UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549



Amendment No. 1

to

Form 10-Q

on

Form 10-Q/A



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

For the quarterly period ended March 31, 2011



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

For the transition period from _______ to _______.



Commission file number 000-30995



SEARCHLIGHT MINERALS CORP.



(Exact name of registrant as specified in
its charter)



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



(702) 939-5247

(Registrant’s telephone number,
including area code)



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



YesxNo ̈



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 filerx        
|------------------------ | --------------------------
|                         |                           
|Non-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 May 13, 2011, the registrant had 127,018,318
outstanding shares of common stock.











Explanatory Note



This Amendment No. 1 to our Quarterly Report
on Form 10-Q/A for the quarter ended March 31, 2011 (the “2011 Form 10-Q/A”) amends the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2011, originally filed by Searchlight Minerals Corp. with the Securities and Exchange Commission
(“SEC”) on May 13, 2011. The following items have been amended:



|PART I - Item 1.  | Financial Statements                                                                 
|----------------- | -------------------------------------------------------------------------------------
|                  |                                                                                      
|PART I - Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations
|                  |                                                                                      
|PART I - Item 4   | Controls and Procedures                                                              
|                  |                                                                                      
|PART II - Item 6. | Exhibits                                                                             



In addition to the filing of this Form 10-Q/A
for the quarter ended March 31, 2011, we are also concurrently filing amendments to our Annual Report on Form 10-K for the year
ended December 31, 2010 and our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30 and September 30, 2011.
The amendments to our Quarterly Reports on Form 10-Q will be filed to restate our unaudited financial statements and related financial
information for the periods contained in those reports. The 2010 Form 10-K/A is being filed to restate our financial statements
for the years ended December 31, 2008, 2009 and 2010.



As disclosed in a Current Report on Form 8-K
we filed with the SEC on January 6, 2012, on January 4, 2012, our board of directors and audit committee determined, based on the
recommendation of management, after consulting with our independent accountants, Brown Armstrong Accountancy Corporation, that
our audited consolidated financial statements for each of the years ended December 31, 2008, 2009 and 2010, and the cumulative
periods from January 14, 2000 (date of inception) through December 31, 2008, 2009 and 2010, and our unaudited interim consolidated
financial statements for each of the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011, should not be
relied upon and that restatements should be made to our consolidated financial statements.



As such, our board of directors unanimously
approved, authorized and directed the restatement of the financial statements for the periods and directed that the reports stated
above be amended to contain such restated financial statements in order to correct certain accounting errors in our previously
filed financial statements.



The following is a brief summary of the accounting
errors:



| | · | 2007 and 2008 Warrants. We issued warrants to purchase up to
an aggregate of 7,042,387 shares of common stock (collectively, the “2007 and 2008 Warrants”) to investors in connection
with our private placements on February 23, 2007 ($4.50 per share exercise price), March 22, 2007 ($4.50 per share exercise price),
December 26, 2007 ($2.40 per share exercise price) and February 7, 2008 ($2.40 per share exercise price). We unilaterally made
two subsequent amendments to the exercise price of the 2007 and 2008 Warrants on December 29, 2008 (those 2007 and 2008 Warrants
with a $4.50 per share exercise price were reduced to a $2.40 per share exercise price, and those 2007 and 2008 Warrants with a
$2.40 per share exercise price did not have a price adjustment) and November 12, 2009 (all of the 2007 and 2008 Warrants were reduced
to a $1.85 per share exercise price).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Further, in connection with the December 29, 2008 amendment,
we unilaterally amended certain of the 2007 and 2008 Warrants to reduce the price at which we would be able to call those 2007
and 2008 Warrants. However, on April 30, 2009, we amended those 2007 and 2008 Warrants to restore their original call provisions.



2







We did not give any accounting recognition to these modifications
in our previously filed financial statements. The pricing modifications conveyed value to these investors that was not contemplated
in the original agreements. Therefore, the pricing modifications to the 2007 and 2008 Warrants in all of these periodic reports
should have been accounted for as warrant modification expense.



We utilized a binomial lattice option pricing model to
estimate the incremental fair values of the modifications to the 2007 and 2008 Warrants. Based on this model, we recorded warrant
modification expense of approximately $1.8 million and $3.2 million, as of December 29, 2008 and November 12, 2009, respectively.



| | · | 2009 Warrants. On November 12, 2009, we issued an aggregate
of 12,078,596 shares of common stock and warrants to purchase an additional 6,039,298 shares of common stock in a private placement.
We paid commissions to agents which included warrants to purchase up to 301,965 shares of common stock. These warrants (collectively,
the “2009 Warrants”) have an anti-dilution provision, including a provision for the adjustment to the exercise price
and to the number of warrants granted if we issue common stock or common stock equivalents at a price less than the exercise price.
The 2009 Warrants were recorded as equity in our previously filed financial statements and we did not consider the impact of the
anti-dilution provision in the 2009 Warrants.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result, we performed a re-assessment of our accounting
for the 2009 Warrants and determined that the 2009 Warrants were within the scope of Accounting Standards Codification 815-40,
Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), formerly Emerging Issues
Task Force Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock.
The 2009 Warrants have an anti-dilution provision, including a provision for the adjustment to the exercise price and to the number
of warrants granted if we issue common stock or common stock equivalents at a price less than the exercise price of $1.85 per share.
Resetting the exercise price based on a price per share received from other sales of common stock and common stock equivalents
is not an input to an option pricing model and thus the fair value of the 2009 Warrants were not linked to our common stock under
ASC 815-40. Accordingly, the 2009 Warrants should have been accounted for as derivative financial liabilities, measured at its
fair value at the date of issuance, with changes in fair value recognized as a gain or loss for each reporting period thereafter.



On our balance sheets, we have recorded a derivative
warrant liability beginning in the fourth quarter of the year ended December 31, 2009. The derivative warrant liability has been
adjusted to its fair value at each of the periods ended from December 31, 2009 through June 30, 2011.



Our statements of operations for the years ended
December 31, 2008 and 2009 have been restated to recognize warrant modification expense as a general and administrative expense.
In addition, our statements of operations for the years ended December 31, 2009 and 2010 and the quarterly periods ended March
31, 2010, June 30, 2010, September 30, 2010, March 31, 2011 and June 30, 2011 have been restated to record the change in fair value
of the derivative warrant liability as an other income (expense) item.



The accounting treatments of the 2007, 2008
and 2009 Warrants are non-cash items and had no impact on our business operations or cash flows.



A more detailed description of the restatements
made to the financial statements for the three month periods ended March 31, 2010 and 2011 is provided at Note 21 to the consolidated
financial statements included with this report.



3







In connection with the above-referenced accounting
errors, management determined that there was a material weakness in our internal control over financial reporting and disclosure
controls and procedures, as discussed in Part I - Item 4 of this Form 10-Q/A. Based on the discovery of the errors relating to
the restatements described above, our management concluded that our system of internal control over financial reporting was not
effective during the period from December 31, 2008 through September 30, 2011, which resulted in the restatements described above.
For a discussion of management’s consideration of our internal control over financial reporting and disclosure controls and
procedures and the material deficiency in our internal control over financial reporting and disclosure controls and procedures,
see Part I - Item 4 included in this Form 10-Q/A.



Item 6 of Part II of this 2010 Form 10-Q/A has
been amended to contain the currently-dated certifications from our principal executive officer and principal financial officer,
as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002.



Except as described above, no other amendments
are being made to the disclosures presented in the original Form 10-Q. This Form 10-Q/A Amendment No. 1 does not reflect events
occurring after the filing of the original Form 10-Q, or modify or update the disclosures contained therein in any other way other
than as required to reflect the amendments discussed above. Information not affected by the restatement is unchanged and reflects
the disclosures made at the time of the original filing of the Form 10-Q with the SEC on May 13, 2011. Accordingly, this Form 10-Q/A
Amendment No. 1 should be read in its historical context and in conjunction with our filings made with the SEC subsequent to the
filing of the original Form 10-Q, as information in such filings may update or supersede certain information contained in this
Form 10-Q/A Amendment No. 1.



4







TABLE OF CONTENTS



|PART I – FINANCIAL INFORMATION                                                                | 6 
|--------------------------------------------------------------------------------------------- | --
|                                                                                              |   
|Item 1. Financial Statements                                                                  | 6 
|                                                                                              |   
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 41
|                                                                                              |   
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            | 55
|                                                                                              |   
|Item 4. Controls and Procedures                                                               | 55
|                                                                                              |   
|PART II - OTHER INFORMATION                                                                   | 56
|                                                                                              |   
|Item 1. Legal Proceedings                                                                     | 56
|                                                                                              |   
|Item 1A. Risk Factors                                                                         | 57
|                                                                                              |   
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           | 57
|                                                                                              |   
|Item 3. Defaults Upon Senior Securities                                                       | 57
|                                                                                              |   
|Item 4. Submission of Matters to a Vote of Security Holders                                   | 57
|                                                                                              |   
|Item 5. Other Information                                                                     | 57
|                                                                                              |   
|Item 6. Exhibits                                                                              | 58
|                                                                                              |   
|SIGNATURES                                                                                    | 59



5







PART I – FINANCIAL INFORMATION



Item 1. Financial Statements







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                        |  | (Unaudited)    |             |   |                   |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|                                                                                                                                        |  | March 31, 2011 |             |   | December 31, 2010 |  
|                                                                                                                                        |  | (restated)     |             |   |                   |  
|ASSETS                                                                                                                                  |  |                |             |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Current assets                                                                                                                          |  |                |             |   |                   |  
|Cash                                                                                                                                    |  | $              | 6,954,346   |   |                   | $
|Prepaid expenses                                                                                                                        |  |                | 156,242     |   |                   |  
|Assets held for sale                                                                                                                    |  |                | 375,000     |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total current assets                                                                                                                    |  |                | 7,485,588   |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Property and equipment, net                                                                                                             |  |                | 12,690,732  |   |                   |  
|Mineral properties                                                                                                                      |  |                | 16,947,419  |   |                   |  
|Slag project                                                                                                                            |  |                | 120,766,877 |   |                   |  
|Land - smelter site and slag pile                                                                                                       |  |                | 5,916,150   |   |                   |  
|Land                                                                                                                                    |  |                | 3,300,000   |   |                   |  
|Reclamation bond and deposits, net                                                                                                      |  |                | 14,772      |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total non-current assets                                                                                                                |  |                | 159,635,950 |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total assets                                                                                                                            |  | $              | 167,121,538 |   |                   | $
|                                                                                                                                        |  |                |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                    |  |                |             |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Current liabilities                                                                                                                     |  |                |             |   |                   |  
|Accounts payable and accrued liabilities                                                                                                |  | $              | 51,213      |   |                   | $
|Accounts payable - related party                                                                                                        |  |                | 58,356      |   |                   |  
|VRIC payable, current portion - related party                                                                                           |  |                | 233,026     |   |                   |  
|Capital lease payable, current portion                                                                                                  |  |                | 8,720       |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total current liabilities                                                                                                               |  |                | 351,315     |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Long-term liabilities                                                                                                                   |  |                |             |   |                   |  
|VRIC payable, net of current portion - related party                                                                                    |  |                | 1,459,417   |   |                   |  
|Derivative warrant liability                                                                                                            |  |                | -           |   |                   |  
|Deferred tax liability                                                                                                                  |  |                | 43,891,705  |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total long-term liabilities                                                                                                             |  |                | 45,351,122  |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total liabilities                                                                                                                       |  |                | 45,702,437  |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Commitments and contingencies - Note 15                                                                                                 |  |                | -           |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Stockholders' equity                                                                                                                    |  |                |             |   |                   |  
|Common stock, $0.001 par value; 400,000,000 shares authorized, 126,018,318 and 123,018,318 shares, respectively, issued and outstanding |  |                | 126,018     |   |                   |  
|Additional paid-in capital                                                                                                              |  |                | 145,936,659 |   |                   |  
|Accumulated deficit during exploration stage                                                                                            |  |                | (24,643,576 | ) |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total stockholders' equity                                                                                                              |  |                | 121,419,101 |   |                   |  
|                                                                                                                                        |  |                |             |   |                   |  
|Total liabilities and stockholders' equity                                                                                              |  | $              | 167,121,538 |   |                   | $



See Accompanying Notes to these Consolidated
Financial Statements



6







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                               |  |                            |             |   |                |   |             | For the period from | 
|-------------------------------------------------------------- |  | -------------------------- | ----------- | - | -------------- | - | ----------- | ------------------- | 
|                                                               |  |                            |             |   |                |   |             | January 14, 2000    | 
|                                                               |  |                            |             |   |                |   |             | (date of inception) | 
|                                                               |  | For the three months ended |             |   | through        |  
|                                                               |  | March 31, 2011             |             |   | March 31, 2010 |   |             | March 31, 2011      | 
|                                                               |  | (restated)                 |             |   | (restated)     |   |             | (restated)          | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Revenue                                                        |  | $                          | -           |   |                | $ | -           |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Operating expenses                                             |  |                            |             |   |                |   |             |                     | 
|Mineral exploration and evaluation expenses                    |  |                            | 597,910     |   |                |   | 716,876     |                     | 
|Mineral exploration and evaluation expenses - related party    |  |                            | 50,058      |   |                |   | 117,857     |                     | 
|Administrative - Clarkdale site                                |  |                            | 110,177     |   |                |   | 99,515      |                     | 
|General and administrative                                     |  |                            | 589,755     |   |                |   | 645,114     |                     | 
|General and administrative - related party                     |  |                            | 43,356      |   |                |   | 37,119      |                     | 
|Depreciation                                                   |  |                            | 348,382     |   |                |   | 221,500     |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Total operating expenses                                       |  |                            | 1,739,638   |   |                |   | 1,837,981   |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Loss from operations                                           |  |                            | (1,739,638  | ) |                |   | (1,837,981  | )                   | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Other income (expense)                                         |  |                            |             |   |                |   |             |                     | 
|Rental revenue                                                 |  |                            | 6,135       |   |                |   | 6,480       |                     | 
|Gain (loss) on equipment disposition                           |  |                            | 71          |   |                |   | -           |                     | 
|Change in derivative warrant liability                         |  |                            | 993,386     |   |                |   | 1,042,031   |                     | 
|Impairment loss on assets held for sale                        |  |                            | (526,824    | ) |                |   | -           |                     | 
|Interest expense                                               |  |                            | (1,140      | ) |                |   | (1,048      | )                   | 
|Interest and dividend income                                   |  |                            | 3,899       |   |                |   | 308         |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Total other income (expense)                                   |  |                            | 475,527     |   |                |   | 1,047,771   |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Loss before income taxes and discontinued operations           |  |                            | (1,264,111  | ) |                |   | (790,210    | )                   | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Income tax benefit                                             |  |                            | 820,931     |   |                |   | 684,876     |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Loss from continuing operations                                |  |                            | (443,180    | ) |                |   | (105,334    | )                   | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Discontinued operations:                                       |  |                            |             |   |                |   |             |                     | 
|Gain (loss) from discontinued operations                       |  |                            | -           |   |                |   | 120,688     |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Net income (loss)                                              |  | $                          | (443,180    | ) |                | $ | 15,354      |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Loss per common share - basic and diluted                      |  |                            |             |   |                |   |             |                     | 
|Loss from continuing operations                                |  | $                          | (0.00       | ) |                | $ | (0.00       | )                   | 
|Gain (loss) from discontinued operations                       |  |                            | -           |   |                |   | -           |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Net gain (loss)                                                |  | $                          | (0.00       | ) |                | $ | 0.00        |                     | 
|                                                               |  |                            |             |   |                |   |             |                     | 
|Weighted average common shares outstanding - basic and diluted |  |                            | 124,484,985 |   |                |   | 118,768,373 |                     | 



See Accompanying Notes to these Consolidated
Financial Statements



7







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED) (RESTATED)



|                                                                                                     |  |              |             |  |            |   |         |                 |  |   | Accumulated    |  |  |        |            
|---------------------------------------------------------------------------------------------------- |  | ------------ | ----------- |  | ---------- | - | ------- | --------------- |  | - | -------------- |  |  | ------ | -----------
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   | Deficit During |  |  | Total  |            
|                                                                                                     |  | Common Stock |             |  | Additional |   |         | Exploration     |  |   | Stockholders'  | 
|                                                                                                     |  | Shares       |             |  | Amount     |   |         | Paid-in Capital |  |   | Stage          |  |  | Equity |            
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Balance, December 31, 2009                                                                           |  |              | 118,768,373 |  |            | $ | 118,768 |                 |  | $ | 141,744,841    |  |  | $      | (22,460,281
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Amortization of stock options issued to directors over vesting period                                |  |              | -           |  |            |   | -       |                 |  |   | 19,560         |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Issuance of common stock for directors' compensation                                                 |  |              | 15,000      |  |            |   | 15      |                 |  |   | 17,985         |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Issuance of stock options for directors' compensation                                                |  |              | -           |  |            |   | -       |                 |  |   | 8,558          |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Net income, March 31, 2010 (restated)                                                                |  |              | -           |  |            |   | -       |                 |  |   | -              |  |  |        | 15,354     
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Balance, March 31, 2010 (restated)                                                                   |  |              | 118,783,373 |  |            | $ | 118,783 |                 |  | $ | 141,790,944    |  |  | $      | (22,444,927
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Balance, December 31, 2010                                                                           |  |              | 123,018,318 |  |            | $ | 123,018 |                 |  | $ | 144,219,513    |  |  | $      | (24,200,396
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Issuance of common stock for cash under Common Stock Purchase Agreement net of $7,500 issuance costs |  |              | 3,000,000   |  |            |   | 3,000   |                 |  |   | 1,620,310      |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Amortization of stock options issued to directors over the vesting periods                           |  |              | -           |  |            |   | -       |                 |  |   | 57,161         |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Amortization of purchase warrants issued to a consultant over the vesting period                     |  |              | -           |  |            |   | -       |                 |  |   | 17,637         |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Issuance of stock options for directors' compensation                                                |  |              | -           |  |            |   | -       |                 |  |   | 22,038         |  |  |        | -          
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Net loss, March 31, 2011 (restated)                                                                  |  |              | -           |  |            |   | -       |                 |  |   | -              |  |  |        | (443,180   
|                                                                                                     |  |              |             |  |            |   |         |                 |  |   |                |  |  |        |            
|Balance, March 31, 2011  (restated)                                                                  |  |              | 126,018,318 |  |            | $ | 126,018 |                 |  | $ | 145,936,659    |  |  | $      | (24,643,576



See Accompanying Notes to these Consolidated
Financial Statements



8







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                                |  |                            |            |   |                |   |            | Period from         | 
|----------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | -------------- | - | ---------- | ------------------- | 
|                                                                                                |  |                            |            |   |                |   |            | January 14, 2000    | 
|                                                                                                |  |                            |            |   |                |   |            | (date of inception) | 
|                                                                                                |  | For the three months ended |            |   | through        |  
|                                                                                                |  | March 31, 2011             |            |   | March 31, 2010 |   |            | March 31, 2011      | 
|                                                                                                |  | (restated)                 |            |   | (restated)     |   |            | (restated)          | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                            |  |                            |            |   |                |   |            |                     | 
|Net income  (loss)                                                                              |  | $                          | (443,180   | ) |                | $ | 15,354     |                     | 
|Gain (loss) from discontinued operations                                                        |  |                            | -          |   |                |   | 120,688    |                     | 
|Loss from continuing operations                                                                 |  |                            | (443,180   | ) |                |   | (105,334   | )                   | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|Adjustments to reconcile income (loss) from operating to net cash used in operating activities: |  |                            |            |   |                |   |            |                     | 
|Depreciation                                                                                    |  |                            | 348,382    |   |                |   | 221,500    |                     | 
|Stock based expenses                                                                            |  |                            | 96,836     |   |                |   | 46,118     |                     | 
|(Gain) loss on disposition of fixed assets                                                      |  |                            | (71        | ) |                |   | -          |                     | 
|Change in derivative warrant liability                                                          |  |                            | (993,386   | ) |                |   | (1,042,031 | )                   | 
|Amortization of prepaid expense                                                                 |  |                            | 83,319     |   |                |   | 74,944     |                     | 
|Write down of assets held for sale                                                              |  |                            | 526,824    |   |                |   | -          |                     | 
|Changes in operating assets and liabilities:                                                    |  |                            |            |   |                |   |            |                     | 
|Prepaid expenses                                                                                |  |                            | (164,518   | ) |                |   | (157,583   | )                   | 
|Reclamation bond and deposits                                                                   |  |                            | -          |   |                |   | (2,640     | )                   | 
|Accounts payable and accrued liabilities                                                        |  |                            | (195,842   | ) |                |   | (191,817   | )                   | 
|Deferred income taxes                                                                           |  |                            | (820,931   | ) |                |   | (684,876   | )                   | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|Net cash used in operating activities                                                           |  |                            | (1,562,567 | ) |                |   | (1,841,719 | )                   | 
|Net cash used in operating activities from discontinued operations                              |  |                            | -          |   |                |   | -          |                     | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|CASH FLOW FROM INVESTING ACTIVITIES                                                             |  |                            |            |   |                |   |            |                     | 
|Cash paid on mineral property claims                                                            |  |                            | -          |   |                |   | -          |                     | 
|Cash paid for joint venture and merger option                                                   |  |                            | -          |   |                |   | -          |                     | 
|Cash paid to VRIC on closing date - related party                                               |  |                            | -          |   |                |   | -          |                     | 
|Cash paid for additional acquisition costs                                                      |  |                            | -          |   |                |   | -          |                     | 
|Capitalized interest - related party                                                            |  |                            | (34,589    | ) |                |   | (38,836    | )                   | 
|Proceeds from property and equipment disposition                                                |  |                            | 338        |   |                |   | -          |                     | 
|Purchase of property and equipment                                                              |  |                            | (6,308     | ) |                |   | (268,185   | )                   | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|Net cash used in investing activities                                                           |  |                            | (40,559    | ) |                |   | (307,021   | )                   | 
|Net cash used in investing activities from discontinued operations                              |  |                            | -          |   |                |   | -          |                     | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|CASH FLOW FROM FINANCING ACTIVITIES                                                             |  |                            |            |   |                |   |            |                     | 
|Proceeds from stock issuance                                                                    |  |                            | 1,630,810  |   |                |   | -          |                     | 
|Stock issuance costs                                                                            |  |                            | (7,500     | ) |                |   | -          |                     | 
|Principal payments on capital lease payable                                                     |  |                            | (6,455     | ) |                |   | (6,175     | )                   | 
|Principal payments on VRIC payable - related party                                              |  |                            | (55,410    | ) |                |   | (51,164    | )                   | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|Net cash provided (used) by financing activities                                                |  |                            | 1,561,445  |   |                |   | (57,339    | )                   | 
|Net cash provided by financing activities from discontinued operations                          |  |                            | -          |   |                |   | -          |                     | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|NET CHANGE IN CASH                                                                              |  |                            | (41,681    | ) |                |   | (2,206,079 | )                   | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|CASH AT BEGINNING OF PERIOD                                                                     |  |                            | 6,996,027  |   |                |   | 13,099,562 |                     | 
|                                                                                                |  |                            |            |   |                |   |            |                     | 
|CASH AT END OF PERIOD                                                                           |  | $                          | 6,954,346  |   |                | $ | 10,893,483 |                     | 



See Accompanying Notes to these Consolidated
Financial Statements



9







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)



|                                                                                          |  |                            |       |  |                |   |       | Period from         | 
|----------------------------------------------------------------------------------------- |  | -------------------------- | ----- |  | -------------- | - | ----- | ------------------- | 
|                                                                                          |  |                            |       |  |                |   |       | January 14, 2000    | 
|                                                                                          |  |                            |       |  |                |   |       | (date of inception) | 
|                                                                                          |  | For the three months ended |       |  | through        |  
|                                                                                          |  | March 31, 2011             |       |  | March 31, 2010 |   |       | March 31, 2011      | 
|                                                                                          |  | (restated)                 |       |  | (restated)     |   |       | (restated)          | 
|SUPPLEMENTAL INFORMATION                                                                  |  |                            |       |  |                |   |       |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Interest paid, net of capitalized amounts                                                 |  | $                          | 1,140 |  |                | $ | 1,048 |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Income taxes paid                                                                         |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Non-cash investing and financing activities:                                              |  |                            |       |  |                |   |       |                     | 
|Capital equipment purchased through accounts payable and financing                        |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Assets acquired for common stock issued for the acquisition                               |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Assets acquired for common stock issued for mineral properties                            |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Assets acquired for liabilities incurred in the acquisition                               |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Net deferred tax liability assumed                                                        |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Merger option payment applied to the acquisition                                          |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Reclassify joint venture option agreement to slag project                                 |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Warrants issued in connection with joint venture option agreement related to slag project |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Stock options for common stock issued in satisfaction of debt                             |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Capitalization of related party liability to equity                                       |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Stock issued for conversion of accounts payable, 200,000 shares at $0.625                 |  | $                          | -     |  |                | $ | -     |                     | 
|                                                                                          |  |                            |       |  |                |   |       |                     | 
|Investor warrants issued with non-customary anti-dilution provisions                      |  | $                          | -     |  |                | $ | -     |                     | 



See Accompanying Notes to these Consolidated
Financial Statements



10











SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 1. | DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
| | -- | --------------------------------------------------------------------



Description of business -
Searchlight Minerals Corp. (the “Company”) is considered an exploration stage company since its formation, and the
Company has not yet realized any revenues from its planned operations. The Company is primarily focused on the exploration, acquisition
and development of mining and mineral properties. Upon the location of commercially minable reserves, the Company plans to prepare
for mineral extraction and enter the development stage.



History - The Company was
incorporated on January 12, 1999 pursuant to the laws of the State of Nevada under the name L.C.M. Equity, Inc. From 1999 to 2005,
the Company operated primarily as a biotechnology research and development company with its headquarters in Canada and an office
in the United Kingdom (the “UK”). On November 2, 2001, the Company entered into an acquisition agreement with Regma
Bio Technologies, Ltd. pursuant to which Regma Bio Technologies, Ltd. entered into a reverse merger with the Company with the surviving
entity named “Regma Bio Technologies Limited”. On November 26, 2003, the Company changed its name from “Regma
Bio Technologies Limited” to “Phage Genomics, Inc.”



In February, 2005, the Company announced
its reorganization from a biotechnology research and development company to a company focused on the development and acquisition
of mineral properties. In connection with its reorganization the Company entered into mineral option agreements to acquire an interest
in the Searchlight Claims. The Company has consequently been considered as an exploration stage enterprise. Also in connection
with its corporate restructuring, its Board of Directors approved a change in its name from “Phage Genomics, Inc.”
(“Phage”) to "Searchlight Minerals Corp.” effective June 23, 2005.



Basis of presentation - The
interim financial statements present the consolidated balance sheets, statements of operations, stockholders’ equity, and
cash flows of the Company. These consolidated financial statements have been prepared in accordance with United States Generally
Accepted Accounting Principles (“GAAP”).



These consolidated financial statements
have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).
In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have
been included. All such adjustments are, in the opinion of management, of a normal recurring nature with the exception of the reclassification
of certain pieces of equipment to “assets held for sale” and the related write down to fair value discussed in Note
3 and with exception of the adjustments discussed in Note 21. The results reported in these interim consolidated financial statements
are not necessarily indicative of the results that may be reported for the entire year. These interim consolidated financial statements
should be read in conjunction with the restated consolidated financial statements included in our Annual Report on Form 10-K/A
for the year ended December 31, 2010, filed with the SEC on March 5, 2012.



11







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



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



Going concern - The Company
incurred cumulative net losses of $24,643,576 from operations as of March 31, 2011 and has not commenced its commercial mining
and mineral processing operations; rather, it is still in the exploration stage, raising substantial doubt about the Company’s
ability to continue as a going concern. The Company will seek additional sources of capital through 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 consolidated
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 GAAP 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. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant
areas requiring management’s estimates and assumptions include the valuation of stock-based compensation, impairment analysis
of long-lived assets, and the valuation allowance on deferred tax assets. Actual results could differ from those estimates.



Mineral properties - Costs
of acquiring mineral properties are capitalized upon acquisition. Exploration costs and costs to maintain mineral properties are
expensed as incurred while the project is in the exploration stage. Development costs and costs to maintain mineral properties
are capitalized as incurred while the property is in the development stage. When a property reaches the production stage, the related
capitalized costs are amortized using the units-of-production basis over the proven and probable reserves. Mineral properties are
assessed for impairment when circumstances indicate that the carrying amount may not be recoverable. Impairment losses are charged
to operations at the time of impairment. When a property is sold or abandoned, a gain or loss is recognized and included in the
consolidated statement of operations.



Mineral exploration and development
costs – Exploration expenditures incurred prior to entering the development stage are expensed and included in “Mineral
exploration and evaluation expenses”.



Capitalized interest cost
- The Company capitalizes interest costs related to the 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 $34,589 and $38,836 for the three months ended March 31, 2011 and 2010, respectively.



12







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



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



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 grinding circuit is depreciated on
the units-of-production method over the total estimated units. The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Gains or losses on disposition are recognized in operations.



For property, plant and equipment
that our Board of Directors approves for sale, the asset is reclassified on our consolidated financial statements as “assets
held for sale”.  Accordingly, we cease recording depreciation expense for assets classified as held for sale until
the asset is sold or reclassified as held for use.  If the asset is ultimately reclassified as held for use, the previously
unrecorded depreciation expense is expensed in the period of reclassification. Assets held for sale are recorded at the lower
of their carrying value or fair values less cost to sell.  Subsequent gains and losses in fair value are recognized in
operations. Subsequent gains are limited to the cumulative losses previously recognized.



Impairment
of long-lived assets -The Company reviews and evaluates
its long-lived assets for impairment at each balance sheet date due to its planned exploration stage losses and documents such
impairment testing. Mineral properties in the exploration stage are monitored for impairment based on factors such as the Company’s
continued right to explore the property, exploration reports, drill results, technical reports and continued plans to fund exploration
programs on the property.



The tests for long-lived assets
in the exploration, development or producing stage that would have a value beyond proven and probable reserves would be monitored
for impairment based on factors such as current market value of the mineral property and results of exploration, future asset utilization,
business climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted
cash flows expected to be generated by the asset, including evaluating its reserves beyond proven and probable amounts.



| |  | The Company's policy is to record an impairment loss in the period when
it is determined that the carrying amount of the asset may not be recoverable either by impairment or by abandonment of the property.
The impairment loss is calculated as the amount by which the carrying amount of the assets exceeds its fair value.To date,
no such impairments have been identified.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Asset retirement obligation
– The Company records the fair value of a liability for an asset retirement obligation (“ARO”) in the period
that it is incurred if a reasonable estimate of fair value can be made. The fair value of the ARO is measured using expected future
cash flows, discounted at the Company’s credit-adjusted risk-free interest rate. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset. When the cost of the long-lived asset is depleted, the cost
of the ARO is expensed over the useful life of the asset. To date, no significant asset retirement obligation exists and accordingly,
no liability has been recorded.



13







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



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



Fair value
of financial instruments - Fair value accounting establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). The three levels of the fair value hierarchy are described below:



|Level 1 |  | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 2 |  | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|Level 3 |  | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).  



The Company’s financial instruments
consist of mineral property purchase obligations and the derivative liability on stock purchase warrants. The mineral property
purchase obligations are classified within Level 2 of the fair value hierarchy as their fair value is determined using interest
rates which approximate market rates.



The derivative liability on stock
purchase warrants was valued using the Binomial Lattice model, a Level 3 input. The change in fair value of the derivative liability
is classified in other income (expense) in the statement of operations. The Company generally does not use derivative financial
instruments to hedge exposures to cash flow, market or foreign currency risks. However, certain of the Company’s warrants
contain anti-dilution provisions that are not afforded equity classification because they embody risks not clearly and closely
related to the host contract. These features are required to be bifurcated and carried as a derivative liability.



Per share amounts
- Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding.
In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of
potentially dilutive securities, such as stock options and warrants. In these consolidated financial statements, stock options
and warrants are not considered in the computation of diluted earnings per share as their inclusion would be anti-dilutive for
the periods presented. Excluded stock options and warrants amounted to 28,037,977 as of March 31, 2011.



Stock-based
compensation – Stock-based compensation awards are recognized in the consolidated financial statements based on the grant
date fair value of the award which is estimated using the Binomial Lattice option pricing model. The Company believes that this
model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility
and interest rates, and to allow for the actual exercise behavior of option holders. The
compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise,
shares issued will be newly issued shares from authorized common stock.



The fair value of performance-based
stock option grants is determined on their grant date through the use of the Binomial Lattice option pricing model. The total value
of the award is recognized over the requisite service period only if management has determined that achievement of the performance
condition is probable. The requisite service period is based on management’s estimate of when the performance condition will
be met. Changes in the requisite service period or the estimated probability of achievement can materially affect the amount of
stock-based compensation recognized in the financial statements.



14







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



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



Income taxes - The Company
follows the liability method of accounting for income taxes. This method recognizes certain temporary differences between the financial
reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates
either a net deferred income tax liability or asset as measured by the statutory tax rates in effect. The effect of a change in
tax rates is recognized in operations in the period that includes the enactment date. The Company records a valuation allowance
against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred income tax asset will not be realized.



For acquired properties that do
not constitute a business, a deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal
and state rates. The resulting estimated future income tax liability associated with the temporary difference between the acquisition
consideration and the tax basis is computed in accordance with Accounting Standards Codification (“ASC”) 740-10-25-51,
Acquired Temporary Differences in Certain Purchase Transactions that are Not Accounted for as Business Combinations, and
is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence
of there being a goodwill component associated with the acquisition transactions.



Recent accounting standards
- From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board(“FASB”)that are adopted by the Company as of the specified effective
date. The Company has evaluated all the recent accounting pronouncements and believes that none of them will have a material effect
on the consolidated financial statements.



15







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 2. | PROPERTY AND EQUIPMENT
| | -- | ----------------------



Property and equipment consisted of the following:



|                          |  | March 31, 2011 |            |  | December 31, 2010        |  
|------------------------- |  | -------------- | ---------- |  | ------------------------ | -
|                          |  | Cost           |            |  | Accumulated Depreciation |  
|                          |  |                |            |  |                          |  
|Furniture and fixtures    |  | $              | 38,255     |  |                          | $
|Lab equipment             |  |                | 249,061    |  |                          |  
|Computers and equipment   |  |                | 79,147     |  |                          |  
|Income property           |  |                | 309,750    |  |                          |  
|Vehicles                  |  |                | 44,175     |  |                          |  
|Slag conveyance equipment |  |                | 300,916    |  |                          |  
|Demo module building      |  |                | 6,630,063  |  |                          |  
|Demo module equipment     |  |                | 35,996     |  |                          |  
|Grinding circuit          |  |                | 863,678    |  |                          |  
|Leaching and filtration   |  |                | 1,300,618  |  |                          |  
|Fero-silicate storage     |  |                | 4,326      |  |                          |  
|Electrowinning building   |  |                | 1,492,853  |  |                          |  
|Site improvements         |  |                | 1,299,630  |  |                          |  
|Site equipment            |  |                | 337,140    |  |                          |  
|Construction in progress  |  |                | 1,102,013  |  |                          |  
|Capitalized interest      |  |                | 691,256    |  |                          |  
|                          |  |                |            |  |                          |  
|                          |  | $              | 14,778,877 |  |                          | $



| |  | At March 31, 2011, construction in progress included the gold, copper and zinc extraction circuits
and electrowinning equipment at the Clarkdale Slag Project. During the first quarter of 2011, certain demo module equipment, grinding
circuit, leaching and filtration system, fero-silicate storage, electrowinning building and the remaining slag conveyance equipment
were reclassified from construction in progress to assets that are available for use in the demonstration testing facility.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Depreciation expense was $348,382
and $221,500 for the three months ended March 31, 2011 and 2010, respectively. The depreciation method for the leaching and filtration
circuits is based on units of production. During the testing phase, units of production have thus far been limited and no depreciation
expense has been recognized for the quarter ended March 31, 2011.



| | 3. | ASSETS HELD FOR SALE
| | -- | --------------------



As of March 31, 2011, assets held
for sale consisted of two pieces of equipment that the Company is in the process of selling. In the first quarter of 2011, the
Company was approached by another entity who was interested in purchasing the equipment. Management determined that the sale was
in the best interest of the Company due to the generation of additional cash flow. Prior to its reclassification to “assets
held for sale” the equipment was classified as “construction in progress” and had a book value of $901,824. The
anticipated selling price of the equipment is $375,000 which is reflective of the fact that the equipment is being sold “as
is” with no implied warranty. Costs to complete the sale are incidental as the buyer will be responsible for the relocation
and retrofitting of the equipment. An impairment loss of $526,824 was recorded to operations during the three month period ended
March 31, 2011.



16







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 4. | CLARKDALE SLAG PROJECT
| | -- | ----------------------



On February 15, 2007, the Company
completed a merger with Transylvania International, Inc. (“TI”) which provided the Company with 100% ownership of the
Clarkdale Slag Project in Clarkdale, Arizona, through its wholly owned subsidiary CML. This acquisition superseded the joint venture
option agreement to acquire a 50% ownership interest as a joint venture partner pursuant to Nanominerals Corp. (“NMC”)
interest in a joint venture agreement (“JV Agreement”) dated May 20, 2005 between NMC and Verde River Iron Company,
LLC (“VRIC”). One of the Company’s former directors was an affiliate of VRIC. The former director joined the
Company’s board subsequent to the acquisition.



The Company believes the acquisition
of the Clarkdale Slag Project was beneficial because it provides for 100% ownership of the properties, thereby eliminating the
need to finance and further develop the projects in a joint venture environment.



This merger was treated as a statutory
merger for tax purposes whereby CML was the surviving merger entity.



The Company applied EITF 98-03 (which
has been superseded by ASC 805-10-25-1) with regard to the acquisition of the Clarkdale Slag Project. The Company determined that
the acquisition of the Clarkdale Slag Project did not constitute an acquisition of a business as that term is defined in ASC 805-10-55-4,
and the Company recorded the acquisition as a purchase of assets.



The Company also formed a second wholly owned subsidiary,
CMC, for the purpose of developing a processing plant at the Clarkdale Slag Project.



The
$130.3 million purchase price was comprised of a combination of the cash paid, the deferred tax liability assumed in connection
with the acquisition, and the fair value of our common shares issued, based on the closing market price of our common stock, using
the average of the high and low prices of our common stock on the closing date of the acquisition. The Clarkdale Slag Project is
without known reserves and the project is exploratory in nature in accordance with Industry Guides promulgated by the Commission,
Guide 7 paragraph (a)(4)(i). As required by ASC 930-805-30, Mining – Business Combinations – Initial Recognition,and ASC 740-10-25-49-55, Income Taxes – Overall – Recognition – Acquired Temporary Differences in Certain
Purchase Transactions that are Not Accounted for as Business Combinations, the Company then allocated the purchase price among
the assets as follows (and also further described in this Note 4 to the financial statements): $5,916,150 of the purchase price
was allocated to the slag pile site, $3,300,000 to the remaining land acquired, and $309,750 to income property and improvements.
The purchase price allocation to the real properties was based on fair market values determined using an independent real estate
appraisal firm (Scott W. Lindsay, Arizona Certified General Real Estate Appraiser No. 30292). The remaining $120,766,877 of the
purchase price was allocated to the Clarkdale Slag Project, which has been capitalized as a tangible asset in accordance with ASC
805-20-55-37, Use Rights. Upon commencement of commercial production, the material will be amortized using the unit-of-production
method over the life of the Clarkdale Slag Project.



17







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)





| | 4. | CLARKDALE SLAG PROJECT (continued)
| | -- | ----------------------------------









Closing of the TI acquisition occurred
on February 15, 2007, (the “Closing Date”) and was subject to, among other things, the following terms and conditions:



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



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



| | c) | The Company issued 16,825,000 shares of its common stock, valued at $3.975 per share using the
average of the high and low on the Closing Date, to the designates of VRIC on the closing pursuant to Section 4(2) and Regulation
D of the Securities Act of 1933;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the cash and equity
consideration paid and issued upon closing, the acquisition agreement contains the following payment terms and conditions:



| | d) | The Company agreed to continue to pay VRIC $30,000 per month until the earlier of: (i) the date
that is 90 days after receipt of a bankable feasibility study by the Company (the “Project Funding Date”), or (ii)
the tenth anniversary of the date of the execution of the letter agreement;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The acquisition agreement also contains the following
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 (“NSR”)
on any and all proceeds of production from the Clarkdale Slag Project (the “Project Royalty”). The Advance Royalty
remains payable until the first to occur of: (i) the end of the first calendar year in which the Project Royalty equals or exceeds
$500,000 or (ii) February 15, 2017. In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty
and Project Royalty will not exceed $500,000 in any calendar year; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | The Company has agreed to pay VRIC an additional amount of $3,500,000 from the net cash flow of
the Clarkdale Slag Project. The Company has accounted for this as a contingent payment and upon meeting the contingency requirements,
the purchase price of the Clarkdale Slag Project will be adjusted to reflect the additional consideration.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under
the original JV Agreement, the Company agreed to pay NMC a 5% royalty on NSR payable from the Company’s 50% joint venture
interest in the production from the Clarkdale Slag Project. Upon the assignment to the Company of VRIC’s 50% interest in
the Joint Venture Agreement in connection with the reorganization with TI, the Company continues to have an obligation to pay NMCa royalty consisting of 2.5% of the NSR on any and all proceeds of production from the Clarkdale Slag Project.



18







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 4. | CLARKDALE SLAG PROJECT (continued)
| | -- | ----------------------------------



The following table reflects the
recorded purchase consideration for the Clarkdale Slag Project:



|Purchase price:                                                    |  |   |             | 
|------------------------------------------------------------------ |  | - | ----------- | 
|Cash payments                                                      |  | $ | 10,100,000  | 
|Joint venture option acquired in 2005 for cash                     |  |   | 690,000     | 
|Warrants issued for joint venture option                           |  |   | 1,918,481   | 
|Common stock issued                                                |  |   | 66,879,375  | 
|Monthly payments, current portion                                  |  |   | 167,827     | 
|Monthly payments, net of current portion                           |  |   | 2,333,360   | 
|Acquisition costs                                                  |  |   | 127,000     | 
|                                                                   |  |   |             | 
|Total purchase price                                               |  |   | 82,216,043  | 
|                                                                   |  |   |             | 
|Net deferred income tax liability assumed – Clarkdale Slag Project |  |   | 48,076,734  | 
|                                                                   |  |   |             | 
|Total                                                              |  | $ | 130,292,777 | 



The
following table reflects the components of the Clarkdale Slag Project:



|Allocation of acquisition cost:                                                             |  |   |             | 
|------------------------------------------------------------------------------------------- |  | - | ----------- | 
|Clarkdale Slag Project (including net deferred income tax liability assumed of $48,076,734) |  | $ | 120,766,877 | 
|Land – smelter site and slag pile                                                           |  |   | 5,916,150   | 
|Land                                                                                        |  |   | 3,300,000   | 
|Income property and improvements                                                            |  |   | 309,750     | 
|                                                                                            |  |   |             | 
|Total                                                                                       |  | $ | 130,292,777 | 



19









SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 5. | MINERAL PROPERTIES - MINING CLAIMS
| | -- | ----------------------------------



As of March 31, 2011, 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 March 31, 2011, the mineral properties balance was $16,947,419.



The mining claims were acquired
with issuance of 5,600,000 shares of the Company’s common stock over a three year period ending in June 2008. On June 25,
2008, the Company issued the final tranche of shares and received the title to the mining claims in consideration of the satisfaction
of the option agreement.



The mining claims were capitalized
as tangible assets in accordance with ASC 805-20-55-37, Use Rights. Upon commencement of commercial production, the claims
will be amortized using the unit-of-production method. If the Company does not continue with exploration after the completion of
the feasibility study, the claims will be expensed at that time.



In connection with the Company’s
Plan of Operations (“POO”) for the Searchlight Gold Project, a bond of $7,802 was posted with the Bureau of Land Management
(“BLM”) in December 2009.



20







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 6. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| | -- | ----------------------------------------



Accounts payable and accrued liabilities
at March 31, 2011 and December 31, 2010 consisted of the following:



|                                       |  | March 31, 2011 |        |  | December 31, 2010 |  
|-------------------------------------- |  | -------------- | ------ |  | ----------------- | -
|                                       |  |                |        |  |                   |  
|Trade accounts payable                 |  | $              | 22,538 |  |                   | $
|Accrued compensation and related taxes |  |                | 28,675 |  |                   |  
|                                       |  | $              | 51,213 |  |                   | $



Prior to the Company’s corporate
restructuring in 2005, the Company had several accounts payable (the “Phage Payables”) included in trade accounts payable,
dating back to 2003 and prior. These expenses were related to business operations which were discontinued in February 2005. During
the first quarter of 2010, the Company updated its internal review of the status of the Phage Payables and recorded a gain of $120,688
from relief of liabilities that were cleared based on expiration of UK statutes of limitations. The Phage Payables are further
discussed in Note 19.



Accounts payable – related party are discussed
in Note 18.



21







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 7. | DERIVATIVE WARRANT LIABILITY
| | -- | ----------------------------



On November 12, 2009, the Company
issued an aggregate of 12,078,596 units of securities to certain investors, consisting of 12,078,596 shares of common stock and
warrants to purchase an additional 6,039,298 shares of common stock, in a private placement to various accredited investors pursuant
to a Securities Purchase Agreement. The Company paid commissions to agents in connection with the private placement in the amount
of approximately $1,056,877 and warrants to purchase up to 301,965 shares of common stock.



The warrants issued to the purchasers
in the private placement became exercisable on November 12, 2009. The warrants have an expiration date of November 12, 2012 and
an initial exercise price of $1.85 per share. Under certain specified circumstances, the warrants may be exercised by means of
a “cashless exercise.” The warrants have anti-dilution provisions, including provisions for the adjustment to the exercise
price and to the number of warrants granted if the Company issues common stock or common stock equivalents at a price less than
the exercise price.



The Company determined that the
warrants were not afforded equity classification because the warrants are not freestanding and are not considered to be indexed
to the Company’s own stock due to the anti-dilution provisions. In addition, the Company determined that the anti-dilution
provisions shield the warrant holders from the dilutive effects of subsequent security issuances and therefore the economic characteristics
and risks of the warrants are not clearly and closely related to the Company’s common stock. Accordingly, the warrants are
treated as a derivative liability and are carried at fair value.



As of March 31, 2011, the Company
adjusted the fair value of the warrants as a result of four closings completed under the Seaside financing agreement. Financings
completed during the three month period ended March 31, 2011 are discussed in Note 10. In accordance with the terms and conditions
of the warrants the following adjustment was made through March 31, 2011: (i) the exercise price was reduced from $1.85 per share
to $1.79 per share, and (ii) the number of warrants was increased by 212,577 warrants.



The following table sets forth the
changes in the fair value of the derivative liability for the three month period ended March 31, 2011:



|Beginning balance      |  | $ | 993,386  |  
|---------------------- |  | - | -------- | -
|Warrants granted       |  |   | -        |  
|Warrants exercised     |  |   | -        |  
|Adjustment to warrants |  |   | 3,006    |  
|Change in fair value   |  |   | (996,392 | )
|                       |  |   |          |  
|Ending balance         |  | $ | -        |  



The Company estimates the fair value
of the derivative liability by using the Binomial Lattice pricing-model, a Level 3 input. The reduction of the derivative liability
to zero at March 31, 2011 was primarily the result of a reduction in the Company’s stock price combined with a decrease in
the volatility of the Company’s stock price. The following assumptions were used during the three month period ended March
31, 2011:



|Dividend yield          |  |  | -                | 
|----------------------- |  |  | ---------------- | 
|Expected volatility     |  |  | 68.29% to 71.50% | 
|Risk-free interest rate |  |  | 0.60% to 0.84%   | 
|Expected life (years)   |  |  | 2.00             | 



22







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 8. | CAPITAL LEASE PAYABLE
| | -- | ---------------------



The Company leases a CAT loader
under a capital lease. The lease provides for monthly payments of $2,200 at interest of 4.45%. The lease matures in July 2011.
The remaining balance at March 31, 2011 and December 31, 2010 was $8,720 and $15,175, respectively. The cost of the CAT loader
less accumulated amortization is included in property, plant and equipment as site equipment. The net book value as of March 31,
2011 and December 31, 2010 was $6,054 and $12,108, respectively.



| | 9. | VRIC PAYABLE - RELATED PARTY
| | -- | ----------------------------



Pursuant to the
Clarkdale acquisition agreement, the Company agreed to pay VRIC $30,000 per month until the Project Funding Date. Mr. Harry Crockett,
one of the Company’s former directors, was anaffiliate of VRIC.  Mr. Crocket joined the
Board of Directors subsequent to the acquisition. Mr. Crocket passed away in September 2010.



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 March 31,



|2012                                 |  | $ | 233,026   | 
|------------------------------------ |  | - | --------- | 
|2013                                 |  |   | 252,367   | 
|2014                                 |  |   | 273,313   | 
|2015                                 |  |   | 295,998   | 
|2016                                 |  |   | 320,566   | 
|Thereafter                           |  |   | 317,173   | 
|                                     |  |   |           | 
|                                     |  |   | 1,692,443 | 
|VRIC payable, current portion        |  |   | 233,026   | 
|                                     |  |   |           | 
|VRIC payable, net of current portion |  | $ | 1,459,417 | 



The acquisition
agreement also contains payment terms which are based on the Project Funding Date as defined in the agreement. The terms and conditions
of these payments are discussed in more detail in Notes 4 and 16.



23







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 10. | STOCKHOLDERS’ EQUITY
| | --- | --------------------



| |  | Common stock Purchase Agreement - On December 22, 2010, the Company entered into a Common
Stock Purchase Agreement (the “Purchase Agreement”) with Seaside 88, LP (“Seaside”) for the sale of 3,000,000
shares of common stock, followed by the sale of up to 1,000,000 shares of common stock on approximately the 15th day
of the month for ten consecutive months.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The per share purchase price of
the shares sold in each transaction will be at a price equal to the volume weighted average trading price of the Company’s
common stock during the ten-day trading period immediately preceding the applicable closing date (the “VWAP”), multiplied
by 0.85.  For any closing to take place, the VWAP must be at least $0.50 per share. If the VWAP is below $0.50 per share,
the applicable closing will not occur. In such event, the closing will be rescheduled to occur following the end of the originally
scheduled closings under the Purchase Agreement, provided that only two closings may be rescheduled.



The Company has the right, upon
written notice to Seaside, to immediately terminate the Purchase Agreement at any time. In no event may the purchase of shares
of common stock at a subsequent closing cause Seaside’s beneficial ownership of the Company’s common stock to exceed
9.99% of the number of common shares outstanding after such subsequent closing.



During the three months ended March
31, 2011, the Company’s stockholders’ equity activity consisted of the following:



| | a) | On March 15, 2011, the Company issued 1,000,000 shares of common stock to Seaside at a price of
$0.47694 per share under the Purchase Agreement for gross proceeds of $476,935. Total fees related to this issuance were $2,500.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | On February 15, 2011, the Company issued 1,000,000 shares of common stock to Seaside at a price
of $0.49198 per share under the Purchase Agreement for gross proceeds of $491,980. Total fees related to this issuance were $2,500.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | On January 18, 2011, the Company issued 1,000,000 shares of common stock to Seaside at a price
of $0.661895 per share under the Purchase Agreement for gross proceeds of $661,895. Total fees related to this issuance were $2,500.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)





| | 10. | STOCKHOLDERS
EQUITY(continued)
| | --- | ------------------------------



Private placement stock warrants
- As a result of the Seaside equity funding transactions completed in the first quarter of 2011, the Company adjusted the warrants
from the November 12, 2009 private placement offering. The following adjustments were made: (i) the exercise price was reduced
to $1.79 per share, (ii) the number of warrants was increased by 108,051, and (iii) at March 31, 2011, the cumulative warrant adjustment
has provided for the issuance of an additional 212,577 warrants.



The following
table summarizes the Company’s private placement warrant activity for the three months ended March 31, 2011:



|                           |  | Number of Shares |            |  | Weighted Average Exercise Price |   |      | Weighted Average Remaining Contractual Life (Years) | 
|-------------------------- |  | ---------------- | ---------- |  | ------------------------------- | - | ---- | --------------------------------------------------- | 
|Balance, December 31, 2010 |  |                  | 13,488,176 |  |                                 | $ | 1.84 |                                                     | 
|Warrants granted           |  |                  | 108,051    |  |                                 |   | 1.79 |                                                     | 
|Warrants expired           |  |                  | -          |  |                                 |   | -    |                                                     | 
|Warrants exercised         |  |                  | -          |  |                                 |   | -    |                                                     | 
|                           |  |                  |            |  |                                 |   |      |                                                     | 
|Balance, March 31, 2011    |  |                  | 13,596,227 |  |                                 | $ | 1.82 |                                                     | 





25







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 11. | STOCK-BASED COMPENSATION
| | --- | ------------------------



Stock-based compensation includes
grants of stock options and purchase warrants to eligible directors, employees and consultants as determined by the board of directors.



Stock option plans - The
Company has adopted several stock option plans, all of which have been approved by the Company’s stockholders that authorize
the granting of stock option awards subject to certain conditions. At March 31, 2011, the Company had 6,691,444 of its common shares
available for issuance for stock option awards under the Company’s stock option plans.



At March 31, 2011, the Company had
the following stock option plans available:



| | · | 2009 Plan - Under the terms of the 2009
Plan, options to purchase up to 3,250,000 shares of common stock may be granted to eligible participants. Under the plan, the exercise
price is generally equal to the fair market value of the Company’s common stock on the grant date and the maximum term of
the options is generally ten years. For grantees who own more than 10% of the Company’s common stock on the grant date, the
exercise price may not be less than 110% of the fair market value on the grant date and the term is limited to five years. The
2009 Plan was approved by the Company’s stockholders on December 15, 2009. As of March 31, 2011, no options have been granted
under the 2009 Plan.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 2009 Directors Plan – Under the
terms of the 2009 Directors Plan, options to purchase up to 750,000 shares of common stock may be granted to Directors. Under the
plan, the exercise price may not be less than 100% of the fair market value of the Company’s common stock on the grant date
and the term may not exceed ten years. No participants shall receive more than 300,000 options under this plan in any one calendar
year. The 2009 Directors Plan was approved by the Company’s stockholders on December 15, 2009. As of March 31, 2011, the
Company had granted 656,745 options under the 2009 Directors Plan with a weighted average exercise price of $1.14 per share. As
of March 31, 2011, all of the options granted were outstanding.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 2007 Plan – Under the terms of the
2007 Plan, options to purchase up to 4,000,000 shares of common stock may be granted to eligible participants. Under the plan,
the option price for incentive stock options is the fair market value of the stock on the grant date and the option price for non-qualified
stock options shall be no less than 85% of the fair market value of the stock on the grant date. The maximum term of the options
under the plan is ten years from the grant date. The 2007 Plan was approved by the Company’s stockholders on June 15, 2007. As
of March 31, 2011, the Company had granted 651,811 options under the 2007 Plan with a weighted average exercise price of $1.18
per share. As of March 31, 2011, 637,065 of the options granted were outstanding.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock warrants– From time to time the Company grants stock warrants to consultants related to services performed. These grants are
on an individual transaction basis and issued upon approval of the Board of Directors.



26







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 11. | STOCK-BASED
COMPENSATION(continued)
| | --- | -----------------------------------



Valuation of awards - The
Company estimates the fair value of stock-based compensation awards by using the Binomial Lattice option pricing-model with the
following assumptions used for grants:





|                        |  | 2011            | 
|----------------------- |  | --------------- | 
|                        |  |                 | 
|Risk-free interest rate |  | 1.00% - 2.24%   | 
|Dividend yield          |  | -               | 
|Expected volatility     |  | 76.54% - 83.28% | 
|Expected life (years)   |  | 2.00 - 4.25     | 





For stock options and warrants awarded
during 2011, the expected volatility is based on the historical volatility levels on our common stock. The risk-free interest rate
is based on the implied yield available on US Treasury zero-coupon issues over equivalent lives of the options.



The expected life of awards represents
the weighted-average period the stock options or warrants are expected to remain outstanding and is a derived output of the Binomial
Lattice model. The expected life 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.



Stock-based compensation activity
- During the three month period ended March 31, 2011, the Company granted stock-based awards as follows:



| | a) | On March 31, 2011, the Company granted nonqualified stock options under the 2007 Plan for the purchase
of 105,882 shares of common stock at $0.51 per share. The options were granted to three of the Company’s non-management directors
for directors’ compensation, are fully vested and expire on March 31, 2016. The exercise price of the stock options equaled
the closing price of the Company’s common stock on the grant date.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | On January 13, 2011, the Company granted stock purchase warrants for the purchase of 200,000 shares
of common stock at $1.00 per share to a consultant. The warrants vest 25% each on April 13, 2011, July 13, 2011, October 13, 2011
and January 13, 2012. The warrants expire on January 13, 2014. The exercise price of the warrants exceeded the closing price of
the Company’s common stock which was $0.76 on the grant date.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expenses for the three months ended
March 31, 2011 and 2010 related to the vesting and granting of stock-based compensation awards were $96,836 and $28,118, respectively,
and are included in general and administrative expense.



27







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 11. | STOCK-BASED
COMPENSATION(continued)
| | --- | -----------------------------------



| |  | The following table summarizes the Company’s stock-based compensation activity for the three
months ended March 31, 2011:
| |  | -------------------------------------------------------------------------------------------------------------------------



|                           |  | Number of Shares |           |  | Weighted Average Exercise Price |   |      | Weighted Average Remaining Contractual Life (Years) | 
|-------------------------- |  | ---------------- | --------- |  | ------------------------------- | - | ---- | --------------------------------------------------- | 
|Balance, December 31, 2010 |  |                  | 2,326,128 |  |                                 | $ | 1.58 |                                                     | 
|Options/warrants granted   |  |                  | 305,882   |  |                                 |   | 0.83 |                                                     | 
|Options/warrants expired   |  |                  | -         |  |                                 |   | -    |                                                     | 
|Options/warrants forfeited |  |                  | -         |  |                                 |   | -    |                                                     | 
|Options/warrants exercised |  |                  | -         |  |                                 |   | -    |                                                     | 
|                           |  |                  |           |  |                                 |   |      |                                                     | 
|Balance, March 31, 2011    |  |                  | 2,632,010 |  |                                 | $ | 1.50 |                                                     | 



Unvested awards - The following
table summarizes the changes of the Company’s stock-based compensation awards subject to vesting for the three months ended
March 31, 2011:



|                            |  | Number of Shares Subject to Vesting |         |   | Weighted Average Grant Date Fair Value |  
|--------------------------- |  | ----------------------------------- | ------- | - | -------------------------------------- | -
|Unvested, December 31, 2010 |  |                                     | 600,000 |   |                                        | $
|Options/warrants granted    |  |                                     | 200,000 |   |                                        |  
|Options/warrants vested     |  |                                     | (50,000 | ) |                                        |  
|Options/warrants cancelled  |  |                                     | -       |   |                                        |  
|                            |  |                                     |         |   |                                        |  
|Unvested, March 31, 2011    |  |                                     | 750,000 |   |                                        | $



As of March 31, 2011, there was
$351,813 total unrecognized compensation cost related to unvested stock-based compensation awards. This cost is expected to be
recognized as follows:



|2011  |  | $ | 157,407 | 
|----- |  | - | ------- | 
|2012  |  |   | 134,085 | 
|2013  |  |   | 52,495  | 
|2014  |  |   | 7,826   | 
|2015  |  |   | -       | 
|      |  |   |         | 
|Total |  | $ | 351,813 | 



28









SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 11. | WARRANTS AND OPTIONS
| | --- | --------------------



The following table summarizes all
of the Company’s stock option and warrant activity for the three month period ended March 31, 2011, including warrants issued
pursuant to private placement agreements, warrants issued in 2005 in connection with the Clarkdale Slag Project (as discussed in
Note 4) and stock options and warrants issued as compensation to directors, employees and consultants:



|                            |  | Number of Shares |            |  | Weighted Average Exercise Price |   |      | Weighted Average Remaining Term (Years) | 
|--------------------------- |  | ---------------- | ---------- |  | ------------------------------- | - | ---- | --------------------------------------- | 
|                            |  |                  |            |  |                                 |   |      |                                         | 
|Balance, December 31, 2010  |  |                  | 27,814,304 |  |                                 | $ | 1.18 |                                         | 
|Options/warrants granted    |  |                  | 413,933    |  |                                 |   | 1.08 |                                         | 
|Options/warrants expired    |  |                  | -          |  |                                 |   | -    |                                         | 
|Options/warrants forfeited  |  |                  | -          |  |                                 |   | -    |                                         | 
|Options/warranted exercised |  |                  | -          |  |                                 |   | -    |                                         | 
|                            |  |                  |            |  |                                 |   |      |                                         | 
|Balance, March 31, 2011     |  |                  | 28,228,237 |  |                                 | $ | 1.18 |                                         | 



| | 12. | STOCKHOLDER RIGHTS PLAN
| | --- | -----------------------



The Company
adopted a Stockholder Rights Plan (the “Rights Plan”) in August 2009 to protect stockholders from attempts to acquire
control of the Company in a manner in which the Company’s Board of Directors determines is not in the best interest of the
Company or its stockholders.  Under the plan, each currently outstanding share of the Company’s common stock includes,
and each newly issued share will include, a common share purchase right.  The rights are attached to and trade with the
shares of common stock and generally are not exercisable.  The rights will become exercisable if a person or group acquires,
or announces an intention to acquire, 15% or more of the Company’s outstanding common stock. The Rights Plan was not adopted
in response to any specific effort to acquire control of the Company.  The issuance of rights had no dilutive effect,
did not affect the Company’s reported earnings per share and was not taxable to the Company or its stockholders.



29







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 13. | 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



| |  | Pursuant to our acquisition of TI, the Company became party to a lease dated August 25, 2004 with
the Town of Clarkdale, AZ (“Clarkdale”). The Company provides approximately 60 acres of land to Clarkdale for disposal
of Class B effluent. In return, the Company has first right to purchase up to 46,000 gallons per day of the effluent for its use
at fifty percent (50%) of the potable water rate. In addition, if Class A effluent becomes available, the Company may purchase
that at seventy-five percent (75%) of the potable water rate.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The original term of the lease was
five years and expired on August 25, 2009; however, the lease also provided for additional one year extensions without any changes
to the original lease agreement. At such time as Clarkdale no longer uses the property for effluent disposal, and for a period
of 25 years measured from the date of the lease, the Company has a continuing right to purchase Class B effluent, and if available,
Class A effluent at then market rates.



30







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 14. | 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.



Significant components
of the Company’s net deferred income tax assets and liabilities at March 31, 2011 and December 31, 2010 were as follows:



|                                  |  | March 31, 2011 |             |   | December 31, 2010 |  
|--------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|Deferred income tax assets:       |  |                |             |   |                   |  
|                                  |  |                |             |   |                   |  
|Net operating loss carryforward   |  | $              | 10,738,786  |   |                   | $
|Option compensation               |  |                | 445,848     |   |                   |  
|Assets held for sale              |  |                | 200,193     |   |                   |  
|Property, plant & equipment       |  |                | 366,781     |   |                   |  
|                                  |  |                |             |   |                   |  
|Gross deferred income tax assets  |  |                | 11,751,608  |   |                   |  
|Less: valuation allowance         |  |                | (445,848    | ) |                   |  
|                                  |  |                |             |   |                   |  
|Net deferred income tax assets    |  |                | 11,305,760  |   |                   |  
|                                  |  |                |             |   |                   |  
|Deferred income tax liabilities:  |  |                |             |   |                   |  
|                                  |  |                |             |   |                   |  
|Acquisition related liabilities   |  |                | (55,197,465 | ) |                   |  
|                                  |  |                |             |   |                   |  
|Net deferred income tax liability |  | $              | (43,891,705 | ) |                   | $



A valuation allowance for deferred
tax related to option compensation was established for net deferred tax assets not allocated to offset acquisition related deferred
tax liabilities due to the uncertainty of realizing these deferred tax assets based on conditions existing at March 31, 2011 and
December 31, 2010.



Deferred income tax liabilities
were recorded on GAAP basis over income tax basis using statutory federal and state rates with the corresponding increase in the
purchase price allocation to the assets acquired.



The resulting estimated future federal
and state income tax liabilities associated with the temporary difference between the acquisition consideration and the tax basis
are 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.



31







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 14. | INCOME TAXES (continued)
| | --- | ------------------------



A reconciliation of the tax benefit
for the three month periods ended March 31, 2011 and 2010 at US federal and state income tax rates to the actual tax provision
recorded in the financial statements consisted of the following components:



|                                      |  | March 31, 2011 |          |   | March 31, 2010 |  
|------------------------------------- |  | -------------- | -------- | - | -------------- | -
|                                      |  |                |          |   |                |  
|Income tax benefit at statutory rates |  | $              | (480,362 | ) |                | $
|                                      |  |                |          |   |                |  
|Reconciling items:                    |  |                |          |   |                |  
|Non-deductible items                  |  |                | (377,367 | ) |                |  
|Change in valuation allowance         |  |                | 36,798   |   |                |  
|                                      |  |                |          |   |                |  
|Income tax benefit                    |  | $              | (820,931 | ) |                | $



The Company had cumulative net operating
losses of approximately $28,259,965 and $26,803,688 as of March 31, 2011 and December 31, 2010, respectively for federal income
tax purposes. The federal net operating loss carryforwards will expire between 2025 and 2031.



State income tax allocation



The Company has elected to file
consolidated tax returns with Arizona tax authorities. Tax attributes are computed using an allocation and apportionment formula
as outlined in Arizona tax law. The Company computes its tax provision using its statutory federal rate plus a state factor that
includes the Arizona statutory rate and the current apportionment percentage, which is then reduced by the federal tax benefit
that would be obtained upon payment of the computed state taxes.



For the three month periods ended
March 31, 2011 and 2010, the state income tax benefit which is included in the total tax benefit was $118,841 and $90,101, respectively.



The Company had cumulative net operating
losses of approximately $17,245,179 and $16,144,965 as of March 31, 2011 and December 31, 2010, respectively for Arizona state
income tax purposes. The Arizona state net operating loss carryforwards will expire between 2012 and 2016.



Tax returns subject to examination



The Company and its subsidiaries
file income tax returns in the United States. These tax returns are subject to examination by taxation authorities provided the
years remain open under the relevant statutes of limitations, which may result in the payment of income taxes and/or decreases
in its net operating losses available for carryforwards. The Company is no longer subject to income tax examinations by US federal
and state tax authorities for years prior to 2007. While the Company believes that its tax filings do not include uncertain tax
positions, the results of potential examinations or the effect of changes in tax law cannot be ascertained at this time. The Company
currently has no tax years under examination.



32







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 15. | COMMITMENTS AND CONTINGENCIES
| | --- | -----------------------------



Lease obligations - The Company
rents office space in Henderson, Nevada. The lease agreement expired in November 2006, and the Company continues to rent the existing
space under month-to-month terms. As of March 31, 2011, the monthly rent was $2,980.



Rental expense resulting from this
operating lease agreement was $8,940 and $12,510 for the three month periods ended March 31, 2011 and 2010, respectively.



Employment contracts - Martin
B. Oring.  On October 1, 2010, the Company entered into an employment agreement and non-qualified stock option agreement
with Mr. Oring as its Chief Executive Officer and President.  The agreement is on an at-will basis and the Company may terminate
his employment, upon written notice, at any time, with or without cause or advance notice.  The Company has agreed to pay
Mr. Oring compensation of $150,000, which includes compensation as a director.  Mr. Oring will be provided with reimbursement
for reasonable business expenses in connection with his duties as Chief Executive Officer.  Mr. Oring has voluntarily agreed
not to participate in health or other benefit plans or programs otherwise in effect from time to time for executives or employees.



In addition, on October 1, 2010,
Mr. Oring was granted options to purchase up to 300,000 shares of common stock with an exercise price of $0.91 per share, based
on the closing price of the Company’s common stock on the grant date.  Of the 300,000 options, 100,000 options vested
upon execution of the agreement, 100,000 vested in December 2010 upon entering into the Seaside Purchase Agreement, and 100,000
options will vest in connection with the hiring of a new Chief Executive Officer to replace Mr. Oring or Mr. Oring’s remaining
as Chief Executive Officer for at least 30 months. The options expire on the fifth anniversary of the date that they vest, but
in no event later than the tenth anniversary of the agreement.



Carl S. Ager.  The
Company entered into an employment agreement with Carl S. Ager, its Vice President, Secretary and Treasurer, effective January
1, 2006 and as amended February 16, 2007.  Pursuant to the terms of the employment agreement, the Company agreed to pay
Mr. Ager an annual salary of $160,000.  In addition to his annual salary, Mr. Ager may be granted a discretionary bonus
and stock options, to the extent authorized by the Board of Directors. The term of the agreement is for an indefinite period, unless
otherwise terminated by either party pursuant to the terms of the agreement.  In the event that the agreement is terminated
by the Company, other than for cause, the Company will provide Mr. Ager with six months written notice or payment equal to six
months of his monthly salary. In September 2010, Mr. Ager voluntarily agreed to reduce his cash compensation by 25% beginning on
October 1, 2010 and continuing for an undetermined amount of time. Mr. Ager’s employment agreement was not affected and has
not been amended.



33







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 15. | COMMITMENTS AND CONTINGENCIES (continued)
| | --- | -----------------------------------------



Melvin L. Williams.  The
Company entered into an employment agreement with Melvin L. Williams, its Chief Financial Officer, effective on June 14, 2006 and
as amended February 16, 2007.  Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. Williams
an annualized salary of $130,000 based on an increase in time commitment from 300-600 hours worked to 600-800 hours worked.  On
June 14, 2006, the Company issued 50,000 restricted shares of its common stock, as a one-time bonus, and granted options to purchase
100,000 shares of its common stock at an exercise price of $2.06 per share, exercisable for a period of five years until June 14,
2011.  The options vested 50% on each of the first and second anniversaries of the execution of the agreement.  The
price of the shares issued and the exercise price of the options granted were valued based on the closing price of the common stock
on the OTCBB on June 14, 2006.  In the event the employment agreement is terminated by the Company without cause, the
Company will pay Mr. Williams an amount equal to three months’ salary in a lump sum as full and final payment of all amounts
payable under the agreement. In September 2010, Mr. Williams voluntarily agreed to reduce his cash compensation by 25% beginning
on October 1, 2010 and continuing for an undetermined amount of time. Mr. Williams’ employment agreement was not affected
and has not been amended.



34







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 15. | COMMITMENTS AND CONTINGENCIES (continued)
| | --- | -----------------------------------------



Purchase consideration Clarkdale
Slag Project - In consideration of the acquisition of the Clarkdale Slag Project from VRIC, the Company has agreed to certain
additional contingent payments. The acquisition agreement contains payment terms which are based on the Project Funding Date as
defined in the agreement:



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



| | b) | The Company has agreed to pay VRIC a minimum annual royalty of $500,000, commencing on the Project
Funding Date (the “Advance Royalty”), and an additional royalty consisting of 2.5% of the NSR on any and all proceeds
of production from the Clarkdale Slag Project (the “Project Royalty”). The Advance Royalty remains payable until the
first to occur of: (i) the end of the first calendar year in which the Project Royalty equals or exceeds $500,000 or (ii) February
15, 2017. In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty and Project Royalty will
not exceed $500,000; and,
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | The Company has agreed to pay VRIC an additional amount of $3,500,000 from the net cash flow of
the Clarkdale Slag Project.
| | -- | ---------------------------------------------------------------------------------------------------------------------------



The Advance Royalty shall continue
for a period of ten years from the Agreement Date or until such time that the Project Royalty shall exceed $500,000 in any calendar
year, at which time the Advance Royalty requirement shall cease.



Clarkdale Slag Project royalty
agreement - NMC - Under the original JV Agreement, the Company agreed to pay NMC a 5% royalty on
NSR payable from the Company’s 50% joint venture interest in the production from the Clarkdale Slag Project. Upon the assignment
to the Company of VRIC’s 50% interest in the Joint Venture Agreement in connection with the reorganization with Transylvania
International, Inc., the Company continues to have an obligation to pay NMCa royalty consisting of 2.5% of the NSR on any
and all proceeds of production from the Clarkdale Slag Project.



Development agreement - In
January 2009, the Company submitted a development agreement to the Town of Clarkdale for development of an Industrial Collector
Road (the “Road”). The purpose of the Road is to provide the Company the capability to transport supplies, equipment
and products to and from the Clarkdale Slag Project site efficiently and to meet stipulations of the Conditional Use Permit for
the full production facility at the Clarkdale Slag Project.



The timing of the development of
the Road is to be within two years of the effective date of the agreement. The effective date shall be the later of (i) 30 days
from the approving resolution of the agreement by the Council, (ii) the date on which the Town obtains a connection dedication
from separate property owners who have land that will be utilized in construction of the Road, or (iii) the date on which the Town
receives the proper effluent permit. The contingencies outlined in (ii) and (iii) above are beyond control of the Company.



The Company estimates the initial
cost of construction of the Road to be approximately $3,500,000 and the cost of additional enhancements to be approximately $1,200,000
which will be required to be funded by the Company. Based on the uncertainty of the contingencies, this cost is not included in
the Company’s current operating plans. Funding for construction of the Road will require obtaining project financing or other
significant financing. At March 31, 2011 and through the date the consolidated financial statements were issued, these contingencies
had not changed.



35







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 16. | CONCENTRATION OF CREDIT RISK
| | --- | ----------------------------



The Company maintains its cash accounts
in three financial institutions. Cash accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) for up to $250,000 per institution. Additionally, under the FDIC’s expanded coverage, all non-interest bearing transactional
accounts are insured in full from December 31, 2010 through December 31, 2012. This expanded coverage is separate from and in addition
to the normal insurance coverage.



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 March 31, 2011, the Company had deposits
in excess of FDIC insured limits in the amount of$5,020,389.



| | 17. | CONCENTRATION OF ACTIVITY
| | --- | -------------------------



For the three months ended March
31, 2011, the Company purchased services from one major vendor, Baker Hostetler, which exceeded more than 10% of total purchases
and amounted to $239,863.



For the three months ended March
31, 2010, the Company purchased services from two major vendors, Baker Hostetler and NMC, which exceeded more than 10% of total
purchases and amounted to $225,000 and $117,857, respectively.



| | 18. | RELATED PARTY TRANSACTIONS
| | --- | --------------------------



During the three month period ended
March 31, 2011, 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. Ager is 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 period ended March 31, 2011,
the Company incurred total fees and reimbursement of expenses to NMC of $45,000 and $5,058, respectively. At March 31, 2011, the
Company had an outstanding balance due to NMC of $15,000.



For the period ended March 31, 2010,
the Company incurred total fees and reimbursement of expenses to NMC of $90,000 and $27,857, respectively. At March 31, 2010, the
Company had an outstanding balance due to NMC of $39,821.



During the three month period ended
March 31, 2011, the Company utilized Cupit, Milligan, Ogden & Williams, CPAs (“CMOW”) to provide accounting support
services. Mr. Williams is affiliated with CMOW.



The Company incurred total fees
to CMOW of $43,356 and $37,119 for the three month periods ended March 31, 2011 and 2010, 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 employment
agreement. The direct benefit to Mr. Williams was $14,741 and $15,590 of the above CMOW fees and expenses for the three month periods
ended March 31, 2011 and 2010, respectively. The Company had an outstanding balance due to CMOW of $43,356 and $37,119 as of March
31, 2011 and 2010, respectively.



36







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 19. | GAIN FROM DISCONTINUED OPERATIONS
| | --- | ---------------------------------



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



20.	SUBSEQUENT EVENT



On April 15, 2011, the Company issued
1,000,000 shares of common stock to Seaside at a price of $0.44846 per share under the Purchase Agreement for gross proceeds of
$448,460. Total fees related to this issuance were $2,500. As a result of this private placement, the Company adjusted the warrants
from the November 12, 2009 private placement offering. The following adjustments were made: (i) the exercise price was reduced
to $1.78 per share, and (ii) the number of warrants was increased by 36,831.



The Purchase Agreement with Seaside
is discussed in Note 10.



| | 21. | RESTATEMENT
| | --- | -----------



During the third quarter of 2011,
the Company identified errors related to the accounting treatment of private placement warrants containing non-customary anti-dilutive
provisions and for modifications of the term and exercise price of certain private placement warrants.



Modification of Private Placement
Warrants - The Company issued warrants to purchase up to an aggregate of 7,042,387 shares of common stock (collectively, the
“Subject Warrants”) to investors in connection with the Company’s February 23, 2007, March 22, 2007, December
26, 2007 and February 7, 2008 private placements. The Company unilaterally made several material amendments to the Subject Warrants.
The Company originally did not give any accounting recognition to these modifications. Upon further review, the Company determined
that these modifications conveyed value to these investors that was not contemplated in the original agreements, and therefore,
the Company should record warrant modification expense.



Private Placement Warrants with
Non-Customary Anti-Dilutive Provisions - On November 12, 2009, the Company issued an aggregate of 12,078,596 units of securities
to certain investors, consisting of 12,078,596 shares of common stock and warrants (the “Offering Warrants”) to purchase
an additional 6,039,298 shares of common stock, in a private placement to various accredited investors pursuant to a Securities
Purchase Agreement. The Company paid commissions to agents which included warrants to purchase up to 301,965 shares of common stock.



The warrants have anti-dilution
provisions, including provisions for the adjustment to the exercise price and to the number of warrants granted if the Company
issues common stock or common stock equivalents at a price less than the exercise price.



37







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 21. | RESTATEMENT (continued)
| | --- | -----------------------



At the issuance date of the Offering
Warrants, the Company did not give any accounting recognition to the Offering Warrants in its previously filed financial statements.
The Company revisited the accounting treatment for the Offering Warrants and concluded that the warrants should be accounted for
a derivative liability and revalued at each reporting period.



The effects of correcting these
errors to each of the consolidated balance sheets as of March 31, 2011 and 2010 and each of the consolidated statements of operations
for the three month periods ended March 31, 2011 and 2010 and for the cumulative periods from inception through March 31, 2011
and 2010 are presented in the tables below. None of the adjustments had an impact on cash flows for any of the periods presented
below.



|Summarized Consolidated Balance Sheet - March 31, 2010 |  | As Previously
Reported |             |   | Adjustment |   |            | Notes |  |  | As Restated | 
|------------------------------------------------------ |  | ---------------------- | ----------- | - | ---------- | - | ---------- | ----- |  |  | ----------- | 
|                                                       |  |                        |             |   |            |   |            |       |  |  |             | 
|Derivative warrant liability                           |  | $                      | -           |   |            | $ | 3,211,378  |       |  |  | (b)(c)      | 
|Total liabilities                                      |  |                        | 49,446,648  |   |            |   | 3,211,378  |       |  |  |             | 
|Additional paid-in capital                             |  |                        | 141,075,978 |   |            |   | 714,966    |       |  |  | (a)(b)      | 
|Accumulated deficit during exploration stage           |  |                        | (18,518,583 | ) |            |   | (3,926,344 | )     |  |  | (a)(c)      | 
|Total stockholders’ equity                             |  |                        | 122,676,178 |   |            |   | (3,211,378 | )     |  |  |             | 



|Summarized Statement of Operations - For the three months ended March 31, 2010 |  | As Previously Reported |            |   | Adjustment |   |           | Notes |  |  | As Restated | 
|------------------------------------------------------------------------------ |  | ---------------------- | ---------- | - | ---------- | - | --------- | ----- |  |  | ----------- | 
|                                                                               |  |                        |            |   |            |   |           |       |  |  |             | 
|Change in fair value of derivative warrant liability                           |  | $                      | -          |   |            | $ | 1,042,031 |       |  |  | (d)         | 
|Total other income (expense)                                                   |  |                        | 5,740      |   |            |   | 1,042,031 |       |  |  | (d)         | 
|Net income (loss)                                                              |  |                        | (1,026,677 | ) |            |   | 1,042,031 |       |  |  | (d)         | 
|Net income (loss) per common share – basic and diluted                         |  | $                      | (0.01      | ) |            | $ | 0.01      |       |  |  |             | 



|Summarized Statement of Operations -  For the period from January 14, 2000 (Date of Inception) through  March 31, 2010 |  | As Previously Reported |             |   | Adjustment |   |            | Notes |  |  | As Restated | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | ---------- | - | ---------- | ----- |  |  | ----------- | 
|                                                                                                                       |  |                        |             |   |            |   |            |       |  |  |             | 
|General and administrative                                                                                             |  | $                      | 9,593,037   |   |            | $ | 4,996,955  |       |  |  | (a)         | 
|Total operating expenses                                                                                               |  |                        | 23,089,715  |   |            |   | 4,996,955  |       |  |  | (a)         | 
|Change in fair value of derivative warrant liability                                                                   |  |                        | -           |   |            |   | 1,070,611  |       |  |  | (c)         | 
|Total other income (expense)                                                                                           |  |                        | 666,853     |   |            |   | 1,070,611  |       |  |  | (c)         | 
|Net income (loss)                                                                                                      |  | $                      | (18,518,583 | ) |            | $ | (3,926,344 | )     |  |  | (a)(c)      | 



38







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 21. | RESTATEMENT (continued)
| | --- | -----------------------



|Summarized Consolidated Balance Sheet - March 31, 2011 |  | As Previously Reported |             |   | Adjustment |   |          | Notes |  |  | As Restated | 
|------------------------------------------------------ |  | ---------------------- | ----------- | - | ---------- | - | -------- | ----- |  |  | ----------- | 
|                                                       |  |                        |             |   |            |   |          |       |  |  |             | 
|Derivative warrant liability                           |  | $                      | -           |   |            | $ | -        |       |  |  |             | 
|Total liabilities                                      |  |                        | 45,702,437  |   |            |   | -        |       |  |  |             | 
|Additional paid-in capital                             |  |                        | 145,221,693 |   |            |   | 714,966  |       |  |  | (a)(b)      | 
|Accumulated deficit during exploration stage           |  |                        | (23,928,610 | ) |            |   | (714,966 | )     |  |  | (a)(e)      | 
|Total stockholders’ equity                             |  |                        | 121,419,101 |   |            |   | -        |       |  |  |             | 



|Summarized Statement of Operations -  For the three months ended  March 31, 2011 |  | As Previously Reported |            |   | Adjustment |   |         | Notes |  |  | As Restated | 
|-------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ---------- | - | ------- | ----- |  |  | ----------- | 
|                                                                                 |  |                        |            |   |            |   |         |       |  |  |             | 
|Change in fair value of derivative warrant liability                             |  | $                      | -          |   |            | $ | 993,386 |       |  |  | (f)(g)      | 
|Total other income (expense)                                                     |  |                        | (517,859   | ) |            |   | 993,386 |       |  |  | (f)(g)      | 
|Net income (loss)                                                                |  |                        | (1,436,566 | ) |            |   | 993,386 |       |  |  | (f)(g)      | 
|Net income (loss) per common share – basic and diluted                           |  | $                      | (0.01      | ) |            | $ | 0.01    |       |  |  |             | 



|Summarized Statement of Operations -  For the period from January 14, 2000 (Date of Inception) through  March 31, 2011 |  | As Previously Reported |             |   | Adjustment |   |           | Notes |  |  | As Restated | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | ---------- | - | --------- | ----- |  |  | ----------- | 
|                                                                                                                       |  |                        |             |   |            |   |           |       |  |  |             | 
|General and administrative                                                                                             |  | $                      | 12,361,904  |   |            | $ | 4,996,955 |       |  |  | (a)         | 
|Total operating expenses                                                                                               |  |                        | 31,294,022  |   |            |   | 4,996,955 |       |  |  | (a)         | 
|Change in fair value of derivative warrant liability                                                                   |  |                        | -           |   |            |   | 4,281,989 |       |  |  | (e)         | 
|Total other income (expense)                                                                                           |  |                        | 173,844     |   |            |   | 4,281,989 |       |  |  | (e)         | 
|Net loss                                                                                                               |  | $                      | (23,928,610 | ) |            | $ | (714,966  | )     |  |  | (a)(e)      | 



The following is a summary of the
differences between the consolidated financial statements as previously reported and the consolidated financial statements as revised
for the errors detected:



| | (a) | Additional paid-in capital and accumulated deficit were increased by $4,996,955 as a result of
two amendments to certain private placement warrants. Related warrant modification expense, categorized within general and administrative
expense, was recognized in the amounts of $1,826,670 and $3,170,285 in the quarters ended December 31, 2009 and 2008, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Additional paid-in capital was decreased and the derivative warrant liability was increased by
$4,281,989 as a result of recognizing the fair value of the warrants issued with the November 12, 2009 private placement as a derivative
warrant liability due to the warrants containing non-customary anti-dilution provisions.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | The derivative warrant liability and accumulated deficit were reduced by $1,070,611 as a result
of the cumulative fair value adjustments from December 31, 2009 through March 31, 2010. A cumulative gain on the change in fair
value of the derivative liability of $1,070,611 was recognized over the corresponding period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39







SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (RESTATED)



| | 21. | RESTATEMENT (continued)
| | --- | -----------------------



| | (d) | The derivative warrant liability was reduced by $1,042,031 and a gain on the change in fair value
of derivative warrant liability was recognized in the same amount as a result of the fair value adjustment as of March 31, 2010.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | The derivative warrant liability and accumulated deficit were reduced by $4,281,989 as a result
of the cumulative fair value adjustments from December 31, 2009 through March 31, 2011. A cumulative gain on the change in fair
value of the derivative liability of $4,281,989 was recognized over the corresponding period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | The derivative warrant liability was increased by $3,006 and a loss on the change in fair value
of derivative warrant liability was recognized in the same amount as a result of the second adjustment to the November 12, 2009
private placement warrants for the second closing of the Seaside equity funding transaction completed on January 18, 2011.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | The derivative warrant liability was reduced by $996,392 and a gain on the change in fair value
of the derivative warrant liability was recognized in the same amount as a result of the fair value adjustment as of March 31,
2011.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40











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, 2010.



The following discussion and analysis summarizes
our plan of operation for the next twelve months, our results of operations for the three month period ended March 31, 2011 and
changes in our financial condition from our year ended December 31, 2010. 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, 2010.



Executive Overview



We are an exploration stage company engaged
in a slag reprocessing project and the acquisition and exploration of mineral properties. 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. During 2010,
our technical team tested four potential flow sheets in an effort to identify new grinding, leaching extraction and equipment alternatives
that would be suitable and commercially viable for the extraction of precious and base metals from the slag material. Based on
this testing program, we believe that autoclaving shows the most promise, and have determined to pursue this method since the second
half of 2010.



Autoclave Process



Autoclaving is a proven technology that is widely
used within the mining industry. The effectiveness of the downstream ambient leach system may benefit from results gleaned from
earlier and extensive leach processing conducted at the Clarkdale Slag Project. This leach process is known as Pressure Oxidation,
or POX, which utilizes elevated temperature and pressure in an autoclave system to dissolve and remove impurities (iron and silica)
from ore. In bench testing of the slag material in a 6 liter autoclave, this process has allowed an ambient leach to dissolve the
gold in a “clean solution,” making it available for recovery by a number of commercially proven process techniques.
The most recent of these tests has been conducted on slag material that was previously ground at the test facility of a manufacturer
of grinding equipment, using its high pressure grinding rolls (HPGR). The tests thus far indicate the following:



41







| | · | Pressure Oxidation, followed by ambient leach (either halide or cyanide),
has resulted in potential commercial-grade gold recovery into solution from the slag material. The ability to leach gold using
cyanide demonstrates that the gold has been totally liberated and is in a “free” state. The use of cyanide at a batch
test level also provides a cross-check on analytical results using a halide leach.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The HPGR-ground slag, ground to a minus-20 mesh size, in autoclave
bench tests seems to be able to provide liberation of gold comparable to the results that were achieved in pilot-level halide leach
formulation tests at a much finer minus-200 mesh size. This appears to be due to the micro-fractures imparted to the slag during
the HPGR grinding process. The technical team believes that the high pressures that exist in the autoclave environment are able
to drive the leach solution into the micro-fracture cracks created in the slag material by the HPGR crusher, thereby dissolving
the gold without having to employ a more expensive process to grind the slag material to a much finer particle size.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Recent autoclave tests indicate that an intermediate grind at approximately
minus-100 mesh may provide sufficient additional gold extraction into solution to warrant the inclusion of a secondary grinding
circuit, such as a tower mill. A tower mill may provide the proper grind with only modest wear on the internal components of the
mill. Grinding tests in a pilot-scale tower mill have been performed. A pilot tower mill has been effective in providing results
that indicate the ability of a larger tower mill to support a commercial scale operation. Several manufacturers provide tower mills
of sufficient size and capacity to support the 2,000 ton-per-day (tpd) capacity envisioned for the commercial system at the Clarkdale
site that we intend to build if we can establish feasibility for the Clarkdale project.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The temperatures and pressures required within the 6 liter autoclave
we have been using for bench testing are relatively moderate when compared with many commercial autoclave systems. Similarly, the
required retention times for the material in the autoclave are relatively short. This may allow us to utilize a smaller, more cost-efficient
autoclave for our anticipated 2,000 tpd commercial production facility, when compared with larger autoclaves installed at other
mining facilities around the world.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Based on all tests of various leach processes
that have been completed to date, autoclave POX appears to provide the most consistent and cost-effective method for extracting
gold from the slag material. It is anticipated that the capital and operating costs of an autoclave system will be significantly
higher than the costs for the other ambient leach techniques tested thus far.



To test the commercial viability of the autoclave
approach, we have performed over 75 bench-scale (6-liter autoclave) tests which have shown to be successful
in leaching gold into solution from the slag material.Bench testing by our consultants indicate that autoclaving can provide
gold recoveries of up to 0.5 ounces per ton (opt) from the samples which we have tested. Prior sampling tests on the slag pile
have reflected that there may be variances in the amount of gold per ton within the composition of the slag in different parts
of the slag pile.



In the first quarter of 2011, an internationally
recognized independent laboratory began testing our slag material in an effort to independently evaluate our internal processing
methods and autoclave results. This independent facility is currently performing tests on our slag material with a bench-scale
autoclave. If the results from these tests prove successful, we intendto perform larger, continuous
pilot bulk tests in a larger multi-compartment autoclave (30-50 liters) as part of the feasibility study process.This type
of scale-up in testing is common in the mining industry. The majority of recent major autoclave installations have proven their
feasibility utilizing continuous tests conducted with 30-50 liter autoclaves. Reputable engineering firms with the expertise to
assist and advise us during these larger tests may be brought on in the near term.



42







We anticipate that the net results from the
bench-scale autoclave testing and continuous bulk autoclave testing will be incorporated into a feasibility study that identifies
the engineering parameters and recoverable gold grade for a commercial-scale production facility. This information will then be
used to identify capital requirements and operating costs to form the basis for a bankable feasibility study to support the financing
of the commercial system.



Our autoclave technical team is currently led
by Richard Kunter, an independent engineer and registered Qualified Person with extensive experience in autoclave development.
In anticipation of continuous bulk tests, we have engaged another autoclave specialist with significant experience in the design,
start-up and commercial operation of autoclave systems. As we approach the preparation of a bankable feasibility study, we may
retain the services of an autoclave engineering procurement construction management (EPCM) firm that specializes in commercial
autoclave design and construction.



We expect to develop a more thorough economic
analysis of the full-scale production facility, including specific capital and operating costs, funding schedules and funding sources
during the feasibility evaluation. The scope, size, timing and cost of a full-scale production facility will addressed in the bankable
feasibility study. If we determine that we should use autoclaving, the capital costs will likely be higher than those of other
methods, including open-vessel leaching, and such costs will need to be considered when comparing the various extraction methods.



Clarkdale Slag Project – History



Prior to 2007, while conducting testing on
the slag material and to assist in the process of designing a large scale production module, we initially conducted our testing
in a smaller scale pilot plant. During this initial testing process, we determined that we could effectively liberate gold, silver,
copper and zinc from smaller quantities of ground slag material by employing:



| | · | a mechanical process to break up the slag material using a small vibratory
mill in our crushing and grinding circuit, and
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | a relatively benign (halide) chemical leaching process to liberate
the precious and base metals from the crushed and ground slag.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



Our primary goal consistently has been to demonstrate
the economic viability of the Clarkdale Slag Project, including the generation of a bankable feasibility study. This work has required
developing a technically viable flow sheet for extracting gold, silver, copper and zinc from the slag material at the Clarkdale
Slag Project site. We began work on the Clarkdale Slag Project under a joint venture arrangement with VRIC, the then-existing owners
of the Clarkdale Slag Project site. We engaged qualified independent engineers, and drilled and sampled the slag pile, under chain-of-custody
standards, in order to understand potential grades and tonnages. After obtaining results from these efforts, we proceeded to work
on the metallurgy capable of unlocking the value of the metals contained in the slag material. To achieve this objective, we operated
a small pilot plant in Phoenix, Arizona, and completed an internal pre-feasibility study. The results of this work demonstrated
that, with proper grinding, a simple halide leach could extract the precious and base metals in sufficient quantities which could
potentially be economically viable. The next step involved the construction of a larger pilot plant (production module) at the
Clarkdale Slag Project site, which was designed to test the commercial viability of the process and to complete a feasibility study.
We proceeded to build one production module rather than complete a theoretical feasibility study. Concurrently, we completed the
acquisition of the Clarkdale Slag Project site from the previous owners.



Thereafter, we designed and built a production
module which was anticipated to process between 100 and 250 tons of slag material per day. The process
of building and equipping the module was completed in late 2008. We ran into delays in construction
and numerous technical difficulties in connection with the scaling up of the processes previously tested for the commercialization
of the Clarkdale Slag Project. Although we were able to assay the milled slag product from the crushing and grinding circuit that
demonstrated the presence of 0.4 ounces per ton of gold in the slag material, the benign leach chemistry used in the production
module was unable to duplicate the results of the liberation of gold from the slag material achieved in the pilot plant.



43







Most of 2009 was devoted to attempts to commission
and optimize the production module, during which time we encountered numerous challenges involving its crushing and grinding circuit.
In early 2010, we brought in experienced outside engineering resources to better define and execute on a multi-pronged approach
to achieve commercial feasibility of the Clarkdale Slag Project. This refocusing effort has resulted in significant progress, both
operationally and from a research and development perspective.



The key to the potential success of the flow
sheet involves the mechanical liberation of the metals by proper grinding. This process proved to be a significant challenge for
the larger grinding equipment installed on site. After an entire year of innovative attempts and modifications, the grinding circuit
did not liberate the precious metals sufficiently to allow the simple and benign halide leach circuit to operate effectively. We
concluded that investigation of alternative grinding and leaching methods was necessary in order to solve the problem. We conducted
preliminary studies of these alternative approaches to the process flow sheet, which have shown promising results and are the current
focus of our efforts.



Initially during the start-up of the production
module, emphasis was placed on the crushing and grinding circuit since it was believed, and shown in the pilot plant, that in order
to leach the highest amount of gold from the slag material with our benign halide leach, mechanical liberation of gold particles
was necessary via a very fine grind. As we began to crush and grind larger amounts of slag material through the production module,
we encountered a number of equipment wear issues. Highly abrasive carbon-rich ferro-silicates (containing carbon, iron and silica)
comprise about 90% of the slag material. The hardness of these materials caused significant wear and tear on the metal crushers
and grinders. Further, as we increased the amount of slag material in the crushing and grinding circuit, we experienced difficulties
in grinding the slag material into a fine enough material to be effectively leached by our benign halide leaching process. Our
experience with the slag material in the larger scale production module required us to seek out more advanced hard facing technology
and wear-resistant surfacing media for our crushing and grinding equipment. Initially, we believed that the wear issues relating
to the throughput rate of the crushing and grinding circuit had been resolved. However, work during the first half of 2010 revealed
that these issues were still present.



As a result of the challenges that arose with
the equipment wear issues and our not being able to grind the slag material in the production module continuously, we adjusted
the chemical characteristics of the leach to a more acidic leach in an effort to put less emphasis on the mechanical liberation
and put more emphasis on the chemical liberation in an effort to maximize gold extraction from the slag material. Our goal was
to achieve similar results in gold extraction from the slag material to those obtained in the smaller scale pilot plant, without
significantly changing the grinding circuit or seeking alternatives to the design of the larger scale production module that might
have a significantly greater capital cost than we had originally planned. In doing this testing, we encountered difficulties with
the liberation of excess amounts of iron and silica in the leaching process, which resulted in difficulties with our filtration
process and made the recovery of gold from the pregnant leach solution more difficult.



Because of these challenges, which have affected
our ability to operate the production module on a continuous basis, the data from our operations reflects that our production module
will not be able to process 100 to 250 tons per day, as originally planned. However, we anticipate the continued use of the facility
for analytical purposes. The information received from the operation of the production module has been invaluable in providing
information on how to process the slag and extract the base and precious metals on a commercial scale. In particular, we have a
significant amount of data on various grinds and leach chemistries and their affect on leaching the desired (gold, silver, copper
and zinc) and undesired (iron and silica) metals into solution. We also have a better understanding of the equipment wear issues
that need to be considered when dealing with such hard and abrasive material. All of this data has provided us with a strong knowledge
base that can be drawn upon as we continue to make adjustments to our process going forward.



44







Although the plant site in Clarkdale remains
a valuable resource for the technical team, it no longer requires the previous levels of staffing during our autoclave testing
and feasibility testing activities. Thus, as of early September 2010, we reduced the number of employees working at the Clarkdale
Slag Project by approximately 50% to levels appropriate only for essential and necessary tasks, while assuring that important permits
remain in good standing.



Searchlight Gold Project



Since 2005, we have maintained an ongoing exploration
program on our Searchlight Gold Project and have contracted with Arrakis, Inc. (“Arrakis”), an unaffiliated mining
and environmental firm, to perform a number of metallurgical tests on surface and bulk samples taken from the project site under
strict chain-of-custody protocols. In 2007, results from these tests validated the presence of gold on the project site, and identified
reliable and consistent metallurgical protocols for the analysis and extraction of gold, such as microwave digestion and autoclave
leaching. Autoclave methods typically carry high capital and operating costs on large scale projects, however, we were encouraged
by these results and intend to continue to explore their applicability to the Searchlight Gold Project.



On February 11, 2010, we received final approval
of our Plan of Operations from the BLM, which allows us to conduct an 18-hole drill program on our project area. However, in an
effort to conserve our cash and resources, we have decided to postpone further exploration on our Searchlight Gold Project until
we are better able to determine the feasibility of our Clarkdale Slag Project. Once we have decided to resume our exploration program,
work on the project site will be limited to the scope within the Plan of Operations. To perform any additional drilling or mining
on the project, we would be required to submit a new application to the BLM for approval prior to the commencement of any such
additional activities.



Anticipated Cash Requirements



Our exploration and evaluation plan calls for
significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. During the next 12 months,
our management anticipates that the minimum cash requirements for funding our proposed testing and feasibility programs and our
continued operations will be approximately $7,410,000. As of May 13, 2011, we had cash reserves in the amount of approximately
$6,800,000. Our current financial resources may not be sufficient to allow us to meet the anticipated costs of our testing and
feasibility programs during the next 12 months and we may require additional financing in order to fund these activities.



A decision on allocating additional funds for
Phase II of the Clarkdale Slag Project will be forthcoming if and once the feasibility study is completed and analyzed. The Phase
II work program is expected to include the preparation of a bankable feasibility study, engineering and design of the full-scale
production facility and planning for the construction of an Industrial Collector Road pursuant to an agreement with the Town of
Clarkdale, Arizona, We estimate that our monthly expenses will increase substantially once we enter Phase II of the project. Therefore,
our current financial resources may not be sufficient to allow us to meet the anticipated costs of our testing, feasibility and
Phase II programs and we may require additional financing in order to fund these activities. We currently have a financing agreement
with Seaside 88, however, there are no assurances that this agreement will be sufficient to cover any increased cost we may incur.
We do not currently have any other financing arrangements in place for such additional financing, and there are no assurances that
we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.



If the actual costs are significantly greater
than anticipated, if we proceed with our testing and feasibility activities beyond what we currently have planned, or if we experience
unforeseen delays during our activities during the next 12 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.



45







Obtaining additional financing is subject to
a number of factors, including market prices for 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.



Critical Accounting Policies



Use of estimates
-The preparation of financial statements in conformity with GAAP requires us 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. By their nature, these estimates are subject
to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.
Significant areas requiring our estimate and assumption include the valuation of stock-based compensation, impairment analysis
of long-lived assets, and the valuation allowance on deferred tax assets. Actual results could differ from those estimates.



Mineral properties- Costs of
acquiring mineral properties are capitalized upon acquisition. Exploration costs and costs to maintain mineral properties are expensed
as incurred while the project is in the exploration stage. Development costs and costs to maintain mineral properties are capitalized
as incurred while the property is in the development stage. When a property reaches the production stage, the related capitalized
costs are amortized using the units-of-production basis over the proven and probable reserves. Mineral properties are assessed
for impairment when circumstances indicate that the carrying amount may not be recoverable. Impairment losses are charged to operations
at the time of impairment. When a property is sold or abandoned, a gain or loss is recognized and included in the consolidated
statement of operations.



Mineral exploration and development
- Exploration expenditures incurred prior to entering the development stage are expensed and included in “Mineral exploration
and evaluation expenses”.



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 grinding circuit is depreciated on the units-of-production
method over the total estimated units. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for
property betterments and renewals are capitalized. Gains or losses on disposition are recognized in operations.



For property, plant and equipment that our
Board of Directors approves for sale, the asset is reclassified on our consolidated financial statements as “assets held
for sale”.  Accordingly, we cease recording depreciation expense for assets classified as held for sale until the
asset is sold or reclassified as held for use.  If the asset is ultimately reclassified as held for use, the previously
unrecorded depreciation expense is expensed in the period of reclassification. Assets held for sale are recorded at the lower
of their carrying value or fair values less cost to sell.  Subsequent gains and losses in fair value are recognized in
operations. Subsequent gains are limited to the cumulative losses previously recognized.



46







Impairment of long-lived assets-We review and evaluate our long-lived assets for impairment at each balance sheet date due to our planned exploration stage
losses and document such impairment testing. Mineral properties in the exploration stage are monitored for impairment based on
factors such as the Company’s continued right to explore the property, exploration reports, drill results, technical reports
and continued plans to fund exploration programs on the property.



The tests for long-lived assets in the exploration,
development or producing stage that would have a value beyond proven and probable reserves would be monitored for impairment based
on factors such as current market value of the mineral property and results of exploration, future asset utilization, business
climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted
cash flows expected to be generated by the asset, including evaluating its reserves beyond proven and probable amounts.



Our policy is to record an impairment loss
in the period when it is determined that the carrying amount of the asset may not be recoverable either by impairment or by abandonment
of the property. The impairment loss is calculated as the amount by which the carrying amount of the assets exceeds its fair value.
To date, no such impairments have been identified.



Restatement of Consolidated Financial Statements



The following is a brief summary of the restatement
of our previously filed consolidated financial statements for the three month periods ended March 31, 2010 and 2011, and the cumulative
periods from January 14, 2000 (date of inception) through March 31, 2011:



| | · | 2007 and 2008 Warrants. We issued warrants to purchase up to
an aggregate of 7,042,387 shares of common stock (collectively, the “2007 and 2008 Warrants”) to investors in connection
with our private placements on February 23, 2007 ($4.50 per share exercise price), March 22, 2007 ($4.50 per share exercise price),
December 26, 2007 ($2.40 per share exercise price) and February 7, 2008 ($2.40 per share exercise price). We unilaterally made
two subsequent amendments to the exercise price of the 2007 and 2008 Warrants on December 29, 2008 (those 2007 and 2008 Warrants
with a $4.50 per share exercise price were reduced to a $2.40 per share exercise price, and those 2007 and 2008 Warrants with a
$2.40 per share exercise price did not have a price adjustment) and November 12, 2009 (all of the 2007 and 2008 Warrants were reduced
to a $1.85 per share exercise price). We did not give any accounting recognition to these modifications in our previously filed
financial statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Further, in connection with the December 29, 2008 amendment,
we unilaterally amended certain of the 2007 and 2008 Warrants to reduce the price at which we would be able to call those 2007
and 2008 Warrants. However, on April 30, 2009, we amended those 2007 and 2008 Warrants to restore their original call provisions.



We did not give any accounting recognition to these modifications
in our previously filed financial statements. The pricing modifications conveyed value to these investors that was not contemplated
in the original agreements. Therefore, the pricing modifications to the 2007 and 2008 Warrants in all of these periodic reports
should have been accounted for as warrant modification expense.



We utilized a binomial lattice option pricing model to estimate
the incremental fair values of the modifications to the 2007 and 2008 Warrants. Based on this model we recorded warrant modification
expense of approximately $1.8 million and $3.2 million, as of December 29, 2008 and November 12, 2009, respectively.



47







| | · | 2009 Warrants. On November 12, 2009, we issued an aggregate
of 12,078,596 shares of common stock and warrants to purchase an additional 6,039,298 shares of common stock in a private placement.
We paid commissions to agents which included warrants to purchase up to 301,965 shares of common stock. These warrants (collectively,
the “2009 Warrants”) have an anti-dilution provision, including a provision for the adjustment to the exercise price
and to the number of warrants granted if we issue common stock or common stock equivalents at a price less than the exercise price.
The 2009 Warrants were recorded as equity in our previously filed financial statements and we did not consider the impact of the
anti-dilution provision in the 2009 Warrants.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result, we performed a re-assessment of our accounting
for the 2009 Warrants and determined that the 2009 Warrants were within the scope of Accounting Standards Codification 815-40,
Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), formerly Emerging Issues
Task Force Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock..
The 2009 Warrants have an anti-dilution provision, including a provision for the adjustment to the exercise price and to the number
of warrants granted if we issue common stock or common stock equivalents at a price less than the exercise price of $1.85 per share.
Resetting the exercise price based on a price per share received from other sales of common stock and common stock equivalents
is not an input to an option pricing model and thus the fair value of the 2009 Warrants were not linked to our common stock under
ASC 815-40. Accordingly, the 2009 Warrants should have been accounted for as derivative financial liabilities, measured at its
fair value at the date of issuance, with changes in fair value recognized as a gain or loss for each reporting period thereafter.



On our balance sheets, we have recorded a derivative
warrant liability beginning in the fourth quarter of the year ended December 31, 2009. The derivative warrant liability has been
adjusted to its fair value at each of the periods ended from December 31, 2009 through June 30, 2011.



Our statements of operations for the years ended
December 31, 2008 and 2009 have been restated to recognize warrant modification expense as a general and administrative expense.
In addition, our statements of operations for the years ended December 31, 2009 and 2010 and the quarterly periods ended March
31, 2010, June 30, 2010, September 30, 2010, March 31, 2011 and June 30, 2011 have been restated to record the change in fair value
of the derivative warrant liability as an other income (expense) item.



The accounting treatments of the 2007, 2008
and 2009 Warrants are non-cash items and had no impact on our business operations or cash flows.



A more detailed description of the restatements
made to the financial statements for the three month periods ended March 31, 2010 and 2011 is provided at Note 21 to the consolidated
financial statements included with this report.



48







Results of Operations



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



|                                  |  | Three Months Ended March 31, |           
|--------------------------------- |  | ---------------------------- | ----------
|                                  |  |                              |           
|                                  |  | 2011                         |           
|                                  |  | (restated)                   |           
|Revenue                           |  | $                            | -         
|Operating expenses                |  |                              | (1,739,638
|Other income (expense)            |  |                              | 475,527   
|Income tax benefit                |  |                              | 820,931   
|Gain from discontinued operations |  |                              | -         
|Net income (loss)                 |  | $                            | (443,180  



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 three month period ended March 31, 2011. 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 March 31, |          
|----------------------------------------------------------- |  | ---------------------------- | ---------
|                                                            |  |                              |          
|                                                            |  | 2011                         |          
|                                                            |  | (restated)                   |          
|Mineral exploration and evaluation expenses                 |  | $                            | 597,910  
|Mineral exploration and evaluation expenses – related party |  |                              | 50,058   
|Administrative – Clarkdale site                             |  |                              | 110,177  
|General and administrative                                  |  |                              | 589,755  
|General and administrative – related party                  |  |                              | 43,356   
|Depreciation                                                |  |                              | 348,382  
|Total operating expenses                                    |  | $                            | 1,739,638



49







Operating expenses decreased by 5.4% to $1,739,638
during the three month period ended March 31, 2011 from $1,837,891 during the three month period ended March 31, 2010. Operating
expense decreased primarily as a result of decreases in mineral exploration and evaluation expenses and general and administrative
expenses.



Mineral exploration and evaluation expenses
decreased to $597,910 during the three month period ended March 31, 2011 from $716,876 during the three month period ended March
31, 2010. Mineral exploration and evaluation expenses decreased primarily as a result of our current work program related to the
Clarkdale Slag Project being focused on autoclave testing which is being conducted by outside independent labs. This allowed for
a reduction in the levels of on-site staffing and site operating costs.



Included in mineral exploration and evaluation
expenses – related party were the amounts of $45,000 in fees and $5,058 in expense reimbursements and $90,000 in fees and
$27,857 in expense reimbursements for the three month periods ended March 31, 2011 and 2010, respectively, to Nanominerals Corp.
(one of our principal stockholders and an affiliate of Ian R. McNeil, our former Chief Executive Officer and President and a director,
and Carl S. Ager, our Vice President, Secretary and Treasurer and a director). Work performed by Nanominerals includes technical
assistance, including providing the use of its laboratory, instrumentation, milling equipment and research facilities with respect
to our Searchlight Gold Project and Clarkdale Slag Project. Additional fees relate to financing related activities, including providing
assistance to us when potential financiers perform technical due diligence on our projects and technical presentations to potential
investors in connection with the exploration, testing and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of our mineral projects.



Administrative – Clarkdale site expenses
increased to $110,177 during the three month period ended March 31, 2011 from $99,515 for the three month period ended March 31,
2010. Administrative costs at the Clarkdale site increased due to an increase in personal property taxes and a donation made to
the Town of Clarkdale.



General and administrative expenses decreased
to $589,755 during the three month period ended March 31, 2011 from $645,114 during the three month period ended March 31, 2010.
General and administrative expenses decreased primarily as a result of our officers and directors agreeing to a 25% reduction in
pay beginning in the fourth quarter of 2010. In addition, during the first quarter of 2010, we held a board of directors meeting
in Florida and incurred additional travel expense. We did not have any in-person board meetings during the first quarter of 2011.



Included in general and administrative –
related party were the amounts of $43,356 and $37,119 for the three month periods ended March 31, 2011 and 2010, respectively,
for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial
Officer. These accounting support services included bookkeeping input for the Clarkdale facility, assistance in preparing working
papers for quarterly and annual reporting, and preparation of federal and state tax filings. These expenses do not include any
fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation has been provided
in the form of salary. The direct benefit to Mr. Williams was $14,741 and $15,590 of the above Cupit, Milligan, Ogden & Williams
fees for the three month periods ended March 31, 2011 and 2010, respectively.



Depreciation expense increased to $348,382
during the three month period ended March 31, 2011 from $221,500 during the three month period ended March 31, 2010. Depreciation
expense increased as a result of bringing additional construction in progress items into service.



Other Income and Expenses



Total other income (expense) decreased to $475,527
during the three month period ended March 31, 2011 from $1,047,771 during the three month period ended March 31, 2010. The decrease
in total other income (expense) was primarily a result of an impairment loss of $526,824 taken on assets that are currently being
held for sale. The impairment loss was a result of writing the equipment down from its book value of $901,824 to its anticipated
selling price of $375,000. The reduced selling price is reflective of the expectation that the equipment will be sold “as
is” with no implied warranty.



50







We received incidental rental revenue of $6,135
and $6,480 for the three month periods ended March 31, 2011 and 2010, respectively, from rentals of our commercial buildings and
certain facilities acquired in connection with our acquisition of Transylvania.



Income Tax Benefit



Our income tax benefit increased to $820,931
for the three month period ended March 31, 2011 from $684,876 during the three month period ended March 31, 2010. The increase
in income tax benefit primarily resulted from the impairment loss taken on assets held for sale during the three month period ended
March 31, 2011.



Gain from Discontinued Operations



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



Net Income (Loss)



The aforementioned factors resulted in a net
loss of $443,180, or $0.00 per common share, for the three month period ended March 31, 2011, as compared to net income of $15,354,
or $0.00 per common share, for the three month period ended March 31, 2010.



As of March 31, 2011 and December 31, 2010,
we had cumulative net operating loss carryforwards of approximately $28,259,965 and $26,803,688, respectively for federal income
taxes. The federal net operating loss carryforwards expire between 2025 and 2031.



We had cumulative state net operating losses
of approximately $17,245,179 and $16,144,965 as of March 31, 2011 and December 31, 2010, respectively for state income tax purposes.
The state net operating loss carryforwards expire between 2012 and 2016.



Liquidity and Capital Resources



Historically, we have financed
our operations primarily through the sale of common stock and other convertible equity securities.



On December 22, 2010, we
entered into a Common Stock Purchase Agreement, or the Purchase Agreement, with an investor. We agreed with the investor, subject
to certain conditions and exceptions, to sell an aggregate of up to 13,000,000 shares of our common stock in up to 11 closings
occurring over the course of a ten-month period. The initial closing of the Purchase Agreement occurred on December 23, 2010 at
which we issued 3,000,000 shares of common stock to the investor at a per share purchase price of $0.53125,resulting in gross proceeds
to us of $1,593,750.



51







The Purchase Agreement
requires us to issue and sell, and the investor to buy, up to 1,000,000 shares of our common stock on or about the 15th day of
each month after the initial closing date (December 23, 2010), subject to the satisfaction of certain conditions at each closing,
ending approximately ten months after the initial closing. The price of the shares that we sell to the investor will be at a 15%
discount to the volume weighted average trading price of our common stock for the ten consecutive trading days immediately preceding
each closing date. The offering and sale of shares of our common stock to the investor was made pursuant to our shelf registration
statement on Form S-3 (File No. 333-169993), which was declared effective by the Securities and Exchange Commission on November
23, 2010.



Since December 31, 2010,
we have completed four additional monthly closings of 1,000,000 shares each between January 18, 2011 and April 15, 2011 at a weighted
per share purchase price of approximately $0.51982 resulting in gross proceeds to us of $2,079,270. Total fees related to these
four closings were $10,000.



In connection with a private
placement which was completed on November 12, 2009, we issued common stock purchase warrants to purchase up to 6,341,263 shares
of common stock, including warrants issued to investors as commissions to agents, at an exercise price of $1.85 per share. These
warrants currently expire on November 12, 2012. Further, based on the transactions related to the Purchase Agreement and an anti-dilution
provision in the warrants issued in the private placement, the aggregate number of warrants issued in connection with the private
placement and their exercise price have been adjusted. From the initial closing of the Purchase Agreement on
December 23, 2010through the most recent closing on April 15, 2011, we have issued an additional 249,408 warrants to the
holders of the warrants issued in connection with the private placement and the exercise price of the warrants has been adjusted
down to $1.78 per share. In all other respects, the terms and conditions of these warrants remain the same.



Working Capital



The following is a summary of our working capital
at March 31, 2011 and December 31, 2010:



|                    |  | At March 31, |           |   | At December 31, |   |           | Percent             | 
|------------------- |  | ------------ | --------- | - | --------------- | - | --------- | ------------------- | 
|                    |  | 2011         |           |   | 2010            |   |           | Increase/(Decrease) | 
|Current Assets      |  | $            | 7,485,588 |   |                 | $ | 7,071,070 |                     | 
|Current Liabilities |  |              | (351,315  | ) |                 |   | (549,013  | )                   | 
|Working Capital     |  | $            | 7,134,273 |   |                 | $ | 6,522,057 |                     | 



As of March 31, 2011, we had an accumulated
deficit of $24,643,576. As of March 31, 2011, we had working capital of $7,134,273, compared to working capital of $6,522,057 as
of December 31, 2010. The increase in our working capital was primarily attributable to reclassification of certain equipment to
assets held for sale and a reduction in accounts payable due to less testing activity at the Clarkdale site. Cash was $6,954,346
as of March 31, 2011, as compared to $6,996,027 as of December 31, 2010. Our cash balance was consistent from quarter to quarter
due to completion of three issuances of securities during the first quarter of 2011 for net proceeds of $1,623,310 offset by our
net loss and principal payments on debt. Net property and equipment decreased to $12,690,732 as of March 31, 2011 from $13,900,308
as of December 31, 2010. The decrease primarily resulted from equipment reclassified to assets held for sale and depreciation expense.



Included in long term liabilities in the accompanying
consolidated financial statements is a balance of $43,891,705 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.



52







Cash Flows



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



|                                                   |  | Three Months Ended March 31, |           
|-------------------------------------------------- |  | ---------------------------- | ----------
|                                                   |  |                              |           
|                                                   |  | 2011                         |           
|Cash Flows Used in Operating Activities            |  | $                            | (1,562,567
|Cash Flows Used in Investing Activities            |  |                              | (40,559   
|Cash Flows Provided (Used) by Financing Activities |  |                              | 1,561,445 
|Net Change in Cash During Period                   |  | $                            | (41,681   



Net Cash Used in Operating Activities.
Net cash used in operating activities decreased to $1,562,567 during the three month period ended March 31, 2011 from $1,841,719
during the three month period ended March 31, 2010. The decrease in cash used in operating activities was primarily due to increased
non-cash charges to our loss from operations, including depreciation and the write down of assets held for sale.



Net Cash Used in Investing Activities.
We used $40,559 in investing activities during the three month period ended March 31, 2011, as compared to $307,021 during the
three month period ended March 31, 2010. The decrease was primarily a result of a decrease in purchases of property and equipment
relating to the Clarkdale Slag Project after receiving the Certificate of Occupancy for the demonstration module building and our
substantial completion of equipment acquisitions for the demonstration module.



Net Cash Provided (Used) by Financing
Activities. Net cash provided by financing activities was $1,561,445 for the three month period ended March 31, 2011 compared
to net cash used by financing activities of $57,339 for the three month period ended March 31, 2010. Net cash provided by financing
activities during the three month period ended March 31, 2011 primarily resulted from net proceeds from issuances of securities
of $1,623,310 partially offset by principal payments on the capital lease and the VRIC payable. Net cash used by financing activities
during the three month period ended March 31, 2010 primarily resulted from principal payments on the capital lease and the VRIC
payable.



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



| | · | our ability to locate a profitable mineral property;
| | - | ----------------------------------------------------



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



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



| | · | our ability to generate revenues.
| | - | ---------------------------------



53







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



Our exploration and evaluation plan calls for
significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next twelve months,
our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program
and our continued operations will be approximately $7,410,000. As of May 13, 2011, we had cash reserves in the amount of approximately
$6,800,000. Our current financial resources are not sufficient to allow us to meet the anticipated costs of our exploration, testing
and construction programs for the next 12 months and we will require additional financing in order to fund these activities. We
do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will
be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.



A decision on allocating additional funds for
Phase II of the Clarkdale Slag Project will be forthcoming once the feasibility study is completed and analyzed. The Phase II work
program is expected to include the preparation of a bankable feasibility study, engineering and design of the full-scale production
facility and planning for the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale,
Arizona. We estimate that our monthly expenses will increase substantially once we enter Phase II of the project and therefore,
we will require the necessary funding to fulfill this anticipated work program.



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



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



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



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



Off-Balance Sheet Arrangements



None.



54







Recent Accounting Pronouncements



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



Item 3. Quantitative
and Qualitative Disclosures About Market Risk



We had unrestricted cash totaling $6,954,346
at March 31, 2011 and $6,996,027 at December 31, 2010. Our cash is held primarily in an interest bearing money market account,
a savings account and non-interest bearing checking accounts and is not materially affected by fluctuations in interest rates.
The unrestricted cash is held for working capital purposes. We do not enter into investments for trading or speculative purposes.
Due to the short-term nature of these cash holdings, we believe that we do not have any material exposure to changes in the fair
value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future
interest income.



Item 4. Controls and
Procedures



Evaluation of Disclosure Controls and Procedures



This Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 2011 (the “2011 Form 10-Q/A”) represents an amended filing for the covered period. In connection
with this amendment to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, our management, with the participation
of principal executive officer and principal financial officer reevaluated the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)
as of the end of the period covered by this report.



In our original filing of the Quarterly Report
on Form 10-Q, management concluded that our disclosure controls and procedures were effective as of March 31, 2011. However, in
connection with the restatement to our previously filed consolidated financial statements for the years ended December 31, 2008,
2009 and 2010, and the cumulative periods from January 14, 2000 (date of inception) through December 31, 2008, 2009 and 2010, and
our unaudited interim financial statements for the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011,
management has subsequently determined that material weakness described below existed as of March 31, 2011. As a result of this
material weakness, management, with the participation of our principal executive officer and principal financial officer has concluded
that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) were not effective
as of March 31, 2011.



Our management is responsible for establishing
and maintaining an adequate system of internal control over financial reporting as required by Sarbanes-Oxley (SOX) Section 404A.
Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures
that:



| | · | pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect our transactions and dispositions of our assets;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide reasonable assurance that our transactions are recorded as
necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the
United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management
and our directors; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



55







| | · | provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Based on the discovery of the errors relating
to the restatements described herein, our management concluded that our internal control over financial reporting was not effective
as of March 31, 2011, and further was not effective during the period from December 31, 2008 through September 30, 2011.



We identified a material weakness in our internal
control based on our assessment under the framework set forth in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or combination of deficiencies, in
internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual
or interim financial statements would not be prevented or detected on a timely basis.



A material weakness regarding management’s
lack of expertise in accounting for complex financial instruments has been identified by management. Specifically, we did not properly
account for the issuance of certain warrants in accordance with Accounting Standards Codification 815-40-15 "Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock" and we did not account for the
impact of warrant modifications. Accordingly, we have restated the previously issued consolidated financial statements for the
years ended December 31, 2008, 2009 and 2010, and the cumulative periods from January 14, 2000 (date of inception) through December
31, 2008, 2009 and 2010, and our unaudited interim financial statements for the quarterly periods ended March 31, 2011, June 30,
2011 and September 30, 2011.



An explanation of the errors and their impact
on our financial statements is contained in Note 21 to the financial statements contained in Item 6 of this 2011 Form 10-Q/A.



Management has been actively engaged in developing
a remediation plan to address the material deficiency in our internal control over financial reporting and disclosure controls
and procedures. Implementation of the remediation plan is in process and consists of redesigning quarterly procedures to enhance
management's identification, capture, review, approval and recording of contractual terms included in complex financial arrangements.
Management believes the foregoing efforts will effectively remediate the material weakness. As we continue to evaluate and work
to improve our internal control over financial reporting and disclosure controls and procedures, management may execute additional
measures to address potential control deficiencies or modify the remediation plan described above. Management will continue to
review and make necessary changes to the overall design of our internal control and disclosure control environment, as well as
to policies and procedures to improve the overall effectiveness of internal control over financial reporting and disclosure 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 March 31, 2011 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.



56







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/A for the year ended December 31, 2010, which to our knowledge have not materially changed. Those risks, which
could materially affect our business, financial condition or future results, are not the only risks we face. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business,
financial condition and/or operating results.



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



On March 31, 2011, we issued
options to purchase up to 105,882 shares of our common stock to three non-management directors, pursuant to the director compensation
policy for these four non-management directors. The 105,882 options were issued at an exercise price of $0.51 per share, the closing
price of our common stock on March 31, 2011, the last trading day of the first quarter of 2011. 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 March 31, 2011.



Item 5. Other Information



None



57







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 |  | Item                                                                                                                           
|---------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|                 |  |                                                                                                                                
|31.1             |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             
|31.2             |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             
|32.1             |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



58







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 corporation
|------------------- | -------------------------------------------------------
|                    |                                                        
|Date: March 6, 2012 | By:                                                    
|                    |                                                        
|                    |                                                        
|                    |                                                        
|                    |                                                        
|Date: March 6, 2012 | By:                                                    
|                    |                                                        
|                    |                                                        
|                    |                                                        





59