UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  Amendment
No. 1
 TO
 Form
10-Q
 ON
 Form
10-Q/A
  x
              Quarterly
      report pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the
quarterly period ended September 30, 2008
  o
              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.
  Yesx     Noo
  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 o
                Accelerated
      filer xNon-accelerated
      filer o
                Smaller
      reporting company o
 (Do not
check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  Yes  o         No  x
 
 As of
July 6, 2009, the registrant had 106,468,637 outstanding shares of common
stock.
  
 EXPLANATORY
NOTE
  On
November 8, 2007, the management of Searchlight Minerals
Corp.  (“Searchlight”, the “Company”, or as used in the context of
“we”, “us” or “our”) concluded that our audited financial statements for the
years ended December 31, 2006 and 2005, and our unaudited interim financial
statements for the periods ended March 31, 2005 through June 30, 2007 needed to
be restated and should not be relied upon.
  On May
5, 2008, our management concluded that our audited financial statements for the
year ended December 31, 2007, and our unaudited interim financial statements for
the period ended September 30, 2007 needed to be restated and should not be
relied upon.
  This
Amendment No. 1 (the “Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the
nine months ended September 30, 2008 (the “2008 Third Quarter 10-Q”) is being
filed with the Securities and Exchange Commission (the “SEC”) to update the
presentation of comparative financial periods from prior periods which have been
restated as discussed in our amended filings for the periods ended March 31,
2005 through December 31, 2007 and the period from January 14, 2000 (date of
inception) through December 31, 2007.
  This
amendment also reflects a reclassification of certain immaterial items in the
financial statements for the period ended September 30, 2008 and the nine month
period then ended, including the reclassifications of accounting fees from
general and administrative expense to general and administrative expense -
related party.
   In
addition, we are concurrently filing Reports on Form 10-K/A to amend and restate
our financial statements for the annual periods in fiscal years 2005 through
2006 and our consolidated financial statements for the annual periods in fiscal
year 2007 and Reports on Form 10-Q/A to amend and restate our financial
statements for the quarterly periods ended March 31, 2005 through September 30,
2005, March 31, 2006 through September 30, 2006, and our consolidated financial
statements for the quarterly periods ended March 31, 2007 through September 30,
2007.
  We
have restated certain items on our balance sheets and statements of
operations.  On our balance sheets: (i) mineral properties have been
restated to include the market value of certain shares issued by us under the
terms of our option agreements for the mineral claims making up the Searchlight
Gold Project; and (ii) the Clarkdale Slag Project has been restated to include
revision of acquisition costs related to issuance of warrants, consideration of
certain terms with respect to future payments that should have been recorded as
contingent consideration and related deferred future income tax liability in
connection with our acquisition of Transylvania International,
Inc.  (“Transylvania”).  Our statements of operations have
been restated to reclassify net losses prior to January 1, 2005 as losses from
discontinued operations.  Our statement of operations for the year
ended December 31, 2006 has been restated to reclassify foreign currency
translation adjustments to general and administrative
expense.  Related to this issue, our balance sheet for the period
ended December 31, 2006 has been restated to reclassify accumulated other
comprehensive loss as accumulated deficit during the exploration
stage.
  Searchlight
Claims - We initially valued the total transaction based on actual costs
incurred by the former owner of $87,134, plus $40,000, represented by $2,000 per
claim, for a total acquisition price of $127,134.  The Searchlight
Gold Project mineral properties have been restated in the financial statements
to reflect payments made by issuance of 1,400,000 shares at $0.35 on July 7,
2005, 1,400,000 shares at $2.20 on July 27, 2006 and 1,400,000 shares at $3.22
on June 29, 2007 at the market values on the dates of issuance.  The
impact of this restatement had the following impact on our balance sheets for
the periods ended September 30, 2005 through December 31, 2006 and our
consolidated balance sheets for the periods ended March 31, 2007 through
December 31, 2007:
 
 ·
                increasing
      the mineral property by $450,000 for the shares issued and by $242,308 for
      the deferred future income tax liability assumed for a total increase of
      $692,308 for the periods ended September 30, 2005, December 31, 2005,
      March 31, 2006 and June 30,
2006.
  
 
 ·
                cumulative
      increase to the mineral asset by $3,530,000 for the shares issued and by
      $1,774,156 for the deferred future income tax liability assumed for a
      total increase of $5,304,156 for the periods ended September 30, 2006,
      December 31, 2006 and March 31,
2007.
 
 ·
                cumulative
      increase to the mineral asset by $8,038,000 for the shares issued and by
      $4,537,124 for the deferred future income tax liability assumed for a
      total increase of $12,575,124 for the period ended June 30,
      2007.
 
 ·
                increasing
      the mineral asset by $450,000 for the shares issued on July 7, 2005 and by
      $242,308 for the related deferred tax liability assumed and by $385,846
      for the recomputation of deferred tax liability as a result of the
      Clarkdale Slag Project restatement for a total increase of $1,078,154 for
      the period ended September 30,
2007.
  ·
                increasing
      the mineral asset by $1,182,594 for the recomputation of the deferred tax
      liability as a result of the Clarkdale Slag Project restatement for the
      period ended December 31, 2007.
  Joint
Venture Agreement – During the second quarter of 2008, we also determined that
the accounting treatment for the 12,000,000 warrants issued to Nanominerals
Corp.  (“Nanominerals”) and its designates in connection with the
assignment of the option for the Clarkdale Slag Project approved on June 1, 2005
was not appropriate.  We have assigned a value to the warrants of
$1,310,204 by using the sales price of shares of common stock issued in
connection with a private placement conducted at the time the warrants were
issued.  The adjustment also included the deferred future income tax
liability assumed of $608,277 for a total increase in purchase consideration of
$1,918,481.  Nanominerals is one of our principal stockholders, and is
an affiliate of two members of our executive management and board of directors,
Ian R. McNeil and Carl S. Ager.
  The
value of the warrants, as restated, was computed using the binomial lattice
method based on the following assumptions:
  Dividend
      yield
                          
                          
                          —Expected
      volatility
                          
                          
                          79
                          %Risk-free
      interest rate
                          
                          
                          3.91
                          %Expected
      life (years)
                          
                          
                          9.6
  This
restatement had the effect of increasing the joint venture and merger option
agreements by $1,918,481 on our balance sheets for the periods ended September
30, 2005, December 31, 2005, March 31, 2006, June 30, 2006, September 30, 2006
and December 31, 2006.
  Clarkdale
Slag Project – On February 15, 2007, we entered into an agreement and plan of
merger with Transylvania. Pursuant to the agreement Transylvania merged with and
into our wholly owned subsidiary, Clarkdale Minerals LLC. This agreement
superseded the original Clarkdale Slag Project option assignment. During the
second quarter of 2008, we identified certain errors in our previously issued
financial statements related to our purchase accounting treatment of the
acquisition of Transylvania, and the resultant computation of future deferred
income tax liability assumed.  We have restated certain items on our
consolidated balance sheets and statements of operations as
follows:
  ·
                amounts
      recorded for the Clarkdale Slag Project on our consolidated balance sheets
      have been restated to reflect changes to the purchase accounting of the
      acquisition of Transylvania based on the acquisition agreement and the
      recomputation of the value of the 12,000,000 warrants issued to
      Nanominerals Corp., and its designates in connection with the assignment
      of the option for the Clarkdale Slag Project.  The amount
      recorded for the Clarkdale Slag Project was also affected by the
      recomputation of the deferred future federal and state income tax
      liability in connection with our acquisition of the Clarkdale Slag
      Project.
  
  ·
                amounts
      recorded for the Searchlight Gold Project on our consolidated balance
      sheets have been restated to include the impact of the recomputation of
      the deferred future income tax liability and state income tax
      liability.  This recomputation was required because changes made
      to the acquisition accounting of the Clarkdale Slag Project affected the
      computation of the deferred future income tax liability related to the
      mineral claims making up the Searchlight Gold
  Project.
  ·
                our
      consolidated statement of operations for each of the periods ended March
      31, 2007, June 30, 2007, September 30, 2007 and December 31, 2007 has been
      restated to reflect the recomputation of the tax benefits related to net
      operating losses as a result of changes to the purchase accounting for the
      Clarkdale Slag Project.  There was no other impact on the
      results of operations.
  ·
                our
      consolidated statement of operations for the three months ended March 31,
      2007 has been restated to reclassify related party mineral exploration and
      evaluation expense not stated separately in previous
      reports.  There was no change to the underlying expense or
      results of operations as previously
  reported.
  During
the second quarter of 2008, we determined that the acquisition accounting method
used in prior periods to record the purchase accounting for the Clarkdale Slag
Project was not appropriate for the 2007 acquisition of
Transylvania.  The adjustments included revision of the acquisition
accounting related to payment terms and conditions contained in the acquisition
agreement.  The overall recorded acquisition purchase consideration
was reduced by $7,546,217 with a corresponding reduction in recorded liabilities
of $7,546,217.  The recorded liabilities were adjusted, as
follows:
  ·
                the
      recorded current portion (relating to the $30,000 monthly obligation due
      to VRIC) decreased on the balance sheet by
  $227,174.
  ·
                the
      recorded long-term portion (relating to the $30,000 monthly obligation due
      to VRIC) decreased on the balance sheet by
  $919,043.
  ·
                the
      payment due to VRIC (with respect to the date that a feasibility study
      relating to the Clarkdale Slag Project establishes that the project is
      economically viable and “bankable,” or the “Project Funding Date”)
      decreased on the balance sheet by
  $6,400,000.
  We
have accounted for the payments based on the Project Funding Date and the
payments based on future cash flow as contingent consideration.  If
the contingency requirements are met, the purchase price of the Clarkdale Slag
Project will be adjusted accordingly at that time.
  The
restatement had the following impact on our balance sheets for the periods ended
March 31, 2007 through December 31, 2007:
 
 ·
                increasing
      the acquisition cost of the Slag Project by $1,918,481 for the warrants
      issued in connection with the option assignment and by $14,925,422 for the
      deferred tax liability assumed and decreasing the acquisition cost by
      $7,546,217 for the contingent payment terms for a total increase of
      $9,297,686 for the periods ended March 31, 2007 and June 30,
      2007.
 
 ·
                increasing
      the acquisition cost of the Slag Project by $1,918,481 for the warrants
      issued in connection with the option assignment and by $10,801,018 for the
      deferred tax liability assumed and decreasing the acquisition cost by
      $7,546,217 for the contingent payment terms for a total increase of
      $5,173,282 for the period ended September 30,
  2007.
 
 ·
                increasing
      the acquisition cost of the Slag Project by $1,918,481 for the warrants
      issued in connection with the option assignment and decreasing the
      acquisition cost by $4,121,755 for the deferred tax liability assumed and
      by $7,546,217 for the contingent payment terms for a total decrease of
      $9,749,491 for the period ended December 31,
  2007.
  
  The
original terms of the underlying purchase agreement were unchanged and this
adjustment had no effect on the acquisition agreement.
  Discontinued
Operations - The statements of operations from the date of inception through the
periods ended March 31, 2005, June 30, 2005, September 30, 2005, December 31,
2005, March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006
and the consolidated statements of operations from the date of inception through
the periods ended March 31, 2007, June 30, 2007, September 30, 2007, December
31, 2007 have been restated to reclassify net losses prior to January 1, 2005 as
discontinued operations.  On February 10, 2005, we announced that we
were changing our business from biotechnology to becoming a mineral exploration
company, dedicated to the discovery and exploration of gold and other precious
metal deposits.  Activity between January 1 and February 10, 2005
consisted of minor general and administrative expenses and as a result was not
included in loss from discontinued operations.
  Foreign
Currency Translation Reclassification - The statement of operations for the year
ended December 31, 2006, has been restated to reclassify foreign currency
translation adjustment as general and administrative expense.  Foreign
currency translation adjustment was related to translation of accounts payable
assumed as part of our change of business in 2005.  This restatement
had the impact of increasing net loss and eliminating other comprehensive loss
for the year ended December 31, 2006 by $11,769.  Related to the same
issue, the balance sheet at December 31, 2006 has been restated to reclassify
accumulated other comprehensive loss as accumulated deficit during exploration
stage.  These restatements had the impact of eliminating accumulated
other comprehensive loss and increasing accumulated deficit during exploration
stage at December 31, 2006 by $121,606.
  The
restatements had no impact on our cash or cash flows.
  This
Form 10-Q/A sets forth the 2008 Third Quarter Form 10-Q in its
entirety.  This Form 10-Q/A includes items that have been changed as a
result of the restatements made in our 2005 First Quarter Form 10-QSB through
the 2007 Annual Report on Form 10-KSB, and the items that are unchanged from the
2005 First Quarter Form 10-QSB through the 2007 Annual Report on Form
10-KSB.  This Form 10-Q/A also includes revisions and additional
disclosures in response to comments from the SEC’s staff included in a series of
comment letters from the staff to us with respect to our currently pending
Registration Statement on Form S-/1/A (File No. 333-132929).
  Other
than the amending of the disclosures relating to the restatements made to our
2005 First Quarter Form 10-QSB through the 2007 Annual Report on Form 10-KSB,
and responding to the staff’s comments, no other material modifications or
updates have been made to the 2008 Third Quarter Form
10-Q.  Information not affected by items described above remains
unchanged and reflects the disclosures made at the time of, and as of the dates
described in, the 2008 ThirdQuarter Form
10-Q.  This Form 10-Q/A does not describe events occurring after the
2008 Third Quarter Form 10-Q (including with respect to exhibits), or modify or
update disclosures (including forward-looking statements) which may have been
affected by events or changes in facts occurring after the date of the 2008
ThirdQuarter Form
10-Q.  Accordingly, this Form 10-Q/A should be read in its historical
context and in conjunction with our filings made with the SEC subsequent to the
filing of the 2008 ThirdQuarter Form 10-Q, as
information in such filings may update or supersede certain information
contained in this Form 10-Q/A.
  Item 6
of Part II of this Form 10-Q/A has been amended to contain the currently-dated
certifications from our principal executive officer and principal financial
officer, as required by Section 302 and 906 of the Sarbanes-Oxley Act of
2002.
  
  TABLE OF
CONTENTS
  PART
      I – FINANCIAL INFORMATION
              7Item
      1. Financial Statements
              7Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              35Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
              55Item
      4.  Controls and Procedures
              56PART
      II - OTHER INFORMATION
              59Item
      1.  Legal Proceedings
              59Item
      1A.  Risk Factors
              59Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
              59Item
      3.  Defaults Upon Senior Securities
              59Item
      4.  Submission of Matters to a Vote of Security
      Holders
              59Item
      5.  Other Information
              59Item
      6.  Exhibits
              60SIGNATURES
              61
  
  PART
I – FINANCIAL INFORMATION
   Item
1. Financial Statements




SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)





September 30, 2008
                          
                          
                          December 31, 2007ASSETSCurrent
      assetsCash
      and cash equivalents
                          
                          $
                          9,809,302
                          
                          
                          $
                          12,007,344Prepaid
      expenses
                          
                          
                          254,272
                          
                          
                          
                          192,789Total
      current assets
                          
                          
                          10,063,574
                          
                          
                          
                          12,200,133Property
      and equipment, net
                          
                          
                          11,377,569
                          
                          
                          
                          5,064,460Mineral
      properties
                          
                          
                          16,947,419
                          
                          
                          
                          12,702,258Slag
      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
                          
                          
                          103,100
                          
                          
                          
                          183,000Total
      non-current assets
                          
                          
                          158,411,115
                          
                          
                          
                          147,932,745Total
      assets
                          
                          $
                          168,474,689
                          
                          
                          $
                          160,132,878LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                          
                          $
                          900,494
                          
                          
                          $
                          849,910Accounts
      payable - related party
                          
                          
                          65,526
                          
                          
                          
                          41,974VRIC
      payable, current portion - related party
                          
                          
                          190,912
                          
                          
                          
                          179,830Capital
      lease payable, current portion
                          
                          
                          23,761
                          
                          
                          
                          22,983Total
      current liabilities
                          
                          
                          1,180,693
                          
                          
                          
                          1,094,697Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                          
                          
                          2,008,928
                          
                          
                          
                          2,153,530Capital
      lease payable, net of current portion
                          
                          
                          46,399
                          
                          
                          
                          64,317Deferred
      tax liability
                          
                          
                          50,914,652
                          
                          
                          
                          50,619,658Total
      long-term liabilities
                          
                          
                          52,969,979
                          
                          
                          
                          52,837,505Total
      liabilities
                          
                          
                          54,150,672
                          
                          
                          
                          53,932,202Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 shares authorized, 105,847,345 and
      96,865,391 shares, respectively, issued and
outstanding
                          
                          
                          105,847
                          
                          
                          
                          96,865Additional
      paid-in capital
                          
                          
                          126,809,741
                          
                          
                          
                          116,223,907Common
      stock subscribed
                          
                          
                          -
                          
                          
                          
                          108,000Accumulated
      deficit during exploration stage
                          
                          
                          (12,591,571
                          )
                          
                          
                          (10,228,096
                          )Total
      stockholders' equity
                          
                          
                          114,324,017
                          
                          
                          
                          106,200,676Total
      liabilities and stockholders' equity
                          
                          $
                          168,474,689
                          
                          
                          $
                          160,132,878





See
Accompanying Notes to these Consolidated Financial Statements





7





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, 2008
                  
                  
                  September 30, 2007
                  
                  
                  September 30, 2008
                  
                  
                  September 30, 2007
                  
                  
                  September 30, 2008Revenue
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Operating
      expensesMineral
      exploration and evaluation expenses
                  
                  
                  392,323
                  
                  
                  
                  199,961
                  
                  
                  
                  841,231
                  
                  
                  
                  810,539
                  
                  
                  
                  4,902,941Mineral
      exploration and evaluation expenses - related party
                  
                  
                  90,000
                  
                  
                  
                  90,000
                  
                  
                  
                  270,000
                  
                  
                  
                  270,000
                  
                  
                  
                  1,125,000Administrative
      - Clarkdale site
                  
                  
                  310,822
                  
                  
                  
                  -
                  
                  
                  
                  818,730
                  
                  
                  
                  -
                  
                  
                  
                  1,332,489General
      and administrative
                  
                  
                  573,302
                  
                  
                  
                  471,209
                  
                  
                  
                  1,854,331
                  
                  
                  
                  1,374,668
                  
                  
                  
                  5,455,021General
      and administrative - related party
                  
                  
                  33,335
                  
                  
                  
                  23,017
                  
                  
                  
                  60,460
                  
                  
                  
                  23,017
                  
                  
                  
                  92,881Depreciation
                  
                  
                  15,658
                  
                  
                  
                  11,710
                  
                  
                  
                  46,210
                  
                  
                  
                  25,952
                  
                  
                  
                  91,220Total
      operating expenses
                  
                  
                  1,415,440
                  
                  
                  
                  795,897
                  
                  
                  
                  3,890,962
                  
                  
                  
                  2,504,176
                  
                  
                  
                  12,999,552Loss
      from operations
                  
                  
                  (1,415,440
                  )
                  
                  
                  (795,897
                  )
                  
                  
                  (3,890,962
                  )
                  
                  
                  (2,504,176
                  )
                  
                  
                  (12,999,552
                  )Other
      income (expense):Rental
      revenue
                  
                  
                  7,740
                  
                  
                  
                  8,515
                  
                  
                  
                  24,780
                  
                  
                  
                  28,095
                  
                  
                  
                  61,190Loss
      on equipment disposition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,526
                  )Interest
      expense
                  
                  
                  (832
                  )
                  
                  
                  (1,049
                  )
                  
                  
                  (2,669
                  )
                  
                  
                  (1,049
                  )
                  
                  
                  (4,731
                  )Interest
      and dividend income
                  
                  
                  48,369
                  
                  
                  
                  94,580
                  
                  
                  
                  187,209
                  
                  
                  
                  246,320
                  
                  
                  
                  578,572Total
      other income (expense)
                  
                  
                  55,277
                  
                  
                  
                  102,046
                  
                  
                  
                  209,320
                  
                  
                  
                  273,366
                  
                  
                  
                  569,315Loss
      before income taxes
                  
                  
                  (1,360,163
                  )
                  
                  
                  (693,851
                  )
                  
                  
                  (3,681,642
                  )
                  
                  
                  (2,230,810
                  )
                  
                  
                  (12,369,047
                  )Income
      tax benefit
                  
                  
                  449,263
                  
                  
                  
                  270,094
                  
                  
                  
                  1,318,167
                  
                  
                  
                  810,282
                  
                  
                  
                  3,920,644Loss
      from continuing operations
                  
                  
                  (910,900
                  )
                  
                  
                  (423,757
                  )
                  
                  
                  (2,363,475
                  )
                  
                  
                  (1,420,528
                  )
                  
                  
                  (8,448,403
                  )Discontinued
      operations:Loss
      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,143,168
                  )Net
      loss
                  
                  $
                  (910,900
                  )
                  
                  $
                  (423,757
                  )
                  
                  $
                  (2,363,475
                  )
                  
                  $
                  (1,420,528
                  )
                  
                  $
                  (12,591,571
                  )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.005
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.02
                  )Loss
      from discontinued operations
                  
                  
                  0.00
                  
                  
                  
                  0.00
                  
                  
                  
                  0.00
                  
                  
                  
                  0.00Net
      loss
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.005
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.02
                  )Weighted
      average common shares outstanding -Basic
      and diluted
                  
                  
                  105,766,452
                  
                  
                  
                  93,003,914
                  
                  
                  
                  103,831,592
                  
                  
                  
                  84,427,516





See
Accompanying Notes to these Consolidated Financial Statements




8




SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


(UNAUDITED)





AccumulatedCommon
                
                
                Deficit During
                
                
                TotalCommon Stock
                
                
                Additional
                
                
                Stock
                
                
                Exploration
                
                
                Stockholders'Shares
                
                
                Amount
                
                
                Paid-in Capital
                
                
                Subscribed
                
                
                Stage
                
                
                EquityBalance,
      December 31, 2007
                
                
                96,865,391
                
                
                $
                96,865
                
                
                $
                116,223,907
                
                
                $
                108,000
                
                
                $
                (10,228,096
                )
                
                $
                106,200,676Issuance
      of common stock for cash, $0.65 per share from exercise of
      warrants
                
                
                3,890,000
                
                
                
                3,890
                
                
                
                2,524,610
                
                
                
                (65,000
                )
                
                
                -
                
                
                
                2,463,500Issuance
      of common stock for cash Reg. S - Private Placement, $1.60 per
      share
                
                
                1,637,500
                
                
                
                1,638
                
                
                
                2,618,362
                
                
                
                -
                
                
                
                -
                
                
                
                2,620,000Issuance
      of common stock for cash Reg. D - Private Placement, $1.60 per
      share
                
                
                1,643,750
                
                
                
                1,644
                
                
                
                2,628,356
                
                
                
                -
                
                
                
                -
                
                
                
                2,630,000Issuance
      of common stock as commission in connection with foreign
      offering
                
                
                80,000
                
                
                
                80
                
                
                
                (80
                )
                
                
                -
                
                
                
                -
                
                
                
                -Amortization
      of stock options issued to officer over vesting period
                
                
                -
                
                
                
                -
                
                
                
                859
                
                
                
                -
                
                
                
                -
                
                
                
                859Issuance
      of common stock for cash, $0.25 per share exercise of nonemployee stock
      options
                
                
                200,000
                
                
                
                200
                
                
                
                49,800
                
                
                
                (25,000
                )
                
                
                -
                
                
                
                25,000Issuance
      of common stock for directors' compensation
                
                
                11,768
                
                
                
                11
                
                
                
                35,989
                
                
                
                (18,000
                )
                
                
                -
                
                
                
                18,000Issuance
      of common stock for mining claims
                
                
                1,400,000
                
                
                
                1,400
                
                
                
                2,630,600
                
                
                
                -
                
                
                
                -
                
                
                
                2,632,000Effect
      of modification of stock options issued to an employee
                
                
                -
                
                
                
                -
                
                
                
                36,457
                
                
                
                -
                
                
                
                -
                
                
                
                36,457Common
      stock subscribed for directors' compensation
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                18,000
                
                
                
                -
                
                
                
                18,000Issuance
      of common stock for cash, $0.25 per share from exercise of nonemployee
      stock options
                
                
                100,000
                
                
                
                100
                
                
                
                24,900
                
                
                
                -
                
                
                
                -
                
                
                
                25,000Issuance
      of common stock for directors' compensation
                
                
                18,936
                
                
                
                19
                
                
                
                35,981
                
                
                
                (18,000
                )
                
                
                -
                
                
                
                18,000Net
      loss September 30, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,363,475
                )
                
                
                (2,363,475
                )Balance,
      September 30, 2008
                
                
                105,847,345
                
                
                $
                105,847
                
                
                $
                126,809,741
                
                
                $
                -
                
                
                $
                (12,591,571
                )
                
                $
                114,324,017




See
Accompanying Notes to these Consolidated Financial Statements




9





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, 2008
                
                
                September 30, 2007
                
                
                September 30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (2,363,475
                )
                
                $
                (1,420,528
                )
                
                $
                (12,591,571
                )Deduct:
      Loss from discontinued operations
                
                
                -
                
                
                
                -
                
                
                
                (4,143,168
                )Loss
      from continuing operations
                
                
                (2,363,475
                )
                
                
                (1,420,528
                )
                
                
                (8,448,403
                )Adjustments
      to reconcile loss from operating  to net cash used in operating
      activities:Depreciation
                
                
                46,210
                
                
                
                25,946
                
                
                
                91,220Stock
      based expenses
                
                
                91,316
                
                
                
                162,415
                
                
                
                1,049,479Loss
      on disposition of fixed assets
                
                
                -
                
                
                
                -
                
                
                
                5,875Amortization
      of prepaid expense
                
                
                131,235
                
                
                
                26,453
                
                
                
                301,648Allowance
      for bond deposit recovery
                
                
                180,500
                
                
                
                -
                
                
                
                180,500Changes
      in operating assets and liabilities:Other
      current assets
                
                
                (179,960
                )
                
                
                (225,606
                )
                
                
                (543,162
                )Other
      assets
                
                
                (100,600
                )
                
                
                -
                
                
                
                (283,600
                )Accounts
      payable and accrued liabilities
                
                
                (279,889
                )
                
                
                (360,319
                )
                
                
                (113,563
                )Deferred
      income taxes
                
                
                (1,318,167
                )
                
                
                (810,282
                )
                
                
                (3,920,644
                )Net
      cash used in operating activities
                
                
                (3,792,830
                )
                
                
                (2,601,921
                )
                
                
                (11,680,650
                )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
                )
                
                
                (9,900,000
                )Cash
      paid for additional acquisition costs
                
                
                -
                
                
                
                (130,105
                )
                
                
                (130,105
                )Capitalized
      interest
                
                
                (136,480
                )
                
                
                (114,934
                )
                
                
                (298,653
                )Purchase
      of property and equipment
                
                
                (5,881,572
                )
                
                
                (3,016,149
                )
                
                
                (10,078,954
                )Net
      cash used in investing activities
                
                
                (6,018,052
                )
                
                
                (13,161,188
                )
                
                
                (21,384,846
                )Net
      cash used in investing activities from discontinued
      operations
                
                
                -
                
                
                
                -
                
                
                
                (452,618
                )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                
                
                7,763,500
                
                
                
                21,713,817
                
                
                
                43,539,501Stock
      issuance costs
                
                
                -
                
                
                
                (677,570
                )
                
                
                (677,570
                )Principal
      payments on capital lease payable
                
                
                (17,140
                )
                
                
                (23,351
                )
                
                
                (46,079
                )Principal
      payments on deferred purchase liability
                
                
                (133,520
                )
                
                
                (125,066
                )
                
                
                (301,348
                )Proceeds
      from subscribed stock
                
                
                -
                
                
                
                25,000
                
                
                
                360,000Net
      cash provided by financing activities
                
                
                7,612,840
                
                
                
                20,912,830
                
                
                
                42,874,504Net
      cash provided by financing activities from discontinued
      operations
                
                
                -
                
                
                
                -
                
                
                
                3,384,236NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                
                
                (2,198,042
                )
                
                
                5,149,721
                
                
                
                9,809,302CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                
                
                12,007,344
                
                
                
                3,684,248
                
                
                
                -CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                9,809,302
                
                
                $
                8,833,969
                
                
                $
                9,809,302




See
Accompanying Notes to these Consolidated Financial Statements




10




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, 2008
                    
                    
                    September 30, 2007
                    
                    
                    September 30, 2008CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      Paid, net of capitalized amounts
                    
                    $
                    2,669
                    
                    
                    $
                    1,049
                    
                    
                    $
                    55,482Income
      Taxes Paid
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing and financing activities: Capital equipment purchased through
      accounts payable and financing
                    
                    $
                    341,267
                    
                    
                    $
                    116,239
                    
                    
                    $
                    785,957Assets
      acquired for common stock issued for the acquisition
                    
                    $
                    -
                    
                    
                    $
                    66,879,375
                    
                    
                    $
                    66,879,375Assets
      acquired for common stock issued for mineral
properties
                    
                    $
                    2,632,000
                    
                    
                    $
                    4,508,000
                    
                    
                    $
                    10,710,000Assets
      acquired for liabilities incurred in the acquisition
                    
                    $
                    -
                    
                    
                    $
                    2,628,188
                    
                    
                    $
                    2,628,188Net
      deferred tax liability assumed
                    
                    $
                    1,613,161
                    
                    
                    $
                    50,839,702
                    
                    
                    $
                    55,197,465Merger
      option payment applied to the acquisition
                    
                    $
                    -
                    
                    
                    $
                    200,000
                    
                    
                    $
                    200,000Reclassify
      joint venture option agreement to slag project
                    
                    $
                    -
                    
                    
                    $
                    690,000
                    
                    
                    $
                    690,000Warrants
      issued in connection with joint venture option agreement 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 of  accounts payable, 200,000 shares at
      $0.625
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    125,000




See
Accompanying Notes to these Consolidated Financial Statements




11


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-KSB for the year ended
December 31, 2007 of Searchlight Minerals Corp. (the
“Company”).





The
interim financial statements present the balance sheets, statements of
operations 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 the notes thereto for the year ended December 31,
2007.





Description of
business – Searchlight Minerals Corp. is an exploration stage company 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 identification 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.




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.





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)





Going concern - The
Company incurred cumulative net losses of $12,591,571 as of September 30, 2008
and has not commenced its mining and mineral processing operations, rather, we
are 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.





Reclassifications –
Certain amounts in the financial statements have been reclassified to conform to
current period presentation.





The
Company reclassified from general and administrative expense to general and
administrative expense – related party $7,160 related to related party
accounting fees for the period from January 14, 2000 (date of inception) through
September 30, 2008.





The
Company believes this reclassification is appropriate and is in accordance with
Regulation S-X, rule 5-03 – Income Statements.  There was no effect on the
consolidated financial statements for the periods ended September 30, 2008 and
2007 and the period from January 14, 2000 (date of inception) through September
30, 2008 as a result of this reclassification.





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 - The
Company capitalizes acquisition and option costs of mineral property
rights.  The amount capitalized represents fair value of the mineral
rights acquired.





The
Company capitalizes acquisition and option costs of mineral rights as tangible
assets in accordance with Emerging Issues Task Force abstract 04-02 (“EITF
04-02”), “Whether Mineral Rights are Tangible or Intangible Assets and Related
Issues”.  Upon commencement of commercial production, the mineral
rights will be amortized using the unit-of-production method over the life of
the mineral rights.  If the Company does not continue with exploration
after the completion of the feasibility study, the mineral rights will be
expensed at that time. 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. The
periodic evaluation of carrying value of capitalized costs and any related
property and equipment costs are based upon expected future cash flows and/or
estimated salvage value in accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, “Accounting for Impairment or Disposal of Long-Lived
Assets.”





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)





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 $136,480 and
$114,934 for the periods ended September 30, 2008 and 2007,
respectively.





Exploration costs –
Mineral exploration costs are expensed as incurred.





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.





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 SFAS
No. 144 if events or circumstances indicate that their carrying amount might not
be recoverable.  As of September 30, 2008 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 a SFAS 144
impairment analysis should be done, the analysis will be performed using the
rules of EITF 04-03, “Mining Assets: Impairment and Business
Combinations.”




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.





14




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 has adopted Statement of Financial Accounting
Standard No. 143 (“SFAS 143”), “Accounting for Asset Retirement 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 these financial instruments
approximates their fair value based on their liquidity or their short-term
nature.  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 Statement of Financial Accounting Standard
No. 128 (“SFAS 128”), “Earnings Per Share” and Statement of Financial Accounting
Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and 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, 2008 and December 31, 2007 that were not included in the
computation of diluted EPS because the effect would be antidilutive were
23,699,591 and 25,352,205, respectively. In addition, the Company issued 200,000
stock options to new director on October 6, 2008 subject to a four year vesting
schedule, increasing the total antidilutive share to 23,899,591.





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.





15




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)


1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)





Income taxes - The
Company accounts for its income taxes in accordance with the Statement of
Financial Accounting No. 109 (“SFAS 109”), “Accounting for 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.





On July
13, 2006, the Financial Accounting Standards Board (“FASB”) issued Financial
Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – An
Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entity’s financial
statements in accordance with SFAS No. 109, and prescribes a recognition
threshold and measurement attributes for financial statement disclosure of tax
positions taken or expected to be taken on a tax return.  Under FIN
48, the impact of an uncertain income tax position on the income tax return must
be recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than 50% likelihood of being
sustained.  Additionally, FIN 48 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  The Company adopted the provision of FIN
48 on January 1, 2007, which did not have any impact on the consolidated
financial statements.





For
acquired properties that do not constitute a business as defined in Emerging
Issues Task Force Issue No. 98-03 (“EIFT 98-03”), “Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or 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
EITF 98-11 “Accounting for Acquired Temporary Differences in Certain Purchase
Transactions That Are Not Accounted for as Business Combinations” and SFAS 109,
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.





Stock-based
compensation - On December 16, 2004, the FASB issued Statement of
Financial Accounting Standard No. 123R (“SFAS 123R”), “Share-Based
Payment”, which replaces Statement of Financial Accounting Standard No. 123
(“SFAS 123”), “Accounting for Stock-Based Compensation” and supersedes APB
Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R
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. Under SFAS No. 123R, the Company must determine
the appropriate fair value model to be used for valuing share-based payments,
the amortization method for compensation cost and the transition method to be
used at date of adoption. The transition methods include prospective and
retroactive adoption option. Under the retroactive option, prior periods may be
restated either as of the beginning of the year of adoption or for all periods
presented. The prospective method requires that compensation expense be recorded
for all unvested stock options and restricted stock at the beginning of the
first quarter of adoption of SFAS No. 123R, while the retroactive methods would
record compensation expense for all unvested stock options and restricted stock
beginning with the first period restated. The Company adopted the requirements
of SFAS No. 123R for the fiscal year beginning after December 31,
2004.





16




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)


1.
            DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)





New accounting
pronouncements – The FASB issued FASB Staff Position (FSP) FAS 157-3,
“Determining the Fair Value of a Financial Asset When the Market for that Asset
Is Not Active”. The FSP clarifies the application of FASB Statement No. 157,
“Fair Value Measurements”, in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. The FSP
is effective October 10, 2008, and for prior periods for which financial
statements have not been issued. Revisions resulting from a change in the
valuation technique or its application should be accounted for as a change in
accounting estimate following the guidance in FASB Statement No. 154,
“Accounting Changes and Error Corrections”. However, the disclosure provisions
in Statement 154 for a change in accounting estimate are not required for
revisions resulting from a change in valuation techniques or its application.
The Company has determined that the adoption of this statement will have little
or no effect on the Company’s consolidated financial position, results of
operations, and disclosures.





In May
2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting
Principles”. This statement is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements of nongovernmental
entities that are presented in conformity with GAAP. This statement will be
effective 60 days following the U.S. Securities and Exchange Commission’s
approval of the Public Company Accounting Oversight Board amendment to AU
Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.”  The Company is currently evaluating
the potential impact, if any, of the adoption of SFAS 162 on its consolidated
financial statements.





On March
19, 2008, the FASB issued Statement of Financial Accounting Standard No. 161
(“SFAS 161”), “Disclosures about Derivative Instruments and Hedging
Activities.”  This statement is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures. This statement is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The Company is currently evaluating the
impact that SFAS 161 will have on the consolidated financial
statements.




In
February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of
FASB Statement No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delayed the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).  The provisions
of FSP FAS 157-2 are effective for the Company's fiscal year beginning January
1, 2009.  SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The Company is currently evaluating
the potential impact of adopting this statement on the Company's consolidated
financial position, results of operations or cash flows.





In
December 2007, the FASB issued Statement of Financial Accounting Standard
No. 141(R) (“SFAS 141(R)”), “Business Combinations,” which amends
SFAS No. 141, and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. SFAS 141(R) is effective
for the Company’s fiscal year beginning January 1, 2009 and is to be
applied prospectively. The Company is currently evaluating the potential impact
of adopting this statement on the Company’s consolidated financial position,
results of operations or cash flows.





In
December 2007, the FASB issued Statement of Financial Accounting Standard
 No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated
Financial Statements - an amendment of ARB No. 51” which establishes
accounting and reporting standards pertaining to ownership interests in
subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent’s ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. SFAS 160 also
establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 is effective for the Company’s fiscal year beginning
January 1, 2009. The Company is currently evaluating the potential impact
of adopting this statement on the Company’s consolidated financial position,
results of operations or cash flows.





17




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)


1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)





In
September 2007, the FASB published Proposed FASB Staff Position (“FSP”) No.
APB 14-a, “Accounting for Convertible Debt Instruments That May Be Settled
in Cash upon Conversion.” The proposed FSP applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under SFAS 133. Convertible debt instruments within the scope of the
proposed FSP are not addressed by the existing APB 14. The proposed FSP
would require that the liability and equity components of convertible debt
instruments within the scope of the proposed FSP shall be separately accounted
for in a manner that reflects the entity’s nonconvertible debt borrowing rate.
This will require an allocation of the convertible debt proceeds between the
liability component and the embedded conversion option (i.e., the equity
component). The difference between the principal amount of the debt and the
amount of the proceeds allocated to the liability component would be reported as
a debt discount and subsequently amortized to earnings over the instrument’s
expected life using the effective interest method.  FSP No. APB 14-a
is effective for the Company’s fiscal year beginning January 1, 2009 and early
adoption is not permitted. The Company is currently evaluating the impact that
Proposed FSP may have on the consolidated financial statements of the
Company.





In
February 2007, the FASB issued Statement of Financial Accounting Standard
No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and
Financial Liabilities - Including an amendment of FASB Statement
No. 115”, which permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. SFAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. SFAS 159 does not affect any
existing accounting literature that requires certain assets and liabilities to
be carried at fair value, nor eliminate disclosure requirements included in
other accounting standards, including requirements for disclosures about fair
value measurements included in Statement of Financial Accounting Standard
No. 157 (“SFAS 157”), “Fair Value Measurements,” and
SFAS 107.  SFAS 159 is effective for our fiscal year
beginning after November 15, 2007. The
Company has adopted SFAS 159 as of January 1, 2008. There was no impact on our
consolidated financial position, results of operations or cash
flows.





18




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)


2.
            PROPERTY AND
      EQUIPMENT





Property
and equipment consisted of the following as of September 30, 2008 and December
31, 2007:





September
      30,
                        2008
                      
                      
                      December
      31,
                        2007Furniture
      and fixtures
                      
                      $
                      35,813
                      
                      
                      $
                      34,694Lab
      equipment
                      
                      
                      2,804
                      
                      
                      
                      2,804Computers
      and equipment
                      
                      
                      49,266
                      
                      
                      
                      32,594Income
      property
                      
                      
                      309,750
                      
                      
                      
                      309,750Construction
      in progress
                      
                      
                      10,584,464
                      
                      
                      
                      4,408,796Capitalized
      interest
                      
                      
                      298,653
                      
                      
                      
                      162,173Vehicles
                      
                      
                      38,175
                      
                      
                      
                      38,175Site
      equipment
                      
                      
                      148,586
                      
                      
                      
                      119,20311,467,511
                      
                      
                      
                      5,108,189Less
      accumulated depreciation
                      
                      
                      89,942
                      
                      
                      
                      43,729$
                      11,377,569
                      
                      
                      $
                      5,064,460





Depreciation
expense was $46,210 and $25,946 for the nine months ended September 30, 2008 and
2007, respectively.





3.
              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
surviving merger entity.




The
Company applied EITF 98-03 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 EITF 98-03, 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.




19




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)




3.
              CLARKDALE SLAG
      PROJECT (continued)




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 EITF 04-03 paragraph 2 and EITF 98-11, the Company then allocated
the purchase price among the assets as follows (and also further described in
this Note 3 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 were 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 with EITF 04-02. Upon commencement of commercial
production, the material will be amortized using the unit-of-production method
over the life of the Slag Project.




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:





d)
            The
      Company paid $200,000 in cash to VRIC on the execution of the Letter
      Agreement;





e)
            The
      Company paid  $9,900,000 in cash to VRIC on the Closing
      Date;





f)
            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:




g)
            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:




h)
            The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;




i)
            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,




20




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)




3.
            CLARKDALE SLAG
      PROJECT (continued)




j)
            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.




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
                    
                    
                    309,750Net
      assets acquired
                    
                    $
                    130,292,777





21




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)


4.
            MINERAL PROPERTIES -
      MINING CLAIMS





As of
September 30, 2008 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.





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.





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, 2008,
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
mining claims are capitalized as tangible assets in accordance with EITF
04-02.  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.





The
following table summarizes the changes of mineral properties for the nine months
ended September 30, 2008:





Total
      mineral properties balance, December 31, 2007
                      
                      $
                      12,702,258Share
      issuance to obtain mineral properties, June 25, 2008
                      
                      
                      2,632,000Net
      deferred income tax liability assumed
                      
                      
                      1,613,161Total
      mineral properties balance, September 30, 2008
                      
                      $
                      16,947,419




22


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




5.
            CAPITAL LEASE
      PAYABLE




The
Company leases equipment under a capital lease. The Capital lease payable
consisted of the following at September 30, 2008 and December 31,
2007,




Lender
                          Collateral
                          
                          Monthly
                            Payment
                          
                          
                          Interest
                            Rate
                          
                          Maturity
                          
                          September
      30,
                            2008
                          
                          
                          December
      31,2007Caterpillar
      Financial ServicesCorporation
                          Equipment
                          
                          $
                          2,200
                          
                          
                          
                          4.45
                          %
                          Jul-11
                          
                          $
                          70,160
                          
                          
                          $
                          87,30070,160
                          
                          
                          
                          87,300Capital
      lease payable, current portion
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (23,761
                          )
                          
                          
                          (22,983
                          )Capital
      lease payable, net of current portion
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          46,399
                          
                          
                          $
                          64,317




The
following table represents future minimum lease payments on the capital lease
for each of the twelve month periods ending September 30,





2009
                    
                    $
                    26,4012010
                    
                    
                    26,4012011
                    
                    
                    22,0012012
                    
                    
                    —Thereafter
                    
                    
                    —Total
      future minimum lease payments
                    
                    $
                    74,803Imputed
      interest
                    
                    
                    (4,643
                    )Present
      value of future minimum lease payments
                    
                    $
                    70,160





The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at September 30, 2008 and
December 31, 2007,





September 30,
                    2008
                  
                  
                  December 31,
                    2007Site
      Equipment
                  
                  $
                  116,239
                  
                  
                  $
                  116,239Accumulated
      amortization
                  
                  
                  (38,746
                  )
                  
                  
                  (16,952
                  )$
                  77,493
                  
                  
                  $
                  99,287




23




SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





6.
            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,





2009
                  
                  $
                  190,9122010
                  
                  
                  206,7582011
                  
                  
                  223,9192012
                  
                  
                  242,5042013
                  
                  
                  262,631Thereafter
                  
                  
                  1,073,116$
                  2,199,840VRIC
      payable, current portion
                  
                  
                  190,912VRIC
      payable, net of current portion
                  
                  $
                  2,008,928





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 3 and 11.


24


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





7.
            STOCKHOLDERS’
      EQUITY





During
the nine months ended September 30, 2008 the Company’s stockholders’ equity
activity consisted of the following:





a)
            On
      September 30, 2008, the Company awarded and issued 5,142 shares each to
      its two non officer directors pursuant to its directors’ compensation
      policy. The share award was priced at $1.75 and has been recorded as
      directors’ compensation expense of $18,000 and additional paid-in
      capital.





b)
            On
      August 26, 2008, the Company issued 100,000 shares of common stock from
      the exercise of nonemployee 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 22,
2010.





c)
            On
      June 30, 2008, the Company awarded 4,326 shares each to its two non
      officer directors pursuant to its directors’ compensation policy. The
      share award was priced at $2.08 and has been recorded as directors’
      compensation expense of $18,000 and additional paid-in capital. The
      Company issued the shares on September 30,
2008.





d)
            On
      June 25, 2008, the Company issued 1,400,000 million shares to the owners
      of the Searchlight Claims. This issuance is the final of four required
      share payments to complete the acquisition of the mining claims totaling
      5,600,000 million shares.





e)
            On
      June 16, 2008, the Company issued 100,000 shares of common stock from the
      exercise of nonemployee 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 February 10,
2010.





f)
            On
      May 5, 2008, the Company issued 100,000 shares of common stock from the
      exercise of nonemployee stock options resulting in cash proceeds of
      $25,000, which were received on August 16, 2007. 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 February 10,
      2010





g)
            On
      March 31, 2008, the Company awarded 2,670 shares each to its two non
      officer directors pursuant to its directors’ compensation
      policy.  The share award was priced at $3.37 and has been
      recorded as directors’ compensation expense of $18,000 and additional
      paid-in capital. The Company issued the shares on May 15,
      2008.





h)
            On
      February 7, 2008, the Company completed a private placement offering for
      gross proceeds of $2,620,000 to non-US persons in reliance of Regulation S
      promulgated under the Securities Act of 1933. A total of 1,637,500 units
      were issued at a price of $1.60. Each unit sold consisted of one share of
      the Company’s common stock and one-half of one share purchase
      warrants.  Each whole share purchase warrant entitles the holder
      to purchase one additional share of the Company’s 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 the Company’s common stock were issued by the
      Company as commission to agents in connection with the
      offering.


25


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





7.
            STOCKHOLDERS’
      EQUITY (continued)





i)
            On
      February 7, 2008, the Company completed a private placement offering for
      gross proceeds of $2,630,000 to US accredited investors pursuant to Rule
      506 of Regulation D promulgated under the Securities Act of 1933. A total
      of 1,643,750 units were issued at a price of $1.60. Each unit sold
      consisted of one share of the Company’s common stock and one-half of one
      share purchase warrants.  Each whole share purchase warrant
      entitles the holder to purchase one additional share of the Company’s
      common stock at a price of $2.40 per share for a period of two years from
      the date of issuance.  There was no commission paid or payable
      to agents in connection with this
offering.





j)
            On
      January 30, 2008, the Company received gross proceeds of $2,528,500 by
      issuing an aggregate of 3,890,000 shares of its common stock on the
      exercise of warrants issued by the Company in January,
      2006.  Each warrant entitled the holder to purchase one share of
      the Company’s 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
      January 18, 2008 expiration date. A total of 3,690,000 shares were issued
      to US accredited investors as defined in Rule 501 of Regulation D
      promulgated under the Securities Act of 1933.  An additional
      200,000 shares were issued to one non-US person as defined in Regulation S
      of the Securities Act.





8.
            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.





During
the nine months ended September 30, 2008, the Company did not grant any stock
options or any other equity incentive plan awards.




Expenses
for the nine months ended September 30, 2008 and 2007 related to vesting and
granting of stock options were $859 and $144,415, respectively and are included
in general and administrative expense.  The Company recorded $36,457
in stock option modification expense for one employee during the nine months
ended September 30, 2008. No such stock option modifications occurred
before.





Stock
      options–During the nine months ended
      September 30, 2008, the Company did not grant any stock options
      awards.  As of September 30, 2008 stock options outstanding
      totaled 3,352,946 with a weighted average strike price of $0.99 per
      share.


26


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





8.
            STOCK OPTION PLAN AND
      WARRANTS (continued)





On May
30, 2008, the Company extended the term of stock options previously issued to an
employee for 50,000 shares of common stock for an additional 3 years. The
Company accounted for the impact of the amended stock option grant as a stock
option modification under SFAS 123R. As a result of the modification, the
Company recognized $36,457 of additional stock-based compensation expense due to
the increase in the fair market value of this stock option grant that is
recorded in general and administrative expense.





The
following table summarizes the Company’s stock option activity for the nine
months ended September 30, 2008:




Number of
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise PriceBalance,
      December 31, 2007
                    
                    
                    3,652,946
                    
                    
                    $
                    0.93Options
      granted and assumed
                    
                    
                    —
                    
                    
                    
                    —Options
      expired
                    
                    
                    —
                    
                    
                    
                    —Options
      cancelled
                    
                    
                    —
                    
                    
                    
                    —Options
      exercised
                    
                    
                    (300,000
                    )
                    
                    
                    0.25Balance,
      September 30, 2008
                    
                    
                    3,352,946
                    
                    
                    $
                    0.99





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:





2008
                  
                  
                  2007Dividend
      yield
                  
                  
                  —
                  
                  
                  
                  —Expected
      volatility
                  
                  
                  —
                  
                  
                  
                  76.6%Risk-free
      interest rate
                  
                  
                  —
                  
                  
                  2.88%
      to 4.68%Expected
      life (years)
                  
                  
                  —
                  
                  
                  2
      to 4.25





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 estimates expected volatility using a representative peer group average,
because of limited historical equity transactions of the Company.  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.


27


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





8.
            STOCK OPTION PLAN AND
      WARRANTS (continued)





The
following table summarizes the changes of the Company’s stock options subject to
vesting for the nine months ended September 30, 2008:





Number of
                    Shares
                  
                  
                  Weighted Average
                    Grant Date
                    Fair ValueUnvested,
      December 31, 2007
                  
                  
                  50,000
                  
                  
                  $
                  0.21Options
      granted
                  
                  
                  —
                  
                  
                  
                  —Options
      vested
                  
                  
                  (50,000
                  )
                  
                  
                  0.21Options
      cancelled
                  
                  
                  —
                  
                  
                  
                  —Unvested,
      September 30, 2008
                  
                  
                  —
                  
                  
                  $
                  —





As of
September 30, 2008, there were no unvested stock options and as such, there is
no related unrecognized compensation expense.





Stock
options/warrants – During the nine months ended September 30, 2008 the
Company granted stock warrants related to common stock issued through a private
placement totaling 1,640,625 with a strike price of $2.40 per
share.





The value
of the warrants was allocated against additional paid in capital as part of the
overall offering cost of the private placement.





The
value of 12 million warrants issued in 2005 in connection with the Clarkdale
Slag Project option were computed using the Binomial Lattice method were
allocated to the acquisition cost of the project and were computed based on the
following assumptions:





Dividend
      yield
                  
                  
                  —Expected
      volatility
                  
                  
                  79
                  %Risk-free
      interest rate
                  
                  
                  3.91
                  %Expected
      life (years)
                  
                  
                  9.6





The
following table summarizes information about options/warrants granted during the
nine months ended September 30, 2008:





Number of
                    Shares
                  
                  
                  Weighted
                    Average
                    Exercise PriceBalance,
      December 31, 2007
                  
                  
                  24,944,708
                  
                  
                  $
                  1.26Options/warrants
      granted and assumed
                  
                  
                  1,640,625
                  
                  
                  
                  2.40Options/warrants
      expired
                  
                  
                  —
                  
                  
                  
                  —Options/warrants
      cancelled
                  
                  
                  —
                  
                  
                  
                  —Options/warrants
      exercised
                  
                  
                  (4,190,000
                  )
                  
                  
                  (0.62
                  )Balance,
      September 30, 2008
                  
                  
                  22,395,333
                  
                  
                  $
                  1.46


28


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





9.
            PROPERTY RENTAL
      AGREEMENTS AND LEASES





The
      Company, through its subsidiary CML, has the following lease and rental
      agreements as lessor:





Clarkdale Arizona
      Central Railroad – Lease





CML
      has a month-to-month rental agreement with Clarkdale Arizona Central
      Railroad. The rental payment is $1,700 per
  month.





Commercial Building –
      Lease





CML
      rents commercial building space to two tenants. The rental arrangements
      for both tenants stem from expired leases and are month-to-month. Rent
      under these agreements totaled $1,260 per
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)





10.
            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, 2008 and
2007,





September 30,
                      2008
                    
                    
                    September 30,
                      2007Income
      tax benefit per financial statements
                    
                    $
                    (1,399,024
                    )
                    
                    $
                    (847,708
                    )Non-deductible
      and other
                    
                    
                    3,579
                    
                    
                    
                    3,789Change
      in valuation allowance
                    
                    
                    77,278
                    
                    
                    
                    (16,821
                    )Rate
      change
                    
                    
                    —
                    
                    
                    
                    50,458Income
      tax benefit
                    
                    $
                    (1,318,167
                    )
                    
                    $
                    (810,282
                    )





Significant
components of the Company’s net deferred income tax assets and liabilities at
September 30, 2008 and December 31, 2007 were as follows:





September 30,
                      2008
                    
                    
                    December 31,
                      2007Deferred
      income tax assetsNet
      operating loss carryforward
                    
                    $
                    4,282,813
                    
                    
                    $
                    2,964,646Option
      compensation
                    
                    
                    339,142
                    
                    
                    
                    324,962Reclamation
      bond
                    
                    
                    68,590
                    
                    
                    
                    —Gross
      deferred income tax asset
                    
                    
                    4,690,545
                    
                    
                    
                    3,289,608Valuation
      allowance
                    
                    
                    (400,476
                    )
                    
                    
                    (323,198
                    )4,290,069
                    
                    
                    
                    2,966,410Deferred
      income tax liabilitiesProperty,
      plant & equipment
                    
                    
                    7,256
                    
                    
                    
                    1,764Acquisition
      related liabilities
                    
                    
                    55,197,465
                    
                    
                    
                    53,584,304Net
      deferred income tax liability
                    
                    $
                    50,914,652
                    
                    
                    $
                    50,619,658





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, 2008 and December 31, 2007.





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.





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 EITF 98-11 and SFAS 109, 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.


30


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





10.
            INCOME TAXES
      (continued)





The
Company had cumulative net operating losses of approximately $11,270,561 and
$7,801,699 as of September 30, 2008 and December 31, 2007, respectively for
federal income tax purposes. The Company had cumulative state net operating
losses of approximately $3,883,008 and $1,795,792 as of September 30, 2008 and
December 31, 2007, respectively. The net operating loss carryforwards will be
expiring between 2025 and 2028.





As of
January 1, 2007, the Company did not have any unrecognized tax
benefits.  The adoption of FIN 48 did not result in any cumulative
effect adjustment to the January 1, 2007 balance of the Company’s accumulated
deficit.  Upon adoption of FIN 48, the Company did not accrue for
interest and penalties as there were no unrecognized tax benefits.  If
interest and penalties were to be assessed, we would charge interest to interest
expense, and penalties to general and administrative expense.  It is
not anticipated that unrecognized tax benefits would significantly increase or
decrease within 12 months of the reporting date.





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.  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)





11.
            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 for $4,900 per month.





Rental
expense, resulting from this operating lease agreement, approximated $44,100 and
$32,151 for the nine months ended September 30, 2008 and 2007,
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 January 1, 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)





11.
            COMMITMENTS AND
      CONTINGENCIES





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 in any calendar year; 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.


33


SEARCHLIGHT
MINERALS CORP.


(AN
EXPLORATION STAGE ENTERPRISE)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





12.
            CONCENTRATION OF
      CREDIT RISK





Financial
instruments that potentially subject the Company to concentration of credit risk
consist of cash investments.  The Company places its temporary cash
investments in United States Treasury instruments with two financial
institutions.  Cash accounts at these financial institutions are
insured by the Federal Deposit Insurance Corporation for up to $250,000 per
financial institution.





13.
            CONCENTRATION OF
      ACTIVITY





For the
nine months ended September 30, 2008, the Company 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.





14.
            RELATED PARTY
      TRANSACTIONS





During
the nine months ended September 30, 2008, 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, 2008, the Company incurred total fees and
reimbursement of expenses to NMC of $270,000 and $56,942, respectively. At
September 30, 2008, the Company had an outstanding balance due to NMC of
$32,191.





During
the nine months ended September 30, 2008, 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 and reimbursement of expenses to CMOW of $60,330 and
$130, respectively, for the nine months ended September 30, 2008. 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 $16,289 of the
above CMOW fees and expenses for the nine months ended September 30, 2008. At
September 30, 2008, the Company had an outstanding balance due to CMOW of
$33,335.





During
the nine months ended September 30, 2007, the Company incurred total fees and
reimbursement of expenses to CMOW of $21,873 and $1,144, respectively. The
approximate direct benefit to Mr. Williams was $6,905.




34


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
  Certain
statements in this Quarterly Report on Form 10-Q/A, 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-KSB for the year
ended December 31, 2007.
  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, 2008 and
changes in our financial condition from our year ended December 31,
2007.  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-KSB for the year ended December 31, 2007.
  Executive Overview
  We are an exploration stage company
engaged in the acquisition and exploration of mineral properties and slag
reprocessing projects.  Our business is presently focused on our two
mineral projects: (i) 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 ores 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.
  35
  Clarkdale Slag
Project
  Since our acquisition of 100% of the
Clarkdale Slag Project in 2007, we have devoted considerable effort designing
and engineering our first production module, which included finalizing the
production flow sheet, sourcing and purchasing equipment as well as refurbishing
the module building and construction of the electrowinning
building.  During the first three quarters of 2008, we have been
executing our 2008 plan of operation on the Clarkdale Slag Project which
includes the completion and operation of the first production
module.  The module and electrowinning buildings will be used to 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 (see Figure 1 below).  The production module, which
continues to be in the development stage, is expected to process between 100 and
250 tons per day of slag material.
  
  Figure 1. Production Module
Outline
  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 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.
  The electrowinning building, which will
house the copper and zinc electrowinning circuits, is currently under
construction and expected to be completed in the fourth quarter of
2008.  An additional occupancy certificate will be required for the
electrowinning building in order to operate the electrowinning
equipment.  We have received and installed most of the equipment
necessary for the assembly of the production module and any outstanding
equipment has been ordered and is expected to be delivered in the fourth quarter
of 2008.
  36
  We are
now actively engaged in the testing and start-up phase of the
project.  Currently, the installed equipment is being tested, and it
is anticipated that this will be followed by the integration of all major
equipment components, including the grinding, leaching, filtering and extraction
circuits.  Component integration involves the fabrication,
installation and connection of the equipment circuits to each other and to the
buildings’ centralized electrical, plumbing and air-flow
systems.  Testing and start-up of the full production module is
anticipated to commence when systems integration is complete.
  We have faced challenges during the
development of our production module, including delays in receiving large pieces
of equipment from the manufacturers and longer than expected engineering-related
issues due to the complexity of designing an upgrade in
our electrowinning systems.  Consequently, the completion timeline of
the production module has been extended from what was originally
anticipated.  We continue to be encouraged by the progress we have
made in the development of the production module and remain committed to its
completion and operation.
  We anticipate that 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 proves economically viable, we expect to commence construction of a
full-scale production facility where we intend to install subsequent modules in
parallel which would be comparable in technology, scale and cost 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.  We have estimated
the cost of the full-production facility (including a multiple number of
modules) to be approximately $70,000,000.  However, this is only an
estimate.  A more thorough economic analysis of the full-scale
production facility is expected to occur during the feasibility of the initial
production module.
  We have budgeted $9,100,000 for our work
program on the Clarkdale Slag Project over the next twelve months, which
includes assembling and operating the production module, performing the
feasibility study as well as Phase II expansion preparations.  In the
first quarter of 2008, we expended approximately $1,000,000 to immediately
address Phase II long lead-time items such as grading 12 acres of land, drilling
a well and preparing the architecture and engineering drawings for the proposed
full-scale production facility.  A decision on allocating
approximately $6,000,000 of additional funds for the Phase II expansion 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, we will have to scale back or
abandon our proposed operations on the Clarkdale Slag
Project.
  Searchlight Gold
Project
  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.
  37
  The
Searchlight Claim owners had previously obtained a BLM approved Plan of
Operations, which included permission to drill 18 holes on the 3,200 acre
project area and to mine a 36 acre pit on the RR304 claim.  Although
the Plan of Operations was accepted and registered in the name of a 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 “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 on an association
placer mining claim located by Mr. Matheson and his affiliates or their
predecessors.  The BLM had demanded payment of approximately
$2,530,000 for the willful trespass.  On May 12, 2006, after failure
by Mr. Matheson and his affiliates to pay the amount, the BLM issued an order
for “Immediate Suspension of All Activities.”  An appeal of the BLM’s
order with the Interior Board of Land Appeals affirmed the BLM’s decision,
keeping the order for “Immediate Suspension of All Activities” in
effect.  The order effectively covered all projects tied to Mr.
Matheson, including the Searchlight Gold Project Plan of Operations, our planned
drilling operations and our ability to fulfill our plan of operation with
respect to the Searchlight Gold Project.
  In late
December 2007, we were verbally informed by the BLM that if we obtained title to
the claims (without Mr. Matheson as a claim owner) and we applied for a new Plan
of Operations under our name, the BLM would cooperate with us in granting
approval of the new Plan of Operations.  During the second quarter of
2008, the Searchlight Claim owners transferred title to the Searchlight Claims
to us in consideration of our agreement to issue to the Searchlight Claim owners
by June 30, 2008 the balance of the 1,400,000 shares of common stock issuable
under the 2005 agreement pursuant to which we had obtained an option to acquire
the Searchlight Claims.  On June 25, 2008, we issued the balance of
the 1,400,000 shares of common stock to the Searchlight Claim
owners.
  During
the second quarter of 2008, we "double staked" the Searchlight property by
filing, with the BLM and the Clark County Recorder, 142 new and separate
20-acre placer claims overtop of the twenty existing 160-acre
claims.   We believe that "double staking" the property will enhance
our existing claims because "double staking" with 20-acre claims provides a more
secure basis for asserting our claim rights than our 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. If the BLM challenges the validity of the
160-acre claims or we are forced to abandon such claims, we would revert to
the 20-acre claims covering only the 2,840 acres.  At that point, any
regulatory permits that we have applied or may apply for (i.e., drilling,
and mining) would have to be conducted within the related 2,840
acres.  We do not believe that the inability to "double stake" the entire
3,200 acre site will have a material adverse effect on our
operations.
  We have
maintained the twenty prior 160-acre claims to provide us with a basis to
maintain the priority of and defend our existing 160-acre mining
claims.  However, we are subject to the risk that when we, a single entity,
acquire title to association placer claims from an association of prior,
multiple locators, there could be potential problems for us in the future. 
First, the validity of the association of the prior locators could always be
challenged by the BLM if the BLM believed that the association was not properly
assembled or if there were any "dummy locators" (place-holder locators who did
not contribute to the association).  Second, if there were a mineral
discovery on the 160-acre claim following the transfer to us, the claims could
implode to a 20-acre parcel surrounding the point of discovery and potentially
leave the surrounding 140 acres unavailable for re-staking.  Third, the
location of the 20-acre claims may cause an implied abandonment of the older
claims.  Should a problem occur in the future with the 160-acre claims, we
could revert to the 20-acre claims, if necessary.  Also, there are
additional costs to us due to the fact that we have to maintain two sets of
claims.
  In
addition, the BLM has been excluding significant amounts of land in
southern Nevada from mining and development over the past few decades.  The
BLM has designated this excluded land as "environmental concern
areas." Any person that wishes to stake mining claims would not be able to do so
in these affected areas.  However, if a person already owns valid claims
before the land is designated as an environmental concern area, the
claimant would have those claims grandfathered in.  In the case
of the Searchlight Claims, the Searchlight Project has not yet
been designated as an environmental concern area.  If the
BLM decides in the future to designate the Searchlight
Project site as an environmental concern area, and also challenges our
160-acre claims, we would have to rely on our "double staked" claims to
preserve the Searchlight Claims. Although we believe that, in such
event, our "double staked" claims would survive a challenge by the BLM,
there can be no assurances to that effect and the successful challenge of all of
the Searchlight claims would have a material adverse effect on the Searchlight
Project and our operations.
  38
  In the
third quarter of 2008, we submitted a new Plan of Operations to the BLM
substantially similar to the original Plan of Operations, which includes a
request to drill 18 holes on the project area and to mine a 36 acre mining
pit.  On August 27, 2008, the BLM notified us that they had certain
questions and needed some clarifications to the Plan of Operations that we
submitted.  These issues included clarifying the equipment to be used
in the operations, any chemicals that may be used, location of and total amount
of mined material as well as intention of crushed rock that will be hauled
off-site.  The BLM also requested clarification on any differences
between our new Plan of Operations and the one previously obtained by Mr.
Matheson’s affiliate.  The BLM also advised 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.  Hence, the
recovery of the reclamation bond is uncertain and therefore we have established
a full allowance against the reclamation bond with the offsetting expense to
project exploration costs.
  On September 24, 2008, we amended the
Plan of Operations to only include 18 500-foot drill holes on the project area
and removed the 36 acre mining pit from consideration.  We believe
this amendment will help us obtain the desired drilling permits in a more timely
manner.  On October 10, 2008, we received a comment letter from the
BLM regarding the revised Plan of Operations, which included a request to
clarify the exact depth of each drill hole, whether the drill holes will be
cased to prevent internal caving, the length of time each drill hole will remain
open, a revised reclamation cost estimation and a minor revision to one of the
maps.  We addressed these comments and submitted our latest amendment
to the Plan of Operations to the BLM on October 22, 2008 and we are now
currently waiting for their response.  If we obtain the necessary
permission from the BLM, we intend to commence our drilling program in the first
quarter of 2009.  If the BLM has additional questions regarding our
Plan of Operations, we intend to respond to them quickly in order to maintain
our goal of commencing the drilling program in the first quarter of 2009. Should
we be granted permission to drill under the Plan of Operations, we will be
required to post a reclamation bond of approximately $16,000 with the
BLM.
  We have budgeted $1,000,000 to our
twelve month work program for the Searchlight Gold Project.  This
amount is based on approximately $50,000 per month for our testing program and
approximately $400,000 total over the next twelve months for our drilling
program.  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 continue to 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 18-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.
  There
is no regulatory time frame for the BLM to review our Plan of
Operation.  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.  Further, although we are still following through with our
appeal regarding the closing of our Notice of Intent, 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 a new Plan of
Operations.
  39
  Whether we obtain an approved Notice
of Intent or Plan of Operations, our work on the project site will be limited to
the scope within the Notice of Intent or 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  plan of operations for the
Searchlight Gold Project.  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 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.
  Anticipated Cash
Requirements
  Over the next twelve months, our
management anticipates that the minimum cash requirements for funding our
proposed exploration and development program and our continued operations will
be approximately $9,200,000.  At September 30, 2008, we had cash
reserves in the amount of $9,809,302.  Our cash position at September
30, 2008 exceeds our anticipated minimum 12 month budget of $9,200,000 by
approximately $609,302.
  Our current twelve month budget also
includes anticipated expenditure of $6,000,000 on Phase II of our Clarkdale Slag
Project.  Although our current cash position is sufficient to meet our
minimum anticipated costs for our development and exploration activities during
the next twelve months, 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.
  40
  Our estimated cash requirements for the
next twelve months are as follows:
  EXPENSE
              
              COSTAdministrative
      Expenses
              
              $
              2,000,000Legal and Accounting
      Expenses
              
              $
              1,100,000Consulting
      Services
              
              $
              2,000,000SUBTOTAL
              
              $
              5,100,000Clarkdale
      Slag ProjectBuilding
      Rehabilitation
              
              $
              400,000Production Module
      Assembly
              
              $
              1,000,000Production Module
      Operation
              
              $
              1,200,000Feasibility
      Study
              
              $
              500,000SUBTOTAL
              
              $
              3,100,000Searchlight Gold ProjectMetallurgical Testing
      Program
              
              $
              600,000Drilling and Pre-Feasibility
      Program
              
              $
              400,000SUBTOTAL
              
              $
              1,000,000TOTAL
              
              $
              9,200,000
  If the actual costs are significantly
greater than anticipated, if we proceed with our development and exploration
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.
  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.
  41
  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- We capitalize
acquisition and option costs of mineral property rights. The amount capitalized
represents fair value of the mineral rights acquired.
  We
capitalize acquisition and option costs of mineral rights as tangible assets in
accordance with Emerging Issues Task Force abstract 04-02 (“EITF 04-02”),
“Whether Mineral Rights are Tangible or Intangible Assets and Related
Issues”.  Upon commencement of commercial production, the mineral
rights will be amortized using the unit-of-production method over the life of
the mineral rights.  If we do not continue with exploration after the
completion of the feasibility study, the mineral rights will be expensed at that
time.  We evaluate 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. The periodic evaluation of
carrying value of capitalized costs and any related property and equipment costs
based upon expected future cash flows and/or estimated value in accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for
Impairment of Disposal of Long-Lived Assets.”
  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).
  We periodically evaluate whether events
and circumstances have occurred that may warrant revision of the estimated
useful life 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.
  Capitalized interest cost - We
capitalize interest cost related to development and construction of property and
equipment.  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.
  Restatement of 2007 and Prior Financial
Statements
  Overview
  During the second quarter of 2008, we
identified certain errors in our previously issued financial statements related
to our purchase accounting treatment of the acquisition of the Clarkdale Slag
Project and the resultant computation of future deferred income tax liability
assumed.We have
restated certain items on our consolidated balance sheets and statements of
operations as follows:
  ·
                Amounts recorded for the Clarkdale
      Slag Project on our consolidated balance sheets have been restated to
      reflect changes to the purchase accounting of the acquisition of
      Transylvania International, Inc. based on the acquisition agreement and
      the recomputation of the value of the 12,000,000 warrants issued to
      Nanominerals Corp. in connection with the assignment of the option for the
      Clarkdale Slag Project.  The amount recorded for the Clarkdale
      Slag Project was also affected by the recomputation of the deferred future
      federal and state income tax liability in connection with our acquisition
      of the Clarkdale Slag
Project.
  ·
                Amounts recorded for the
      Searchlight Gold Project on our consolidated balance sheets have been
      restated to include the impact of the recomputation of the deferred future
      income tax liability and state income tax liability.  This
      recomputation was required because changes made to the acquisition
      accounting of the Clarkdale Slag Project affected the computation of the
      deferred future income tax liability related to the mineral claims making
      up the Searchlight Gold Project.  Other than the impact of the
      deferred tax computation, there was no change to the purchase accounting
      of the Searchlight Gold
Project.
  ·
                Our consolidated statement of
      operations for the period from inception to December 31, 2007 has been
      restated to reflect the recomputation of the tax benefits related to net
      operating losses as a result of changes to the purchase accounting for the
      Clarkdale Slag Project.  There was no other impact on the
      results of operations.
  ·
                Ourconsolidatedstatement of operations for the
      three monthsand nine months ended September 30, 2007has been restated to reclassify
      related party mineral exploration and evaluation expense not stated
      separately in previous reports.  There was no change to the
      underlying expense or results of operations as previously
      reported.
  The
restatements had no impact on our cash or cash flows.
  42
  Clarkdale Slag
Project
  Acquisition
of Transylvania International, Inc.  During the second quarter
of 2008, we determined that the acquisition accounting method used in prior
periods to record the purchase accounting for the Clarkdale Slag Project was not
appropriate for the 2007 acquisition of Transylvania International,
Inc.
  The adjustments included revision of the
acquisition accounting related to payment terms and conditions contained in the
acquisition agreement.  The overall recorded acquisition purchase
consideration was reduced by $7,546,217 with a corresponding reduction in
recorded liabilities of $7,546,217.  The recorded liabilities were
adjusted, as follows:
  ·
                the recorded current portion
      (relating to the $30,000 monthly obligation due to VRIC) decreased on the
      balance sheet by $227,174
  ·
                the recorded long-term portion
      (relating tothe $30,000 monthly obligation due
      to VRIC) decreased on the balance sheet by
  $919,043
  ·
                the payment due to VRIC (with
      respect to the date that a feasibility study relating to the Clarkdale
      Slag Project proves that the project is economically viable and
      “bankable,” or the “Project Funding Date”) decreased on the balance sheet
      by $6,400,000.
  We have
accounted for the payments based on the Project Funding Date and the payments
based on future cash flow as contingent consideration.  If the
contingency requirements are met, the purchase price of the Clarkdale Slag
Project will be adjusted accordingly at that time.
  The original terms of the underlying
purchase agreement were unchanged and this adjustment had no effect on the
acquisition agreement.
  Warrants
issued in connection with option assignment.  During the second quarter
of 2008, we also determined that the accounting treatment for the 12,000,000
warrants to Nanominerals issued in connection with the originalClarkdale
Slag Project option assignment
made on June 1, 2005 related to the Clarkdale Slag Project was not appropriate
and we have assigned a value to the warrants of $1,310,204 by using the sales
price of shares of common stock issued in connection with aprivateplacement conducted at the time the
warrants were issued.  The adjustment also included the deferred
future income tax liability assumed of $608,277 for a total increase in purchase
consideration of $1,918,481.
  The value
of the warrants, as restated, was computed using the binomial lattice method
based on the following assumptions:
  Dividend
      yield
                --Expected
      volatility
                79%Risk-free
      interest rate
                3.91%Expected
      life (years)
                9.6
  Overall
summary of restated purchase consideration.The following table
reflects the restatement to the recorded purchase consideration for the
Clarkdale Slag Project:
  December
      31, 2007
                  As
      Reported
                
                
                Adjustments
                
                
                December
      31, 2007
                  As
      RestatedPurchase
    price:Cash
    payments
                
                $
                10,100,000
                
                
                $
                -
                
                
                $
                10,100,000Joint venture option acquired in
      2005 for cash
                
                
                690,000
                
                
                
                -
                
                
                
                690,000Warrants issued for joint venture
      option
                
                
                -
                
                
                
                1,918,481
                
                
                
                1,918,481Common stock
      issued
                
                
                66,879,375
                
                
                
                -
                
                
                
                66,879,375Monthly payments, current
      portion
                
                
                395,001
                
                
                
                (227,174
                )
                
                
                167,827Monthly payments, long-term
      portion
                
                
                3,252,403
                
                
                
                (919,043
                )
                
                
                2,333,360Due to VRIC
                
                
                6,400,000
                
                
                
                (6,400,000
                )
                
                
                -Acquisition
      costs
                
                
                127,000
                
                
                
                -
                
                
                
                127,000Total purchase
      price
                
                
                87,843,779
                
                
                
                (5,627,736
                )
                
                
                82,216,043Net
      deferred income tax liability assumed - slag project
                
                
                52,198,489
                
                
                
                (4,121,755
                )
                
                
                48,076,734$
                140,042,268
                
                
                $
                (9,749,491
                )
                
                $
                130,292,777
  43
  As a result of the revisions in recorded
acquisition purchase consideration, the total deferred future income tax
liability assumed for the acquisition of the Clarkdale Slag Project decreased by
$4,121,755.
  In
accordance with Emerging Issues Task Force Issue 98-11 “Accounting for Acquired
Temporary Differences in Certain Purchase Transactions That Are Not Accounted
for as Business Combinations” (EITF 98-11), the purchase price of $130 million
was allocated to the assets acquired and liabilities assumed, based on their
respective fair values at the date of acquisition.  The purchase price
allocated 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) and the fair value of the
remaining assets acquired and liabilities assumed were based on management’s
best estimates taking into account all available information at the
time.
  The following table reflects the
restated components of the Clarkdale Slag Project:
  December
      31, 2007
                  As
      Reported
                
                
                Adjustments
                
                
                December
      31, 2007
                  As
      RestatedAllocation of acquisition
      cost:Slag project (including net
      deferred tax liability assumed of $48,076,734)
                
                $
                130,516,368
                
                
                $
                (9,749,491
                )
                
                $
                120,766,877Land - slag pile
      site
                
                
                5,916,150
                
                
                
                -
                
                
                
                5,916,150Land
                
                
                3,300,000
                
                
                
                -
                
                
                
                3,300,000Income property and
      improvements
                
                
                309,750
                
                
                
                -
                
                
                
                309,750Net assets
      acquired
                
                $
                140,042,268
                
                
                $
                (9,749,491
                )
                
                $
                130,292,777
  Searchlight Gold Project
Claims
  We also restated the Searchlight Gold
Project claims as of December 31, 2007 for the effect of the deferred future
income tax liability assumed in the acquisition of the Searchlight
Claims.  The restatement of the Clarkdale Slag Project affected the
overall computation of deferred future income tax liability for the amounts of
deferred future income tax liability allocated to the Searchlight
Claims.  There were no other changes to the accounting treatment of
the acquisition of the claims.
  As
      Originally
                  Reported
                
                
                Adjustments
                
                
                As
      RestatedCash
      and shares issuance to obtain mineralproperties,
      July 7, 2005
                
                $
                577,134
                
                
                $
                --
                
                
                $
                577,134Net
      deferred income tax liability assumed
                
                
                145,090
                
                
                
                97,218
                
                
                
                242,308Mineral
      properties balance, December 31, 2005
                
                
                722,224
                
                
                
                97,218
                
                
                
                819,442Share
      issuance to obtain mineral properties, July 27, 2006
                
                
                3,080,000
                
                
                
                --
                
                
                
                3,080,000Net
      deferred income tax liability assumed
                
                
                446,472
                
                
                
                1,085,376
                
                
                
                1,531,848Mineral
      properties balance, December 31, 2006
                
                
                4,248,696
                
                
                
                1,182,594
                
                
                
                5,431,290Share
      issuance to obtain mineral properties, June 29, 2007
                
                
                4,508,000
                
                
                
                --
                
                
                
                4,508,000Net
      deferred income tax liability assumed
                
                
                2,762,968
                
                
                
                --
                
                
                
                2,762,968Total
      mineral properties balance, December 31, 2007
                
                $
                11,519,664
                
                
                $
                1,182,594
                
                
                $
                12,702,258
  44
  Restatement
of Consolidated Balance Sheet December 31, 2007
  The
following table summarizes overall restatements to our consolidated balance
sheet as of December 31, 2007 and reconciles the previously reported amounts to
the restated amounts:
  Summarized
      Consolidated Balance Sheet -
                
                December
      31, 2007
                
                
                
                
                
                December
      31, 2007December
      31, 2007
                
                As
      Reported
                
                
                Adjustments
                
                
                As
      RestatedProperty
      and equipment, net (1)
                
                $
                4,902,287
                
                
                $
                162,173
                
                
                $
                5,064,460Mineral
      properties (2)
                
                
                11,519,664
                
                
                
                1,182,594
                
                
                
                12,702,258Slag
      project (3)
                
                
                130,516,368
                
                
                
                (9,749,491
                )
                
                
                120,766,877Total
      assets
                
                
                168,537,602
                
                
                
                (8,404,724
                )
                
                
                160,132,878VRIC
      payable, current portion (3)
                
                
                106,303
                
                
                
                73,527
                
                
                
                179,830Due
      to VRIC (3)
                
                
                6,400,000
                
                
                
                (6,400,000
                )
                
                
                -VRIC
      payable, net of current portion (3)
                
                
                3,211,101
                
                
                
                (1,057,571
                )
                
                
                2,153,530Deferred
      tax liability (4)
                
                
                53,875,079
                
                
                
                (3,255,421
                )
                
                
                50,619,658Total
      liabilities
                
                
                64,571,667
                
                
                
                (10,639,465
                )
                
                
                53,932,202Additional
      paid-in capital (3)
                
                
                114,913,703
                
                
                
                1,310,204
                
                
                
                116,223,907Accumulated
      deficit during exploration stage (5)
                
                
                (11,152,633
                )
                
                
                924,537
                
                
                
                (10,228,096
                )Total
      stockholders’ equity
                
                
                103,965,935
                
                
                
                2,234,741
                
                
                
                106,200,676Total
      liabilities and stockholders’ equity
                
                $
                168,537,602
                
                
                $
                (8,404,724
                )
                
                $
                160,132,878
  45
  Restatement
of Consolidated Statement of Operations September 30, 2007
  The
following table summarizes consolidated statements of operations for the three
and nine months ended September 30, 2007 and reconciles the reported amounts to
the restated amounts:
  Summarized
      Consolidated Statement of Operations -For
      the three months ended September 30, 2007
                
                As
      Reported
                
                
                Adjustments
                
                
                As
      RestatedTotal
      operating expenses (5)
                
                $
                796,946
                
                
                $
                (1,049
                )
                
                $
                795,897Loss
      from operations (6)
                
                
                (788,431
                )
                
                
                (7,466
                )
                
                
                (795,897
                )Total
      other income (expense) (6)
                
                
                94,580
                
                
                
                7,466
                
                
                
                102,046Income
      tax benefit (7)
                
                
                -
                
                
                
                270,094
                
                
                
                270,094Net
      loss (7)
                
                $
                (693,851
                )
                
                $
                270,094
                
                
                $
                (423,757
                )Loss
      per common share
                
                $
                (0.01
                )
                
                
                
                
                
                $
                (0.005
                )Summarized
      Consolidated Statement of Operations -For
      the nine months ended September 30, 2007
                
                As
      Reported
                
                
                Adjustments
                
                
                As
      RestatedTotal
      operating expenses (5)
                
                $
                2,505,225
                
                
                $
                (1,049
                )
                
                $
                2,504,176Loss
      from operations (6)
                
                
                (2,477,130
                )
                
                
                (27,046
                )
                
                
                (2,504,176
                )Total
      other income (expense) (6)
                
                
                246,320
                
                
                
                27,046
                
                
                
                273,366Income
      tax benefit (7)
                
                
                -
                
                
                
                810,282
                
                
                
                810,282Net
      loss (7)
                
                $
                (2,230,810
                )
                
                $
                810,282
                
                
                $
                (1,420,528
                )Loss
      per common share
                
                $
                (0.03
                )
                
                
                
                
                
                $
                (0.02
                )
  Notes to
the restatement adjustments set forth in the tables above are, as
follows:
  (1)
                Restated
      for capitalization of interest related to deferred purchase
      liability.
 (2)
                Restated
      for computation of deferred tax liability assumed in mineral property
      acquisition.
 (3)
                  Restated
      for revision of the acquisition accounting related to payment terms and
      conditions contained in the acquisition agreement and the resulting
      deferred tax liability assumed in the
  acquisition.
 (4)
                Restated
      for deferred tax computation related to acquisition
      accounting.
 (5)
                Reclassify
      interest expense from operating expenses to other income
      (expense).
 (6)
                Reclassify
      interest expense and rental revenue from operations to other income
      (expense).
 (7)
                Restated
      for deferred tax benefit related to mineral property
      acquisition.
  46
  Results of
Operations
  The following table illustrates a
summary of our results of operations for the periods listed
below:
  Three Months Ended September
      30,
              
              
              Nine Months Ended September
      30,2008
              
              
              2007
              
              
              Percent
                Increase/
                (Decrease)
              
              
              2008
              
              
              2007
              
              
              Percent
                Increase/
                (Decrease)Revenue
              
              $
              -
              
              
              $
              -
              
              
              
              n/a
              
              
              $
              -
              
              
              $
              -
              
              
              
              n/aOperating
      Expenses
              
              
              (1,415,440
              )
              
              
              (795,897
              )
              
              
              77.8
              %
              
              
              (3,890,962
              )
              
              
              (2,504,176
              )
              
              
              55.4
              %Other
Income
              
              
              55,277
              
              
              
              102,046
              
              
              
              (45.8
              )
      %
              
              
              209,320
              
              
              
              273,366
              
              
              
              (23.4
              )
      %Income tax
      benefit
              
              
              449,263
              
              
              
              270,094
              
              
              
              66.3
              %
              
              
              1,318,167
              
              
              
              810,282
              
              
              
              62.7
              %Net Loss
              
              $
              (910,900
              )
              
              $
              (423,757
              )
              
              
              115.0
              %
              
              $
              (2,363,475
              )
              
              $
              (1,420,528
              )
              
              
              66.4
              %
  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 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:
  Three Months Ended September
      30,
              
              
              Nine Months Ended September
      30,2008
              
              
              2007
              
              
              Percent
                Increase/
                (Decrease)
              
              
              2008
              
              
              2007
              
              
              Percent
                Increase/
                (Decrease)Mineral exploration and evaluation
      expenses
              
              $
              392,323
              
              
              $
              199,961
              
              
              
              96.2
              %
              
              $
              841,231
              
              
              $
              810,539
              
              
              
              3.8
              %Mineral exploration and evaluation
      expenses – related party
              
              
              90,000
              
              
              
              90,000
              
              
              
              0.0
              %
              
              
              270,000
              
              
              
              270,000
              
              
              
              0.0
              %Administrative – Clarkdale
      site
              
              
              310,822
              
              
              
              -
              
              
              
              n/a
              
              
              
              818,730
              
              
              
              -
              
              
              
              n/aGeneral and
      administrative
              
              
              573,302
              
              
              
              471,209
              
              
              
              21.7
              %
              
              
              1,854,331
              
              
              
              1,374,668
              
              
              
              34.9
              %General and administrative
      –
                related
    party
              
              
              33,335
              
              
              
              23,017
              
              
              
              44.8
              %
              
              
              60,460
              
              
              
              23,017
              
              
              
              162.7
              %Depreciation
              
              
              15,658
              
              
              
              11,710
              
              
              
              33.7
              %
              
              
              46,210
              
              
              
              25,952
              
              
              
              78.1
              %Total Operating
      Expenses
              
              $
              1,415,440
              
              
              $
              795,897
              
              
              
              77.8
              %
              
              $
              3,890,962
              
              
              $
              2,504,176
              
              
              
              55.4
              %
  47
  Nine
month periods ended September 30, 2008 and 2007.Operating expenses increased
to $3,890,962 during the nine month period ended September 30, 2008 from
$2,504,176 during the nine month period ended September 30,
2007.  Operating expense increased during the nine month period ended
September 30, 2008 compared to the corresponding period in 2007 primarily as a
result of increases in general and administrative expenses and Clarkdale site
administrative expenses.
  General and administrative expenses
increased to $1,854,331 during the nine month period ended September 30, 2008
from $1,374,668 during the nine month period ended September 30,
2007.  General and administrative expenses increased primarily as a
result of (i) increased professional and administrative expenses associated with
the completion of our equity financings, the preparation of our 2007 annual
report on Form 10-KSB, the preparation of our registration statement on Form
S-1, and legal and accounting fees; (ii) increased expenses related to the
administration of the Clarkdale Slag Project site; and (iii) increased
compensation paid to our executive officers and our
directors.
  Included in general and administrative
expenses for the nine month period ended September 30, 2008 and 2007 were
compensation expenses related to the option vesting and option grants of $859
and $144,415, 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.
  In
addition, we incurred $60,460 and $23,017 during the nine month periods ended
September 30, 2008 and 2007, 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 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 approximate direct benefit
to Mr. Williams was $16,289 of the above Cupit Milligan fees and expenses for
the nine months ended September 30, 2008.  These expenses increased
during the nine month period ended September 30, 2008 as compared to 2007
because we did not incur such expenses to the firm prior to the third quarter of
2007.
  Mineral exploration and evaluation
expenses increased to $841,231 during the nine month period ended September 30,
2008 from $810,539 during the nine month period ended September 30,
2007.  Mineral exploration and evaluation expenses increased primarily
as a result of establishment of a full allowance against the reclamation bond
offset by our focus on our construction efforts for the Clarkdale Slag
Project.
  Included in mineral exploration and
evaluation expenses were the amounts of $270,000 and $270,000 paid during the
nine month periods ended September 30, 2008 and 2007, respectively, 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 and
development of our mineral projects, and reimbursement of expenses provided by
Nanominerals in connection with the exploration and development of our mineral
projects.
  Further, we paid $818,730 for
administrative expenses relating to the Clarkdale Slag Project during the nine
month period ended September 30, 2008. Such expenses for the nine month period
ended September 30, 2007 were $345,793 and were included in general and
administrative expense.The
increase in these expenses was attributable to increased activity at the
Clarkdale Slag Project Site which commenced during the second quarter of
2007.
  48
  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.For the nine month period ended September 30,
2007, we purchased services from one major vendor, Talson Corporation, that
exceeded more than 10% of total purchases and amounted to approximately
$1,496,000.
  Three
month periods ended September 30, 2008 and 2007.  Operating expenses
increased to $1,415,440 during the three month period ended September 30, 2008
from $795,897 during the three month period ended September 30,
2007.  Operating expense increased during the three month period ended
September 30, 2008 compared to the corresponding period in 2007 primarily as a
result of increases in mineral exploration and evaluation expenses and Clarkdale
site administrative expenses.
  General and administrative expenses
increased to $573,302 during the three month period ended September 30, 2008
from $471,209 during the three month period ended September 30,
2007.  General and administrative expenses increased primarily as a
result of increased legal and accounting fees related to preparation of our
registration statement on Form S-1.
  In
addition, we incurred $33,335 and $23,017 during the three month periods ended
September 30, 2008 and 2007, 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 accounting support services included bookkeeping input
for 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 approximate direct benefit
to Mr. Williams was $9,000 of the above Cupit Milligan fees and expenses for the
three months ended September 30, 2008.  These expenses increased
primarily as a result of increased accounting expenses related to preparation of
our registration statement on Form S-1.
  Mineral exploration and evaluation
expenses increased to $392,323 during the three month period ended September 30,
2008 from $199,961 during the three month period ended September 30,
2007.  Mineral exploration and evaluation expenses increased primarily
as a result of establishment of a full allowance against the reclamation bond
and increased activity at the Clarkdale site and increased focus on
Searchlight Gold Project as compared to the corresponding period of
2007.
  Included in mineral exploration and
evaluation expenses were the amounts of $90,000 and $90,000 paid during the
three month periods ended September 30, 2008 and 2007, respectively, 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 and
development of our mineral projects, and reimbursement of expenses provided by
Nanominerals in connection with the exploration and development of our mineral
projects.
  Further, we paid $310,822 for
administrative expenses relating to the Clarkdale Slag Project during the three
month period ended September 30, 2008. Such expenses for the three month period
ended September 30, 2007 were $163,223 and were included in general and
administrative expense. The increase in these expenses is attributable to
increased activity at the Clarkdale Slag Project Site.
  49
  Other Income and
Expenses
  Nine
month periods ended September 30, 2008 and 2007.Total other income decreased
to $209,320 during the nine month period ended September 30, 2008 from $273,366
during the nine month period ended September 30, 2007.  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 during the nine month period ended
September 30, 2008 as compared to the same period in 2007.
  Three
month periods ended September 30, 2008 and 2007.  Total other income
decreased to $55,277 during the three month period ended September 30, 2008 from
$102,046 during the three month period ended September 30, 2007.  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 during the three month period ended
September 30, 2008 as compared to the same period in 2007.
  Income Tax Benefit
  Nine
month periods ended September 30, 2008 and 2007.Income tax benefit increased
to $1,318,167 for the nine month period ended September 30, 2008 from $810,282
during the nine month period ended September 30, 2007.  The increase
in income tax benefit primarily resulted from the increase in exploration stage
losses during the nine month period ended September 30, 2008 from the nine month
period ended September 30, 2007.
  Three
month periods ended September 30, 2008 and 2007.  Income tax benefit
increased to $449,263 for the three month period ended September 30, 2008 from
$270,094 during the three month period ended September 30, 2007.  The
increase in income tax benefit primarily resulted from the increase in
exploration stage losses during the three month period ended September 30, 2008
from the three month period ended September 30, 2007.
  Net Loss
  Nine
month periods ended September 30, 2008 and 2007.The aforementioned factors
resulted in a net loss of $2,363,475, or $0.02 per common share, for the nine
month period ended September 30, 2008, as compared to a net loss of $1,420,528,
or $0.02 per common share, for the nine month period ended September 30,
2007.
  Three
month periods ended September 30, 2008 and 2007.  The aforementioned factors
resulted in a net loss of $910,900, or $0.01 per common share, for the three
month period ended September 30, 2008, as compared to a net loss of $423,757, or
$0.005 per common share, for the three month period ended September 30,
2007.
  As of September 30, 2008 and December
31, 2007, we had cumulative net operating loss carryforwards of approximately
$11,270,561 and $7,801,699, respectively for federal income taxes.  As
of September 30, 2008 and December 31, 2007, we had cumulative net operating
losses of approximately $3,883,008 and $1,795,792, respectively for state income
tax purposes.  The net operating loss carryforwards expire between
2025 and 2028.
  50
  Liquidity and Capital
Resources
  Historically, we have financed our
operations primarily through the sale of common stock and other convertible
equity securities. During the nine months ended September 30, 2008, we conducted
the followingprivateplacements of our
securities:
  ·
              On February 7, 2008, we completed
      two concurrentprivateplacement 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. Each unit sold consisted of one share of our common stock and
      one-half of one share 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 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, 2008:
  At September 30,
      2008
              
              
              At December 31,
      2007
              
              
              Percent
                Increase/(Decrease)Current
    Assets
              
              $
              10,063,574
              
              
              $
              12,200,133
              
              
              
              (17.5
              )%Current
      Liabilities
              
              
              (1,180,693
              )
              
              
              (1,094,697
              )
              
              
              7.9
              %Working
    Capital
              
              $
              8,882,881
              
              
              $
              11,105,436
              
              
              
              (20.0
              )%
  As of
September 30, 2008, we had an accumulated deficit of $12,591,571. As of
September 30, 2008, we had working capital of $8,882,881, compared to working
capital of $11,105,436 as of December 31, 2007. The decrease in our working
capital was primarily attributable to our net loss and capital expenditures
partially offset by the completion of our private placements in 2008. Cash was
$9,809,302 as of September 30, 2008, as compared to $12,007,344 as of December
31, 2007.  Property and equipment increased to $11,377,569 as of
September 30, 2008 from $5,064,460 as of December 31, 2007.  The
increase primarily resulted from site improvements and equipment acquisitions at
the Clarkdale Slag Project.
  Included in long term liabilities in the
accompanying consolidated financials statements is a balance of $50,914,652 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.
  51
  Cash Flows
  The following is a summary of our uses
of cash for the periods set forth below:
  Nine Months Ended September
      30,2008
              
              
              2007
              
              
              Percent
                Increase/(Decrease)Cash Flows Used in OperatingActivities
              
              $
              (3,792,830
              )
              
              $
              (2,601,921
              )
              
              
              45.8
              %Cash
      Flows Used in Investing Activities
              
              
              (6,018,052
              )
              
              
              (13,161,188
              )
              
              
              (54.3
              )%Cash
      Flows Provided by Financing Activities
              
              
              7,612,840
              
              
              
              20,912,830
              
              
              
              (63.6
              )%Net Change in Cash During
      Period
              
              $
              (2,198,042
              )
              
              $
              5,149,721
              
              
              
              (142.7
              )%
  Net cash used in operating activities
increased to $3,792,830 during the nine month period ended September 30, 2008
from $2,601,921 during the nine month period ended September 30,
2007.  The increase in cash used in operating activities was primarily
due to operating losses from our exploration activity and general and
administrative expenses, offset by non-cash elements which were primarily
related to change in deferred tax liability of $1,318,167 and change in accounts
payable and accrued liabilities of $279,889.
  We used $6,018,052 in investing
activities during the nine month period ended September 30, 2008, as compared to
$13,161,188 during the nine month period ended September 30,
2007.  The decrease in the nine month period ended September 30, 2008
was primarily a result of the payment to Verde River Iron Company (“VRIC”), an
affiliate of a member of our board of directors, Harry B. Crockett, of
$9,900,000 in connection with the acquisition of VRIC’s wholly owned subsidiary,
Transylvania, during the nine month period ended September 30, 2007, offset by
property and equipment purchases of $5,881,572 relating to the Clarkdale Slag
Project during the nine month period ended September 30,
2008.
  Net cash provided by financing
activities was $7,612,840 for the nine month period ended September 30, 2008
compared to $20,912,830 for the nine month period ended September 30,
2007.  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 ofprivateplacements of our securities and
$2,528,500 from the exercise of warrants, offset by $133,520 of cash paid to
VRIC based on our $30,000 monthly obligation to VRIC under the terms of the
Transylvania reorganization agreement. Net cash provided by financing activities
during the nine month period ended September 30, 2007 primarily resulted from
the receipt of $21,713,817 from the gross proceeds ofprivateplacements of our
securities.
  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:
  ·
              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.
  52
  We ma y 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 plan of operation calls for
significant expenses in connection with the development of 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 and development program and
our continued operations will be approximately $9,200,000. As of September 30,
2008, we had cash reserves in the amount of $9,809,302.  Our cash
position at September 30, 2008 exceeds our anticipated minimum 12 month budget
of $9,200,000 by approximately $609,302.
  Our current twelve month budget also
includes anticipated expenditure of $6,000,000 on Phase II of our Clarkdale Slag
Project.  Although our current cash position is sufficient to meet our
minimum anticipated costs for our development and exploration activities during
the next twelve months, 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 development and exploration
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.
  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
  The FASB
issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a
Financial Asset When the Market for that Asses Is Not Active”. The FSP clarifies
the application of FASB Statement No. 157, “Fair Value Measurements”, in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. The FSP is effective October 10,
2008, and for prior periods for which financial statements have not been issued.
Revisions resulting from a change in the valuation technique or its application
should be accounted for as a change in accounting estimate following the
guidance in FASB Statement No. 154, “Accounting Changes and Error Corrections”.
However, the disclosure provisions in Statement 154 for a change in accounting
estimate are not required for revisions resulting from a change in valuation
techniques or its application. We
have determined that the adoption of this statement will have little or no
effect on our consolidated financial position, results of operations, and
disclosures.
  53
  In May
2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting
Principles”. This statement is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements of nongovernmental
entities that are presented in conformity with GAAP. This statement will be
effective 60 days following the U.S. Securities and Exchange Commission’s
approval of the Public Company Accounting Oversight Board amendment to AU
Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.”  We are currently evaluating the
potential impact, if any, of the adoption of SFAS 162 on our consolidated
financial statements.
  On March
19, 2008 the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities.”  This statement is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures.  This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged.  We are
currently evaluating the impact that SFAS 161 will have on the consolidated
financial statements.
  In February 2008, the FASB staff
issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP
FAS 157-2”).  FSP FAS 157-2 delayed the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  The provisions of FSP FAS 157-2 are
effective for our fiscal year beginning January 1, 2009.  SFAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. We are currently evaluating the potential impact of adopting
this statement on our consolidated financial position, results of operations or
cash flows.
  In December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations,” which amends SFAS No. 141, and provides
revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the
acquiree.  It also provides disclosure requirements to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination.  SFAS No. 141(R) is effective for our fiscal
year beginning January 1, 2009 and is to be applied prospectively. We are
currently evaluating the potential impact of adopting this statement on our
consolidated financial position, results of operations or cash
flows.
  In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51” which establishes accounting and reporting standards
pertaining to ownership interests in subsidiaries held by parties other than the
parent, the amount of net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of any retained noncontrolling equity investment when a subsidiary is
deconsolidated. SFAS No. 160 also establishes disclosure requirements that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS No. 160 is effective for our fiscal
year beginning January 1, 2009.  We are currently evaluating the
potential impact of adopting this statement on our consolidated financial
position, results of operations or cash flows.
  54
  In
September 2007, the FASB published Proposed FASB Staff Position (“FSP”) No.
APB 14-a, “Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion.”  The proposed FSP applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under SFAS 133.  Convertible debt instruments within the scope of the
proposed FSP are not addressed by the existing APB 14. The proposed FSP would
require that the liability and equity components of convertible debt instruments
within the scope of the proposed FSP shall be separately accounted for in a
manner that reflects the entity’s nonconvertible debt borrowing
rate.  This will require an allocation of the convertible debt
proceeds between the liability component and the embedded conversion option
(i.e., the equity component).  The difference between the principal
amount of the debt and the amount of the proceeds allocated to the liability
component would be reported as a debt discount and subsequently amortized to
earnings over the instrument’s expected life using the effective interest
method.  FSP No. APB 14-a is effective for the Company’s fiscal year
beginning January 1, 2009 and early adoption is not permitted.  We are
currently evaluating the impact that Proposed FSP may have on our financial
position, results of operations and cash flows.
  In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115” (“SFAS 159”), which permits entities to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value.  The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS 159
does not affect any existing accounting literature that requires certain assets
and liabilities to be carried at fair value, nor eliminate disclosure
requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157, “Fair Value
Measurements,” and SFAS 107, “Disclosures about Fair Value of Financial
Instruments.” SFAS 159 is effective for our fiscal year beginning after November
15, 2007.  We have adopted SFAS 159 as of January 1,
2008.  There was no impact on our consolidated financial position,
results of operations or cash flows.
  Item
3.  Quantitative and Qualitative Disclosures About Market
Risk
  Not applicable.
  55
  Item
4.  Controls and Procedures
  NOTE:
This Item 4. Controls and Procedures has been updated to reflect the restatement
of our 2005, 2006 and 2007 financial statements, as discussed above in the
Introductory Explanatory Note and in Item 2 under the section heading
“Restatements.”
 
 Evaluation
of Disclosure Controls and Procedures
 
 This
Quarterly Report on Form 10-Q/A represents an amended filing for the covered
period.  In connection with this amendment to our Quarterly Report for
the period ended September 30, 2008, our management reevaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)) as of
the end of the period covered by this report.
 
 Subsequently,
we discovered material weaknesses in our internal control over financial
reporting.  For this reason, in reevaluating the adequacy of our
disclosure controls and procedures as of the end of the period covered by this
report, our management has determined that our disclosure controls and
procedures were not adequate.  In evaluating whether our disclosure
controls and procedures were effective as of September 30, 2008, management
considered the impact of the restatements to our 2005 First Quarter Form 10-QSB
through our 2007 Annual Report on Form 10-KSB, as outlined in Item 2, as well as
our control environment.
 
 Our
management is responsible for establishing and maintaining an adequate system of
internal control over financial reporting as required by Sarbanes-Oxley (SOX)
Section 404A.  Our system of internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America.  Our internal control over financial
reporting includes those policies and procedures that:
 
 ·
              pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect our transactions and dispositions of our
      assets;
  ·
              provide
      reasonable assurance that our transactions are recorded as necessary to
      permit preparation of our financial statements in accordance with
      accounting principles generally accepted in the United States of America,
      and that our receipts and expenditures are being made only in accordance
      with authorizations of our management and our directors;
      and
  ·
              provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on the financial
  statements.
  Because
of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements.  Further, because of changes in conditions,
effectiveness of internal controls over financial reporting may vary over
time.  Our system contains self monitoring mechanisms, and actions are
taken to correct deficiencies as they are identified.
  During
the fourth quarter of 2008, in the course of preparing for our year end
evaluation of effectiveness of our system of internal control over financial
reporting based on the framework in Internal Control-Integrated
Framework  issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and SEC guidance on conducting such assessments, our
management concluded that our system of internal control over financial
reporting was not effective as of the year ended December 31, 2007 and the nine
month period ended September 30, 2008 which resulted in the restatements
described above.  Although management does not anticipate making
restatements to the financial statements for the periods ended March 31, 2008,
June 30, 2008 and September 30, 2008, management believes that our weakness in
internal controls continued during such periods.
 
 56
 
 Management
has identified internal control deficiencies which resulted in the material
restatements described above, which, in management’s judgment, represented
material weakness in internal control over financial reporting.  The
control deficiencies related to controls over the accounting and disclosure for
complex transactions to ensure such transactions were recorded as necessary to
permit preparation of financial statements and disclosure in accordance with
generally accepted accounting principles.  Specifically, the control
deficiency which resulted in the restatements above, which has since been
remediated, was management’s failure to consult an outside expert regarding the
initial accounting for certain complex transactions.  Such complex
transactions included:
  ·
              capital
      asset acquisitions; and
  ·
              accounting
      for income taxes.
  The
internal control deficiencies associated with capital asset acquisitions related
to the acquisition accounting method used to recordthe issuance of warrants
in connection with the assignment of the option for the Clarkdale Slag Project,
and the 2007 acquisition of Transylvania, and the internal control deficiencies
associated with accounting for income taxes related to the purchase accounting
treatment of the issuance of warrants in connection with the assignment of the
option for the Clarkdale Slag Project, the acquisition of the Clarkdale Slag
Project, and the resultant computation of future deferred income tax liability
assumed.
 
 A
material weakness in internal controls is a significant deficiency, or
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the financial statements would not be
prevented or detected on a timely basis by us.
 
 Our
management is responsible for establishing and maintaining an adequate system of
disclosure controls and procedures designed to provide reasonable assurance that
the information required to be disclosed by us in reports that we file and
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. Disclosure
controls also are designed to reasonably assure that such information is
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosures. Disclosure controls include components of
internal control over financial reporting, which consists of control processes
designated to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance
with United States generally accepted accounting principles.
 
 We
have determined that our material weakness in its internal controls over
financial reporting was also a weakness in our disclosure controls and
procedures, since such weakness related to the disclosure controls which provide
us with reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles.
 
 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.
 Based
on its assessment, including consideration of the aforementioned material
weaknesses, and the criteria discussed above, our management has concluded that
our disclosure controls and procedures were not effective as of September 30,
2008 to provide reasonable assurance that information required to be disclosed
by us in the reports that we file under the Exchange Act is recorded, processed,
and summarized within the appropriate periods.
 
 Management
will continue to evaluate the effectiveness of our disclosure controls and
procedures on an ongoing basis, and has taken action and implemented
improvements as necessary.
  Changes
in Internal Controls over Financial Reporting
  While
no changes to our internal control over financial reporting or disclosure
controls and procedures were made to rectify the material weakness during the
period covered by this report because such weakness was not known at that
time,subsequent to
the period we remediated this weakness in part by appointing an independent
director who will participate in the review our internal controls and who has
been appointed to our audit committee.  We also have consulted with a
third party financial consultant who has assisted in our restatement regarding
our capital acquisition and accounting for income taxes.  Management
has:
 
 57
 
 ·
              completed
      a review and updated risk assessment of all of our financial controls and
      procedures;
  ·
              provided
      additional training of financial
staff;
  ·
              purchased
      additional research materials and
services;
  ·
              shortened
      the financial closing process to allow more time for a thorough
      review;
  ·
              reviewed
      and instituted controls for each weakness;
  and
  ·
              adopted
      a policy to consult outside experts on complex accounting
      issues.




58


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-KSB for the year ended December 31, 2007, 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 August
26, 2008, 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, 2008, we issued 10,284 shares of our common stock to our
non-management directors.  These shares were issued pursuant to the
director compensation policy for our non-management directors based on a price
of $1.75 per share with respect to 10,284 shares, being the closing price of our
common stock on September 30, 2008, the last trading day of the third quarter of
2008.  These securities were issued pursuant to Section 4(2) of the
Securities Act.
  Item
3.  Defaults Upon Senior Securities
  None.
  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, 2008.
  Item
5.  Other Information
  Not
applicable.
  59
  Item
6.  Exhibits
  EXHIBIT
      TABLE
                
                The
      following is a complete list of exhibits filed as part of the Quarterly
      Report on Form 10-Q/A, 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
  60
  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:
      July 6, 2009
              By:
              /s/ Ian R. McNeilIan
      R. McNeilPresident
      and Chief Executive Officer
                (Principal Executive
      Officer)Date:
      July 6, 2009
              By:
              /s/
      Melvin L. WilliamsMelvin L.
      WilliamsChief
      Financial Officer
                (Principal Accounting
      Officer)
  61