XOTC:MSTG Mustang Alliances Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended March 31, 2012
 
o   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 333-148431

MUSTANG ALLIANCES, INC.
(Exact name of small business issuer as specified in its charter)

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

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 May 17, 2012, 100,664,133 shares of common stock, par value $0.0001 per share, were issued and outstanding.
 


 
 

 
 
TABLE OF CONTENTS

     
Page
 
PART I     3  
           
Item 1.
Financial Statements
    3  
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    21  
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
    24  
Item 4.
Controls and Procedures
    24  
           
PART II     26  
           
Item 1.
Legal Proceedings
    26  
Item IA.
Risk Factors
    26  
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    26  
Item 3.
Defaults Upon Senior Securities
    26  
Item 4.
Mine Safety Disclosures
    26  
Item 5.
Other Information
    26  
Item 6.
Exhibits
    27  
 
 
2

 
 
PART I
FINANCIAL INFORMATION

Item 1.      Financial Statements.
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEET
 
ASSETS
             
   
March 31,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
             
Current Assets:
           
Cash
  $ 34,741     $ 891  
Prepaid expense
    -       -  
Total current assets
    34,741       891  
                 
                 
Property, plant, and equipment, net
    106,000       -  
                 
Total Assets
  $ 140,741     $ 891  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIENCY)
                 
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 156,335     $ 119,988  
Notes payable
    30,000       -  
Notes payable-related party
    25,000       25,000  
Due to shareholder
    150       -  
Total current liabilities
    211,485       144,988  
                 
Total Liabilities
    211,485       144,988  
                 
Commitments and contingencies
               
                 
Stockholder's Equity(Deficiency)
               
Preferred stock, $.0001 par value; 5,000,000 shares
               
   authorized, none issued and outstanding
    -       -  
Common stock, $.0001 par value; 500,000,000 shares authorized,
               
  100,622,516 shares issued and 100,664,133 shares outstanding at March 31, 2012,
               
   and 99,920,000 shares issued and 100,217,516 shares outstanding at December 31, 2011
    10,063       9,992  
Common shares issuable
    39,000       74,000  
Additional paid in capital
    1,243,263       865,363  
Deficit accumulated during the exploration stage
    (1,363,070 )     (1,093,452 )
                 
Total Stockholders' Equity (Deficiency)
    (70,744 )     (144,097 )
                 
Total Liabilities and Stockholders' Equity(Deficiency)
  $ 140,741     $ 891  
 
The accompanying notes are an integral part of these financial statements

 
3

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF OPERATIONS
 
               
For the Period
 
               
February 22, 2007
 
    For the Three Months Ended    
(Inception) to
 
    March 31,    
March 31,
 
   
2012
   
2011
   
2012
 
                   
Net Revenues
  $ -              
                     
Cost and Expenses:
                   
Professional fees
    14,844       20,571       283,222  
Consulting fees
    205,084       -       728,369  
General and administrative expenses
    7,053       46,709       86,743  
Mining and exploration costs
    42,326       70,522       224,887  
                         
Total costs and expenses
    269,307       137,802       1,323,221  
                         
Operating Loss
    (269,307 )     (137,802 )     (1,323,221 )
                         
Other (Expenses)
                       
Interest expense
    (311 )     (2,466 )     (20,126 )
Amortization of debt discount
    -       (433 )     (19,723 )
                         
Total Other (Expense)
    (311 )     (2,899 )     (39,849 )
                         
Net Loss
  $ (269,618 )   $ (140,701 )   $ (1,363,070 )
                         
Basic and Diluted Loss Per Share
  $ (0.01 )   $ (0.00 )        
                         
Weighted Average Common Shares Outstanding
    37,426,292       115,313,778          
 
The accompanying notes are an integral part of these financial statements
 
 
4

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD FEBRUARY 22, 2007 (INCEPTION) TO MARCH 31, 2012
(UNAUDITED)
 
   
Common Stock
   
Paid-In
   
Common Shares
   
Accumulated Deficit During the Exploration
       
   
Shares
   
Amount
   
Capital
   
Issuable
   
Stage
   
Total
 
Balance, February 22 2007
    -     $ -     $ -           $ -     $ -  
                                               
Common Stock Issued to Founders at
                                             
$.0000125 Per Share, February 22, 2007
    64,000,000       6,400       (5,600 )           -       800  
                                               
Net Loss for the Period
    -       -       -             (4,498 )     (4,498 )
Balance, December 31, 2007
    64,000,000       6,400       (5,600 )           (4,498 )     (3,698 )
                                               
Common Stock Issued to Investors at $.002 Per
                                             
Share, Net of Offering Costs, February 20, 2008
    22,400,000       2,240       42,724             -       44,964  
                                               
Common Stock Issued for Services at $.0075
                                             
Per Share, February 25, 2008
    800,000       80       5,920             -       6,000  
                                               
Net Loss for the Year Ended December 31, 2008
    -       -       -             (91,106 )     (91,106 )
Balance, December 31, 2008
    87,200,000       8,720       43,044             (95,604 )     (43,840 )
                                               
Net Loss for the Year Ended December 31, 2009
    -       -       -             (29,939 )     (29,939 )
Balance, December 31, 2009
    87,200,000       8,720       43,044             (125,543 )     (73,779 )
                                               
Common Stock Issued for Mining Lease at $.000125
                                             
Per Share, December 15, 2010
    20,000,000       2,000       500             -       2,500  
                                               
Net Loss for the Year Ended December 31, 2010
    -       -       -             (69,436 )     (69,436 )
Balance, December 31, 2010
    107,200,000       10,720       43,544             (194,979 )     (140,715 )
                                               
Common Stock Issued for Mining Lease at $.000125
                                             
Per Share, February 22, 2011
    20,000,000       2,000       500             -       2,500  
                                               
Sale of Stock and Warrants at $.25 Per Share,
                                             
March 2011
    60,000       6       14,994             -       15,000  
                                               
Retirement of 30,000,000 Shares of Common Stock
                                             
as Contributed Capital on March 31, 2011 by Chief
                                             
Executive Officer
    (30,000,000 )     (3,000 )     3,000             -       -  
                                               
Discount on Convertible Debt
    -       -       19,723             -       19,723  
                                               
Sale of Stock and Warrants at $.25 Per Share,
                                             
June 2011
    1,280,000       128       319,872             -       320,000  
                                               
Sale of Stock and Warrants at $.25 Per Share
    1,000,000       100       249,900                     250,000  
July 2011
                                             
                                               
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)
    297,516                       74,000               74,000  
to consultants, related parties during 2011
                                               
                                                 
Net Loss for the Year Ended
                                               
December 31, 2011
    -       -       -               (898,473 )     (898,473 )
                                                 
Balance, December 31, 2011
    100,217,516     $ 9,992     $ 865,363     $ 74,000     $ (1,093,452 )   $ (144,097 )
                                                 
Stocks issued for mining equipments, February 2012
    200,000       20       105,980                       106,000  
                                                 
Sale of Stock and Warrants at $1.00 Per Share
    175,000       18       174,983                       175,001  
March, 2012
                                               
                                                 
Exercise of stock options at $0.50 Per Share
    30,000       3       14,997                       15,000  
March, 2012
                                               
                                                 
Stocks issued for common shares issuable
            30       73,970       (74,000 )             -  
to consultants, related parties, March 2012
                                               
                                                 
                                                 
Fair value of options issued during 1st quarter, 2012
                    7,970                       7,970  
                                                 
Common shares issuable(41,617shares)
    41,617                       39,000               39,000  
to consultants, related parties during 2011
                                               
                                                 
Net Loss for the Quarter Ended
                                               
March 31, 2012
    -       -       -               (269,618 )     (269,618 )
                                                 
Balance, March 31, 2012
    100,664,133     $ 10,063     $ 1,243,263     $ 39,000     $ (1,363,070 )   $ (70,744 )
 
The accompanying notes are an integral part of these financial statements
 
 
5

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
               
For the Period
 
   
For the Three Months Ended
   
February 22, 2007
 
   
March 31,
   
(Inception) to
 
   
2012
   
2011
   
March 31, 2012
 
Cash Flows from Operating Activities:
                 
Net Loss
  $ (269,618 )   $ (140,701 )   $ (1,363,070 )
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
                       
Common Stock Issued for Services
    -               96,800  
Common Stock Issuable for Services
    39,000               113,000  
Common Stock Issued for Mining Rights
                    2,500  
Stock Compensation Cost
    7,970               21,253  
Amortization of Debt Discount
    -       433       19,723  
Impairment of Mining Leases
    -               2,500  
Changes in Assets and Liabilities:
                       
Increase in Accrued Expenses
    36,348       89,884       180,249  
                         
Net Cash Used in Operating Activities
    (186,300 )     (50,384 )     (927,045 )
                         
Cash Flows from Investing Activities:
    -       -       -  
                         
Cash Flows from Financing Activities:
                       
Proceeds of Borrowings
    30,150       75,000       216,021  
Proceeds from Sale of Common Stock
                       
and Warrants
    190,000       15,000       845,800  
Repayment of Borrowings
                    (75,000 )
Payments of Deferred Offering Costs
    -       -       (25,000 )
Expenses of Offering
    -       -       (35 )
Repayment of Due to Shareholder
    -       (6,000 )        
                         
Net Cash Provided by Financing Activities
    220,150       84,000       961,786  
                         
Increase in Cash
    33,850       33,616       34,741  
                         
Cash – Beginning of Period
    891       6,767       -  
                         
Cash – End of Period
  $ 34,741     $ 40,383     $ 34,741  
                         
                         
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     $ 2,500     $ 5,000  
Debt forgiveness
  $ 97,785     $ -     $ 97,785  
Consulting fees forgiveness
  $ 12,000     $ -     $ 12,000  
Common Stock Issued for Mining Equipments
  $ 266,000     $ 0     $ 266,000  
Common Stock Issued for Shares Issuable
  $ 74,000     $ 0     $ 74,000  
 
The accompanying notes are an integral part of these financial statements
 
 
6

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


NOTE 1 -                Organization and Basis of Presentation

Mustang Alliances, Inc. (“the Company”) was incorporated on February 22, 2007 under the laws of the State of Nevada.

The Company has not yet generated revenues from planned principal operations and is considered a development stage company.  The Company originally intended to market and sell anti-lock braking systems produced in China to the auto parts and auto manufacturing market in the United States.  The Company has since abandoned its business plan and was seeking an operating company with which to merge or acquire.  Currently, we are no longer a blank check company as we have a specific business plan.  We are an exploration-stage mining company and as a result of the execution and delivery of the lease agreements, we are now in the business of exploring mineral properties.  There is no assurance, however, that the Company will achieve its objectives or goals.

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

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

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

NOTE 2 -                Going Concern and Significant Accounting Policies

Going Concern

The Company is the exploration and had no revenues and has incurred a net loss of approximately $269,618 for the three months ended March 31, 2012 and a cumulative net loss of approximately $1,363,070 for the period February 22, 2007 (inception) to March 31, 2012.   These factors raise substantial doubt about the Company’s ability to continue as a going concern.

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources.  The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.  Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.
 
The Company is attempting to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof.   There can be no assurances that the Company will be able to raise the additional funds it requires.

 
7

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

Going Concern – (Continued)

The accompanying unaudited condensed financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Use of Estimates

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

Cash and Cash Equivalents

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

Property, Plant and Equipment

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

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

The mining equipment has not been placed into service as of March 31, 2012
Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, “Earnings Per Share.”  As of March 31, 2012 and March 31, 2011, the Company has 5,195,000 and 30,000 warrants and options that are anti-dilutive and not included in diluted loss per share respectively.

 
8

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

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

Income Taxes

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

Business Segments

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

Revenue Recognition

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

Fair Value of Financial Instruments

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

Mining Properties (Exploration Costs)

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

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

 
9

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

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

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

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

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

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

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

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

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

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

On February 3, 2012, the Company entered into a Purchase and Sale Agreement with Clavo Rico, Ltd., a Turks and a fair 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 March 31, 2012.
 
NOTE 5 -                Notes Payable
 
 On July 25, 2011, repayment for $25,000 was made for the $50,000 note due to Landolt, a company owned by a director of the Company. At which time the note was assigned to MeM Mining, Inc.   MeM is controlled by, Mendel Mochkin, a director of the company.  As of March 31, 2012 and December 31, 2011, the Principle balance due was $25,000, is unsecured and is due January 2013 with accrued interest at 5%.

On March 28, 2012 the Company received $30,000 from First Line Capital, in exchange for an unsecured note bearing interest at 8%. The principal and interest is payable in full on March 28, 2013.

 On March 28, 2012 the Company received $8,000 from First Line Capital. It represents overfunded amount and was returned to First Line Capital on April 9, 2012. The amount was recorded as accounts payable as of March 31, 2012.

 
11

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

In February 2007 the Company issued 64,000,000 shares of common stock at $.0000125 per share to the Founders of the Company for $800.

In February 2008 the Company sold 22,400,000 shares of common stock at $.002 per share pursuant to its public offering.  The Company received net proceeds of $44,964.

In February 2008 the Company issued 800,000 shares of common stock with the fair value of $.0075 per share for services rendered.  The Company recorded stock based compensation expense of $6,000 in connection with this issuance.

On December 15, 2010, the Company notified the FINRA of its intention to implement a 1 for 8 share dividend or forward stock split of its issued and outstanding common stock to the holders of record as of December 27, 2010 (the “Shareholders”). The forward stock split became effective as of the start of business on January 3, 2011.  All share and per share data have been retroactively restated to reflect this recapitalization.

On December 13, 2010 the Company issued 20,000,000 shares of common stock as payment for certain mining leases in Honduras at a fair value of $2,500.

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

On March 28, 2011 the Company sold 60,000 units consisting of 60,000 shares of common stock and 30,000 warrants for $15,000.  The warrants are exercisable at $.50 per share and have a two year term.

On March 31, 2011 the Company's CEO retired 30,000,000 shares of his common stock of the Company as additional paid-in capital.

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

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

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

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

On May 11, 2011, the Company sold 20,000 units consisting of 20,000 shares of common stock and 10,000 warrants for cash of $5,000.  The warrants are exercisable at $.50 per share and have a two year term.
 
 
12

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

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

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

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

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

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

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

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

At March 31, 2011 the Company has 41,617 shares issuable to officers and directors with a fair value of $39,000 in connection with certain consulting agreements.  These shares were valued at the fair value on the date of grant.
 
 
13

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

Warrants

During 2011, the Company issued 1,690,000 warrants in connection with a private placement offering. The warrants have a term of two years from the date of the subscription agreement and allow investors to purchase one share of common stock for $.50.  At March 31, 2012 and December 31, 2011 all warrants have a remaining contractual life of approximately 1.5 years and 1.25 years, respectively.

In February and March 2012, the company issued 175,000 warrants in connection with a private placement offering. The warrants have a term of three years from the date of the subscription agreement and allow investors to purchase one share of common stock for $1.50 per share. At March 31, 2012, all warrants have a remaining contractual life of approximately 3 years.
 
Information with respect to warrants outstanding and exercisable at March 31, 2012 is as follows:

Three Months Ended, March 31, 2012:
                 
   
Number
Outstanding
   
Range of
Exercise Price
   
Number
Exercisable
 
                   
Warrants outstanding, December 31, 2011
   
1,690,000
   
$
0.50
     
1,690,000
 
Issued
   
175,000
   
$
1.50
     
175,000
 
Exercised
   
(30,000)
   
$
0.50
     
-
 
Expired
   
-
     
--
     
-
 
Warrants outstanding, March 31, 2012
   
1,835,000
   
$
0.50-1.50
     
1,835,000
 

 
14

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

Options

During July 2011, the Company granted 360,000 stock options to consultants for services to be rendered over a two-year period.  The options are exercisable at $0.50 per share, half of the option shall vest on January 1 and half on June 1 following the grant date. These options had a fair value of $61,104 using the Black-Scholes option-pricing model. The grant date fair values of the Company’s option awards during the three months ended March 31, 2012 and the year ended December 31, 2011 were estimated using the Black Scholes option pricing model with the following assumptions:
 
   
For the Three months ended
   
For the Year ended
 
   
March 31, 2012
   
December 31, 2011
 
Expected life (years)
    2       2  
Risk – free interest rate
    0.40 %     0.40 %
Expected volatility
    178 %     178 %
Dividend Yield
    0.00 %     0.00 %
 
The Company has Consultancy agreements that contain provisions for the issuance and granting of options aggregating 3,000,000 shares at $.50 per share  that are predicated on the Company reaching certain milestones in the production of gold.  None of the milestones have been met and accordingly such options have not been granted or issued.
 
   
Number of Options
   
Weighted Average Exercise Price
 
Balance at December 31, 2011
    360,000     $ 0.50  
Granted
    -       -  
Exercised
    -       -  
Forfeited
    -       -  
Balance at March 31, 2012
    360,000     $ 0.50  
Options exercisable at December 31, 2011
    180,000     $ 0.50  
Weighted average fair value of options granted during 2012
          $ 61,104.00  

 
15

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

NOTE 6 -                Common Stock - Continued
 
Options - Continued
 
 
 Of the total 360,000 options granted during 2011, 180,000 of them are vested, exercisable and non-forfeitable.
 
The following table summarizes information about stock options for the Company as of March 31, 2012 and December 31, 2011:
 
 
2012 Options Outstanding     2012 Options Exercisable  
Number   Weighted Average                    
Outstanding at   Remaining     Weighted Average     Vested at        
March 31, 2012   Contractual Life     Exercise Price     March, 31, 2012        
                                 
360,000     1.17     $ 0.50       180,000     $ 0.50  
 
 
2011 Options Outstanding
    2011 Options Exercisable  
Number   Weighted Average           Vested at        
Outstanding at   Remaining     Weighted Average     December 31,        
December 31, 2011
  Contractual Life     Exercise Price    
 2011
       
                                 
360,000    
1.42
    $ 0.50       -     $ 0.50  
 
NOTE 7 -                Preferred Stock

The Company has 5,000,000 preferred shares authorized that the Company’s Board of Directors may, without further action by the Company’s stockholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of the common stock.  Furthermore, the board of directors could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of the common stock.

 
16

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


NOTE 8 -                Commitment and Contingencies
 
Lease Commitment

On December 13, 2010, the Company entered into a Lease Agreement (the "Lease Agreement") with Compania Minera Cerros Del Sur, S.A., a corporation organized under the laws of Honduras (“Cerros”) and Mayan Gold, Inc., a Nevada corporation (“Mayan Gold”) pursuant to which Cerros, the registered owner of the Corpus I, II, III and IV mining concessions and the Potosi concession, leased us the exclusive right to prospect, explore and mine for minerals in Corpus IV. The Lease Agreement continues until the Honduras government grants Cerros the right to assign the Corpus IV mining concession to the Company, at which time Cerros will transfer title to the mining concession to the Company.  In consideration for such rights, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of a 100% interest in Corpus IV. The shares issued by the Company to Mayan Gold represent approximately 18.66% of the then issued and outstanding shares of the Company. As further consideration for the right granted, we agreed to pay Cerros an annual sum of $1,500 no later than April 1st of each year, beginning April 1, 2011.

Cerros also granted the Company an option to acquire the exclusive rights to properties known as Corpus I, II, and III mining concessions and the Potosi concession. If we desire to exercise such option, the Company must send written notice to Cerros and Mayan Gold on or before December 31, 2010. The consideration for the exercise of the option is an additional 20,000,000 shares of the Company’s common stock to be issued to Mayan Gold no later than 30 days after the date we receive all the requested documentation from Cerros in connection with the exercise of the option.

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

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

 
17

 
 
MUSTANG ALLIANCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 8 -                Commitment and Contingencies - Continued

Employment Agreements

On March 22, 2011, the Company entered into a two year employment agreement with Mendel Mochkin, pursuant to which he will be employed on a part time basis.  Mr. Mochkin shall work at least one hundred (100) hours per month on behalf of the Company as the Company's Vice President.  Pursuant to the agreement, his compensation will be $120,000 annually, which shall accrue from the date of the agreement and to be paid at such time when the Company has adequate capital.   On July 25, 2011, the Company entered into a Consultancy Agreement, which replaced in its entirety the Employment Agreement between the Company and Mendel Mochkin dated March 22, 2011.

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.
 
NOTE 9 –                Related Parties

Consulting Agreements

On July 21, 2011, the Company entered into a consulting agreement with Lawrence H. Wolfe, pursuant to which he will work as Chief Financial Officer. Pursuant to the agreement, 100,000 shares were issued as a signing bonus for the execution and delivery of the agreement with a fair value of $24,000(See note 5). His compensation will be $150,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of 0.50 per share is granted, half of Option shall vest on January 1 and half on June 1 following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 (cents) per share price floor on the valuation of the common stock. For the three months ended March 31, 2012 and year ended December 31, 2011, Mr. Wolfe has earned an aggregate of 16,007 shares and 122,120 shares pursuant to his consulting agreement with a fair value of $15,000 and $30,000, respectively.
 
 
18

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


NOTE 9 –                Related Parties – Continued
 
On July 25, 2011, the Company entered into a Consultancy Agreement with Mendel Mochkin, which replaced in its entirety the Employment Agreement dated March 22, 2011(See note 7). Pursuant to the agreement, his compensation will be $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of 0.50 per share is granted, half of option shall vest on January 1 and half on June 1 following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 (cents) per share price floor on the valuation of the common stock. For the three months ended March 31, 2012 and year ended December 31, 2011, Mr. Mendel has been paid $24,221 and $89,935, respectively and an aggregate of 12,805 and 97,698 shares pursuant to his consulting agreement with a fair value of $12,000 and $24,000, respectively.
 
On July 21, 2011, the Company entered into a Consultancy Agreement with Zegal and Ross Capital LLC. Pursuant to the agreement, 100,000 shares was issued as a signing bonus for the execution and delivery of the agreement with a fair value of $24,000(See note 5). The compensation will be $120,000 for the first 12 months, payable 60% in cash and 40% in stock. The cash portion shall be paid monthly, and the shares shall be valued based on the stock price of the last day of the preceding month and will be issued on January 1st and June 1st. On each anniversary, an option to purchase 120,000 shares of common stock at an exercise price of $0.50 per share is granted, half of option shall vest on January 1st and half on June 1st following such grant date. As a one-time bonus, the options to purchase 250,000 shares at $0.50 per share upon production of 12,000 and 24,000 ounces of gold, respectively, and an option to purchase 500,000 shares at $0.50 per share upon production of 48,000 ounces of gold. The consulting agreement has been amended to include a $.25 (cents) per share price floor on the valuation of the common stock. . For the three months ended March 31, 2012 and year ended December 31, 2011, Zegal and Ross has earned an aggregate of 12,805 and 42,849 shares pursuant to the consulting agreement with a fair value of $12,000 and $20,000, respectively.
 
Mr. Sternheim is currently on a month-to-month arrangement with the company and has been paid $60,000 and $179,943 for three months ended March 31, 2012 and the year ended December 31, 2011, respectively.
 
 
19

 
 
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.

 
20

 
 
Prior to February 9, 2010, Cerros was a wholly owned subsidiary of Mayan Gold.  When Mayan Gold sold all of its shares in Cerros to Razor on such date, Mayan Gold retained all mining rights to the Properties and certain other assets that were in the name of Cerros. As a part of the sales transaction, Cerros and Razor entered into an agreement pursuant to which Cerros is contractually obligated to transfer those concessions and the other assets to transferees as directed by Mayan Gold from time to time. Since Razor is the title owner of all the shares of Cerros, Razor was required to represent to Mayan Gold and us that it has absolutely no direct or indirect title or interest in any of the Properties or any of the shares being issued to Mayan Gold.
 
On February 22, 2011, we entered into another Lease Agreement with Cerros and Mayan Gold pursuant to which we exercised our option to acquire the exclusive rights to the properties known as Corpus I, II, and III concessions and the Potosi concession and the Potosi ground lease. The Lease Agreement continues until the Honduras government grants Cerros the right to assign these properties to the Company, at which time Cerros will transfer title to the mining concession to us. In consideration for such right, we issued 20,000,000 shares of common stock to Mayan Gold, the beneficial owner of 100% interest in these properties. As further consideration for the rights granted, we agreed to pay Cerros an annual sum of $3,200 no later than April 1st of each year with the first payment due on April 1, 2011. The payments have been paid to Mayan by us and Mayan paid Cerros.

Plan of Operation

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

 
21

 
 
Results of Operations

Comparison of Three Months Ended March 31, 2012 and 2011

Revenues

During the three months ended March 31, 2012, we had no revenues. We did not generate any revenues during the three months ended March 31, 2011.

General and administrative expenses
 
Costs and expenses for the three months ended March 31, 2012 was $269,307, as compared to selling, general and administrative expenses for the three months ended March 31, 2011 of $137,802. These expenses are comprised of mining and exploration expenses of $42,326, general and administrative expenses of $7,053, consulting fees of $205,084 and professional fees of $14,844

Net loss
 
As a result of the foregoing, for the three months ended March 31, 2012, net loss increased by $128,917, or 91.6%, to a loss of $269,618, compared to a net loss of $140,701 during the three months ended March 31, 2011.
 
 
22

 
 
Liquidity and Capital Resources
 
On March 31, 2012, we had a working capital deficiency of $176,744 and a stockholders' deficiency of $70,744 as compared to a working capital deficiency and a stockholders' deficiency of $144,097 at December 31, 2011. The increase in working capital deficiency was primarily due to increased consulting fees during the quarter ended March 31, 2012.

We will require additional capital to mine and explore the property in Honduras and estimate that within the next 12 months we will need approximately $1,000,000.

During the quarter ended March 31, 2012, we borrowed $30,000 from First Line Capital. Such sum is due on March 28, 2013 with interest accruing at the rate of 8% per annum.

As a result of the sale of common stock and the exercise of warrants to purchase 30,000 shares, we raised $190,000 from the sale of securities during the quarter. As of March 31, 2012 we had cash on hand of approximately $34,741. Current cash on hand is insufficient for all of the Company’s commitments for the next 12 months. We anticipate that the additional funding that we require will be in the form of equity financing from the sale of our units, consisting of a share of common stock and warrants.  However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of these units to fund our expenses. We do not have any arrangements in place for any other financings.

We cannot be certain that the required additional financing will be available or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If adequate funds are not available or not available on acceptable terms, we may be unable to fund our operations.

Going Concern Consideration

The Company is the exploration stage and has no revenues. The Company incurred a net loss of approximately $269,618 for the three months ended March 31, 2012 and a cumulative net loss of approximately $1,363,070 for the period February 22, 2007 (inception) to March 31, 2012.   These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

The Company is attempting to address its lack of liquidity by raising additional funds through the issuance of the units described above.  There can be no assurances that the Company will be able to raise the additional funds it requires.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

 
23

 
 
Item 3.      Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4.      Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of March 31, 2012. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were ineffective at such time to ensure that information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls, which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, was inappropriate to allow timely decisions regarding required disclosure. Additionally, based on management’s assessment, the Company determined that there were material weaknesses in its internal control over financial reporting as of March 31, 2012.

Therefore, our internal controls over financial reporting were not effective as of March 31, 2012 based on the material weaknesses described below:

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

 
24

 
 
As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of March 31, 2012. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

In order to mitigate the foregoing material weakness, we 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. believe that these engagements will lessen the possibility that a material misstatement of our annual or interim financial statements will be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate. We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
 
Changes in Internal Controls over Financial Reporting

During the quarter ended March 31, 2012, 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.
 
 
25

 
 
PART II
OTHER INFORMATION

Item 1.      Legal Proceedings.

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

Item 1A.   Risk Factors

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
 
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

In February and March 2012 the company raised an aggregate of $50,000 from one investor under a Regulation S Subscription Agreement. Under this agreement, the Company sold 50,000 of shares and warrants, each warrant entitling the investor to purchase one share of common stock for $1.50 per share. The warrants expire on the third anniversary date its issuance. The units were sold to the investor pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and each of the persons named is a non-US person.

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

 
26

 

Item 6.      Exhibits
 
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)*
     
31.2
 
Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)*
     
32.1
 
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith) *
     
32.2
 
Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith) *
 
101 **
The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i)  Balance Sheet, (ii) Statement of Operations, (iii)  Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements, tagged as blocks of text.
_________
*Filed herewith.
 
**Furnished herewith.
 
 
27

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
MUSTANG ALLIANCES, INC.
 
       
Dated: May 21, 2012    
By
/s/ Leonard Sternheim
 
   
Name: Leonard Sternheim
 
   
Title:   President, Chief Executive Officer and Chairman
(Principal Executive Officer) 
 
 
Dated: May 21, 2012    
By
/s/ Lawrence H. Wolfe
 
   
Name: Lawrence H. Wolfe
 
   
Title:   Chief Financial Officer
(Principal Financial and Accounting Officer) 
 
 
 
 
 
 
 
 

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XOTC:MSTG Mustang Alliances Inc Quarterly Report 10-Q Filing - 3/31/2012
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