MUSTANG ALLIANCES, INC. - FORM 10-Q

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EX-31 - CERTIFICATION - MUSTANG ALLIANCES, INC.	mstg_ex31.htm
EX-32 - CERTIFICATION - MUSTANG ALLIANCES, INC.	mstg_ex32.htm
EXCEL - IDEA: XBRL DOCUMENT - MUSTANG ALLIANCES, INC.	Financial_Report.xls

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, 2013

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)

382 NE 191St, Suite #46843

Miami, FL 33179-3899

(Address of principal executive offices)

888-251-3422

(Issuer's telephone number)

410 Park Avenue, New York, NY 10022

(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 May 15, 2013, 107,037,834 shares of common stock, par value $0.0001 per share, were outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION			3

Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis or Plan of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		25

PART II – OTHER INFORMATION			27

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		27
Item 4.	Mine Safety Disclosures		27
Item 5.	Other Information		27
Item 6.	Exhibits		28

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS

	March 31,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets:
Cash	$	155,107		$	247
Total current assets		155,107			247
Property and equipment, net		-			-
Total assets	$	155,107		$	247

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	98,255		$	96,869
Accrued compensation-related party		321,176			290,789
Notes payable		30,000			30,000
Notes payable-related party		75,020			75,020
Convertible debts, net of discounts of $111,250 and $0, respectively		133,750			-
Due to shareholder		150			150
Total current liabilities		658,351			492,828
Total liabilities		658,351			492,828

Commitments and contingencies (See note 9)

Stockholder's deficit
Preferred stock, $.0001 par value; 5,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $.0001 par value; 500,000,000 shares authorized, 107,037,834 and 104,537,834 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		10,681			10,431
Additional paid in capital		1,917,875			1,672,139
Deficit accumulated during the exploration stage		(2,431,800	)		(2,175,151	)
Total stockholders' deficit		(503,244	)		(492,581	)
Total liabilities and stockholders' deficit	$	155,107		$	247

The accompanying notes are an integral part of these financial statements

MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)

	For the Three Months Ended March 31,						For the Period February 22, 2007 (Inception) to March 31,
	2013			2012			2013

Net revenues	$	-		$	-		$	-

Operating expenses:
Professional fees		19,933			14,844			332,499
Consulting fees		62,500			205,084			1,349,327
General and administrative expenses		9,390			7,053			107,654
Impairment loss		-			-			106,000
Mining and exploration costs		26,752			42,326			355,769
Total Operating expenses		118,575			269,307			2,251,249

Operating loss		(118,575	)		(269,307	)		(2,251,249	)

Other expenses:
Interest expense, net		(4,324	)		(311	)		(27,078	)
Amortization of debt discount		(133,750	)		-			(153,473	)
Total other expenses, net		(138,074	)		(311	)		(180,551	)

Net loss	$	(256,649	)	$	(269,618	)	$	(2,431,800	)

Basic and diluted loss per share	$	(0.00	)	$	(0.00	)

Weighted average common shares outstanding		105,760,056			100,369,133

The accompanying notes are an integral part of these financial statements

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO MARCH 31, 2013

(UNAUDITED)

	Common Stock						Paid-In			Accumulated Deficit During the Exploration				Total Stockholders's
	Shares			Amount			Capital				Stage			Deficit
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		-			-			-				(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		-			-			-				(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		-			-			-				(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

The accompanying notes are an integral part of these financial statements

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO MARCH 31, 2013

(UNAUDITED)

	Common Stock				Paid-In			Accumulated Deficit During the Exploration			Total Stockholders's
	Shares		Amount		Capital			Stage			Deficit

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		-		-		-			(898,473	)		(898,473	)

Balance, December 31, 2011		100,217,516	$	9,992	$	939,363		$	(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		(30	)					-

Fair value of options issued during six months ended June 30, 2012						47,822						47,822

Common shares issuable (235,318 shares) to consultants, related parties during 2012		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

In-kind contribution of interest						393						393

Consulting fees forgiveness-related party						57,000						57,000

Net Loss for the Year Ended		-		-		-			(1,081,699	)		(1,081,699	)

Balance, December 31, 2012		104,537,834		10,431		1,672,139			(2,175,151	)		(492,581	)

Common stocks issued with convertible debt		2,500,000		250		27,875						28,125

Discount on Convertible Debt						216,875						216,875

In-kind contribution of interest						986						986

Net Loss for the quarter ended March 31, 2013									(256,649	)		(256,649	)

Balance, March 31, 2013		107,037,834	$	10,681	$	1,917,875		$	(2,431,800	)	$	(503,244	)

The accompanying notes are an integral part of these financial statements

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31,						For the Period February 22, 2007 (Inception) to March 31,
	2013			2012			2013
Cash Flows from Operating Activities:
Net Loss	$	(256,649	)	$	(269,618	)	$	(2,431,800	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Common stock issued for services		-			-			306,800
Common stock issuable for services		-			39,000			162,000
Common Stock issued for mining rights		-			-			2,500
Stock compensation cost		-			7,970			61,105
Amortization of debt discount		133,750			-			153,473
Impairment of mining equipment		-			-			108,500
In-kind contribution of interest		986			-			1,379
In-kind contribution of services		-						57,000
Changes in operating assets and liabilities:
Increase in accounts payable and accrued expenses		31,773			36,348			443,345
Net Cash Used in Operating Activities		(90,140	)		(186,300	)		(1,135,698	)

Cash Flows from Investing Activities:		-			-			-

Cash Flows from Financing Activities:
Proceeds of borrowings from convertible debts-non-related parties		245,000			-			245,000
Proceeds of borrowings from non-related party		-			30,150			215,871
Proceeds of borrowings from related parties		-						50,170
Proceeds from sale of common stock and warrants, net		-			190,000			854,764
Repayment of borrowings		-			-			(75,000	)
Net Cash Provided by Financing Activities		245,000			220,150			1,290,805

Increase(Decrease) in Cash		154,860			33,850			155,107

Cash – Beginning of Period		247			891			-

Cash – End of Period	$	155,107		$	34,741		$	155,107

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	$	-		$	2,500		$	5,000
Debt forgiveness	$	-		$	97,785		$	97,785
Consulting fees forgiveness	$	-		$	12,000		$	12,000
Common stock issued for mining equipments	$	-		$	266,000		$	106,000
Common stock issued for shares issuable	$	-		$	74,000		$	74,000
Discount on convertible debt	$	245,000		$	-		$	245,000

The accompanying notes are an integral part of these financial statements

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 an exploration 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 is 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.

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.

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 $256,649 for the three months ended March 31, 2013 and a cumulative net loss of $2,431,800 for the period from February 22, 2007 (inception) to March 31, 2013. In addition, at March 31, 2013, there is a working capital deficit of $503,244. 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 available from external sources such as debt, equity financings, or other potential sources. The inability to generate cash flow from operations or to raise capital from external sources will force the Company to substantially curtail and cease operations, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any funds, if available, will possess attractive terms or 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, equity, or some combination thereof. There can be no assurances that the Company will be able to raise the additional funds it requires.

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, 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 instruments.

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 March 31, 2013 and December 31, 2012, the Company had no cash equivalents.

Property 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. As of March 31, 2013, the Company has 2,145,000 warrants and 0 options that are anti-dilutive and not included in diluted loss per share. As of March 31, 2012, the Company has 5,195,000 warrants and 360,000 options that are anti-dilutive and not included in diluted loss per share.

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 ASC Topic 740, Income Taxes (“ASC Topic 740”). Under ASC Topic 740, 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 Topic 740, 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 2010 to 2012 tax returns are subject to examination 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 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 sheets for accounts payable, notes payable, loans 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 ASC Topic 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. During 2012, the Company recorded an impairment of $106,000.

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 ASC Topic 718, Compensation–Stock Compensation(ASC Topic 718). Under ASC Topic 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. Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by ASC Topic 718.

ASC Topic 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 performance commitment, as defined, is reached or the earlier of the non-employee performance is complete or 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 ASC.

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, convertible debts, 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, convertible debts, and notes and loans payable approximated fair value because of the short maturity of these instruments.

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 February 2013, FASB issued Accounting Standards Update 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force). This guidance requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This stipulates that (1) it will include the amount the entity agreed to pay for the arrangement between them and the other entities that are also obligated to the liability and (2) any additional amount the entity expects to pay on behalf of the other entities. The objective of this update is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements. The amendments in this update are effective for fiscal periods (and interim reporting periods within those years) beginning after December 15, 2013. This standard is not expected to have a material impact on the Company’s reported results of operations or financial position.

In February 2013, FASB issued Accounting Standards Update 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income. This update requires an entity to provide information about the amount reclassified out of accumulated other comprehensive income by component. The entity is also required to disclose significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting periods. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other discourses required under U.S. GAAP that provide additional detail about those amounts. The objective in this Update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update should be applied prospectively for reporting periods beginning after December 15, 2013. This standard is not expected to have a material impact on the Company’s reported results of operations or financial position.

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 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, Compania Minera Cerros del 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 had not been placed in service as of December 31, 2012 and the Company recorded an impairment loss of $106,000.

Property and equipment consists of the following at March 31, 2013 and December 31, 2012:

	March 31, 2013			December 31, 2012

Mining equipments	$	106,000		$	106,000
Total		106,000			106,000
Less: impairment loss		(106,000	)		(106,000	)

Property and equipment, net	$	-		$	-

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 December 31, 2012, the principle balance due was $25,000, is unsecured and was due January 2013 with accrued interest at 5%. As of March 31, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $25,000 and accrued interest of $3,459 are in default. The note does not include any additional fees or penalties due to the loan being in default.

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 December 31, 2012, the principal due was $30,000, is unsecured and was due in full plus accrued interest on March 28, 2013. As of March 31, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $30,000 and accrued interest of $2,420 are in default. The loan stipulates an increase to a 15% interest rate until the loan is repaid.

During 2012, the Company received a total of $50,020 from Leonard Sternheim, CEO of the Company, as an unsecured non-interest bearing loan. As of March 31, 2013 and December 31, 2012, the principal due was $50,020, is unsecured and is due on demand. The Company recorded $986 and $393 of imputed interest related to Mr. Sternheim’s loan payable as in-kind contribution at March 31, 2013 and December 31, 2012, respectively.

NOTE 6 - Convertible Debts

On February 15, 2013, the Company issued a convertible note of $45,000. The note accrues interest at 12% per annum and matures on April 16, 2013. The note is convertible into shares of Company’s common stock at a conversion price of $0.01 per share. The difference between the effective conversion price of the convertible notes into shares of the Company’s common stock, and the fair value of the Company’s common stock on the date of issuance of the convertible notes, resulted in a beneficial conversion feature in the amount of $16,875. In addition, upon the issuance of convertible note, the Company issued 2,500,000 shares of the Company's common stocks (See note 7). The Company has recorded a debt discount in the amount of $28,125 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The total discount of $45,000 will be amortized over the term of the debt. Amortization for the three months ended March 31, 2013 was $33,750.

On February 28, 2013, the Company issued two convertible notes totaling $200,000. The notes accrue interest at 12% per annum and mature on April 29, 2013. The notes are convertible into shares of Company’s common stocks at a conversion price of $0.01 per share. The difference between the effective conversion price of the convertible notes into shares of the Company’s common stock, and the fair value of the Company’s common stock on the date of issuance of the convertible notes, resulted in a beneficial conversion in the amount of $200,000. The total discount of $200,000 will be amortized over the term of the debt. Total amortization for the two convertible notes for the three months ended March 31, 2013 was $100,000.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - Common Stock

In February 2007, the Company issued 64,000,000 shares of common stock at $0.0000125 per share to the Founders of the Company for $800.

In February 2008, the Company sold 22,400,000 shares of common stock at $0.002 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 $0.0075 per share for services rendered. The Company recorded stock based compensation expense of $6,000 in connection with this issuance.

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 December 15, 2010, the Company notified 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 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 $0.50 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 $0.50 per share and have a two year term expiring April 12, 2013.

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 $0.50 per share and have a two year term expiring April 20, 2013.

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 $0.50 per share and have a two year term expiring April 21, 2013.

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 $0.50 per share and have a two year term expiring May 6, 2013.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - Common Stock - Continued

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 $0.50 per share and have a two year term expiring May 11, 2013.

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 expiring July 19, 2013. The shares were valued at $10,000 ($0.25 per share), the fair value on the date of grant.

On July 21, 2011, the Company issued 100,000 shares to Lawrence H. Wolfe, the Chief Financial Officer at the time, in consideration for the execution and delivery of a consulting agreement with Mr. Wolfe. The shares were valued at $24,000 ($0.24 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 ($0.24 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 that replaced Mr. Mochkin's employment agreement entirely. 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 ($0.24 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 expiring July 27, 2013.

During 2011, the principal stockholder forgave consulting fees of $12,000. The amount was recorded as an in-kind contribution.

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 $0.22 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.

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.

In February 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 in February 2015.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - Common Stock - Continued

On March 1, 2012, an investor exercised his right to purchase 30,000 shares for $0.50 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 Agreement in exchange for 680,000 shares of common stock at $0.05 per share and 340,000 warrants exercisable at $0.20 per share. The warrants expire on the fifth anniversary date of its issuance in August 2017.

On August 28, 2012, the Company issued 3,000,000 shares of common stock to three consultants in consideration for services previously provided. The shares were valued at $0.07 per share, the fair value on the date of grant of $210,000.

At December 31, 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.

During 2012, an officer forgave consulting fees of $57,000. The amount was recorded as an in-kind contribution.

On February 15, 2013, the Company issued 2,500,000 shares of common stock in connection with issuance of convertible debt of $45,000. These shares were valued at the fair value on the date of grant (See note 6).

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 $0.50. 30,000 warrants expired during the three months ended March 31, 2013.

In February 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.

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.

Information with respect to warrants outstanding and exercisable at March 31, 2013 is as follows:

	Number Outstanding		Range of Exercise Price		Number Exercisable

Warrants outstanding, December 31, 2012		2,175,000	$	0.20-1.50		2,175,000
Issued		-
Exercised		-
Expired/Forfeited		(30,000)	$	0.50		-
Warrants outstanding, March 31, 2013		2,145,000	$	0.20-1.50		2,145,000

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 8 - 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, 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 9 - Commitment and Contingencies

Lease Commitments

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 the Company 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 desired to exercise such option, the Company was required to send written notice to Cerros and Mayan Gold. 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.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 9 - 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(See note 10).

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 (See Note 10).

Litigation:

In July of 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 March 31, 2013, the Company has not accrued any amounts related to this lawsuit.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 10 - 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 7). His compensation was $150,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion would be paid monthly, and the shares would be valued based on the stock price of the last day of the preceding month and would 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 was granted, half of the option would 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 was amended to include a $0.25 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. As of March 31, 2013 and December 31, 2012, accrued consulting fees of $69,200 and $71,500 were including in accrued compensation- related party, respectively.

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 9). Pursuant to the agreement, his compensation was $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion would be paid monthly, and the shares would be valued based on the stock price of the last day of the preceding month and would 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 was amended to include a $0.25 per share price floor on the valuation of the common stock. 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 December 31, 2012, the Company has not accrued any amounts related to this indemnification. As of December 31, 2012, total consulting fees of $57,000 owed by Company was forgiven and recorded in additional paid in capital. As of March 31, 2013 and December 31, 2013 consulting fees and accrued compensation balances for Mendel Mochkin are $0.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 10 - Related Parties - Continued

Consulting Agreements- Continued

On July 21, 2011, the Company entered into a Consultancy Agreement with Zegal and Ross Capital LLC. 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 7). The compensation was $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion would be paid monthly, and the shares would be valued based on the stock price of the last day of the preceding month and would 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 would 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 was amended to include a $0.25 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. As of March 31, 2013 and December 31, 2012, accrued consulting fees of $48,000 were including in accrued compensation- related party, respectively.

Mr. Sternheim is currently on a month-to-month arrangement at a rate of $20,000 a month. As of March 31, 2013 and December 31, 2012, the accrued compensation fees of $203,976 and $171,289 were recorded in accrued compensation- related party, respectively.

NOTE 11 - Subsequent Events

On April 20, 2013 the Company issued a 12 % promissory note for $100,000, due in sixty days, to an independent third party. The note holder has the right to convert, at any time, the unpaid principal balance for $0.01 per share. As of May 14, 2013 the Company received $90,000 of the total amount for this note.

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. We do have certain mining equipment that was purchased in February 2012 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, 2013 and 2012

Revenues

During the three months ended March 31, 2013, we had no revenues. We did not generate any revenues during the three months ended March 31, 2012.

Operating expenses

Costs and expenses for the three months ended March 31, 2013 was $118,575, as compared to operating expenses for the three months ended March 31, 2012 of $269,307. These expenses are comprised of consulting fees $62,500, mining and exploration costs of $26,752, professional fees of $19,933 and general and administrative expenses of $9,390. The decrease of approximately 56% in operating expenses for the three months ended March 31, 2013 from March 31, 2012 was primarily as a result of the decrease in consulting fees from $205,084 to $62,500, and mining and exploration costs from $42,326 to $26,752.

During the three months ended March 31, 2013, the Company recorded an amortization of discount for $133,750 related to the convertible loans obtained during the period. There was no such cost incurred during the three months ended March 31, 2012.

Net loss

As a result of the foregoing, for the three months ended March 31, 2013, net loss decreased by $12,969, or 5%, to a loss of $256,649, compared to a net loss of $269,618 during the three months ended March 31, 2012.

Liquidity and Capital Resources

On March 31, 2013, we had a working capital deficiency and stockholders' deficiency of $503,244 as compared to a working capital deficiency and a stockholders' deficiency of $492,581, at December 31, 2012. The increase in working capital deficiency was primarily due to increase in liabilities and note payable during the quarter ended March 31, 2013. In addition, the Company has five notes in default as March 31, 2013.

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 of March 31, 2013 we had cash on hand of approximately $155,107. This resulted from the issuance of three convertible notes - on February 15, 2013, the Company issued a convertible note of $45,000 and on February 28, 2013 the Company issued two convertible notes totaling $200,000. The notes accrue interest at 12% per annum and mature sixty days from the borrowing date. The notes are convertible into shares of Company’s common stock at a conversion price of $0.01 per share.

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 has no revenues, has incurred a net loss of approximately $256,649 for the three months ended March 31, 2013 and a cumulative net loss of $2,431,800 for the period from February 22, 2007 (inception) to March 31, 2013. In addition, at March 31, 2013, there is a working capital deficit of $503,244. 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

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 March 31, 2013. 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 March 31, 2013.

Therefore, our internal controls over financial reporting were not effective as of March 31, 2013 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;

• 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.

As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of March 31, 2013. 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.

In order to mitigate the foregoing material weakness, we had engaged a CFO who was previously a PCAOB auditor with significant experience in the preparation of financial statements in conformity with U.S. GAAP and an outside accounting consultant to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. As of August 31, 2012, Lawrence Wolfe resigned as the Chief Financial Officer and a director of the Company. Leonard Sternheim, our chief executive officer, 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.

Changes in Internal Controls over Financial Reporting

During the quarter ended March 31, 2013, 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.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Other than described below, 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.

On July 23, 2012, the Company was named a defendant in a lawsuit George Sharp v. Mustang Alliances, Inc. et al which was filed in the Superior Court of the State of California, San Diego County. The lawsuit alleges violations of California restrictions on unsolicited commercial e-mail advertisers and seeks damages and punitive damages in an unspecified amount. The Company believes that this lawsuit is without merit and intends to vigorously defend the action. Currently, a trial date has been set for March of 2014.

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 February 15, 2013, the Company issued a convertible note of $45,000. The note accrues interest at 12% per annum and matures on April 16, 2013. The note is convertible into shares of Company’s common stock at a conversion price of $0.01 per share. The difference between the effective conversion price of the convertible notes into shares of the Company’s common stock, and the fair value of the Company’s common stock on the date of issuance of the convertible notes, resulted in a beneficial conversion feature in the amount of $16,875. In addition, upon the issuance of convertible note, the Company issued 2,500,000 shares of the Company's common stocks. The issuance was made in reliance upon an exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended. The Company has recorded a debt discount in the amount of $28,125 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The total discount of $45,000 will be amortized over the term of the debt. Amortization for the three months ended March 31, 2013 was $33,750.

Purchases of equity securities by the issuer and affiliated purchasers

None.

Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

On February 15, 2013, the Company issued a convertible note of $45,000. The note accrues interest at 12% per annum and matures on April 16, 2013. The note is convertible into shares of Company’s common stock at a conversion price of $0.01 per share. The difference between the effective conversion price of the convertible notes into shares of the Company’s common stock, and the fair value of the Company’s common stock on the date of issuance of the convertible notes, resulted in a beneficial conversion feature in the amount of $16,875. In addition, upon the issuance of convertible note, the Company issued 2,500,000 shares of the Company's common stocks. The Company has recorded a debt discount in the amount of $28,125 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The total discount of $45,000 will be amortized over the term of the debt. Amortization for the three months ended March 31, 2013 was $33,750. As of May 15, 2013, the note is in default.

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Item 6. Exhibits

31.1				Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)*

32.1				Certification of Principal Executive Officer and 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 quarter ended March 31, 2013 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.

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: May 15, 2013	By:	/s/ Leonard Sternheim
		Name: Leonard Sternheim
		Title: President, Chief Executive Officer and Chairman and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

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