UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-Q




x
            Quarterly
      report pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934


For the
quarterly period ended September 30, 2009




 ̈
            Transition
      report pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934


For the
transition period from _______ to _______.




Commission
file number 000-30995




SEARCHLIGHT
MINERALS CORP.




(Exact
name of registrant as specified in its charter)




Nevada
                (State
      or other jurisdiction of incorporation or organization)
              98-0232244
                (I.R.S.
      Employer Identification No.)#120
      - 2441 West Horizon Ridge Pkwy.
                Henderson,
      Nevada
                (Address
      of principal executive offices)
              89052
                (Zip
      code)




(702)
939-5247


(Registrant’s telephone number, including area
code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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            ̈




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            ̈




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




Large
      accelerated filer  ̈
            Accelerated
      filer xNon-accelerated
      filer  ̈
            Smaller
      reporting company  ̈(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            ̈      No           x




As of
November 13, 2009, the registrant had 118,657,123 outstanding shares of common
stock.







TABLE OF
CONTENTS





PART
      I – FINANCIAL INFORMATION
              3Item
      1. Financial Statements
              3Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              37Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
              54Item
      4.  Controls and Procedures
              54PART
      II - OTHER INFORMATION
              55Item
      1.  Legal Proceedings
              55Item
      1A.  Risk Factors
              55Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
              55Item
      3.  Defaults Upon Senior Securities
              55Item
      4.  Submission of Matters to a Vote of Security
      Holders
              56Item
      5.  Other Information
              56Item
      6.  Exhibits
              57SIGNATURES
              58




2




PART
I – FINANCIAL INFORMATION




Item
1. Financial Statements




3




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)
 
 September 30, 2009
                                  
                                  
                                  December 31, 2008ASSETSCurrent
      assetsCash
                                  
                                  $
                                  1,077,606
                                  
                                  
                                  $
                                  7,055,591Prepaid
      expenses
                                  
                                  
                                  113,611
                                  
                                  
                                  
                                  251,414Total
      current assets
                                  
                                  
                                  1,191,217
                                  
                                  
                                  
                                  7,307,005Property
      and equipment, net
                                  
                                  
                                  14,028,442
                                  
                                  
                                  
                                  13,132,282Mineral
      properties
                                  
                                  
                                  16,947,419
                                  
                                  
                                  
                                  16,947,419Slag
      project
                                  
                                  
                                  120,766,877
                                  
                                  
                                  
                                  120,766,877Land
      - smelter site and slag pile
                                  
                                  
                                  5,916,150
                                  
                                  
                                  
                                  5,916,150Land
                                  
                                  
                                  3,300,000
                                  
                                  
                                  
                                  3,300,000Reclamation
      bond and deposits, net
                                  
                                  
                                  3,100
                                  
                                  
                                  
                                  109,900Total
      non-current assets
                                  
                                  
                                  160,961,988
                                  
                                  
                                  
                                  160,172,628Total
      assets
                                  
                                  $
                                  162,153,205
                                  
                                  
                                  $
                                  167,479,633LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                                  
                                  $
                                  719,549
                                  
                                  
                                  $
                                  1,093,778Accounts
      payable - related party
                                  
                                  
                                  100,785
                                  
                                  
                                  
                                  108,515VRIC
      payable, current portion - related party
                                  
                                  
                                  206,758
                                  
                                  
                                  
                                  194,756Capital
      lease payable, current portion
                                  
                                  
                                  24,840
                                  
                                  
                                  
                                  24,026Total
      current liabilities
                                  
                                  
                                  1,051,932
                                  
                                  
                                  
                                  1,421,075Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                                  
                                  
                                  1,802,171
                                  
                                  
                                  
                                  1,958,774Capital
      lease payable, net of current portion
                                  
                                  
                                  21,559
                                  
                                  
                                  
                                  40,291Deferred
      tax liability
                                  
                                  
                                  48,553,722
                                  
                                  
                                  
                                  50,455,361Total
      long-term liabilities
                                  
                                  
                                  50,377,452
                                  
                                  
                                  
                                  52,454,426Total
      liabilities
                                  
                                  
                                  51,429,384
                                  
                                  
                                  
                                  53,875,501Commitments
      and contingencies - Note 13
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 sharesauthorized,
      106,578,527 and 105,854,691 shares,respectively,
      issued and outstanding
                                  
                                  
                                  106,578
                                  
                                  
                                  
                                  105,854Additional
      paid-in capital
                                  
                                  
                                  127,168,599
                                  
                                  
                                  
                                  126,854,760Accumulated
      deficit during exploration stage
                                  
                                  
                                  (16,551,356
                                  )
                                  
                                  
                                  (13,356,482
                                  )Total
      stockholders' equity
                                  
                                  
                                  110,723,821
                                  
                                  
                                  
                                  113,604,132Total
      liabilities and stockholders' equity
                                  
                                  $
                                  162,153,205
                                  
                                  
                                  $
                                  167,479,633
 
 See
Accompanying Notes to these Consolidated Financial Statements
  4
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 For the period fromJanuary 14, 2000(Date of Inception)For the three months ended
                                                
                                                
                                                For the nine months ended
                                                
                                                
                                                ThroughSeptember 30, 2009
                                                
                                                
                                                September 30, 2008
                                                
                                                
                                                September 30, 2009
                                                
                                                
                                                September 30, 2008
                                                
                                                
                                                September 30, 2009Revenue
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -Operating
      expensesMineral
      exploration and evaluation expenses
                                                
                                                
                                                626,450
                                                
                                                
                                                
                                                392,323
                                                
                                                
                                                
                                                1,471,047
                                                
                                                
                                                
                                                841,231
                                                
                                                
                                                
                                                6,509,731Mineral
      exploration and evaluationexpenses
      - related party
                                                
                                                
                                                60,000
                                                
                                                
                                                
                                                90,000
                                                
                                                
                                                
                                                240,000
                                                
                                                
                                                
                                                270,000
                                                
                                                
                                                
                                                1,455,000Administrative
      - Clarkdale site
                                                
                                                
                                                168,212
                                                
                                                
                                                
                                                310,822
                                                
                                                
                                                
                                                527,442
                                                
                                                
                                                
                                                818,730
                                                
                                                
                                                
                                                2,183,303General
      and administrative
                                                
                                                
                                                759,839
                                                
                                                
                                                
                                                573,302
                                                
                                                
                                                
                                                2,219,779
                                                
                                                
                                                
                                                1,854,331
                                                
                                                
                                                
                                                8,337,948General
      and administrative - related party
                                                
                                                
                                                22,407
                                                
                                                
                                                
                                                33,335
                                                
                                                
                                                
                                                112,226
                                                
                                                
                                                
                                                60,460
                                                
                                                
                                                
                                                227,980Depreciation
                                                
                                                
                                                186,025
                                                
                                                
                                                
                                                15,658
                                                
                                                
                                                
                                                554,641
                                                
                                                
                                                
                                                46,210
                                                
                                                
                                                
                                                661,720Total
      operating expenses
                                                
                                                
                                                1,822,933
                                                
                                                
                                                
                                                1,415,440
                                                
                                                
                                                
                                                5,125,135
                                                
                                                
                                                
                                                3,890,962
                                                
                                                
                                                
                                                19,375,682Loss
      from operations
                                                
                                                
                                                (1,822,933
                                                )
                                                
                                                
                                                (1,415,440
                                                )
                                                
                                                
                                                (5,125,135
                                                )
                                                
                                                
                                                (3,890,962
                                                )
                                                
                                                
                                                (19,375,682
                                                )Other
      income (expense)Rental
      revenue
                                                
                                                
                                                6,295
                                                
                                                
                                                
                                                7,740
                                                
                                                
                                                
                                                20,400
                                                
                                                
                                                
                                                24,780
                                                
                                                
                                                
                                                92,530Loss
      on equipment disposition
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,542
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (6,068
                                                )Interest
      expense
                                                
                                                
                                                (561
                                                )
                                                
                                                
                                                (832
                                                )
                                                
                                                
                                                (1,882
                                                )
                                                
                                                
                                                (2,669
                                                )
                                                
                                                
                                                (7,372
                                                )Interest
      and dividend income
                                                
                                                
                                                5,193
                                                
                                                
                                                
                                                48,369
                                                
                                                
                                                
                                                11,646
                                                
                                                
                                                
                                                187,209
                                                
                                                
                                                
                                                606,830Total
      other income (expense)
                                                
                                                
                                                10,927
                                                
                                                
                                                
                                                55,277
                                                
                                                
                                                
                                                28,622
                                                
                                                
                                                
                                                209,320
                                                
                                                
                                                
                                                685,920Loss
      before income taxes
                                                
                                                
                                                (1,812,006
                                                )
                                                
                                                
                                                (1,360,163
                                                )
                                                
                                                
                                                (5,096,513
                                                )
                                                
                                                
                                                (3,681,642
                                                )
                                                
                                                
                                                (18,689,762
                                                )Income
      tax benefit
                                                
                                                
                                                675,517
                                                
                                                
                                                
                                                449,263
                                                
                                                
                                                
                                                1,901,639
                                                
                                                
                                                
                                                1,318,167
                                                
                                                
                                                
                                                6,281,574Loss
      from continuing operations
                                                
                                                
                                                (1,136,489
                                                )
                                                
                                                
                                                (910,900
                                                )
                                                
                                                
                                                (3,194,874
                                                )
                                                
                                                
                                                (2,363,475
                                                )
                                                
                                                
                                                (12,408,188
                                                )Discontinued
      operations:Loss
      from discontinued operations
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,143,168
                                                )Net
      loss
                                                
                                                $
                                                (1,136,489
                                                )
                                                
                                                $
                                                (910,900
                                                )
                                                
                                                $
                                                (3,194,874
                                                )
                                                
                                                $
                                                (2,363,475
                                                )
                                                
                                                $
                                                (16,551,356
                                                )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                                                
                                                $
                                                (0.01
                                                )
                                                
                                                $
                                                (0.01
                                                )
                                                
                                                $
                                                (0.03
                                                )
                                                
                                                $
                                                (0.02
                                                )Net
      loss
                                                
                                                $
                                                (0.01
                                                )
                                                
                                                $
                                                (0.01
                                                )
                                                
                                                $
                                                (0.03
                                                )
                                                
                                                $
                                                (0.02
                                                )Weighted
      average common shares outstanding -Basic
      and diluted
                                                
                                                
                                                106,537,115
                                                
                                                
                                                
                                                105,766,452
                                                
                                                
                                                
                                                106,417,990
                                                
                                                
                                                
                                                103,831,592
 
 See
Accompanying Notes to these Consolidated Financial Statements
  5
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 (UNAUDITED)
 
 AccumulatedDeficit During
                                                      
                                                      
                                                      TotalCommon Stock
                                                      
                                                      
                                                      Additional
                                                      
                                                      
                                                      Exploration
                                                      
                                                      
                                                      Stockholders'Shares
                                                      
                                                      
                                                      Amount
                                                      
                                                      
                                                      Paid-in Capital
                                                      
                                                      
                                                      Stage
                                                      
                                                      
                                                      EquityBalance,
      December 31, 2008
                                                      
                                                      
                                                      105,854,691
                                                      
                                                      
                                                      $
                                                      105,854
                                                      
                                                      
                                                      $
                                                      126,854,760
                                                      
                                                      
                                                      $
                                                      (13,356,482
                                                      )
                                                      
                                                      $
                                                      113,604,132Issuance
      of common stockfor
      cash, $0.25 per share fromexercise
      of nonemployee stock options
                                                      
                                                      
                                                      400,000
                                                      
                                                      
                                                      
                                                      400
                                                      
                                                      
                                                      
                                                      99,600
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      100,000Issuance
      of common stockfor
      cash, $0.25 per share fromexercise
      of nonemployee stock options
                                                      
                                                      
                                                      100,000
                                                      
                                                      
                                                      
                                                      100
                                                      
                                                      
                                                      
                                                      24,900
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      25,000Amortization
      of stock optionsissued
      to director overvesting
      period
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149Issuance
      of common stockfor
      directors' compensation
                                                      
                                                      
                                                      6,568
                                                      
                                                      
                                                      
                                                      7
                                                      
                                                      
                                                      
                                                      17,993
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      18,000Issuance
      of stock optionsfor
      directors' compensation
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      8,010
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      8,010Issuance
      of common stockfor
      cash, $0.25 per share fromexercise
      of nonemployee stock options
                                                      
                                                      
                                                      100,000
                                                      
                                                      
                                                      
                                                      100
                                                      
                                                      
                                                      
                                                      24,900
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      25,000Amortization
      of stock optionsissued
      to director overvesting
      period
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149Issuance
      of common stockfor
      directors' compensation
                                                      
                                                      
                                                      7,378
                                                      
                                                      
                                                      
                                                      7
                                                      
                                                      
                                                      
                                                      17,993
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      18,000Issuance
      of stock optionsfor
      directors' compensation
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      7,684
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      7,684Issuance
      of common stockfor
      cash, $0.25 per share fromexercise
      of nonemployee stock options
                                                      
                                                      
                                                      100,000
                                                      
                                                      
                                                      
                                                      100
                                                      
                                                      
                                                      
                                                      24,900
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      25,000Amortization
      of stock optionsissued
      to director overvesting
      period
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,149Issuance
      of common stockfor
      directors' compensation
                                                      
                                                      
                                                      9,890
                                                      
                                                      
                                                      
                                                      10
                                                      
                                                      
                                                      
                                                      17,990
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      18,000Issuance
      of stock optionsfor
      directors' compensation
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      12,422
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      12,422Net
      loss September 30, 2009
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (3,194,874
                                                      )
                                                      
                                                      
                                                      (3,194,874
                                                      )Balance,
      September 30, 2009
                                                      
                                                      
                                                      106,578,527
                                                      
                                                      
                                                      $
                                                      106,578
                                                      
                                                      
                                                      $
                                                      127,168,599
                                                      
                                                      
                                                      $
                                                      (16,551,356
                                                      )
                                                      
                                                      $
                                                      110,723,821
 
 See
Accompanying Notes to these Consolidated Financial Statements
 
 6
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Period fromJanuary 14, 2000(Date of inception)For the nine months ended
                                    
                                    
                                    throughSeptember 30, 2009
                                    
                                    
                                    September 30, 2008
                                    
                                    
                                    September 30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                    
                                    $
                                    (3,194,874
                                    )
                                    
                                    $
                                    (2,363,475
                                    )
                                    
                                    $
                                    (16,551,356
                                    )Deduct:
      Loss from discontinued operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4,143,168
                                    )Loss
      from continuing operations
                                    
                                    
                                    (3,194,874
                                    )
                                    
                                    
                                    (2,363,475
                                    )
                                    
                                    
                                    (12,408,188
                                    )Adjustments
      to reconcile loss from operatingto
      net cash used in operating activities:Depreciation
                                    
                                    
                                    554,641
                                    
                                    
                                    
                                    46,210
                                    
                                    
                                    
                                    661,720Stock
      based expenses
                                    
                                    
                                    139,563
                                    
                                    
                                    
                                    91,316
                                    
                                    
                                    
                                    1,234,068Loss
      on disposition of fixed assets
                                    
                                    
                                    1,542
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7,417Amortization
      of prepaid expense
                                    
                                    
                                    216,801
                                    
                                    
                                    
                                    131,235
                                    
                                    
                                    
                                    571,127Allowance
      for bond deposit recovery
                                    
                                    
                                    -
                                    
                                    
                                    
                                    180,500
                                    
                                    
                                    
                                    180,500Changes
      in operating assets and liabilities:Other
      current assets
                                    
                                    
                                    (78,998
                                    )
                                    
                                    
                                    (179,960
                                    )
                                    
                                    
                                    (684,738
                                    )Other
      assets
                                    
                                    
                                    100,900
                                    
                                    
                                    
                                    (100,600
                                    )
                                    
                                    
                                    (189,500
                                    )Accounts
      payable and accrued liabilities
                                    
                                    
                                    (381,959
                                    )
                                    
                                    
                                    (279,889
                                    )
                                    
                                    
                                    94,776Deferred
      income taxes
                                    
                                    
                                    (1,901,639
                                    )
                                    
                                    
                                    (1,318,167
                                    )
                                    
                                    
                                    (6,281,574
                                    )Net
      cash used in operating activities
                                    
                                    
                                    (4,544,023
                                    )
                                    
                                    
                                    (3,792,830
                                    )
                                    
                                    
                                    (16,814,392
                                    )Net
      cash used in operating activities from discontinued
    operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (2,931,324
                                    )CASH
      FLOW FROM INVESTING ACTIVITIESCash
      paid on mineral property claims
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (87,134
                                    )Cash
      paid for joint venture and merger option
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (890,000
                                    )Cash
      paid to VRIC on closing date
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (9,900,000
                                    )Cash
      paid for additional acquisition costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (130,105
                                    )Capitalized
      interest
                                    
                                    
                                    (125,398
                                    )
                                    
                                    
                                    (136,480
                                    )
                                    
                                    
                                    (467,741
                                    )Purchase
      of property and equipment
                                    
                                    
                                    (1,321,045
                                    )
                                    
                                    
                                    (5,881,572
                                    )
                                    
                                    
                                    (13,468,149
                                    )Net
      cash used in investing activities
                                    
                                    
                                    (1,446,443
                                    )
                                    
                                    
                                    (6,018,052
                                    )
                                    
                                    
                                    (24,943,129
                                    )Net
      cash used in investing activities from discontinued
    operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (452,618
                                    )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                                    
                                    
                                    175,000
                                    
                                    
                                    
                                    7,763,500
                                    
                                    
                                    
                                    43,714,500Stock
      issuance costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (677,570
                                    )Principal
      payments on capital lease payable
                                    
                                    
                                    (17,918
                                    )
                                    
                                    
                                    (17,140
                                    )
                                    
                                    
                                    (69,839
                                    )Principal
      payments on deferred purchase liability
                                    
                                    
                                    (144,601
                                    )
                                    
                                    
                                    (133,520
                                    )
                                    
                                    
                                    (492,259
                                    )Proceeds
      from subscribed stock
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    360,000Net
      cash provided by financing activities
                                    
                                    
                                    12,481
                                    
                                    
                                    
                                    7,612,840
                                    
                                    
                                    
                                    42,834,832Net
      cash provided by financing activities from discontinued
      operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,384,237NET
      CHANGE IN CASH
                                    
                                    
                                    (5,977,985
                                    )
                                    
                                    
                                    (2,198,042
                                    )
                                    
                                    
                                    1,077,606CASH
      AT BEGINNING OF PERIOD
                                    
                                    
                                    7,055,591
                                    
                                    
                                    
                                    12,007,344
                                    
                                    
                                    
                                    -CASH
      AT END OF PERIOD
                                    
                                    $
                                    1,077,606
                                    
                                    
                                    $
                                    9,809,302
                                    
                                    
                                    $
                                    1,077,606
 
 See
Accompanying Notes to these Consolidated Financial
Statements
  7
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Period fromJanuary 14, 2000(Date of inception)For the nine months ended
                                
                                
                                throughSeptember 30, 2009
                                
                                
                                September 30, 2008
                                
                                
                                September 30, 2009CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      Paid, net of capitalized amounts
                                
                                $
                                1,882
                                
                                
                                $
                                2,669
                                
                                
                                $
                                58,123Income
      Taxes Paid
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -Non-cash
      investing and financing activities:Capital
      equipment purchased throughaccounts
      payable and financing
                                
                                $
                                -
                                
                                
                                $
                                341,267
                                
                                
                                $
                                444,690Assets
      acquired for common stock issued for the acquisition
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                66,879,375Assets
      acquired for common stock issued for mineral properties
                                
                                $
                                -
                                
                                
                                $
                                2,632,000
                                
                                
                                $
                                10,220,000Assets
      acquired for liabilities incurred in the acquisition
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                2,628,188Net
      deferred tax liability assumed
                                
                                $
                                -
                                
                                
                                $
                                1,613,161
                                
                                
                                $
                                55,197,465Merger
      option payment applied to the acquisition
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                200,000Reclassify
      joint venture option agreement to slag project
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                690,000Warrants
      issued in connection with joint venture optionagreement
      related to slag project
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,310,204Stock
      options for common stock issued in satisfaction of debt
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,500,000Capitalization
      of related party liability to equity
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                742,848Stock
      issued for conversion ofaccounts
      payable, 200,000 shares at $0.625
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                125,000
 
 See
Accompanying Notes to these Consolidated Financial Statements
  8
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
    POLICIES
 
 Basis of presentation
– The accompanying unaudited financial statements have been prepared in
accordance with Securities and Exchange Commission requirements for interim
financial statements. Therefore, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. The financial statements should be
read in conjunction with the Form 10-K for the year ended December 31, 2008 of
Searchlight Minerals Corp. (the “Company”).
 
 The
interim financial statements present the balance sheets, statements of
operations, stockholders’ equity, and cash flows of the Company. The financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States.
 
 These
financial statements have been prepared by the Company without audit, and
include all adjustments (which consist solely of normal recurring adjustments)
which, in the opinion of management, are necessary for a fair presentation of
financial position and results of operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the Company’s audited financial
statements and notes thereto for the year ended December 31, 2008.
 
 In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through November 6, 2009,
the date the financial statements were issued.
 
 Description of
business – Searchlight Minerals Corp. is considered an exploration stage
company since its formation and the Company has not yet realized any revenues
from its planned operations.  The Company is primarily focused on the
exploration, acquisition and development of mining and mineral
properties.  Upon the location of commercially minable reserves, the
Company plans to prepare for mineral extraction and enter the development
stage.
  History - The Company
was incorporated on January 12, 1999 pursuant to the laws of the State of Nevada
under the name L.C.M. Equity, Inc.  From 1999 to 2005, the Company operated
primarily as a biotechnology research and development company with its
headquarters in Canada and an office in the UK.  On November 2, 2001, the
Company entered into an acquisition agreement with Regma Bio Technologies, Ltd.
pursuant to which Regma Bio Technologies, Ltd. entered into a reverse merger
with us with the surviving entity named “Regma Bio Technologies Limited”. On
November 26, 2003, the Company changed its name from “Regma Bio Technologies
Limited” to “Phage Genomics, Inc.”
  In
February, 2005, the Company announced its reorganization from a biotechnology
research and development company to a company focused on the development and
acquisition of mineral properties. In connection with its reorganization the
Company entered into mineral option agreements to acquire an interest in the
Searchlight Claims. The Company has consequently been considered an exploration
stage enterprise. Also in connection with its corporate restructuring, its board
of directors approved a change in its name from “Phage Genomics, Inc.” (Phage)
to "Searchlight Minerals Corp.” effective June 23, 2005.
  9
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Going concern - The
Company incurred cumulative net losses of $16,551,356 from operations as of
September 30, 2009 and has not commenced its mining and mineral processing
operations, rather, still in the exploration stage, raising substantial doubt
about the Company’s ability to continue as a going concern.  The Company
will seek additional sources of capital through the issuance of debt or equity
financing, but there can be no assurance the Company will be successful in
accomplishing its objectives.
 
 The
ability of the Company to continue as a going concern is dependent on additional
sources of capital and the success of the Company’s plan.  The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
 
 Principles of
consolidation – The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Clarkdale Minerals,
LLC (CML) and Clarkdale Metals Corp. (CMC).  Significant intercompany
accounts and transactions have been eliminated.
 
 Use of estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Mineral rights -
Costs of acquiring mining properties are capitalized upon acquisition. 
Mine development costs incurred either to develop new ore deposits, to expand
the capacity of mines, or to develop mine areas substantially in advance of
current production are also capitalized once proven and probable reserves exist
and the property is a commercially mineable property. 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 the carrying value of capitalized
mining costs and related property and equipment costs, to determine if these
costs are in excess of their recoverable amount whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. 
Evaluation of the carrying value of capitalized costs and any related property
and equipment costs would be based upon expected future cash flows and/or
estimated salvage value in accordance with Accounting Standards Codification
(ASC) 360-10-35-15, Impairment
or Disposal of Long-Lived Assets.
 
 Capitalized interest
cost - The Company capitalizes interest cost related to acquisition,
development and construction of property and equipment which is designed as
integral parts of the manufacturing process.  The capitalized interest is
recorded as part of the asset it relates to and will be amortized over the
asset’s useful life once production commences.  Interest cost capitalized
from imputed interest on acquisition indebtedness was $125,398 and $136,480 for
the nine months ended September 30, 2009 and 2008, respectively.
  10
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Exploration costs –
Mineral exploration costs are expensed as incurred.
 
 Property and
equipment – Property and equipment is stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line method
over the estimated useful lives of the assets, which are generally 3 to 39
years. The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).
 
 The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful lives of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. If events and circumstances warrant
evaluation, the Company uses an estimate of the related undiscounted cash flows
over the remaining life of the property and equipment in measuring their
recoverability.
  Impairment of long-lived
assets–The Company reviews and evaluates long-lived assets for impairment when
events or changes in circumstances indicate the related carrying amounts may not
be recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17, Measurement of
an Impairment Loss, if events or circumstances indicate that their
carrying amount might not be recoverable.  As of September 30, 2009
exploration progress is on target with the Company’s exploration and evaluation
plan and no events or circumstances have happened to indicate the related
carrying values of the properties may not be recoverable. When the Company
determines that an impairment analysis should be done, the analysis will be
performed using the rules of ASC 930-360-35, Asset Impairment, and
360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.
  Various
      factors could impact our ability to achieve forecasted production
      schedules. Additionally, commodity prices, capital expenditure
      requirements and reclamation costs could differ from the assumptions the
      Company may use in cash flow models used to assess impairment. The ability
      to achieve the estimated quantities of recoverable minerals from
      exploration stage mineral interests involves further risks in addition to
      those factors applicable to mineral interests where proven and probable
      reserves have been identified, due to the lower level of confidence that
      the identified mineralized material can ultimately be mined
      economically.
 
 Material
changes to any of these factors or assumptions discussed above could result in
future impairment charges to operations.
  11
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Asset retirement
obligation - The Company follows ASC 410, Asset Retirement and Environmental
Obligations, which requires that an asset retirement obligation (“ARO”)
associated with the retirement of a tangible long-lived asset be recognized as a
liability in the period in which it is incurred and becomes determinable, with
an offsetting increase in the carrying amount of the associated asset.  The
cost of the tangible asset, including the initially recognized ARO, is depleted,
such that the cost of the ARO is recognized over the useful life of the
asset.  The ARO is recorded at fair value, and accretion expense is
recognized over time as the discounted liability is accreted to its expected
settlement value.  The fair value of the ARO is measured using expected
future cash flow, discounted at the Company’s credit-adjusted risk-free interest
rate.  To date, no significant asset retirement obligation exists due to
the early stage of exploration.  Accordingly, no liability has been
recorded.
 
 Fair value of financial
instruments - The Company’s financial instruments consist of accounts
payable, accrued liabilities, capital lease payable and mineral property
purchase obligations. The carrying value of accounts payable and accrued
liabilities approximate their fair value based on their short-term nature. 
The carrying value of the capital lease payable and the mineral property
purchase obligations approximate fair value as interest approximates market
rates. The Company is not exposed to significant interest or credit risk arising
from these financial instruments.
 
 Revenue recognition -
Revenues are recognized during the period in which the revenues are earned.
Costs and expenses are recognized during the period in which they are
incurred.
  Research and
development - All research and development expenditures are expensed as
incurred.
  Earnings (loss) per
share - The Company follows ASC 260, Earnings Per Share, and ASC
480, Distinguishing
Liabilities from Equity,  which establish standards for the
computation, presentation and disclosure requirements for basic and diluted
earnings per share for entities with publicly-held common shares and potential
common stock issuances. Basic earnings (loss) per share are computed by dividing
net income by the weighted average number of common shares outstanding.  In
computing diluted earnings per share, the weighted average number of shares
outstanding is adjusted to reflect the effect of potentially dilutive
securities, such as stock options and warrants.  Common stock equivalent
shares are excluded from the computation if their effect is antidilutive.
Weighted average of common stock equivalents, which include stock options and
warrants to purchase common stock, on September 30, 2009 and 2008 that were not
included in the computation of diluted EPS because the effect would be
antidilutive were, 21,979,651 and 23,699,591, respectively.
 
 Expenses of offering
– The Company accounts for specific incremental costs directly to a proposed or
actual offering of securities as a direct charge against the gross proceeds of
the offering.
  12
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  Stock-based
compensation – The Company accounts for share based payments in
accordance with ASC 718, Compensation – Stock
Compensation, which requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on the grant date fair value of the award. In accordance with
ASC 718-10-30-9, Measurement
Objective – Fair Value at Grant Date, the Company estimates the fair
value of the award using a valuation technique. For this purpose, the Company
uses the Binomial Lattice option pricing model. The Company believes this model
provides the best estimate of fair value due to its ability to incorporate
inputs that change over time, such as volatility and interest rates, and to
allow for actual exercise behavior of option holders.The compensation
cost is recognized over the requisite service period which is generally equal to
the vesting period.
 
 Income taxes - The
Company accounts for its income taxes in accordance with ASC 740, Income Taxes, which requires
recognition of deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and tax credit
carry-forwards. 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. 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.
 
 For
acquired properties that do not constitute a business as defined in ASC
805-10-55-4, Definition of a
Business, deferred income tax liability is recorded on GAAP basis over
income tax basis using statutory federal and state rates. The resulting
estimated future federal and state income tax liability associated with the
temporary difference between the acquisition consideration and the tax basis is
computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in
Certain Purchase Transactions that Are Not Accounted for as Business
Combinations, and is reflected as an increase to the total purchase price
which is then applied to the underlying acquired assets in the absence of there
being a goodwill component associated with the acquisition
transactions.
  13
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Recent accounting
standards – From time to time, new accounting standards are issued by the
FASB that are adopted by the Company as of the specified effective date. Unless
otherwise discussed, management believes that the impact of recently issued
standards did not or will not have a material impact on the Company’s
consolidated financial statements upon adoption.
 
 Effective
July 1, 2009, the FASB (Financial Accounting Standards Board) Accounting
Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting
Principles”), became the single source for authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants.  The ASC does not change U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all
the authoritative literature related to a particular topic in one place.
Effective September 15, 2009, all public filings of the Company will
reference the ASC as the sole source of authoritative literature.
 
 In April
2009, the FASB issued SFAS No. 165, Subsequent Events(ASC
855-10-05), which provides guidance to establish general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Under ASC
855-10-05 entities are required to disclose the date through which subsequent
events were evaluated, as well as the rationale for why that date was selected.
ASC 855-10-05 is effective for interim or annual financial periods ending after
June 15, 2009, and shall be applied prospectively.  The required
disclosures of this statement have been incorporated into the Company’s
consolidated financial statements.
  14
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  2.
                PREPAID
      EXPENSES
  Prepaid
expenses at September 30, 2009 and December 31, 2008 consisted of the
following:
  September
      30,
                            2009
                          
                          
                          December
      31,
                            2008Claims
      maintenance
                          
                          $
                          48,808
                          
                          
                          $
                          —Insurance
      policies
                          
                          
                          40,231
                          
                          
                          
                          103,335Engineering
      services
                          
                          
                          21,640
                          
                          
                          
                          32,135Retainers
                          
                          
                          8,000
                          
                          
                          
                          2,000Other
                          
                          
                          7,057
                          
                          
                          
                          3,865$
                          125,736
                          
                          
                          $
                          145,335
 
 3.
                PROPERTY AND
      EQUIPMENT
 
 Property
and equipment consisted of the following as of September 30, 2009 and December
31, 2008:
 
 September
      30,
                                2009
                              
                              
                              December
      31,
                                2008Furniture
      and fixtures
                              
                              $
                              36,740
                              
                              
                              $
                              35,813Lab
      equipment
                              
                              
                              216,923
                              
                              
                              
                              2,804Computers
      and equipment
                              
                              
                              67,192
                              
                              
                              
                              50,253Income
      property
                              
                              
                              309,750
                              
                              
                              
                              309,750Construction
      in progress
                              
                              
                              5,580,857
                              
                              
                              
                              12,289,996Capitalized
      interest
                              
                              
                              467,741
                              
                              
                              
                              342,343Vehicles
                              
                              
                              38,175
                              
                              
                              
                              38,175Demo
      module building
                              
                              
                              6,621,980
                              
                              
                              
                              —Site
      improvements
                              
                              
                              1,132,922
                              
                              
                              
                              —Site
      equipment
                              
                              
                              215,342
                              
                              
                              
                              168,94914,687,622
                              
                              
                              
                              13,238,083Less
      accumulated depreciation
                              
                              
                              659,180
                              
                              
                              
                              105,801$
                              14,028,442
                              
                              
                              $
                              13,132,282
 
 Depreciation
expense was $554,641 and $46,210 for the nine months ended September 30, 2009
and 2008, respectively.
  15
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 4.
                CLARKDALE SLAG
      PROJECT
  On
February 15, 2007, the Company completed a merger with Transylvania
International, Inc. (TI) which provided the Company with 100% ownership of the
Clarkdale Slag Project in Clarkdale Arizona, through its wholly owned subsidiary
CML.  This acquisition superseded the joint venture option agreement to
acquire a 50% ownership interest as a joint venture partner pursuant to
Nanominerals Corp. (“NMC”) interest in a joint venture agreement (“JV
Agreement”) dated May 20, 2005 between NMC and Verde River Iron Company, LLC
(“VRIC”). Subsequent to the acquisition, Mr. Harry Crockett joined the Company’s
board of directors. VRIC is an affiliate of Mr. Crockett.
  The
Company believes the acquisition of the Clarkdale Slag Project was beneficial
because it provides for 100% ownership of the properties, thereby eliminating
the need to finance and further develop the projects in a joint venture
environment.
  This
merger was treated as a statutory merger for tax purposes whereby, CML was the
surviving merger entity.
  The
Company applied EITF 98-03 (which has been superseded by ASC 805-10-25-1) with
regard to the acquisition of the Clarkdale Slag Project. The Company determined
that the acquisition of the Clarkdale Slag Project did not constitute an
acquisition of a business, as that term is defined in ASC 805-10-55-4, and the
Company recorded the acquisition as a purchase of assets.
  The
Company also formed a second wholly owned subsidiary CMC, for the purpose of
developing a processing plant at the Clarkdale Slag Project.
  The $130
million purchase price was comprised of a combination of the cash paid, the
deferred tax liability assumed in connection with the acquisition, and the fair
value of our common shares issued, based on the closing market price of our
common stock, using the average of the high and low prices of our common stock
on the closing date of the acquisition. The Clarkdale Slag Project is without
known reserves and the project is exploratory in nature in accordance with
Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As
required by ASC 930-805-30, Mining – Business Combinations –
Initial Recognition, and ASC
740-10-25-49-55, Income Taxes
– Overall – Recognition – Acquired Temporary Differences in Certain Purchase
Transactions that Are Not Accounted for as Business Combinations, the
Company then allocated the purchase price among the assets as follows (and also
further described in this Note 4 to the financial statements): $5,916,150 of the
purchase price was allocated to the slag pile site, $3,300,000 to the remaining
land acquired, and $309,750 to income property and improvements. The purchase
price allocation to the real properties was based on fair market values
determined using an independent real estate appraisal firm (Scott W. Lindsay,
Arizona Certified General Real Estate Appraiser No. 30292). The remaining
$120,766,877 of the purchase price was allocated to the Slag Project, which has
been capitalized as a tangible asset in accordance ASC 805-20-55-37, Use Rights. Upon commencement
of commercial production, the material will be amortized using the
unit-of-production method over the life of the Slag Project.
  16
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  4.
                CLARKDALE SLAG
      PROJECT (continued)
  Closing
of the TI acquisition occurred on February 15, 2007, (the “Closing Date”) and
was subject to, among other things, the following terms and
conditions:
 
 a)
                The
      Company paid $200,000 in cash to VRIC on the execution of the Letter
      Agreement;
 
 b)
                The
      Company paid $9,900,000 in cash to VRIC on the Closing
    Date;
 
 c)
                The
      Company issued 16,825,000 shares of its common stock, valued at $3.975 per
      share using the average of the high and low on the Closing Date, to the
      designates of VRIC on the closing pursuant to Section 4(2) and Regulation
      D of the Securities Act of 1933;
  In
addition to the cash and equity consideration paid and issued upon closing, the
acquisition agreement contains the following payment terms and
conditions:
  d)
                The
      Company agreed to continue to pay VRIC $30,000 per month until the earlier
      of: (i) the date that is 90 days after receipt of a bankable feasibility
      study by the Company (the “Project Funding Date”), or (ii) the tenth
      anniversary of the date of the execution of the letter
      agreement;
  The
acquisition agreement also contains additional contingent payment terms which
are based on the Project Funding Date as defined in the agreement.
  e)
                The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  f)
                The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the “net smelter returns” on any
      and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until the
      first to occur of: (1) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000; or (2) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000 in any calendar year; and,
  g)
                The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Company has accounted for this as a contingent payment and upon meeting the
contingency requirements, the purchase price of the Clarkdale Slag Project will
be adjusted to reflect the additional consideration.
  17
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  4.
                CLARKDALE SLAG
      PROJECT (continued)
  The
following table reflects the recorded purchase consideration for the Slag
Project:
 
 Purchase
      price:Cash
      payments
                              
                              $
                              10,100,000Joint
      venture option acquired in 2005 for cash
                              
                              
                              690,000Warrants
      issued for joint venture option
                              
                              
                              1,918,481Common
      stock issued
                              
                              
                              66,879,375Monthly
      payments, current portion
                              
                              
                              167,827Monthly
      payments, net of current portion
                              
                              
                              2,333,360Acquisition
      costs
                              
                              
                              127,000Total
      purchase price
                              
                              
                              82,216,043Net
      deferred income tax liability assumed - slag project
                              
                              
                              48,076,734$
                              130,292,777
  The following table reflects the
components of the Slag Project:
  Allocation
      of acquisition cost:Slag
      project (including net deferred tax liability assumed of
      $48,076,734)
                        
                        $
                        120,766,877Land
      - slag pile site
                        
                        
                        5,916,150Land
                        
                        
                        3,300,000Income
      property and improvements
                        
                        
                        309,750Total
                        
                        $
                        130,292,777
  18
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 5.
                MINERAL PROPERTIES -
      MINING CLAIMS
 
 As of
September 30, 2009 mining claims consisted of 3,200 acres located near
Searchlight, Nevada. The 3,200 acre property is staked as twenty 160 acre
claims, most of which are also double-staked as 142 twenty acre claims. At
September 30, 2009 mineral properties balance was $16,947,419.
 
 The
mining claims were acquired during 2005 with issuance of 1,400,000 shares of the
Company’s common stock and the provision that the Company, at its option, issue
an additional 1,400,000 shares each year in June for three remaining
years.  On June 25, 2008, the Company issued the remaining 1,400,000 shares
and received the title to the mining claims in consideration of the satisfaction
of the option agreement.
 
 The
mining claims were capitalized as tangible assets in accordance with ASC
805-20-55-37, Use
Rights.  Upon commencement of commercial production, the claims will
be amortized using the unit-of-production method over the life of the
claims.  If the Company does not continue with exploration after the
completion of the feasibility study, the claims will be expensed at that
time.
 
 On August
26, 2005, the Company paid $180,500 to the Bureau of Land Management as a bond
for future reclamation work in Searchlight, Nevada. As of September 30, 2009,
the recovery of the reclamation bond is uncertain, therefore the Company has
established a full allowance against the reclamation bond with the offsetting
expense to project exploration costs.
  The
Company reviews and evaluates long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amount may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amount
might not be recoverable. As of September 30, 2009 exploration progress is on
target with the Company’s exploration and evaluation plan and no events or
circumstances have happened to indicate the related carrying values of the
properties may not be recoverable. When the Company determines that an
impairment analysis should be done, the analysis will be performed using the
rules ASC 930-360-35 and 360-10-15-3 through 15-5.
  6.
                ACCOUNTS PAYABLE AND
      ACCRUED LIABILITIES
  Accounts
payable and accrued liabilities at September 30, 2009 and December 31, 2008
consisted of the following:
  September
      30,
                              2009
                            
                            
                            December
      31,
                              2008Trade
      accounts payable
                            
                            $
                            642,147
                            
                            
                            $
                            1,080,115Accrued
      compensation and related taxes
                            
                            
                            45,771
                            
                            
                            
                            7,546Accrued
      property taxes
                            
                            
                            31,631
                            
                            
                            
                            —Other
                            
                            
                            —
                            
                            
                            
                            6,117$
                            719,549
                            
                            
                            $
                            1,093,778
  19
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
                CAPITAL LEASE
      PAYABLE
 
 The
Company leases equipment under a capital lease. The capital lease payable
consisted of the following at September 30, 2009 and December 31,
2008,
 Lender
                              
                              Collateral
                              
                              Monthly
                                Payment
                              
                              
                              Interest
                                Rate
                              
                              Maturity
                              
                              September
      30,
                                2009
                              
                              
                              December
      31,
                                2008Caterpillar
      Financial ServicesCorporation
                              
                              Equipment
                              
                              $
                              2,200
                              
                              
                              
                              4.45
                              %
                              Jul-11
                              
                              $
                              46,399
                              
                              
                              $
                              64,31746,399
                              
                              
                              
                              64,317Capital
      lease payable, current portion
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (24,840
                              )
                              
                              
                              (24,026
                              )Capital
      lease payable, net of current portion
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              21,559
                              
                              
                              $
                              40,291
  The
following table represents future minimum lease payments on the capital lease
payable for each of the twelve month periods ending September 30,
 
 2010
                          
                          $
                          24,8402011
                          
                          
                          21,559Thereafter
                          
                          
                          —Total
      future minimum lease payments
                          
                          $
                          48,403Imputed
      interest
                          
                          
                          (2,004
                          )Present
      value of future minimum lease payments
                          $
                          46,399
 
 The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at September 30, 2009 and
December 31, 2008,
 
 September
      30,
                          2009
                        
                        
                        December
      31,
                          2008Site
      Equipment
                        
                        $
                        116,239
                        
                        
                        $
                        116,239Accumulated
      amortization
                        
                        
                        (67,806
                        )
                        
                        
                        (46,011
                        )$
                        48,433
                        
                        
                        $
                        70,228
  20
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
                CLARKDALE ACQUISITION
      PAYABLE
 
 Pursuant
to the Clarkdale acquisition agreement the Company agreed to pay VRIC $30,000
per month until the Project Funding Date.
 
 The
Company has recorded a liability for this commitment using imputed interest
based on its best estimate of future cash flows. The effective interest rate
used was 8.00%, resulting in an initial present value of $2,501,187 and imputed
interest of $1,128,813. The expected term used was 10 years which represents the
maximum term the VRIC liability is payable if the Company does not obtain
Project Funding.
 
 The
following table represents future principal payments on VRIC payable for each of
the twelve month periods ending September 30,
 
 2010
                          
                          $
                          206,7582011
                          
                          
                          223,9192012
                          
                          
                          242,5042013
                          
                          
                          262,6312014
                          
                          
                          284,430Thereafter
                          
                          
                          788,6872,008,929VRIC
      payable, current portion
                          
                          
                          (206,758
                          )VRIC
      payable, net of current portion
                          $
                          1,802,171
 
 The
acquisition agreement also contains payment terms which are based on the Project
Funding Date as defined in the agreement. The terms of and conditions of these
payments are discussed in more detail in Note 4 and 13.
 
 9.
                STOCKHOLDERS’
      EQUITY
 
 During
the nine months ended September 30, 2009 the Company’s stockholders’ equity
activity consisted of the following:
 
 a)
                On
      September 30, 2009, the Company awarded and issued 4,945 shares each to
      its two non officer directors pursuant to its directors’ compensation
      policy.  The share award was priced at $1.82 per share and has been
      recorded as directors’ compensation expense of $18,000 and additional
      paid-in capital.
 
 b)
                On
      July 29, 2009, the Company issued 100,000 shares of common stock from the
      exercise of stock options resulting in cash proceeds of $25,000. 
      Options exercised were for 100,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date of
      November 23, 2010.
 
 21
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                STOCKHOLDERS’ EQUITY(continued)
 
 c)
                On
      June 30, 2009, the Company awarded and issued 3,689 shares each to its two
      non officer directors pursuant to its directors’ compensation
      policy.  The share award was priced at $2.44 per share and has been
      recorded as directors’ compensation expense of $18,000 and additional
      paid-in capital
 
 d)
                On
      April 14, 2009, the Company issued 100,000 shares of common stock from the
      exercise of stock options resulting in cash proceeds of $25,000. 
      Options exercised were for 100,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date of
      November 23, 2010.
 
 e)
                On
      March 31, 2009, the Company awarded and issued 3,284 shares each to its
      two non officer directors pursuant to its directors’ compensation policy.
      The share award was priced at $2.74 per share and has been recorded as
      directors’ compensation expense of $18,000 and additional paid-in
      capital.
 
 f)
                On
      January 30, 2009, the Company issued 100,000 shares of common stock from
      the exercise of stock options resulting in cash proceeds of $25,000.
      Options exercised were for 100,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date of
      November 23, 2010.
 
 g)
                On
      January 12, 2009, the Company issued 400,000 shares of common stock from
      the exercise of stock options resulting in cash proceeds of $100,000.
      Options exercised were for 400,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date of
      February 16, 2009.
 
 h)
                Equity
      Activity Subsequent to September 30, 2009 - On November 12, 2009, the
      Company completed a private placement of 12,078,596 units of securities to
      certain investors, including Nanominerals Corp., one of our principal
      stockholders and an affiliate of certain of the Company’s officers and
      directors, at a purchase price of $1.25 per unit, resulting in aggregate
      gross proceeds to the Company of $15,098,245.   In connection
      with the private placement, Nanominerals purchased 400,000 units of
      securities at an aggregate purchase price of $500,000.  Each unit
      consists of one share of common stock and one half share of common stock
      purchase warrant. Based on the number of units sold, the Company issued
      12,078,596 shares of common stock and warrants to purchase up to 6,039,298
      additional shares of common stock. The Company paid commissions to agents
      in connection with the Offering private placement in the amount of
      $1,056,877 in cash and issued warrants to purchase up to 301,965 shares of
      common stock. The warrants have an expiration date of November 12, 2012
      and an exercise price of $1.85 per share.   Details relating to
      the private placement are further discussed in Note
  17.
  22
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCKOPTION PLAN AND
      WARRANTS
 
 On April
30, 2007, the Board of Directors adopted the 2007 Stock Option Plan (the “2007
Plan”) and determined to cease granting any further options under the Company’s
2006 Stock Option Plan. Under the terms of the 2007 Plan, options to purchase up
to 40,000,000 shares of common stock of the Company may be granted to eligible
Participants.  On May 8, 2007, the Board of Directors determined to cease
granting any further options under the Company’s 2003 Nonqualified Stock Option
Plan and amended the number of shares of the Company’s common stock available
for issuance under the 2007 Plan to a maximum of 4,000,000. On June 15, 2007,
shareholders of the Company approved the 2007 Plan.
 
 The 2007
Plan provides that the option price for incentive stock options be the fair
market value of the stock at the date of the grant and the option price for
non-qualified stock options be no less than 85% of the fair market value of the
stock at the date of the grant.  The maximum term of an option shall be
established for that option by the Board of Directors or, if not so established,
shall be ten years from the grant date. Options granted under the 2007 Plan
become exercisable and expire as determined by the Board of
Directors.
 
 On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Award
Plan for Employees and Service Providers (the “2009 Incentive Plan”). Under the
terms of the 2009 Incentive Plan, options to purchase up to 3,250,000 shares of
common stock of the Company may be granted to eligible
Participants.
 
 The
      2009 Incentive Plan provides that the option price for incentive stock
      options be the fair market value of the stock at the date of the grant,
      except that with respect to an incentive stock option, for holders of
      Awards who, on the date of grant, own more than 10% of the total combined
      voting power of all classes of our stock (or any parent or subsidiary
      thereof), the exercise price may not be less than 110% of the fair market
      value of a share of our common stock on the date of grant.  The
      maximum term of an option shall be established for that option by the
      Board of Directors or, if not so established, shall be ten years from the
      grant date, except that the term for incentive stock options may not
      exceed five years for Award holders who, on the date of grant, own more
      then 10% of the voting power of all classes of stock. Options granted
      under the 2009 Incentive Plan become exercisable and expire as determined
      by the Board of Directors.
 
 The 2009
Incentive Plan is subject to shareholder approval at the next annual
shareholder’s meeting. Until shareholder approval is obtained, options will be
granted under the 2007 Plan.
 
 On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Plan
for Directors (“2009 Directors Plan”). Under the terms of the 2009 Directors
Plan, options to purchase up to 750,000 common shares with no participant
receiving more then 250,000 common shares during any calendar year.
 
 The
      2009 Directors Plan provides that the exercise price of stock options
      granted may not be less than 100% of the fair market value of the
      Company’s common stock on the date of the grant.  The term of the
      grant shall be established by the Compensation Committee and may not
      exceed ten years from the date of the stock option is granted. Options
      granted under the 2009 Directors Plan become exercisable and expire as
      determined by the Compensation
Committee.
  23
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 The
Compensation Committee may grant restricted stock awards and determine when and
to whom such grants will be made, the number of shares to be awarded, the date
or dates upon which restricted stock awards will vest, the time or times within
which such awards may be subject to forfeiture, and all other terms and
conditions of such awards.
 
 Unless
otherwise determined by the Compensation Committee, or provided in the
restricted stock award agreement, if a participant’s service with the Company
terminates, any restricted shares held by such participant will be forfeited and
reacquired by the Company.
 
 The
Compensation Committee may grant other share-based awards, including share units
that may be valued in whole or in part by reference to or otherwise based on
common shares. Other share-based awards may be granted either alone, in addition
to or in tandem with other awards. The Compensation Committee will determine the
terms and conditions of such awards.
 
 The 2009
Directors Plan is subject to shareholder approval at the next annual
shareholder’s meeting. Until shareholder approval is obtained, options will be
granted under the 2007 Plan.
  24
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 During
the nine months ended September 30, 2009, the Company granted stock options as
follows:
 
 a)
                On
      September 30, 2009, the Company granted nonqualified stock options under
      the 2007 Plan for the purchase of 9,890 shares of common stock at $1.82
      per share.  The options were granted to an independent director for
      directors’ compensation are fully vested and expire on September 30,
      2014.
  b)
                On
      June 30, 2009, the Company granted nonqualified stock options under the
      2007 Plan for the purchase of 7,377 shares of common stock at $2.44 per
      share.  The options were granted to an independent director for
      directors’ compensation are fully vested and expire on June 30,
      2014.
  c)
                On
      March 31, 2009, the Company granted nonqualified stock options under the
      2007 Plan for the purchase of 6,569 shares of common stock at $2.74 per
      share. The options were granted to an independent director for directors’
      compensation are fully vested and expire on March 31,
  2014.
  Expenses
for the nine months ended September 30, 2009 and 2008 related to vesting and
granting of stock options were $85,563 and $859, respectively and are included
in general and administrative expense.
 
 Stock
      options–During the nine months ended
      September 30, 2009 the Company granted stock options to a director
      totaling 23,836, with a weighted average exercise price of $2.27 per
      share. As of September 30, 2009 stock options outstanding totaled
      2,769,383 with a weighted average exercise price of $1.17 per
      share.
 
 The
following table summarizes the Company’s stock option activity for the nine
months ended September 30, 2009:
  Number
      of
                          Shares
                        
                        
                        Weighted
                          Average
                          Exercise
      PriceBalance,
      December 31, 2008
                        
                        
                        3,560,293
                        
                        
                        $
                        1.02Options
      granted and assumed
                        
                        
                        23,836
                        
                        
                        
                        2.27Options
      expired
                        
                        
                        (114,746
                        )
                        
                        
                        2.43Options
      cancelled
                        
                        
                        —
                        
                        
                        
                        —Options
      exercised
                        
                        
                        (700,000
                        )
                        
                        
                        0.25Balance,
      September 30, 2009
                        
                        
                        2,769,383
                        
                        
                        $
                        1.17
 
 The
Company estimates the fair value of these options granted by using the Binomial
Lattice option pricing-model with the following assumptions used for
grants:
 
 2009Dividend
      yield
                              
                              —Expected
      volatility
                              
                              72.67
      to 76.65%Risk-free
      interest rate
                              
                              1.67%
      to 2.54%Expected
      life (years)
                              
                              4.13
      to 4.25
  25
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 The
Company believes this model provides the best estimate of fair value due to its
ability to incorporate inputs that change over time, such as volatility and
interest rates, and to allow for actual exercise behavior of option holders.
 
 The
Company estimated expected volatility using the historical volatility levels of
the Company’s common stock.  The risk-free interest rate is based on the
implied yield available on U.S. Treasury zero-coupon issues over equivalent
lives of the options.
  The
expected life of employee stock options represents the weighted-average period
the stock options are expected to remain outstanding and is a derived output of
the Binomial Lattice model. The expected life of employee stock options is
impacted by all of the underlying assumptions and calibration of the Company’s
model. The Binomial Lattice model estimates the probability of exercise as a
function of these two variables based on the entire history of exercises and
cancellations on all past option grants made by the Company.
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the nine months ended September 30, 2009:
 
 Number
      of
                          SharesSubject
                          to
      Vesting
                        
                        
                        Weighted
      Average
                          Grant
      Date
                          Fair
      ValueUnvested,
      December 31, 2008
                        
                        
                        200,000
                        
                        
                        $
                        0.79Options
      granted
                        
                        
                        —
                        
                        
                        
                        —Options
      vested
                        
                        
                        —
                        
                        
                        
                        —Options
      cancelled
                        
                        
                        —
                        
                        
                        
                        —Unvested,
      September 30, 2009
                        
                        
                        200,000
                        
                        
                        $
                        0.79
 
 As of
September 30, 2009, there was $80,707 total unrecognized compensation cost
related to unvested stock options. This cost is expected to be recognized as
follows: 2009 - $11,193, 2010 - $39,873, 2011 - $21,598, and 2012 -
$8,043.
 
 The
following table summarizes information about options granted during the nine
months ended September 30, 2009:
  Number
      of Options
                        Granted
                        During
      2009
                      
                      Exercise
      Price
                        Equals,
      Exceeds
                        Or
                        Is
      Less than Mkt.
                        Price
      of Stock
                        On
      Grant Date
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Range
      of
                        Exercise
                        Price
                      
                      
                      Weighted
                        Average
      Fair
                        Value23,836
                      
                      Equals
                      
                      $
                      2.27
                      
                      
                      $1.82
      to $2.74
                      
                      
                      $
                      1.18—
                      
                      Exceeds
                      
                      $
                      —
                      
                      
                      $— to $—
                      
                      
                      $
                      ——
                      
                      Less
      Than
                      
                      $
                      —
                      
                      
                      $ — to
      $ —
                      
                      
                      $
                      —23,836
                      
                      Equals
                      
                      $
                      2.27
                      
                      
                      $1.82
      to $2.74
                      
                      
                      $
                      1.18
  26
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 Stock
options/warrants – During the nine months ended September 30, 2009 the
Company did not grant any stock warrants.
 
 During
the nine months ended September 30, 2009 the Company issued stock options for
23,836 shares of common stock to a director with a weighted average exercise
price of $2.27 per share.
 
 The
following table summarizes information about options/warrants granted during the
nine months ended September 30, 2009:
 
 Number
      of
                          Shares
                        
                        
                        Weighted
                          Average
                          Exercise
      PriceBalance,
      December 31, 2008
                        
                        
                        22,602,680
                        
                        
                        $
                        1.11Options/warrants
      granted and assumed
                        
                        
                        23,836
                        
                        
                        
                        2.27Options/warrants
      expired
                        
                        
                        (114,746
                        )
                        
                        
                        2.43Options/warrants
      cancelled
                        
                        
                        —
                        
                        
                        
                        —Options/warrants
      exercised
                        
                        
                        (700,000
                        )
                        
                        
                        0.25Balance,
      September 30, 2009
                        
                        
                        21,811,770
                        
                        
                        $
                        1.13
 
 Warrant Amendments -
On December 29, 2008, the Company amended the private placement warrants from
the February 23, 2007 and March 22, 2007 private placement offerings. The
following material amendments to the private placement warrants were adopted:
(i) the expiration date of the private placement warrants has been extended to
March 1, 2010; (ii) the exercise price of the private placement warrants has
been decreased to $2.40 per share; (iii) the call provision in the investor
warrants is now included in the broker warrants; and (iv) the call provision in
the private placement warrants has been amended so that all of such private
placement warrants callable for cancellation by the Company if the volume
weighted average price of the common stock exceeds $4.40 per share for 20
consecutive trading days and there is an effective registration statement
registering the shares of common stock underlying the private placement warrants
at the time of the call of the private placement warrants.
 
 On April
30, 2009, the Company’s Board of Directors unilaterally determined, without any
negotiations with the warrant holders to amend and restate the call provisions
in the private placement warrants further so that the terms of such amended and
restated call provisions are identical to the terms of the private placement
warrants on their original dates of issuance.  As a result: (v) all of the
investor warrants are callable for cancellation by the Company if the volume
weighted average price of the common stock exceeds $6.50 per share for 20
consecutive trading days and there is an effective registration statement
registering the shares of common stock underlying the investor warrants at the
time of the call of the investor warrants, (vi) the broker warrants will not
have call provision, (vii) the previously adopted amendments with respect to the
extension of the expiration dates and the reduction of the exercise price for
the private placement warrants will remain unchanged.
  27
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 Subsequent Amendment of
Warrants -  After the end of the third quarter 2009, on November 12,
2009, immediately prior to the closing of the private placement described in
Note 17, the Company made several material amendments to certain of its
outstanding common stock purchase warrants. The warrants that were amended were
issued in connection with the February 23, 2007, March 22, 2007, December 26,
2007 and February 7, 2008 private placements. In connection with these private
placements, the Company issued warrants to purchase up to an aggregate of
7,042,387 shares of common stock. Prior to the amendments, these warrants
expired at various times between December 26, 2009 and March 1, 2010 and had an
exercise price of $2.40 per share.   The Company has amended the terms
of these warrants by extending the expiration date to November 12, 2012 and
reducing the exercise price to $1.85 per share.
 
 The
Company determined that the amendments to extend the expiration date of the
private placement warrants which were originally issued as part of equity
transactions, did not result in an expense to the Company.  The warrants
were not a component to any debt transaction, registration agreement or services
rendered to the Company.
 
 Subsequent Issuance of
Warrants – In connection with a private placement, completed on November
12, 2009, the Company issued 6,341,263 warrants. The warrants have an expiration
date of November 12, 2012 and an exercise price of $1.85 per share. Under
certain specified circumstances, the warrants may be exercised by means of a
“cashless exercise.” The warrants have customary anti-dilution provisions,
including, without limitation, provisions for the adjustment to the exercise
price based on certain stock dividends, stock splits and issuances of equity
securities (including the issuance of debt convertible into equity) by the
Company, subject to certain exempt issuances which will not result in an
adjustment to the exercise price. The securities were issued in reliance on
exemptions from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended (and Rule 506 of Regulation D there under.
 
 The
following table summarizes information about warrant activity subsequent to
September 30, 2009:
 
 Number
      of
                              Shares
                            
                            
                            Weighted
      Average
                              Exercise
      Price
                              September
      30,
                              2009
                            
                            
                            Proforma
      Weighted
                              Average
      Exercise Price
                              November
      12,
                              2009Balance,
      December 31, 2008
                            
                            
                            22,602,680
                            
                            
                            $
                            1.11
                            
                            
                            $
                            0.94Options/warrants
      granted and assumed
                            
                            
                            23,836
                            
                            
                            
                            2.27
                            
                            
                            
                            2.27Options/warrants
      expired
                            
                            
                            (114,746
                            )
                            
                            
                            2.43
                            
                            
                            
                            2.43Options/warrants
      cancelled
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Options/warrants
      exercised
                            
                            
                            (700,000
                            )
                            
                            
                            0.25
                            
                            
                            
                            0.25Balance,
      September 30, 2009
                            
                            
                            21,811,770
                            
                            
                            $
                            1.13
                            
                            
                            $
                            0.95Warrants
      granted November 12, 2009
                            
                            
                            6,341,263
                            
                            
                            
                            
                            
                            
                            
                            1.85Balance,
      November 12, 2009
                            
                            
                            28,153,033
                            
                            
                            
                            
                            
                            
                            $
                            1.15
  28
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 11.
                PROPERTY RENTAL
      AGREEMENTS AND LEASES
 
 The
      Company through its subsidiary CML has the following lease and rental
      agreements as lessor:
 
 Clarkdale Arizona
      Central Railroad – Rental
 
 CML
      has a month-to-month rental agreement with Clarkdale Arizona Central
      Railroad. The rental payment is $1,700 per
  month.
 
 Commercial Building –
      Rental
 
 CML
      rents commercial building space to various tenants. Rental arrangements
      are minor in amount and are typically
  month-to-month.
 
 Land Lease – Wastewater
Effluent
 
 CML
      assumed a lease as lessor on February 15, 2007 that was entered into by TI
      on August 25, 2004 with the Town of Clarkdale, AZ (Clarkdale). The Company
      provides approximately 60 acres of land to Clarkdale for disposal of Class
      B effluent. In return, the Company has first right to purchase up to
      46,000 gallons per day of the effluent for its use at fifty percent (50%)
      of the potable water rate. In addition, if Class A effluent becomes
      available, the Company may purchase that at seventy five percent (75%) of
      the potable water rate.
 
 The term
of the lease is 5 years with a one year extension available. At such time as
Clarkdale no longer uses the property for effluent disposal, and for a period of
twenty five (25) years measured from the date of the lease, the Company has a
continuing right to purchase Class B, and if available, Class A at then market
rates.
  29
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                INCOME
      TAXES
 
 The
Company is a Nevada corporation and is subject to federal and Arizona income
taxes.  Nevada does not impose a corporate income tax.
 
 The
income tax benefit consisted of the following at September 30, 2009 and
2008,
 
 September
      30,
                          2009
                        
                        
                        September
      30,
                          2008Income
      tax benefit based on statutory tax rate
                        
                        $
                        (1,951,393
                        )
                        
                        $
                        (1,399,024
                        )Non-deductible
      and other
                        
                        
                        2,739
                        
                        
                        
                        3,579Change
      in valuation allowance
                        
                        
                        47,015
                        
                        
                        
                        77,278Income
      tax benefit
                        
                        $
                        (1,901,639
                        )
                        
                        $
                        (1,318,167
                        )
 
 Significant
components of the Company’s net deferred income tax assets and liabilities at
September 30, 2009 and December 31, 2008 were as follows:
 
 September
      30,
                            2009
                          
                          
                          December
      31,
                            2008Deferred
      income tax assetsNet
      operating loss carryforward
                          
                          $
                          6,517,967
                          
                          
                          $
                          4,742,104Option
      compensation
                          
                          
                          381,926
                          
                          
                          
                          349,412Reclamation
      bond
                          
                          
                          68,590
                          
                          
                          
                          68,590Property,
      plant & equipment
                          
                          
                          125,776
                          
                          
                          
                          —Gross
      deferred income tax asset
                          
                          
                          7,094,259
                          
                          
                          
                          5,160,106Valuation
      allowance
                          
                          
                          (450,516
                          )
                          
                          
                          (403,501
                          )6,643,743
                          
                          
                          
                          4,756,605Deferred
      income tax liabilitiesProperty,
      plant & equipment
                          
                          
                          —
                          
                          
                          
                          14,501Acquisition
      related liabilities
                          
                          
                          55,197,465
                          
                          
                          
                          55,197,465Net
      deferred income tax liability
                          
                          $
                          48,553,722
                          
                          
                          $
                          50,455,361
 
 A
valuation allowance for deferred tax related to option compensation and the
reclamation bond was established for net deferred tax assets not allocated to
offset acquisition related deferred tax liabilities due to the uncertainty of
realizing these deferred tax assets based on conditions existing at September
30, 2009 and December 31, 2008.
 
 Deferred
income tax liability was recorded on GAAP basis over income tax basis using
statutory federal and state rates with the corresponding increase in the
purchase price allocation to the assets acquired.
  30
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                INCOME TAXES
      (continued)
 
 The
resulting estimated future federal and state income tax liability associated
with the temporary difference between the acquisition consideration and the tax
basis as computed in accordance with ASC 740, is reflected as an increase to the
total purchase price which has been applied to the underlying mineral and slag
project assets in the absence of there being a goodwill component associated
with the acquisition transactions.
 
 The
Company had cumulative net operating losses of approximately $17,152,547 and
$12,483,860 as of September 30, 2009 and December 31, 2008, respectively for
federal income tax purposes. The federal net operating loss carryforwards will
be expiring between 2025 and 2029.
 
 The
Company had cumulative net operating losses of approximately $8,821,356 and
$5,325,778 as of September 30, 2009 and December 31, 2008, respectively for
state income tax purposes. The state net operating loss carryforwards will be
expiring between 2013 and 2015.
 
 The
Company and its subsidiary file income tax returns in the United States. 
These tax returns are subject to examination by taxation authorities provided
the years remain open under the relevant statutes of limitations, which may
result in the payment of income taxes and/or decrease its net operating losses
available for carryforwards.  The Company is no longer subject to income
tax examinations by US federal and state tax authorities for years prior to
2005. While the Company believes its tax filings do not include uncertain tax
positions, the results of potential examinations or the effect of changes in tax
law cannot be ascertained at this time.  The Company currently has no tax
years under examination.
  31
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
                COMMITMENTS AND
      CONTINGENCIES
 
 Lease obligations –
The Company rents office space in Henderson, Nevada.  The lease terms
expired in November 2006 and the Company continues to rent the existing space
under month-to-month terms. Monthly rent was decreased from $4,900 per month to
$4,000 per month beginning in August 2009 due to less office space
leased.
 
 Rental
expense, resulting from this operating lease agreement, approximated $42,300 and
$44,100 for each of the nine months ended September 30, 2009 and 2008,
respectively.
 
 Employment contracts
– Ian R. McNeil, President and Chief Executive Officer. The Company has an
employment agreement with Mr. McNeil effective since January 1, 2006. Under the
terms of the agreement, as updated February 16, 2007, Mr. McNeil is paid a
salary of $190,000. Mr. McNeil is also eligible for a discretionary bonus to be
determined based on factors considered relevant by the Company’s board of
directors, and may be granted, subject to the approval of the board of
directors, incentive stock options to purchase shares of the Company’s common
stock in such amounts and at such times as the board of directors, in its
absolute discretion, may from time to time determine.  The term of the
agreement is for an indefinite period, unless otherwise terminated pursuant to
the terms of the agreement.  In the event that the agreement is terminated
by the Company other than for cause, the Company will provide Mr. McNeil with
six months written notice or payment equal to six months of his monthly
remuneration.
 
 Carl S.
Ager, Treasurer and Secretary. The Company has an employment agreement with Mr.
Ager effective since January 1, 2006. Under the terms of the agreement, as
updated February 16, 2007, Mr. Ager is paid a salary of $160,000. Mr. Ager is
also eligible for a discretionary bonus to be determined based on factors
considered relevant by the Company’s board of directors, and may be granted,
subject to the approval of the board of directors, incentive stock options to
purchase shares of the Company’s common stock in such amounts and at such times
as the board of directors, in its absolute discretion, may from time to time
determine.  The term of the agreement is for an indefinite period, unless
otherwise terminated pursuant to the terms of the agreement.  In the event
that the agreement is terminated by the Company other than for cause, the
Company will provide Mr. Ager with six months written notice or payment equal to
six months of his monthly remuneration.
 
 Melvin L.
Williams, Chief Financial Officer. The Company has an employment agreement with
Mr. Williams effective since June 14, 2006. Under the terms of the agreement, as
updated February 16, 2007, Mr. Williams is paid a salary of $130,000, based on
600-800 hours worked.  Mr. Williams is also eligible for a discretionary
bonus to be determined based on factors considered relevant by the Company’s
board of directors, and may be granted, subject to the approval of the board of
directors, incentive stock options to purchase shares of the Company’s common
stock in such amounts and at such times as the board of directors, in its
absolute discretion, may from time to time determine.  The term of the
agreement is for an indefinite period, unless otherwise terminated pursuant to
the terms of the agreement.  In the event that the agreement is terminated
by the Company other than for cause, the Company will provide Mr. Williams with
thirty days written notice or payment equal to three months of his monthly
remuneration.
  32
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
                COMMITMENTS AND
      CONTINGENCIES (continued)
 
 Purchase consideration
Clarkdale Slag Project – In consideration of the acquisition of the
Clarkdale Slag Project from VRIC, the Company has agreed to certain additional
contingent payments. The acquisition agreement contains payment terms which are
based on Project Funding Date as defined in the agreement:
 
 a)
                The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  b)
                The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the net smelter returns (“NSR”)
      on any and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until the
      first to occur of: (1) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000; or (2) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000; and,
  c)
                The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Advance Royalty shall continue for a period of ten (10) years from the Agreement
Date or until such time that the Project Royalty shall exceed $500,000 in any
calendar year, at which time the Advance Royalty requirement shall end
forever.
 
 Development agreement
– In January 2009, the Company submitted a development agreement to the Town of
Clarkdale for development of an Industrial Collector Road (the “Road”). The
purpose of the Road is to provide the Company the capability to transport
supplies, equipment and products to and from the Slag Project site efficiently
and to meet stipulations of the Conditional Use Permit (CUP) for the full
production facility at the Clarkdale Slag Project.
 
 The
timing of the development of the Road is to be within two years of the effective
date of the agreement. The effective date shall be the later of (i) 30 days from
the approving resolution of the agreement by the Council; or (ii) the date on
which the Town obtains a connection dedication from separate property owners who
have land that will be utilized in construction of the Road; or (iii) the date
on which the Town receives the proper effluent permit. The contingencies
outlined in (i), (ii), and (iii) above are beyond control of the
Company.
 
 The
Company estimates construction of the Road to cost approximately $3,500,000
which will be required to be funded by the Company. Based on the uncertainty of
the contingencies, this cost is not included in the Company’s current operating
plans. Funding for construction of the Road will require obtaining project
financing or other significant financing.
  33
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 14.
                CONCENTRATION OF
      CREDIT RISK
 
 The
Company maintains its cash accounts in two financial institutions. Cash accounts
at these financial institutions are insured by the Federal Deposit Insurance
Corporation (FDIC) for up to $250,000 per financial institution. Additionally,
through the financial institutions’ participation in the FDIC’s Transaction
Account Guarantee Program, all non-interest bearing checking accounts are fully
guaranteed by the FDIC for the entire amount in the account through June 30,
2010. Coverage under the Transaction Account Guarantee Program is in addition to
and separate from the coverage available under the FDIC’s general deposit
insurance rules.
 
 The
Company has never experienced a material loss or lack of access to its cash
accounts; however no assurance can be provided that access to the Company’s cash
accounts will not be impacted by adverse conditions in the financial markets. At
September 30, 2009, the Company did not have material deposits in excess of FDIC
insured limits.
 
 15.
                CONCENTRATION OF
      ACTIVITY
 
 For the
nine months ended September 30, 2009, the Company purchased services from one
major vendor, Baker & Hostetler LLP, which exceeded more than 10% of total
purchases and amounted to approximately $958,962.
 
 16.
                RELATED PARTY
      TRANSACTIONS
 
 During
the nine months ended September 30, 2009, the Company utilized the services of
NMC to provide technical assistance and financing related activities. 
These services related primarily to the Clarkdale Slag Project and the
Searchlight Claims Project.  Mr. McNeil and Mr. Ager are affiliated with
NMC.
 
 In
addition to the above services, NMC provided dedicated use of its laboratory,
instrumentation, milling equipment and research facilities.  NMC provided
invoices for these fees plus expenses.
 
 For the
nine months ended September 30, 2009, the Company incurred total fees and
reimbursement of expenses to NMC of $240,000 and $68,240, respectively. At
September 30, 2009, the Company had an outstanding balance due to NMC of
$78,378.
  In
connection with the private placement completed on November 12, 2009, NMC
purchased 400,000 units of securities at an aggregate purchase price of
$500,000.  Each unit consists of one share of common stock and one
half share of common stock purchase warrant. For further discussion on the
financing, see Note 17.
 During
the nine months ended September 30, 2009, the Company utilized Cupit, Milligan,
Ogden & Williams, CPAs (CMOW) to provide accounting support services. 
Mr. Williams is affiliated with CMOW.
 
 The
Company incurred total fees to CMOW of $112,226 and $60,330 for the nine months
ended September 30, 2009 and 2008, respectively. The Company also reimbursed
expenses to CMOW of $0 and $130 for the nine months ended September 30, 2009 and
2008, respectively. Fees for services provided by CMOW do not include any
charges for Mr. Williams’ time.  Mr. Williams is compensated for his time
under his salary agreement. The approximate direct benefit to Mr. Williams was
$35,912 and $16,289 of the above CMOW fees and expenses for the nine months
ended September 30, 2009 and 2008, respectively. The Company had an outstanding
balance due to CMOW of $22,407 as of September 30, 2009.
  34
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 17.
                SUBSEQUENT
      EVENTS
 
 a)           On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Award
Plan for Employees and Service Providers (the “2009 Incentive Plan”). Under the
terms of the 2009 Incentive Plan, options to purchase up to 3,250,000 shares of
common stock of the Company may be granted to eligible Participants. The 2009
Incentive Plan is subject to shareholder approval at the next annual
shareholder’s meeting. Until shareholder approval is obtained, options will be
granted under the 2007 Plan.
 
 b)           On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Plan
for Directors (“2009 Directors Plan”). Under the terms of the 2009 Directors
Plan, options to purchase up to 750,000 common shares with no participant
receiving more then 250,000 common shares during any calendar year. The 2009
Directors Plan is subject to shareholder approval at the next annual
shareholder’s meeting. Until shareholder approval is obtained, options will be
granted under the 2007 Plan.
 
 c)           Subsequent
Amendment of Warrants - After the end of the third quarter 2009, on November 12,
2009, immediately prior to the closing of the private placement described in
below, the Company made several material amendments to certain of its
outstanding common stock purchase warrants. The warrants that were amended were
issued in connection with the February 23, 2007, March 22, 2007, December 26,
2007 and February 7, 2008 private placements. In connection with these private
placements, the Company issued warrants to purchase up to an aggregate of
7,042,387 shares of common stock. Prior to the amendments, these warrants
expired at various times between December 26, 2009 and March 1, 2010 and had an
exercise price of $2.40 per share.   The Company has amended the
terms of these warrants by extending the expiration date to November 12, 2012
and reducing the exercise price to $1.85 per share.  The November 12, 2009
warrant amendment and issuance of additional warrants are further discussed in
Note 10.
 
 d)           Private
Placement Equity Financing - On November 12, 2009, the Company completed a
private placement of 12,078,596 units of securities to certain investors,
including Nanominerals Corp., one of our principal stockholders and an affiliate
of certain of the Company’s officers and directors, at a purchase price of $1.25
per unit, resulting in aggregate gross proceeds to the Company of
$15,098,245.  In connection with the private placement, Nanominerals
purchased 400,000 units of securities at an aggregate purchase price of
$500,000.  Each unit consists of one share of common stock and one half
share of common stock purchase warrant. Based on the number of units sold, the
Company issued 12,078,596 shares of common stock and warrants to purchase up to
6,039,298 additional shares of common stock. The Company paid commissions to
agents in connection with the Offering private placement in the amount of
$1,056,877 in cash and issued warrants to purchase up to 301,965 shares of
common stock. The warrants have an expiration date of November 12, 2012 and an
exercise price of $1.85 per share.
  35
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 17.
                SUBSEQUENT EVENTS –(continued)
 
 Under
certain specified circumstances, the warrants may be exercised by means of a
“cashless exercise.” The warrants have customary anti-dilution provisions,
including, without limitation, provisions for the adjustment to the exercise
price based on certain stock dividends, stock splits and issuances of equity
securities (including the issuance of debt convertible into equity) by the
Company, subject to certain exempt issuances which will not result in an
adjustment to the exercise price. The securities were issued in reliance on
exemptions from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended (and Rule 506 of Regulation D thereunder. Under the transaction
documents, the Company is restricted from, among other things, (i) issuing any
shares of common stock, subject to certain exempt issuances, until the initial
registration statement the Company agreed to file in connection with the private
placement is declared effective by the U.S. Securities and Exchange Commission,
but in no event will this restriction expire prior to 90 days following the
closing of the private placement, (ii) entering into certain “variable rate
transactions,” as such term is defined in the purchase agreement, or (iii)
effecting any forward or reverse stock splits for a period of six months after
the closing without the prior written consent of a majority of the
purchasers.
 
 The
Company agreed to file a registration statement covering the resale of the
shares of common stock issued to purchasers in the private placement, including
the shares of common stock issuable upon exercise of the warrants and the shares
of common stock issuable upon the exercise of the warrants issued to agents as
commissions in the private placement. If, among other things, (i) the Company
fails to file the initial registration statement within the prescribed period or
(ii) any registration statement that the Company files is not declared effective
within 120 calendar days of the required filing date, the Company has agreed to
pay to each purchaser, as partial liquidated damages, an amount in cash equal to
1% of the aggregate purchase price paid by each such purchaser for any shares of
common stock that have not then been registered for every 30 days following any
required filing date and, on a pro rata basis, for every 30 days following the
120 day period within which any registration statement was to be declared
effective. The maximum aggregate liquidated damages payable to a purchaser will
not exceed 3% of the aggregate purchase price paid by such
purchaser.
  36




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




Certain
statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.”  These forward-looking statements
include, but are not limited to, statements about the plans, objectives,
expectations and intentions of Searchlight Minerals Corp., a Nevada corporation
(referred to in this Report as “we,” “us,” “our” or “registrant”) and other
statements contained in this Report that are not historical facts.
Forward-looking statements in this Report or hereafter included in other
publicly available documents filed with the Securities and Exchange Commission,
or the Commission, reports to our stockholders and other publicly available
statements issued or released by us involve known and unknown risks,
uncertainties and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Such future results are based upon
management’s best estimates based upon current conditions and the most recent
results of operations. When used in this Report, the words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar
expressions are generally intended to identify forward-looking statements,
because these forward-looking statements involve risks and uncertainties. There
are important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including our
plans, objectives, expectations and intentions and other factors that are
discussed under the section entitled “Risk Factors,” in this Report and in our
Annual Report on Form 10-K for the year ended December 31, 2008.




The
following discussion and analysis summarizes our plan of operation for the next
twelve months, our results of operations for the three and nine month periods
ended September 30, 2009 and changes in our financial condition from our year
ended December 31, 2008. The following discussion should be read in conjunction
with the Management’s Discussion and Analysis or Plan of Operation included in
our Annual Report on Form 10-K for the year ended December 31,
2008.




Executive
Overview




We are an
exploration stage company engaged in the acquisition and exploration of mineral
properties and slag reprocessing projects. We hold interests in two mineral
projects, our Clarkdale Slag Project and our Searchlight Gold Project. Our
business is presently focused on our two mineral projects: (i) the Clarkdale
Slag Project, located in Clarkdale, Arizona, which is a reclamation project to
recover precious and base metals from the reprocessing of slag produced from the
smelting of copper ore mined at the United Verde Copper Mine in Jerome, Arizona;
and (ii) the Searchlight Gold Project, which involves exploration for precious
metals on mining claims near Searchlight, Nevada.




Clarkdale Slag
Project. The Clarkdale Slag Project, located in Clarkdale, Arizona, is a
reclamation project to recover precious and base metals from the reprocessing of
slag produced from the smelting of copper ore mined at the United Verde Copper
Mine in Jerome, Arizona. Metallurgical testing and project construction on the
Clarkdale Slag Project have been ongoing since 2005, initially under the
direction of the prior owners, thereafter with our participation in a joint
venture with the prior owners in 2005, and currently solely by us since we
acquired 100% of the Clarkdale Slag Project in 2007.




Since our
acquisition of 100% of the Clarkdale Slag Project in 2007, we have devoted
considerable effort to the designing and engineering of our first production
module, which included finalizing the production flow sheet, sourcing and
purchasing equipment as well as refurbishing the module building and
constructing the electrowinning building. The module and electrowinning
buildings house the first production module, which has been designed to allow
for the grinding, leaching, filtering and extraction of precious and base metals
from the slag material and is expected to process between 100 and 250 tons of
slag material per day. During 2008, we completed the refurbishing and
construction of the module and electrowinning buildings, respectively, and we
installed all the necessary equipment in the two buildings for the operation of
the first production module. During 2009, we have been executing our business
plan on the Clarkdale Slag Project, which includes the start-up and operation of
the first production module, in an effort to achieve consistent levels of gold
and silver extraction that would support the economic feasibility of a
commercial production facility.




37









On June
17, 2008, we received a Certificate of Occupancy for the laboratory facilities
located within the module building, allowing our chemists to conduct immediate,
on-site analyses of leaching results to further optimize the metals extraction
process. On August 8, 2008, we received a Certificate of Occupancy for the
module building, allowing us to operate the grinding, leaching, filtering and
resin extraction equipment within the module building. On December 30, 2008, we
received a Certificate of Occupancy for the electrowinning building, allowing us
to operate the copper and zinc electrowinning equipment within the
electrowinning building.




We have
completed the construction of the production module for the Clarkdale Slag
Project and are now actively engaged in the testing and start-up phase of the
project. Since the start of 2009, the primary emphasis has been placed on the
crushing and grinding circuit as well as the leaching and extraction of precious
metals (gold and silver). We have completed continuous runs of up to 16 hours
through the crushing and grinding circuit. To date, our internal laboratory
testing has reflected consistent levels of extractable precious and base metals
in pregnant leach solutions from the Clarkdale slag material. The crushing and
grinding circuit effectively liberates gold, silver, copper and zinc from the
slag material. Further, management believes that extraction results from
preliminary internal laboratory testing have been consistent with the results of
earlier assay testing conducted by our independent consultants. We believe that
we can improve extraction rates further by optimizing the grind, the chemical
characteristics of the leach solutions and the amount of residence time required
for maximum grind and leach efficiency.




38




We have
faced challenges involving the amount of wear on certain grinding components
caused by the abrasiveness of the slag material and the rate of throughput.
Highly abrasive carbon-rich ferro-silicates (containing carbon, iron and silica)
comprise about 90% of the slag material, which required us to seek out more
advanced hard facing technology and wear-resistant surfacing media on our
crushing and grinding equipment. These materials were fabricated by third
parties. We, along with our consulting engineers, believe that the issues
relating to the throughput rate of the crushing and grinding circuit have now
been resolved. We are now capable of operating the throughput in the crushing
and grinding circuit on a continuous basis.




With the
gold and silver ion exchange resin circuit currently operational and the solvent
exchange electrowinning circuit currently operational for copper and approaching
operational status for zinc, once the leach circuit has been configured to run
continuously at optimum productivity levels, we believe that we will be able to
proceed with the operation of all circuits within the production module. Our
technical team is currently focused on optimizing the leach circuit with the
grind/leach combination that will optimize metal extraction, which can then be
filtered and run through the ion exchange resin extraction and solvent exchange
electrowinning circuits in order to extract precious and base metals in
marketable forms.




On May 6,
2009, we entered into a new engagement of Mountain States R&D International
Inc. (“Mountain States”), an independent engineering consultant, to conduct a
technical analysis of our gold recovery process, which we believe comprises the
majority of the potential value of the entire Clarkdale Slag Project. Such
technical analysis was to consist of the observation and analysis of our gold
recovery process in accordance with chain-of-custody standards. The technical
analysis was not intended for the purpose of determining the economic
feasibility of the Clarkdale Slag Project.




However,
during our work program with Mountain States, we jointly determined with
Mountain States that we would need specialty expertise in dealing with the
abrasiveness of the slag material. As a result, Mountain States agreed to
withdraw from its engagement and we have engaged a new team of independent
metallurgical engineers, with extensive international experience in milling and
leaching hard, abrasive and refractory material similar to that found in the
slag pile. We have engaged the new engineering team to provide us with
recommendations regarding further optimization of all four primary processing
circuits, with their initial recommendations focusing upon the crushing,
grinding, leaching and filtration circuits. Once we are able to resolve these
issues, we intend to engage an independent engineer to conduct a technical
analysis of our gold recovery process.




We
incurred delays during the construction of our production module, including
delays in receiving large pieces of equipment from manufacturers, engineering
related delays due to the complexity of installing the production module
equipment in a World War I era module building and the decision to construct a
separate building to house the electrowinning equipment after it was determined
that the electrowinning equipment would not adequately fit in the module
building. Consequently, the construction timeline for completing the production
module was extended by approximately twelve months from what we originally
anticipated and there was an approximately 55% increase in costs from what we
had originally projected.




39


We
anticipate that the operation of our production module will allow us to
determine the economics of the project and serve as the basis for the final
feasibility of the project. If the feasibility of the project establishes
economic viability, we expect to commence construction of a full-scale
production facility where we intend to install subsequent modules in parallel.
We expect that each subsequent module would be comparable in technology and
scale to the initial production module. The number of subsequent modules
required to attain full-production of 2,000 tons per day will be determined once
the initial production module capacity is determined. The cost of designing and
constructing our initial production module was approximately $12,000,000. We do
not believe that the construction of subsequent modules will cost as much
because: (i) of the knowledge we have developed in the construction of the
initial production module, and (ii) any additional modules will be new
construction, rather than rehabilitation of an older building. However, the
scope and size of our full-scale production facility, including the number of
additional modules, the timing and cost of additional modules and the economies
of scale of a production facility, will depend upon a number of factors,
including the results of a feasibility study and the availability of funding. A
more thorough economic analysis of the full-scale production facility, including
specific capital and operating costs, funding schedules and funding sources, is
expected to occur during the feasibility evaluation of the initial production
module. The first stage of the feasibility evaluation began in the second
quarter of 2009, and has continued into the third quarter of 2009 when we
engaged the new team of metallurgical engineers, with specialty expertise in
dealing with milling and leaching hard, abrasive and refractory material, to
work with our Clarkdale personnel and consultants to achieve optimum continuous
production.




We have
budgeted $5,500,000 for our work program on the Clarkdale Slag Project over the
next twelve months, which includes the operation of the production module and
performing the feasibility study. A decision on allocating approximately
$6,000,000 of additional funds for the Phase II expansion and $4,700,000 to
complete the construction of an Industrial Collector Road pursuant to an
agreement with the Town of Clarkdale, Arizona by January 2011 will be made once
the first production module is operational and its results are
analyzed.




We expect
that there will be significant financing requirements in order to finance the
construction of a full-scale production facility, and cannot assure you that
such funding will be available at all or on terms that are reasonably acceptable
to us. If the results from our feasibility study and the results from the
operation of the production module do not support a basis for us to proceed with
the construction of our proposed, full-scale production facility or we cannot
obtain funding at all or on terms that are reasonably acceptable to us, we will
have to scale back or abandon our proposed operations on the Clarkdale Slag
Project. If management determines, based on any factors, including the
foregoing, that capitalized costs associated with any of our mineral interests
are not likely to be recovered, we would incur a significant impairment of our
investment in such property interests on our financial statements.




In
January 2009, we submitted a development agreement to the Town of Clarkdale for
the construction of an Industrial Collector Road. The purpose of the road is to
provide us with the capability to enhance the flow of industrial traffic to and
from the Clarkdale Slag Project. The construction of the road is a required
infrastructure improvement under the terms of our conditional use permit with
the Town of Clarkdale. The Town of Clarkdale approved the development agreement
on January 9, 2009.




The
development agreement provides that its effective date will be the later of (i)
30 days from the approving resolution of the agreement by the Clarkdale Town
Council; or (ii) the date on which the Town of Clarkdale obtains a connection
dedication from separate property owners who have land that will be utilized in
construction of the road; or (iii) the date on which the Town of Clarkdale
receives the proper effluent permit. The Town of Clarkdale has approved the
development agreement, and the remaining two contingencies with respect to the
effectiveness of the development agreement are beyond our control.




Under the
development agreement, we are obligated to complete the construction of the road
within two years after the effective date of the agreement. If we do not
complete the road within the two year period, we may lose our conditional use
permit from the Town of Clarkdale. Further, as a condition of our developing any
of our property that is adjacent to the Clarkdale Slag Project, we will be
required to construct additional enhancements to the road. We will have ten
years from the start of construction on the road in which to complete the
additional enhancements. However, we do not currently have any defined plans for
the development of the adjacent property.




We
estimate that the initial cost of construction of the road will be approximately
$3,500,000 and that the cost of the additional enhancements will be
approximately $1,200,000. We will be required to fund the costs of this
construction. Based on the uncertainty of the timing of these contingencies, we
have not included these costs in our current operating plans or budgets.
However, we will require additional project financing or other financing in
order to fund the construction of the road and the additional enhancements.
There are no assurances that we will be able to obtain additional financing in
an amount sufficient to meet our needs or on terms that are acceptable to us.
The failure to complete the road and the additional enhancements in a timely
manner under the development agreement would have a material adverse effect on
the Clarkdale Slag Project and our operations.




40




Searchlight Gold
Project. The Searchlight Gold Project involves exploration for precious
metals on mining claims near Searchlight, Nevada. We have been engaged in an
exploration program on our Searchlight Gold Project since 2005. Our Searchlight
Claims are comprised of non-patented placer mining claims located on federal
land administered by the United States Bureau of Land Management (“BLM”).
Drilling and mining activities on the Searchlight Claims must be carried out in
accordance with a Plan of Operations or permit issued by the BLM.




Since
2005, we have maintained an ongoing exploration program on our Searchlight Gold
Project and have contracted with Arrakis, Inc. (“Arrakis”), an unaffiliated
mining and environmental firm, to perform a number of metallurgical tests on
surface and bulk samples taken from the project site under strict
chain-of-custody protocols. In 2007, results from these tests validated the
presence of gold on the project site, and identified reliable and consistent
metallurgical protocols for the analysis and extraction of gold, such as
microwave digestion and autoclave leaching. Autoclave methods typically carry
high capital and operating costs on large scale projects, however, we were
encouraged by these results and in the first quarter of 2008, we approved a
continuation of the metallurgical work program with Arrakis. The goal of this
work program is to attempt to further improve upon the extraction grades of gold
from samples taken from the project and explore in more detail the potential
capital and operating costs of implementing methods, such as autoclave
leaching.




During
the second quarter of 2008, we “double staked” the Searchlight property by
filing, with the BLM and the Clark County, Nevada Recorder, 142 new and separate
20-acre placer claims overtop of the twenty existing 160-acre claims. We were
only able to “double stake” 2,840 acres out of the 3,200 acre site due to
various regulatory restrictions on staking of certain of the smaller land
parcels on the site. We have maintained the twenty prior 160-acre claims to
provide us with a basis to retain the priority of and defend our existing
160-acre mining claims.




The
former Searchlight Claim owners had previously obtained a BLM approved Plan of
Operations, which included permission to drill eighteen holes on the 3,200 acre
project area and to mine a 36-acre pit on our RR304 claim. We had anticipated
conducting our early stage exploratory work on the Searchlight Claims property
by utilizing the Plan of Operations issued to the former Searchlight Claim
owners, until such time as we would obtain a permit for exploration and
development in our own name or the former Searchlight Claim holder’s permit was
transferred to us. Although we did not acquire the Searchlight Claims with a
written agreement to purchase the Plan of Operations, the prior owners verbally
agreed to cooperate with us in attempting to transfer their Plan of Operations
into our name.




Although
the Plan of Operations was accepted and registered in the name of a former
Searchlight Claim owner, which is an affiliate of K. Ian Matheson, one of our
principal stockholders and a former officer and director, in September 2007, we
learned that the BLM had issued an order (the “BLM Order”) for “Immediate
Suspension of All Activities” notice on May 12, 2006 against Mr. Matheson and
certain of his affiliates (Pass Minerals, Inc., Kiminco, Inc. and Pilot Plant
Inc., which also were prior Searchlight Claim owners and are our stockholders)
with respect to a dispute with the BLM on a project unrelated to the Searchlight
Gold Project. The dispute between the BLM and Mr. Matheson arose due to the
BLM’s determination that Mr. Matheson and his affiliates had engaged in willful
mineral trespass for the unauthorized removal of sand and gravel from public
lands by Mr. Matheson and his affiliates or their predecessors. The BLM had
demanded payment of approximately $2,530,000 for the willful trespass. After
failure by Mr. Matheson and his affiliates to pay the amount, the BLM issued the
BLM Order. The issuance of the BLM Order restricted our ability to rely upon the
Plan of Operations to conduct our early stage exploratory work on the
Searchlight Claims property until such time that we may obtain our own Plan of
Operations. An appeal by Mr. Matheson of the BLM Order with the Interior Board
of Land Appeals affirmed the BLM’s decision, keeping the BLM Order in effect.
The BLM Order effectively covered all projects tied to Mr.
Matheson.




41




As a
result of the BLM Order, we have been delayed in our ability to drill on the
Searchlight Gold Project property. However, we have anticipated that regulatory
and other delays would take place, which are typical in our industry. We have
applied for a new Plan of Operations in our name and are currently in the course
of the BLM’s review process. In addition, we have continued and will continue
with our surface sampling and metallurgical testing program while awaiting
approval of a new Plan of Operations.




In the
third quarter of 2008, we submitted a Plan of Operations to the BLM in our name,
substantially similar to the original Plan of Operations, which included a
request to drill eighteen holes on the project area and to mine a 36-acre mining
pit. On August 27, 2008, the BLM responded, in part, by advising that the
previous bond that we posted of $180,500 for the previous Plan of Operations
would not be transferrable to the new one and that a new bond would have to be
posted. At the time, we considered the recovery of the reclamation bond to be
uncertain and, therefore, we have established a full allowance against the
reclamation bond with the offsetting expense to project exploration costs. Based
on correspondence with the BLM, we believe we will be able to recover the bond
upon withdrawal of the prior Plan of Operations, however, we have not chosen to
make such a request at this time.




In
September 2008, we decided that we would only continue to pursue the permits to
drill on the project area and forgo the 36-acre pit until a later date since we
believed that by keeping the pit area in the Plan of Operations, it might delay
the BLM’s approval process for our Plan of Operations. Although the 36-acre pit
had been part of the Plan of Operations obtained by the prior owners of the
Searchlight Claims, we do not believe that digging and mining a 36-acre pit
would be a material aspect of the Plan of Operations at this stage of the
Searchlight Gold Project. Therefore, we decided to remove the 36-acre pit from
the Plan of Operations. Further, by reducing the scope of the permit, we decided
that we could submit the application in the form of a Notice of Intent, a
shorter and less complex application form than a Plan of Operations.
Consequently, on September 24, 2008, we withdrew the Plan of Operations and
submitted a Notice of Intent with the BLM, pursuant to which we sought
permission to drill eighteen 500-foot drill holes on the Searchlight project
area.




After a
series of correspondence between us and the BLM, on December 15, 2008, we
received a letter from the BLM advising us that the BLM had closed our Notice of
Intent from consideration and that a new Plan of Operations would be required
based on two issues relating to the Desert Tortoise (Gopherus asassizii), a
Federally listed Threatened Species: (i) the proximity of the project area to a
nearby Area of Critical Environmental Concern (ACEC); and (ii) the future
likelihood of tortoises being present on the land within the project area which
is involved in the application.




On
January 13, 2009, we filed a Notice of Appeal of the BLM’s decision regarding
the closing of our Notice of Intent. However, the BLM’s decision was upheld on
appeal by the U.S. Department of Interior on September 9, 2009.




During
the course of the appeal, we determined that, due to the standard lengthy time
required to have a Plan of Operations approved by the BLM and should we be
unsuccessful with our appeal, it would be prudent to begin the approval process
immediately by filing for our Plan of Operations. Thus, on March 23, 2009, we
submitted a new Plan of Operations to the BLM, taking into account the Desert
Tortoise issue. In our Plan of Operations, we have requested permission to drill
eighteen drill holes on the project area. In the event of the approval of our
Plan of Operations, we will be required to post a new reclamation bond with the
BLM, which we anticipate will be approximately $16,000. We have reached an
understanding with the BLM that we will use the Environmental Assessment
previously approved by the BLM under the prior Plan of Operations in connection
with the new Plan of Operations, and the BLM has requested that we conform
certain aspects of the new Plan of Operations with the previously approved
Environmental Assessment.




We
conformed the new Plan of Operations with the previously approved Environmental
Assessment and, after a further series of correspondence between us and the BLM,
on October 13, 2009, we received a letter from the BLM regarding our Plan of
Operations confirming that the BLM considers our Plan of Operations to conduct
drilling complete and that the BLM will conduct a final review of the previously
approved Environmental Assessment to determine its adequacy. The BLM’s letter
also advised that they would be sending letters addressing the Conditions of
Approval and the bond determination under separate cover.




42




There is
no regulatory time frame for the BLM to review our Plan of Operations. We
understand that the average time frame for approval of a plan of operation by
the Las Vegas, Nevada branch office of the BLM since January 1, 2000 has been
approximately four years and five months. Although we understand that the
average time frame of the application process by the Las Vegas branch office of
the BLM relating to an environmental assessment in connection with a plan of
operations is approximately eleven months, the “threatened species” issue raised
by the BLM requires the BLM to consult with the U.S. Fish and Wildlife Service
of the Department of Interior, and the BLM has no control over the length of
this consultation process in order to develop any necessary environmental
mitigation measures.




Our work
on the project site will be limited to the scope within the Plan of Operations.
However, the Plan of Operations approval process will delay the start of our
drilling program for an undetermined period of time. To perform any additional
drilling or mining on the project, we would be required to submit a new
application to the BLM for approval prior to the commencement of any such
additional activities.




We do not
believe these added requirements will have a material adverse impact on our
overall business plan for the Searchlight Gold Project, given that we have
received no indication from the BLM, at this time, that the BLM will ultimately
deny our request for approval of our Plan of Operations. However, there is no
assurance of the timeline for approval by the BLM or that the BLM will grant
approval. Our drilling and mining program on this project is dependent on
obtaining the necessary approval from the BLM. Therefore, if approval ultimately
is not obtained, we may have to scale back or abandon exploration efforts on the
project. If management determines, based on any factors including the foregoing,
that capitalized costs associated with any of our mineral interests are not
likely to be recovered, we would incur a significant impairment of our
investment in such property interests on our financial statements.




Further,
although our ability to obtain drilling permits has been delayed, we have
continued and intend to continue our current metallurgical program with
Arrakis.




We have
budgeted $500,000 to our twelve month work program for the Searchlight Gold
Project. Our work program is focused on continuing the testing program with
Arrakis, including metallurgical tests, bulk sampling, milling, leaching and
extraction tests to optimize recovery of precious metals from samples taken from
the project and exploring in more detail the potential capital and operating
costs of implementing methods, such as autoclave leaching. We will also focus on
our work with the BLM, our consultants and our attorneys to help us obtain
approval of the Plan of Operations, containing the necessary permits to execute
on our desired drilling program. The drilling and pre-feasibility program, which
we anticipate will include an eighteen-hole drill program, chain-of-custody
sampling and assaying of drill hole material, pilot plant tests and a
pre-feasibility report, is expected to commence shortly after receiving the
BLM’s approval of the Plan of Operations.




Anticipated
Cash Requirements




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next
twelve months, our management anticipates that the minimum cash requirements for
funding our proposed exploration, testing and construction program and our
continued operations will be approximately $9,000,000. On November 12, 2009, we
completed a private placement of 12,078,596 units of our securities at a
purchase price of $1.25 per unit, resulting in aggregate gross proceeds to us of
$15,098,245. Based on the net proceeds received by us from the private
placement, we estimate that our current financial resources are sufficient to
allow us to meet the anticipated costs of our exploration, testing and
construction programs for the 2010 fiscal year. However, if actual costs are
greater than we have anticipated, we will require additional financing in order
to fund our exploration, testing and construction plans for 2010. We do not
currently have any financing arrangements in place for such additional
financing, and there are no assurances that we will be able to obtain additional
financing in an amount sufficient to meet our needs or on terms that are
acceptable to us.




43




Our
current twelve month plan also includes anticipated expenditure of approximately
$6,000,000 on Phase II of our Clarkdale Slag Project and $4,700,000 to complete
the construction of an Industrial Collector Road pursuant to an agreement with
the Town of Clarkdale, Arizona by January 2011, subject to funding availability.
We will require additional funding to fulfill our entire anticipated plan of
operations. In addition, the actual costs of completing those activities may be
greater than anticipated.




Our
estimated cash requirements for the next twelve months are as
follows:




BUDGETAdministrative
      Expenses
                        
                        $
                        1,500,000Legal
      and Accounting Expenses
                        
                        $
                        1,500,000SUBTOTAL
                        
                        $
                        3,000,000Clarkdale Slag
      ProjectProduction
      Module Operation
                        
                        $
                        3,500,000Technical
      Consulting Services
                        
                        $
                        1,000,000Feasibility
      Study and Expansion Preparation
                        
                        $
                        1,000,000SUBTOTAL
                        
                        $
                        5,500,000Searchlight Gold
      ProjectMetallurgical
      Testing and Pre-Feasibility Program
                        
                        $
                        100,000Permitting
      & Drilling Program
                        
                        $
                        400,000SUBTOTAL
                        
                        $
                        500,000TOTAL
                        
                        $
                        9,000,000
  Critical
Accounting Policies




Use of
estimates – The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period.  Actual results could differ
from those estimates.




Mineral
rights – Costs of acquiring mining properties are capitalized upon
acquisition. Mine development costs incurred either to develop new ore deposits,
to expand the capacity of mines, or to develop mine areas substantially in
advance of current production are also capitalized once proven and probable
reserves exist and the property is a commercially mineable property. 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 the carrying value of capitalized mining
costs and related property and equipment costs, to determine if these costs are
in excess of their recoverable amount whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.
Evaluation of the carrying value of capitalized costs and any related property
and equipment costs would be based upon expected future cash flows and/or
estimated salvage value in accordance with Accounting Standards Codification
(ASC) 360-10-35-15, Impairment
or Disposal of Long-Lived Assets.




Capitalized
interest cost - We capitalize interest cost related to acquisition,
development and construction of property and equipment which is designed as
integral parts of the manufacturing process of this project. The capitalized
interest is recorded as part of the asset it relates to and will be amortized
over the asset’s useful life once production commences.




44




Exploration
costs – Mineral exploration costs are expensed as incurred.




Property and
Equipment –Property and equipment is stated at cost less accumulated
depreciation. Depreciation is principally provided on the straight-line method
over the estimated useful lives of the assets, which are generally 3 to 39
years. The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).




We
periodically evaluate whether events and circumstances have occurred that may
warrant revision of the estimated useful lives of property and equipment or
whether the remaining balance of property and equipment should be evaluated for
possible impairment. If events and circumstances warrant evaluation, we use an
estimate of the related undiscounted cash flows over the remaining life of the
fixed assets in measuring their recoverability.




Impairment of
long-lived assets–We review and evaluate long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amount
might not be recoverable. As of September 30, 2009 exploration progress is on
target with our exploration and evaluation plan and no events or circumstances
have happened to indicate the related carrying values of the properties may not
be recoverable. When we determine that an impairment analysis should be done,
the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and ASC
360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.




Results
of Operations




The
following table illustrates a summary of our results of operations for the
periods listed below:




ThreeMonthsEndedSeptember30,
                  
                  
                  NineMonthsEndedSeptember30,2009
                  
                  
                  2008
                  
                  
                  Percent
                    Increase/
                    (Decrease)
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  Percent
                    Increase/
                    (Decrease)Revenue
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  n/a
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  n/aOperating
      Expenses
                  
                  
                  (1,822,933
                  )
                  
                  
                  (1,415,440
                  )
                  
                  
                  28.8
                  %
                  
                  
                  (5,125,135
                  )
                  
                  
                  (3,890,962
                  )
                  
                  
                  31.7
                  %Other
      Income
                  
                  
                  10,927
                  
                  
                  
                  55,277
                  
                  
                  
                  (80.2
                  )%
                  
                  
                  28,622
                  
                  
                  
                  209,320
                  
                  
                  
                  (86.3
                  )%Income
      tax benefit
                  
                  
                  675,517
                  
                  
                  
                  449,263
                  
                  
                  
                  50.4
                  %
                  
                  
                  1,901,639
                  
                  
                  
                  1,318,167
                  
                  
                  
                  44.3
                  %Net
      Loss
                  
                  $
                  (1,136,489
                  )
                  
                  $
                  (910,900
                  )
                  
                  
                  24.8
                  %
                  
                  $
                  (3,194,874
                  )
                  
                  $
                  (2,363,475
                  )
                  
                  
                  35.2
                  %




45




Revenue




We are
currently in the exploration stage of our business, and have not earned any
revenues from our planned mineral operations to date. We did not generate any
revenues from inception in 2000 through the nine months period ended September
30, 2009. We do not anticipate earning revenues from our planned mineral
operations until such time as we enter into commercial production of the
Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties
we may acquire from time to time, and of which there are no
assurances.




Operating
Expenses




The major
components of our operating expenses are outlined in the table
below:




ThreeMonthsEndedSeptember30,
                  
                  
                  NineMonthsEndedSeptember30,2009
                  
                  
                  2008
                  
                  
                  Percent
                    Increase/
                    (Decrease)
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  Percent
                    Increase/
                    (Decrease)Mineral
      exploration and evaluation expenses
                  
                  $
                  626,450
                  
                  
                  $
                  392,323
                  
                  
                  
                  59.7
                  %
                  
                  $
                  1,471,047
                  
                  
                  $
                  841,231
                  
                  
                  
                  74.9
                  %Mineral
      exploration and evaluation expenses – related party
                  
                  
                  60,000
                  
                  
                  
                  90,000
                  
                  
                  
                  (33.3
                  )%
                  
                  
                  240,000
                  
                  
                  
                  270,000
                  
                  
                  
                  (11.1
                  )%Administrative
      – Clarkdale site
                  
                  
                  168,212
                  
                  
                  
                  310,822
                  
                  
                  
                  (45.9
                  )%
                  
                  
                  527,442
                  
                  
                  
                  818,730
                  
                  
                  
                  (35.6
                  )%General
      and administrative
                  
                  
                  759,839
                  
                  
                  
                  573,302
                  
                  
                  
                  32.5
                  %
                  
                  
                  2,219,779
                  
                  
                  
                  1,854,331
                  
                  
                  
                  19.7
                  %General
      and administrative – related party
                  
                  
                  22,407
                  
                  
                  
                  33,335
                  
                  
                  
                  (32.8
                  )%
                  
                  
                  112,226
                  
                  
                  
                  60,460
                  
                  
                  
                  85.6
                  %Depreciation
                  
                  
                  186,025
                  
                  
                  
                  15,658
                  
                  
                  
                  1,088.1
                  %
                  
                  
                  554,641
                  
                  
                  
                  46,210
                  
                  
                  
                  1,100.3
                  %Total
      Operating Expenses
                  
                  $
                  1,822,933
                  
                  
                  $
                  1,415,440
                  
                  
                  
                  28.8
                  %
                  
                  $
                  5,125,135
                  
                  
                  $
                  3,890,962
                  
                  
                  
                  31.7
                  %




Nine month
periods ended September 30, 2009 and 2008. Operating expenses increased
by 31.7% to $5,125,135 during the nine month period ended September 30, 2009
from $3,890,962 during the nine month period ended September 30, 2008. Operating
expense increased during the nine month period ended September 30, 2009 compared
to the corresponding period in 2008 primarily as a result of increases in
general and administrative expenses, increase in depreciation expense, and
mineral exploration and evaluation expenses.




General
and administrative expenses increased by 19.7% to $2,219,779 during the nine
month period ended September 30, 2009 from $1,854,331 during the nine month
period ended September 30, 2008. General and administrative expenses increased
primarily as a result of (i) increased professional and administrative expenses
associated with the preparation of our 2008 annual report on Form 10-K, the
preparation of our registration statement on Form S-1, preparation of amended
periodic reports for the periods from March 31, 2005 through December 31, 2008,
and legal and accounting fees; and (ii) increased director compensation due to
expansion of our board of directors. We anticipate operating expenses to
continue to increase as we grow our business operations.




Included
in general and administrative expenses for the nine month period ended September
30, 2009 and 2008 were compensation expenses related to the option vesting and
option grants of $85,563 and $859, respectively.




On April
30, 2007, we adopted our 2007 Stock Option Plan (the “2007 Plan”). Under the
terms of the 2007 Plan, as amended May 8, 2007, options to purchase up to
4,000,000 shares of common stock may be granted to our employees, officers,
directors, and eligible consultants under such plan. On June 15, 2007, our
stockholders approved the 2007 Plan. As of September 30, 2009, 331,183 options
have been granted under the 2007 Plan with an exercise price ranging from $1.45
to $2.74 per share.




46




On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Award
Plan for Employees and Service Providers (the “2009 Incentive Plan”). Under the
terms of the 2009 Incentive Plan, options to purchase up to 3,250,000 shares of
our common stock may be granted to eligible Participants. The 2009 Incentive
Plan is subject to stockholder approval at the next annual stockholder’s
meeting. Until stockholder approval is obtained, options will be granted under
the 2007 Plan.




On
October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Plan
for Directors (“2009 Directors Plan”). Under the terms of the 2009 Directors
Plan, options to purchase up to 750,000 shares of our common stock with no
participant receiving more then 250,000 shares during any calendar year. The
2009 Directors Plan is subject to stockholder approval at the next annual
stockholder’s meeting. Until stockholder approval is obtained, options will be
granted under the 2007 Plan.


In
addition, we incurred $112,226 and $60,460 during the nine month periods ended
September 30, 2009 and 2008, respectively, for general and administrative
expenses for accounting support services to Cupit, Milligan, Ogden &
Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial Officer.
These expenses increased during the nine month period ended September 30, 2009
as compared to 2008 as a result of Cupit, Milligan, Ogden & Williams
providing staff support related to the preparation of our registration statement
on Form S-1, preparation of amended periodic reports for the periods from March
31, 2005 through December 31, 2008, and the completion of the first time filing
of the Arizona Business Personal Property Statement. These accounting support
services included bookkeeping input for the Clarkdale facility, assistance in
preparing working papers for quarterly and annual reporting, and preparation of
federal and state tax filings. These expenses do not include any fees for Mr.
Williams’ time in directly supervising the support staff. Mr. Williams’
compensation has been provided in the form of salary. The direct benefit to Mr.
Williams was $35,912 and $16,289 of the above Cupit, Milligan, Ogden &
Williams fees for the nine months ended September 30, 2009 and 2008,
respectively.




Mineral
exploration and evaluation expenses increased to $1,471,047 during the nine
month period ended September 30, 2009 from $841,231 during the nine month period
ended September 30, 2008. Mineral exploration and evaluation expenses increased
primarily as a result of increased testing activity subsequent to receiving of
Certificate of Occupancy for the demonstration module building.




In
addition, we incurred $240,000 and $270,000 during the nine month period ended
September 30, 2009 and 2008, respectively, for mineral exploration and
evaluation expenses to Nanominerals Corp. (one of our principal stockholders and
an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a
director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a
director) for technical assistance, including providing us with the use of its
laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentation to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.




Depreciation
expense increased to $554,641 during the nine month period ended September 30,
2009 from $46,210 during the nine month period ended September 30, 2008.
Depreciation expense increased primarily because a substantial portion of
property and equipment that was previously reported as construction in progress
was placed in service during the nine month period ended September 30,
2009.




For the
nine month period ended September 30, 2009, we purchased services from one major
vendor, Baker & Hostetler LLP, our legal counsel, which exceeded more than
10% of total purchases and amounted to approximately $958,962. For the nine
month period ended September 30, 2008, we purchased services from two major
vendors, Talson Corporation and Cimetta Engineering, which exceeded more than
10% of total purchases and amounted to approximately $1,650,126 and $1,013,258,
respectively.




47




Three month
periods ended September 30, 2009 and 2008. Operating expenses increased
by 28.8% to $1,822,933 during the three month period ended September 30, 2009
from $1,415,440 during the three month period ended September 30, 2008.
Operating expense increased during the three month period ended September 30,
2009 compared to the corresponding period in 2008 primarily as a result of
increases in general and administrative expenses, increase in depreciation
expense, and mineral exploration and evaluation expenses.




General
and administrative expenses increased by 32.5% to $759,839 during the three
month period ended September 30, 2009 from $573,302 during the three month
period ended September 30, 2009. General and administrative expenses increased
primarily as a result of increased professional and administrative expenses
associated with the preparation of our registration statement on Form S-1, and
preparation of amended periodic reports for the periods from March 31, 2005
through December 31, 2008, and legal and accounting fees. We anticipate
operating expenses to continue to increase as we grow our business
operations.




In
addition, we incurred $22,407 and $33,335 during the three month periods ended
September 30, 2009 and 2008, respectively, for general and administrative
expenses for accounting support services to Cupit, Milligan, Ogden &
Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial Officer.
These expenses decreased during the three month period ended September 30, 2009
as compared to 2008 as a result of Cupit, Milligan, Ogden & Williams
providing staff support related to the preparation of our registration statement
on Form S-1. These accounting support services included bookkeeping input for
the Clarkdale facility, assistance in preparing working papers for quarterly and
annual reporting, and preparation of federal and state tax filings. These
expenses do not include any fees for Mr. Williams’ time in directly supervising
the support staff. Mr. Williams’ compensation has been provided in the form of
salary. The direct benefit to Mr. Williams was $7,170 and $9,000 of the above
Cupit, Milligan, Ogden & Williams fees for the three months ended September
30, 2009 and 2008, respectively.




Mineral
exploration and evaluation expenses increased to $626,450 during the three month
period ended September 30, 2009 from $392,323 during the three month period
ended September 30, 2008. Mineral exploration and evaluation expenses increased
primarily as a result of increased testing activity subsequent to receiving of
Certificate of Occupancy for the demonstration module building.




In
addition, we incurred $60,000 and $90,000 during the three month period ended
September 30, 2009 and 2008, respectively, for mineral exploration and
evaluation expenses to Nanominerals Corp. (one of our principal stockholders and
an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a
director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a
director) for technical assistance, including providing us with the use of its
laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentation to potential investors in connection with the exploration, testing
and construction our mineral projects, and reimbursement of expenses provided by
Nanominerals in connection with the exploration, testing and construction of our
mineral projects.




Depreciation
expense increased to $186,025 during the three month period ended September 30,
2009 from $15,658 during the three month period ended September 30, 2008.
Depreciation expense increased primarily because of depreciation of property and
equipment that was placed in service after September 30, 2008.




48


Other
Income and Expenses




Nine month
periods ended September 30, 2009 and 2008. Total other income decreased
to $28,622 during the nine month period ended September 30, 2009 from $209,320
during the nine month period ended September 30, 2008. The decrease in total
other income primarily resulted from a decrease in interest and dividend income.
The decrease in interest and dividend income earned was attributable to lower
interest rates and lower cash reserves earning interest.




During
the nine month period ended September 30, 2009, we received incidental rental
revenue of $20,400 compared to $24,780 for the same period in 2008 from rentals
of our commercial buildings and certain facilities acquired in connection with
our acquisition of Transylvania. The property leases consist of: (i) a rental
agreement with Clarkdale Arizona Central Railroad for the use of certain
facilities at a rate of $1,700 per month; and (ii) rental of a commercial
building space to various tenants. The rental arrangements are on a month to
month basis with no formal agreements.




Three month
periods ended September 30, 2009 and 2008. Total other income decreased
to $10,927 during the three month period ended September 30, 2009 from $55,277
during the three month period ended September 30, 2008. The decrease in total
other income primarily resulted from a decrease in interest and dividend income.
The decrease in interest and dividend income earned resulted from most cash
reserves earning zero or low interest rates.




During
the three month period ended September 30, 2009, we received incidental rental
revenue of $6,295 compared to $7,740 for the same period in 2008 from rentals of
our commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania.




Income
Tax Benefit




Nine month
periods ended September 30, 2009 and 2008. Income tax benefit increased
to $1,901,639 for the nine months period ended September 30, 2009 from
$1,318,167 during the nine month period ended September 30, 2008. The increase
in income tax benefit primarily resulted from the increase in exploration stage
losses during the nine month period ended September 30, 2009 from the nine month
period ended September 30, 2008.




Three month
periods ended September 30, 2009 and 2008. Income tax benefit increased
to $675,517 for the three months period ended September 30, 2009 from $449,263
during the three month period ended September 30, 2008. The increase in income
tax benefit primarily resulted from the increase in exploration stage losses
during the three month period ended September 30, 2009 from the three month
period ended September 30, 2008.




Net
Loss




Nine month
periods ended September 30, 2009 and 2008. The aforementioned factors
resulted in a net loss of $3,194,874, or $0.03 per common share, for the nine
month period ended September 30, 2009, as compared to a net loss of $2,363,475,
or $0.02 per common share, for the nine month period ended September 30,
2008.




Three month
periods ended September 30, 2009 and 2008. The aforementioned factors
resulted in a net loss of $1,136,489, or $0.01 per common share, for the three
month period ended September 30, 2009, as compared to a net loss of $910,900, or
$0.01 per common share, for the three month period ended September 30,
2008.




As of
September 30, 2009 and December 31, 2008, we had cumulative net operating loss
carryforwards of approximately $17,152,547 and $12,483,860, respectively for
federal income taxes. The federal net operating loss carryforwards expire
between 2025 and 2029.




49




We had
cumulative state net operating losses of approximately $8,821,356 and $5,325,778
as of September 30, 2009 and December 31, 2008, respectively for state income
tax purposes. The state net operating loss carryforwards expire between 2013 and
2015.




Liquidity
and Capital Resources




Historically,
we have financed our operations primarily through the sale of common stock and
other convertible equity securities. During 2008, we conducted the following
private placements of our securities:




·
            On
      February 7, 2008, we completed two concurrent private placement offerings
      for gross proceeds of $5,250,000 to non-US persons and to US accredited
      investors. A total of 3,281,250 units were issued at a price of $1.60 per
      unit. Each unit sold consisted of one share of our common stock and
      one-half of one share common stock purchase warrants. Each whole share
      purchase warrant entitles the holder to purchase one additional share of
      our common stock at a price of $2.40 per share for a period of two years
      from the date of issuance. A total of 80,000 shares of our common stock
      were issued as commission to agents in connection with these
      offerings.




·
            On
      January 30, 2008, we received gross proceeds of $2,528,500 and issued an
      aggregate of 3,890,000 shares of our common stock on the exercise of
      warrants we issued in January, 2006. Each warrant entitled the holder to
      purchase one share of our common stock at a price of $0.65 per share on or
      before January 18, 2008. The warrant holders delivered their notices of
      exercise, and paid the exercise price of $0.65 per share, prior to the
      January 18, 2008 expiration date.




These
agreements do not include contractual penalty provisions for failure to comply
with these registration rights provisions. Further, we are not a party to any
other agreements which require us to pay liquidated damages in the future for
failure to register securities for sale.




Working
Capital




The
following is a summary of our working capital at September 30, 2009 and December
31, 2008:




AtSeptember30,
                  2009
                
                
                AtDecember31,
                  2008
                
                
                Percent
                  Increase/(Decrease)Current
      Assets
                
                $
                1,191,217
                
                
                $
                7,307,005
                
                
                
                (83.7
                )%Current
      Liabilities
                
                
                (1,051,932
                )
                
                
                (1,421,075
                )
                
                
                (26.0
                )%Working
      Capital
                
                $
                139,285
                
                
                $
                5,885,930
                
                
                
                (97.6
                )%




As of
September 30, 2009, we had an accumulated deficit of $16,551,356. As of
September 30, 2009, we had working capital of $139,285, compared to working
capital of $5,885,930 as of December 31, 2008. The decrease in our working
capital was primarily attributable to our net loss and capital expenditures
partially offset by issuance of our common stock from exercise of stock options
in 2009. Cash was $1,077,606 as of September 30, 2009, as compared to $7,055,591
as of December 31, 2008. Property and equipment increased to $14,028,442 as of
September 30, 2009 from $13,132,282 as of December 31, 2008. The increase
primarily resulted from site improvements and equipment acquisitions at the
Clarkdale Slag Project partially offset by depreciation expense.




Included
in long term liabilities in the accompanying consolidated financials statements
is a balance of $48,553,722 for deferred tax liability relating to the Clarkdale
Slag Project and Searchlight Gold Project. A deferred income tax liability was
recorded on the excess of fair market value for the asset acquired over income
tax basis at a combined statutory federal and state rate of 38% with the
corresponding increase in the purchase price allocation of the assets
acquired.




50




Cash
Flows




The
following is a summary of our sources and uses of cash for the periods set forth
below:




NineMonthsEndedSeptember30,2009
                
                
                2008
                
                
                Percent
                  Increase/(Decrease)Cash
      Flows Used in Operating Activities
                
                $
                (4,544,023
                )
                
                $
                (3,792,830
                )
                
                
                19.8
                %Cash
      Flows Used in Investing Activities
                
                
                (1,446,443
                )
                
                
                (6,018,052
                )
                
                
                (76.0
                )%Cash
      Flows Provided by Financing Activities
                
                
                12,481
                
                
                
                7,612,840
                
                
                
                (99.8
                )%Net
      Change in Cash During Period
                
                $
                (5,977,985
                )
                
                $
                (2,198,042
                )
                
                
                172.0
                %




Net cash used in
operating activities. Net cash used in operating activities increased to
$4,544,023 during the nine month period ended September 30, 2009 from $3,792,830
during the nine month period ended September 30, 2008. The increase in cash used
in operating activities was primarily due to operating losses from our
exploration and evaluation activity and general and administrative expenses,
offset by non-cash elements which were primarily related to change in deferred
tax liability of $1,901,639.




Net cash used in
investing activities. We used $1,446,443 in investing activities during
the nine month period ended September 30, 2009, as compared to $6,018,052 during
the nine month period ended September 30, 2008. The decrease in the nine month
period ended September 30, 2009 was primarily a result of decrease in purchases
of property and equipment relating to the Clarkdale Slag Project which decreased
primarily as a result of receiving of Certificate of Occupancy for the
demonstration module building and substantial completion of equipment
acquisitions for the demonstration module.




Net cash provided
by financing activities. Net cash provided by financing activities was
$12,481 for the nine month period ended September 30, 2009 compared to
$7,612,840 for the nine month period ended September 30, 2008. Net cash provided
by financing activities during the nine month period ended September 30, 2009
primarily resulted from the receipt of $175,000 from the exercise of stock
options offset by principal payments on the capital lease and the deferred
purchase liability. Net cash provided by financing activities during the nine
month period ended September 30, 2008 primarily resulted from the receipt of
$5,250,000 from the proceeds of private placements of our securities and
$2,528,500 from the exercise of warrants offset by principal payments on the
capital lease and the deferred purchase liability.




We have
not attained profitable operations and are dependent upon obtaining financing to
pursue our plan of operation. Our ability to achieve and maintain profitability
and positive cash flow will be dependent upon, among other things:




51




·
            our
      ability to locate a profitable mineral
property;




·
            positive
      results from our feasibility studies on the Searchlight Gold Project and
      the Clarkdale Slag Project;




·
            positive
      results from the operation of our initial test module on the Clarkdale
      Slag Project; and




·
            our
      ability to generate revenues.




We may
not generate sufficient revenues from our proposed business plan in the future
to achieve profitable operations. If we are not able to achieve profitable
operations at some point in the future, we eventually may have insufficient
working capital to maintain our operations as we presently intend to conduct
them or to fund our expansion plans. In addition, our losses may increase in the
future as we expand our business plan. These losses, among other things, have
had and will continue to have an adverse effect on our working capital, total
assets and stockholders’ equity. If we are unable to achieve profitability, the
market value of our common stock will decline and there would be a material
adverse effect on our financial condition.




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the exploration of the Searchlight Gold
Project. Over the next twelve months, our management anticipates that the
minimum cash requirements for funding our proposed exploration, testing and
construction program and our continued operations will be approximately
$9,000,000.




On
November 12, 2009, we completed a private placement of 12,078,596 units of our
securities of our securities to certain investors, including Nanominerals Corp.,
one of our principal stockholders and an affiliate of certain of our officers
and directors, at a purchase price of $1.25 per unit, resulting in aggregate
gross proceeds to us of $15,098,245. Each unit consists of one share of our
common stock and one half share of common stock purchase warrant. Based on the
number of units sold, we issued 12,078,596 shares of common stock and warrants
to purchase up to 6,039,298 additional shares of common stock. In connection
with the private placement, Nanominerals purchased 400,000 units of securities
at an aggregate purchase price of $500,000. We paid commissions to agents in
connection with the private placement in the amount of approximately $1,056,877
and warrants to purchase up to 301,965 shares of common stock. Dahlman Rose
& Company, LLC served as sole placement agent for the private placement,
along with a syndicate that included RK Equity Capital Markets. The
warrants have an expiration date of November 12, 2012 and an exercise price of
$1.85 per share. Under certain specified circumstances, the warrants may be
exercised by means of a “cashless exercise.” The warrants have customary
anti-dilution provisions, including, without limitation, provisions for the
adjustment to the exercise price based on certain stock dividends, stock splits
and issuances of equity securities (including the issuance of debt convertible
into equity) by us, subject to certain exempt issuances which will not result in
an adjustment to the exercise price. The securities were issued in reliance on
exemptions from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended (and Rule 506 of Regulation D thereunder.




Under the
transaction documents, we are restricted from, among other things, (i) issuing
any shares of common stock, subject to certain exempt issuances, until the
initial registration statement we agreed to file in connection with the private
placement is declared effective by the U.S. Securities and Exchange Commission,
but in no event will this restriction expire prior to 90 days following the
closing of the private placement, (ii) entering into certain “variable rate
transactions,” as such term is defined in the purchase agreement, or (iii)
effecting any forward or reverse stock splits for a period of six months after
the closing without the prior written consent of a majority of the
purchasers.




52




We have
agreed to file a registration statement covering the resale of the shares of
common stock issued to purchasers in the private placement, including the shares
of common stock issuable upon exercise of the warrants and the shares of common
stock issuable upon the exercise of the warrants issued to agents as commissions
in theprivate
placement. If, among other things, (i) we fail to file the initial registration
statement within the prescribed period or (ii) any registration statement that
we file is not declared effective within 120 calendar days of the required
filing date, we have agreed to pay to each purchaser, as partial liquidated
damages, an amount in cash equal to 1% of the aggregate purchase price paid by
each such purchaser for any shares of common stock that have not then been
registered for every 30 days following any required filing date and, on a pro
rata basis, for every 30 days following the 120 day period within which any
registration statement was to be declared effective. The maximum aggregate
liquidated damages payable to a purchaser will not exceed 3% of the aggregate
purchase price paid by such purchaser.




Based on
the net proceeds received by us from the private placement, we estimate that our
current financial resources are sufficient to allow us to meet the anticipated
costs of our exploration, testing and construction programs for the 2010 fiscal
year. However, if actual costs are greater than we have anticipated, we will
require additional financing in order to fund our exploration testing and
construction plans for 2010. We do not currently have any financing arrangements
in place for such additional financing, and there are no assurances that we will
be able to obtain additional financing in an amount sufficient to meet our needs
or on terms that are acceptable to us.




Further,
on November 12, 2009, immediately prior to the closing of the private placement
described above, we made several material amendments to certain of our
outstanding common stock purchase warrants. The warrants that were amended were
issued in connection with our February 23, 2007, March 22, 2007, December 26,
2007 and February 7, 2008 private placements. In connection with these private
placements, we issued warrants to purchase up to an aggregate of 7,042,387
shares of common stock. Prior to the amendments, these warrants expired at
various times between December 26, 2009 and March 1, 2010 and had an exercise
price of $2.40 per share. We have amended the terms of these warrants as
follows:




·
            the
      expiration date of these warrants has been extended to November 12, 2012,
      and




·
            the
      exercise price of these warrants has been reduced to $1.85 per
      share.




Our
current twelve month plan also includes anticipated expenditure of approximately
$6,000,000 on Phase II of our Clarkdale Slag Project and $4,700,000 to complete
the construction of an Industrial Collector Road pursuant to an agreement with
the Town of Clarkdale, Arizona by January 2011, subject to funding availability.
We will require additional funding to fulfill our entire anticipated plan of
operations. In addition, the actual costs of completing those activities may be
greater than anticipated.




If the
actual costs are significantly greater than anticipated, if we proceed with our
exploration, testing and construction activities beyond what we currently have
planned, or if we experience unforeseen delays during our activities over the
next twelve months, we will need to obtain additional financing. There are no
assurances that we will be able to obtain additional financing in an amount
sufficient to meet our needs or on terms that are acceptable to us.




Obtaining
additional financing is subject to a number of factors, including the market
prices for the mineral property and base and precious metals. These factors may
make the timing, amount, terms or conditions of additional financing unavailable
to us. If adequate funds are not available or if they are not available on
acceptable terms, our ability to fund our business plan could be significantly
limited and we may be required to suspend our business operations. We cannot
assure you that additional financing will be available on terms favorable to us,
or at all. The failure to obtain such a financing would have a material, adverse
effect on our business, results of operations and financial
condition.




If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of current stockholders will be reduced and
these securities may have rights and preferences superior to that of current
stockholders. If we raise capital through debt financing, we may be forced to
accept restrictions affecting our liquidity, including restrictions on our
ability to incur additional indebtedness or pay dividends.




53




For these
reasons, our financial statements filed herewith include a statement that these
factors raise substantial doubt about our ability to continue as a going
concern. Our ability to continue as a going concern will be dependent on our
raising of additional capital and the success of our business plan.




Off-Balance
Sheet Arrangements




None.




Recent
Accounting Pronouncements




From time
to time, new accounting pronouncements are issued by the FASB that are adopted
by us, as of the specified effective date. Unless otherwise discussed,
management believes that the impact of recently issued standards did not or will
not have a material impact on our consolidated financial statements upon
adoption.




Effective
July 1, 2009, the FASB (Financial Accounting Standards Board) Accounting
Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting
Principles”), became the single source for authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. The ASC does not change U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all
the authoritative literature related to a particular topic in one place.
Effective September 15, 2009, all of our public filings will reference the ASC
as the sole source of authoritative literature.




In April
2009, the FASB issued SFAS No. 165, Subsequent Events(ASC
855-10-05), which provides guidance to establish general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Under ASC
855-10-05, entities are required to disclose the date through which subsequent
events were evaluated, as well as the rationale for why that date was selected.
ASC 855-10-05 is effective for interim or annual financial periods ending after
June 15, 2009, and shall be applied prospectively. The required disclosures of
this statement have been incorporated into our consolidated financial
statements.




Item
3. Quantitative and Qualitative Disclosures About Market Risk




We had
unrestricted cash totaling $1,077,606 at September 30, 2009 and $7,055,591 at
December 31, 2008. Our cash is held primarily in a non-interest bearing checking
accounts and is not materially affected by fluctuations in interest rates. The
unrestricted cash is held for working capital purposes. We do not enter into
investments for trading or speculative purposes. Due to the short-term nature of
these investments, we believe that we do not have any material exposure to
changes in the fair value of our investment portfolio as a result of changes in
interest rates. Declines in interest rates, however, would reduce future
investment income.




Item
4.  Controls and Procedures




Controls
and Procedures




As of
September 30, 2009, we carried out an evaluation, under the supervision and with
the participation of our management, including our chief executive officer and
chief financial officer, of the effectiveness of the design and operation of our
“disclosure controls and procedures,” as such term is defined under Exchange Act
Rules 13a-15(e) and 15d-15(e).




Based on
this evaluation, our chief executive officer and chief financial officer
concluded that, as of September 30, 2009, such disclosure controls and
procedures were effective to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC, and accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure.




54




In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.




Changes
in Internal Control Over Financial Reporting




There
were no changes in our internal controls over financial reporting during the
quarter ended September 30, 2009 that materially affected, or are reasonably
likely to materially affect, our internal controls over financial
reporting.




PART
II - OTHER INFORMATION




Item
1.  Legal Proceedings




From time
to time, we are a party to claims and legal proceedings arising in the ordinary
course of business. Our management evaluates our exposure to these claims and
proceedings individually and in the aggregate and provides for potential losses
on such litigation if the amount of the loss is determinable and the loss is
probable.




We
believe that there are no material litigation matters at the current time.
Although the results of such litigation matters and claims cannot be predicted
with certainty, we believe that the final outcome of such claims and proceedings
will not have a material adverse impact on our financial position, liquidity, or
results of operations.




Item
1A.  Risk Factors




In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in the section entitled “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2008, which to our
knowledge have not materially changed. Those risks, which could materially
affect our business, financial condition or future results, are not the only
risks we face. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.




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




On July
29, 2009, we issued 100,000 shares of common stock upon the exercise of stock
options at an exercise price of $0.25 per share.  These securities
were issued pursuant to Section 4(2) of the Securities Act.




On
September 30, 2009, we issued 9,980 shares of our common stock and options to
purchase up to 9,980 shares of common stock to our non-management
directors.  These shares and options were issued pursuant to the
director compensation policy for our non-management directors based on a price
of $1.82 per share with respect to the 9,980 shares, and an exercise price of
$1.82 per share with respect to the 9,980 stock options, each being the closing
price of our common stock on September 30, 2009, the last trading day of the
third quarter of 2009.  These securities were issued pursuant to
Section 4(2) of the Securities Act.




Item
3.  Defaults Upon Senior Securities




None.




55




Item
4.   Submission of Matters to a Vote of Security Holders




No
matters were submitted to our stockholders, through the solicitation of proxies
or otherwise, during the quarter ended September 30, 2009.




Item
5.  Other Information




Not
applicable.




56


Item
6.  Exhibits




EXHIBIT TABLE


The
following is a complete list of exhibits filed as part of the Quarterly Report
on Form 10-Q, some of which are incorporated herein by reference from the
reports, registration statements and other filings of the issuer with the
Securities and Exchange Commission, as referenced below:





Reference
                  Number
                
                Item31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232
                
                Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002




57




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.




SEARCHLIGHT
      MINERALS CORP.
              a
      Nevada corporationDate:
      November 13, 2009
            By:
            /s/ Ian R.
      McNeilIan
      R. McNeilPresident
      and Chief Executive Officer
              (Principal
      Executive Officer)Date:
      November 13, 2009
            By:
            /s/Melvin L.
      WilliamsMelvin
      L. WilliamsChief
      Financial Officer
              (Principal
      Accounting Officer)




58