MUSTANG ALLIANCES, INC. - FORM 10-Q

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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 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 191 St.

Suite #46843

Miami, FL 33179-3899

(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). Yesx 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 August 19, 2013, 167,802,516 shares of common stock, par value $0.0001 per share, were issued and outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures		27

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item IA.	Risk Factors		29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Mine Safety Disclosures		30
Item 5.	Other Information		30
Item 6.	Exhibits		31

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

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

	June 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets:
Cash	$	993,188		$	247
Prepaid expense		55,067			-
Total current assets		1,048,255			247
Plant and equipment, net		20,475			-
Other assets		156,667			-
Total assets	$	1,225,397		$	247

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	229,216		$	96,869
Accrued compensation-related party		117,200			290,789
Notes payable		30,000			30,000
Notes payable-related party		28,637			75,020
Convertible debts		300,000			-
Contract settlement liabilities-current portion		888,000			-
Due to shareholder		150			150
Total current liabilities		1,593,203			492,828
Convertible debts, net of discounts of $1,297,500 and $0, respectively		2,500			-
Contract settlement liabilities		1,702,000			-
Total long term liabilities		1,704,500			-
Total liabilities		3,297,703			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, 137,037,834 and 104,537,834 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		13,703			10,453
Additional paid in capital		3,815,445			1,672,117
Deficit accumulated during the exploration stage		(5,901,454	)		(2,175,151	)
Total stockholders' deficit		(2,072,306	)		(492,581	)
Total liabilities and stockholders' deficit	$	1,225,397		$	247

The accompanying notes are an integral part of these unaudited condensed financial statements

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Period February 22, 2007 (Inception) to June 30,
	2013			2012			2013			2012			2013

Net revenues	$	-		$	-		$	-		$	-		$	-

Operating expenses:
Professional fees		39,679			19,425			59,612			34,269			372,178
Consulting fees		1,753,097			173,717			1,815,597			378,801			3,102,424
General and administrative expenses		2,862			6,738			12,252			13,791			110,516
Impairment loss		-			-			-			-			106,000
Mining and exploration costs		74,862			35,601			101,614			77,927			430,631
Total Operating expenses		1,870,500			235,481			1,989,075			504,788			4,121,749

Operating loss		(1,870,500	)		(235,481	)		(1,989,075	)		(504,788	)		(4,121,749	)

Other expenses:
Liquidated damage		(81,000	)		-			(81,000	)		-			(81,000	)
Loss on future sales		(1,290,000	)		-			(1,290,000	)		-			(1,290,000	)
Interest expense, net		(14,404	)		(930	)		(18,728	)		(1,241	)		(41,482	)
Amortization of debt discount		(213,750	)		-			(347,500	)		-			(367,223	)
Total other expenses, net		(1,599,154	)		(930	)		(1,737,228	)		(1,241	)		(1,779,705	)

Net loss	$	(3,469,654	)	$	(236,411	)	$	(3,726,303	)	$	(506,029	)	$	(5,901,454	)

Basic and diluted loss per share	$	(0.03	)	$	(0.00	)	$	(0.03	)	$	(0.01	)

Weighted average common shares outstanding		120,224,647			100,622,516			113,032,309			100,376,664

The accompanying notes are an integral part of these unaudited condensed financial statements

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO JUNE 30, 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 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		$	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			22			87,978						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			10,453			1,672,117			(2,175,151	)		(492,581	)

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

Common stocks issued for repayment of a related party loan		30,000,000			3,000			1,797,000						1,800,000

Discount on Convertible Debt								316,875						316,875

In-kind contribution of interest								1,578						1,578

Net Loss for the six months ended June 30, 2013											(3,726,303	)		(3,726,303	)

Balance, June 30, 2013		137,037,834		$	13,703		$	3,815,445		$	(5,901,454	)	$	(2,072,306	)

The accompanying notes are an integral part of these unaudited condensed financial statements

MUSTANG ALLIANCES, INC..

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30,						For the Period February 22, 2007 (Inception) to June 30,
	2013			2012			2013
Cash Flows from Operating Activities:
Net Loss	$	(3,726,303	)	$	(506,029	)	$	(5,901,454	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Common stock issued for services		1,500,000			-			1,806,800
Common stock issuable for services		-			78,000			162,000
Common Stock issued for mining rights		-			-			2,500
Stock compensation cost		-			15,940			61,105
Amortization of debt discount		347,500			-			367,223
Depreciation expense		525						525
Liquidated damages		81,000						81,000
Loss on future sales		1,290,000						1,290,000
Impairment of mining equipment		-			-			108,500
In-kind contribution of interest		1,578			-			1,971
In-kind contribution of services		-						57,000
Changes in operating assets and liabilities:
Increase in prepaid expense		(211,734	)					(211,734	)
Increase in accounts payable and accrued expenses		177,758			178,615			589,330
Net Cash Used in Operating Activities		(539,676	)		(233,474	)		(1,585,234	)

Cash Flows from Investing Activities:
Purchase of Plant and equipment		(21,000	)		-			(21,000	)
Net Cash Used in Investing Activities		(21,000	)		-			(21,000	)


Cash Flows from Financing Activities:
Proceeds of borrowings from convertible debts-non-related parties		1,600,000			-			1,600,000
Proceeds of borrowings from non-related party		-			30,150			215,871
Proceeds of borrowings from related parties		400						50,570
Proceeds from sale of common stock and warrants, net		-			204,000			854,764
Repayment of borrowings to a related party		(46,783	)		-			(121,783	)
Net Cash Provided by Financing Activities		1,553,617			234,150			2,599,422

Increase in Cash		992,941			676			993,188

Cash – Beginning of Period		247			891			-

Cash – End of Period	$	993,188		$	1,567		$	993,188

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	$	-		$	166,000		$	106,000
Common stock issued for shares issuable	$	-		$	74,000		$	74,000
Common stock issued for repayment of accrued consulting fees to a related party	$	300,000		$	-		$	300,000
Discount on convertible debt	$	345,000		$	-		$	367,223
Note payable proceeds allocated to settlement liablity	$	1,300,000		$	-		$	1,300,000
Common stock retired as contributed capital	$	-		$	-		$	3,000

The accompanying notes are an integral part of these unaudited condensed 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. We are an exploration stage mining company and as a result of the execution and delivery of the lease agreements, we are 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 $3,726,303 for the six months ended June 30, 2013 and a cumulative net loss of $5,901,454 for the period from February 22, 2007 (inception) to June 30, 2013. In addition, at June 30, 2013, there is a working capital deficit of $544,948. 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.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 - Going Concern and Significant Accounting Policies – (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, valuation of equity instruments, and valuation of derivative transactions.

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 June 30, 2013 and December 31, 2012, the Company had no cash equivalents.

Plant and Equipment

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
Vehicles		5 years
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 June 30, 2013, the Company has 70,000,000 shares convertible under note agreements, 15,035,000 warrants and 0 options that are anti-dilutive and not included in diluted loss per share. As of June 30, 2012, the Company has 0 shares convertible under note agreements, 5,195,000 warrants and 5,050,000 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 and notes payable – related party approximate fair value based on the short-term maturity of these instruments.

Firm Sale Commitment - Derivative

The Company intends to produce gold bullion. As a result of an agreement with a note holder, the Company has agreed to deliver and sell 100 oz of gold bullion each month over the next 35 months (3,500 oz in total) at a fixed price of $500, unless price of gold as measured by the Kitco.com price index is below $1,000 at which time the fixed price drops to $400 per ounce. In accordance with ASC 820, Fair Value Measurements, we value this derivative at its fair value determined to be the intrinsic value differential between the spot price and fixed price at each reporting period with adjustments to fair value to be made each reporting period.

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.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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

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.

Reclassifications

Certain reclassifications have been made to the prior period to conform with the current period presentation.

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:

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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

Fair Value Measurement (Continued)

• 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 following table summarizes our financial instruments measured at fair value as of June 30, 2013:

	Fair Value Measurements at June 30, 2013
Liabilities:	Total		Level 1		Level 2		Level 3

Commodity derivative at fair value	$	2,590,000	$	2,590,000	$	-	$	-
Convertible notes at fair value	$	302,500	$	-	$	-	$	302,500

The Company recorded $888,000 of the commodity derivative in current liabilities and the balance of $1,702,000 in the long term liabilities.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or are not believed by the Company’s management, to have a material impact on the Company’s present or future financial statements.

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 - 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, 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 has not been placed in service as of December 31, 2012 and the Company recorded an impairment loss of $106,000.

Plant and equipment consists of the following at June 30, 2013 and December 31, 2012:

	June 30, 2013			December 31, 2012

Mining equipments	$	106,000		$	106,000
Vehicles		21,000			-
Total		127,000			106,000
Less: accumulated depreciation		(525	)		-
Less: impairment loss		(106,000	)		(106,000	)

Plant and equipment, net	$	20,475		$	-

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 5 - Notes Payable

On June 15, 2011, the loans payable to First Line Capital which is a company owned by a previous stockholder, a related party, including accrued interest in the amount of $97,785 was forgiven. The Company has recorded the carrying amount of debt with accrued interest as an increase to additional paid-in capital

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 June 30, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $25,000 and accrued interest of $3,771 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 June 30, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $30,000 and accrued interest of $3,542 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. During the six months ended June 30, 2013, the Company repaid $46,783 of notes payable. As of June 30, 2013 and December 31, 2012, the principal due was $3,637 and $50,020, is unsecured and is due on demand. The Company recorded $1,578 and $393 of imputed interest related to Mr. Sternheim’s loan payable as in-kind contribution at June 30, 2013 and December 31, 2012, respectively.

NOTE 6 - Convertible Debts

The Company has issued for aggregate consideration of $25,000 a convertible note to a related party, a stockholder of the Company. This note bears interest at the imputed IRS rate of .0054% per annum and is due September 28, 2011. The note is convertible into common stock of the Company at the rate of $.25 per share. In addition, upon conversion to common stock at maturity date, the Company will issue a 2-year warrant to purchase 100,000 shares of the Company's common stock at an exercise price of $.50 per share. The Company has recorded a beneficial conversion in the amount of $19,723 to reflect the fair value of the convertible debt and a corresponding increase to additional paid-in capital. As of December 31, 2011, the convertible note was repaid in full.

On February 15, 2013, the Company issued a convertible note of $45,000. The note accrues interest at 12% per annum and matured 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 was amortized over the term of the debt. Amortization for the six months ended June 30, 2013 was $45,000. The Company was not able to repay the loan on the maturity date, however, the principal balance of $45,000 was repaid on June 28, 2013. At June 30, 2013, the Company owes accrued interest of $1,586 to the Note Holder.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 6 - Convertible Debts - Continued

On February 28, 2013, the Company issued two convertible notes totaling $200,000. The notes accrued interest at 12% per annum and matured on April 27, 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 was amortized over the term of the debt. Total amortization for the two convertible notes for the six months ended June 30, 2013 was $200,000. As of June 30, 2013, the Company was not able to repay the loan on the maturity date, and the principal balance of $200,000 and accrued interest of $8,022 are in default. The note does not include any additional fees or penalties due to the loan being in default. The notes were converted into 20,000,000 shares of Company’s common stock to satisfy the debt of $200,000 on July 8, 2013.

On April 20, 2013, the Company issued a convertible note of $100,000. The note accrued interest at 12% per annum and matured on June 19, 2013. The note is 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 $100,000. The total discount of $100,000 was amortized over the term of the debt. Total amortization for the convertible note for the six months ended June 30, 2013 was $100,000. As of June 30, 2013, the Company was not able to repay the loan on the maturity date, and the principal balance of $100,000 and accrued interest of $2,334 are in default. The note does not include any additional fees or penalties due to the loan being in default. The notes were converted into 10,000,000 shares of Company’s common stock was made to satisfy the debt of $100,000 on July 8, 2013.

On June 28, 2013, the Company issued a convertible note of $1,350,000. The Note matures on June 28, 2016 and is secured by a lien on all the assets of the Company. The interest is payable by 50 ounces of gold produced by the Company on a monthly basis commencing on August 28, 2013. If the 50 ounces of gold are not available, the gold shall be made available at the next monthly interest date. As of June 30, 2013, the interest expense is $4,136.

The note is convertible into shares of Company’s common stock at a conversion price of $0.10 per share. The Company also issued a 5-year warrant to purchase 13,500,000 shares of common stock at an exercise price of $0.15 per share. (See note 7). In addition, the Company agreed to sell to the Note holder on a monthly basis commencing August 28, 2013, 100 ounces of gold per month for a purchase price of $500 per ounce. If an ounce of gold as reported on Kitco.com is less than $1,000 an ounce when the gold is to be delivered to the Buyer, the purchase price of the gold shall be $400 per ounce. The agreement shall survive until an aggregate of 3,500 ounces of gold have been purchased by the Note holder. The Company has recorded a contract settlement liability in the amount of $2,590,000 to reflect the value of the 3,500 ounces of gold committed to purchase as a reduction to the carrying amount of the convertible debt. The total discount of $1,300,000 will be amortized over the term of the debt. Amortization for the six months ended June 30, 2013 was $2,500.

The Company also agreed to file a registration statement to register for re-sale the shares issuable upon conversion of the Note and the shares underlying the Warrant . If the registration statement is not declared effective by the Securities and Exchange Commission by August 28, 2013, the Company shall pay the Buyer as liquidated damages 3% of the liquidated value of the Conversion Shares for each 30 day period subsequent to August 28, 2013. As of June 30, 2013, the Company has accrued liquidated damage expense of $81,000.

As of June 30, 2013, the Company has received $1,300,000 of the proceeds from the convertible note. The remaining $50,000 was funded in July 2013.

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 $0.25 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 $0.25 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 $0.25 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 $0.25 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 $0.25 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 $0.25 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 $0.25 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).

During May 2013, the Board of Directors approved resolutions for the issuance of a total of 30,000,000 shares of the Company’s restricted common stock to Mr. Sternheim (our CEO) to discharge $300,000 of amounts due to him at $0.01 per share. The transaction was recorded at the fair value of the stocks on the grant date of $1,800,000 ($0.06 per share). The difference between the debt discharged and the fair value was recorded as stock compensation expense (See note 10).

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. The 640,000 warrants expired during the six months ended June 30, 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.

On June 28, 2013, the Company issued a 5-year warrantto purchase 13,500,000 shares of common stock at an exercise price of $0.15 per share in connection with issuance of convertible debt of $1,350,000. These shares were valued at the fair value on the date of grant (See note 6).

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - Common Stock - Continued

Warrants - Continued

Information with respect to warrants outstanding and exercisable at June 30, 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		13,500,000	$	0.15		13,500,000
Exercised		-
Expired/Forfeited		(640,000)	$	0.50		-
Warrants outstanding, June 30, 2013		15,035,000	$	0.20-1.50		15,035,000

Options

There were no options issued during the six months ended June 30, 2013.

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 $47,822 using the Black-Scholes option-pricing model. The grant date fair values of the Company’s option awards during the years ended December 31, 2012 and 2011 were estimated using the Black Scholes option pricing model with the following assumptions:

	For the six months ended June 30, 2013		For the six months ended June 30, 2012
Expected life (years)		-		2
Risk – free interest rate		-		0.40	%
Expected volatility		-		178	%
Dividend Yield		-		0.00	%

The Company had Consultancy agreements that contain provisions for the issuance and granting of options aggregating 3,000,000 shares at $0.50 per share that were predicated on the Company reaching certain milestones in the production of gold. None of the milestones were met and accordingly such options were not 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.

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 desire to exercise such option, the Company must send written notice to Cerros and Mayan Gold on or before December 31, 2010. The consideration for the exercise of the option is an additional 20,000,000 shares of the Company’s common stock to be issued to Mayan Gold no later than 30 days after the date we receive all the requested documentation from Cerros in connection with the exercise of the option.

On February 22, 2011, Company entered into a Lease Agreement (the "Lease Agreement") with Cerros and Mayan Gold pursuant to which the Company exercised its option to acquire the exclusive rights to properties known as Corpus I, II, and III mining concessions and the Potosi concession and the Potosi ground lease (collectively, referred to herein as the “Property”), with the subsequent right to participate in the development of minerals from the remaining mining concessions.

The Lease Agreement continues until the Honduras government grants Cerros the right to assign the Property to the Company, at which time Cerros will transfer title to the mining concession to us. In consideration for such right, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of a 100% interest in Property. The shares issued by the Company to Mayan Gold represent an additional interest of 15.72% of the then issued and outstanding shares of the Company. As further consideration for the rights granted, we agreed to pay Cerros an annual sum of $3,200 no later than April 1st of each year with the first payment due on April 1, 2011.

MUSTANG ALLIANCES, INC.

(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 June 30, 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 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 the 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 $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 June 30, 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 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 $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.

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 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 $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 June 30, 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. During May 2013, the Board of Directors approved resolutions to pay Mr. Sternheim a bonus of $150,000 for his service during 2011 and 2012. In addition, the Company issued a total of 30,000,000 shares of the Company’s restricted common stock to discharge $300,000 of amounts due to him at $0.01 per share. (See note 7). The difference between the grant date fair value and grant price was recorded on the statements of operations as compensation expense of $1,500,000. As of June 30, 2013 and December 31, 2012, the accrued compensation fees of $0 and $171,289 were recorded in accrued compensation- related party, respectively.

NOTE 11 – Subsequent Events

On February 28, 2013, we issued a Promissory Note in the principal amount of $100,000 to Silverlint International SA. The note was convertible at the rate of $0.01 per share. During July 2013, the holder converted the note into 10,000,000 shares.

On February 28, 2013, we issued a Promissory Note in the principal amount of $100,000 to Chesswood Holdings SA. The note was convertible at the rate of $0.01 per share. During July 2013, the holder converted the note into 10,000,000 shares.

On April 20, 2013, we issued a Promissory Note in the principal amount of $100,000 to Binyomin Gordon. The note was convertible at the rate of $0.01 per share. During July 2013, the holder converted the note into 10,000,000 shares.

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.

Cerros also granted the Company an option to acquire the exclusive rights to properties known as Corpus I, II, and III mining 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.

From inception until the date of this filing, we have had very limited operating activities. Our financial statements from inception (February 22, 2007) through the quarterly period ended June 30, 2013 reports no revenues and a net loss of $4,401,454.

Note Payable

On April 30, 2013, we issued a Promissory Note in the principal amount of $100,000 to Binyomin Gordon. The note was convertible at the rate of $0.01 per share. During July 2013, the holder converted the note into 10,000,000 shares.

Private Placement

On June 28, 2013, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Carlton Family Ltd., a Bahamian Corporation (“Carlton”) for the sale of a secured convertible promissory note (the “Carlton Note”) in the principal amount of $1,350,000. The Note, which is due and payable on June 28, 2016, is secured by a lien on all the assets of the Company.

The interest on the Carlton Note is payable by making available to Carlton, on a monthly basis commencing on August 28th, 2013, 50 ounces of gold produced by the Company. If the 50 ounces of gold are not available, the gold shall be made available to Carlton at the next monthly interest date.

Carlton has the right to convert all or any portion of the outstanding principal on the Carlton Note into shares of our common stock equal to $0.10 per share based on each $1.00 of outstanding principal amount. The conversion price is subject to customary anti-dilution protection.

In connection with the Carlton Note, we also granted Carlton a 5-year warrant (the "Carlton Warrant") to purchase 13,500,000 shares of common stock at an exercise price of $0.15 per share.

On July 11, 2013 we filed a registration statement to register for re-sale the shares issuable upon conversion of the Carlton Note and the shares underlying the Carlton Warrant. If the registration statement is not declared effective by the Securities and Exchange Commission by August 28, 2013, the Company shall pay Carlton as liquidated damages 3% of the liquidated value of the shares underlying its securities for each 30 day period subsequent to August 28, 2013. The Company has accrued liquidated damages of $81,000 at June 30, 2013.

In addition, we agreed to sell to Carlton on a monthly basis commencing August 28, 2013, 100 ounces of gold per month for a purchase price of $500 per ounce. If an ounce of gold, as reported on Kitco.com, is less than $1,000 an ounce when the gold is to be delivered to Carlton, the purchase price of the gold shall be $400 per ounce. This agreement shall survive until an aggregate of 3,500 ounces of gold have been purchased by Carlton. If 3,500 ounces of gold have not been purchased within 35 months, then the agreement shall continue until said amount of gold is purchased by Carlton.

Plan of Operation

We are dependent upon making a gold deposit discovery at the properties. Should we be able to make an economic find, we would then be solely dependent upon the mining operation for our revenue and profits, if any. The probability that reserves that meet SEC guidelines will be discovered on the property is undeterminable at this time. The properties presently do not have any mineral resources or reserves. There is currently no mining plant or equipment located within the property boundaries. Currently, there is no power supply to the mineral claims. A great deal of work is required on our property before a determination as to the economic and legal feasibility of a mining venture on it can be made.

Results of Operations

Comparison of Three Months Ended June 30, 2013 and 2012

Revenues

During the three months ended June 30, 2013, we had no revenues. We did not generate any revenues during the three months ended June 30, 2012.

Operating expenses

Total operating expenses for the three months ended June 30, 2013 was $1,870,500, as compared to total operating expenses for the three months ended June 30, 2012 of $235,481. During the three months ended June 30, 2013, these expenses are comprised of consulting fees of $1,753,097, mining and exploration costs of $74,862, professional fees of $39,679 and general and administrative expenses of $2,862. The increase of approximately 694% in total operating expenses for the three months ended June 30, 2013 from June 30, 2012 was primarily a result of the increase in consulting fees from $173,717 to $1,753,097, an increase in professional fees from $19,425 to $39,679 and an increase in mining and exploration costs from $35,601 to $74,862. The increase in consulting fees was primarily due to the company utilizing resources and raising capital. Additionally, the Company has increase its mining exploration activities in preparation for commencing mining operations as funds from financing are received.

The Company incurred $1,500,000 of expenses that were included in consulting fees. This was the result of the fair value calculation incurred upon the conversion of outstanding liability to its officer to equity shares.

Other expenses

Total other expenses for the three months ended June 30, 2013 was $1,599,154, as compared to other expenses for the three months ended June 30, 2012 of $930. The increase of approximately 171,852% in total other expenses was primarily as a result of the increase in loss on future sales commitments from $0 to $1,290,000, an increase in liquidated damages from $0 to $81,000, an increase in amortization of debt discount from $0 to $213,750, and an increase in interest expense from $930 to $14,404. Primarily the result of commitments incurred from the recent financing.

Net loss

As a result of the foregoing, for the three months ended June 30, 2013, net loss increased by $3,233,243, or 1,368%, to a loss of $3,469,654, compared to a net loss of $236,411 during the three months ended June 30, 2012.

Comparison of Six Months Ended June 30, 2013 and 2012

Revenues

During the six months ended June 30, 2013 and June 30, 2012, we did not generate any revenues.

Operating expenses

Total operating expenses for the six month period ended June 30, 2013 was $1,989,075, as compared to total operating expenses for the six months ended June 30, 2012 of $504,788. During the six months ended June 30, 2013, these expenses are comprised of consulting fees of $1,815,597, mining and exploration costs of $101,614, professional fees of $59,612 and general and administrative expenses of $12,252. The decrease of approximately 294% in total operating expenses for the six months ended June 30, 2013 from June 30, 2012 was primarily as a result of the decrease in consulting fees from $378,801 to $1,815,597 and the decrease in general and administrative expense from $13,791 to $12,252, even though there was an increase in professional fees from $34,269 to $59,612 and an increase in mining and exploration costs from $77,927 to $101,614. The increase in consulting fees was primarily due to the company utilizing resources and raising capital. Additionally, the Company has increase its mining exploration activities in preparation for commencing mining operations as funds from financing are received.

Other expenses

Total other expenses for the six months ended June 30, 2013 was $1,737,228, as compared to total other expenses for the six months ended June 30, 2012 of $1,241. The increase of approximately 139,886% in total other expenses was primarily as a result of the increase in loss on future sales commitments from $0 to $1,290,000, an increase in liquidated damages from $0 to $81,000, an increase in amortization of debt discount from $0 to $347,500, and an increase in interest expense from $1,241 to $18,728.

Net loss

As a result of the foregoing, for the six months ended June 30, 2013, net loss increased by $3,220,274, or 636%, to a loss of $3,726,303, compared to a net loss of $506,029 during the six months ended June 30, 2012.

Liquidity and Capital Resources

On June 30, 2013, we had a working capital deficit of $544,948.

As of June 30, 2013, as a result of the private placement with Carlton, we had cash on hand of approximately $993,200. Current cash on hand is sufficient for all of the Company’s commitments for the next 12 months. The Company will need approximately $1,000,000 in additional captial resources to begin mining operations.

Going Concern Consideration

The Company is in the exploration stage and has no revenues since inception. The Company has no revenues, has incurred a net loss of approximately $3,726,303 for the six months ended June 30, 2013 and a cumulative net loss of $5,901,454 for the period from February 22, 2007 (inception) to June 30, 2013. In addition, at June 30, 2013, there is a working capital deficit of $544,948. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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.

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 and 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 June 30, 2013. Based on this evaluation, our principal executive officer and principal financial officer has 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. Said 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 June 30, 2013.

Therefore, our internal controls over financial reporting were not effective as of June 30, 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 June 30, 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. However, as of August 31, 2012, Wolfe resigned as the CFO and a director of the Company and has yet to be replaced by another chief financial and accounting officer. 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 June 30, 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.

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 28, 2013, the Company issued a Promissory Note in the principal amount of $100,000 to Silverlint International SA. On July 8, 2013, the note holder converted the note and the Company issued the note holder 10,000,000 shares. The issuance was conducted in reliance upon an exemption from registration

provided under Section 4(2) of the Securities Act of 1933, as amended.

On February 28, 2013, the Company issued a Promissory Note in the principal amount of $100,000 to Chesswood Holdings SA. On July 8, 2013, the note holder converted the note and the Company issued the note holder 10,000,000 shares. The issuance was conducted in reliance upon an exemption from registration

provided under Section 4(2) of the Securities Act of 1933, as amended.

On April 20, 2013, the Company issued a promissory note for $100,000, due in sixty days, to Binyamin Gordon. On July 8, 2013, the note holder converted the note and the Company issued 10,000,000 shares. The issuance was conducted in reliance upon an exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended.

Purchases of equity securities by the issuer and affiliated purchasers

None.

Use of Proceeds

Such proceeds were used to fund the operating expenses of the Company.

Item 3. Defaults Upon Senior Securities.

On July 25, 2011, repayment for $25,000 was made for the $50,000 note due to Landolt, an independent third party. At which time the note was assigned to MeM Mining, Inc. MeM is controlled by, Mendel Mochkin, a former 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 June 30, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $25,000 and accrued interest of $3,771 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 June 30, 2013, the Company was unable to repay the loan on the maturity date, and the principal balance of $30,000 and accrued interest of $3,547 are in default. The loan stipulates an increase to a 15% interest rate until the loan is repaid.

On February 28, 2013, the Company issued two convertible notes totaling $200,000. The notes accrued interest at 12% per annum and matured on April 27, 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 was amortized over the term of the debt. Total amortization for the two convertible notes for the six months ended June 30, 2013 was $200,000. As of June 30, 2013, the Company was not able to repay the loan on the maturity date, and the principal balance of $200,000 and accrued interest of $8,022 are in default. The note does not include any additional fees or penalties due to the loan being in default. The conversion of 20,000,000 shares of Company’s common stock was made to satisfy the debt of $200,000 on July 8, 2013.

On April 20, 2013, the Company issued a convertible note of $100,000. The note accrued interest at 12% per annum and matured on June 19, 2013. The note is 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 $100,000. The total discount of $100,000 was amortized over the term of the debt. Total amortization for the convertible note for the six months ended June 30, 2013 was $100,000. As of June 30, 2013, the Company was not able to repay the loan on the maturity date, and the principal balance of $100,000 and accrued interest of $2,334 are in default. The note does not include any additional fees or penalties due to the loan being in default. The conversion of 10,000,000 shares of Company’s common stock was made to satisfy the debt of $100,000 on July 8, 2013.

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 June 30, 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: August 19, 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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