                                 
Discount on Convertible Debt
    -       -       19,723               -       19,723  
                                                 
Sale of Stock and Warrants at $.25 Per Share, June 2011
    1,280,000       128       319,872               -       320,000  
                                                 
Sale of Stock and Warrants at $.25 Per Share, July 2011
    1,000,000       100       249,900                       250,000  
                                                 
Stock issued for services, July 2011
    340,000       34       81,966                       82,000  
                                                 
Debt forgiveness, July 2011
                    97,785                       97,785  
                                                 
Consulting fees forgiveness, July 2011
                    12,000                       12,000  
                                                 
Stock issued for services, Oct 2011
    40,000       4       8,796                       8,800  
                                                 
Fair value of options issued during 2011
                    13,283                       13,283  
                                                 
Common shares issuable(297,516 shares) to consultants, related parties during 2011
    297,516                       74,000               74,000  
                                                 
Net Loss for the Year Ended December 31, 2011
    -       -       -               (898,473 )     (898,473 )
                                                 
Balance, December 31, 2011
    100,217,516     $ 9,992     $ 865,363     $ 74,000     $ (1,093,452 )   $ (144,097 )
                                                 
Stocks issued for mining equipments, February 2012
    200,000       20       105,980                       106,000  
                                                 
Sale of Stock and Warrants at $1.00 Per Share March, 2012
    175,000       18       174,982                       175,000  
                                                 
Exercise of stock options at $0.50 Per Share March, 2012
    30,000       3       14,997                       15,000  
                                                 
Stocks issued for common shares issuable to consultants, related parties, March 2012
            30       73,970       (74,000 )             -  
                                                 
Fair value of options issued during six months ended June 30, 2012
                    15,941                       15,941  
                                                 
Common shares issuable(235,318 shares) to consultants, related parties
    235,318                       88,000               88,000  
                                                 
Sale of stocks and warrants at $0.05 per share, Aug 2012
    680,000       68       33,932                       34,000  
                                                 
Stocks issued for services, Aug 2012
    3,000,000       300       209,700                       210,000  
                                                 
Net Loss for the Nine Months Ended September 30, 2012
    -       -       -               (844,339 )     (844,339 )
                                                 
Balance, September 30, 2012
    104,537,834     $ 10,431     $ 1,494,865     $ 88,000     $ (1,937,791 )   $ (344,495 )
 
The accompanying notes are an integral part of these unaudited condensed financials statements.
 
 
5

 
 
MUSTANG ALLIANCES, INC..
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
For the Nine Months Ended
   
For the Period
February 22, 2007 (Inception) to
 
   
September 30,
   
September 30,
 
   
2012
   
2011
   
2012
 
Cash Flows from Operating Activities:
                 
Net Loss
  $ (844,339 )   $ (620,562 )   $ (1,937,791 )
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
                       
Common Stock Issued for Services
    210,000       82,000       306,800  
Common Stock Issuable for Services
    88,000       35,000       162,000  
Common Stock Issued for Mining Rights
    -       2,500       2,500  
Stock Compensation Cost
    15,940               29,223  
Amortization of Debt Discount
    -       19,723       19,723  
Impairment of Mining Leases
    -               2,500  
Increase in Prepaid Expense
    -       (37,111 )     -  
Decrease in Mining Leases
    -       2,500       -  
Increase(Decrease) in Accrued Expenses
    261,833       (13,611 )     405,734  
                         
Net Cash Used in Operating Activities
    (268,566 )     (529,561 )     (1,009,311 )
                         
Cash Flows from Investing Activities:
    -       -       -  
                         
Cash Flows from Financing Activities:
                       
Proceeds of Borrowings from non-related party
    30,000       75,000       215,871  
Proceeds of Borrowings from related parties
    15,150       -       15,150  
Proceeds from Sale of Common Stock
                       
and Warrants
    224,000       585,000       879,800  
Repayment of Borrowings
    -       (75,000 )     (75,000 )
Payments of Deferred Offering Costs
    -       -       (25,000 )
Expenses of Offering
    -       -       (35 )
Repayment of Due to Shareholder
    -       -       -  
                         
Net Cash Provided by Financing Activities
    269,150       585,000       1,010,786  
                         
Increase in Cash
    584       55,439       1,475  
                         
Cash – Beginning of Period
    891       6,767       -  
                         
Cash – End of Period
  $ 1,475     $ 62,206     $ 1,475  
                         
Supplemental Disclosures of Cash Flow Information:
                       
Interest Paid
  $ -     $ -     $ -  
Income Taxes Paid
  $ -     $ -     $ -  
                         
Supplemental Schedule of Non-Cash Investing and Financing Activities:
                       
Deferred Offering Costs Charged to Additional
                       
Paid-In Capital
  $ -     $ -     $ 25,000  
Deferred Offering Costs Recorded in Accounts Payable
  $ -     $ -     $ 7,500  
Common Stock Issued for Mining Lease
  $ -     $ -     $ 5,000  
Debt forgiveness
  $ -     $ 97,785     $ 97,785  
Consulting fees forgiveness
  $ -     $ 12,000     $ 12,000  
Common Stock Issued for Mining Equipments
  $ 106,000     $ -     $ 106,000  
 
The accompanying notes are an integral part of these unaudited condensed financials statements.
 
 
6

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION 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 in Honduras, we are now in the business of exploring mineral properties.  There is no assurance, however, that the Company will achieve its objectives or goals.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

NOTE 2 -               Going Concern and Significant Accounting Policies

 Going Concern

The Company is in the exploration stage and has no revenues, has incurred a net loss of approximately $844,339for the nine months ended September 30, 2012 and a cumulative net loss of $1,937,791 for the period from February 22, 2007 (inception) to September 30, 2012 and a working capital deficit of $450,495.   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. There can be no assurances that the Company will be able to raise the additional funds it requires.

 
7

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 2 -               Going Concern and Significant Accounting Policies – (Continued)

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.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates. Significant estimates include the valuation of deferred tax assets and valuation of equity instrument.

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.  At September 30, 2012 and December 31, 2011, the Company had no cash equivalents.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs, which are not considered improvements and do not extend the useful life of the asset, are expensed as incurred; additions, renewals and betterments are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in the statement of operations in other income and expenses.

Depreciation is provided to recognize the cost of the asset in the results of operations. The Company calculates depreciation using the straight-line method with estimated useful life as follows:
 
Item
 
Useful Life
Mining equipments
 
10 years

 Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, “Earnings Per Share.”  As of September 30, 2012 and September 30, 2011, the Company has 2,175,000 and 4,690,000 warrants and options that are anti-dilutive and not included in diluted loss per share respectively.

 
8

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 -               Going Concern and Significant Accounting Policies – (Continued)

Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”).  Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The Company’s 2007 to 2011 tax returns are subject to examinate by Internal Revenue Services.

Business Segments

The Company operates in one segment and therefore segment information is not presented.

Revenue Recognition

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for accounts payable and notes payable – related party approximate fair value based on the short-term maturity of these instruments.

Mining Properties (Exploration Costs)

Costs of acquiring mining properties and any exploration costs are capitalized as incurred,in accordance with FASB Accounting Standards Codification No. 930, Extractive Activities – Mining, when proven and probable reserves exist and the property is a commercially mineable property. Mine exploration costs incurred either to develop new gold, silver, lead and copper deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates, at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of the carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value.

The Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the prospects for economic productions are reasonably certain. Capitalized costs are expensed in the period when the determination has been made that economic production does not appear reasonably certain.
 
 
9

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 -               Going Concern and Significant Accounting Policies – (Continued)
 
Stock-Based Compensation
 
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.  The Company applies this statement prospectively. 

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
 
Fair Value Measurement

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

• Level 1 Quoted prices in active markets for identical assets or liabilities.

• Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities.

• Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

The Company's financial instruments include cash and equivalents, accounts payable and accrued expenses and notes and loans payable. All these items were determined to be Level 1 fair value measurements. The carrying amounts of cash and equivalents, accounts payable and accrued expenses and notes and loans payable approximated fair value because of the short maturity of these instruments. The recorded value of long-term debt approximates its fair value as the terms and rates approximate market rates.
 
 
10

 

MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 -                Going Concern and Significant Accounting Policies – (Continued)
 
Recent Accounting Pronouncements
 
In December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such; we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.
 
In July 2012, FASB issued Accounting Standards Update 2012-01, Balance Sheet - Subtopic 954-430, Health Care Entities-Deferred Revenue, requires that a continuing care retirement community recognize a deferral of revenue when a contract between a continuing care retirement community and a resident stipulates that (1) a portion of the advanced fee is refundable if the contract holder's unit is reoccupied by a subsequent resident, (2) the refund is limited to the proceeds of reoccupancy, and (3) the legal environment and the entity's management policy and practice support the withholding of refunds under condition (2). Questions have arisen in practice about cases where the refund depends on reoccupancy. The objective of this Update is to clarify the reporting for refundable advance fees received by continuing care retirement communities. The amendments in this update are effective for fiscal periods beginning after December 15, 2013. Early adoption is permitted. The amendments in this Update should be applied retrospectively by recording a cumulative-effect adjustment to opening retained earnings (or unrestricted net assets) as of the beginning of the earliest period presented.
 
In July 2012, FASB issued Accounting Standards Update 2012-02, Balance Sheet- Intangibles- Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment is an Amendment to FASB Accounting Standards Update 2011-08. The objective of the amendments in this Update is to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles—Goodwill and Other—General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.
 
 
11

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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, with a fair value of $2,500 for this lease that was charged to mining exploration costs.

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, with a fair value of $2,500 for this lease that was charged to mining exploration costs.
 
NOTE 4 -               Property Plant and Equipment

On February 3, 2012, the Company entered into a Purchase and Sale Agreement with Clavo Rico, Ltd. a related party, a Turks and Caicos company (“Seller”) for the purchase of certain mining equipment from the Seller's wholly-owned subsidiary, CompaniaMineraCerrosdel Sur, S.A., a Honduran company (“Cerros”). The Company is a party to a lease agreement with Cerros for certain exclusive mining and development rights and a ground lease in Honduras.

As consideration for the equipment, the Company exchanged 200,000 shares of common stock to the Seller with a fair value of $106,000 based on the value of equipment. The Company also agreed to be responsible for, among other things, the cost of freight, insurance, packing and transportation, and the risk of loss in shipping of the purchased equipment. The equipment has not been placed in service as of September 30, 2012.
 
NOTE 5 -               Notes Payable
 
 On July 25, 2011, repayment for $25,000 was made for the $50,000 note due to Landolt, a company owned by a director of the Company. At which time the note was assigned to MeM Mining, Inc.   MeM is controlled by, Mendel Mochkin, a director of the company.  As of September 30, 2012 and December 31, 2011, the principle balance due was $25,000, is unsecured and is due January 2013 with accrued interest at 5%.

On March 28, 2012 the Company received $30,000 from First Line Capital, in exchange for an unsecured note bearing interest at 8%. As of September 30, 2012, the principal due was $30,000, is unsecured and is due in full plus accrued interest on March 28, 2013.

On September 13, 2012, the Company received $15,000 from Mr. Sternheim, CEO of the Company as an unsecured non-interest bearing loan. As of September 30, 2012, the principal due was $15,000, is unsecured and is due on demand.

 
12

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 6 -               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 with the fair value of $.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, 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 at a fair value of $2,500.

On February 22, 2011, the Company issued 20,000,000 shares of common stock as payment for certain additional mining leases in Honduras at a fair value of $2,500.

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.

On April 12, 2011, the Company sold 1,000,000 units consisting of 1,000,000 shares of common stock and 500,000 warrants for cash of $250,000.  The warrants are exercisable at $.50 per share and have a two year term

On April 20, 2011, the Company sold 100,000 units consisting of 100,000 shares of common stock and 50,000 warrants for cash of $25,000.  The warrants are exercisable at $.50 per share and have a two year term.

On April 21, 2011, the Company sold 100,000 units consisting of 100,000 shares of common stock and 50,000 warrants for cash of $25,000.  The warrants are exercisable at $.50 per share and have a two year term.

On May 6, 2011, the Company sold 60,000 units consisting of 60,000 shares of common stock and 30,000 warrants for cash of $15,000.  The warrants are exercisable at $.50 per share and have a two year term.

On May 11, 2011, the Company sold 20,000 units consisting of 20,000 shares of common stock and 10,000 warrants for cash of $5,000.  The warrants are exercisable at $.50 per share and have a two year term.
 
 
13

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 6 -               Common Stock - Continued

On July 19, 2011, the Company issued 40,000 units to Mark Holcombe, a director of the Company in consideration of consisting of 40,000 shares of common stock and 20,000 warrants with a fair value of $1,583. Each warrant allows Mr. Holcombe to purchase one additional share of common stock at a price of $0.50 per share for two years.  The shares were valued at$10,000 ($.25 per share), the fair value on the date of grant.
 
On July 21, 2011, the Company issued 100,000 shares to Lawrence H. Wolfe, our Chief Financial Officer, in consideration for the execution and delivery of a consulting agreement with Mr. Wolfe.  The shares were valued at $29,000 ($.24 per share), the fair value on the date of grant.
 
On July 21, 2011, the Company issued 100,000 shares to Zegal and Ross Capital LLC in consideration for the execution and delivery of a consulting agreement. The shares were valued at $24,000($.24 per share), the fair value on the date of grant.
 
On July 25, 2011, the Company issued 100,000 shares to Mendel Mochkin, a director, in consideration for the execution and delivery of a consulting agreement with such person which replaced in its entirety Mr. Mochkin's employment agreement. Mr. Mochkin is an accredited investor. The issuance was conducted in reliance upon an exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended.  The shares were valued at $24,000($.24 per share), the fair value on the date of grant.

On July 27, 2011, the Company sold 1,000,000 units in consideration of $250,000 consisting of 1,000,000 shares of common stock and 1,000,000 warrants. Each warrant allows for the purchase one additional share of common stock at a price of $0.50 per share for two years.

On October 24, 2011, the Company issued 20,000 shares to Ben Lafazan and 20,000 shares to Barry Wolinetz as partial settlement for services rendered. The shares were valued at $.22 per share, the fair value on the date of grant.

At December 31, 2011, the Company has 297,516 shares issuable to officers and directors with a fair value of $74,000 in connection with certain consulting agreements.  These shares were valued at the fair value on the date of grant.  These shares were issued to officers and directors during March, 2012.

In February and March 2012, the company issued 175,000 units and raised an aggregate of $175,000 from one investor under a Regulation S Subscription Agreement. Under this agreement, the Company is offering for sale up to $500,000 of shares and warrants at a purchase price of $1.00 per share. For each dollar invested, the investor will receive one share of common stock and one warrant. Each warrant entitles the investor to purchase one share of common stock for $1.50 per share. The warrants expire on the third anniversary date its issuance.

On February 3, 2012, the Company issued 200,000 shares of common stock as payment for certain mining equipments in Honduras at a fair value of $106,000 based on the value of the equipment.

On March 1, 2012, an investor exercised his right to purchase 30,000 shares for $.50 per share. The Company received proceeds of $15,000.

In August 2012, the Company raised an aggregate of $34,000 from one investor under a Regulation S Subscription Agreementin exchange for 680,000 shares of common stock at $.05 per share and 340,000 warrants exercisable at $.20 per share.   The warrants expire on the fifth anniversary date its issuance.

On August 28, 2011, the Company issued 3,000,000 shares of common stock to three consultants in consideration for services previously provided. The shares were valued at $.07 per share, the fair value on the date of grant of $210,000.

At September 30, 2012, the Company has 235,318 shares issuable to officers and directors with a fair value of $88,000 in connection with certain consulting agreements.  These shares were valued at the fair value on the date of grant.
 
 
14

 

MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 6 -               Common Stock - Continued

Warrants

During 2011, the Company issued 1,690,000 warrants in connection with a private placement offering. The warrants have a term of two years from the date of the subscription agreement and allow investors to purchase one share of common stock for $.50.  At September 30, 2012 and December 31, 2011 all warrants have a remaining contractual life of approximately 0.7 year and 1.5 years, respectively.

In February and March 2012, the company issued 175,000 warrants in connection with a private placement offering. The warrants have a term of three years from the date of the subscription agreement and allow investors to purchase one share of common stock for $1.50 per share.At September 30, 2012, all warrants have a remaining contractual life of approximately 2.48years.

In August 2012, the company issued 340,000 warrants in connection with a private placement offering. The warrants have a term of five years from the date of the subscription agreement and allow investors to purchase one share of common stock for $0.20 per share.At September 30, 2012, all warrants have a remaining contractual life of approximately 4.91 years.

Information with respect to warrants outstanding and exercisable at September 30, 2012 is as follows:

Nine Months Ended September30, 2012:
               
   
Number
Outstanding
 
Range of
Exercise Price
   
Number
Exercisable
 
                 
Warrants outstanding, December 31, 2011
    1,690,000     $ 0.50       1,690,000  
Issued
    515,000     $ 0.20-1.50       515,000  
Exercised
    (30,000 )   $ 0.50       -  
Forfeited
    -       --       -  
Warrants outstanding, September 30, 2012
    2,175,000     $ 0.20-1.50       2,175,000  

 
15

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 6 -               Common Stock - Continued

Options

During July 2011, the Company granted 360,000 stock options to consultants for services to be rendered over a two-year period.  The options are exercisable at $0.50 per share, half of the option shall vest on January 1 and half on June 1 following the grant date. These options had a fair value of $61,104 using the Black-Scholes option-pricing model. The grant date fair values of the Company’s option awards during the nine months ended September 30, 2012 and the year ended December 31, 2011 were estimated using the Black Scholes option pricing model with the following assumptions:
 
   
For the Nine months ended
   
For the Year ended
 
   
September 30,
2012
   
December 31,
2011
 
Expected life (years)
    -       2  
Risk – free interest rate
    -       0.40 %
Expected volatility
    -       178 %
Dividend Yield
    -       0.00 %
 
The Company has Consultancy agreements that contain provisions for the issuance and granting of options aggregating 3,000,000 shares at $.50 per share  that are predicated on the Company reaching certain milestones in the production of gold.None of the milestones have been met and accordingly such options have not been granted or issued.
 
During the third quarter of 2012, all the consultancy agreements noted above were terminated. As a result, the 360,000 stock options and 3,000,000 grant options were forfeited.
 
   
Number of Options
   
Weighted Average Exercise Price
 
Balance at December 31, 2011
    360,000     $ 0.50  
Granted
    -       -  
Exercised
    -       -  
Forfeited
    (360,000 )     0.50  
Balance at September 30, 2012
    -       -  
Options exercisable at September 30, 2012
    -     $ 0.50  
              -  

 
16

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 -               Preferred Stock

The Company has 5,000,000 preferred shares authorized that 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.

NOTE 8 -              Commitment and Contingencies

Lease Commitments

On December 13, 2010, the Company entered into a Lease Agreement (the "Lease Agreement") with CompaniaMineraCerros 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.

 
17

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 8 -              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 July 25, 2011, the Company entered into a Consultancy Agreement, which replaced in its entirety the Employment Agreement between the Company and Mendel Mochkin dated March 22, 2011. Mr. Mochkin resigned on 8/23/12 and terminated this contract.
 
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. In July 2011 this agreement was nullified.  Mr. Sternheim is currently acting in a consultancy capacity as the Company’s Chief Executive Officer.
 
Litigation:
 
On or about July 2012, the Company was named as a defendant in a lawsuit titled George Sharp vs. Mustang Alliances, Inc. et al.  The lawsuit was filed in the Superior court of the State of California, in San Diego County.  The lawsuit alleges violations of California restrictions on unsolicited commercial e-mail advertisers and seeks damages and punitive dames in an unspecified amount.  The Company intends to vigorously defend this lawsuit.  As of September 30, 2012, the Company has not accrued any amounts related to this lawsuit
 
NOTE 9 -               Related Parties

Consulting Agreements

On July 21, 2011, the Company entered into a consulting agreement with Lawrence H. Wolfe, pursuant to which he will work as Chief Financial Officer. Pursuant to the agreement, 100,000 shares were issued as a signing bonus for the execution and delivery of the agreement with a fair value of $24,000 (See note 6). His compensation will be $150,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of 0.50 per share is granted, half of Option shall vest on January 1 and half on June 1 following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 per share price floor on the valuation of the common stock. On August 31, 2012, Mr. Lawrence H. Wolfe resigned from his position as a Chief Financial Officer. As a result of Mr. Wolfe's resignation, the Consultancy Agreement dated July 25, 2011 was terminated in its entirety.  For the nine months ended September 30, 2012, and year ended December 31, 2011, Mr. Wolfe has earned an aggregate of 139,376 shares and 122,120 shares pursuant to his consulting agreement with a fair value of $30,000, respectively.
 
 
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MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 9 -               Related Parties – Continued

On July 25, 2011, the Company entered into a Consultancy Agreement with Mendel Mochkin, which replaced in its entirety the Employment Agreement dated March 22, 2011(See note 8). Pursuant to the agreement, his compensation will be $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of 0.50 per share is granted, half of option shall vest on January 1 and half on June 1 following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 per share price floor on the valuation of the common stock. For thenine months ended September 30, 2012, andyear ended December 31, 2011, Mr. Mendel has been paid$44,221 and $89,935, respectively and an aggregate of 47,971 and 97,698 shares pursuant to his consulting agreement with a fair value of $24,000, respectively. On August 23, 2012, Mr. Mendel Mochkin resigned from his position as a director of the Board of Directors. As a result of Mr. Mochkin's resignation, the Consultancy Agreement dated July 25, 2011 was terminated in its entirety. The Company has agreed to indemnify Mr. Mochkin in connection with the lawsuit by George Sharp vs. Mustang Alliances, Inc. et al filed in the Superior court of the State of California, in San Diego County. As of September 30, 2012, the Company has not accrued any amounts related to this indemnification. This contract was terminated on Aug 31, 2012.
 
On July 21, 2011, the Company entered into a Consultancy Agreement with Zegal and Ross Capital LLC. Pursuant to the agreement, 100,000 shares was issued as a signing bonus for the execution and delivery of the agreement with a fair value of $24,000(See note 5). The compensation will be $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of $0.50 per share is granted, half of option shall vest on January 1st and half on June 1st following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 per share price floor on the valuation of the common stock.On July 1, 2012, the Consultancy Agreement dated July 25, 2011 was terminated in its entirety. For thenine months ended September 30, 2012, andyear ended December 31, 2011, Zegal and Ross has earned an aggregate of 47,971 and 42,849 shares pursuant to the consulting agreement with a fair value of $24,000 and $20,000, respectively. This contract was terminated on Aug 31, 2012.
 
Mr. Sternheim is currently on a month-to-month arrangement with the company and has been paid $180,000 and $179,943 for nine months ended September 30, 2012 and the year ended December 31, 2011, respectively.
 
NOTE 10 -             Subsequent Events
 
On November 20, 2012 the Company received $25,000 as an unsecured non-interest bearing loan.
 
 
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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 CompaniaMineraCerros 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.

 
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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.

 
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Results of Operations

Comparison of Three Months Ended September 30, 2012 and 2011
 
Revenues
 
During the three months ended September 30, 2012, we had no revenues. We did not generate any revenues during the three months ended September 30, 2011.
 
Operating expenses

Costs and expenses for the three months ended September 30, 2012 was $337,390, as compared to costs for the three months ended September 30, 2011 of $322,456. These expenses are comprised of mining and exploration expenses of $33,223, general and administrative expenses of $3,196, consulting fees of $298,471 and professional fees of $2,500. Operating expenses for the period commencing February 22, 2007 (inception) through September 30, 2012 was $1,896,092.
 
Net loss

As a result of the foregoing, for the three months ended September 30, 2012, net loss increased by $15,447, or 4.8%, to a loss of $338,310, compared to a net loss of $322,863 during the three months ended September 30, 2011

Comparison of Nine Months Ended September 30, 2012 and 2011

Revenues
 
During the nine months ended September 30, 2012, we had no revenues. We did not generate any revenues during the nine months ended September 30, 2011.
 
Operating expenses

Costs and expenses for the nine months ended September 30, 2012 was $842,178, as compared to costs for the nine months ended September 30, 2011 of $595,500. These expenses are comprised of professional fees of $36,769, general and administrative expenses of $16,987, consulting fees of $677,272 and mining and exploration expenses of $111,150. Operating expenses for the period commencing February 22, 2007 (inception) through September 30, 2012 was $1,896,092.
 
Net loss

As a result of the foregoing, for the nine months ended September 30, 2012, net loss increased by $223,777, or 36.1%, to a loss of $844,339, compared to a net loss of $620,562 during the nine months ended September 30, 2011. Net loss for the period commencing February 22, 2007 (inception) through September 30, 2012 was $1,937,791. 
 
 
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Liquidity and Capital Resources
 
On September 30, 2012, we had a working capital deficiency of $450,495 and a stockholders' deficiency of $344,495 as compared to a working capital deficiency of $450,495 and a stockholders' deficiency of $344,495 at December 31, 2011. The increase in working capital deficiency was primarily due to increased consulting fees during the nine months ended September 30, 2012.

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.

In August 2012, we received an aggregate investment of $34,000 in exchange for 680,000 shares and 340,000 exercisable at $.20 per share expiring in 2017.As of September 30, 2012, we had cash on hand of approximately $1,475. 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 the exploration stage and has no revenues. The Company incurred a net loss of approximately $844,339 for the nine months ended September 30, 2012 and a cumulative net loss of approximately $1,937,791 for the period February 22, 2007 (inception) to September 30, 2012 and a working capital deficit of $450,495. 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 fund 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 seeking additional funds.  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.
 
 
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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

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2012. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were ineffective at such time to ensure that information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls, which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, was inappropriate to allow timely decisions regarding required disclosure. Additionally, based on management’s assessment, the Company determined that there were material weaknesses in its internal control over financial reporting as of September 30, 2012.

Therefore, our internal controls over financial reporting were not effective as of September 30, 2012 based on the material weaknesses described below:

• we lacked proper procedures in place to track and record expenses;
• we lacked competent financial management personnel with appropriate accounting knowledge and training prior to the engagement of our current Chief Financial Officer;
• we relied on an outside consultant to prepare our financial statements;
• lack of segregation of duties at the Company due to the principal executive officer dealing with general administrative and financial matters; and
• we have insufficient controls over our period-end financial close and reporting processes.

 
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As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of September 30, 2012. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
 
As of August 31, 2012, Larry Wolfe resigned as an officer and director of the Company. Mr. Wolfe's resignation did not result from any disagreement with us concerning any matter relating to the Company's operations, policies or practices. Mr. Sternheim has assumed the role of interim principal accounting officer and is utilizing the services of an independent accounting consultant to continue to mitigate the foregoing material weakness., to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. Management believes that this will lessen the possibility that a material misstatement of our annual or interim financial statements will be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate. We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
 
Changes in Internal Controls over Financial Reporting

During the three months ended September 30, 2012, other than the resignation of Mr. Wolfe as CFO, there was no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
 
 
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PART II
OTHER INFORMATION

Item 1.      Legal Proceedings.
 
On or about July 2012, the Company was named as a defendant in a lawsuit titled George Sharp vs. Mustang Alliances, Inc. et al. The lawsuit was filed in the Superior court of the State of California, in San Diego County. The lawsuit alleges violations of California restrictions on unsolicited commercial e-mail advertisers and seeks damages and punitive dames in an unspecified amount. The Company intends to vigorously defend this lawsuit. As of September 30, 2012, the Company has not accrued any amounts related to this lawsuit.
 
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

None

Purchases of equity securities by the issuer and affiliated purchasers

None.
 
Use of Proceeds
 
Item 3.      Defaults Upon Senior Securities.

None.

Item 4.      Mine Safety Disclosures

Not Applicable
 
Item 5.      Other Information

As of August 31, 2012, Larry Wolfe resigned as an officer and director of the Company. Mr. Wolfe's resignation did not result from any disagreement with us concerning any matter relating to the Company's operations, policies or practices. As a result of Mr. Wolfe's resignation, the Consultancy Agreement dated July, 2011 between the Company and Mr. Wolfe was terminated in its entirety.

 
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Item 6.      Exhibits
 
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)*
     
31.2
 
Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)*
     
32.1
 
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith) *
     
32.2
 
Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith) *
 
101 **
The following materials from our Quarterly Report on Form 10-Q for the nine months ended September 30, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheet, (ii) Statement of Operations, (iii)  Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements, tagged as blocks of text.
_________
*Filed herewith.
 
**Furnished herewith.
 
 
27

 
 
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.
 
 
 
MUSTANG ALLIANCES, INC.
 
       
Dated: November 26, 2012    
By
/s/ Leonard Sternheim
 
   
Leonard Sternheim
 
   
President, Chief Executive Officer and Chairman
(Principal Executive Officer)
 
 
Dated: November 26, 2012    
By
/s/ Leonard Sternheim
 
   
Leonard Sternheim
 
   
Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
 
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