UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-Q




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


For the
quarterly period ended June 30, 2010




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


For the
transition period from _______ to _______.




Commission
file number 000-30995




SEARCHLIGHT
MINERALS CORP.




(Exact
name of registrant as specified in its charter)




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




(702)
939-5247


(Registrant’s telephone number, including area
code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




Yes           x           No            ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).




Yes            ̈           No            ̈




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




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




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes            ̈      No           x




As of
August 13, 2010, the registrant had 118,809,087 outstanding shares of common
stock.







TABLE OF
CONTENTS




PART I – FINANCIAL
    INFORMATION
                    3Item
      1. Financial Statements
                    3Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                    33Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                    49Item
      4.  Controls and Procedures
                    49PART II – OTHER
      INFORMATION
                    49Item
      1.  Legal Proceedings
                    49Item
      1A.  Risk Factors
                    49Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                    50Item
      3.  Defaults Upon Senior Securities
                    50Item
      4.  Submission of Matters to a Vote of Security
      Holders
                    50Item
      5.  Other Information
                    50Item
      6.  Exhibits
                    51SIGNATURES
                    52


2


PART I –
FINANCIAL INFORMATION




Item
1. Financial Statements




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
BALANCE SHEETS
 
 (UNAUDITED)June 30, 2010
                              
                              
                              December 31, 2009ASSETSCurrent
      assetsCash
                              
                              $
                              8,726,301
                              
                              
                              $
                              13,099,562Prepaid
      expenses
                              
                              
                              141,255
                              
                              
                              
                              122,261Total
      current assets
                              
                              
                              8,867,556
                              
                              
                              
                              13,221,823Property
      and equipment, net
                              
                              
                              14,208,941
                              
                              
                              
                              13,994,934Mineral
      properties
                              
                              
                              16,947,419
                              
                              
                              
                              16,947,419Slag
      project
                              
                              
                              120,766,877
                              
                              
                              
                              120,766,877Land
      - smelter site and slag pile
                              
                              
                              5,916,150
                              
                              
                              
                              5,916,150Land
                              
                              
                              3,300,000
                              
                              
                              
                              3,300,000Reclamation
      bond and deposits, net
                              
                              
                              13,902
                              
                              
                              
                              10,902Total
      non-current assets
                              
                              
                              161,153,289
                              
                              
                              
                              160,936,282Total
      assets
                              
                              $
                              170,020,845
                              
                              
                              $
                              174,158,105LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                              
                              $
                              266,312
                              
                              
                              $
                              443,742Accounts
      payable - related party
                              
                              
                              49,548
                              
                              
                              
                              194,690VRIC
      payable, current portion - related party
                              
                              
                              219,499
                              
                              
                              
                              210,921Capital
      lease payable, current portion
                              
                              
                              25,681
                              
                              
                              
                              25,117Total
      current liabilities
                              
                              
                              561,040
                              
                              
                              
                              874,470Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                              
                              
                              1,635,916
                              
                              
                              
                              1,747,853Capital
      lease payable, net of current portion
                              
                              
                              2,192
                              
                              
                              
                              15,175Deferred
      tax liability
                              
                              
                              46,331,596
                              
                              
                              
                              47,863,870Total
      long-term liabilities
                              
                              
                              47,969,704
                              
                              
                              
                              49,626,898Total
      liabilities
                              
                              
                              48,530,744
                              
                              
                              
                              50,501,368Commitments
      and contingencies - Note 13
                              
                              
                              -
                              
                              
                              
                              -Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 shares authorized, 118,809,087 and
      118,768,373 shares, respectively, issued and outstanding
                              
                              
                              118,809
                              
                              
                              
                              118,768Additional
      paid-in capital
                              
                              
                              141,159,616
                              
                              
                              
                              141,029,875Accumulated
      deficit during exploration stage
                              
                              
                              (19,788,324
                              )
                              
                              
                              (17,491,906
                              )Total
      stockholders' equity
                              
                              
                              121,490,101
                              
                              
                              
                              123,656,737Total
      liabilities and stockholders' equity
                              
                              $
                              170,020,845
                              
                              
                              $
                              174,158,105
 
 See
Accompanying Notes to these Consolidated Financial Statements
  3
  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 six months ended
                                  
                                  
                                  throughJune 30, 2010
                                  
                                  
                                  June 30, 2009
                                  
                                  
                                  June 30, 2010
                                  
                                  
                                  June 30, 2009
                                  
                                  
                                  June 30, 2010Revenue
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Operating
      expensesMineral
      exploration and evaluation expenses
                                  
                                  
                                  778,086
                                  
                                  
                                  
                                  531,291
                                  
                                  
                                  
                                  1,259,841
                                  
                                  
                                  
                                  843,626
                                  
                                  
                                  
                                  8,325,339Mineral
      exploration and evaluation expenses - related party
                                  
                                  
                                  89,400
                                  
                                  
                                  
                                  90,000
                                  
                                  
                                  
                                  207,257
                                  
                                  
                                  
                                  180,000
                                  
                                  
                                  
                                  1,898,402Administrative
      - Clarkdale site
                                  
                                  
                                  287,747
                                  
                                  
                                  
                                  138,250
                                  
                                  
                                  
                                  605,981
                                  
                                  
                                  
                                  370,937
                                  
                                  
                                  
                                  3,046,276General
      and administrative
                                  
                                  
                                  696,783
                                  
                                  
                                  
                                  716,160
                                  
                                  
                                  
                                  1,358,796
                                  
                                  
                                  
                                  1,449,204
                                  
                                  
                                  
                                  10,306,719General
      and administrative - related party
                                  
                                  
                                  52,808
                                  
                                  
                                  
                                  67,617
                                  
                                  
                                  
                                  89,927
                                  
                                  
                                  
                                  89,819
                                  
                                  
                                  
                                  344,692Depreciation
                                  
                                  
                                  226,681
                                  
                                  
                                  
                                  186,657
                                  
                                  
                                  
                                  448,181
                                  
                                  
                                  
                                  368,615
                                  
                                  
                                  
                                  1,300,289Total
      operating expenses
                                  
                                  
                                  2,131,505
                                  
                                  
                                  
                                  1,729,975
                                  
                                  
                                  
                                  3,969,983
                                  
                                  
                                  
                                  3,302,201
                                  
                                  
                                  
                                  25,221,717Loss
      from operations
                                  
                                  
                                  (2,131,505
                                  )
                                  
                                  
                                  (1,729,975
                                  )
                                  
                                  
                                  (3,969,983
                                  )
                                  
                                  
                                  (3,302,201
                                  )
                                  
                                  
                                  (25,221,717
                                  )Other
      income (expense)Rental
      revenue
                                  
                                  
                                  6,480
                                  
                                  
                                  
                                  6,565
                                  
                                  
                                  
                                  12,960
                                  
                                  
                                  
                                  14,105
                                  
                                  
                                  
                                  111,970Loss
      on equipment disposition
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,542
                                  )
                                  
                                  
                                  (35,067
                                  )Interest
      expense
                                  
                                  
                                  (364
                                  )
                                  
                                  
                                  (628
                                  )
                                  
                                  
                                  (1,413
                                  )
                                  
                                  
                                  (1,321
                                  )
                                  
                                  
                                  (11,433
                                  )Interest
      and dividend income
                                  
                                  
                                  8,749
                                  
                                  
                                  
                                  680
                                  
                                  
                                  
                                  9,056
                                  
                                  
                                  
                                  6,453
                                  
                                  
                                  
                                  616,246Total
      other income (expense)
                                  
                                  
                                  14,865
                                  
                                  
                                  
                                  6,617
                                  
                                  
                                  
                                  20,603
                                  
                                  
                                  
                                  17,695
                                  
                                  
                                  
                                  681,716Loss
      before income taxes and discontinued operations
                                  
                                  
                                  (2,116,640
                                  )
                                  
                                  
                                  (1,723,358
                                  )
                                  
                                  
                                  (3,949,380
                                  )
                                  
                                  
                                  (3,284,506
                                  )
                                  
                                  
                                  (24,540,001
                                  )Income
      tax benefit
                                  
                                  
                                  847,398
                                  
                                  
                                  
                                  645,029
                                  
                                  
                                  
                                  1,532,274
                                  
                                  
                                  
                                  1,226,122
                                  
                                  
                                  
                                  8,503,700Loss
      from continuing operations
                                  
                                  
                                  (1,269,242
                                  )
                                  
                                  
                                  (1,078,329
                                  )
                                  
                                  
                                  (2,417,106
                                  )
                                  
                                  
                                  (2,058,384
                                  )
                                  
                                  
                                  (16,036,301
                                  )Discontinued
      operations:Gain
      (loss) from discontinued operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  120,688
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (3,752,023
                                  )Net
      loss
                                  
                                  $
                                  (1,269,242
                                  )
                                  
                                  $
                                  (1,078,329
                                  )
                                  
                                  $
                                  (2,296,418
                                  )
                                  
                                  $
                                  (2,058,384
                                  )
                                  
                                  $
                                  (19,788,324
                                  )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.02
                                  )
                                  
                                  $
                                  (0.02
                                  )Gain
      (loss) from discontinued operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.02
                                  )
                                  
                                  $
                                  (0.02
                                  )Weighted
      average common shares outstanding - basic and diluted
                                  
                                  
                                  118,783,373
                                  
                                  
                                  
                                  106,457,962
                                  
                                  
                                  
                                  118,775,914
                                  
                                  
                                  
                                  106,363,518
 
 See
Accompanying Notes to these Consolidated Financial Statements
  4
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 (UNAUDITED)
 AccumulatedDeficit During
                  
                  
                  TotalCommon Stock
                  
                  
                  Additional
                  
                  
                  Exploration
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Paid-in Capital
                  
                  
                  Stage
                  
                  
                  EquityBalance,
      December 31, 2009
                  
                  
                  118,768,373
                  
                  
                  $
                  118,768
                  
                  
                  $
                  141,029,875
                  
                  
                  $
                  (17,491,906
                  )
                  
                  $
                  123,656,737Amortization
      of stock options issued to directors over vesting period
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  19,560
                  
                  
                  
                  -
                  
                  
                  
                  19,560Issuance
      of common stock for directors' compensation
                  
                  
                  15,000
                  
                  
                  
                  15
                  
                  
                  
                  17,985
                  
                  
                  
                  -
                  
                  
                  
                  18,000Issuance
      of stock options for directors' compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,558
                  
                  
                  
                  -
                  
                  
                  
                  8,558Amortization
      of stock options issued to directors over vesting period
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48,291
                  
                  
                  
                  -
                  
                  
                  
                  48,291Issuance
      of common stock for directors' compensation
                  
                  
                  25,714
                  
                  
                  
                  26
                  
                  
                  
                  17,974
                  
                  
                  
                  -
                  
                  
                  
                  18,000Issuance
      of stock options for directors' compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17,373
                  
                  
                  
                  -
                  
                  
                  
                  17,373Net
      loss June 30, 2010
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,296,418
                  )
                  
                  
                  (2,296,418
                  )Balance,
      June 30, 2010
                  
                  
                  118,809,087
                  
                  
                  $
                  118,809
                  
                  
                  $
                  141,159,616
                  
                  
                  $
                  (19,788,324
                  )
                  
                  $
                  121,490,101
 
 See
Accompanying Notes to these Consolidated Financial Statements
  5
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Period fromJanuary 14, 2000(date of inception)For the six months ended
                      
                      
                      throughJune 30, 2010
                      
                      
                      June 30, 2009
                      
                      
                      June 30, 2010CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                      
                      $
                      (2,296,418
                      )
                      
                      $
                      (2,058,384
                      )
                      
                      $
                      (19,788,324
                      )Gain
      (loss) from discontinued operations
                      
                      
                      120,688
                      
                      
                      
                      -
                      
                      
                      
                      (3,752,023
                      )Loss
      from continuing operations
                      
                      
                      (2,417,106
                      )
                      
                      
                      (2,058,384
                      )
                      
                      
                      (16,036,301
                      )Adjustments
      to reconcile loss from operating to net cash used in operating
      activities:Depreciation
                      
                      
                      448,181
                      
                      
                      
                      368,615
                      
                      
                      
                      1,300,289Stock
      based expenses
                      
                      
                      129,782
                      
                      
                      
                      89,992
                      
                      
                      
                      1,461,144Loss
      on disposition of fixed assets
                      
                      
                      -
                      
                      
                      
                      1,542
                      
                      
                      
                      36,416Amortization
      of prepaid expense
                      
                      
                      137,407
                      
                      
                      
                      114,826
                      
                      
                      
                      789,435Allowance
      for bond deposit recovery
                      
                      
                      (180,500
                      )
                      
                      
                      -
                      
                      
                      
                      -Changes
      in operating assets and liabilities:Prepaid
      expenses
                      
                      
                      24,099
                      
                      
                      
                      (18,503
                      )
                      
                      
                      (750,190
                      )Reclamation
      bond and deposits
                      
                      
                      (3,000
                      )
                      
                      
                      900
                      
                      
                      
                      (194,402
                      )Accounts
      payable and accrued liabilities
                      
                      
                      (201,884
                      )
                      
                      
                      (253,609
                      )
                      
                      
                      (18,553
                      )Deferred
      income taxes
                      
                      
                      (1,532,274
                      )
                      
                      
                      (1,226,122
                      )
                      
                      
                      (8,503,700
                      )Net
      cash used in operating activities
                      
                      
                      (3,595,295
                      )
                      
                      
                      (2,980,743
                      )
                      
                      
                      (21,915,862
                      )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 - related party
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (9,900,000
                      )Cash
      paid for additional acquisition costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (130,105
                      )Capitalized
      interest - related party
                      
                      
                      (76,642
                      )
                      
                      
                      (84,563
                      )
                      
                      
                      (584,229
                      )Proceeds
      from property and equipment disposition
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      400Purchase
      of property and equipment
                      
                      
                      (585,546
                      )
                      
                      
                      (1,124,155
                      )
                      
                      
                      (14,206,028
                      )Net
      cash used in investing activities
                      
                      
                      (662,188
                      )
                      
                      
                      (1,208,718
                      )
                      
                      
                      (25,797,096
                      )Net
      cash used in investing activities from discontinued
    operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (452,618
                      )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                      
                      
                      -
                      
                      
                      
                      150,000
                      
                      
                      
                      59,197,745Stock
      issuance costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (2,024,643
                      )Principal
      payments on capital lease payable
                      
                      
                      (12,419
                      )
                      
                      
                      (11,879
                      )
                      
                      
                      (88,365
                      )Principal
      payments on VRIC payable - related party
                      
                      
                      (103,359
                      )
                      
                      
                      (95,437
                      )
                      
                      
                      (645,773
                      )Net
      cash (used) provided by financing activities
                      
                      
                      (115,778
                      )
                      
                      
                      42,684
                      
                      
                      
                      56,438,964Net
      cash provided by financing activities from discontinued
      operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,384,237NET
      CHANGE IN CASH
                      
                      
                      (4,373,261
                      )
                      
                      
                      (4,146,777
                      )
                      
                      
                      8,726,301CASH
      AT BEGINNING OF PERIOD
                      
                      
                      13,099,562
                      
                      
                      
                      7,055,591
                      
                      
                      
                      -CASH
      AT END OF PERIOD
                      
                      $
                      8,726,301
                      
                      
                      $
                      2,908,814
                      
                      
                      $
                      8,726,301
 
 See
Accompanying Notes to these Consolidated Financial Statements
  6
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Period fromJanuary 14, 2000(date of inception)For the six months ended
                  
                  
                  throughJune 30, 2010
                  
                  
                  June 30, 2009
                  
                  
                  June 30, 2010CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      paid, net of capitalized amounts
                  
                  $
                  1,413
                  
                  
                  $
                  1,321
                  
                  
                  $
                  62,184Income
      taxes paid
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Non-cash
      investing and financing activities:Capital
      equipment purchased through accounts payable and financing
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  444,690Assets
      acquired for common stock issued for the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  66,879,375Assets
      acquired for common stock issued for mineral properties
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  10,220,000Assets
      acquired for liabilities incurred in the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,628,188Net
      deferred tax liability assumed
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  55,197,465Merger
      option payment applied to the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  200,000Reclassify
      joint venture option agreement to slag project
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  690,000Warrants
      issued in connection with joint venture 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
  7
  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 consolidated financial statements have been
prepared in accordance with Securities and Exchange Commission requirements for
interim financial statements. Therefore, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. The financial statements
should be read in conjunction with the Form 10-K for the year ended December 31,
2009 of Searchlight Minerals Corp. (the “Company”).
 
 The
interim financial statements present the consolidated balance sheets, statements
of operations, stockholders’ equity, and cash flows of the Company. The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States.
 
 These
consolidated 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 consolidated financial statements be read in conjunction with the
Company’s audited consolidated financial statements and notes thereto for the
year ended December 31, 2009.
 
 Description of
business - Searchlight Minerals Corp. is considered an exploration stage
company since its formation, and the Company has not yet realized any revenues
from its planned operations.  The Company is primarily focused on the
exploration, acquisition and development of mining and mineral
properties.  Upon the location of commercially minable reserves, the
Company plans to prepare for mineral extraction and enter the development
stage.
  History - The Company
was incorporated on January 12, 1999 pursuant to the laws of the State of Nevada
under the name L.C.M. Equity, Inc.  From 1999 to 2005, the Company
operated primarily as a biotechnology research and development company with its
headquarters in Canada and an office in the United Kingdom (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 the Company 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 as 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.
  8
  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 $19,788,324 from operations as of June
30, 2010 and has not commenced its commercial mining and mineral processing
operations; rather, it is still in the exploration stage, raising substantial
doubt about the Company’s ability to continue as a going concern.  The
Company will seek additional sources of capital through the issuance of debt or
equity financing, but there can be no assurance the Company will be successful
in accomplishing its objectives.
 
 The
ability of the Company to continue as a going concern is dependent on additional
sources of capital and the success of the Company’s plan.  The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
 
 Principles of
consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Clarkdale Minerals,
LLC (“CML”) and Clarkdale Metals Corp. (“CMC”).  Significant
intercompany accounts and transactions have been eliminated.
 
 Use of estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Mineral rights -
Costs of acquiring mining properties are capitalized upon
acquisition.  Mine development costs incurred to develop new ore
deposits, to expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially mineable
property. Costs incurred to maintain current production or to maintain assets on
a standby basis are charged to operations.  Costs of abandoned
projects are charged to operations upon abandonment.  The Company
evaluates the carrying value of capitalized mining costs and related property
and equipment costs to determine if these costs are in excess of their
recoverable amount whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable.  Evaluation of the
carrying value of capitalized costs and any related property and equipment costs
would be based upon expected future cash flows and/or estimated salvage value in
accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived
Assets.
 
 Capitalized interest
cost - The Company capitalizes interest cost related to acquisition,
development and construction of property and equipment which is designed as
integral parts of the manufacturing process.  The capitalized interest
is recorded as part of the asset it relates to and will be amortized over the
asset’s useful life once production commences.  Interest cost
capitalized from imputed interest on acquisition indebtedness was $76,642 and
$84,563 for the six months ended June 30, 2010 and 2009,
respectively.
  9
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Exploration costs -
Mineral exploration costs are expensed as incurred.
 
 Property and
equipment - Property and equipment is stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line method
over the estimated useful lives of the assets, which are generally 3 to 39
years. The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).
 
 The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful lives of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. If events and circumstances warrant
evaluation, the Company uses an estimate of the related undiscounted cash flows
over the remaining life of the property and equipment in measuring their
recoverability.
  Impairment of long-lived
assets-The Company reviews and evaluates long-lived assets for impairment when
events or changes in circumstances indicate the related carrying amounts may not
be recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17, Measurement of
an Impairment Loss, if events or circumstances indicate that their
carrying amount might not be recoverable.  As of June 30, 2010, and
through the date of issuance of these financial statements, no events or
circumstances have happened to indicate that the related carrying values of the
properties may not be recoverable. When the Company determines that an
impairment analysis should be done, the analysis will be performed using the
rules of ASC 930-360-35, Asset
Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.
  Various
factors could impact the Company’s 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.
  10
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Asset retirement
obligation - The Company follows ASC 410, Asset Retirement and Environmental
Obligations, which requires that an asset retirement obligation (“ARO”)
associated with the retirement of a tangible long-lived asset be recognized as a
liability in the period in which it is incurred and becomes determinable, with
an offsetting increase in the carrying amount of the associated
asset.  The cost of the tangible asset, including the initially
recognized ARO, is depleted, such that the cost of the ARO is recognized over
the useful life of the asset.  The ARO is recorded at fair value, and
accretion expense is recognized over time as the discounted liability is
accreted to its expected settlement value.  The fair value of the ARO
is measured using expected future cash flow, discounted at the Company’s
credit-adjusted risk-free interest rate.  To date, no significant
asset retirement obligation exists due to the early stage of
exploration.  Accordingly, no liability has been
recorded.
 
 Fair value of financial
instruments - Fair value accounting establishes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy are described below:
 
 Level 1
              Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or
  liabilities;
 Level 2
              Quoted
      prices in markets that are not active, or inputs that are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability; and
 Level 3
              Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (supported by little or no
      market activity).
 
 The
Company’s financial instruments consist of mineral property purchase
obligations. These obligations are classified within Level 2 of the fair value
hierarchy as their fair value is determined using interest rates which
approximate market rates. The Company is not exposed to significant interest or
credit risk arising from these financial instruments.
  Research and
development - All research and development expenditures are expensed as
incurred.
  Earnings (loss) per
share - The Company follows ASC 260, Earnings Per Share, and ASC
480, Distinguishing
Liabilities from Equity,  which establish standards for the
computation, presentation and disclosure requirements for basic and diluted
earnings per share for entities with publicly-held common shares and potential
common stock issuances. Basic earnings (loss) per share are computed by dividing
net income (loss) 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 June 30, 2010 and 2009 that were not included in the computation of diluted
EPS because the effect would be antidilutive were 28,274,338 and 22,047,910,
respectively.
  11
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Expenses of offering
- The Company accounts for specific incremental costs that are directly related
to a proposed or actual offering of securities as a direct charge against the
gross proceeds of the offering.
 
 Stock-based
compensation - The Company accounts for share based payments in
accordance with ASC 718, Compensation - Stock
Compensation, which requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on the grant date fair value of the award. In accordance with
ASC 718-10-30-9, Measurement
Objective – Fair Value at Grant Date, the Company estimates the fair
value of the award using a valuation technique. For this purpose, the Company
uses the Binomial Lattice option pricing model. The Company believes that 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 the actual exercise behavior of option holders.The compensation
cost is recognized over the requisite service period which is generally equal to
the vesting period. Upon exercise, shares issued will be newly issued shares
from authorized common stock.
 
 Income taxes - The
Company accounts for its income taxes in accordance with ASC 740, Income Taxes, which requires
recognition of deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
 For
acquired properties that do not constitute a business as defined in ASC
805-10-55-4, Definition of a
Business, deferred income tax liability is recorded on GAAP basis over
income tax basis using statutory federal and state rates. The resulting
estimated future federal and state income tax liability associated with the
temporary difference between the acquisition consideration and the tax basis is
computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in
Certain Purchase Transactions that are Not Accounted for as Business
Combinations, and is reflected as an increase to the total purchase price
which is then applied to the underlying acquired assets in the absence of there
being a goodwill component associated with the acquisition
transactions.
  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)
 
 Recent accounting
standards - From time to time, new accounting pronouncements are issued
by the Financial Accounting Standards Board (“FASB”) that are adopted by
the Company as of the specified effective date. Unless otherwise discussed,
management believes that the impact of recently issued standards did not or will
not have a material impact on the Company’s consolidated financial statements
upon adoption.
 
 In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair
Value Measurements, which requires reporting entities to make new
disclosures about recurring or nonrecurring fair value measurements including
significant transfers into and out of Level 1 and Level 2 fair value
measurements and information on purchases, sales, issuances, and settlements on
a gross basis in the reconciliation of Level 3 fair value measurements.
ASU 2010-6 is effective for annual reporting periods beginning after
December 15, 2009, except for Level 3 reconciliation disclosures which
are effective for annual periods beginning after December 15, 2010. The
Company does not have any assets or liabilities classified as Level 3. The
Company has adopted the Level 1 and Level 2 amendments accordingly. As the
update only pertained to disclosures, it had no impact on the Company’s
financial position, results of operations, or cash flows upon
adoption.
 
 In
February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic
855), Amendment to
Certain Recognition and Disclosure Requirements, to remove the
requirement for SEC filers to disclose the date through which an entity has
evaluated subsequent events. This change removes potential conflicts with
current SEC guidance and clarifies the intended scope of the reissuance
disclosure provisions. The update was effective upon its date of issuance,
February 24, 2010, and the Company has adopted the amendments accordingly. As
the update only pertained to disclosures, it had no impact on the Company’s
financial position, results of operations, or cash flows upon
adoption.
  13
  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 June 30, 2010 and December 31,
2009:
 
 June 30,
                        2010
                      
                      
                      December 31,
                        2009Furniture
      and fixtures
                      
                      $
                      38,480
                      
                      
                      $
                      36,740Lab
      equipment
                      
                      
                      241,507
                      
                      
                      
                      228,052Computers
      and equipment
                      
                      
                      77,997
                      
                      
                      
                      67,791Income
      property
                      
                      
                      309,750
                      
                      
                      
                      309,750Construction
      in progress
                      
                      
                      5,921,580
                      
                      
                      
                      5,523,620Capitalized
      interest
                      
                      
                      584,229
                      
                      
                      
                      507,587Vehicles
                      
                      
                      44,175
                      
                      
                      
                      44,175Slag
      conveyance equipment
                      
                      
                      44,375
                      
                      
                      
                      44,375Demo
      module building
                      
                      
                      6,630,063
                      
                      
                      
                      6,625,603Site
      improvements
                      
                      
                      1,276,774
                      
                      
                      
                      1,241,468Site
      equipment
                      
                      
                      337,760
                      
                      
                      
                      215,34115,506,690
                      
                      
                      
                      14,844,502Less
      accumulated depreciation
                      
                      
                      1,297,749
                      
                      
                      
                      849,568$
                      14,208,941
                      
                      
                      $
                      13,994,934
 
 Depreciation
expense was $448,181 and $368,615 for the six months ended June 30, 2010 and
2009, respectively.
  14
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 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 the
surviving merger entity.
  The
Company applied EITF 98-03 (which has been superseded by ASC 805-10-25-1) with
regard to the acquisition of the Clarkdale Slag Project. The Company determined
that the acquisition of the Clarkdale Slag Project did not constitute an
acquisition of a business as that term is defined in ASC 805-10-55-4, and the
Company recorded the acquisition as a purchase of assets.
  The
Company also formed a second wholly owned subsidiary, CMC, for the purpose of
developing a processing plant at the Clarkdale Slag Project.
  The $130
million purchase price was comprised of a combination of the cash paid, the
deferred tax liability assumed in connection with the acquisition, and the fair
value of our common shares issued, based on the closing market price of our
common stock, using the average of the high and low prices of our common stock
on the closing date of the acquisition. The Clarkdale Slag Project is without
known reserves and the project is exploratory in nature in accordance with
Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As
required by ASC 930-805-30, Mining – Business Combinations –
Initial Recognition, and ASC
740-10-25-49-55, Income Taxes
– Overall – Recognition – Acquired Temporary Differences in Certain Purchase
Transactions that are Not Accounted for as Business Combinations, the
Company then allocated the purchase price among the assets as follows (and also
further described in this Note 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 was based on fair market values
determined using an independent real estate appraisal firm (Scott W. Lindsay,
Arizona Certified General Real Estate Appraiser No. 30292). The remaining
$120,766,877 of the purchase price was allocated to the Clarkdale Slag Project,
which has been capitalized as a tangible asset in accordance with ASC
805-20-55-37, Use
Rights. Upon commencement of commercial production, the material will be
amortized using the unit-of-production method over the life of the Clarkdale
Slag Project.
  15
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  3.
              CLARKDALE SLAG
      PROJECT (continued)
  Closing
of the TI acquisition occurred on February 15, 2007, (the “Closing Date”) and
was subject to, among other things, the following terms and
conditions:
 
 a)
              The
      Company paid $200,000 in cash to VRIC on the execution of the Letter
      Agreement;
 
 b)
              The
      Company paid $9,900,000 in cash to VRIC on the Closing
    Date;
 
 c)
              The
      Company issued 16,825,000 shares of its common stock, valued at $3.975 per
      share using the average of the high and low on the Closing Date, to the
      designates of VRIC on the closing pursuant to Section 4(2) and Regulation
      D of the Securities Act of 1933;
  In
addition to the cash and equity consideration paid and issued upon closing, the
acquisition agreement contains the following payment terms and
conditions:
  d)
              The
      Company agreed to continue to pay VRIC $30,000 per month until the earlier
      of: (i) the date that is 90 days after receipt of a bankable feasibility
      study by the Company (the “Project Funding Date”), or (ii) the tenth
      anniversary of the date of the execution of the letter
      agreement;
  The
acquisition agreement also contains additional contingent payment terms which
are based on the Project Funding Date as defined in the agreement.
  e)
              The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  f)
              The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the “net smelter returns” on any
      and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until
      the first to occur of: (i) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000 or (ii) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000 in any calendar year; and
  g)
              The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag Project. The Company has accounted for
      this as a contingent payment and upon meeting the contingency
      requirements, the purchase price of the Clarkdale Slag Project will be
      adjusted to reflect the additional
  consideration.
  Under the
original JV Agreement, the Company agreed to pay NMC a 5% royalty on “net
smelter returns” payable from the Company’s 50% joint venture interest in the
production from the Clarkdale Slag Project.  Upon the assignment to
the Company of VRIC’s 50% interest in the Joint Venture Agreement in connection
with the reorganization with TI, the Company continues to have an
obligation to pay NMC a royalty consisting of 2.5% of the net smelter
returns on any and all proceeds of production from the Clarkdale Slag
Project.
  16
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  3.
              CLARKDALE SLAG
      PROJECT (continued)
  The
following table reflects the recorded purchase consideration for the Clarkdale
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 – Clarkdale Slag
    Project
                          
                          
                          48,076,734Total
                          
                          $
                          130,292,777
  The following table reflects the
components of the Clarkdale Slag Project:
  Allocation
      of acquisition cost:Clarkdale
      Slag Project (including net deferred income tax liability assumed of
      $48,076,734)
                        
                        $
                        120,766,877Land
      – smelter site and slag pile
                        
                        
                        5,916,150Land
                        
                        
                        3,300,000Income
      property and improvements
                        
                        
                        309,750Total
                        
                        $
                        130,292,777
  17
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 4.
              MINERAL PROPERTIES -
      MINING CLAIMS
 
 As of
June 30, 2010, mining claims consisted of 3,200 acres located near Searchlight,
Nevada. The 3,200 acre property is staked as twenty 160 acre claims, most of
which are also double-staked as 142 twenty acre claims. At June 30, 2010, the
mineral properties balance was $16,947,419.
 
 The
mining claims were acquired with issuance of 1,400,000 shares of the Company’s
common stock during 2005 and the provision that the Company, at its option,
issue an additional 1,400,000 shares each year in June for three consecutive
years ending in June 2008.  On June 25, 2008, the Company issued the
final 1,400,000 shares and received the title to the mining claims in
consideration of the satisfaction of the option agreement.
 
 The
mining claims were capitalized as tangible assets in accordance with ASC
805-20-55-37, Use
Rights.  Upon commencement of commercial production, the claims
will be amortized using the unit-of-production method.  If the Company
does not continue with exploration after the completion of the feasibility
study, the claims will be expensed at that time.
 
 On August
26, 2005, the Company paid $180,500 to the Bureau of Land Management (“BLM”) as
a bond for future reclamation work in Searchlight, Nevada. The recovery of the
reclamation bond was uncertain; therefore, the Company had established a full
allowance against the reclamation bond with the offsetting expense to project
exploration costs. During June 2010, the BLM determined that the bond was no
longer required, and the Company received a full refund of the bond. As such,
the allowance was reversed with an offsetting credit to project exploration
costs.
 
 In
connection with the Company’s new Plan of Operations (“POO”) for the Searchlight
Gold Project, a bond of $7,802 was posted with the BLM in December
2009.
  18
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  5.
              ACCOUNTS PAYABLE AND
      ACCRUED LIABILITIES
  Accounts
payable and accrued liabilities at June 30, 2010 and December 31, 2009 consisted
of the following:
  June 30,
                          2010
                        
                        
                        December 31,
                          2009Trade
      accounts payable
                        
                        $
                        197,242
                        
                        
                        $
                        414,279Accrued
      compensation and related taxes
                        
                        
                        69,070
                        
                        
                        
                        29,463$
                        266,312
                        
                        
                        $
                        443,742
  19
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 6.
              CAPITAL LEASE
      PAYABLE
 
 The
Company leases equipment under a capital lease. The capital lease payable
consisted of the following at June 30, 2010 and December 31, 2009,
 
 Lender
                                                                                
                                                                                Collateral
                                                                                
                                                                                Monthly
                                                                                  Payment
                                                                                
                                                                                Interest
                                                                                  Rate
                                                                                
                                                                                Maturity
                                                                                
                                                                                June 30,
                                                                                  2010
                                                                                
                                                                                December 31,
                                                                                  2009Caterpillar
      Financial Services Corporation
                                                                                
                                                                                Equipment
                                                                                
                                                                                $
                                                                                2,200
                                                                                
                                                                                
                                                                                4.45
                                                                                %
                                                                                July 2011
                                                                                
                                                                                $
                                                                                27,873
                                                                                
                                                                                $
                                                                                40,29227,873
                                                                                
                                                                                
                                                                                40,292Capital
      lease payable, current portion
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                (25,681
                                                                                )
                                                                                
                                                                                (25,117
                                                                                )Capital
      lease payable, net of current portion
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                $
                                                                                2,192
                                                                                
                                                                                $
                                                                                15,175
 
 The
following table represents future minimum lease payments on the capital lease
payable for each of the twelve month periods ending June 30,
 
 2011
                      
                      $
                      26,4012012
                      
                      
                      2,200Thereafter
                      
                      
                      —Total
      future minimum lease payments
                      
                      
                      28,601Imputed
      interest
                      
                      
                      (728
                      )Present
      value of future minimum lease payments
                      
                      $
                      27,873
 
 The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at June 30, 2010 and December 31,
2009,
 
 June 30,
                        2010
                      
                      
                      December 31,
                        2009Site
      equipment
                      
                      $
                      116,239
                      
                      
                      $
                      116,239Accumulated
      amortization
                      
                      
                      (89,601
                      )
                      
                      
                      (75,071
                      )$
                      26,638
                      
                      
                      $
                      41,168
  20
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
              VRIC PAYABLE - RELATED
      PARTY
 
 Pursuant
to the Clarkdale acquisition agreement, the Company agreed to pay VRIC $30,000
per month until the Project Funding Date.  Mr. Harry Crockett, one of
the Company’s directors, is an affiliate of VRIC.  Mr. Crocket joined the
Board of Directors subsequent to the acquisition.
 
 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 June 30,
 
 2011
                      
                      $
                      219,4992012
                      
                      
                      237,7182013
                      
                      
                      257,4482014
                      
                      
                      278,8162015
                      
                      
                      301,957Thereafter
                      
                      
                      559,9771,855,415VRIC
      payable, current portion
                      
                      
                      219,499VRIC
      payable, net of current portion
                      
                      $
                      1,635,916
 
 The
acquisition agreement also contains payment terms which are based on the Project
Funding Date as defined in the agreement. The terms and conditions of these
payments are discussed in more detail in Notes 3 and 13.
  21
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
              STOCKHOLDERS’
      EQUITY
 
 During
the six months ended June 30, 2010, the Company’s stockholders’ equity activity
consisted of the following:
 
 On June
30, 2010, the Company awarded and issued 12,857 shares each to two non officer
directors pursuant to its directors’ compensation policy.  The share
awards were priced at $0.70 per share and have been recorded as directors’
compensation expense of $18,000 and as common stock and additional paid-in
capital.
 
 On March
31, 2010, the Company awarded and issued 7,500 shares each to two non officer
directors pursuant to its directors’ compensation policy.  The share
awards were priced at $1.20 per share and have been recorded as directors’
compensation expense of $18,000 and as common stock and additional paid-in
capital.
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS
 
 On
October 15, 2009, the Board of Directors adopted the 2009 Stock Option Plan (the
“2009 Plan”). Under the terms of the 2009 Plan, options to purchase up to
3,250,000 shares of common stock of the Company may be granted to eligible
participants.
 
 The 2009
Plan was approved by the Company’s stockholders on December 15,
2009.
 
 The 2009
Plan provides that the option price for incentive stock options be the fair
market value of the stock at the date of the grant; however, for grantees who,
on the date of grant, own more than 10% of the total combined voting power of
the Company’s stock the exercise price may not be less than 110% of the fair
market value of the stock on the date of grant.  The maximum term of
an option shall be established by the Board of Directors or, if not so
established, shall be ten years from the grant date; however, for grantees who,
on the date of grant, own more then 10% of the total combined voting power of
the Company’s stock, the term may not exceed five years. Options granted under
the 2009 Plan become exercisable and expire as determined by the Board of
Directors.
 
 On
October 15, 2009, the Board of Directors approved the 2009 Stock Incentive Plan
for Directors (the “2009 Directors Plan”). Under the terms of the 2009 Directors
Plan, options to purchase up to 750,000 shares of common stock may be granted to
the Company’s directors.
 
 The 2009
Directors Plan was approved by the Company’s stockholders on December 15,
2009.
 
 Under the
2009 Directors Plan, no participant may receive awards with respect to more than
250,000 common shares during any calendar year. Stock options will be
exercisable and will vest at such time or times as the Board or Compensation
Committee determines at the time of grant. The exercise price of a stock option
granted under the 2009 Directors Plan may not be less than 100% of the fair
market value of a share of the Company’s common stock on the date the stock
option is granted. The term of each stock option will be established at the time
of grant by the Compensation Committee and may not exceed ten years from the
date the stock option is granted.
  22
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 During the six months ended June 30,
2010, the Company granted stock options as follows:
 
 a)
              On
      June 30, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 68,571 shares of common stock at
      $0.70 per share.  The options were granted to the Company’s
      three independent directors for directors’ compensation, are fully vested
      and expire on June 30, 2015.
  b)
              On
      May 3, 2010, the Company granted nonqualified stock options under the 2009
      Directors Plan for the purchase of 200,000 shares of common stock at $1.06
      per share.  The options were granted to an independent director
      upon his appointment to the Board of Directors. The options vest pro rata
      over four years, from May 1, 2011 through May 1, 2014. The options expire
      on the five year anniversary of the date that they
  vest.
  c)
              On
      March 31, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 20,000 shares of common stock at
      $1.20 per share.  The options were granted to the Company’s two
      independent directors for directors’ compensation, are fully vested and
      expire on March 31, 2015.
  d)
              On
      March 1, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 200,000 shares of common stock at
      $1.59 per share.  The options were granted to an independent
      director upon his appointment to the Board of Directors. The options vest
      pro rata over four years, from March 1, 2011 through March 1, 2014. The
      options expire on the five year anniversary of the date that they
      vest.
  Expenses
for the six months ended June 30, 2010 and 2009 related to vesting and granting
of stock options were $65,664 and $53,992, respectively, and are included in
general and administrative expense.
 
 Stock options -During
the six months ended June 30, 2010, the Company granted stock options to
directors totaling 488,571, with a weighted average exercise price of $1.23 per
share. As of June 30, 2010, stock options outstanding totaled 3,169,204 with a
weighted average price of $1.21 per share.
 
 The
following table summarizes the Company’s stock option activity for the six
months ended June 30, 2010:
 Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Exercise PriceBalance,
      December 31, 2009
                      
                      
                      2,680,633
                      
                      
                      $
                      1.20Options
      granted and assumed
                      
                      
                      488,571
                      
                      
                      
                      1.23Options
      expired
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled, forfeited
                      
                      
                      —
                      
                      
                      
                      —Options
      exercised
                      
                      
                      —
                      
                      
                      
                      —Balance,
      June 30, 2010
                      
                      
                      3,169,204
                      
                      
                      $
                      1.21
  23
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 The
Company estimates the fair value of options granted by using the Binomial
Lattice option pricing-model with the following assumptions used for
grants:
 
 2010Dividend
      yield
                      
                      —Expected
      volatility
                      
                      105.85% to 110.84%Risk-free
      interest rate
                      
                      1.79% to 3.28%Expected
      life (years)
                      
                      4.25 to 4.94
 
 The
Company believes that 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.
 
 For stock
options awarded during 2010, the expected volatility is based on the historical
volatility levels on our common stock. The risk-free interest rate is based on
the implied yield available on US Treasury zero-coupon issues over equivalent
lives of the options.
  The
expected life of employee stock options represents the weighted-average period
the stock options are expected to remain outstanding and is a derived output of
the Binomial Lattice model. The expected life of employee stock options is
impacted by all of the underlying assumptions and calibration of the Company’s
model. The Binomial Lattice model estimates the probability of exercise as a
function of these two variables based on the entire history of exercises and
cancellations on all past option grants made by the Company.
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the six months ended June 30, 2010:
 
 Number of
                        Shares Subject
                        to Vesting
                      
                      
                      Weighted Average
                        Grant Date
                        Fair ValueUnvested,
      December 31, 2009
                      
                      
                      150,000
                      
                      
                      $
                      0.84Options
      granted
                      
                      
                      400,000
                      
                      
                      
                      1.01Options
      vested
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled
                      
                      
                      —
                      
                      
                      
                      —Unvested,
      June 30, 2010
                      
                      
                      550,000
                      
                      
                      $
                      0.96
 
 As of
June 30, 2010, there was $405,540 total unrecognized compensation cost related
to unvested stock options. This cost is expected to be recognized as
follows:
 
 2010
                      
                      $
                      103,6752011
                      
                      
                      157,9522012
                      
                      
                      93,6942013
                      
                      
                      42,3932014
                      
                      
                      7,826Total
                      
                      $
                      405,540
  24
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 The
following table summarizes information about options granted during the six
months ended June 30, 2010:
 Number of Options
                      Granted
                      During 2010
                    
                    
                    Exercise Price
                      Equals, Exceeds
                      or
                      is Less than Mkt.
                      Price of Stock
                      on Grant Date
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Range of
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average Grant
                      Date Fair Value488,571
                    
                    
                    Equals
                    
                    
                    $
                    1.23
                    
                    
                    $0.70
      to $1.59
                    
                    
                    $
                    0.88—
                    
                    
                    Exceeds
                    
                    
                    $
                    —
                    
                    
                    $— to
      $ —
                    
                    
                    $
                    ——
                    
                    
                    Less
      Than
                    
                    
                    $
                    —
                    
                    
                    $— to
      $ —
                    
                    
                    $
                    —
 
 Stock
options/warrants - The Company did not grant any stock warrants during
the six months ended June 30, 2010.
 
 During
the six months ended June 30, 2010, the Company issued stock options for 488,571
shares of common stock to directors with a range of exercise prices of $0.70 to
$1.59 per share.
 
 The
following table summarizes information about options/warrants granted during the
six months ended June 30, 2010:
 
 Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Exercise PriceBalance,
      December 31, 2009
                      
                      
                      28,064,283
                      
                      
                      $
                      1.16Options/warrants
      granted and assumed
                      
                      
                      488,571
                      
                      
                      
                      1.23Options/warrants
      expired
                      
                      
                      —
                      
                      
                      
                      —Options/warrants
      cancelled, forfeited
                      
                      
                      —
                      
                      
                      
                      —Options/warrants
      exercised
                      
                      
                      —
                      
                      
                      
                      —Balance,
      June 30, 2010
                      
                      
                      28,552,854
                      
                      
                      $
                      1.16
  25
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
              STOCKHOLDER RIGHTS
      PLAN
 
 The
Company adopted a Stockholder Rights Plan (the “Rights Plan”) in August 2009 to
protect stockholders from attempts to acquire control of the Company in a manner
in which the Company’s Board of Directors determines is not in the best interest
of the Company or its stockholders.  Under the plan, each currently
outstanding share of the Company’s common stock includes, and each newly issued
share will include, a common share purchase right.  The rights are
attached to and trade with the shares of common stock and generally are not
exercisable.  The rights will become exercisable if a person or group
acquires, or announces an intention to acquire, 15% or more of the Company’s
outstanding common stock. The Rights Plan was not adopted in response to any
specific effort to acquire control of the Company.  The issuance of
rights had no dilutive effect, did not affect the Company’s reported earnings
per share and was not taxable to the Company or its
stockholders.
 
 11.
              PROPERTY RENTAL
      AGREEMENTS AND LEASES
 
 The
Company, through its subsidiary CML, has the following lease and rental
agreements as lessor:
 
 Clarkdale Arizona Central
Railroad - Rental
 
 CML has a
month-to-month rental agreement with Clarkdale Arizona Central Railroad. The
rental payment is $1,700 per month.
 
 Commercial Building -
Rental
 
 CML rents
commercial building space to various tenants. Rental arrangements are minor in
amount and are typically month-to-month.
 
 Land Lease - Wastewater
Effluent
 
 CML
assumed a lease as lessor on February 15, 2007 that was entered into by TI on
August 25, 2004 with the Town of Clarkdale, AZ (“Clarkdale”). The Company
provides approximately 60 acres of land to Clarkdale for disposal of Class B
effluent. In return, the Company has first right to purchase up to 46,000
gallons per day of the effluent for its use at fifty percent (50%) of the
potable water rate. In addition, if Class A effluent becomes available, the
Company may purchase that at seventy-five percent (75%) of the potable water
rate.
 
 The
original term of the lease was five years and expired on August 25, 2009.
However, the lease also provided for additional one year extensions without any
changes to the original lease agreement. At such time as Clarkdale no longer
uses the property for effluent disposal, and for a period of 25 years measured
from the date of the lease, the Company has a continuing right to purchase Class
B effluent, and if available, Class A effluent at then market
rates.
  26
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                INCOME
      TAXES
 
 The
Company is a Nevada corporation and is subject to federal and Arizona income
taxes.  Nevada does not impose a corporate income tax.
 
 The
income tax benefit consisted of the following at June 30, 2010 and
2009:
 
 June 30, 2010
                        
                        
                        June 30, 2009Income
      tax benefit at statutory rates
                        
                        $
                        1,454,903
                        
                        
                        $
                        1,262,831Non-deductible
      and other
                        
                        
                        44,418
                        
                        
                        
                        (1,691
                        )Change
      in valuation allowance
                        
                        
                        32,953
                        
                        
                        
                        (35,018
                        )Income
      tax benefit
                        
                        $
                        1,532,274
                        
                        
                        $
                        1,226,122
 
 Significant
components of the Company’s net deferred income tax assets and liabilities at
June 30, 2010 and December 31, 2009 were as follows:
 
 June 30,
                          2010
                        
                        
                        December 31,
                          2009Deferred
      income tax assetsNet
      operating loss carryforward
                        
                        $
                        8,614,931
                        
                        
                        $
                        7,169,190Option
      compensation
                        
                        
                        447,695
                        
                        
                        
                        412,058Reclamation
      bond
                        
                        
                        —
                        
                        
                        
                        68,590Property,
      plant & equipment
                        
                        
                        250,938
                        
                        
                        
                        164,405Gross
      deferred income tax asset
                        
                        
                        9,313,564
                        
                        
                        
                        7,814,243Valuation
      allowance
                        
                        
                        (447,695
                        )
                        
                        
                        (480,648
                        )8,865,869
                        
                        
                        
                        7,333,595Deferred
      income tax liabilitiesAcquisition
      related liabilities
                        
                        
                        55,197,465
                        
                        
                        
                        55,197,465Net
      deferred income tax liability
                        
                        $
                        46,331,596
                        
                        
                        $
                        47,863,870
 
 A
valuation allowance for deferred tax related to option compensation 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 June 30, 2010. For the year
ended December 31, 2009, the valuation allowance also included the reclamation
bond. The bond was returned to the Company in full in June 2010.
 
 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.
  27
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
              INCOME TAXES
      (continued)
 
 The
resulting estimated future federal and state income tax liability associated
with the temporary difference between the acquisition consideration and the tax
basis as computed in accordance with ASC 740 is reflected as an increase to the
total purchase price which has been applied to the underlying mineral and slag
project assets in the absence of there being a goodwill component associated
with the acquisition transactions.
 
 The
Company had cumulative net operating losses of approximately $22,670,873 and
$18,866,291 as of June 30, 2010 and December 31, 2009, respectively for federal
income tax purposes. The federal net operating loss carryforwards will expire
between 2025 and 2030.
 
 State Income Tax
Allocation
 
 The
Company has elected to file consolidated tax returns with federal and Arizona
tax authorities.  Tax attributes are computed using an allocation and
apportionment formula as outlined in Arizona tax law.  The Company
computes its tax provision using its statutory federal rate plus a state factor
that includes the Arizona statutory rate and the current apportionment
percentage, which is then reduced by the federal tax benefit that would be
obtained upon payment of the computed state taxes.
 
 For the
six month period ended June 30, 2010 and 2009, the state income tax benefit
which is included in the total tax benefit was $201,554 and $171,287,
respectively.
 
 The
Company had cumulative net operating losses of approximately $13,022,631 and
$10,148,277 as of June 30, 2010 and December 31, 2009, respectively for Arizona
state income tax purposes. The Arizona state net operating loss carryforwards
will expire between 2013 and 2015.
 
 Tax Returns Subject to
Examination
 
 The
Company and its subsidiaries 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 decreases in
its net operating losses available for carryforwards.  The Company is
no longer subject to income tax examinations by US federal and state tax
authorities for years prior to 2005. While the Company believes that 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.
  28
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
              COMMITMENTS AND
      CONTINGENCIES
 
 Lease obligations -
The Company rents office space in Henderson, Nevada.  The lease
agreement expired in November 2006, and the Company continues to rent the
existing space under month-to-month terms. Monthly rent was decreased from
$4,900 per month to $4,000 per month beginning in August 2009 due to less office
space leased. In February 2010, the monthly rent was increased to
$4,255.
 
 Rent
expense resulting from this operating lease agreement was $25,275 and $29,400
for each of the six months ended June 30, 2010 and 2009,
respectively.
 
 Employment contracts
- Ian R.
McNeil.  The Company
entered into an employment agreement with Ian R. McNeil, its President and Chief
Executive Officer, effective January 1, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. McNeil an annual salary of $190,000.  On December
30, 2005, Mr. McNeil received a one time bonus of $36,000 on execution of the
agreement.  In addition to his annual salary, Mr. McNeil may be
granted a discretionary bonus and stock options, to the extent authorized by the
Board of Directors.  The term of the agreement is for an indefinite
period, unless otherwise terminated by either party 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
salary.
 
 Carl S. Ager.  The Company
entered into an employment agreement with Carl S. Ager, its Vice President,
Secretary and Treasurer, effective January 1, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. Ager an annual salary of $160,000.  On December 30,
2005, Mr. Ager received a one time bonus of $26,666 on execution of the
agreement.  In addition to his annual salary, Mr. Ager may be granted
a discretionary bonus and stock options, to the extent authorized by the Board
of Directors. The term of the agreement is for an indefinite period, unless
otherwise terminated by either party 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
salary.
  Melvin L.
Williams.  The Company
entered into an employment agreement with Melvin L. Williams, its Chief
Financial Officer, effective June 14, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. Williams an annualized salary of $130,000 based on an increase
in time commitment from 300-600 hours worked to 600-800 hours
worked.  On June 14, 2006, the Company issued 50,000 restricted shares
of its common stock, as a one time bonus, and granted options to purchase
100,000 shares of its common stock at an exercise price of $2.06 per share,
exercisable for a period of five years until June 14, 2011.  The
options vested 50% on each of the first and second anniversaries of the
execution of the agreement.  The price of the shares issued and the
exercise price of the options granted were valued based on the closing price of
the common stock on the OTCBB on June 14, 2006.  In the event the
employment agreement is terminated by the Company without cause, the Company
will pay Mr. Williams an amount equal to three months’ salary in a lump sum as
full and final payment of all amounts payable under the
agreement.
  29
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
                COMMITMENTS AND
      CONTINGENCIES
(continued)
 
 Purchase consideration
Clarkdale Slag Project - In consideration of the acquisition of the
Clarkdale Slag Project from VRIC, the Company has agreed to certain additional
contingent payments. The acquisition agreement contains payment terms which are
based on the 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: (i) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000 or (ii) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000; and,
  c)
              The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Advance Royalty shall continue for a period of ten 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
cease.
 
 Clarkdale Slag Project
royalty agreement - NMC - Under the original JV Agreement, the Company
agreed to pay NMC a 5% royalty on “net smelter returns” payable from the
Company’s 50% joint venture interest in the production from the Clarkdale Slag
Project.  Upon the assignment to the Company of VRIC’s 50% interest in
the Joint Venture Agreement in connection with the reorganization with
Transylvania International, Inc., the Company continues to have an obligation to
pay NMC a royalty consisting of 2.5% of the net smelter returns on any and
all proceeds of production from the Clarkdale Slag Project.
 
 Development agreement
- In January 2009, the Company submitted a development agreement to the Town of
Clarkdale for development of an Industrial Collector Road (the “Road”). The
purpose of the Road is to provide the Company the capability to transport
supplies, equipment and products to and from the Clarkdale Slag Project site
efficiently and to meet stipulations of the Conditional Use Permit for the full
production facility at the Clarkdale Slag Project.
 
 The
timing of the development of the Road is to be within two years of the effective
date of the agreement. The effective date shall be the later of (i) 30 days from
the approving resolution of the agreement by the Council, (ii) the date on which
the Town obtains a connection dedication from separate property owners who have
land that will be utilized in construction of the Road, or (iii) the date on
which the Town receives the proper effluent permit. The contingencies outlined
in (ii) and (iii) above are beyond control of the Company.
 
 The
Company estimates the initial cost of construction of the Road to be
approximately $3,500,000 and the cost of additional enhancements to be
approximately $1,200,000 which will be required to be funded by the Company.
Based on the uncertainty of the contingencies, this cost is not included in the
Company’s current operating plans. Funding for construction of the Road will
require obtaining project financing or other significant
financing.  At June 30, 2010 and through the date the consolidated
financial statements were issued, these contingencies had not
changed.
  30
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 14.
              CONCENTRATION OF
      CREDIT RISK
 
 The
Company maintains its cash accounts in three financial institutions. Cash
accounts at these financial institutions are insured by the Federal Deposit
Insurance Corporation (FDIC) for up to $250,000 per institution. The Company has
never experienced a material loss or lack of access to its cash accounts;
however, no assurance can be provided that access to the Company’s cash accounts
will not be impacted by adverse conditions in the financial markets. At June 30,
2010, the Company had deposits in excess of FDIC insured limits in the amount of
$8,401,812.
 
 15.
              CONCENTRATION OF
      ACTIVITY
 
 For the
six months ended June 30, 2010, the Company purchased services from three major
vendors, Baker Hostetler, Arrakis, Inc. and NMC, which exceeded more than 10% of
total purchases and amounted to $450,000, $329,632 and $207,257,
respectively.
 
 For the
six months ended June 30, 2009, the Company purchased services from one major
vendor, Baker Hostetler, which exceeded more than 10% of total purchases and
amounted to approximately $591,892.
 
 16.
              RELATED PARTY
      TRANSACTIONS
 
 During
the six months ended June 30, 2010, 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
six months ended June 30, 2010, the Company incurred total fees and
reimbursement of expenses to NMC of $178,500 and $28,757, respectively. At June
30, 2010, the Company had an outstanding balance due to NMC of
$30,400.
 
 During
the six months ended June 30, 2010, the Company utilized Cupit, Milligan, Ogden
& Williams, CPAs (CMOW) to provide accounting support
services.  Mr. Williams is affiliated with CMOW.
 
 The
Company incurred total fees to CMOW of $89,927 for the six months ended June 30,
2010. 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 direct benefit to Mr. Williams was $37,769 of the above
CMOW fees and expenses for the six months ended June 30, 2010. The Company had
an outstanding balance due to CMOW of $19,148 as of June 30,
2010.
  31
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 17.
              GAIN FROM DISCONTINUED
      OPERATIONS
 
 Prior to
the Company’s corporate restructuring in 2005, the Company had several accounts
payable (the “Phage Payables”) dating back to 2003 and prior. All of these Phage
Payables were incurred in the UK.  These expenses were related to
business operations which were discontinued in February 2005.  In the
first quarter of 2010, the Company updated its internal review of the status of
the Phage Payables and recorded a $120,688 gain resulting from relief of
liabilities that were cleared based on expiration of UK statutes of limitations.
The gain is reflected as a gain from discontinued operations. There was no tax
impact as the prior expenses occurred while the Company operated outside the
United States, and the losses are not included in the Company’s net operating
losses.
  32




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




Certain
statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.”  These forward-looking statements
include, but are not limited to, statements about the plans, objectives,
expectations and intentions of Searchlight Minerals Corp., a Nevada corporation
(referred to in this Report as “we,” “us,” “our” or “registrant”) and other
statements contained in this Report that are not historical
facts.  Forward-looking statements in this Report or hereafter
included in other publicly available documents filed with the Securities and
Exchange Commission, or the Commission, reports to our stockholders and other
publicly available statements issued or released by us involve known and unknown
risks, uncertainties and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements.  Such future results are
based upon management’s best estimates based upon current conditions and the
most recent results of operations.  When used in this Report, the
words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate”
and similar expressions are generally intended to identify forward-looking
statements, because these forward-looking statements involve risks and
uncertainties.  There are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including our plans, objectives, expectations and
intentions and other factors that are discussed under the section entitled “Risk
Factors,” in this Report and in our Annual Report on Form 10-K for the year
ended December 31, 2009.




The
following discussion and analysis summarizes our plan of operation for the next
twelve months, our results of operations for the three and six month periods
ended June 30, 2010 and changes in our financial condition from our year ended
December 31, 2009.  The following discussion should be read in
conjunction with the Management’s Discussion and Analysis or Plan of Operation
included in our Annual Report on Form 10-K for the year ended December 31,
2009.




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, which is a reclamation project to recover precious and base
metals from the reprocessing of slag produced from the smelting of copper ore
mined at the United Verde Copper Mine in Jerome, Arizona; and (ii) the
Searchlight Gold Project, which involves exploration for precious metals on
mining claims near Searchlight, Nevada.




Clarkdale Slag
Project.  Prior to 2007, while conducting testing on the slag
material and to assist in the process of designing a larger scale production
module, we initially conducted our testing in a smaller scale pilot
plant.  During this initial testing process, we determined that we
could effectively liberate gold, silver, copper and zinc fromsmaller quantities of
ground slag material by employing:
  ·
              a
      mechanical process to break up the slag material using a small vibratory
      mill in our crushing and grinding circuit,
and
  ·
              a
      relatively benign (halide) chemical leaching process to liberate the
      precious and base metals from the crushed and ground
  slag.
  Our
primary goal consistently has been to demonstrate the economic viability of the
Clarkdale Project, including the generation of a bankable feasibility study for
the Clarkdale Project.  This work has required developing a
technically viable flow sheet for extracting gold, silver, copper and zinc from
the slag material at the Clarkdale Project site.  We began work on the
Clarkdale Project under a joint venture arrangement with the then existing
owners of the Clarkdale Project site, with qualified independent engineers, by
drilling and sampling the slag pile, under chain-of-custody standards, in order
to understand potential grades and tonnages.  After obtaining results
from these efforts, we proceeded to work on the metallurgy capable of unlocking
the value of the metals contained in the slag material.  To achieve
this objective, we operated a small pilot plant in Phoenix, Arizona, and
completed an internal pre-feasibility study.  The results of this work
demonstrated that, with proper grinding, a simple halide leach could extract the
precious and base metals in sufficient quantities which could potentially be
economically viable.  The next step involved the construction of a
larger pilot plant (test module) at the Clarkdale Project site designed to test
the commercial viability of the process and to complete a feasibility
study.  The flow sheet created for the test module did not contain any
proprietary or “black box” technology, but management was not aware of any
commercial mining operation that used this specific equipment and
chemistry.  We proceeded to build one commercial module rather than
complete a theoretical feasibility study.  Concurrently, we completed
the acquisition of the Clarkdale Project site from the previous
owners.
  33
  Thereafter,
we designed and built an operational plant in order to process 100-250 tons of
slag per day based upon the pilot program in Phoenix.  The plant was
staffed and commissioned in the first quarter of 2009.  However,
although the crushing and grinding circuit was able to produce assays from small
samples of milled product that demonstrated the presence of 0.4 ounces per ton
of gold in the slag material, the benign leach chemistry used in the operational
plant was unable to duplicate the results of the liberation of gold from the
slag material achieved in the pilot plant.
  Most of
2009 was devoted to attempts to commission and optimize the production module,
during which time we encountered numerous challenges involving its crushing and
grinding circuit.  In early 2010, we brought in experienced outside
engineering resources to better define and execute on a multi-pronged approach
to commercial feasibility of the Clarkdale Project.  This refocusing
effort has resulted in significant progress, both operationally and from a
research and development perspective, and the technical team is in the final
stages of analyzing multiple processes in order to determine the most efficient
and productive path towards the completion of a bankable feasibility
study.
  The key
to the potential success of the flow sheet involves the mechanical liberation of
the metals by proper grinding.  This process proved to be a
significant challenge for the larger grinding equipment installed on
site.  After an entire year of innovative attempts and modifications,
the grinding circuit failed to liberate the precious metals sufficiently to
allow the simple and benign halide leach circuit to operate
effectively.  We concluded that investigations of alternative grinding
and leaching methods were necessary in order to solve the problem.  We
have conducted preliminary studies of these alternative approaches to the
process flow sheet, which have shown promising results and are the current focus
of our efforts.
  Initially
during the start-up of the production module, emphasis was put on the crushing
and grinding circuit since it was believed, and shown in the pilot plant, that
in order to leach the highest amount of gold from the slag material with our
benign halide leach, mechanical liberation of gold particles was necessary via a
very fine grind.  As we began to crush and grind larger amounts of
slag material through the production module, we encountered a number of
equipment wear issues.  Highly abrasive carbon-rich ferro-silicates
(containing carbon, iron and silica) comprise about 90% of the slag
material.  The hardness of these materials caused significant wear and
tear on the metal crushers and grinders.  Further, as we have
increased the amount of slag material in the crushing and grinding circuit, we
experienced difficulties in grinding the slag material into a fine enough
material to be effectively leached by our benign halide leaching
process.  Our experience with the slag material in the larger scale
production module required us to seek out more advanced hard facing technology
and wear-resistant surfacing media for our crushing and grinding
equipment.  Initially, we believed that the wear issues relating to
the throughput rate of the crushing and grinding circuit had been
resolved.  However, further experience has shown, during the first
half of 2010 that these issues are still present.
  34
  As a
result of the challenges that have arisen with the equipment wear issues and our
not being able to grind the slag material in the production module continuously,
we adjusted the chemical characteristics of the leach to a more acidic leach in
an effort to put less emphasis on the mechanical liberation and put more
emphasis on the chemical liberation in an effort to maximize gold extraction
from the slag material.  Our goal was to achieve similar results in
gold extraction from the slag material to those obtained in the smaller scale
pilot plant, without significantly changing the grinding circuit or seeking
alternatives to the design of the larger scale production module that might have
a significantly greater capital cost than we had originally
planned.  In doing this testing, we have encountered difficulties with
the liberation of excess amounts of iron and silica in the leaching process,
which has resulted in difficulties with our filtration process and has made the
precipitation of gold from the pregnant leach solution more
difficult.
  Despite
these difficulties, during the second quarter of 2010, we processed 100 tons of
slag material through the grinding, leaching and filtering circuits of the
production module and produced pregnant leach solution that contains gold,
silver, copper and zinc.
  Because
of these challenges, which have affected our ability to operate the larger scale
production module on a continuous basis, the data from our operations reflects
that our production module will not be able to process 100 to 250 tons per day,
as originally planned.  However, the information received from the
operation of the larger scale production module has been invaluable in providing
information on how to process the slag and extract the base and precious metals
on a commercial scale.  In particular, we have a significant amount of
data on various grinds and leach chemistries and their affect on leaching the
desired (gold, silver, copper and zinc) and undesired (iron and silica) metals
into solution.  We also have a much better understanding of the
equipment wear issues that need to be considered when dealing with such hard and
abrasive material.  All of this data has provided us with a strong
knowledge base that can be drawn from as we continue to make adjustments to our
process going forward.
  During
the first quarter of 2010, we made a strategic decision to pursue a “multi-path”
approach to the accomplishment of our technical and gold production objectives
at the Clarkdale Slag Project in order to determine which is a more effective
technique to extract precious and base metals from our slag
material.  In early 2010, in order to focus more effectively on
alternative approaches to the process flow sheet, we supplemented our internal
technical team with a new project manager and additional experienced
engineers.  The new engineering team consists of specialists in
grinding, leaching, autoclaving, filtration, resins, solvent extraction and
electro-winning.  Of the five experienced engineering professionals
brought in to assist our internal technical team, three are registered
“qualified persons” by the Mining and Minerals Association of
America.
  The
technical staff refocused our resources and activities in accordance with
operational and research and development objectives.  The operational
team was tasked with retrofitting the existing plant to operate and produce
metal.  The research and development team was tasked with exploring
new grinding, leaching and extraction alternatives that would be suitable and
economically viable.  As a result of these efforts, four potential
flow sheets have been identified for the project and are currently being
tested.  They are as follows:
  ·
              Original Halide
      Leach.  The technical team’s preferred path to
      feasibility involves a focus on a mechanical liberation of the metals that
      would allow the simple halide leach to work effectively.  The
      research and development challenge has involved the identification of
      other commercially available and proven milling equipment that can
      mechanically liberate the metals and also stand up to the extreme
      abrasiveness of the slag material.  Three potential grinding
      technologies have been identified, and slag samples have been shipped to
      domestic and foreign facilities for testing.  Of the three
      alternatives, the most promising appears to be high pressure grinding
      rolls (HPGR), a very robust and efficient grinding system that is commonly
      used on hard and abrasive material.  Two tons of slag has now
      been crushed and ground at a large, third party plant.  We are
      analyzing the results of the mechanical performance of the HPGR
      system.  Based upon initial analysis of the two independent
      engineers that observed and monitored the tests, the crushing system does
      not appear to suffer extreme wear, such as we have encountered with the
      crushing and grinding system currently installed at
      Clarkdale.  The HPGR system also provided significant reduction
      of the ground particle size of the slag material.  The original
      halide leach is currently being tested on samples of the HPGR-ground
      slag.  The HPGR process could also eliminate similar equipment
      wear issues involved with developing feed for the other proposed
      parallel-path options.
  35
  ·
              Modified Halide
      Leach.  As the grinders in the process plant were not
      producing a product with sufficient mechanical liberation, alternate
      solutions were proposed utilizing existing plant and infrastructure at the
      Clarkdale facility.  The most straightforward solution, with the
      least equipment alterations, involved modifying the leach chemistry to
      overcome the mechanical grinding deficiencies.  To test this
      approach, 100 tons of Clarkdale slag were crushed, ground, and leached,
      resulting in approximately 50,000 gallons of pregnant leach solution
      (“PLS”).  This lower pH chemistry successfully dissolved a
      portion of the contained precious and base metals into
      solution.  The PLS contained an equivalent extracted gold grade
      of 0.1 to 0.2 ounces per ton (opt) of processed
      material.  However, the more aggressive leach also dissolves
      significant quantities of silica and iron, creating significant challenges
      with the filtration and extraction processes.  To deal with this
      challenge, the plant was subsequently retrofitted to add a solvent
      extraction (SX) unit to remove the silica and iron before metal recovery
      could be effectuated.  Results to date have been mixed, and the
      effectiveness of the SX unit in the circuit is still being
      tested.
  An
alternative method for extracting the gold from solution was also examined,
involving direct precipitation and zinc precipitation.  This resulted
in the production of a low-grade doré metal containing gold, silver and
copper.  The technical team is currently analyzing the smelting and
calculating results from the precipitation process.
  ·
              Three-Stage Acidic
      Leach.  After analyzing all of the technical data
      generated from the above two processes, our consulting metallurgists
      suggested tackling the iron and silica problem with a more direct
      approach.  This approach used existing equipment at the
      Clarkdale facility and leveraged the experience gained by running a more
      acidic modified halide leach.  The team is currently testing a
      three-stage leach.  The first step in this process selectively
      and deliberately leaches only the iron and silica from the
      material.  With the silica and iron removed, the filtered
      byproduct is then leached to extract the copper.  The final step
      is designed to leach the precious metals.  We are currently
      testing this approach, which is used on a commercial scale in the South
      African minerals processing industry, to determine its commercial
      viability.
  ·
              Autoclave
      Process.  The research and development team has also
      explored other alternatives, in light of experience in running the plant,
      to assure that all high-potential processes are adequately
      evaluated.  A promising alternative process involves
      autoclaving, a common process in the mining industry that involves adding
      substantial heat and pressure to the leaching
      process.  Originally, this approach was considered less
      attractive, due to the higher capital costs associated with
      autoclaving.
  Thus far,
the tests conducted under elevated temperature and pressure in a six-liter
autoclave system, indicate an average recovered gold grade into solution of
approximately 0.5 ounces per ton (opt).  The autoclave tests have also
shown a significant reduction in the iron and silica leached into solution,
allowing the extraction process to be executed more
efficiently.  Initial testing further reveals that, due to added
pressure, the grind may not be required to be as fine as with earlier procedures
tested.  These preliminary results may have positive implications for
significantly reducing capital and operating costs associated with grinding,
avoiding abrasive damage to equipment and improving the efficiency of the
filtration process.  Also, the potential higher recovered grades may
offset the higher capital costs involved with autoclave systems.
  36
  We have
conducted testing of the autoclave process and developed a technical program to
determine whether the autoclave process is a commercially scalable and
economically viable alternative.  Optimization of autoclave testing is
currently underway prior to running a bulk sample through a larger continuous
pilot autoclave system to determine the potential scale-up to a full-scale
commercial system.  If successful, this pilot testing would serve as
the basis for a pre-design engineering study for a full-scale 2,000 ton-per-day
commercial production facility.  If the autoclave technology proves
viable, its most common application in processing copper/gold ore would be to
use it as a pre- or post-treatment to a chemical leach.  The data and
practical operating experience gained in all leach tests completed in the
Clarkdale plant thus far may be directly applicable and will be part of the
pre-design engineering study.  Although we are at an early testing
stage of this program, the off-the-shelf and commercially-proven nature of
autoclave technology, coupled with the experience gained with chemical leach
testing, may reduce the delays encountered with previous technical
approaches.
  Our
objective in pursuing this multi-path approach is to determine which methodology
to use for the operation of our larger scale production facility so as to allow
us to determine the economics and serve as the basis for the final feasibility
of the Clarkdale Project.
  A more
thorough economic analysis of the full-scale production facility, including
specific capital and operating costs, funding schedules and funding sources, is
expected to occur during the feasibility evaluation of the larger scale
production module, which we believe will be completed by the end of October
2010.  The first stage of the feasibility evaluation began in the
second quarter of 2009, and has continued into the first half of 2010 with our
team of metallurgical engineers, with specialty expertise in dealing with
milling and leaching hard, abrasive and refractory material, working with our
Clarkdale personnel and consultants to achieve optimum results.  The
scope and size of our full-scale production facility, the timing and cost of a
production facility, will depend upon a number of factors, including the results
of a feasibility study and the availability of funding.
  If we
determine that we will use autoclaving, the capital costs will likely be higher
than those of open-vessel leaching, and, therefore, need to be considered when
comparing the various extraction methods.  If the results of the tests
to be conducted during the third quarter of 2010 demonstrate that autoclaving
has potential as a commercially viable method for production of base and
precious metal from the slag material, we may pursue a feasibility study using
the autoclave method.  However, if we decide to pursue an autoclave
method, our estimated capital costs could significantly increase over the
estimated costs for an extraction system based on our production
module.
  We have
budgeted $6,200,000 for our work program on the Clarkdale Slag Project over the
next twelve months, which includes the operation of the large scale production
module, our testing efforts and performing a feasibility study.  A
decision on allocating approximately $6,000,000 of additional funds for the
Phase II expansion and $4,700,000 to complete the construction of an Industrial
Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona will
be made once the large scale production module is operational and the results of
this testing program has been analyzed.
  In either
event, we expect that there will be significant financing requirements in order
to finance the construction of a full-scale production facility, and cannot
assure you that such funding will be available at all or on terms that are
reasonably acceptable to us.  If the results from our feasibility
study and the results from the operation of the production module do not support
a basis for us to proceed with the construction of our proposed, full-scale
production facility or we cannot obtain funding at all or on terms that are
reasonably acceptable to us, we will have to scale back or abandon our proposed
operations on the Clarkdale Slag Project.  If management determines,
based on any factors, including the foregoing, that capitalized costs associated
with any of our mineral interests are not likely to be recovered, we would incur
a significant impairment of our investment in such property interests on our
financial statements.




37


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 intend to continue to explore their applicability to the Searchlight
Gold Project.




On
February 11, 2010, we received final approval of our Plan of Operations from the
BLM, which allows us to conduct an 18-hole drill program on our project
area.  However, in an effort to conserve our cash and resources, we
have decided to postpone further exploration on our Searchlight Gold Project
until we are better able to determine the feasibility of our Clarkdale Slag
Project.  Once we have decided to resume our exploration program, work
on the project site will be limited to the scope within the Plan of
Operations.  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 have
budgeted $50,000 over the next twelve months for the Searchlight Gold Project to
file and pay the necessary fees to maintain our claims.




Anticipated
Cash Requirements




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold
Project.  Over the next twelve months, our management anticipates that
the minimum cash requirements for funding our proposed exploration, testing and
construction program and our continued operations will be approximately
$9,350,000.  As of August 10, 2010, we had cash reserves in the amount
of approximately $7,366,936.  Our current financial resources are not
sufficient to allow us to meet the anticipated costs of our exploration, testing
and construction programs for the next 12 months and we will require additional
financing in order to fund these activities.  We do not currently have
any financing arrangements in place for such additional financing, and there are
no assurances that we will be able to obtain additional financing in an amount
sufficient to meet our needs or on terms that are acceptable to us.




38


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




BUDGETAdministrative
      Expenses
                    
                    $
                    1,700,000Legal
      and Accounting Expenses
                    
                    
                    1,400,000SUBTOTAL
                    
                    $
                    3,100,000Clarkdale
      Slag ProjectProduction
      Module Operation
                    
                    $
                    3,040,000Technical
      Consulting Services
                    
                    
                    1,500,000Autoclave
      Testing
                    
                    
                    500,000Feasibility
      Study and Expansion Preparation
                    
                    
                    800,000Purchase
      Payments – VRIC
                    
                    
                    360,000SUBTOTAL
                    
                    $
                    6,200,000Searchlight
      Gold ProjectClaim
      Maintenance
                    
                    $
                    50,000SUBTOTAL
                    
                    $
                    50,000TOTAL
                    
                    $
                    9,350,000




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




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




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




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




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.




39




Critical
Accounting Policies




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




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




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




Exploration
costs – Mineral exploration costs are expensed as incurred.




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




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




Impairment of
long-lived assets–We review and evaluate long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amount
might not be recoverable.  As of June 30, 2010, and through the date
that these financial statements were issued, no events or circumstances have
happened to indicate that the related carrying values of the properties may not
be recoverable.  When we determine that an impairment analysis should
be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and ASC
360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.




40


Results
of Operations




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




ThreeMonthsEndedJune30,
                      
                      
                      SixMonthsEndedJune30,2010
                      
                      
                      2009
                      
                      
                      Percent
                        Increase/
                        (Decrease)
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      Percent
                        Increase/
                        (Decrease)Revenue
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      n/a
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      n/aOperating
      expenses
                      
                      
                      (2,131,505
                      )
                      
                      
                      (1,729,975
                      )
                      
                      
                      23.2
                      %
                      
                      
                      (3,969,983
                      )
                      
                      
                      (3,302,201
                      )
                      
                      
                      20.2
                      %Other
      income
                      
                      
                      14,865
                      
                      
                      
                      6,617
                      
                      
                      
                      124.6
                      %
                      
                      
                      20,603
                      
                      
                      
                      17,695
                      
                      
                      
                      16.4
                      %Income
      tax benefit
                      
                      
                      847,398
                      
                      
                      
                      645,029
                      
                      
                      
                      31.4
                      %
                      
                      
                      1,532,274
                      
                      
                      
                      1,226,122
                      
                      
                      
                      25.0
                      %Gain
      from discontinued operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      n/a
                      
                      
                      
                      120,688
                      
                      
                      
                      -
                      
                      
                      
                      n/aNet
      loss
                      
                      $
                      (1,269,242
                      )
                      
                      $
                      (1,078,329
                      )
                      
                      
                      17.7
                      %
                      
                      $
                      (2,296,418
                      )
                      
                      $
                      (2,058,384
                      )
                      
                      
                      11.6
                      %




Revenue




We are
currently in the exploration stage of our business, and have not earned any
revenues from our planned mineral operations to date.  We did not
generate any revenues from inception in 2000 through the six month period ended
June 30, 2010.  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:




ThreeMonthsEndedJune30,
                    
                    
                    SixMonthsEndedJune30,2010
                    
                    
                    2009
                    
                    
                    Percent
                      Increase/
                      (Decrease)
                    
                    
                    2010
                    
                    
                    2009
                    
                    
                    Percent
                      Increase/
                      (Decrease)Mineral
      explorationand
      evaluationexpenses
                    
                    $
                    778,086
                    
                    
                    $
                    531,291
                    
                    
                    
                    46.5
                    %
                    
                    $
                    1,259,841
                    
                    
                    $
                    843,626
                    
                    
                    
                    49.3
                    %Mineral
      exploration and evaluation expenses – related party
                    
                    
                    89,400
                    
                    
                    
                    90,000
                    
                    
                    
                    (0.7
                    )
      %
                    
                    
                    207,257
                    
                    
                    
                    180,000
                    
                    
                    
                    15.1
                    %Administrative
      – Clarkdale site
                    
                    
                    287,747
                    
                    
                    
                    138,250
                    
                    
                    
                    108.1
                    %
                    
                    
                    605,981
                    
                    
                    
                    370,937
                    
                    
                    
                    63.4
                    %General
      and administrative
                    
                    
                    696,783
                    
                    
                    
                    716,160
                    
                    
                    
                    (2.7
                    )
      %
                    
                    
                    1,358,796
                    
                    
                    
                    1,449,204
                    
                    
                    
                    (6.2
                    )
      %General
      and administrative –related
      party
                    
                    
                    52,808
                    
                    
                    
                    67,617
                    
                    
                    
                    (21.9
                    )
      %
                    
                    
                    89,927
                    
                    
                    
                    89,819
                    
                    
                    
                    0.1
                    %Depreciation
                    
                    
                    226,681
                    
                    
                    
                    186,657
                    
                    
                    
                    21.4
                    %
                    
                    
                    448,181
                    
                    
                    
                    368,615
                    
                    
                    
                    21.6
                    %Total
      operating expenses
                    
                    $
                    2,131,505
                    
                    
                    $
                    1,729,975
                    
                    
                    
                    23.2
                    %
                    
                    $
                    3,969,983
                    
                    
                    $
                    3,302,201
                    
                    
                    
                    20.2
                    %


41




Six month period
ended June 30, 2010 and 2009. Operating expenses increased by 20.2% to
$3,969,983 during the six month period ended June 30, 2010 from $3,302,201
during the six month period ended June 30, 2009.  Operating expense
increased primarily as a result of increases in mineral exploration and
evaluation expenses and administrative expenses at our Clarkdale project
site.




Mineral
exploration and evaluation expenses increased to $1,259,841 during the six month
period ended June 30, 2010 from $843,626 during the six month period ended June
30, 2009.  Mineral exploration and evaluation expenses increased
primarily as a result of greater use of independent consultants and engineers
related to pre-production activity on the Clarkdale project.




Included
in mineral exploration and evaluation expenses were the amounts of $207,257 and
$180,000 paid in the six month period ended June 30, 2010 and 2009,
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
presentations to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.




Administrative
– Clarkdale site expenses increased to $605,981 during the six month period
ended June 30, 2010 from $370,937 for the six month period ended June 30, 2009.
Administrative costs at the Clarkdale site increased due to the increase in
activity at the Clarkdale site related to pre-production activity on the
project.




General
and administrative expenses decreased by 6.2% to $1,358,796 during the six month
period ended June 30, 2010 from $1,449,204 during the six month period ended
June 30, 2009.  General and administrative expenses decreased
primarily as a result of increased professional administrative expense in the
prior comparable period due to the preparation of our registration statement on
Form S-1 and preparation of amended periodic reports for the periods from March
31, 2005 through December 31, 2008. This decrease was partially offset by
increased director compensation due to expansion of our board of
directors.  We anticipate that operating expenses will increase as we
grow our business operations.




Included
in general and administrative expenses for the six month periods ended June 30,
2010 and 2009 were compensation expenses related to the option vesting and
option grants of $93,782 and $53,992, respectively. On October 15, 2009, the
Board of Directors adopted the 2009 Stock Incentive Award Plan for Employees and
Service Providers (the “2009 Incentive Plan”).  Under the terms of the
2009 Incentive Plan, options to purchase up to 3,250,000 shares of our common
stock may be granted to eligible Participants. On December 15, 2009, our
stockholders approved the 2009 Incentive Plan. As of June 30, 2010, no options
have been granted under the 2009 Incentive Plan. On October 15, 2009, we adopted
the 2009 Stock Incentive Plan for Directors (the “2009 Directors
Plan”).  Under the terms of the 2009 Directors Plan, options to
purchase up to 750,000 shares of our common stock may be granted to directors
under such plan.  On December 15, 2009, our stockholders approved the
2009 Directors Plan. As of June 30, 2010, 499,821 options have been granted
under the 2009 Directors Plan with an exercise price ranging from $0.70 to $1.60
per share.




In
addition, we incurred $89,927 and $89,819 during the six month periods ended
June 30, 2010 and 2009, 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 direct
benefit to Mr. Williams was $37,769 and $28,742 of the above Cupit, Milligan,
Ogden & Williams fees for the six month periods ended June 30, 2010 and
2009, respectively.




42




Depreciation
expense increased to $448,181 during the six month period ended June 30, 2010
from $368,615 during the six month period ended June 30,
2009.  Depreciation expense increased as a result of bringing
additional construction in progress items into service and acquiring additional
equipment.




For the
six month period ended June 30, 2010, we purchased services from three major
vendors, Baker Hostetler LLP, our legal counsel; Arrakis, Inc.; and Nanominerals
Corp which exceeded more than 10% of total purchases and amounted to
approximately $450,000, $329,632, and $207,257, respectively.  For the
six month period ended June 30, 2009, we purchased services from one major
vendor, Baker Hostetler LLP, our legal counsel, which exceeded more than 10% of
total purchases and amounted to approximately $591,982.




Three month
period ended June 30, 2010 and 2009. Operating expenses increased by
23.2% to $2,131,505 during the three month period ended June 30, 2010 from
$1,729,975 during the three month period ended June 30,
2009.  Operating expense increased primarily as a result of increases
in mineral exploration and evaluation expenses and administrative expenses at
our Clarkdale project site.




Mineral
exploration and evaluation expenses increased to $778,086 during the three month
period ended June 30, 2010 from $531,291 during the three month period ended
June 30, 2009.  Mineral exploration and evaluation expenses increased
primarily as a result of moving from the testing phase to the pre-production
phase on the Clarkdale project.




Included
in mineral exploration and evaluation expenses were the amounts of $89,400 and
$90,000 paid in the three month period ended June 30, 2010 and 2009,
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
presentations to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.




Administrative
– Clarkdale site expenses increased to $287,747 during the three month period
ended June 30, 2010 from $138,250 for the three month period ended June 30,
2009. Administrative costs at the Clarkdale site increased due to the increase
in activity at the Clarkdale site related to pre-production activity on the
project.




General
and administrative expenses decreased by 2.7% to $696,783 during the three month
period ended June 30, 2010 from $716,160 during the three month period ended
June 30, 2009.  General and administrative expenses decreased
primarily as a result of increased professional administrative expense in the
prior comparable period due to the preparation of our registration statement on
Form S-1 and preparation of amended periodic reports for the periods from March
31, 2005 through December 31, 2008. This decrease was partially offset by
increased director compensation due to expansion of our board of
directors.  We anticipate that operating expenses will increase as we
grow our business operations.




43


In
addition, we incurred $52,808 and $67,617 during the three month periods ended
June 30, 2010 and 2009, 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 direct
benefit to Mr. Williams was $22,179 and $21,637 of the above Cupit, Milligan,
Ogden & Williams fees for the three month periods ended June 30, 2010 and
2009, respectively.




Depreciation
expense increased to $226,681 during the three month period ended June 30, 2010
from $186,657 during the three month period ended June 30,
2009.  Depreciation expense increased as a result of bringing
additional construction in progress items into service and acquiring additional
equipment.




Other
Income and Expenses




Six month period
ended June 30, 2010 and 2009.  Total other income increased to
$20,603 during the six month period ended June 30, 2010 from $17,695 during the
six month period ended June 30, 2009.  The increase was primarily due
to higher levels of cash placed in interest bearing accounts resulting in
increased interest income.




During
the six month period ended June 30, 2010, we received incidental rental revenue
of $12,960 compared to $14,105 for the same period in 2009 from rentals of our
commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania. The property leases consist of: (i) a rental
agreement with Clarkdale Arizona Central Railroad for the use of certain
facilities at a rate of $1,700 per month; and (ii) rental of commercial building
space to various tenants.  Rental arrangements are minor in amount and
are typically on a month to month basis.




Three month
period ended June 30, 2010 and 2009.  Total other income
increased to $14,865 during the three month period ended June 30, 2010 from
$6,617 during the three month period ended June 30, 2009.  The
increase in total other income primarily resulted from our placing additional
cash reserves in an interest bearing money market account during the second
quarter of 2010.




During
the three month period ended June 30, 2010, we received incidental rental
revenue of $6,480 compared to $6,565 for the same period in 2009 from rentals of
our commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania.




Income
Tax Benefit




Six month period
ended June 30, 2010 and 2009.  Income tax benefit increased to
$1,532,274 for the six month period ended June 30, 2010 from $1,226,122 during
the six month period ended June 30, 2009.  The increase in income tax
benefit primarily resulted from the increase in exploration stage losses during
the six month period ended June 30, 2010 from the six month period ended June
30, 2009.




Three month
period ended June 30, 2010 and 2009.  Income tax benefit
increased to $847,398 for the three month period ended June 30, 2010 from
$645,029 during the three month period ended June 30, 2009.  The
increase in income tax benefit primarily resulted from the increase in
exploration stage losses during the three month period ended June 30, 2010 from
the three month period ended June 30, 2009.




Gain
from Discontinued Operations




Six month period
ended June 30, 2010 and 2009. Prior to our corporate restructuring
in 2005, we had several accounts payable (the “Phage Payables”) dating back to
2003 and prior. All of these Phage Payables were incurred in the United Kingdom
(“UK”).  These expenses were related to business operations which were
discontinued in February 2005.  In the first quarter of 2010, we
updated our internal review of the status of the Phage Payables and recorded a
$120,688 gain resulting from relief of liabilities that were cleared based on
expiration of UK statutes of limitations. The gain is reflected as a gain from
discontinued operations. There was no tax impact as the prior expenses occurred
while we operated outside the United States and the losses are not included in
our net operating losses.




44




Net
Loss




Six month period
ended June 30, 2010 and 2009.  The aforementioned factors
resulted in a net loss of $2,296,418, or $0.02 per common share, for the six
month period ended June 30, 2010, as compared to a net loss of $2,058,384, or
$0.02 per common share, for the six month period ended June 30,
2009.




Three month
period ended June 30, 2010 and 2009.  The aforementioned
factors resulted in a net loss of $1,269,242, or $0.01 per common share, for the
three month period ended June 30, 2010, as compared to a net loss of $1,078,329,
or $0.01 per common share, for the three month period ended June 30,
2009.




As of
June 30, 2010 and December 31, 2009, we had cumulative net operating loss
carryforwards of approximately $22,670,873 and $18,866,291, respectively for
federal income taxes.  The federal net operating loss carryforwards
expire between 2025 and 2030.




We
had cumulative state net operating losses of approximately $13,022,631 and
$10,148,277 as of June 30, 2010 and December 31, 2009, respectively for state
income tax purposes.  The state net operating loss carryforwards
expire between 2013 and 2015.




Liquidity
and Capital Resources




Historically,
we have financed our operations primarily through the sale of common stock and
other convertible equity securities.  During 2009, we conducted the
following private placement of our securities:




·
            On
      November 12, 2009, we completed a private placement offering for gross
      proceeds of $15,098,245 to US accredited investors. A total of 12,078,596
      units were issued at a price of $1.25. Each unit sold consisted of one
      share of common stock and one-half of one share common stock purchase
      warrants. Each whole share purchase warrant entitles the folder to
      purchase one additional share of our common stock at a price of $1.85 per
      share for a period of three years form the date of issuance. In connection
      with this offering, we paid commissions to agents in the amount of
      $1,056,877 and issued warrants to purchase up to 301,965 shares of common
      stock. Additional costs related to this financing issuance were
      $290,196.




On
November 12, 2009, immediately prior to the closing of the November 12, 2009
private placement, we made several amendments to our outstanding common stock
purchase warrants. The warrants that were amended were issued in connection with
our February 23, 2007, March 22, 2007, December 26, 2007 and February 7, 2008
private placements. In connection with these private placements, we issued
warrants to purchase up to an aggregate of 7,042,387 shares of common stock.
Based on these amendments, the exercise price of these warrants was reduced to
$1.85 per share and their expiration dates were extended to November 12, 2012.
In all other respects, the terms and conditions of these warrants remain the
same.




The 2009
private placement agreements included contractual penalty provisions for failure
to comply with these registration rights provisions. However, we are in
compliance with these registration rights provisions. 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.




45


Working
Capital




The
following is a summary of our working capital at June 30, 2010 and December 31,
2009:




AtJune30,
                  2010
                
                
                AtDecember31,
                  2009
                
                
                Percent
                  Increase/(Decrease)Current
      Assets
                
                $
                8,867,556
                
                
                $
                13,221,823
                
                
                
                (32.9
                )%Current
      Liabilities
                
                
                (561,040
                )
                
                
                (874,470
                )
                
                
                (35.8
                )%Working
      Capital
                
                $
                8,306,516
                
                
                $
                12,347,353
                
                
                
                (32.7
                )%




As of
June 30, 2010, we had an accumulated deficit of $19,788,324. As of June 30,
2010, we had working capital of $8,306,516, compared to working capital of
$12,347,353 as of December 31, 2009.  The decrease in our working
capital was primarily attributable to our net loss, capital expenditures and
principal payments on our long term liabilities. Working capital was increased
during the fourth quarter of 2009 by the receipt of gross proceeds of
$15,098,245 from our November 2009 private placement. Cash was $8,726,301 as of
June 30, 2010, as compared to $13,099,562 as of December 31,
2009.  Net property and equipment increased to $14,208,941 as of June
30, 2010 from $13,994,934 as of December 31, 2009.  The increase
primarily resulted from equipment acquisitions and additions to the leaching and
filtration circuit at the Clarkdale Slag Project partially offset by
depreciation expense.




Included
in long term liabilities in the accompanying consolidated financials statements
is a balance of $46,331,596 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.




Cash
Flows




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




SixMonthsEndedJune30,2010
                
                
                2009
                
                
                Percent
                  Increase/(Decrease)Cash
      Flows Used in Operating Activities
                
                $
                (3,595,295
                )
                
                $
                (2,980,743
                )
                
                
                20.6
                %Cash
      Flows Used in Investing Activities
                
                
                (662,188
                )
                
                
                (1,208,718
                )
                
                
                (45.2
                )%Cash
      Flows (Used) Provided by  Financing Activities
                
                
                (115,778
                )
                
                
                42,684
                
                
                
                (371.2
                )%Net
      Change in Cash During Period
                
                $
                (4,373,261
                )
                
                $
                (4,146,777
                )
                
                
                5.5
                %




Net Cash Used in
Operating Activities.  Net cash used in operating activities
increased to $3,595,295 during the six month period ended June 30, 2010 from
$2,980,743 during the six month period ended June 30, 2009.  The
increase in cash used in operating activities was primarily due to operating
losses resulting from increased activity on our Clarkdale project.




Net Cash Used in
Investing Activities.  We used $662,118 in investing activities
during the six month period ended June 30, 2010, as compared to $1,208,718
during the six month period ended June 30, 2009.  The decrease was
primarily a result of decrease in purchases of property and equipment relating
to the Clarkdale Slag Project after receiving the Certificate of Occupancy for
the demonstration module building and our substantial completion of equipment
acquisitions for the demonstration module.




46




Net Cash (Used)
Provided by Financing Activities.  Net cash used by financing
activities was $115,778 for the six month period ended June 30, 2010 compared to
net cash provided by financing activities of $42,684 for the six month period
ended June 30, 2009.  Net cash used by financing activities during the
six month period ended June 30, 2010 primarily resulted from principal payments
on the capital lease and the VRIC payable.  Net cash provided by
financing activities during the six month period ended June 30, 2009 primarily
resulted from the receipt of $150,000 from the exercise of stock options offset
by principal payments on the capital lease and the VRIC payable.




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.




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




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold
Project.  Over the next twelve months, our management anticipates that
the minimum cash requirements for funding our proposed exploration, testing and
construction program and our continued operations will be approximately
$9,350,000.  As of August 10, 2010, we had cash reserves in the amount
of approximately $7,366,936.  Our current financial resources are not
sufficient to allow us to meet the anticipated costs of our exploration, testing
and construction programs for the next 12 months and we will require additional
financing in order to fund these activities.  We do not currently have
any financing arrangements in place for such additional financing, and there are
no assurances that we will be able to obtain additional financing in an amount
sufficient to meet our needs or on terms that are acceptable to us.




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




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




47




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




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




In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair
Value Measurements, which requires reporting entities to make new
disclosures about recurring or nonrecurring fair value measurements including
significant transfers into and out of Level 1 and Level 2 fair value
measurements and information on purchases, sales, issuances, and settlements on
a gross basis in the reconciliation of Level 3 fair value
measurements.  ASU 2010-6 is effective for annual reporting periods
beginning after December 15, 2009, except for Level 3 reconciliation disclosures
which are effective for annual periods beginning after December 15, 2010. We do
not have any assets or liabilities classified as Level 3.  We have
adopted the Level 1 and Level 2 amendments accordingly. As the update only
pertained to disclosures, it had no impact on our financial position, results of
operations, or cash flows upon adoption.




In
February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic
855), Amendment to
Certain Recognition and Disclosure Requirements, to remove the
requirement for SEC filers to disclose the date through which an entity has
evaluated subsequent events.  This change removes potential conflicts
with current SEC guidance and clarifies the intended scope of the reissuance
disclosure provisions.  The update was effective upon its date of
issuance, February 24, 2010 and we have adopted the amendments accordingly. As
the update only pertained to disclosures, it had no impact on our financial
position, results of operations, or cash flows upon adoption.




48


Item
3.  Quantitative and Qualitative Disclosures About Market
Risk




We had
unrestricted cash totaling $8,726,301 at June 30, 2010 and $13,099,562 at
December 31, 2009.  Our cash is held primarily in non-interest bearing
checking accounts, a savings account and a money market account and is not
materially affected by fluctuations in interest rates.  The
unrestricted cash is held for working capital purposes.  We do not
enter into investments for trading or speculative purposes.  Due to
the short-term nature of these cash holdings, we believe that we do not have any
material exposure to changes in the fair value of our investment portfolio as a
result of changes in interest rates.  Declines in interest rates,
however, would reduce future investment income.




Item
4.  Controls and Procedures




Controls
and Procedures




As of
June 30, 2010, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer, of the effectiveness of the design and operation of our
“disclosure controls and procedures,” as such term is defined under Exchange Act
Rules 13a-15(e) and 15d-15(e).




Based on
this evaluation, our chief executive officer and chief financial officer
concluded that, as of June 30, 2010, such disclosure controls and procedures
were effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC, and accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.




Changes
in Internal Control Over Financial Reporting




There
were no changes in our internal controls over financial reporting during the
quarter ended June 30, 2010 that materially affected, or are reasonably likely
to materially affect, our internal controls over financial
reporting.




PART
II - OTHER INFORMATION




Item
1.  Legal Proceedings




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




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




Item
1A.  Risk Factors




In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in the section entitled “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2009, 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.




49




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




On May 3,
2010, we issued options to purchase up to 200,000 shares of common stock to an
independent director upon his appointment to the Board.  The options
have an exercise price of $1.06 per share, vest pro rata over four years, from
May 1, 2011 through May 1, 2014, and expire on the five year anniversary of the
vesting date. These securities were issued pursuant to Section 4(2) of the
Securities Act.




On June
30, 2010, we issued 25,714 shares of our common stock to two non-management
directors, pursuant to the director compensation policy for these two
non-management directors. The 25,714 shares were issued based on a price of
$0.70 per share, the closing price of our common stock on June 30, 2010, the
last trading day of the second quarter of 2010.  These securities were
issued pursuant to Section 4(2) of the Securities Act.




On June
30, 2010, we issued options to purchase up to 68,571 shares of our common stock
to three non-management directors, pursuant to the director compensation policy
for these three non-management directors.  The 68,571 options were
issued at an exercise price of $0.70 per share, the closing price of our common
stock on June 30, 2010, the last trading day of the first quarter of
2010.  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 June 30, 2010.




Item
5.  Other Information




Not
applicable.




50


Item
6.  Exhibits




EXHIBIT TABLE




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




Reference
                  Number
                
                Item31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
                
                Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002




51





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:
      August 16, 2010
            By:
            /s/ Ian R. McNeilIan
      R. McNeilPresident
      and Chief Executive Officer
              (Principal
      Executive Officer)Date:
      August 16, 2010
            By:
            /s/Melvin L.
      WilliamsMelvin
      L. WilliamsChief
      Financial Officer
              (Principal
      Accounting Officer)




52