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, 2009




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


For the
transition period from _______ to _______.




Commission
file number 000-30995




SEARCHLIGHT
MINERALS CORP.




(Exact
name of registrant as specified in its charter)




Nevada
                (State
      or other jurisdiction of incorporation or
                organization)
              
              98-0232244
                (I.R.S.
      Employer Identification No.)#120
      - 2441 West Horizon Ridge Pkwy.
                Henderson,
      Nevada
              
              89052(Address
      of principal executive offices)
              
              (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 6, 2009, the registrant had 106,568,637 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
                                            
                                            36Item 3.  Quantitative and Qualitative
      Disclosures About Market Risk
                                            
                                            54Item 4.  Controls and
      Procedures
                                            
                                            55PART II - OTHER INFORMATION
                                            
                                            55Item 1.  Legal
      Proceedings
                                            
                                            55Item 1A.  Risk
      Factors
                                            
                                            55Item 2.  Unregistered Sales of Equity
      Securities and Use of Proceeds
                                            
                                            56Item 3.  Defaults Upon Senior
      Securities
                                            
                                            56Item 4.  Submission of Matters to a Vote
      of Security Holders
                                            
                                            56Item 5.  Other
      Information
                                            
                                            56Item 6.  Exhibits
                                            
                                            57SIGNATURES
                                            
                                            58


2




PART
I – FINANCIAL INFORMATION




Item
1. Financial Statements




SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)


June
      30, 2009
                                            
                                            
                                            December
      31, 2008ASSETSCurrent
      assetsCash
                                            
                                            $
                                            2,908,814
                                            
                                            
                                            $
                                            7,055,591Prepaid
      expenses
                                            
                                            
                                            155,091
                                            
                                            
                                            
                                            251,414Total
      current assets
                                            
                                            
                                            3,063,905
                                            
                                            
                                            
                                            7,307,005Property
      and equipment, net
                                            
                                            
                                            13,976,743
                                            
                                            
                                            
                                            13,132,282Mineral
      properties
                                            
                                            
                                            16,947,419
                                            
                                            
                                            
                                            16,947,419Slag
      project
                                            
                                            
                                            120,766,877
                                            
                                            
                                            
                                            120,766,877Land
      - smelter site and slag pile
                                            
                                            
                                            5,916,150
                                            
                                            
                                            
                                            5,916,150Land
                                            
                                            
                                            3,300,000
                                            
                                            
                                            
                                            3,300,000Reclamation
      bond and deposits, net
                                            
                                            
                                            103,100
                                            
                                            
                                            
                                            109,900Total
      non-current assets
                                            
                                            
                                            161,010,289
                                            
                                            
                                            
                                            160,172,628Total
      assets
                                            
                                            $
                                            164,074,194
                                            
                                            
                                            $
                                            167,479,633LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                                            
                                            $
                                            806,115
                                            
                                            
                                            $
                                            1,093,778Accounts
      payable - related party
                                            
                                            
                                            142,569
                                            
                                            
                                            
                                            108,515VRIC
      payable, current portion - related party
                                            
                                            
                                            202,677
                                            
                                            
                                            
                                            194,756Capital
      lease payable, current portion
                                            
                                            
                                            24,565
                                            
                                            
                                            
                                            24,026Total
      current liabilities
                                            
                                            
                                            1,175,926
                                            
                                            
                                            
                                            1,421,075Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                                            
                                            
                                            1,855,416
                                            
                                            
                                            
                                            1,958,774Capital
      lease payable, net of current portion
                                            
                                            
                                            27,873
                                            
                                            
                                            
                                            40,291Deferred
      tax liability
                                            
                                            
                                            49,229,239
                                            
                                            
                                            
                                            50,455,361Total
      long-term liabilities
                                            
                                            
                                            51,112,528
                                            
                                            
                                            
                                            52,454,426Total
      liabilities
                                            
                                            
                                            52,288,454
                                            
                                            
                                            
                                            53,875,501Commitments
      and contingencies - Note 12
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 shares authorized, 106,468,637 and
      105,854,691 shares, respectively, issued and outstanding
                                            
                                            
                                            106,468
                                            
                                            
                                            
                                            105,854Additional
      paid-in capital
                                            
                                            
                                            127,094,138
                                            
                                            
                                            
                                            126,854,760Accumulated
      deficit during exploration stage
                                            
                                            
                                            (15,414,866
                                            )
                                            
                                            
                                            (13,356,482
                                            )Total
      stockholders' equity
                                            
                                            
                                            111,785,740
                                            
                                            
                                            
                                            113,604,132Total
      liabilities and stockholders' equity
                                            
                                            $
                                            164,074,194
                                            
                                            
                                            $
                                            167,479,633
  See
Accompanying Notes to these Consolidated Financial Statements
  3
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 For the periodfromJanuary
      14, 2000(Date
      of Inception)For
      the three months ended
                                      
                                      
                                      For
      the six months ended
                                      
                                      
                                      ThroughJune
      30, 2009
                                      
                                      
                                      June
      30, 2008
                                      
                                      
                                      June
      30, 2009
                                      
                                      
                                      June
      30, 2008
                                      
                                      
                                      March
      31, 2009Revenue
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -Operating
      expensesMineral
      exploration and evaluation expenses
                                      
                                      
                                      531,291
                                      
                                      
                                      
                                      334,390
                                      
                                      
                                      
                                      843,626
                                      
                                      
                                      
                                      448,908
                                      
                                      
                                      
                                      5,882,310Mineral
      exploration and evaluation expenses - related party
                                      
                                      
                                      90,000
                                      
                                      
                                      
                                      90,000
                                      
                                      
                                      
                                      180,000
                                      
                                      
                                      
                                      180,000
                                      
                                      
                                      
                                      1,395,000Administrative
      - Clarkdale site
                                      
                                      
                                      138,250
                                      
                                      
                                      
                                      272,769
                                      
                                      
                                      
                                      370,937
                                      
                                      
                                      
                                      507,908
                                      
                                      
                                      
                                      2,026,798General
      and administrative
                                      
                                      
                                      716,160
                                      
                                      
                                      
                                      689,031
                                      
                                      
                                      
                                      1,449,204
                                      
                                      
                                      
                                      1,281,025
                                      
                                      
                                      
                                      7,567,373General
      and administrative - related party
                                      
                                      
                                      67,617
                                      
                                      
                                      
                                      10,722
                                      
                                      
                                      
                                      89,819
                                      
                                      
                                      
                                      27,125
                                      
                                      
                                      
                                      205,573Depreciation
                                      
                                      
                                      186,657
                                      
                                      
                                      
                                      15,430
                                      
                                      
                                      
                                      368,615
                                      
                                      
                                      
                                      30,552
                                      
                                      
                                      
                                      475,694Total
      operating expenses
                                      
                                      
                                      1,729,975
                                      
                                      
                                      
                                      1,412,342
                                      
                                      
                                      
                                      3,302,201
                                      
                                      
                                      
                                      2,475,518
                                      
                                      
                                      
                                      17,552,748Loss
      from operations
                                      
                                      
                                      (1,729,975
                                      )
                                      
                                      
                                      (1,412,342
                                      )
                                      
                                      
                                      (3,302,201
                                      )
                                      
                                      
                                      (2,475,518
                                      )
                                      
                                      
                                      (17,552,748
                                      )Other
      income (expense)Rental
      revenue
                                      
                                      
                                      6,565
                                      
                                      
                                      
                                      7,740
                                      
                                      
                                      
                                      14,105
                                      
                                      
                                      
                                      17,040
                                      
                                      
                                      
                                      86,235Loss
      on equipment disposition
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,542
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (6,068
                                      )Interest
      expense
                                      
                                      
                                      (628
                                      )
                                      
                                      
                                      (887
                                      )
                                      
                                      
                                      (1,321
                                      )
                                      
                                      
                                      (1,837
                                      )
                                      
                                      
                                      (6,811
                                      )Interest
      and dividend income
                                      
                                      
                                      680
                                      
                                      
                                      
                                      40,479
                                      
                                      
                                      
                                      6,453
                                      
                                      
                                      
                                      138,839
                                      
                                      
                                      
                                      601,637Total
      other income (expense)
                                      
                                      
                                      6,617
                                      
                                      
                                      
                                      47,332
                                      
                                      
                                      
                                      17,695
                                      
                                      
                                      
                                      154,042
                                      
                                      
                                      
                                      674,993Loss
      before income taxes
                                      
                                      
                                      (1,723,358
                                      )
                                      
                                      
                                      (1,365,010
                                      )
                                      
                                      
                                      (3,284,506
                                      )
                                      
                                      
                                      (2,321,476
                                      )
                                      
                                      
                                      (16,877,755
                                      )Income
      tax benefit
                                      
                                      
                                      645,029
                                      
                                      
                                      
                                      505,275
                                      
                                      
                                      
                                      1,226,122
                                      
                                      
                                      
                                      868,904
                                      
                                      
                                      
                                      5,606,057Loss
      from continuing operations
                                      
                                      
                                      (1,078,329
                                      )
                                      
                                      
                                      (859,735
                                      )
                                      
                                      
                                      (2,058,384
                                      )
                                      
                                      
                                      (1,452,572
                                      )
                                      
                                      
                                      (11,271,698
                                      )Discontinued
      operations:Loss
      from discontinued operations
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4,143,168
                                      )Net
      loss
                                      
                                      $
                                      (1,078,329
                                      )
                                      
                                      $
                                      (859,735
                                      )
                                      
                                      $
                                      (2,058,384
                                      )
                                      
                                      $
                                      (1,452,572
                                      )
                                      
                                      $
                                      (15,414,866
                                      )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.02
                                      )
                                      
                                      $
                                      (0.01
                                      )Net
      loss
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.02
                                      )
                                      
                                      $
                                      (0.01
                                      )Weighted
      average common shares outstanding -Basic
      and diluted
                                      
                                      
                                      106,457,962
                                      
                                      
                                      
                                      104,276,436
                                      
                                      
                                      
                                      106,363,518
                                      
                                      
                                      
                                      102,853,530
 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, 2008
                  
                  
                  105,854,691
                  
                  
                  $
                  105,854
                  
                  
                  $
                  126,854,760
                  
                  
                  $
                  (13,356,482
                  )
                  
                  $
                  113,604,132Issuance
      of common stock for cash, $0.25 per share from exercise of nonemployee
      stock options
                  
                  
                  400,000
                  
                  
                  
                  400
                  
                  
                  
                  99,600
                  
                  
                  
                  -
                  
                  
                  
                  100,000Issuance
      of common stock for cash, $0.25 per share from exercise of nonemployee
      stock options
                  
                  
                  100,000
                  
                  
                  
                  100
                  
                  
                  
                  24,900
                  
                  
                  
                  -
                  
                  
                  
                  25,000Amortization
      of stock options issued to director over vesting period
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  19,149
                  
                  
                  
                  -
                  
                  
                  
                  19,149Issuance
      of common stock for directors' compensation
                  
                  
                  6,568
                  
                  
                  
                  7
                  
                  
                  
                  17,993
                  
                  
                  
                  -
                  
                  
                  
                  18,000Issuance
      of stock options for directors' compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,010
                  
                  
                  
                  -
                  
                  
                  
                  8,010Issuance
      of common stock for cash, $0.25 per share from exercise of nonemployee
      stock options
                  
                  
                  100,000
                  
                  
                  
                  100
                  
                  
                  
                  24,900
                  
                  
                  
                  -
                  
                  
                  
                  25,000Amortization
      of stock options issued to director over vesting period
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  19,149
                  
                  
                  
                  -
                  
                  
                  
                  19,149Issuance
      of common stock for directors' compensation
                  
                  
                  7,378
                  
                  
                  
                  7
                  
                  
                  
                  17,993
                  
                  
                  
                  -
                  
                  
                  
                  18,000Issuance
      of stock options for directors' compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,684
                  
                  
                  
                  -
                  
                  
                  
                  7,684Net
      loss June 30, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,058,384
                  )
                  
                  
                  (2,058,384
                  )Balance,
      June 30, 2009
                  
                  
                  106,468,637
                  
                  
                  $
                  106,468
                  
                  
                  $
                  127,094,138
                  
                  
                  $
                  (15,414,866
                  )
                  
                  $
                  111,785,740
 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, 2009
                            
                            
                            June
      30, 2008
                            
                            
                            June
      30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                            
                            $
                            (2,058,384
                            )
                            
                            $
                            (1,452,572
                            )
                            
                            $
                            (15,414,866
                            )Deduct:
      Loss from discontinued operations
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (4,143,168
                            )Loss
      from continuing operations
                            
                            
                            (2,058,384
                            )
                            
                            
                            (1,452,572
                            )
                            
                            
                            (11,271,698
                            )Adjustments
      to reconcile loss from operating to net cash used in operating
      activities:Depreciation
                            
                            
                            368,615
                            
                            
                            
                            30,552
                            
                            
                            
                            475,694Stock
      based expenses
                            
                            
                            89,992
                            
                            
                            
                            73,316
                            
                            
                            
                            1,184,497Loss
      on disposition of fixed assets
                            
                            
                            1,542
                            
                            
                            
                            -
                            
                            
                            
                            7,417Amortization
      of prepaid expense
                            
                            
                            114,826
                            
                            
                            
                            86,445
                            
                            
                            
                            469,152Allowance
      for bond deposit recovery
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            180,500Changes
      in operating assets and liabilities:Other
      current assets
                            
                            
                            (18,503
                            )
                            
                            
                            (19,591
                            )
                            
                            
                            (624,243
                            )Other
      assets
                            
                            
                            900
                            
                            
                            
                            (101,000
                            )
                            
                            
                            (289,500
                            )Accounts
      payable and accrued liabilities
                            
                            
                            (253,609
                            )
                            
                            
                            (269,650
                            )
                            
                            
                            223,126Deferred
      income taxes
                            
                            
                            (1,226,122
                            )
                            
                            
                            (868,904
                            )
                            
                            
                            (5,606,057
                            )Net
      cash used in operating activities
                            
                            
                            (2,980,743
                            )
                            
                            
                            (2,521,404
                            )
                            
                            
                            (15,251,112
                            )Net
      cash used in operating activities from discontinued
    operations
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (2,931,324
                            )CASH
      FLOW FROM INVESTING ACTIVITIESCash
      paid on mineral property claims
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (87,134
                            )Cash
      paid for joint venture and merger option
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (890,000
                            )Cash
      paid to VRIC on closing date
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (9,900,000
                            )Cash
      paid for additional acquisition costs
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (130,105
                            )Capitalized
      interest
                            
                            
                            (84,563
                            )
                            
                            
                            (91,877
                            )
                            
                            
                            (426,906
                            )Purchase
      of property and equipment
                            
                            
                            (1,124,155
                            )
                            
                            
                            (3,495,044
                            )
                            
                            
                            (13,271,259
                            )Net
      cash used in investing activities
                            
                            
                            (1,208,718
                            )
                            
                            
                            (3,586,921
                            )
                            
                            
                            (24,705,404
                            )Net
      cash used in investing activities from discontinued
    operations
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (452,618
                            )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                            
                            
                            150,000
                            
                            
                            
                            7,738,500
                            
                            
                            
                            43,689,500Stock
      issuance costs
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (677,570
                            )Principal
      payments on capital lease payable
                            
                            
                            (11,879
                            )
                            
                            
                            (11,364
                            )
                            
                            
                            (63,800
                            )Principal
      payments on deferred purchase liability
                            
                            
                            (95,437
                            )
                            
                            
                            (88,124
                            )
                            
                            
                            (443,095
                            )Proceeds
      from subscribed stock
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            360,000Net
      cash provided by financing activities
                            
                            
                            42,684
                            
                            
                            
                            7,639,012
                            
                            
                            
                            42,865,035Net
      cash provided by financing activities from discontinued
      operations
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,384,237NET
      CHANGE IN CASH
                            
                            
                            (4,146,777
                            )
                            
                            
                            1,530,687
                            
                            
                            
                            2,908,814CASH
      AT BEGINNING OF PERIOD
                            
                            
                            7,055,591
                            
                            
                            
                            12,007,344
                            
                            
                            
                            -CASH
      AT END OF PERIOD
                            
                            $
                            2,908,814
                            
                            
                            $
                            13,538,031
                            
                            
                            $
                            2,908,814
  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, 2009
                  
                  
                  June 30, 2008
                  
                  
                  June 30, 2009CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      Paid, net of capitalized amounts
                  
                  $
                  1,321
                  
                  
                  $
                  1,837
                  
                  
                  $
                  57,562Income
      Taxes Paid
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Non-cash
      investing and financing activities:Capital
      equipment purchased through accounts payable and financing
                  
                  $
                  -
                  
                  
                  $
                  363,442
                  
                  
                  $
                  444,690Assets
      acquired for common stock issued for the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  66,879,375Assets
      acquired for common stock issued for mineral properties
                  
                  $
                  -
                  
                  
                  $
                  2,632,000
                  
                  
                  $
                  10,220,000Assets
      acquired for liabilities incurred in the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,628,188Net
      deferred tax liability assumed
                  
                  $
                  -
                  
                  
                  $
                  1,613,161
                  
                  
                  $
                  55,197,465Merger
      option payment applied to the acquisition
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  200,000Reclassify
      joint venture option agreement to slag project
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  690,000Warrants
      issued in connection with joint venture 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 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, as amended, for the year ended December
31, 2008 of Searchlight Minerals Corp. (the “Company”).
 
 The
interim financial statements present the balance sheets, statements of
operations, stockholders’ equity, and cash flows of the Company. The financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States.
 
 These
financial statements have been prepared by the Company without audit, and
include all adjustments (which consist solely of normal recurring adjustments)
which, in the opinion of management, are necessary for a fair presentation of
financial position and results of operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the Company’s audited financial
statements and notes thereto for the year ended December 31, 2008.
 
 In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through August 7, 2009, the
date the financial statements were issued.
 
 Description of
business – Searchlight Minerals Corp. is considered an exploration stage
company since its formation and the Company has not yet realized any revenues
from its planned operations.  The Company is primarily focused on the
exploration, acquisition and development of mining and mineral
properties.  Upon the location of commercially minable reserves, the
Company plans to prepare for mineral extraction and enter the development
stage.
  History - The Company
was incorporated on January 12, 1999 pursuant to the laws of the State of Nevada
under the name L.C.M. Equity, Inc.  From 1999 to 2005, the Company
operated primarily as a biotechnology research and development company with its
headquarters in Canada and an office in the UK.  On November 2, 2001,
the Company entered into an acquisition agreement with Regma Bio Technologies,
Ltd. pursuant to which Regma Bio Technologies, Ltd. entered into a reverse
merger with us with the surviving entity named “Regma Bio Technologies Limited”.
On November 26, 2003, the Company changed its name from “Regma Bio Technologies
Limited” to “Phage Genomics, Inc.”
  In
February, 2005, the Company announced its reorganization from a biotechnology
research and development company to a company focused on the development and
acquisition of mineral properties. In connection with its reorganization the
Company entered into mineral option agreements to acquire an interest in the
Searchlight Claims. The Company has consequently been considered an exploration
stage enterprise. Also in connection with its corporate restructuring, its board
of directors approved a change in its name from “Phage Genomics, Inc.” (Phage)
to "Searchlight Minerals Corp.” effective June 23, 2005.
  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 $15,414,866 from operations as of June
30, 2009 and has not commenced its mining and mineral processing operations,
rather, still in the exploration stage, raising substantial doubt about the
Company’s ability to continue as a going concern.  The Company will
seek additional sources of capital through the issuance of debt or equity
financing, but there can be no assurance the Company will be successful in
accomplishing its objectives.
 
 The
ability of the Company to continue as a going concern is dependent on additional
sources of capital and the success of the Company’s plan.  The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
 
 Principles of
consolidation – The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Clarkdale Minerals,
LLC (CML) and Clarkdale Metals Corp. (CMC).  Significant intercompany
accounts and transactions have been eliminated.
 
 Use of estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Mineral rights -
Costs of acquiring mining properties are capitalized upon
acquisition.  Mine development costs incurred either to develop new
ore deposits, to expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially mineable
property. Costs incurred to maintain current production or to maintain assets on
a standby basis are charged to operations.  Costs of abandoned
projects are charged to operations upon abandonment.  The Company
evaluates the carrying value of capitalized mining costs and related property
and equipment costs, to determine if these costs are in excess of their
recoverable amount whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable.  The periodic
evaluation of carrying value of capitalized costs and any related property and
equipment costs are based upon expected future cash flows and/or estimated
salvage value in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, “Accounting for Impairment or Disposal of Long-Lived
Assets.”
 
 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 $84,563 and
$91,877 for the six months ended June 30, 2009 and 2008,
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 SFAS
No. 144 if events or circumstances indicate that their carrying amount might not
be recoverable.  As of June 30, 2009 exploration progress is on target
with the Company’s exploration and evaluation plan and no events or
circumstances have happened to indicate the related carrying values of the
properties may not be recoverable. When the Company determines that a SFAS 144
impairment analysis should be done, the analysis will be performed using the
rules of EITF 04-03, “Mining Assets: Impairment and Business
Combinations.”
  Various
factors could impact our ability to achieve forecasted production schedules.
Additionally, commodity prices, capital expenditure requirements and reclamation
costs could differ from the assumptions the Company may use in cash flow models
used to assess impairment. The ability to achieve the estimated quantities of
recoverable minerals from exploration stage mineral interests involves further
risks in addition to those factors applicable to mineral interests where proven
and probable reserves have been identified, due to the lower level of confidence
that the identified mineralized material can ultimately be mined
economically.
 
 Material
changes to any of these factors or assumptions discussed above could result in
future impairment charges to operations.
  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 has adopted Statement of Financial Accounting
Standard No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations”,
which requires that an asset retirement obligation (“ARO”) associated with the
retirement of a tangible long-lived asset be recognized as a liability in the
period in which it is incurred and becomes determinable, with an offsetting
increase in the carrying amount of the associated asset.  The cost of
the tangible asset, including the initially recognized ARO, is depleted, such
that the cost of the ARO is recognized over the useful life of the
asset.  The ARO is recorded at fair value, and accretion expense is
recognized over time as the discounted liability is accreted to its expected
settlement value.  The fair value of the ARO is measured using
expected future cash flow, discounted at the Company’s credit-adjusted risk-free
interest rate.  To date, no significant asset retirement obligation
exists due to the early stage of exploration.  Accordingly, no
liability has been recorded.
 
 Fair value of financial
instruments - The Company’s financial instruments consist of accounts
payable, accrued liabilities, capital lease payable and mineral property
purchase obligations. The carrying value of these financial instruments
approximates their fair value based on their liquidity or their short-term
nature.  The Company is not exposed to significant interest or credit
risk arising from these financial instruments.
 
 Revenue recognition -
Revenues are recognized during the period in which the revenues are earned.
Costs and expenses are recognized during the period in which they are
incurred.
  Research and
development - All research and development expenditures are expensed as
incurred.
  Earnings (loss) per
share - The Company follows Statement of Financial Accounting Standard
No. 128 (“SFAS 128”), “Earnings Per Share” and Statement of Financial Accounting
Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity,” which establish
standards for the computation, presentation and disclosure requirements for
basic and diluted earnings per share for entities with publicly-held common
shares and potential common stock issuances. Basic earnings (loss) per share are
computed by dividing net income by the weighted average number of common shares
outstanding.  In computing diluted earnings per share, the weighted
average number of shares outstanding is adjusted to reflect the effect of
potentially dilutive securities, such as stock options and
warrants.  Common stock equivalent shares are excluded from the
computation if their effect is antidilutive. Weighted average of common stock
equivalents, which include stock options and warrants to purchase common stock,
on June 30, 2009 and 2008 that were not included in the computation of diluted
EPS because the effect would be antidilutive were, 21,953,465 and 24,361,656,
respectively.
 
 Expenses of offering
– The Company accounts for specific incremental costs directly to a proposed or
actual offering of securities as a direct charge against the gross proceeds of
the offering.
  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)
  Income taxes - The
Company accounts for its income taxes in accordance with the Statement of
Financial Accounting No. 109 (“SFAS 109”), “Accounting for Income Taxes”, which
requires recognition of deferred tax assets and liabilities for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and tax credit carry-forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
 
 On July
13, 2006, the Financial Accounting Standards Board (“FASB”) issued Financial
Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – An
Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entity’s financial
statements in accordance with SFAS No. 109, and prescribes a recognition
threshold and measurement attributes for financial statement disclosure of tax
positions taken or expected to be taken on a tax return.  Under FIN
48, the impact of an uncertain income tax position on the income tax return must
be recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than 50% likelihood of being
sustained.  Additionally, FIN 48 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  The Company adopted the provision of FIN
48 on January 1, 2007, which did not have any impact on the consolidated
financial statements.
 
 For
acquired properties that do not constitute a business as defined in Emerging
Issues Task Force Issue No. 98-03 (“EITF 98-03”), “Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business”,
deferred income tax liability is recorded on GAAP basis over income tax basis
using statutory federal and state rates. The resulting estimated future federal
and state income tax liability associated with the temporary difference between
the acquisition consideration and the tax basis is computed in accordance with
EITF 98-11 “Accounting for Acquired Temporary Differences in Certain Purchase
Transactions That Are Not Accounted for as Business Combinations” and SFAS 109,
and is reflected as an increase to the total purchase price which is then
applied to the underlying acquired assets in the absence of there being a
goodwill component associated with the acquisition
transactions.
  12
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  Stock-based
compensation - On December 16, 2004, the FASB issued Statement of
Financial Accounting Standard No. 123R (“SFAS 123R”), “Share-Based
Payment”, which replaces Statement of Financial Accounting Standard No. 123
(“SFAS 123”), “Accounting for Stock-Based Compensation” and supersedes APB
Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based on the grant
date fair value of the award. Under SFAS No. 123R, the Company must determine
the appropriate fair value model to be used for valuing share-based payments,
the amortization method for compensation cost and the transition method to be
used at date of adoption. The transition methods include prospective and
retroactive adoption option. Under the retroactive option, prior periods may be
restated either as of the beginning of the year of adoption or for all periods
presented. The prospective method requires that compensation expense be recorded
for all unvested stock options and restricted stock at the beginning of the
first quarter of adoption of SFAS No. 123R, while the retroactive methods would
record compensation expense for all unvested stock options and restricted stock
beginning with the first period restated. The Company adopted the requirements
of SFAS No. 123R for the fiscal year beginning after December 31,
2004.
 
 New accounting
pronouncements – The FASB has issued FASB Statement No. 168, The “FASB
Accounting Standards CodificationTM” and
the Hierarchy of Generally Accepted Accounting Principles. Statement 168
establishes the FASB Accounting Standards CodificationTM
(Codification) as the single source of authoritative U.S. generally accepted
accounting principles (U.S. GAAP) recognized by the FASB to be applied by
nongovernmental entities.  Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants.  Statement 168 and the Codification are
effective for financial statements issued for interim and annual periods ending
after September 15, 2009.
 
 The FASB
has issued FASB Statement No. 167, “Amendment to FASB Interpretation No. 46(R)”.
Statement 167 is a revision to FASB Interpretation No. 46 (Revised December
2003), ‘Consolidation of Variable Interest Entities”, and changes how a
reporting entity determines when an entity that is insufficiently capitalized or
is not controlled through voting (or similar rights) should be
consolidated.  The determination of whether a reporting entity is
required to consolidate another entity is based on, among other things, the
other entity’s purpose and design and the reporting entity’s ability to direct
the activities of the other entity that most significantly impact the other
entity’s economic performance.  Statement 167 will require a reporting
entity to provide additional disclosures about its involvement with variable
interest entities and any significant changes in risk exposure due to that
involvement.  A reporting entity will be required to disclose how its
involvement with a variable interest entity affects the reporting entity’s
financial statements. Statement 167 will be effective at the start of a
reporting entity’s first fiscal year beginning after November 15, 2009, or
January 1, 2010, for a calendar year-end entity. Adoption of this statement is
not expected to have a material impact on the Company’s consolidated financial
statements.
  13
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  The FASB
has issued FASB Statement No. 166, “Accounting for Transfers of Financial
Assets”. Statement 166 is a revision to FASB Statement No. 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”,
and will require more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risk related to the transferred financial assets.  It eliminates the
concept of a “qualifying special-purpose entity”, changes the requirements for
derecognizing financial assets, and requires additional
disclosures.  Statement 166 enhances information reported to users of
financial statements by providing greater transparency about transfers of
financial assets and an entity’s continuing involvement in transferred financial
assets.  Statement 166 will be effective at the start of a reporting
entity’s first fiscal year beginning after November 15, 2009, or January 1,
2010, for a calendar year-end entity. Adoption of this statement is not expected
to have a material impact on the Company’s consolidated financial
statements.
 
 The FASB
has issued FASB Statement No. 165, “Subsequent Events”. Statement 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet but before financial statements are issued or are
available to be issued. Specifically, Statements 165 provides: (i) the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements; (ii) the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements; and (iii) the disclosures that an entity
should make about events or transactions that occurred after the balance sheet
date.  Statement 165 is effective for interim or annual financial
periods ending after June 15, 2009, and shall be applied
prospectively.  The required disclosures of this statement have been
incorporated into the Company’s consolidated financial statements.
 
 In April
2009, FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1 was issued to amend
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, to
require disclosures about fair value of financial instruments for interim
reporting period as well as in annual financial statements. This FSP also amends
APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures
in summarized financial information at interim reporting periods. FSP No. 107-1
and APB 28-1 is effective for interim reporting period ending after June 15,
2009. Adoption of this guidance is not expected to have a material impact on the
Company’s consolidated financial statements.
 
 In April
2009, FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly”, was issued to provide additional guidance
for estimating the fair value in accordance with SFAS No. 157, “Fair Value
Measurements”, when the volume and level of activity for the asset or liability
have significantly decreased. This FSP also provides guidance on identifying
circumstances that indicate a transaction is not orderly. FSP No. FAS 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively. Adoption of this guidance is not expected to
have a material impact on the Company’s consolidated financial
statements.
  14
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  In April
2009, FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies”. This FSP
amends the guidance in FASB Statement No. 141 to require that assets acquired
and liabilities assumed in a business combination that arise from contingencies
be recognized at fair value if fair value can be reasonably estimated. If fair
value of such asset or liability cannot be reasonably estimated, the asset or
liability would generally be recognized in accordance with FASB Statement No. 5,
“Accounting for Contingencies”, and FASB Interpretation (FIN) No. 14,
“Reasonable Estimation of the Amount of a Loss”. This FSP eliminates the
requirements to disclose an estimate of the range of outcomes of recognized
contingencies at the acquisition date. This FSP also requires that contingent
consideration arrangements of an acquiree assumed by the acquirer in a business
combination be treated as contingent consideration of the acquirer and should be
initially and subsequently measured at fair value in accordance with Statement
141R. This FSP is effective for assets or liabilities arising from contingencies
in business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The adoption of this statement had little or no effect on the
Company’s consolidated financial position, results of operations, and
disclosures.
 
 In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’
Disclosures about Post-Retirement Benefit Plan Assets” (“FSP
FAS 132(R)-1”), which amends FASB Statement No. 132 “Employers’
Disclosures about Pensions and Other Post-Retirement Benefits” (“FAS 132”),
to provide guidance on an employer’s disclosures about plan assets of a defined
benefit pension or other post-retirement plan. The objective of FSP
FAS 132(R)-1 is to require more detailed disclosures about employers’ plan
assets, including employers’ investment strategies, major categories of plan
assets, concentrations of risk within plan assets, and valuation techniques used
to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for
the Company’s fiscal year ending after December 15, 2009. Upon initial
application, the provisions of this FSP are not required for earlier periods
that are presented for comparative purposes. The adoption of this statement had
little or no effect on the Company’s consolidated financial position, results of
operations, and disclosures.
 
 In
November 2008, the EITF reached consensus on Issue No. 08-6, “Equity Method
Investment Accounting Considerations” (“EITF 08-6”), which clarifies the
accounting for certain transactions and impairment considerations involving
equity method investments. The intent of EITF 08-6 is to provide guidance
on (i) determining the initial carrying value of an equity method
investment, (ii) performing an impairment assessment of an underlying
indefinite-lived intangible asset of an equity method investment,
(iii) accounting for an equity method investee’s issuance of shares, and
(iv) accounting for a change in an investment from the equity method to the
cost method. EITF 08-6 is effective for the Company’s fiscal year beginning
January 1, 2009 and is to be applied prospectively. The adoption of this
statement had little or no effect on the Company’s consolidated financial
position, results of operations, and disclosures.
 
 In
June 2008, the EITF reached consensus on Issue No. 07-5, “Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”
(“EITF 07-5”). EITF 07-5 clarifies the determination of whether an
instrument (or an embedded feature) is indexed to an entity’s own stock, which
would qualify as a scope exception under FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”).
EITF 07-5 is effective for the Company’s fiscal years beginning
January 1, 2009. Early adoption for an existing instrument is not
permitted. The adoption of this statement had little or no effect on the
Company’s consolidated financial position, results of operations, and
disclosures.
  15
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  In May
2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under FAS 133. Convertible debt instruments within the scope of FSP APB
14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires that the
liability and equity components of convertible debt instruments within the scope
of FSP APB 14-1 be separately accounted for in a manner that reflects the
entity’s nonconvertible debt borrowing rate. This requires an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component will be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. FSP APB 14-1 is effective for the Company’s fiscal year
beginning January 1, 2009 and will be applied retrospectively to all
periods presented.  The adoption of this statement had little or no
effect on the Company’s consolidated financial position, results of operations,
and disclosures.
  In April
2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”) which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). The
intent of this FSP is to improve the consistency between the useful life of a
recognized intangible asset under FAS 142 and the period of expected cash
flows used to measure the fair value of the asset under FASB Statement
No. 141, “Business Combinations” (“FAS 141”). FSP 142-3 is
effective for the Company’s fiscal year beginning January 1, 2009 and will
be applied prospectively to intangible assets acquired after the effective date.
The adoption of this statement had little or no effect on the Company’s
consolidated financial position, results of operations, and
disclosures.
 
 The FASB
issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a
Financial Asset When the Market for that Asset Is Not Active”. The FSP clarifies
the application of FASB Statement No. 157, “Fair Value Measurements”, in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. The FSP is effective October 10,
2008, and for prior periods for which financial statements have not been issued.
Revisions resulting from a change in the valuation technique or its application
should be accounted for as a change in accounting estimate following the
guidance in FASB Statement No. 154, “Accounting Changes and Error Corrections”.
However, the disclosure provisions in Statement 154 for a change in accounting
estimate are not required for revisions resulting from a change in valuation
techniques or its application. The adoption of this statement had no material
effect on the Company’s consolidated financial position, results of operations,
and disclosures.
  16
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
  On March
19, 2008, the FASB issued Statement of Financial Accounting Standard No. 161
(“SFAS 161”), “Disclosures about Derivative Instruments and Hedging
Activities.”  This statement is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures. This statement is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The adoption of this statement had little or
no effect on the Company’s consolidated financial position, results of
operations, and disclosures.
 
 In
February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of
FASB Statement No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delayed the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).  The provisions
of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January
1, 2009.  SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The adoption of this statement had
little or no effect on the Company’s consolidated financial position, results of
operations, and disclosures.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standard
No. 141(R) (“SFAS 141(R)”), “Business Combinations,” which amends
SFAS No. 141, and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. SFAS 141(R) is effective
for the Company’s fiscal year beginning January 1, 2009 and is to be
applied prospectively. The adoption of this statement had little or no effect on
the Company’s consolidated financial position, results of operations, and
disclosures.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standard
 No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated
Financial Statements - an amendment of ARB No. 51” which establishes
accounting and reporting standards pertaining to ownership interests in
subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent’s ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. SFAS 160 also
establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 is effective for the Company’s fiscal year beginning
January 1, 2009. The adoption of this statement had little or no effect on
the Company’s consolidated financial position, results of operations, and
disclosures.
  17
  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, 2009 and December 31,
2008:
 
 June
      30,
                            2009
                          
                          
                          December
      31,
                            2008Furniture
      and fixtures
                          
                          $
                          36,740
                          
                          
                          $
                          35,813Lab
      equipment
                          
                          
                          216,923
                          
                          
                          
                          2,804Computers
      and equipment
                          
                          
                          59,442
                          
                          
                          
                          50,253Income
      property
                          
                          
                          309,750
                          
                          
                          
                          309,750Construction
      in progress
                          
                          
                          5,392,815
                          
                          
                          
                          12,289,996Capitalized
      interest
                          
                          
                          426,906
                          
                          
                          
                          342,343Vehicles
                          
                          
                          38,175
                          
                          
                          
                          38,175Demo
      module building
                          
                          
                          6,621,980
                          
                          
                          
                          —Site
      improvements
                          
                          
                          1,132,924
                          
                          
                          
                          —Site
      equipment
                          
                          
                          214,242
                          
                          
                          
                          168,94914,449,897
                          
                          
                          
                          13,238,083Less
      accumulated depreciation
                          
                          
                          473,154
                          
                          
                          
                          105,801$
                          13,976,743
                          
                          
                          $
                          13,132,282
 
 Depreciation
expense was $368,615 and $30,552 for the six months ended June 30, 2009 and
2008, respectively.
  18
 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 with regard to the acquisition of the Clarkdale Slag
Project. The Company determined that the acquisition of the Clarkdale Slag
Project did not constitute an acquisition of a business, as that term is defined
in EITF 98-03, and the Company recorded the acquisition as a purchase of
assets.
  The $130
million purchase price was comprised of a combination of the cash paid, the
deferred tax liability assumed in connection with the acquisition, and the fair
value of our common shares issued, based on the closing market price of our
common stock, using the average of the high and low prices of our common stock
on the closing date of the acquisition. The Clarkdale Slag Project is without
known reserves and the project is exploratory in nature in accordance with
Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As
required by EITF 04-03 paragraph 2 and EITF 98-11, the Company then allocated
the purchase price among the assets as follows (and also further described in
this Note 3 to the financial statements): $5,916,150 of the purchase price was
allocated to the slag pile site, $3,300,000 to the remaining land acquired, and
$309,750 to income property and improvements. The purchase price allocation to
the real properties was based on fair market values determined using an
independent real estate appraisal firm (Scott W. Lindsay, Arizona Certified
General Real Estate Appraiser No. 30292). The remaining $120,766,877 of the
purchase price was allocated to the Slag Project, which has been capitalized as
a tangible asset in accordance with EITF 04-02. Upon commencement of commercial
production, the material will be amortized using the unit-of-production method
over the life of the Slag Project.
  The
Company also formed a second wholly owned subsidiary CMC, for the purpose of
developing a processing plant at the Clarkdale Slag Project.
  19
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 3.
                  CLARKDALE SLAG PROJECT
      (continued)
 
 Closing
of the TI acquisition occurred on February 15, 2007, (the “Closing Date”) and
was subject to, among other things, the following terms and
conditions:
 
 a)
                The
      Company paid $200,000 in cash to VRIC on the execution of the Letter
      Agreement;
 
 b)
                The
      Company paid $9,900,000 in cash to VRIC on the Closing
    Date;
 
 c)
                The
      Company issued 16,825,000 shares of its common stock, valued at $3.975 per
      share using the average of the high and low on the Closing Date, to the
      designates of VRIC on the closing pursuant to Section 4(2) and Regulation
      D of the Securities Act of 1933;
  In
addition to the cash and equity consideration paid and issued upon closing, the
acquisition agreement contains the following payment terms and
conditions:
  d)
                The
      Company agreed to continue to pay VRIC $30,000 per month until the earlier
      of: (i) the date that is 90 days after receipt of a bankable feasibility
      study by the Company (the “Project Funding Date”), or (ii) the tenth
      anniversary of the date of the execution of the letter
      agreement;
  The
acquisition agreement also contains additional contingent payment terms which
are based on the Project Funding Date as defined in the agreement.
  e)
                The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  f)
                The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the “net smelter returns” on any
      and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until
      the first to occur of: (1) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000; or (2) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000 in any calendar year; and,
  g)
                The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Company has accounted for this as a contingent payment and upon meeting the
contingency requirements, the purchase price of the Clarkdale Slag Project will
be adjusted to reflect the additional consideration.
  20
  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 Slag
Project:
 
 Purchase
      price:Cash
      payments
                            
                            $
                            10,100,000Joint
      venture option acquired in 2005 for cash
                            
                            
                            690,000Warrants
      issued for joint venture option
                            
                            
                            1,918,481Common
      stock issued
                            
                            
                            66,879,375Monthly
      payments, current portion
                            
                            
                            167,827Monthly
      payments, net of current portion
                            
                            
                            2,333,360Acquisition
      costs
                            
                            
                            127,000Total
      purchase price
                            
                            
                            82,216,043Net
      deferred income tax liability assumed - slag project
                            
                            
                            48,076,734$
                            130,292,777
  The following table reflects the
components of the Slag Project:
  Allocation
      of acquisition cost:Slag
      project (including net deferred tax liability assumed of
      $48,076,734)
                          
                          $
                          120,766,877Land
      - slag pile site
                          
                          
                          5,916,150Land
                          
                          
                          3,300,000Income
      property and improvements
                          
                          
                          309,750Total
                          
                          $
                          130,292,777
  21
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 4.
                  MINERAL
      PROPERTIES - MINING CLAIMS
 
 As of
June 30, 2009 mining claims consisted of 3,200 acres located near Searchlight,
Nevada. The 3,200 acre property is staked as twenty 160 acre claims, most of
which are also double-staked as 142 twenty acre claims. At June 30, 2009 mineral
properties balance was $16,947,419.
 
 The
mining claims were acquired during 2005 with issuance of 1,400,000 shares of the
Company’s common stock and the provision that the Company, at its option, issue
an additional 1,400,000 shares each year in June for three remaining
years.  On June 25, 2008, the Company issued the remaining 1,400,000
shares and received the title to the mining claims in consideration of the
satisfaction of the option agreement.
 
 The
mining claims were capitalized as tangible assets in accordance with EITF
04-02.  Upon commencement of commercial production, the claims will be
amortized using the unit-of-production method over the life of the
claims.  If the Company does not continue with exploration after the
completion of the feasibility study, the claims will be expensed at that
time.
 
 On August
26, 2005, the Company paid $180,500 to the Bureau of Land Management as a bond
for future reclamation work in Searchlight, Nevada. As of June 30, 2009, the
recovery of the reclamation bond is uncertain, therefore the Company has
established a full allowance against the reclamation bond with the offsetting
expense to project exploration costs.
 
 The
Company reviews and evaluates long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amount may not be
recoverable. The assets are subject to impairment consideration under SFAS No.
144 if events or circumstances indicate that their carrying amount might not be
recoverable. As of June 30, 2009 exploration progress is on target with the
Company’s exploration and evaluation plan and no events or circumstances have
happened to indicate the related carrying values of the properties may not be
recoverable. When the Company determines that a SFAS 144 impairment analysis
should be done, the analysis will be performed using the rules of EITF 04-03,
“Mining Assets: Impairment and Business Combinations.”
 
 5.
                  ACCOUNTS
      PAYABLE AND ACCRUED
LIABILITIES
  Accounts
payable and accrued liabilities at June 30, 2009 and December 31, 2008 consisted
of the following:
  June
      30,
                    2009
                  
                  
                  December
      31,
                    2008Trade
      accounts payable
                  
                  $
                  716,410
                  
                  
                  $
                  1,080,115Accrued
      compensation and related taxes
                  
                  
                  61,765
                  
                  
                  
                  7,546Accrued
      property taxes
                  
                  
                  26,500
                  
                  
                  
                  —Other
                  
                  
                  1,440
                  
                  
                  
                  6,117$
                  806,115
                  
                  
                  $
                  1,093,778
  22
  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, 2009 and December 31, 2008,
  Lender
                                            
                                            Collateral
                                            
                                            Monthly
                                              Payment
                                            
                                            
                                            Interest
                                              Rate
                                            
                                            Maturity
                                            
                                            June
      30,
                                              2009
                                            
                                            
                                            December
      31,
                                              2008Caterpillar
      Financial ServicesCorporation
                                            
                                            Equipment
                                            
                                            $
                                            2,200
                                            
                                            
                                            
                                            4.45
                                            %
                                            Jul-11
                                            
                                            $
                                            52,438
                                            
                                            
                                            $
                                            64,31752,438
                                            
                                            
                                            
                                            64,317Capital
      lease payable, current portion
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (24,565
                                            )
                                            
                                            
                                            (24,026
                                            )Capital
      lease payable, net of current portion
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            $
                                            27,873
                                            
                                            
                                            $
                                            40,291
  The
following table represents future minimum lease payments on the capital lease
payable for each of the twelve month periods ending June 30,
 
 2010
                              
                              $
                              26,4012011
                              
                              
                              26,4012012
                              
                              
                              2,2002013
                              
                              
                              —Thereafter
                              
                              
                              —Total
      future minimum lease payments
                              
                              $
                              55,002Imputed
      interest
                              
                              
                              (2,564
                              )Present
      value of future minimum lease payments
                              
                              $
                              52,438
 
 The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at June 30, 2009 and December 31,
2008,
 
 June 30, 2009
                                
                                
                                December 31,
                                  2008Site
      Equipment
                                
                                $
                                116,239
                                
                                
                                $
                                116,239Accumulated
      amortization
                                
                                
                                (60,541
                                )
                                
                                
                                (46,011
                                )$
                                55,698
                                
                                
                                $
                                70,228
  23
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
                        CLARKDALE
      ACQUISITION PAYABLE
 
 Pursuant
to the Clarkdale acquisition agreement the Company agreed to pay VRIC $30,000
per month until the Project Funding Date.
 
 The
Company has recorded a liability for this commitment using imputed interest
based on its best estimate of future cash flows. The effective interest rate
used was 8.00%, resulting in an initial present value of $2,501,187 and imputed
interest of $1,128,813. The expected term used was 10 years which represents the
maximum term the VRIC liability is payable if the Company does not obtain
Project Funding.
 
 The
following table represents future principal payments on VRIC payable for each of
the twelve month periods ending June 30,
 
 2010
                              
                              $
                              202,6772011
                              
                              
                              219,4992012
                              
                              
                              237,7182013
                              
                              
                              257,4482014
                              
                              
                              278,816Thereafter
                              
                              
                              861,9352,058,093VRIC
      payable, current portion
                              
                              
                              202,677VRIC
      payable, net of current portion
                              
                              $
                              1,855,416
 
 The
acquisition agreement also contains payment terms which are based on the Project
Funding Date as defined in the agreement. The terms of and conditions of these
payments are discussed in more detail in Note 3 and 12.
  24
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
                        STOCKHOLDERS’
      EQUITY
 
 During
the six months ended June 30, 2009 the Company’s stockholders’ equity activity
consisted of the following:
 
 a)
                      On
      June 30, 2009, the Company awarded and issued 3,689 shares each to its two
      non officer directors pursuant to its directors’ compensation
      policy.  The share award was priced at $2.44 per share and has
      been recorded as directors’ compensation expense of $18,000 and additional
      paid-in capital.
 
 b)
                      On
      April 14, 2009, the Company issued 100,000 shares of common stock from the
      exercise of stock options resulting in cash proceeds of
      $25,000.  Options exercised were for 100,000 shares of common
      stock at $0.25 per share.  These stock options were subject to
      an expiration date of November 23,
2010.
 
 c)
                      On
      March 31, 2009, the Company awarded and issued 3,284 shares each to its
      two non officer directors pursuant to its directors’ compensation policy.
      The share award was priced at $2.74 per share and has been recorded as
      directors’ compensation expense of $18,000 and additional paid-in
      capital.
 
 d)
                      On
      January 30, 2009, the Company issued 100,000 shares of common stock from
      the exercise of stock options resulting in cash proceeds of $25,000.
      Options exercised were for 100,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date
      of November 23, 2010.
 
 e)
                      On
      January 12, 2009, the Company issued 400,000 shares of common stock from
      the exercise of stock options resulting in cash proceeds of $100,000.
      Options exercised were for 400,000 shares of common stock at $0.25 per
      share.  These stock options were subject to an expiration date
      of February 16, 2009.
 
 9.
                      STOCKOPTION PLAN AND
      WARRANTS
 
 On April
30, 2007, the Board of Directors adopted the 2007 Stock Option Plan (the “2007
Plan”) and determined to cease granting any further options under the Company’s
2006 Stock Option Plan. Under the terms of the 2007 Plan, options to purchase up
to 40,000,000 shares of common stock of the Company may be granted to eligible
Participants.  On May 8, 2007, the Board of Directors determined to
cease granting any further options under the Company’s 2003 Nonqualified Stock
Option Plan and amended the number of shares of the Company’s common stock
available for issuance under the 2007 Plan to a maximum of 4,000,000. On June
15, 2007, shareholders of the Company approved the 2007 Plan.
 
 The 2007
Plan provides that the option price for incentive stock options be the fair
market value of the stock at the date of the grant and the option price for
non-qualified stock options be no less than 85% of the fair market value of the
stock at the date of the grant.  The maximum term of an option shall
be established for that option by the Board of Directors or, if not so
established, shall be ten years from the grant date. Options granted under the
2007 Plan become exercisable and expire as determined by the Board of
Directors.
  25
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                        STOCK OPTION PLAN AND
      WARRANTS(continued)
 
 During the six months ended June 30,
2009, the Company granted stock options as follows:
 
 a)
                      On
      June 30, 2009, the Company granted nonqualified stock options under the
      2007 Plan for the purchase of 7,377 shares of common stock at $2.44 per
      share.  The options were granted to an independent director for
      directors’ compensation are fully vested and expire on June 30,
      2014.
  b)
                      On
      March 31, 2009, the Company granted nonqualified stock options under the
      2007 Plan for the purchase of 6,569 shares of common stock at $2.74 per
      share. The options were granted to an independent director for directors’
      compensation are fully vested and expire on March 31,
  2014.
  Expenses
for the six months ended June 30, 2009 and 2008 related to vesting and granting
of stock options were $53,992 and $859, respectively and are included in general
and administrative expense.
 
 Stock
      options–During the six months ended June
      30, 2009 the Company granted stock options to a director totaling 13,946,
      with a weighted average exercise price of $2.58 per share. As of June 30,
      2009 stock options outstanding totaled 2,859,493 with a weighted average
      exercise price of $1.13 per
share.
 
 The
following table summarizes the Company’s stock option activity for the six
months ended June 30, 2009:
  Number of
                                    Shares
                                  
                                  
                                  Weighted
                                    Average
                                    Exercise PriceBalance,
      December 31, 2008
                                  
                                  
                                  3,560,293
                                  
                                  
                                  $
                                  1.02Options
      granted and assumed
                                  
                                  
                                  13,946
                                  
                                  
                                  
                                  2.58Options
      expired
                                  
                                  
                                  (114,746
                                  )
                                  
                                  
                                  2.43Options
      cancelled
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Options
      exercised
                                  
                                  
                                  (600,000
                                  )
                                  
                                  
                                  0.25Balance, June 30, 2009
                                  
                                  
                                  2,859,493
                                  
                                  
                                  $
                                  1.13
 
 The
Company estimates the fair value of these options granted by using the Binomial
Lattice option pricing-model with the following assumptions used for
grants:
 
 2009Dividend
      yield
                              
                              
                              —Expected
      volatility
                              
                              72.67%
      to 76.65%Risk-free
      interest rate
                              
                              1.67%
      to 2.54%Expected
      life (years)
                              
                              
                              4.25
 
 The
Company believes this model provides the best estimate of fair value due to its
ability to incorporate inputs that change over time, such as volatility and
interest rates, and to allow for actual exercise behavior of option holders.
  26
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                        STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 The
Company estimated expected volatility using the historical volatility levels of
the Company’s common stock.  The risk-free interest rate is based on
the implied yield available on U.S. Treasury zero-coupon issues over equivalent
lives of the options.
  The
expected life of employee stock options represents the weighted-average period
the stock options are expected to remain outstanding and is a derived output of
the Binomial Lattice model. The expected life of employee stock options is
impacted by all of the underlying assumptions and calibration of the Company’s
model. The Binomial Lattice model estimates the probability of exercise as a
function of these two variables based on the entire history of exercises and
cancellations on all past option grants made by the Company.
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the six months ended June 30, 2009:
 
 Number of
                                    Shares Subject
                                    to Vesting
                                  
                                  
                                  Weighted Average
                                    Grant Date
                                    Fair ValueUnvested,
      December 31, 2008
                                  
                                  
                                  200,000
                                  
                                  
                                  $
                                  0.79Options
      granted
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Options
      vested
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Options
      cancelled
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Unvested, June 30, 2009
                                  
                                  
                                  200,000
                                  
                                  
                                  $
                                  0.79
 
 As of
June 30, 2009, there was $99,856 total unrecognized compensation cost related to
unvested stock options. This cost is expected to be recognized as follows: 2009
- $30,342, 2010 - $39,873, 2011 - $21,598, and 2012 - $8,043.
 
 The
following table summarizes information about options granted during the six
months ended June 30, 2009:
  Number of Options
                                  Granted
                                  During 2009
                                
                                Exercise Price
                                  Equals, Exceeds
                                  Or
                                  Is Less than Mkt.
                                  Price of Stock
                                  On Grant Date
                                
                                Weighted
                                  Average
                                  Exercise
                                  Price
                                
                                
                                Range of
                                  Exercise
                                  Price
                                
                                
                                Weighted
                                  Average Fair
                                  Value13,946
                                
                                Equals
                                
                                $
                                2.58
                                
                                
                                $
                                2.44
      to $2.74
                                
                                
                                $
                                1.13—
                                
                                Exceeds
                                
                                $
                                —
                                
                                
                                $—to $—
                                
                                
                                $
                                ——
                                
                                Less Than
                                
                                $
                                —
                                
                                
                                $ — to $ —
                                
                                
                                $
                                —13,946
                                
                                Equals
                                
                                $
                                2.58
                                
                                
                                $
                                2.44 to $2.74
                                
                                
                                $
                                1.13
  27
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                        STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 Stock
options/warrants – During the six months ended June 30, 2009 the Company
did not grant any stock warrants.
 
 On
      December 29, 2008, the Company amended the private placement warrants from
      the February 23, 2007 and March 22, 2007 private placement offerings. The
      following material amendments to the private placement warrants were
      adopted: (i) the expiration date of the private placement warrants has
      been extended to March 1, 2010; (ii) the exercise price of the private
      placement warrants has been decreased to $2.40 per share; (iii) the call
      provision in the investor warrants is now included in the broker warrants;
      and (iv) the call provision in the private placement warrants has been
      amended so that all of such private placement warrants callable for
      cancellation by the Company if the volume weighted average price of the
      common stock exceeds $4.40 per share for 20 consecutive trading days and
      there is an effective registration statement registering the shares of
      common stock underlying the private placement warrants at the time of the
      call of the private placement
warrants.
 
 On April
30, 2009, the Company’s Board of Directors unilaterally determined, without any
negotiations with the warrant holders to amend and restate the call provisions
in the private placement warrants further so that the terms of such amended and
restated call provisions are identical to the terms of the private placement
warrants on their original dates of issuance.  As a result: (v) all of
the investor warrants are callable for cancellation by the Company if the volume
weighted average price of the common stock exceeds $6.50 per share for 20
consecutive trading days and there is an effective registration statement
registering the shares of common stock underlying the investor warrants at the
time of the call of the investor warrants, (vi) the broker warrants will not
have call provision, (vii) the previously adopted amendments with respect to the
extension of the expiration dates and the reduction of the exercise price for
the private placement warrants will remain unchanged.
 
 The
Company determined that the amendment to extend the expiration date of the
private placement warrants which were originally issued as part of equity
transactions, did not result in an expense to the Company.  The
warrants were not a component to any debt transaction, registration agreement or
services rendered to the Company.
 
 During
the six months ended June 30, 2009 the Company issued stock options for 13,946
shares of common stock to a director with a weighted average exercise price of
$2.58 per share.
 
 The
following table summarizes information about options/warrants granted during the
six months ended June 30, 2009:
 
 Number of
                                    Shares
                                  
                                  
                                  Weighted
                                    Average
                                    Exercise PriceBalance,
      December 31, 2008
                                  
                                  
                                  22,602,680
                                  
                                  
                                  $
                                  1.11Options/warrants
      granted and assumed
                                  
                                  
                                  13,946
                                  
                                  
                                  
                                  2.58Options/warrants
      expired
                                  
                                  
                                  (114,746
                                  )
                                  
                                  
                                  2.43Options/warrants
      cancelled
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Options/warrants
      exercised
                                  
                                  
                                  (600,000
                                  )
                                  
                                  
                                  0.25Balance, June 30, 2009
                                  
                                  
                                  21,901,880
                                  
                                  
                                  $
                                  1.12
  28
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                        PROPERTY RENTAL
      AGREEMENTS AND LEASES
 
 The
      Company through its subsidiary CML has the following lease and rental
      agreements as lessor:
 
 Clarkdale Arizona
      Central Railroad – Rental
 
 CML
      has a month-to-month rental agreement with Clarkdale Arizona Central
      Railroad. The rental payment is $1,700 per
  month.
 
 Commercial Building –
      Rental
 
 CML
      rents commercial building space to various tenants. Rental arrangements
      are minor in amount and are typically
  month-to-month.
 
 Land Lease – Wastewater
Effluent
 
 CML
      assumed a lease as lessor on February 15, 2007 that was entered into by TI
      on August 25, 2004 with the Town of Clarkdale, AZ (Clarkdale). The Company
      provides approximately 60 acres of land to Clarkdale for disposal of Class
      B effluent. In return, the Company has first right to purchase up to
      46,000 gallons per day of the effluent for its use at fifty percent (50%)
      of the potable water rate. In addition, if Class A effluent becomes
      available, the Company may purchase that at seventy five percent (75%) of
      the potable water rate.
 
 The term
of the lease is 5 years with a one year extension available. At such time as
Clarkdale no longer uses the property for effluent disposal, and for a period of
twenty five (25) years measured from the date of the lease, the Company has a
continuing right to purchase Class B, and if available, Class A at then market
rates.
  29
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 11.
                        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, 2009 and
2008,
 
 June 30,
                                    2009
                                  
                                  
                                  June 30,
                                    2008Income
      tax benefit based on statutory tax rate
                                  
                                  $
                                  (1,262,831
                                  )
                                  
                                  $
                                  (882,110
                                  )Non-deductible
      and other
                                  
                                  
                                  1,691
                                  
                                  
                                  
                                  2,125Change
      in valuation allowance
                                  
                                  
                                  35,018
                                  
                                  
                                  
                                  11,081Income
      tax benefit
                                  
                                  $
                                  (1,226,122
                                  )
                                  
                                  $
                                  (868,904
                                  )
 
 Significant
components of the Company’s net deferred income tax assets and liabilities at
June 30, 2009 and December 31, 2008 were as follows:
 
 June 30,
                                2009
                              
                              
                              December 31,
                                2008Deferred
      income tax assetsNet
      operating loss carryforward
                              
                              $
                              5,885,066
                              
                              
                              $
                              4,742,104Option
      compensation
                              
                              
                              369,929
                              
                              
                              
                              349,412Reclamation
      bond
                              
                              
                              68,590
                              
                              
                              
                              68,590Property,
      plant & equipment
                              
                              
                              83,160
                              
                              
                              
                              —Gross
      deferred income tax asset
                              
                              
                              6,406,745
                              
                              
                              
                              5,160,106Valuation
      allowance
                              
                              
                              (438,519
                              )
                              
                              
                              (403,501
                              )5,968,226
                              
                              
                              
                              4,756,605Deferred
      income tax liabilitiesProperty,
      plant & equipment
                              
                              
                              —
                              
                              
                              
                              14,501Acquisition
      related liabilities
                              
                              
                              55,197,465
                              
                              
                              
                              55,197,465Net
      deferred income tax liability
                              
                              $
                              49,229,239
                              
                              
                              $
                              50,455,361
 
 A
valuation allowance for deferred tax related to option compensation and the
reclamation bond was established for net deferred tax assets not allocated to
offset acquisition related deferred tax liabilities due to the uncertainty of
realizing these deferred tax assets based on conditions existing at June 30,
2009 and December 31, 2008.
 
 Deferred
income tax liability was recorded on GAAP basis over income tax basis using
statutory federal and state rates with the corresponding increase in the
purchase price allocation to the assets acquired.
  30
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 11.
                        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 EITF 98-11 and SFAS 109, is reflected as an
increase to the total purchase price which has been applied to the underlying
mineral and slag project assets in the absence of there being a goodwill
component associated with the acquisition transactions.
 
 The
Company had cumulative net operating losses of approximately $15,487,017 and
$12,483,860 as of June 30, 2009 and December 31, 2008, respectively for federal
income tax purposes. The federal net operating loss carryforwards will be
expiring between 2025 and 2029.
 
 The
Company had cumulative net operating losses of approximately $7,573,040 and
$5,325,778 as of June 30, 2009 and December 31, 2008, respectively for state
income tax purposes. The state net operating loss carryforwards will be expiring
between 2013 and 2015.
 
 As of
January 1, 2007, the Company did not have any unrecognized tax
benefits.  The adoption of FIN 48 did not result in any cumulative
effect adjustment to the January 1, 2007 balance of the Company’s accumulated
deficit.  Upon adoption of FIN 48, the Company did not accrue for
interest and penalties as there were no unrecognized tax benefits.  If
interest and penalties were to be assessed, we would charge interest to interest
expense, and penalties to general and administrative expense.  It is
not anticipated that unrecognized tax benefits would significantly increase or
decrease within 12 months of the reporting date.
 
 The
Company and its subsidiary file income tax returns in the United
States.  These tax returns are subject to examination by taxation
authorities provided the years remain open under the relevant statutes of
limitations, which may result in the payment of income taxes and/or decrease its
net operating losses available for carryforwards.  The Company is no
longer subject to income tax examinations by US federal and state tax
authorities for years prior to 2005. While the Company believes its tax filings
do not include uncertain tax positions, the results of potential examinations or
the effect of changes in tax law cannot be ascertained at this
time.  The Company currently has no tax years under
examination.
 
 31
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                        COMMITMENTS AND
      CONTINGENCIES
 
 Lease obligations –
The Company rents office space in Henderson, Nevada.  The lease terms
expired in November 2006 and the Company continues to rent the existing space
under month-to-month terms for $4,900 per month.
 
 Rental
expense, resulting from this operating lease agreement, approximated $29,400 for
each of the six months ended June 30, 2009 and 2008, respectively.
 
 Employment contracts
– Ian R. McNeil, President and Chief Executive Officer. The Company has an
employment agreement with Mr. McNeil effective since January 1, 2006. Under the
terms of the agreement, as updated February 16, 2007, Mr. McNeil is paid a
salary of $190,000. Mr. McNeil is also eligible for a discretionary bonus to be
determined based on factors considered relevant by the Company’s board of
directors, and may be granted, subject to the approval of the board of
directors, incentive stock options to purchase shares of the Company’s common
stock in such amounts and at such times as the board of directors, in its
absolute discretion, may from time to time determine.  The term of the
agreement is for an indefinite period, unless otherwise terminated pursuant to
the terms of the agreement.  In the event that the agreement is
terminated by the Company other than for cause, the Company will provide Mr.
McNeil with six months written notice or payment equal to six months of his
monthly remuneration.
 
 Carl S.
Ager, Treasurer and Secretary. The Company has an employment agreement with Mr.
Ager effective since January 1, 2006. Under the terms of the agreement, as
updated February 16, 2007, Mr. Ager is paid a salary of $160,000. Mr. Ager is
also eligible for a discretionary bonus to be determined based on factors
considered relevant by the Company’s board of directors, and may be granted,
subject to the approval of the board of directors, incentive stock options to
purchase shares of the Company’s common stock in such amounts and at such times
as the board of directors, in its absolute discretion, may from time to time
determine.  The term of the agreement is for an indefinite period,
unless otherwise terminated pursuant to the terms of the
agreement.  In the event that the agreement is terminated by the
Company other than for cause, the Company will provide Mr. Ager with six months
written notice or payment equal to six months of his monthly
remuneration.
 
 Melvin L.
Williams, Chief Financial Officer. The Company has an employment agreement with
Mr. Williams effective since June 14, 2006. Under the terms of the agreement, as
updated February 16, 2007, Mr. Williams is paid a salary of $130,000, based on
600-800 hours worked.  Mr. Williams is also eligible for a
discretionary bonus to be determined based on factors considered relevant by the
Company’s board of directors, and may be granted, subject to the approval of the
board of directors, incentive stock options to purchase shares of the Company’s
common stock in such amounts and at such times as the board of directors, in its
absolute discretion, may from time to time determine.  The term of the
agreement is for an indefinite period, unless otherwise terminated pursuant to
the terms of the agreement.  In the event that the agreement is
terminated by the Company other than for cause, the Company will provide Mr.
Williams with thirty days written notice or payment equal to three months of his
monthly remuneration.
  32
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                        COMMITMENTS AND
      CONTINGENCIES
(continued)
 
 Purchase consideration
Clarkdale Slag Project – In consideration of the acquisition of the
Clarkdale Slag Project from VRIC, the Company has agreed to certain additional
contingent payments. The acquisition agreement contains payment terms which are
based on Project Funding Date as defined in the agreement:
 
 a)
                      The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  b)
                      The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the net smelter returns (“NSR”)
      on any and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until
      the first to occur of: (1) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000; or (2) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000; and,
  c)
                      The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Advance Royalty shall continue for a period of ten (10) years from the Agreement
Date or until such time that the Project Royalty shall exceed $500,000 in any
calendar year, at which time the Advance Royalty requirement shall end
forever.
 
 Development agreement
– In January 2009, the Company submitted a development agreement to the Town of
Clarkdale for development of an Industrial Collector Road.  The
purpose of the road is to provide the Company with the capability to enhance the
flow of industrial traffic to and from the Clarkdale Slag
Project.  The construction of the road is a required infrastructure
improvement under the terms of the Company’s conditional use permit with the
Town of Clarkdale.  The Town of Clarkdale approved the development
agreement on January 9, 2009.
  The
development agreement provides that its effective date will be the later of (i)
30 days from the approving resolution of the agreement by the Clarkdale Town
Council; or (ii) the date on which the Town of Clarkdale obtains a connection
dedication from separate property owners who have land that will be utilized in
construction of the road; or (iii) the date on which the Town of Clarkdale
receives the proper effluent permit.  The Town of Clarkdale has
approved the development agreement, and the remaining two contingencies with
respect to the effectiveness of the development agreement are beyond the
Company’s control.
  Under the
development agreement, the Company is obligated to complete the development of
the road within two years after the effective date of the
agreement.  If the Company does not complete the road within the two
year period, the Company may lose the conditional use permit from the Town of
Clarkdale.  Further, as a condition of the Company’s developing any of
the Company’s property that is adjacent to the Clarkdale Slag Project, the
Company will be required to construct additional enhancements to the road. The
Company will have ten years from the start of construction on the road in which
to complete the additional enhancements.  However, the Company does
not currently have any defined plans for the development of the adjacent
property.
  33
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                      COMMITMENTS AND
      CONTINGENCIES (continued)
 
 The
Company estimates that the initial cost of construction of the road will be
approximately $3,500,000 and that the cost of the additional enhancements will
be approximately $1,200,000.  The Company will be required to fund the
costs of this construction.  Based on the uncertainty of the timing of
these contingencies, the Company has not included these costs in current
operating plans or budgets.  However, the Company will require
additional project financing or other financing in order to fund the
construction of the road and the additional enhancements.  There are
no assurances that the Company will be able to obtain additional financing in an
amount sufficient to meet the Company’s needs or on terms that are acceptable to
the Company.  The failure to complete the road and the additional
enhancements in a timely manner under the development agreement would have a
material adverse effect on the Clarkdale Slag Project and
operations.
  13.
                        CONCENTRATION OF
      CREDIT RISK
 
 The
Company maintains its cash accounts in two financial institutions. Cash accounts
at these financial institutions are insured by the Federal Deposit Insurance
Corporation (FDIC) for up to $250,000 per financial institution. Additionally,
through the financial institutions’ participation in the FDIC’s Transaction
Account Guarantee Program, all non-interest bearing checking accounts are fully
guaranteed by the FDIC for the entire amount in the account through December 31,
2009. Coverage under the Transaction Account Guarantee Program is in addition to
and separate from the coverage available under the FDIC’s general deposit
insurance rules.
 
 The
Company has never experienced a material loss or lack of access to its cash
accounts; however no assurance can be provided that access to the Company’s cash
accounts will not be impacted by adverse conditions in the financial markets. At
June 30, 2009, the Company did not have material deposits in excess of FDIC
insured limits.
 
 14.
                        CONCENTRATION OF
      ACTIVITY
 
 For the
six months ended June 30, 2009, the Company purchased services from one major
vendor, Baker & Hostetler LLP, which exceeded more than 10% of total
purchases and amounted to approximately $591,982.
 
 15.
                      RELATED PARTY
      TRANSACTIONS
 
 During
the six months ended June 30, 2009, the Company utilized the services of NMC to
provide technical assistance and financing related activities.  These
services related primarily to the Clarkdale Slag Project and the Searchlight
Claims Project.  Mr. McNeil and Mr. Ager are affiliated with
NMC.
 
 In
addition to the above services, NMC provided dedicated use of its laboratory,
instrumentation, milling equipment and research facilities.  NMC
provided invoices for these fees plus expenses.
 
 For the
six months ended June 30, 2009, the Company incurred total fees and
reimbursement of expenses to NMC of $180,000 and $49,862, respectively. At June
30, 2009, the Company had an outstanding balance due to NMC of
$74,951.
 
 During
the six months ended June 30, 2009, the Company utilized Cupit, Milligan, Ogden
& Williams, CPAs (CMOW) to provide accounting support
services.  Mr. Williams is affiliated with CMOW.
  34
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 15.
                      RELATED PARTY
      TRANSACTIONS (continued)
 
 The
Company incurred total fees to CMOW of $89,819 and $27,035 for the six months
ended June 30, 2009 and 2008, respectively. The Company also reimbursed expenses
to CMOW of $0 and $90 for the six months ended June 30, 2009 and 2008,
respectively. Fees for services provided by CMOW do not include any charges for
Mr. Williams’ time.  Mr. Williams is compensated for his time under
his salary agreement. The approximate direct benefit to Mr. Williams was $28,742
and $7,300 of the above CMOW fees and expenses for the six months ended June 30,
2009 and 2008, respectively. The Company had an outstanding balance due to CMOW
of $67,617 as of June 30, 2009.
   35






Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
  Certain
statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.”  These forward-looking statements
include, but are not limited to, statements about the plans, objectives,
expectations and intentions of Searchlight Minerals Corp., a Nevada corporation
(referred to in this Report as “we,” “us,” “our” or “registrant”) and other
statements contained in this Report that are not historical
facts.  Forward-looking statements in this Report or hereafter
included in other publicly available documents filed with the Securities and
Exchange Commission, or the Commission, reports to our stockholders and other
publicly available statements issued or released by us involve known and unknown
risks, uncertainties and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements.  Such future results are
based upon management’s best estimates based upon current conditions and the
most recent results of operations.  When used in this Report, the
words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate”
and similar expressions are generally intended to identify forward-looking
statements, because these forward-looking statements involve risks and
uncertainties.  There are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including our plans, objectives, expectations and
intentions and other factors that are discussed under the section entitled “Risk
Factors,” in this Report and in our Annual Report on Form 10-K for the year
ended December 31, 2008.
  The
following discussion and analysis summarizes our plan of operation for the next
twelve months, our results of operations for the three and six month periods
ended June 30, 2009 and changes in our financial condition from our year ended
December 31, 2008.  The following discussion should be read in
conjunction with the Management’s Discussion and Analysis or Plan of Operation
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
  Executive
Overview
  We are an
exploration stage company engaged in the acquisition and exploration of mineral
properties and slag reprocessing projects.  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.  Since our acquisition of 100% of the Clarkdale Slag
Project in 2007, we have devoted considerable effort designing and engineering
our first production module, which included finalizing the production flow
sheet, sourcing and purchasing equipment as well as refurbishing the module
building and constructing the electrowinning building.  The module and
electrowinning buildings house the first production module, which has been
designed to allow for the grinding, leaching, filtering and extraction of
precious and base metals from the slag material and is expected to process
between 100 and 250 tons of slag material per day.  During 2008, we
completed the refurbishing and construction of the module and electrowinning
buildings, respectively, and we installed all the necessary equipment in the two
buildings for the operation of the first production module.  Also in
2008, we expended approximately $1,000,000 to immediately address Phase II long
lead-time items such as grading 12 acres of land, drilling a well and preparing
the architecture and engineering drawings for the proposed full-scale production
facility.  In the first two quarters of 2009, we have been executing
our business plan on the Clarkdale Slag Project, which includes the start-up and
operation of the first production module, in an effort to achieve consistent
levels of gold and silver extraction that would support the economic feasibility
of a commercial production facility.
  36
 
 
  On June
17, 2008, we received a Certificate of Occupancy for the laboratory facilities
located within the module building, allowing our chemists to conduct immediate,
on-site analyses of leaching results to further optimize the metals extraction
process.  On August 8, 2008, we received a Certificate of Occupancy
for the module building, allowing us to operate the grinding, leaching,
filtering and resin extraction equipment within the module
building.  On December 30, 2008, we received a Certificate of
Occupancy for the electrowinning building, allowing us to operate the copper and
zinc electrowinning equipment within the electrowinning building.
  We have
completed the construction of the production module for the Clarkdale Slag
Project and are now actively engaged in the testing and start-up phase of the
project.  Since the start of 2009, the primary emphasis has been
placed on the crushing and grinding circuits as well as the leaching and
extraction of precious metals (gold and silver).  To date, our
internal laboratory testing has reflected consistent levels of extractable
precious metals in pregnant leach solutions from the Clarkdale slag
material.  We believe that we can improve extraction rates further by
optimizing the grind, the chemical characteristics of the leach solutions and
the amount of residence time required for maximum grind and leach
efficiency.  We have engaged Mountain States R&D International,
Inc., an independent engineering firm, to analyze, in accordance with
chain-of-custody standards, the internal operating results of the gold circuit,
which we believe comprises the majority of the potential value of the entire
Clarkdale Slag Project.
  37
  We
incurred delays during the construction of our production module, including
delays in receiving large pieces of equipment from manufacturers, engineering
related delays due to the complexity of installing the production module
equipment in a World War I era module building and the decision to construct a
separate building to house the electrowinning equipment after it was determined
that the electrowinning equipment would not adequately fit in the module
building.  Consequently, the construction timeline for completing the
production module was extended by approximately twelve months from what we
originally anticipated and there was an approximately 55% increase in costs from
what we had originally projected.
  We
anticipate that the operation of our production module will allow us to
determine the economics of the project and serve as the basis for the final
feasibility of the project.  If the feasibility of the project
establishes economic viability, we expect to commence construction of a
full-scale production facility where we intend to install subsequent modules in
parallel where we expect that each subsequent module would be comparable in
technology and scale to the initial production module.  The number of
subsequent modules required to attain full-production of 2,000 tons per day will
be determined once the initial production module capacity is
determined.  The cost of developing our initial production module was
approximately $12,000,000.  We do not believe that the construction of
subsequent modules will cost as much because: (i) of the knowledge we have
developed in the construction of the initial production module, and (ii) any
additional modules will be new construction, rather than rehabilitation of an
older building.  However, the scope and size of our full-scale
production facility, including the number of additional modules, the timing and
cost of additional modules and the economies of scale of a production facility,
will depend upon a number of factors, including the results of a feasibility
study and the availability of funding.  A more thorough economic
analysis of the full-scale production facility, including specific capital and
operating costs, funding schedules and funding sources, is expected to occur
during the feasibility evaluation of the initial production
module.  The first stage of the feasibility evaluation began in the
second quarter of 2009 when we engaged Mountain States to analyze, in accordance
with chain-of-custody standards, the internal operating results of the gold
circuit of the Clarkdale Slag Project.
  We have
budgeted $2,400,000 for our work program on the Clarkdale Slag Project over the
next twelve months, which includes the operation of the production module and
performing the feasibility study.  A decision on allocating
approximately $6,000,000 of additional funds for the Phase II expansion and
$4,700,000 to complete the development of an Industrial Collector Road pursuant
to an agreement with the Town of Clarkdale, Arizona by January 2011 will be made
once the first production module is operational and its results are
analyzed.
  We expect
that there will be significant financing requirements in order to finance the
construction of a full-scale production facility, and cannot assure you that
such funding will be available at all or on terms that are reasonably acceptable
to us.  If the results from our feasibility study and the results from
the operation of the production module do not support a basis for us to proceed
with the construction of our proposed, full-scale production facility or we
cannot obtain funding at all or on terms that are reasonably acceptable to us,
we will have to scale back or abandon our proposed operations on the Clarkdale
Slag Project.  If management determines, based on any factors,
including the foregoing, that capitalized costs associated with any of our
mineral interests are not likely to be recovered, we would incur a significant
impairment of our investment in such property interests on our financial
statements.
  In
January 2009, we submitted a development agreement to the Town of Clarkdale for
development of an Industrial Collector Road.  The purpose of the road
is to provide us with the capability to enhance the flow of industrial traffic
to and from the Clarkdale Slag Project.  The construction of the road
is required infrastructure improvement under the terms of our conditional use
permit with the Town of Clarkdale.  The Town of Clarkdale approved the
development agreement on January 9, 2009.
  The
development agreement provides that its effective date will be the later of (i)
30 days from the approving resolution of the agreement by the Clarkdale Town
Council; or (ii) the date on which the Town of Clarkdale obtains a connection
dedication from separate property owners who have land that will be utilized in
construction of the road; or (iii) the date on which the Town of Clarkdale
receives the proper effluent permit.  The Town of Clarkdale has
approved the development agreement, and the remaining two contingencies with
respect to the effectiveness of the development agreement are beyond our
control.
  38
  Under the
development agreement, we are obligated to complete the development of the road
within two years after the effective date of the agreement.  If we do
not complete the road within the two year period, we may lose our conditional
use permit from the Town of Clarkdale.  Further, as a condition of our
developing any of our property that is adjacent to the Clarkdale Slag Project,
we will be required to construct additional enhancements to the
road.  We will have ten years from the start of construction on the
road in which to complete the additional enhancements.  However, we do
not currently have any defined plans for the development of the adjacent
property.
  We
estimate that the initial cost of construction of the road will be approximately
$3,500,000 and that the cost of the additional enhancements will be
approximately $1,200,000.  We will be required to fund the costs of
this construction.  Based on the uncertainty of the timing of these
contingencies, we have not included these costs in our current operating plans
or budgets.  However, we will require additional project financing or
other financing in order to fund the construction of the road and the additional
enhancements.  There are no assurances that we will be able to obtain
additional financing in an amount sufficient to meet our needs or on terms that
are acceptable to us.  The failure to complete the road and the
additional enhancements in a timely manner under the development agreement would
have a material adverse effect on the Clarkdale Slag Project and our
operations.
  Searchlight Gold
Project.  Since 2005, we have maintained an ongoing exploration
program on our Searchlight Gold Project and have contracted with Arrakis, Inc.
(“Arrakis”), an unaffiliated mining and environmental firm, to perform a number
of metallurgical tests on surface and bulk samples taken from the project site
under strict chain-of-custody protocols.  In 2007, results from these
tests validated the presence of gold on the project site, and identified
reliable and consistent metallurgical protocols for the analysis and extraction
of gold, such as microwave digestion and autoclave
leaching.  Autoclave methods typically carry high capital and
operating costs on large scale projects, however, we were encouraged by these
results and in the first quarter of 2008, and we approved a continuation of the
metallurgical work program with Arrakis.  The goal of this work
program is to attempt to further improve upon the extraction grades of gold from
samples taken from the project and explore in more detail the potential capital
and operating costs of implementing methods, such as autoclave
leaching.
  During
the second quarter of 2008, we “double staked” the Searchlight property by
filing, with the United States Bureau of Land Management (“BLM”) and the Clark
County, Nevada Recorder, 142 new and separate 20-acre placer claims overtop of
the twenty existing 160-acre claims.  We were only able to “double
stake” 2,840 acres out of the 3,200 acre site due to various regulatory
restrictions on staking of certain of the smaller land parcels on the
site.  We have maintained the twenty prior 160-acre claims to provide
us with a basis to retain the priority of and defend our existing 160-acre
mining claims.
  The
former Searchlight Claim owners had previously obtained a BLM approved Plan of
Operations, which included permission to drill eighteen holes on the 3,200 acre
project area and to mine a 36-acre pit on our RR304 claim.  We had
anticipated conducting our early stage exploratory work on the Searchlight
Claims property by utilizing the Plan of Operations issued to the former
Searchlight Claim owners, until such time as we would obtain a permit for
exploration and development in our own name or the former Searchlight Claim
holder’s permit was transferred to us.  Although we did not acquire
the Searchlight Claims with a written agreement to purchase the Plan of
Operations, the prior owners verbally agreed to cooperate with us in attempting
to transfer their Plan of Operations into our name.
  Although
the Plan of Operations was accepted and registered in the name of a former
Searchlight Claim owner, which is an affiliate of K. Ian Matheson, one of our
principal stockholders and a former officer and director, in September 2007, we
learned that the BLM had issued an order (the “BLM Order”) for “Immediate
Suspension of All Activities” notice on May 12, 2006 against Mr. Matheson and
certain of his affiliates (Pass Minerals, Inc., Kiminco, Inc. and Pilot Plant
Inc., which also were prior Searchlight Claim owners and are our stockholders)
with respect to a dispute with the BLM on a project unrelated to the Searchlight
Gold Project.  The dispute between the BLM and Mr. Matheson arose due
to the BLM’s determination that Mr. Matheson and his affiliates had engaged in
willful mineral trespass for the unauthorized removal of sand and gravel from
public lands by Mr. Matheson and his affiliates or their
predecessors.  The BLM had demanded payment of approximately
$2,530,000 for the willful trespass.  After failure by Mr. Matheson
and his affiliates to pay the amount, the BLM issued the BLM
Order.  The issuance of the BLM Order restricted our ability to rely
upon the Plan of Operations to conduct our early stage exploratory work on the
Searchlight Claims property until such time that we may obtain our own Plan of
Operations.  An appeal by Mr. Matheson of the BLM Order with the
Interior Board of Land Appeals affirmed the BLM’s decision, keeping the BLM
Order in effect.  The BLM Order effectively covered all projects tied
to Mr. Matheson.
  39
  As a
result of the BLM Order, we have been delayed in our ability to drill on the
Searchlight Gold Project property.  However, we have anticipated that
regulatory and other delays would take place, which are typical in our
industry.  We have applied for a new Plan of Operations in our name
and are currently in the course of the BLM’s review process.  In
addition, we have continued and will continue with our surface sampling and
metallurgical testing program while awaiting approval of a new Plan of
Operations.
  In the
third quarter of 2008, we submitted a Plan of Operations to the BLM in our name,
substantially similar to the original Plan of Operations, which included a
request to drill eighteen holes on the project area and to mine a 36-acre mining
pit.  On August 27, 2008, the BLM responded, in part, by advising that
the previous bond that we posted of $180,500 for the previous Plan of Operations
would not be transferrable to the new one and that a new bond would have to be
posted.  At the time, we considered the recovery of the reclamation
bond to be uncertain and, therefore, we have established a full allowance
against the reclamation bond with the offsetting expense to project exploration
costs.  Based on continued discussions with the BLM, we may be able to
recover the bond upon request, however, we have not chosen to make such a
request at this time.
  In
September 2008, we decided that we would only continue to pursue the permits to
drill on the project area and forgo the 36-acre pit until a later date since we
believed that by keeping the pit area in the Plan of Operations, it might delay
the BLM’s approval process for our Plan of Operations.  Although the
36-acre pit had been part of the Plan of Operations obtained by the prior owners
of the Searchlight Claims, we do not believe that digging and mining a 36-acre
pit would be a material aspect of the Plan of Operations at this stage of the
Searchlight Gold Project.  Therefore, we decided to remove the 36-acre
pit from the Plan of Operations.  Further, by reducing the scope of
the permit, we decided that we could submit the application in the form of a
Notice of Intent, a shorter and less complex application form than a Plan of
Operations.  Consequently, on September 24, 2008, we withdrew the Plan
of Operations and submitted a Notice of Intent with the BLM, pursuant to which
we sought permission to drill eighteen 500-foot drill holes on the Searchlight
project area.
  After a
series of correspondence between us and the BLM, on December 15, 2008, we
received a letter from the BLM advising us that the BLM had closed our Notice of
Intent from consideration and that a new Plan of Operations would be required
based on two issues relating to the Desert Tortoise (Gopherus asassizii), a
Federally listed Threatened Species: (i) the proximity of the project area to a
nearby Area of Critical Environmental Concern (ACEC); and (ii) the future
likelihood of tortoises being present on the land within the project area which
is involved in the application.
  On
January 13, 2009, we filed a Notice of Appeal of the BLM’s decision regarding
the closing of our Notice of Intent, and, thereafter, submitted a statement of
reasons relating to the appeal, which supports our case that we should be
allowed to obtain our desired drilling permits through a Notice of Intent, as
opposed to a Plan of Operations, even considering the Searchlight Project’s
proximity to the ACEC.
  Although
we are still following through with our appeal regarding the closing of our
Notice of Intent, we determined that, due to the standard lengthy time required
to have a Plan of Operations approved by the BLM and should we be unsuccessful
with our appeal, it would be prudent to begin the approval process immediately
by filing for our Plan of Operations.  Thus, on March 23, 2009, we
submitted a new Plan of Operations to the BLM, taking into account the Desert
Tortoise issue.  In our Plan of Operations, we have requested
permission to drill eighteen drill holes on the project area.  In the
event of the approval of our Plan of Operations, we will be required to post a
new reclamation bond with the BLM, which we anticipate will be approximately
$16,000.  After a further series of correspondence between us and the
BLM, on June 3, 2009, we received a comment letter from the BLM regarding our
Plan of Operations, which included requests to clarify issues related to the
location of fuels and lubricants being used by us, the location of potential new
disturbances in connection with new road construction, a map edit and our
materials storage area.  We responded to the BLM’s questions by letter
on July 2, 2009.
  40
  There is
no regulatory time frame for the BLM to review our Plan of
Operations.  We understand that the average time frame for approval of
a plan of operation by the Las Vegas, Nevada branch office of the BLM since
January 1, 2000 has been approximately four years and five
months.  Although we understand that the average time frame of the
application process by the Las Vegas branch office of the BLM relating to an
environmental assessment in connection with a plan of operations is
approximately eleven months, the “threatened species” issue raised by the BLM
requires the BLM to consult with the U.S. Fish and Wildlife Service of the
Department of Interior, and the BLM has no control over the length of this
consultation process in order to develop any necessary environmental mitigation
measures.
  Whether
we obtain an approved Notice of Intent or Plan of Operations, our work on the
project site will be limited to the scope within the Notice of Intent or Plan of
Operations.  However, the Plan of Operations approval process will
delay the start of our drilling program for an undetermined period of
time.  To perform any additional drilling or mining on the project, we
would be required to submit a new application to the BLM for approval prior to
the commencement of any such additional activities.
  We do not
believe these added requirements will have a material adverse impact on our
overall business plan for the Searchlight Gold Project, given that we have
received no indication from the BLM, at this time, that the BLM will ultimately
deny our request for approval of our Plan of Operations.  However,
there is no assurance of the timeline for approval by the BLM or that the BLM
will grant approval.  Our drilling and mining program on this project
is dependent on obtaining the necessary approval from the
BLM.  Therefore, if approval ultimately is not obtained, we may have
to scale back or abandon exploration efforts on the project.  If
management determines, based on any factors including the foregoing, that
capitalized costs associated with any of our mineral interests are not likely to
be recovered, we would incur a significant impairment of our investment in such
property interests on our financial statements.
  Further,
although our ability to obtain drilling permits has been delayed, we have
continued and intend to continue our current metallurgical program with
Arrakis.
  We have
budgeted $200,000 to our twelve month work program for the Searchlight Gold
Project.  Our work program is focused on continuing the testing
program with Arrakis, including metallurgical tests, bulk sampling, milling,
leaching and extraction tests to optimize recovery of precious metals from
samples taken from the project and exploring in more detail the potential
capital and operating costs of implementing methods, such as autoclave
leaching.  We will also focus on our work with the BLM, our
consultants and our attorneys to help us obtain approval of the Plan of
Operations, containing the necessary permits to execute on our desired drilling
program.  The drilling and pre-feasibility program, which we
anticipate will include an eighteen-hole drill program, chain-of-custody
sampling and assaying of drill hole material, pilot plant tests and a
pre-feasibility report, is expected to commence shortly after receiving the
BLM’s approval of the Plan of Operations.
  Anticipated
Cash Requirements
  Our plan
of operation calls for significant expenses in connection with the development
of the Clarkdale Slag Project and the exploration of the Searchlight Gold
Project.  Over the next twelve months, our management anticipates that
the minimum cash requirements for funding our proposed exploration and
development program and our continued operations will be approximately
$5,300,000.  At July 31, 2009, we had cash reserves in the amount of
approximately $2,300,000.  This amount is substantially less than the
total expenditures that we have budgeted for the next 12 months by approximately
$3,000,000.  We estimate that our current financial resources are
sufficient to allow us to meet the anticipated costs of our exploration and
development programs until approximately the middle of the fourth quarter of the
2009 fiscal year.  However, if actual costs are greater than we have
anticipated, we will require additional financing in order to fund our
exploration and development plans for 2009.  We do not currently have
any financing arrangements in place, 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.
  41
  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 development of an Industrial Collector Road pursuant to an agreement with
the Town of Clarkdale, Arizona by January 2011, subject to funding
availability.  We will require additional funding to fulfill our
entire anticipated plan of operations.  In addition, the actual costs
of completing those activities may be greater than anticipated.
  Our
estimated cash requirements for the next twelve months are as
follows:
  BUDGETAdministrative
      Expenses
                            
                            $
                            1,400,000Legal
      and Accounting Expenses
                            
                            $
                            800,000Consulting
      Services
                            
                            $
                            500,000SUBTOTAL
                            
                            $
                            2,700,000Clarkdale
      Slag ProjectProduction
      Module Operation
                            
                            $
                            1,900,000Feasibility
      Study
                            
                            $
                            500,000SUBTOTAL
                            
                            $
                            2,400,000Searchlight
      Gold ProjectMetallurgical
      Testing and Pre-Feasibility Program
                            
                            $
                            100,000Permitting
                            
                            $
                            100,000SUBTOTAL
                            
                            $
                            200,000TOTAL
                            
                            $
                            5,300,000
  Critical
Accounting Policies
  Use of
estimates – The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period.  Actual results could differ
from those estimates.
  Mineral
rights – Cost of acquiring mining properties are capitalized upon
acquisition.  Mine development costs incurred either to develop new
ore deposits, to expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially mineable
property.  Costs incurred to maintain current production or to
maintain assets on a standby basis are charged to operations.  Costs
of abandoned projects are charged to operations upon abandonment.  We
evaluate the carrying value of capitalized mining costs and related property and
equipment costs, to determine if these costs are in excess of their recoverable
amount whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable.  The periodic evaluation of carrying
value of capitalized costs and any related property and equipment costs are
based upon expected future cash flows and/or estimated salvage value in
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for Impairment of Disposal of Long-Lived Assets.”
  42
  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 SFAS No.
144 if events or circumstances indicate that their carrying amount might not be
recoverable.  As of June 30, 2009 exploration progress is on target
with our exploration and evaluation plan and no events or circumstances have
happened to indicate the related carrying values of the properties may not be
recoverable.  When we determine SFAS 144 impairment analysis should be
done, the analysis will be performed using the rules of EITF 04-03, “Mining
Assets: Impairment and Business Combinations.”
  Results
of Operations
  The
following table illustrates a summary of our results of operations for the
periods listed below:
  Three Months Ended June 30,
                
                
                Six Months Ended June 30,2009
                
                
                2008
                
                
                Percent
                  Increase/
                  (Decrease)
                
                
                2009
                
                
                2008
                
                
                Percent
                  Increase/
                  (Decrease)Revenue
                
                $
                -
                
                
                $
                -
                
                
                
                n/a
                
                
                $
                -
                
                
                $
                -
                
                
                
                n/aOperating
      Expenses
                
                
                (1,729,975
                )
                
                
                (1,412,342
                )
                
                
                22.5
                %
                
                
                (3,302,201
                )
                
                
                (2,475,518
                )
                
                
                33.4
                %Other
      Income
                
                
                6,617
                
                
                
                47,332
                
                
                
                (86.0
                )
      %
                
                
                17,695
                
                
                
                154,042
                
                
                
                (88.5
                )
      %Income
      tax benefit
                
                
                645,029
                
                
                
                505,275
                
                
                
                27.7
                %
                
                
                1,226,122
                
                
                
                868,904
                
                
                
                41.1
                %Net
      Loss
                
                $
                (1,078,329
                )
                
                $
                (859,735
                )
                
                
                25.4
                %
                
                $
                (2,058,384
                )
                
                $
                (1,452,572
                )
                
                
                41.7
                %
  43
 
 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 months period ended
June 30, 2009.  We do not anticipate earning revenues from our planned
mineral operations until such time as we enter into commercial production of the
Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties
we may acquire from time to time, and of which there are no
assurances.
  Operating
Expenses
  The major
components of our operating expenses are outlined in the table
below:
  Three Months Ended June 30,
                
                
                Six Months Ended June 30,2009
                
                
                2008
                
                
                Percent
                  Increase/
                  (Decrease)
                
                
                2009
                
                
                2008
                
                
                Percent
                  Increase/
                  (Decrease)Mineral
      exploration and evaluation expenses
                
                $
                531,291
                
                
                $
                334,390
                
                
                
                58.9
                %
                
                $
                843,626
                
                
                $
                448,908
                
                
                
                87.9
                %Mineral
      exploration and evaluation expenses – related party
                
                
                90,000
                
                
                
                90,000
                
                
                
                0.0
                %
                
                
                180,000
                
                
                
                180,000
                
                
                
                0.0
                %Administrative
      – Clarkdale site
                
                
                138,250
                
                
                
                272,769
                
                
                
                (49.3
                )
      %
                
                
                370,937
                
                
                
                507,908
                
                
                
                (27.0
                )
      %General
      and administrative
                
                
                716,160
                
                
                
                689,031
                
                
                
                3.9
                %
                
                
                1,449,204
                
                
                
                1,281,025
                
                
                
                13.1
                %General
      and administrative –
                  related
      party
                
                
                67,617
                
                
                
                10,722
                
                
                
                530.6
                %
                
                
                89,819
                
                
                
                27,125
                
                
                
                231.1
                %Depreciation
                
                
                186,657
                
                
                
                15,430
                
                
                
                1,109.7
                %
                
                
                368,615
                
                
                
                30,552
                
                
                
                1,106.5
                %Total
      Operating Expenses
                
                $
                1,729,975
                
                
                $
                1,412,342
                
                
                
                22.5
                %
                
                $
                3,302,201
                
                
                $
                2,475,518
                
                
                
                33.4
                %
  Six month periods
ended June 30, 2009 and 2008.  Operating expenses increased by
33.4% to $3,302,201 during the six month period ended June 30, 2009 from
$2,475,518 during the six month period ended June 30, 2008.  Operating
expense increased during the six month period ended June 30, 2009 compared to
the corresponding period in 2008 primarily as a result of increases in general
and administrative expenses, increase in depreciation expense, and mineral
exploration and evaluation expenses.
  General
and administrative expenses increased by 13.1% to $1,449,204 during the six
month period ended June 30, 2009 from $1,281,025 during the six month period
ended June 30, 2008.  General and administrative expenses increased
primarily as a result of (i) increased professional and administrative expenses
associated with the preparation of our 2008 annual report on Form 10-K, the
preparation of our registration statement on Form S-1, preparation of amended
periodic reports for the periods from March 31, 2005 through December 31, 2008,
and legal and accounting fees; and (ii) increased director compensation due to
expansion of our board of directors.  We anticipate operating expenses
to continue to increase as we grow our business operations.
  Included
in general and administrative expenses for the six month period ended June 30,
2009 and 2008 were compensation expenses related to the option vesting and
option grants of $53,992 and $859, respectively.
  44
  On April
30, 2007, we adopted our 2007 Stock Option Plan (the “2007
Plan”).  Under the terms of the 2007 Plan, as amended May 8, 2007,
options to purchase up to 4,000,000 shares of common stock may be granted to our
employees, officers, directors, and eligible consultants under such
plan.  On June 15, 2007, our stockholders approved the 2007 Plan. As
of June 30, 2009, 321,293 options have been granted under the 2007 Plan with an
exercise price ranging from $1.45 to $2.74 per share.
  In
addition, we incurred $89,819 and $27,125 during the six month periods ended
June 30, 2009 and 2008, respectively, for general and administrative expenses
for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs,
an affiliate of Melvin L. Williams, our Chief Financial
Officer.  These expenses increased during the six month period ended
June 30, 2009 as compared to 2008 as a result of Cupit, Milligan, Ogden &
Williams providing staff support related to the preparation of our registration
statement on Form S-1, preparation of amended periodic reports for the periods
from March 31, 2005 through December 31, 2008, and the completion of the first
time filing of the Arizona Business Personal Property
Statement.  These accounting support services included bookkeeping
input for the Clarkdale facility, assistance in preparing working papers for
quarterly and annual reporting, and preparation of federal and state tax
filings.  These expenses do not include any fees for Mr. Williams’
time in directly supervising the support staff. Mr. Williams’ compensation has
been provided in the form of salary.  The approximate direct benefit
to Mr. Williams was $28,742 and $7,300 of the above Cupit, Milligan, Ogden &
Williams fees for the six months ended June 30, 2009 and 2008,
respectively.
  Mineral
exploration and evaluation expenses increased to $843,626 during the six month
period ended June 30, 2009 from $448,908 during the six month period ended June
30, 2008.  Mineral exploration and evaluation expenses increased
primarily as a result of increased testing activity subsequent to receiving of
Certificate of Occupancy for the demonstration module building.
  Included
in mineral exploration and evaluation expenses were the amounts of $180,000 and
$180,000 paid during the six month period ended June 30, 2009 and 2008,
respectively, to Nanominerals Corp. (one of our principal stockholders and an
affiliate of Ian R. McNeil, our Chief Executive Officer and President and a
director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a
director) for technical assistance, including providing us with the use of its
laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentation to potential investors in connection with the exploration and
development of our mineral projects, and reimbursement of expenses provided by
Nanominerals in connection with the exploration and development of our mineral
projects.
  Depreciation
expense increased to $368,615 during the six month period ended June 30, 2009
from $30,552 during the six month period ended June 30,
2008.  Depreciation expense increased primarily because a substantial
portion of property and equipment that was previously reported as construction
in progress was placed in service during the six month period ended June 30,
2009.
  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.  For
the six month period ended June 30, 2008, we purchased services from two major
vendors, Talson Corporation and Cimetta Engineering, which exceeded more than
10% of total purchases and amounted to approximately $1,132,537 and $525,892,
respectively.
  Three month
periods ended June 30, 2009 and 2008.  Operating expenses
increased by 22.5% to $1,729,975 during the three month period ended June 30,
2009 from $1,412,342 during the three month period ended June 30,
2008.  Operating expense increased during the three month period ended
June 30, 2009 compared to the corresponding period in 2008 primarily as a result
of increases in general and administrative expenses, increase in depreciation
expense, and mineral exploration and evaluation expenses.
  45
  General
and administrative expenses increased by 3.9% to $716,160 during the three month
period ended June 30, 2009 from $689,031 during the three month period ended
June 30, 2009.  General and administrative expenses increased
primarily as a result of increased professional and administrative expenses
associated with the preparation of our registration statement on Form S-1, and
preparation of amended periodic reports for the periods from March 31, 2005
through December 31, 2008, and legal and accounting fees.  We
anticipate operating expenses to continue to increase as we grow our business
operations.
  In
addition, we incurred $67,617 and $10,722 during the three month periods ended
June 30, 2009 and 2008, respectively, for general and administrative expenses
for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs,
an affiliate of Melvin L. Williams, our Chief Financial
Officer.  These expenses increased during the three month period ended
June 30, 2009 as compared to 2008 as a result of Cupit, Milligan, Ogden &
Williams providing staff support related to the preparation of our registration
statement on Form S-1 and preparation of amended periodic reports for the
periods from March 31, 2005 and December 31, 2008.  These accounting
support services included bookkeeping input for the Clarkdale facility,
assistance in preparing working papers for quarterly and annual reporting, and
preparation of federal and state tax filings.  These expenses do not
include any fees for Mr. Williams’ time in directly supervising the support
staff. Mr. Williams’ compensation has been provided in the form of
salary.  The approximate direct benefit to Mr. Williams was $21,637
and $2,895 of the above Cupit, Milligan, Ogden & Williams fees for the three
months ended June 30, 2009 and 2008, respectively.
  Mineral
exploration and evaluation expenses increased to $531,291 during the three month
period ended June 30, 2009 from $334,390 during the three month period ended
June 30, 2008.  Mineral exploration and evaluation expenses increased
primarily as a result of increased testing activity subsequent to receiving of
Certificate of Occupancy for the demonstration module building.
  Included
in mineral exploration and evaluation expenses were the amounts of $90,000 and
$90,000 paid during the three month period ended June 30, 2009 and 2008,
respectively, to Nanominerals Corp. (one of our principal stockholders and an
affiliate of Ian R. McNeil, our Chief Executive Officer and President and a
director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a
director) for technical assistance, including providing us with the use of its
laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentation to potential investors in connection with the exploration and
development of our mineral projects, and reimbursement of expenses provided by
Nanominerals in connection with the exploration and development of our mineral
projects.
  Depreciation
expense increased to $186,657 during the three month period ended June 30, 2009
from $15,430 during the three month period ended June 30,
2008.  Depreciation expense increased primarily because of further
depreciation of property and equipment that was placed in service during the
first quarter of 2009 that was reported as construction in progress during
2008.
  Other
Income and Expenses
  Six month periods
ended June 30, 2009 and 2008.  Total other income decreased to
$17,695 during the six month period ended June 30, 2009 from $154,042 during the
six month period ended June 30, 2008.  The decrease in total other
income primarily resulted from a decrease in interest and dividend
income.  The decrease in interest and dividend income earned was
attributable to lower interest rates and lower cash reserves earning
interest.
  During
the six month period ended June 30, 2009, we received incidental rental revenue
of $14,105 compared to $17,040 for the same period in 2008 from rentals of our
commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania.  The property leases consist of: (i) a
rental agreement with Clarkdale Arizona Central Railroad for the use of certain
facilities at a rate of $1,700 per month; and (ii) rental of a commercial
building space to various tenants.  The rental arrangements are on a
month to month basis with no formal agreements.
  46
  Three month
periods ended June 30, 2009 and 2008.  Total other income
decreased to $6,617 during the three month period ended June 30, 2009 from
$47,332 during the three month period ended June 30, 2008.  The
decrease in total other income primarily resulted from a decrease in interest
and dividend income.  The decrease in interest and dividend income
earned resulted from most cash reserves being placed in a non-interest bearing
checking account during the three months ended June 30, 2009.
  During
the three month period ended June 30, 2009, we received incidental rental
revenue of $6,565 compared to $7,740 for the same period in 2008 from rentals of
our commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania.
  Income
Tax Benefit
  Six month periods
ended June 30, 2009 and 2008.  Income tax benefit increased to
$1,226,122 for the six months period ended June 30, 2009 from $868,904 during
the six month period ended June 30, 2008.  The increase in income tax
benefit primarily resulted from the increase in exploration stage losses during
the six month period ended June 30, 2009 from the six month period ended June
30, 2008.
  Three month
periods ended June 30, 2009 and 2008.  Income tax benefit
increased to $645,029 for the three months period ended June 30, 2009 from
$505,275 during the three month period ended June 30, 2008.  The
increase in income tax benefit primarily resulted from the increase in
exploration stage losses during the three month period ended June 30, 2009 from
the three month period ended June 30, 2008.
  Net
Loss
  Six month periods
ended June 30, 2009 and 2008.  The aforementioned factors
resulted in a net loss of $2,058,384, or $0.02 per common share, for the six
month period ended June 30, 2009, as compared to a net loss of $1,452,572, or
$0.01 per common share, for the six month period ended June 30,
2008.
  Three month
periods ended June 30, 2009 and 2008.  The aforementioned
factors resulted in a net loss of $1,078,329, or $0.01 per common share, for the
three month period ended June 30, 2009, as compared to a net loss of $859,735,
or $0.01 per common share, for the three month period ended June 30,
2008.
  As of
June 30, 2009 and December 31, 2008, we had cumulative net operating loss
carryforwards of approximately $15,487,017 and $12,483,860, respectively for
federal income taxes.  The federal net operating loss carryforwards
expire between 2025 and 2029.
  We
had cumulative state net operating losses of approximately $7,573,040 and
$5,325,778 as of June 30, 2009 and December 31, 2008, respectively for state
income tax purposes.  The state net operating loss carryforwards
expire between 2013 and 2015.
  Liquidity
and Capital Resources
  Historically,
we have financed our operations primarily through the sale of common stock and
other convertible equity securities.  During 2008, we conducted the
following private placements of our securities:
  ·
              On
      February 7, 2008, we completed two concurrent private placement offerings
      for gross proceeds of $5,250,000 to non-US persons and to US accredited
      investors.  A total of 3,281,250 units were issued at a price of
      $1.60 per unit.  Each unit sold consisted of one share of our
      common stock and one-half of one share common stock purchase
      warrants.  Each whole share purchase warrant entitles the holder
      to purchase one additional share of our common stock at a price of $2.40
      per share for a period of two years from the date of
      issuance.  A total of 80,000 shares of our common stock were
      issued as commission to agents in connection with these
      offerings.
  47
  ·
              On
      January 30, 2008, we received gross proceeds of $2,528,500 and issued an
      aggregate of 3,890,000 shares of our common stock on the exercise of
      warrants we issued in January, 2006.  Each warrant entitled the
      holder to purchase one share of our common stock at a price of $0.65 per
      share on or before January 18, 2008.  The warrant holders
      delivered their notices of exercise, and paid the exercise price of $0.65
      per share, prior to the January 18, 2008 expiration
  date.
  These
agreements do not include contractual penalty provisions for failure to comply
with these registration rights provisions.  Further, we are not a
party to any other agreements which require us to pay liquidated damages in the
future for failure to register securities for sale.
  Working
Capital
  The
following is a summary of our working capital at June 30, 2009 and December 31,
2008:
  At June 30,
                    2009
                  
                  
                  At December 31,
                    2008
                  
                  
                  Percent
                    Increase/(Decrease)Current
      Assets
                  
                  $
                  3,063,905
                  
                  
                  $
                  7,307,005
                  
                  
                  
                  (58.1
                  )
      %Current
      Liabilities
                  
                  
                  (1,175,926
                  )
                  
                  
                  (1,421,075
                  )
                  
                  
                  (17.3
                  )
      %Working
      Capital
                  
                  $
                  1,887,979
                  
                  
                  $
                  5,885,930
                  
                  
                  
                  (67.9
                  )
      %
  As of
June 30, 2009, we had an accumulated deficit of $15,414,866. As of June 30,
2009, we had working capital of $1,887,979, compared to working capital of
$5,885,930 as of December 31, 2008.  The decrease in our working
capital was primarily attributable to our net loss and capital expenditures
partially offset by issuance of our common stock from exercise of stock options
in 2009. Cash was $2,908,814 as of June 30, 2009, as compared to $7,055,591 as
of December 31, 2008.  Property and equipment increased to $13,976,743
as of June 30, 2009 from $13,132,282 as of December 31, 2008.  The
increase primarily resulted from site improvements and equipment acquisitions at
the Clarkdale Slag Project partially offset by depreciation
expense.
  Included
in long term liabilities in the accompanying consolidated financials statements
is a balance of $49,229,239 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.
  48
 
 Cash
Flows
  The
following is a summary of our sources and uses of cash for the periods set forth
below:
  Six Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  Percent
                    Increase/(Decrease)Cash
      Flows Used in Operating Activities
                  
                  $
                  (2,980,743
                  )
                  
                  $
                  (2,521,404
                  )
                  
                  
                  18.2
                  %Cash
      Flows Used in Investing Activities
                  
                  
                  (1,208,718
                  )
                  
                  
                  (3,586,921
                  )
                  
                  
                  (66.3
                  )%Cash
      Flows Provided by Financing Activities
                  
                  
                  42,684
                  
                  
                  
                  7,639,012
                  
                  
                  
                  (99.4
                  )%Net
      Change in Cash During Period
                  
                  $
                  (4,146,777
                  )
                  
                  $
                  1,530,687
                  
                  
                  
                  (370.9
                  )%
  Net cash used in
operating activities.  Net cash used in operating activities
increased to $2,980,743 during the six month period ended June 30, 2009 from
$2,521,404 during the six month period ended June 30, 2008.  The
increase in cash used in operating activities was primarily due to operating
losses from our exploration and evaluation activity and general and
administrative expenses, offset by non-cash elements which were primarily
related to change in deferred tax liability of $1,226,122.
  Net cash used in
investing activities.  We used $1,208,718 in investing
activities during the six month period ended June 30, 2009, as compared to
$3,586,921 during the six month period ended June 30, 2008.  The
decrease in the six month period ended June 30, 2009 was primarily a result of
decrease in purchases of property and equipment relating to the Clarkdale Slag
Project which decreased primarily as a result of receiving of Certificate of
Occupancy for the demonstration module building and substantial completion of
equipment acquisitions for the demonstration module.
  Net cash provided
by financing activities.  Net cash provided by financing
activities was $42,684 for the six month period ended June 30, 2009 compared to
$7,639,012 for the six month period ended June 30, 2008.  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.  Net cash provided by financing activities during the six
month period ended June 30, 2008 primarily resulted from the receipt of
$5,250,000 from the proceeds of private placements of our securities and
$2,528,500 from the exercise of warrants.
  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.
  49
  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 development of the Clarkdale Slag Project and the exploration of the
Searchlight Gold Project.  Over the next twelve months, our management
anticipates that the minimum cash requirements for funding our proposed
exploration and development program and our continued operations will be
approximately $5,300,000.  As of July 31, 2009, we had cash reserves
in the amount of approximately $2,300,000.
  This
amount is substantially less than the total expenditures that we have budgeted
for the next 12 months by approximately $3,000,000.  We estimate that
our current financial resources are sufficient to allow us to meet the
anticipated costs of our exploration and development programs until
approximately the middle of the fourth quarter of the 2009 fiscal
year.  However, if actual costs are greater than we have anticipated,
we will require additional financing in order to fund our exploration and
development plans for 2009.  We do not currently have any financing
arrangements in place, 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 development 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
development and exploration activities beyond what we currently have planned, or
if we experience unforeseen delays during our activities over the next twelve
months, we will need to obtain additional financing.  There are no
assurances that we will be able to obtain additional financing in an amount
sufficient to meet our needs or on terms that are acceptable to us.
  Obtaining
additional financing is subject to a number of factors, including the market
prices for the mineral property and base and precious metals.  These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.  If adequate funds are not available or if they are
not available on acceptable terms, our ability to fund our business plan could
be significantly limited and we may be required to suspend our business
operations.  We cannot assure you that additional financing will be
available on terms favorable to us, or at all.  The failure to obtain
such a financing would have a material, adverse effect on our business, results
of operations and financial condition.
  If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of current stockholders will be reduced and
these securities may have rights and preferences superior to that of current
stockholders.  If we raise capital through debt financing, we may be
forced to accept restrictions affecting our liquidity, including restrictions on
our ability to incur additional indebtedness or pay dividends.
  For these
reasons, our financial statements filed herewith include a statement that these
factors raise substantial doubt about our ability to continue as a going
concern.  Our ability to continue as a going concern will be dependent
on our raising of additional capital and the success of our business
plan.
  Off-Balance
Sheet Arrangements
  None.
  50
  Recent
Accounting Pronouncements
  In June
2009, the FASB issued FASB Statement No. 168, The “FASB Accounting Standards
CodificationTM” and
the Hierarchy of Generally Accepted Accounting Principles. Statement 168
establishes the FASB Accounting Standards CodificationTM
(Codification) as the single source of authoritative U.S. generally accepted
accounting principles (U.S. GAAP) recognized by the FASB to be applied by
nongovernmental entities.  Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants.  Statement 168 and the Codification are
effective for financial statements issued for interim and annual periods ending
after September 15, 2009.
  In June
2009, the FASB issued FASB Statement No. 167, “Amendment to FASB Interpretation
No. 46(R)”. Statement 167 is a revision to FASB Interpretation No. 46 (Revised
December 2003), “Consolidation of Variable Interest Entities”, and changes how a
reporting entity determines when an entity that is insufficiently capitalized or
is not controlled through voting (or similar rights) should be
consolidated.  The determination of whether a reporting entity is
required to consolidate another entity is based on, among other things, the
other entity’s purpose and design and the reporting entity’s ability to direct
the activities of the other entity that most significantly impact the other
entity’s economic performance.  Statement 167 will require a reporting
entity to provide additional disclosures about its involvement with variable
interest entities and any significant changes in risk exposure due to that
involvement.  A reporting entity will be required to disclose how its
involvement with a variable interest entity affects the reporting entity’s
financial statements.  Statement 167 will be effective at the start of
a reporting entity’s first fiscal year beginning after November 15, 2009, or
January 1, 2010, for a calendar year-end entity.  Adoption of this
statement is not expected to have a material impact on our consolidated
financial statements.
  In June
2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets”. Statement 166 is a revision to FASB Statement No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities”, and will require more information about transfers of financial
assets, including securitization transactions, and where entities have
continuing exposure to the risk related to the transferred financial
assets.  It eliminates the concept of a “qualifying special-purpose
entity”, changes the requirements for derecognizing financial assets, and
requires additional disclosures.  Statement 166 enhances information
reported to users of financial statements by providing greater transparency
about transfers of financial assets and an entity’s continuing involvement in
transferred financial assets.  Statement 166 will be effective at the
start of a reporting entity’s first fiscal year beginning after November 15,
2009, or January 1, 2010, for a calendar year-end entity.  Adoption of
this statement is not expected to have a material impact on our consolidated
financial statements.
  In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events”. Statement 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet but before financial statements are issued or are
available to be issued.  Specifically, Statements 165 provides: (i)
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; (ii) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements; and (iii) the disclosures
that an entity should make about events or transactions that occurred after the
balance sheet date.  Statement 165 is effective for interim or annual
financial periods ending after June 15, 2009, and shall be applied
prospectively.  The required disclosures of this statement have been
incorporated into our consolidated financial statements.
  In April
2009, FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1 was issued to amend
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments for interim
reporting period as well as in annual financial statements.  This FSP
also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those
disclosures in summarized financial information at interim reporting periods.
FSP No. 107-1 and APB 28-1 is effective for interim reporting period ending
after June 15, 2009.  Adoption of this guidance is not expected to
have a material impact on our consolidated financial statements.
  51
  In April
2009, FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly,” was issued to provide additional guidance
for estimating the fair value in accordance with SFAS No. 157, “Fair Value
Measurements,” when the volume and level of activity for the asset or liability
have significantly decreased.  This FSP also provides guidance on
identifying circumstances that indicate a transaction is not orderly. FSP No.
FAS 157-4 is effective for interim and annual reporting periods ending after
June 15, 2009, and shall be applied prospectively.  Adoption of this
guidance is not expected to have a material impact on our consolidated financial
statements.
  In April
2009, FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies.” This FSP
amends the guidance in FASB Statement No. 141 to require that assets acquired
and liabilities assumed in a business combination that arise from contingencies
be recognized at fair value if fair value can be reasonable
estimated.  If fair value of such asset or liability cannot be
reasonably estimated, the asset or liability would generally be recognized in
accordance with FASB Statement No. 5, “Accounting for Contingencies,” and FASB
Interpretation (FIN) No. 14, “Reasonable Estimation of the Amount of a
Loss.”  This FSP eliminates the requirements to disclose an estimate
of the range of outcomes of recognized contingencies at the acquisition
date.  This FSP also requires that contingent consideration
arrangements of an acquiree assumed by the acquirer in a business combination be
treated as contingent consideration of the acquirer and should be initially and
subsequently measured at fair value in accordance with Statement
141R.  This FSP is effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008.  The adoption of this statement had little or no
effect on our consolidated financial position, results of operations, and
disclosures.
  In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’
Disclosures about Post-Retirement Benefit Plan Assets” (“FSP
FAS 132(R)-1”), which amends FASB Statement No. 132 “Employers’
Disclosures about Pensions and Other Post-Retirement Benefits” (“FAS 132”),
to provide guidance on an employer’s disclosures about plan assets of a defined
benefit pension or other post-retirement plan.  The objective of FSP
FAS 132(R)-1 is to require more detailed disclosures about employers’ plan
assets, including employers’ investment strategies, major categories of plan
assets, concentrations of risk within plan assets, and valuation techniques used
to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for
fiscal years ending after December 15, 2009.  Upon initial
application, the provisions of this FSP are not required for earlier periods
that are presented for comparative purposes.  The adoption of this
statement had little or no effect on our consolidated financial position,
results of operations, and disclosures.
  In
November 2008, the EITF reached consensus on Issue No. 08-6, “Equity Method
Investment Accounting Considerations” (“EITF 08-6”), which clarifies the
accounting for certain transactions and impairment considerations involving
equity method investments.  The intent of EITF 08-6 is to provide
guidance on (i) determining the initial carrying value of an equity method
investment, (ii) performing an impairment assessment of an underlying
indefinite-lived intangible asset of an equity method investment,
(iii) accounting for an equity method investee’s issuance of shares, and
(iv) accounting for a change in an investment from the equity method to the
cost method.  EITF 08-6 is effective for fiscal years beginning
January 1, 2009 and is to be applied prospectively.  The adoption
of this statement had little or no effect on our consolidated financial
position, results of operations, and disclosures.
  In June
2008, the EITF reached consensus on Issue No. 07-5, “Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”
(“EITF 07-5”). EITF 07-5 clarifies the determination of whether an
instrument (or an embedded feature) is indexed to an entity’s own stock, which
would qualify as a scope exception under FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities”
(“FAS 133”).  EITF 07-5 is effective for fiscal years
beginning January 1, 2009.  Early adoption for an existing
instrument is not permitted.  The adoption of this statement had
little or no effect on our consolidated financial position, results of
operations, and disclosures.
  52
  In May
2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under FAS 133.  Convertible debt instruments within the scope of
FSP APB 14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires
that the liability and equity components of convertible debt instruments within
the scope of FSP APB 14-1 be separately accounted for in a manner that reflects
the entity’s nonconvertible debt borrowing rate.  This requires an
allocation of the convertible debt proceeds between the liability component and
the embedded conversion option (i.e., the equity component).  The
difference between the principal amount of the debt and the amount of the
proceeds allocated to the liability component will be reported as a debt
discount and subsequently amortized to earnings over the instrument’s expected
life using the effective interest method.  FSP APB 14-1 is effective
for fiscal years beginning January 1, 2009 and will be applied
retrospectively to all periods presented.  The adoption of this
statement had little or no effect on our consolidated financial position,
results of operations, and disclosures.
  In April
2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”) which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets”
(“FAS 142”).  The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under
FAS 142 and the period of expected cash flows used to measure the fair
value of the asset under FASB Statement No. 141, “Business Combinations”
(“FAS 141”).  FSP 142-3 is effective for fiscal years
beginning January 1, 2009 and will be applied prospectively to intangible
assets acquired after the effective date.  The adoption of this
statement had little or no effect on our consolidated financial position,
results of operations, and disclosures.
  The FASB
issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a
Financial Asset When the Market for that Asset Is Not Active.”  The
FSP clarifies the application of FASB Statement No. 157, “Fair Value
Measurements,” in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset
when the market for that financial asset is not active.  The FSP is
effective October 10, 2008, and for prior periods for which financial statements
have not been issued.  Revisions resulting from a change in the
valuation technique or its application should be accounted for as a change in
accounting estimate following the guidance in FASB Statement No. 154,
“Accounting Changes and Error Corrections.”  However, the disclosure
provisions in Statement 154 for a change in accounting estimate are not required
for revisions resulting from a change in valuation techniques or its
application.  The adoption of this statement has had no material
effect on our consolidated financial position, results of operations, and
disclosures.
  On March
19, 2008 the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities.”  This statement is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures.  This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged.  The adoption of
this statement had little or no effect on our consolidated financial position,
results of operations, and disclosures.
  In
February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of
FASB Statement No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delayed the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).  The provisions
of FSP FAS 157-2 are effective for fiscal years beginning January 1,
2009.  SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements.  The adoption of this
statement had little or no effect on our consolidated financial position,
results of operations, and disclosures.
  53
  In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which
amends SFAS No. 141, and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree.  It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination.  SFAS No. 141(R) is
effective for our fiscal year beginning January 1, 2009 and is to be applied
prospectively.  The adoption of this statement had little or no effect
on our consolidated financial position, results of operations, and
disclosures.
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” which
establishes accounting and reporting standards pertaining to ownership interests
in subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent’s ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated.  SFAS No. 160
also establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners.  SFAS No. 160 is effective for our fiscal year beginning
January 1, 2009.  The adoption of this statement had little or no
effect on our consolidated financial position, results of operations, and
disclosures.
  Item
3.  Quantitative and Qualitative Disclosures About Market
Risk
  We had
unrestricted cash totaling $2,908,814 at June 30, 2009 and $7,055,591 at
December 31, 2008.  Our cash is invested primarily in a non-interest
bearing checking 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 investments, we
believe that we do not have any material exposure to changes in the fair value
of our investment portfolio as a result of changes in interest
rates.  Declines in interest rates, however, would reduce future
investment income.
  54
 
 Item
4.  Controls and Procedures
  Controls
and Procedures
  As of
June 30, 2009, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer, of the effectiveness of the design and operation of our
“disclosure controls and procedures,” as such term is defined under Exchange Act
Rules 13a-15(e) and 15d-15(e).
  Based on
this evaluation, our chief executive officer and chief financial officer
concluded that, as of June 30, 2009, such disclosure controls and procedures
were effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC, and accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.
  In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
  Changes
in Internal Control Over Financial Reporting
  There
were no changes in our internal controls over financial reporting during the
quarter ended June 30, 2009 that materially affected, or are reasonably likely
to materially affect, our internal controls over financial
reporting.
  PART
II - OTHER INFORMATION
  Item
1.  Legal Proceedings
  From time
to time, we are a party to claims and legal proceedings arising in the ordinary
course of business.  Our management evaluates our exposure to these
claims and proceedings individually and in the aggregate and provides for
potential losses on such litigation if the amount of the loss is determinable
and the loss is probable.
  We
believe that there are no material litigation matters at the current
time.  Although the results of such litigation matters and claims
cannot be predicted with certainty, we believe that the final outcome of such
claims and proceedings will not have a material adverse impact on our financial
position, liquidity, or results of operations.
  Item
1A.  Risk Factors
  In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in the section entitled “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2008, which to our
knowledge have not materially changed.  Those risks, which could
materially affect our business, financial condition or future results, are not
the only risks we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.
  55
  Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
  On April
14, 2009, we issued 100,000 shares of common stock upon the exercise of stock
options at an exercise price of $0.25 per share.  These securities
were issued pursuant to Section 4(2) of the Securities Act.
  On June
30, 2009, we issued 7,378 shares of our common stock and options to purchase up
to 7,377 shares of common stock to our non-management
directors.  These shares and options were issued pursuant to the
director compensation policy for our non-management directors based on a price
of $2.44 per share with respect to the 7,378 shares, and an exercise price of
$2.44 per share with respect to the 7,377 stock options, each being the closing
price of our common stock on June 30, 2009, the last trading day of the second
quarter of 2009.  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, 2009.
  Item
5.  Other Information
  Not
applicable.
  56
  Item
6.  Exhibits
  EXHIBIT TABLE
  The
following is a complete list of exhibits filed as part of the Quarterly Report
on Form 10-Q, some of
which are incorporated herein by reference from the reports, registration
statements and other
filings of the issuer with the Securities and Exchange Commission, as referenced
below:
 
 Reference
                      Number
                    
                    Item31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232
                    
                    Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002
  57
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  SEARCHLIGHT
      MINERALS CORP.
                    a
      Nevada corporationDate:
      August 7, 2009
                  By:
                  /s/ Ian R. McNeilIan
      R. McNeilPresident
      and Chief Executive Officer
                    (Principal
      Executive Officer)Date:
      August 7, 2009
                  By:
                  /s/Melvin L.
      WilliamsMelvin
      L. WilliamsChief
      Financial Officer
                    (Principal
      Accounting Officer)
  58