MUSTANG ALLIANCES, INC. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - MUSTANG ALLIANCES, INC.	Financial_Report.xls
EX-31.1 - CERTIFICATION - MUSTANG ALLIANCES, INC.	mstg_ex311.htm
EX-32.1 - CERTIFICATION - MUSTANG ALLIANCES, INC.	mstg_ex321.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 nine months ended September 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 191St, Suite #46843

Miami, Florida 33179

(Address of principal executive offices)

(888) 251-3422

(Issuer's telephone number)

________________________________________________________________

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 22, 2013, 167,537,834 shares of common stock, par value $0.0001 per share, were issued and outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item IA.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

PART I. FINANCIAL INFORMATION

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

CONDENSED BALANCE SHEETS

	September 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets:
Cash	$	589,933		$	247
Prepaid expense		48,833			-
Total current assets		638,766			247
Plant and equipment, net		19,425			-
Other assets		170,667			-
					-
Total assets	$	828,858		$	247

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	476,996		$	96,869
Accrued compensation-related party		176,200			290,789
Notes payable		30,000			30,000
Notes payable-related party		28,637			75,020
Contract settlement liabilities-current portion		1,208,958			-
Due to shareholder		150			150
Total current liabilities		1,920,941			492,828
Convertible debts, net of discounts of $1,235,000 and $0, respectively		115,000			-
Contract settlement liabilities		1,692,542			-
Total liabilities		3,728,483			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, 167,537,834 and 104,537,834 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively		16,753			10,453
Additional paid in capital		4,143,969			1,672,117
Deficit accumulated during the exploration stage		(7,060,347	)		(2,175,151	)
Total stockholders' deficit		(2,899,625	)		(492,581	)
Total liabilities and stockholders' deficit	$	828,858		$	247

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

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

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

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

Operating expenses:
Professional fees		37,446			2,500			97,058			36,769			409,624
Consulting fees		364,643			298,471			2,180,240			677,272			3,467,067
General and administrative expenses		18,201			3,196			30,453			16,987			128,717
Impairment loss		-			-			-			-			106,000
Mining and exploration costs		121,757			33,223			223,371			111,150			552,388
Total Operating expenses		542,047			337,390			2,531,122			842,178			4,663,796

Operating loss		(542,047	)		(337,390	)		(2,531,122	)		(842,178	)		(4,663,796	)

Other expenses:
Liquidated damage		(40,500	)		-			(121,500	)		-			(121,500	)
Loss on future sales		(261,500	)		-			(1,551,500	)		-			(1,551,500	)
Interest expense, net		(202,346	)		(920	)		(221,074	)		(2,161	)		(243,828	)
Amortization of debt discount		(112,500	)		-			(460,000	)		-			(479,723	)
Total other expenses, net		(616,846	)		(920	)		(2,354,074	)		(2,161	)		(2,396,551	)

Net loss	$	(1,158,893	)	$	(338,310	)	$	(4,885,196	)	$	(844,339	)	$	(7,060,347	)

Basic and diluted loss per share	$	(0.01	)	$	(0.00	)	$	(0.04	)	$	(0.01	)

Weighted average common shares outstanding		164,836,747			101,942,516			130,490,215			100,885,923

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 SEPTEMBER 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				297,000						300,000

Common stocks issued for salary										1,500,000						1,500,000

Common stocks issued from conversion of debts		30,000,000				3,000				297,000						300,000

Common stocks issued for services		500,000				50				31,450						31,500

Discount on Convertible Debt										316,875						316,875

In-kind contribution of interest										1,652						1,652

Net Loss for the nine months ended September 30, 2013													(4,885,196	)		(4,885,196	)

Balance, September 30, 2013		167,537,834			$	16,753			$	4,143,969		$	(7,060,347	)	$	(2,899,625	)

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 Nine Months Ended September 30,						For the Period February 22, 2007 (Inception) to September 30,
	2013			2012				2013
Cash Flows from Operating Activities:
Net Loss	$	(4,885,196	)	$	(844,339	)	$	(7,060,347	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Common stock issued for services		1,531,500			210,000			1,838,300
Common stock issuable for services		-			88,000			162,000
Common Stock issued for mining rights		-			-			2,500
Stock compensation cost		-			15,940			61,105
Amortization of debt discount		460,000			-			479,723
Depreciation expense		1,575						1,575
Liquidated damages		121,500						121,500
Loss on future sales		1,551,500						1,551,500
Impairment of mining equipment		-			-			108,500
In-kind contribution of interest		1,652			-			2,045
In-kind contribution of services		-						57,000
Changes in operating assets and liabilities:
Increase in prepaid expense		(219,500	)					(219,500	)
Increase in accounts payable and accrued expenses		444,038			261,833			855,610
Net Cash Used in Operating Activities		(992,931	)		(268,566	)		(2,038,489	)

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		1,650,000			-			1,650,000
Proceeds of borrowings from non-related party		-			30,000			215,871
Proceeds of borrowings from related parties		400			15,150			50,570
Proceeds from sale of common stock and warrants, net					224,000			854,764
Repayment of borrowings to a related party		(46,783	)		-			(121,783	)
Net Cash Provided by Financing Activities		1,603,617			269,150			2,649,422

Increase in Cash		589,686			584			589,933

Cash – Beginning of Period		247			891			-

Cash – End of Period	$	589,933		$	1,475		$	589,933

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-

Supplemental Schedule of Non-Cash Investing and Financing Activities:

Deferred offering costs charged to additional paid-in capital		-		$	-		$	25,000
Deferred offering costs recorded in accounts payable		-		$	-		$	7,500
Common stock issued for mining lease	$	-		$	-		$	5,000
Debt forgiveness	$	-		$	-		$	97,785
Consulting fees forgiveness	$	-		$	-		$	12,000
Common stock issued for mining equipments	$	-		$	106,000		$	106,000
Common stock issued for shares issuable	$	-		$	-		$	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		$	-		$	345,000
Note payable proceeds allocated to settlement liablity	$	1,350,000		$	-		$	1,350,000
Common stock issued for debt conversion	$	300,000		$	-		$	300,000

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 $4,885,196 for the nine months ended September 30, 2013 and a cumulative net loss of $7,060,347 for the period from February 22, 2007 (inception) to September 30, 2013. In addition, at September 30, 2013, there is a working capital deficit of $1,282,175. 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 September 30, 2013 and December 31, 2012, the Company had no cash equivalents.

Concentration of Credit Risk

Cash and cash equivalents are deposited with major financial institutions and, at times, such balances with any one financial institution may be in excess of FDIC-insured limits. As of September 30, 2013, $297,175 was deposited in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal.

As of September 30, 2013, approximately $50,200 of the Company’s cash is maintained in a foreign country that is not covered by the FDIC.

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 September 30, 2013, the Company has 13,500,000 shares convertible under note agreements, 14,015,000 warrants and 0 options that are anti-dilutive and not included in diluted loss per share. As of September 30, 2012, the Company has 0 shares convertible under note agreements, 2,175,000 warrants and 4,690,000 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 September 30, 2013:

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

Commodity derivative at fair value	$	2,901,500	$	2,901,500	$	-	$	-
Convertible notes at fair value	$	115,000	$	-	$	-	$	115,000

The Company recorded $1,208,958 of the commodity derivative in current liabilities and the balance of $1,692,542 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 September 30, 2013 and December 31, 2012:

	September 30, 2013			December 31, 2012

Mining equipments	$	-		$	-
Vehicles		21,000			-
Total		21,000			-
Less: accumulated depreciation		(1,575	)		-

Plant and equipment, net	$	19,425		$	-

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 September 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 $4,086 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 September 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 $4,681 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 nine months ended September 30, 2013, the Company repaid $46,783 of notes payable. As of September 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 $1,652 and $393 of imputed interest related to Mr. Sternheim’s loan payable as in-kind contribution at September 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 nine months ended September 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 September 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 nine months ended September 30, 2013 was $200,000. The Company was not able to repay the loan on the maturity date, however, 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. At September 30, 2013, the Company owes accrued interest of $4,274 to each Note Holder (See Note 7).

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 nine months ended September 30, 2013 was $100,000. The Company was not able to repay the loan on the maturity date; however, the note was converted into 10,000,000 shares of Company’s common stock to satisfy the debt of $100,000 on July 8, 2013. At September 30, 2013, the Company owes accrued interest of $2,597 to the Note Holder (See Note 7).

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 $2,901,500 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 $1,350,000 will be amortized over the term of the debt. Amortization for the nine months ended September 30, 2013 was $115,000.

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 September 30, 2013, the Company has accrued liquidated damage expense of $121,500.

As of June 30, 2013, the Company had 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 of $1,500,000 between the debt discharged and the fair value was recorded as stock compensation expense (See note 10).

On July 8, 2013, convertible notes of $300,000 were converted into 30,000,000 shares of Company’s common stock at the rate of $0.01 per share (See Note 6).

On July 17, 2013, the Company issued 500,000 shares to Samuel Sternheim, a related party, in consideration for the execution and delivery of a consulting agreement. The shares were valued at $31,500 ($0.063 per share), the fair value on the date of grant (See Note 10).

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - Common Stock - Continued

Warrants

During 2011, the Company issued 1,690,000 warrants in connection with a private placement offering. The warrants have a term of two years from the date of the subscription agreement and allow investors to purchase one share of common stock for $0.50. The remaining 1,660,000 outstanding warrants expired during the nine months ended September 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 warrant to 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 September 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		(1,660,000	)		$	0.50		-
Warrants outstanding, September 30, 2013		14,015,000			$	0.15-1.50		14,015,000

Options

There were no options issued during the nine months ended September 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 nine months ended September 30, 2013 and 2012 were estimated using the Black Scholes option pricing model with the following assumptions:

	For the nine months ended		For the nine months ended
	September 30, 2013		September 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. The agreement ended in June 2013.

MUSTANG ALLIANCES, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 9 - Commitment and Contingencies (Continued)

Lease Commitments (Continued)

On October 1, 2013, Company entered into a lease agreement with Minera Potosi S. DE R.L for a period of ten years beginning October 1, 2013. The Company was required a security deposit of $7,500 for the first and the last month of rent. The Company also paid a total of $22,500 as additional lease consideration upon signing the contract. The deposit for $7,500 and the additional consideration of $22,500 were paid on September 28, 2013, and recorded as prepaid expense as of September 30, 2013. The monthly rent is $3,750 and is subject to a review and increase every two years based on the agreement. The Company shall be obligated to pay the royalties of five percent (5%) of the net production revenue over the life of the agreement. The Company is also granted the right to assign or cancel the remaining term of the agreement for a one-time fee of $50,000.

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 September 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 September 30, 2013 and December 31, 2012, accrued consulting fees of $71,700 and $71,500 were included 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 the Company were forgiven and recorded as 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. For the nine months ended September 30, 2013 and 2012, the Company has paid Zegal and Ross consulting fees for $12,500 and $0, respectively. As of September 30, 2013 and December 31, 2012, accrued consulting fees of $35,500 and $48,000 were including in accrued compensation- related party, respectively.

Mr. Sternheim is on a month-to-month arrangement at a rate of $20,000 a month. For the nine months ended September 30, 2013 and 2012, the Company has paid Mr. Sternheim consulting fees of $ 1,976,716 and $180,000, respectively. During the second quarter of 2013, the Board of Directors approved resolutions to pay Mr. Sternheim a total 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. On September 29, 2013, the Board of Directors approved resolutions to pay Mr. Sternheim a total bonus of $75,000. On November 19, 2013, the Board of Directors approved resolutions to pay Mr. Sternheim a bonus of $131,716 during the quarter ended September 30, 2013, instead of his $20,000 a month rate. As of September 30, 2013 and December 31, 2012, the accrued compensation fees of $69,000 and $171,289 were recorded in accrued compensation- related party, respectively.

On July 17, 2012, the Company entered into a consulting agreement with Samuel Sternheim, pursuant to which he will work as an investor relations consultant. Pursuant to the agreement, 500,000 shares were issued as a signing bonus for the execution and delivery of the agreement with a fair value of $31,500 (See note 7). His compensation will be $5,000 per month for the first 12 months. The monthly fee will increase to $10,000 per month when the Company is producing 500 ounces a month of gold for more than 60 days. For the nine months ended September 30, 2013, the Company has paid Samuel Sternheim consulting fees for $61,500 which included the $15,000 consulting fees paid for service rendered before the agreement commenced.

NOTE 11 - Subsequent Events

We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events.

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 September 30, 2013 reports no revenues and a net loss of $7,060,347.

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 September 30, 2013 and 2012

Revenues

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

Operating expenses

Total operating expenses for the three months ended September 30, 2013 was $542,047, as compared to total operating expenses for the three months ended September 30, 2012 of $337,390. These expenses are comprised of mining and exploration expenses of $121,757, general and administrative expenses of $18,201, consulting fees of $364,643 and professional fees of $37,446. The increase of approximately 61% in total operating expenses for the three months ended September 30, 2013 from September 30, 2012 was primarily a result of the increase in consulting fees from $298,471 to $364,643, an increase in professional fees from $2,500 to $37,446 and an increase in mining and exploration costs from $33,223 to $121,757. The increase was primarily due to the company utilizing resources and raising capital and increase in its mining exploration activities in preparation for commencing mining operations as funds from financing are received. The increase also attributed to the bonus of $75,000 approved by the Board of Directors to pay Mr. Sternheim to cover travel and entertainment expenses in connection with raising funds for the Company and $131,716 for Mr. Sternheims salary during the third quarter of 2013.

Other expenses

Total other expenses for the three months ended September 30, 2013 was $616,846, as compared to other expenses for the three months ended September 30, 2012 of $920. The increase of approximately 66,948% in total other expenses was primarily as a result of the increase in loss on future sales commitments from $0 to $261,500, an increase in liquidated damages from $0 to $40,500, an increase in amortization of debt discount from $0 to $112,500, and an increase in interest expense from $920 to $202,346. The increase is primarily the result of commitments incurred from the recent financing.

Net loss

As a result of the foregoing, for the three months ended September 30, 2013, net loss increased by $820,583, or 243%, to a loss of $1,158,893, compared to a net loss of $338,310 during the three months ended September 30, 2012.

Comparison of Nine Months Ended September 30, 2013 and 2012

Revenues

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

Operating expenses

Total operating expenses for the nine months ended September 30, 2013 was $2,531,122, as compared to total operating expenses for the nine months ended September 30, 2012 of $842,178. These expenses are comprised of professional fees of $97,058, general and administrative expenses of $30,453, consulting fees of $2,180,240 and mining and exploration expenses of $223,371. The increase of approximately 201% in total operating expenses for the nine months ended September 30, 2013 from September 30, 2012 was primarily as a result of the increase in consulting fees from $677,272 to $2,180,240 and the increase in general and administrative expense from $16,987 to $30,453, an increase in professional fees from $36,769 to $97,085 and an increase in mining and exploration costs from $111,150 to $223,371. The increase was primarily due to the company utilizing resources and raising capital and increase in its mining exploration activities in preparation for commencing mining operations as funds from financing are received. The increase also attributed to the bonus of $150,000 approved by the Board of Directors to pay Mr. Sternheim for his services in 2011 and 2012 during the second quarter of 2013, a bonus of $75,000 to cover travel and entertainment expenses in connection with raising funds for the Company and $131,716 for Mr. Sternheims salary during the third quarter of 2013.

Other expenses

Total other expenses for the nine months ended September 30, 2013 was $2,354,074, as compared to total other expenses for the nine months ended September 30, 2012 of $2,161. The increase of approximately 108,834% in total other expenses was primarily as a result of the increase in loss on future sales commitments from $0 to $1,551,500, an increase in liquidated damages from $0 to $121,500, an increase in amortization of debt discount from $0 to $460,000, and an increase in interest expense from $2,161 to $221,074. The increase is primarily the result of commitments incurred from the recent financing.

Net loss

As a result of the foregoing, for the nine months ended September 30, 2013, net loss increased by $4,040,857, or 479%, to a loss of $4,885,196, compared to a net loss of $844,339 during the nine months ended September 30, 2012. Net loss for the period commencing February 22, 2007 (inception) through September 30, 2013 was $7,060,347.

Liquidity and Capital Resources

On September 30, 2013, we had a working capital deficiency of $1,282,175 and a stockholders' deficiency of $2,899,625 as compared to a working capital deficiency of $495,401 and a stockholders' deficiency of $492,581 at December 31, 2012. The increase in working capital deficiency was primarily due to increase in mining expenses and consulting fees, and the commodity derivative in current liabilities during the nine months ended September 30, 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.

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 September 30, 2013, the interest expense is $203,765. 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. 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 $2,901,500 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 $1,350,000 will be amortized over the term of the debt. Amortization for the nine months ended September 30, 2013 was $115,000.

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 Note holder as liquidated damages 3% of the liquidated value of the Conversion Shares for each 30 day period subsequent to August 28, 2013. As of September 30, 2013, the Company has accrued liquidated damage expense of $121,500.

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 in the exploration stage and has no revenues, has incurred a net loss of approximately $4,885,196 for the nine months ended September 30, 2013 and a cumulative net loss of $7,060,347 for the period from February 22, 2007 (inception) to September 30, 2013. In addition, at September 30, 2013, there is a working capital deficit of $1,282,175. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

There can be no assurance that sufficient funds will be generated during the next year or thereafter from operations or that fund will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital could force the Company to curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.

The Company is attempting to address its lack of liquidity by seeking additional funds. There can be no assurances that the Company will be able to raise the additional funds it requires.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 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. Our principal executive officer and principal financial officer also concluded that our disclosure controls, which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, was inappropriate to allow timely decisions regarding required disclosure. Additionally, based on management’s assessment, the Company determined that there were material weaknesses in its internal control over financial reporting as of September 30, 2013.

Therefore, our internal controls over financial reporting were not effective as of September 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 September 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 three months ended September 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.

On or about July 2012, the Company was named as a defendant in a lawsuit titled George Sharp vs. Mustang Alliances, Inc. et al. The lawsuit was filed in the Superior court of the State of California, in San Diego County. The lawsuit alleges violations of California restrictions on unsolicited commercial e-mail advertisers and seeks damages and punitive dames in an unspecified amount. The Company intends to vigorously defend this lawsuit. As of September 30, 2013, the Company has not accrued any amounts related to this lawsuit.

Item 1A. Risk Factors

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

On July 8, 2013, convertible notes of $300,000 were converted into 30,000,000 shares of Company’s common stock at the rate of $0.01 per share.

The issuance of the shares upon conversion of the note 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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None.

Item 6. Exhibits

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

32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith) *

101 **

The following materials from our Quarterly Report on Form 10-Q for the nine months ended September 30, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheet, (ii) Statement of Operations, (iii) Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements, tagged as blocks of text.

_________

*Filed herewith.

**Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MUSTANG ALLIANCES, INC.

Dated: November 22, 2013	By	/s/ Leonard Sternheim
		Leonard Sternheim
		President, Chief Executive Officer and Chairman
		(Principal Executive Officer and Principal Financial and Accounting Officer)

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