UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-Q




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


For the
quarterly period ended September 30, 2010




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


For the
transition period from _______ to _______.




Commission
file number 000-30995




SEARCHLIGHT
MINERALS CORP.




(Exact
name of registrant as specified in its charter)




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




(702)
939-5247


(Registrant’s telephone number, including area
code)




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




Yes           x           No            ̈




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




Yes            ̈           No            ̈




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




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





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




Yes            ̈      No           x




As of
November 8, 2010, the registrant had 119,244,451 outstanding shares of common
stock.





TABLE OF
CONTENTS





PART I – FINANCIAL
    INFORMATION
                              
                              
                              3Item
      1. Financial Statements
                              
                              
                              3Item
      2.  Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                              
                              
                              36Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                              
                              
                              52Item
      4.  Controls and Procedures
                              
                              
                              52PART II - OTHER INFORMATION
                              
                              
                              52Item
      1.  Legal Proceedings
                              
                              
                              52Item
      1A.  Risk Factors
                              
                              
                              53Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                              
                              
                              53Item
      3.  Defaults Upon Senior Securities
                              
                              
                              53Item
      4.  Submission of Matters to a Vote of Security
    Holders
                              
                              
                              53Item
      5.  Other Information
                              
                              
                              53Item
      6.  Exhibits
                              
                              
                              55SIGNATURES
                              
                              
                              56


2





PART I –
FINANCIAL INFORMATION




Item
1. Financial Statements


SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
BALANCE SHEETS
 
 (UNAUDITED)September 30, 2010
                    
                    
                    December 31, 2009ASSETSCurrent
      assetsCash
                    
                    $
                    6,552,359
                    
                    
                    $
                    13,099,562Prepaid
      expenses
                    
                    
                    121,452
                    
                    
                    
                    122,261Total
      current assets
                    
                    
                    6,673,811
                    
                    
                    
                    13,221,823Property
      and equipment, net
                    
                    
                    14,095,809
                    
                    
                    
                    13,994,934Mineral
      properties
                    
                    
                    16,947,419
                    
                    
                    
                    16,947,419Slag
      project
                    
                    
                    120,766,877
                    
                    
                    
                    120,766,877Land
      - smelter site and slag pile
                    
                    
                    5,916,150
                    
                    
                    
                    5,916,150Land
                    
                    
                    3,300,000
                    
                    
                    
                    3,300,000Reclamation
      bond and deposits, net
                    
                    
                    14,772
                    
                    
                    
                    10,902Total
      non-current assets
                    
                    
                    161,041,027
                    
                    
                    
                    160,936,282Total
      assets
                    
                    $
                    167,714,838
                    
                    
                    $
                    174,158,105LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                    
                    $
                    111,689
                    
                    
                    $
                    443,742Accounts
      payable - related party
                    
                    
                    49,585
                    
                    
                    
                    194,690VRIC
      payable, current portion - related party
                    
                    
                    223,919
                    
                    
                    
                    210,921Capital
      lease payable, current portion
                    
                    
                    21,559
                    
                    
                    
                    25,117Total
      current liabilities
                    
                    
                    406,752
                    
                    
                    
                    874,470Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                    
                    
                    1,578,252
                    
                    
                    
                    1,747,853Capital
      lease payable, net of current portion
                    
                    
                    -
                    
                    
                    
                    15,175Deferred
      tax liability
                    
                    
                    45,533,937
                    
                    
                    
                    47,863,870Total
      long-term liabilities
                    
                    
                    47,112,189
                    
                    
                    
                    49,626,898Total
      liabilities
                    
                    
                    47,518,941
                    
                    
                    
                    50,501,368Commitments
      and contingencies - Note 13
                    
                    
                    -
                    
                    
                    
                    -Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 shares authorized, 118,818,318 and
      118,768,373 shares,respectively, issued and outstanding
                    
                    
                    118,818
                    
                    
                    
                    118,768Additional
      paid-in capital
                    
                    
                    141,249,219
                    
                    
                    
                    141,029,875Accumulated
      deficit during exploration stage
                    
                    
                    (21,172,140
                    )
                    
                    
                    (17,491,906
                    )Total
      stockholders' equity
                    
                    
                    120,195,897
                    
                    
                    
                    123,656,737Total
      liabilities and stockholders' equity
                    
                    $
                    167,714,838
                    
                    
                    $
                    174,158,105
 
 See
Accompanying Notes to these Consolidated Financial Statements
  3
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 For the period fromJanuary 14, 2000(date of inception)For the three months ended
                                          
                                          
                                          For the nine months ended
                                          
                                          
                                          throughSeptember 30, 2010
                                          
                                          
                                          September 30, 2009
                                          
                                          
                                          September 30, 2010
                                          
                                          
                                          September 30, 2009
                                          
                                          
                                          September 30, 2010Revenue
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -Operating
      expensesMineral
      exploration and evaluation expenses
                                          
                                          
                                          1,009,116
                                          
                                          
                                          
                                          626,450
                                          
                                          
                                          
                                          2,476,213
                                          
                                          
                                          
                                          1,471,047
                                          
                                          
                                          
                                          9,541,711Mineral
      exploration and evaluation expenses - related party
                                          
                                          
                                          78,865
                                          
                                          
                                          
                                          60,000
                                          
                                          
                                          
                                          286,122
                                          
                                          
                                          
                                          240,000
                                          
                                          
                                          
                                          1,977,267Administrative
      - Clarkdale site
                                          
                                          
                                          196,988
                                          
                                          
                                          
                                          168,212
                                          
                                          
                                          
                                          595,714
                                          
                                          
                                          
                                          527,442
                                          
                                          
                                          
                                          3,036,009General
      and administrative
                                          
                                          
                                          651,844
                                          
                                          
                                          
                                          759,839
                                          
                                          
                                          
                                          2,011,139
                                          
                                          
                                          
                                          2,219,779
                                          
                                          
                                          
                                          10,959,062General
      and administrative - related party
                                          
                                          
                                          31,705
                                          
                                          
                                          
                                          22,407
                                          
                                          
                                          
                                          121,632
                                          
                                          
                                          
                                          112,226
                                          
                                          
                                          
                                          376,397Depreciation
                                          
                                          
                                          227,402
                                          
                                          
                                          
                                          186,025
                                          
                                          
                                          
                                          675,585
                                          
                                          
                                          
                                          554,641
                                          
                                          
                                          
                                          1,527,693Total
      operating expenses
                                          
                                          
                                          2,195,920
                                          
                                          
                                          
                                          1,822,933
                                          
                                          
                                          
                                          6,166,405
                                          
                                          
                                          
                                          5,125,135
                                          
                                          
                                          
                                          27,418,139Loss
      from operations
                                          
                                          
                                          (2,195,920
                                          )
                                          
                                          
                                          (1,822,933
                                          )
                                          
                                          
                                          (6,166,405
                                          )
                                          
                                          
                                          (5,125,135
                                          )
                                          
                                          
                                          (27,418,139
                                          )Other
      income (expense)Rental
      revenue
                                          
                                          
                                          6,480
                                          
                                          
                                          
                                          6,295
                                          
                                          
                                          
                                          19,440
                                          
                                          
                                          
                                          20,400
                                          
                                          
                                          
                                          118,450Loss
      on equipment disposition
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1,542
                                          )
                                          
                                          
                                          (35,067
                                          )Interest
      expense
                                          
                                          
                                          (287
                                          )
                                          
                                          
                                          (561
                                          )
                                          
                                          
                                          (1,699
                                          )
                                          
                                          
                                          (1,882
                                          )
                                          
                                          
                                          (11,719
                                          )Interest
      and dividend income
                                          
                                          
                                          8,752
                                          
                                          
                                          
                                          5,193
                                          
                                          
                                          
                                          17,809
                                          
                                          
                                          
                                          11,646
                                          
                                          
                                          
                                          624,999Total
      other income (expense)
                                          
                                          
                                          14,945
                                          
                                          
                                          
                                          10,927
                                          
                                          
                                          
                                          35,550
                                          
                                          
                                          
                                          28,622
                                          
                                          
                                          
                                          696,663Loss
      before income taxes and discontinued operations
                                          
                                          
                                          (2,180,975
                                          )
                                          
                                          
                                          (1,812,006
                                          )
                                          
                                          
                                          (6,130,855
                                          )
                                          
                                          
                                          (5,096,513
                                          )
                                          
                                          
                                          (26,721,476
                                          )Income
      tax benefit
                                          
                                          
                                          797,659
                                          
                                          
                                          
                                          675,517
                                          
                                          
                                          
                                          2,329,933
                                          
                                          
                                          
                                          1,901,639
                                          
                                          
                                          
                                          9,301,359Loss
      from continuing operations
                                          
                                          
                                          (1,383,316
                                          )
                                          
                                          
                                          (1,136,489
                                          )
                                          
                                          
                                          (3,800,922
                                          )
                                          
                                          
                                          (3,194,874
                                          )
                                          
                                          
                                          (17,420,117
                                          )Discontinued
      operations:Gain
      (loss) from discontinued operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          120,688
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (3,752,023
                                          )Net
      loss
                                          
                                          $
                                          (1,383,316
                                          )
                                          
                                          $
                                          (1,136,489
                                          )
                                          
                                          $
                                          (3,680,234
                                          )
                                          
                                          $
                                          (3,194,874
                                          )
                                          
                                          $
                                          (21,172,140
                                          )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          (0.03
                                          )
                                          
                                          $
                                          (0.03
                                          )Gain
      (loss) from discontinued operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
      loss
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          (0.03
                                          )
                                          
                                          $
                                          (0.03
                                          )Weighted
      average common shares outstanding -basic and diluted
                                          
                                          
                                          118,809,087
                                          
                                          
                                          
                                          106,537,115
                                          
                                          
                                          
                                          118,787,093
                                          
                                          
                                          
                                          106,417,990
 
 See
Accompanying Notes to these Consolidated Financial Statements
  4
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 (UNAUDITED)
 
 AccumulatedDeficit During
                      
                      
                      TotalCommon Stock
                      
                      
                      Additional
                      
                      
                      Exploration
                      
                      
                      Stockholders'Shares
                      
                      
                      Amount
                      
                      
                      Paid-in Capital
                      
                      
                      Stage
                      
                      
                      EquityBalance,
      December 31, 2008
                      
                      
                      105,854,691
                      
                      
                      $
                      105,854
                      
                      
                      $
                      126,854,760
                      
                      
                      $
                      (13,356,482
                      )
                      
                      $
                      113,604,132Issuance
      of common stock for cash, $0.25 per share from exercise of nonemployee
      stock options
                      
                      
                      700,000
                      
                      
                      
                      700
                      
                      
                      
                      174,300
                      
                      
                      
                      -
                      
                      
                      
                      175,000Amortization
      of stock options issued to director over vesting period
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      57,447
                      
                      
                      
                      -
                      
                      
                      
                      57,447Issuance
      of common stock for directors' compensation
                      
                      
                      23,836
                      
                      
                      
                      24
                      
                      
                      
                      53,976
                      
                      
                      
                      -
                      
                      
                      
                      54,000Issuance
      of stock options for directors' compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      28,116
                      
                      
                      
                      -
                      
                      
                      
                      28,116Net
      loss, September 30, 2009
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (3,194,874
                      )
                      
                      
                      (3,194,874
                      )Balance,
      September 30, 2009
                      
                      
                      106,578,527
                      
                      
                      $
                      106,578
                      
                      
                      $
                      127,168,599
                      
                      
                      $
                      (16,551,356
                      )
                      
                      $
                      110,723,821Balance,
      December 31, 2009
                      
                      
                      118,768,373
                      
                      
                      $
                      118,768
                      
                      
                      $
                      141,029,875
                      
                      
                      $
                      (17,491,906
                      )
                      
                      
                      123,656,737Amortization
      of stock options issued to directors over vesting period
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      122,127
                      
                      
                      
                      -
                      
                      
                      
                      122,127Issuance
      of common stock for directors' compensation
                      
                      
                      49,945
                      
                      
                      
                      50
                      
                      
                      
                      44,950
                      
                      
                      
                      -
                      
                      
                      
                      45,000Issuance
      of stock options for directors' compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      52,267
                      
                      
                      
                      -
                      
                      
                      
                      52,267Net
      loss, September 30, 2010
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (3,680,234
                      )
                      
                      
                      (3,680,234
                      )Balance,
      September 30, 2010
                      
                      
                      118,818,318
                      
                      
                      $
                      118,818
                      
                      
                      $
                      141,249,219
                      
                      
                      $
                      (21,172,140
                      )
                      
                      $
                      120,195,897
 
 See
Accompanying Notes to these Consolidated Financial Statements
  5
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Period fromJanuary 14, 2000(date of inception)For the nine months ended
                        
                        
                        throughSeptember 30, 2010
                        
                        
                        September 30, 2009
                        
                        
                        September 30, 2010CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                        
                        $
                        (3,680,234
                        )
                        
                        $
                        (3,194,874
                        )
                        
                        $
                        (21,172,140
                        )Gain
      (loss) from discontinued operations
                        
                        
                        120,688
                        
                        
                        
                        -
                        
                        
                        
                        (3,752,023
                        )Loss
      from continuing operations
                        
                        
                        (3,800,922
                        )
                        
                        
                        (3,194,874
                        )
                        
                        
                        (17,420,117
                        )Adjustments
      to reconcile loss from operating to net cash used in operating
      activities:Depreciation
                        
                        
                        675,585
                        
                        
                        
                        554,641
                        
                        
                        
                        1,527,693Stock
      based expenses
                        
                        
                        219,394
                        
                        
                        
                        139,563
                        
                        
                        
                        1,550,756Loss
      on disposition of fixed assets
                        
                        
                        -
                        
                        
                        
                        1,542
                        
                        
                        
                        36,416Amortization
      of prepaid expense
                        
                        
                        200,512
                        
                        
                        
                        216,801
                        
                        
                        
                        852,540Allowance
      for bond deposit recovery
                        
                        
                        (180,500
                        )
                        
                        
                        -
                        
                        
                        
                        -Changes
      in operating assets and liabilities:Prepaid
      expenses
                        
                        
                        (199,703
                        )
                        
                        
                        (78,998
                        )
                        
                        
                        (973,992
                        )Reclamation
      bond and deposits
                        
                        
                        176,630
                        
                        
                        
                        100,900
                        
                        
                        
                        (14,772
                        )Accounts
      payable and accrued liabilities
                        
                        
                        (356,470
                        )
                        
                        
                        (381,959
                        )
                        
                        
                        (173,139
                        )Deferred
      income taxes
                        
                        
                        (2,329,933
                        )
                        
                        
                        (1,901,639
                        )
                        
                        
                        (9,301,359
                        )Net
      cash used in operating activities
                        
                        
                        (5,595,407
                        )
                        
                        
                        (4,544,023
                        )
                        
                        
                        (23,915,974
                        )Net
      cash used in operating activities from discontinued
    operations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (2,931,324
                        )CASH
      FLOW FROM INVESTING ACTIVITIESCash
      paid on mineral property claims
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (87,134
                        )Cash
      paid for joint venture and merger option
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (890,000
                        )Cash
      paid to VRIC on closing date - related party
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (9,900,000
                        )Cash
      paid for additional acquisition costs
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (130,105
                        )Capitalized
      interest - related party
                        
                        
                        (113,397
                        )
                        
                        
                        (125,398
                        )
                        
                        
                        (620,984
                        )Proceeds
      from property and equipment disposition
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        400Purchase
      of property and equipment
                        
                        
                        (663,063
                        )
                        
                        
                        (1,321,045
                        )
                        
                        
                        (14,283,545
                        )Net
      cash used in investing activities
                        
                        
                        (776,460
                        )
                        
                        
                        (1,446,443
                        )
                        
                        
                        (25,911,368
                        )Net
      cash used in investing activities from discontinued
    operations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (452,618
                        )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                        
                        
                        -
                        
                        
                        
                        175,000
                        
                        
                        
                        59,197,745Stock
      issuance costs
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (2,024,643
                        )Principal
      payments on capital lease payable
                        
                        
                        (18,733
                        )
                        
                        
                        (17,918
                        )
                        
                        
                        (94,679
                        )Principal
      payments on VRIC payable - related party
                        
                        
                        (156,603
                        )
                        
                        
                        (144,601
                        )
                        
                        
                        (699,017
                        )Net
      cash (used) provided by financing activities
                        
                        
                        (175,336
                        )
                        
                        
                        12,481
                        
                        
                        
                        56,379,406Net
      cash provided by financing activities from discontinued
      operations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        3,384,237NET
      CHANGE IN CASH
                        
                        
                        (6,547,203
                        )
                        
                        
                        (5,977,985
                        )
                        
                        
                        6,552,359CASH
      AT BEGINNING OF PERIOD
                        
                        
                        13,099,562
                        
                        
                        
                        7,055,591
                        
                        
                        
                        -CASH
      AT END OF PERIOD
                        
                        $
                        6,552,359
                        
                        
                        $
                        1,077,606
                        
                        
                        $
                        6,552,359
 
 See
Accompanying Notes to these Consolidated Financial Statements
  6
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Period fromJanuary 14, 2000(date of inception)For the nine months ended
                    
                    
                    throughSeptember 30, 2010
                    
                    
                    September 30, 2009
                    
                    
                    September 30, 2010CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      paid, net of capitalized amounts
                    
                    $
                    1,699
                    
                    
                    $
                    1,882
                    
                    
                    $
                    62,470Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing and financing activities:Capital
      equipment purchased through accounts payable and financing
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    444,690Assets
      acquired for common stock issued for the acquisition
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    66,879,375Assets
      acquired for common stock issued for mineral properties
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    10,220,000Assets
      acquired for liabilities incurred in the acquisition
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    2,628,188Net
      deferred tax liability assumed
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    55,197,465Merger
      option payment applied to the acquisition
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    200,000Reclassify
      joint venture option agreement to slag project
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    690,000Warrants
      issued in connection with joint venture option agreement related to slag
      project
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    1,310,204Stock
      options for common stock issued in satisfaction of debt
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    1,500,000Capitalization
      of related party liability to equity
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    742,848Stock
      issued for conversion of accounts payable, 200,000 shares at
      $0.625
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    125,000
 
 See
Accompanying Notes to these Consolidated Financial
Statements
  7
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
    POLICIES
 
 Basis of presentation
- The accompanying unaudited consolidated financial statements have been
prepared in accordance with Securities and Exchange Commission requirements for
interim financial statements. Therefore, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. The financial statements
should be read in conjunction with the Form 10-K for the year ended December 31,
2009 of Searchlight Minerals Corp. (the “Company”).
 
 The
interim financial statements present the consolidated balance sheets, statements
of operations, stockholders’ equity, and cash flows of the Company. The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States.
 
 These
consolidated financial statements have been prepared by the Company without
audit, and include all adjustments (which consist solely of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
presentation of financial position and results of operations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these consolidated financial statements be read in conjunction with the
Company’s audited consolidated financial statements and notes thereto for the
year ended December 31, 2009.
 
 Description of
business - Searchlight Minerals Corp. is considered an exploration stage
company since its formation, and the Company has not yet realized any revenues
from its planned operations.  The Company is primarily focused on the
exploration, acquisition and development of mining and mineral properties. 
Upon the location of commercially minable reserves, the Company plans to prepare
for mineral extraction and enter the development stage.
  History - The Company
was incorporated on January 12, 1999 pursuant to the laws of the State of Nevada
under the name L.C.M. Equity, Inc.  From 1999 to 2005, the Company operated
primarily as a biotechnology research and development company with its
headquarters in Canada and an office in the United Kingdom (the “UK”).  On
November 2, 2001, the Company entered into an acquisition agreement with Regma
Bio Technologies, Ltd. pursuant to which Regma Bio Technologies, Ltd. entered
into a reverse merger with the Company with the surviving entity named “Regma
Bio Technologies Limited”. On November 26, 2003, the Company changed its name
from “Regma Bio Technologies Limited” to “Phage Genomics, Inc.”
  In
February, 2005, the Company announced its reorganization from a biotechnology
research and development company to a company focused on the development and
acquisition of mineral properties. In connection with its reorganization the
Company entered into mineral option agreements to acquire an interest in the
Searchlight Claims. The Company has consequently been considered as an
exploration stage enterprise. Also in connection with its corporate
restructuring, its Board of Directors approved a change in its name from “Phage
Genomics, Inc.” (“Phage”) to "Searchlight Minerals Corp.” effective June 23,
2005.
 
 8
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Going concern - The
Company incurred cumulative net losses of $21,172,140 from operations as of
September 30, 2010 and has not commenced its commercial mining and mineral
processing operations; rather, it is still in the exploration stage, raising
substantial doubt about the Company’s ability to continue as a going
concern.  The Company will seek additional sources of capital through the
issuance of debt or equity financing, but there can be no assurance the Company
will be successful in accomplishing its objectives.
 
 The
ability of the Company to continue as a going concern is dependent on additional
sources of capital and the success of the Company’s plan.  The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
 
 Principles of
consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Clarkdale Minerals,
LLC (“CML”) and Clarkdale Metals Corp. (“CMC”).  Significant intercompany
accounts and transactions have been eliminated.
 
 Use of estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Mineral rights -
Costs of acquiring mining properties are capitalized upon acquisition. 
Mine development costs incurred to develop new ore deposits, to expand the
capacity of mines, or to develop mine areas substantially in advance of current
production are also capitalized once proven and probable reserves exist and the
property is a commercially mineable property. Costs incurred to maintain current
production or to maintain assets on a standby basis are charged to
operations.  Costs of abandoned projects are charged to operations upon
abandonment.  The Company evaluates the carrying value of capitalized
mining costs and related property and equipment costs to determine if these
costs are in excess of their recoverable amount whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. 
Evaluation of the carrying value of capitalized costs and any related property
and equipment costs would be based upon expected future cash flows and/or
estimated salvage value in accordance with Accounting Standards Codification
(ASC) 360-10-35-15, Impairment
or Disposal of Long-Lived Assets.
 
 Capitalized interest
cost - The Company capitalizes interest cost related to acquisition,
development and construction of property and equipment which is designed as
integral parts of the manufacturing process.  The capitalized interest is
recorded as part of the asset it relates to and will be amortized over the
asset’s useful life once production commences.  Interest cost capitalized
from imputed interest on acquisition indebtedness was $113,397 and $125,398 for
the nine months ended September 30, 2010 and 2009, respectively.
 
 9
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Exploration costs -
Mineral exploration costs are expensed as incurred.
 
 Property and
equipment - Property and equipment is stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line method
over the estimated useful lives of the assets, which are generally 3 to 39
years. The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).
 
 The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful lives of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. If events and circumstances warrant
evaluation, the Company uses an estimate of the related undiscounted cash flows
over the remaining life of the property and equipment in measuring their
recoverability.
  Impairment of long-lived
assets-The Company reviews and evaluates long-lived assets for impairment when
events or changes in circumstances indicate the related carrying amounts may not
be recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17, Measurement of
an Impairment Loss, if events or circumstances indicate that their
carrying amount might not be recoverable.  As of September 30, 2010, and
through the date of issuance of these financial statements, no events or
circumstances have happened to indicate that the related carrying values of the
properties may not be recoverable. When the Company determines that an
impairment analysis should be done, the analysis will be performed using the
rules of ASC 930-360-35, Asset
Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.
  Various
factors could impact the Company’s ability to achieve forecasted production
schedules. Additionally, commodity prices, capital expenditure requirements and
reclamation costs could differ from the assumptions the Company may use in cash
flow models used to assess impairment. The ability to achieve the estimated
quantities of recoverable minerals from exploration stage mineral interests
involves further risks in addition to those factors applicable to mineral
interests where proven and probable reserves have been identified, due to the
lower level of confidence that the identified mineralized material can
ultimately be mined economically.
 
 Material
changes to any of these factors or assumptions discussed above could result in
future impairment charges to operations.
 
 10
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Asset retirement
obligation - The Company follows ASC 410, Asset Retirement and Environmental
Obligations, which requires that an asset retirement obligation (“ARO”)
associated with the retirement of a tangible long-lived asset be recognized as a
liability in the period in which it is incurred and becomes determinable, with
an offsetting increase in the carrying amount of the associated asset.  The
cost of the tangible asset, including the initially recognized ARO, is depleted,
such that the cost of the ARO is recognized over the useful life of the
asset.  The ARO is recorded at fair value, and accretion expense is
recognized over time as the discounted liability is accreted to its expected
settlement value.  The fair value of the ARO is measured using expected
future cash flow, discounted at the Company’s credit-adjusted risk-free interest
rate.  To date, no significant asset retirement obligation exists. 
Accordingly, no liability has been recorded.
 
 Fair value of financial
instruments - Fair value accounting establishes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy are described below:
 
 Level 1
                Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or liabilities;Level 2
                Quoted
      prices in markets that are not active, or inputs that are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability; andLevel 3
                Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (supported by little or no
      market activity).
 
 The
Company’s financial instruments consist of mineral property purchase
obligations. These obligations are classified within Level 2 of the fair value
hierarchy as their fair value is determined using interest rates which
approximate market rates. The Company is not exposed to significant interest or
credit risk arising from these financial instruments.
  Research and
development - All research and development expenditures are expensed as
incurred.
  Earnings (loss) per
share - The Company follows ASC 260, Earnings Per Share, and ASC
480, Distinguishing
Liabilities from Equity,  which establish standards for the
computation, presentation and disclosure requirements for basic and diluted
earnings per share for entities with publicly-held common shares and potential
common stock issuances. Basic earnings (loss) per share are computed by dividing
net income (loss) by the weighted average number of common shares
outstanding.  In computing diluted earnings per share, the weighted average
number of shares outstanding is adjusted to reflect the effect of potentially
dilutive securities, such as stock options and warrants.  Common stock
equivalent shares are excluded from the computation if their effect is
antidilutive. Weighted average of common stock equivalents, which include stock
options and warrants to purchase common stock, on September 30, 2010 and 2009
that were not included in the computation of diluted EPS because the effect
would be antidilutive were 28,368,197 and 21,979,651, respectively.
 
 11
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Expenses of offering
- The Company accounts for specific incremental costs that are directly related
to a proposed or actual offering of securities as a direct charge against the
gross proceeds of the offering.
 
 Stock-based
compensation - The Company accounts for share based payments in
accordance with ASC 718, Compensation - Stock
Compensation, which requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on the grant date fair value of the award. In accordance with
ASC 718-10-30-9, Measurement
Objective – Fair Value at Grant Date, the Company estimates the fair
value of the award using a valuation technique. For this purpose, the Company
uses the Binomial Lattice option pricing model. The Company believes that this
model provides the best estimate of fair value due to its ability to incorporate
inputs that change over time, such as volatility and interest rates, and to
allow for the actual exercise behavior of option holders.The compensation
cost is recognized over the requisite service period which is generally equal to
the vesting period. Upon exercise, shares issued will be newly issued shares
from authorized common stock.
 
 Income taxes - The
Company accounts for its income taxes in accordance with ASC 740, Income Taxes, which requires
recognition of deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
 For
acquired properties that do not constitute a business as defined in ASC
805-10-55-4, Definition of a
Business, deferred income tax liability is recorded on GAAP basis over
income tax basis using statutory federal and state rates. The resulting
estimated future federal and state income tax liability associated with the
temporary difference between the acquisition consideration and the tax basis is
computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in
Certain Purchase Transactions that are Not Accounted for as Business
Combinations, and is reflected as an increase to the total purchase price
which is then applied to the underlying acquired assets in the absence of there
being a goodwill component associated with the acquisition
transactions.
 
 12
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Recent accounting
standards - From time to time, new accounting pronouncements are issued
by the Financial Accounting Standards Board (“FASB”) that are adopted by
the Company as of the specified effective date. Unless otherwise discussed,
management believes that the impact of recently issued standards did not or will
not have a material impact on the Company’s consolidated financial statements
upon adoption.
 
 In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair
Value Measurements, which requires reporting entities to make new
disclosures about recurring or nonrecurring fair value measurements including
significant transfers into and out of Level 1 and Level 2 fair value
measurements and information on purchases, sales, issuances, and settlements on
a gross basis in the reconciliation of Level 3 fair value measurements.
ASU 2010-6 is effective for annual reporting periods beginning after
December 15, 2009, except for Level 3 reconciliation disclosures which
are effective for annual periods beginning after December 15, 2010. The
Company does not have any assets or liabilities classified as Level 3. The
Company has adopted the Level 1 and Level 2 amendments accordingly. As the
update only pertained to disclosures, it had no impact on the Company’s
financial position, results of operations, or cash flows upon
adoption.
 
 In
February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic
855), Amendment to
Certain Recognition and Disclosure Requirements, to remove the
requirement for SEC filers to disclose the date through which an entity has
evaluated subsequent events. This change removes potential conflicts with
current SEC guidance and clarifies the intended scope of the reissuance
disclosure provisions. The update was effective upon its date of issuance,
February 24, 2010, and the Company has adopted the amendments accordingly. As
the update only pertained to disclosures, it had no impact on the Company’s
financial position, results of operations, or cash flows upon
adoption.
 
 13
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 2.
              PROPERTY AND
      EQUIPMENT
 
 Property
and equipment consisted of the following as of September 30, 2010 and December
31, 2009:
 
 September 30,
                          2010
                        
                        
                        December 31,
                          2009Furniture
      and fixtures
                        
                        $
                        38,480
                        
                        
                        $
                        36,740Lab
      equipment
                        
                        
                        249,831
                        
                        
                        
                        228,052Computers
      and equipment
                        
                        
                        82,920
                        
                        
                        
                        67,791Income
      property
                        
                        
                        309,750
                        
                        
                        
                        309,750Construction
      in progress
                        
                        
                        5,978,363
                        
                        
                        
                        5,523,620Capitalized
      interest
                        
                        
                        620,984
                        
                        
                        
                        507,587Vehicles
                        
                        
                        44,175
                        
                        
                        
                        44,175Slag
      conveyance equipment
                        
                        
                        44,375
                        
                        
                        
                        44,375Demo
      module building
                        
                        
                        6,630,063
                        
                        
                        
                        6,625,603Site
      improvements
                        
                        
                        1,276,774
                        
                        
                        
                        1,241,468Site
      equipment
                        
                        
                        345,247
                        
                        
                        
                        215,34115,620,962
                        
                        
                        
                        14,844,502Less
      accumulated depreciation
                        
                        
                        1,525,153
                        
                        
                        
                        849,568$
                        14,095,809
                        
                        
                        $
                        13,994,934
 
 Depreciation
expense was $675,585 and $554,641 for the nine months ended September 30, 2010
and 2009, respectively.
 
 14
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 3.
              CLARKDALE SLAG
      PROJECT
  On
February 15, 2007, the Company completed a merger with Transylvania
International, Inc. (“TI”) which provided the Company with 100% ownership of the
Clarkdale Slag Project in Clarkdale, Arizona, through its wholly owned
subsidiary CML.  This acquisition superseded the joint venture option
agreement to acquire a 50% ownership interest as a joint venture partner
pursuant to Nanominerals Corp. (“NMC”) interest in a joint venture agreement
(“JV Agreement”) dated May 20, 2005 between NMC and Verde River Iron Company,
LLC (“VRIC”). 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
million purchase price was comprised of a combination of the cash paid, the
deferred tax liability assumed in connection with the acquisition, and the fair
value of our common shares issued, based on the closing market price of our
common stock, using the average of the high and low prices of our common stock
on the closing date of the acquisition. The Clarkdale Slag Project is without
known reserves and the project is exploratory in nature in accordance with
Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As
required by ASC 930-805-30, Mining – Business Combinations –
Initial Recognition, and ASC
740-10-25-49-55, Income Taxes
– Overall – Recognition – Acquired Temporary Differences in Certain Purchase
Transactions that are Not Accounted for as Business Combinations, the
Company then allocated the purchase price among the assets as follows (and also
further described in this Note 3 to the financial statements): $5,916,150 of the
purchase price was allocated to the slag pile site, $3,300,000 to the remaining
land acquired, and $309,750 to income property and improvements. The purchase
price allocation to the real properties was based on fair market values
determined using an independent real estate appraisal firm (Scott W. Lindsay,
Arizona Certified General Real Estate Appraiser No. 30292). The remaining
$120,766,877 of the purchase price was allocated to the Clarkdale Slag Project,
which has been capitalized as a tangible asset in accordance with ASC
805-20-55-37, Use
Rights. Upon commencement of commercial production, the material will be
amortized using the unit-of-production method over the life of the Clarkdale
Slag Project.
 
 15
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 3.
              CLARKDALE SLAG
      PROJECT (continued)
 
 Closing
of the TI acquisition occurred on February 15, 2007, (the “Closing Date”) and
was subject to, among other things, the following terms and
conditions:
 
 a)
              The
      Company paid $200,000 in cash to VRIC on the execution of the Letter
      Agreement;
 
 b)
              The
      Company paid $9,900,000 in cash to VRIC on the Closing
    Date;
 
 c)
              The
      Company issued 16,825,000 shares of its common stock, valued at $3.975 per
      share using the average of the high and low on the Closing Date, to the
      designates of VRIC on the closing pursuant to Section 4(2) and Regulation
      D of the Securities Act of 1933;
  In
addition to the cash and equity consideration paid and issued upon closing, the
acquisition agreement contains the following payment terms and
conditions:
  d)
              The
      Company agreed to continue to pay VRIC $30,000 per month until the earlier
      of: (i) the date that is 90 days after receipt of a bankable feasibility
      study by the Company (the “Project Funding Date”), or (ii) the tenth
      anniversary of the date of the execution of the letter
      agreement;
  The
acquisition agreement also contains additional contingent payment terms which
are based on the Project Funding Date as defined in the agreement.
  e)
              The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  f)
              The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the “net smelter returns” on any
      and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until the
      first to occur of: (i) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000 or (ii) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000 in any calendar year; and
  g)
              The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag Project. The Company has accounted for
      this as a contingent payment and upon meeting the contingency
      requirements, the purchase price of the Clarkdale Slag Project will be
      adjusted to reflect the additional
  consideration.
  Under the
original JV Agreement, the Company agreed to pay NMC a 5% royalty on “net
smelter returns” payable from the Company’s 50% joint venture interest in the
production from the Clarkdale Slag Project.  Upon the assignment to the
Company of VRIC’s 50% interest in the Joint Venture Agreement in connection with
the reorganization with TI, the Company continues to have an obligation to
pay NMC a royalty consisting of 2.5% of the net smelter returns on any and
all proceeds of production from the Clarkdale Slag Project.
 
 16
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 3.
              CLARKDALE SLAG
      PROJECT (continued)
  The
following table reflects the recorded purchase consideration for the Clarkdale
Slag Project:
 
 Purchase
      price:Cash
      payments
                        
                        $
                        10,100,000Joint
      venture option acquired in 2005 for cash
                        
                        
                        690,000Warrants
      issued for joint venture option
                        
                        
                        1,918,481Common
      stock issued
                        
                        
                        66,879,375Monthly
      payments, current portion
                        
                        
                        167,827Monthly
      payments, net of current portion
                        
                        
                        2,333,360Acquisition
      costs
                        
                        
                        127,000Total
      purchase price
                        
                        
                        82,216,043Net
      deferred income tax liability assumed – Clarkdale Slag
    Project
                        
                        
                        48,076,734Total
                        
                        $
                        130,292,777
  The following table reflects the
components of the Clarkdale Slag Project:
  Allocation
      of acquisition cost:Clarkdale
      Slag Project (including net deferred income tax liability assumed of
      $48,076,734)
                        
                        $
                        120,766,877Land
      – smelter site and slag pile
                        
                        
                        5,916,150Land
                        
                        
                        3,300,000Income
      property and improvements
                        
                        
                        309,750Total
                        
                        $
                        130,292,777
 
 17
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 4.
              MINERAL PROPERTIES -
      MINING CLAIMS
 
 As of
September 30, 2010, mining claims consisted of 3,200 acres located near
Searchlight, Nevada. The 3,200 acre property is staked as twenty 160 acre
claims, most of which are also double-staked as 142 twenty acre claims. At
September 30, 2010, the mineral properties balance was $16,947,419.
 
 The
mining claims were acquired with issuance of 1,400,000 shares of the Company’s
common stock during 2005 and the provision that the Company, at its option,
issue an additional 1,400,000 shares each year in June for three consecutive
years ending in June 2008.  On June 25, 2008, the Company issued the final
1,400,000 shares and received the title to the mining claims in consideration of
the satisfaction of the option agreement.
 
 The
mining claims were capitalized as tangible assets in accordance with ASC
805-20-55-37, Use
Rights.  Upon commencement of commercial production, the claims will
be amortized using the unit-of-production method.  If the Company does not
continue with exploration after the completion of the feasibility study, the
claims will be expensed at that time.
 
 On August
26, 2005, the Company paid $180,500 to the Bureau of Land Management (“BLM”) as
a bond for future reclamation work in Searchlight, Nevada. The recovery of the
reclamation bond was uncertain; therefore, the Company had established a full
allowance against the reclamation bond with the offsetting expense to project
exploration costs. During June 2010, the BLM determined that the bond was no
longer required, and the Company received a full refund of the bond. As such,
the allowance was reversed with an offsetting credit to project exploration
costs.
 
 In
connection with the Company’s new Plan of Operations (“POO”) for the Searchlight
Gold Project, a bond of $7,802 was posted with the BLM in December
2009.
 
 18
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 5.
              ACCOUNTS PAYABLE AND
      ACCRUED LIABILITIES
  Accounts
payable and accrued liabilities at September 30, 2010 and December 31, 2009
consisted of the following:
  September 30,
                      2010
                    
                    
                    December 31,
                      2009Trade
      accounts payable
                    
                    $
                    81,268
                    
                    
                    $
                    414,279Accrued
      compensation and related taxes
                    
                    
                    30,421
                    
                    
                    
                    29,463$
                    111,689
                    
                    
                    $
                    443,742
 
 19
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  6.
              CAPITAL LEASE
      PAYABLE
  The
Company leases equipment under a capital lease. The capital lease payable
consisted of the following at September 30, 2010 and December 31,
2009,
  Lender
                                  
                                  Collateral
                                  
                                  Monthly
                                    Payment
                                  
                                  
                                  Interest
                                    Rate
                                  
                                  Maturity
                                  
                                  September 30,
                                    2010
                                  
                                  
                                  December 31,
                                    2009Caterpillar
      Financial Services Corporation
                                  
                                  Equipment
                                  
                                  $
                                  2,200
                                  
                                  
                                  
                                  4.45
                                  %
                                  July
      2011
                                  
                                  $
                                  21,559
                                  
                                  
                                  $
                                  40,29221,559
                                  
                                  
                                  
                                  40,292Capital
      lease payable, current portion
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (21,559
                                  )
                                  
                                  
                                  (25,117
                                  )Capital
      lease payable, net of current portion
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  15,175
 
 The
following table represents future minimum lease payments on the capital lease
payable for each of the twelve month periods ending September 30,
 
 2011
                        
                        $
                        22,001Thereafter
                        
                        
                        —Total
      future minimum lease payments
                        
                        
                        22,001Imputed
      interest
                        
                        
                        (442
                        )Present
      value of future minimum lease payments
                        
                        $
                        21,559
 
 The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at September 30, 2010 and
December 31, 2009,
 
 September 30,
                          2010
                        
                        
                        December 31,
                          2009Site
      equipment
                        
                        $
                        116,239
                        
                        
                        $
                        116,239Accumulated
      amortization
                        
                        
                        (96,866
                        )
                        
                        
                        (75,071
                        )$
                        19,373
                        
                        
                        $
                        41,168
 
 20
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
              VRIC PAYABLE - RELATED
      PARTY
 
 Pursuant
to the Clarkdale acquisition agreement, the Company agreed to pay VRIC $30,000
per month until the Project Funding Date.  Mr. Harry Crockett, one of the
Company’s former directors, was an affiliate 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 September 30,
 
 2011
                      
                      $
                      223,9192012
                      
                      
                      242,5042013
                      
                      
                      262,6312014
                      
                      
                      284,4302015
                      
                      
                      308,037Thereafter
                      
                      
                      480,6501,802,171VRIC
      payable, current portion
                      
                      
                      223,919VRIC
      payable, net of current portion
                      
                      $
                      1,578,252
 
 The
acquisition agreement also contains payment terms which are based on the Project
Funding Date as defined in the agreement. The terms and conditions of these
payments are discussed in more detail in Notes 3 and 13.
 
 21
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
              STOCKHOLDERS’
      EQUITY
 
 During
the nine months ended September 30, 2010, the Company’s stockholders’ equity
activity consisted of the following:
 
 On
September 30, 2010, the Company awarded and issued 9,231 shares to a non officer
director pursuant to its directors’ compensation policy.  The share award
was priced at $0.975 per share and has been recorded as directors’ compensation
expense of $9,000 and as common stock and additional paid-in
capital.
 
 On June
30, 2010, the Company awarded and issued 12,857 shares each to two non officer
directors pursuant to its directors’ compensation policy.  The share awards
were priced at $0.70 per share and have been recorded as directors’ compensation
expense of $18,000 and as common stock and additional paid-in
capital.
 
 On March
31, 2010, the Company awarded and issued 7,500 shares each to two non officer
directors pursuant to its directors’ compensation policy.  The share awards
were priced at $1.20 per share and have been recorded as directors’ compensation
expense of $18,000 and as common stock and additional paid-in
capital.
 
 During
the nine months ended September 30, 2009, the Company’s stockholders’ equity
activity consisted of the following:
 
 The
Company awarded and issued 23,836 shares to non officer directors pursuant to
its directors’ compensation policy.  The share awards were priced between
$1.82 and $2.74 per share and were recorded as directors’ compensation expense
of $54,000 and additional paid-in capital.
 
 The
Company issued 700,000 shares of common stock from the exercise of stock options
resulting in cash proceeds of $175,000.  Options exercised were for 700,000
shares of common stock at $0.25 per share.  These stock options were
subject to an expiration date of November 23, 2010.
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS
 
 On
October 15, 2009, the Board of Directors adopted the 2009 Stock Option Plan (the
“2009 Plan”). Under the terms of the 2009 Plan, options to purchase up to
3,250,000 shares of common stock of the Company may be granted to eligible
participants.  The 2009 Plan was approved by the Company’s stockholders on
December 15, 2009.
 
 The 2009
Plan provides that the option price for incentive stock options be the fair
market value of the stock at the date of the grant; however, for grantees who,
on the date of grant, own more than 10% of the total combined voting power of
the Company’s stock the exercise price may not be less than 110% of the fair
market value of the stock on the date of grant.  The maximum term of an
option shall be established by the Board of Directors or, if not so established,
shall be ten years from the grant date; however, for grantees who, on the date
of grant, own more then 10% of the total combined voting power of the Company’s
stock, the term may not exceed five years. Options granted under the 2009 Plan
become exercisable and expire as determined by the Board of
Directors.
 
 On
October 15, 2009, the Board of Directors approved the 2009 Stock Incentive Plan
for Directors (the “2009 Directors Plan”). Under the terms of the 2009 Directors
Plan, options to purchase up to 750,000 shares of common stock may be granted to
the Company’s directors.
 
 22
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 The
      2009 Directors Plan was approved by the Company’s stockholders on December
      15, 2009.
 
 Under
      the 2009 Directors Plan, no participant may receive awards with respect to
      more than 250,000 common shares during any calendar year. Stock options
      will be exercisable and will vest at such time or times as the Board or
      Compensation Committee determines at the time of grant. The exercise price
      of a stock option granted under the 2009 Directors Plan may not be less
      than 100% of the fair market value of a share of the Company’s common
      stock on the date the stock option is granted. The term of each stock
      option will be established at the time of grant by the Compensation
      Committee and may not exceed ten years from the date the stock option is
      granted.
 
 During
the nine months ended September 30, 2010, the Company granted stock options as
follows:
 
 a)
              On
      September 30, 2010, the Company granted nonqualified stock options under
      the 2009 Directors Plan for the purchase of 73,848 shares of common stock
      at $0.975 per share.  The options were granted to four of the
      Company’s directors for directors’ compensation, are fully vested and
      expire on September 30, 2015.
  b)
              On
      June 30, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 68,571 shares of common stock at
      $0.70 per share.  The options were granted to the Company’s three
      independent directors for directors’ compensation, are fully vested and
      expire on June 30, 2015.
  c)
              On
      May 3, 2010, the Company granted nonqualified stock options under the 2009
      Directors Plan for the purchase of 200,000 shares of common stock at $1.06
      per share.  The options were granted to an independent director upon
      his appointment to the Board of Directors. The options vest pro rata over
      four years, from May 1, 2011 through May 1, 2014. The options expire on
      the five year anniversary of the date that they
  vest.
  d)
              On
      March 31, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 20,000 shares of common stock at
      $1.20 per share.  The options were granted to the Company’s two
      independent directors for directors’ compensation, are fully vested and
      expire on March 31, 2015.
  e)
              On
      March 1, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 200,000 shares of common stock at
      $1.59 per share.  The options were granted to an independent director
      upon his appointment to the Board of Directors. The options vest pro rata
      over four years, from March 1, 2011 through March 1, 2014. The options
      expire on the five year anniversary of the date that they
      vest.
  During
the nine months ended September 30, 2009, the Company granted nonqualified stock
options under the 2007 Plan for the purchase of 23,836 shares of common stock at
prices ranging from $1.82 to $2.74 per share. The options were granted to an
independent director for director’s compensation, are fully vested and expire
five years after the date they were granted.
  Expenses
for the nine months ended September 30, 2010 and 2009 related to vesting and
granting of stock options were $80,612 and $85,563, respectively, and are
included in general and administrative expense.
 
 23
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 Stock options -During
the nine months ended September 30, 2010, the Company granted stock options to
directors totaling 562,419, with a weighted average exercise price of $1.20 per
share. As of September 30, 2010, stock options outstanding totaled 3,243,052
with a weighted average price of $1.20 per share.
 
 The
following table summarizes the Company’s stock option activity for the nine
months ended September 30, 2010:
 Number of
                          Shares
                        
                        
                        Weighted
                          Average
                          Exercise PriceBalance, December
      31, 2009
                        
                        
                        2,680,633
                        
                        
                        $
                        1.20Options
      granted and assumed
                        
                        
                        562,419
                        
                        
                        
                        1.20Options
      expired
                        
                        
                        —
                        
                        
                        
                        —Options
      cancelled, forfeited
                        
                        
                        —
                        
                        
                        
                        —Options
      exercised
                        
                        
                        —
                        
                        
                        
                        —Balance,
      September 30, 2010
                        
                        
                        3,243,052
                        
                        
                        $
                        1.20
 
 During
the nine months ended September 30, 2009 the Company granted stock options to a
director totaling 23,836, with a weighted average exercise price of $2.27 per
share. As of September 30, 2009 stock options outstanding totaled 2,769,383 with
a weighted average exercise price of $1.17 per share.
 
 The
following table summarizes the Company’s stock option activity for the nine
months ended September 30, 2009:
 Number of
                          Shares
                        
                        
                        Weighted
                          Average
                          Exercise PriceBalance, December 31,
      2008
                        
                        
                        3,560,293
                        
                        
                        $
                        1.02Options
      granted and assumed
                        
                        
                        23,836
                        
                        
                        
                        2.27Options
      expired
                        
                        
                        (114,746
                        )
                        
                        
                        2.43Options
      cancelled
                        
                        
                        —
                        
                        
                        
                        —Options
      exercised
                        
                        
                        (700,000
                        )
                        
                        
                        0.25Balance,
      September 30, 2009
                        
                        
                        2,769,383
                        
                        
                        $
                        1.17
 
 The
Company estimates the fair value of options granted by using the Binomial
Lattice option pricing-model with the following assumptions used for
grants:
 
 2010
                            
                            2009Dividend
      yield
                            
                            —
                            
                            —Expected
      volatility
                            
                            105.85% to 116.78%
                            
                            72.67 to 76.65%Risk-free interest
      rate
                            
                            1.27%
      to 3.28%
                            
                            1.67%
      to 2.54%Expected
      life (years)
                            
                            4.25
      to 4.94
                            
                            4.13
      to
4.25
 
 The
Company believes that this model provides the best estimate of fair value due to
its ability to incorporate inputs that change over time, such as volatility and
interest rates, and to allow for actual exercise behavior of option holders.
 
 24
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION
      PLAN AND WARRANTS
  (continued)
 
 For stock
options awarded during 2010 and 2009, the expected volatility is based on the
historical volatility levels on our common stock. The risk-free interest rate is
based on the implied yield available on US Treasury zero-coupon issues over
equivalent lives of the options.
  The
expected life of employee stock options represents the weighted-average period
the stock options are expected to remain outstanding and is a derived output of
the Binomial Lattice model. The expected life of employee stock options is
impacted by all of the underlying assumptions and calibration of the Company’s
model. The Binomial Lattice model estimates the probability of exercise as a
function of these two variables based on the entire history of exercises and
cancellations on all past option grants made by the Company.
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the nine months ended September 30, 2010:
 
 Number of
                        Shares Subject
                        to Vesting
                      
                      
                      Weighted Average
                        Grant Date
                        Fair ValueUnvested,
      December 31, 2009
                      
                      
                      150,000
                      
                      
                      $
                      0.84Options
      granted
                      
                      
                      400,000
                      
                      
                      
                      1.01Options
      vested
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled
                      
                      
                      —
                      
                      
                      
                      —Unvested,
      September 30, 2010
                      
                      
                      550,000
                      
                      
                      $
                      0.96
 
 As of
September 30, 2010, there was $351,264 total unrecognized compensation cost
related to unvested stock options. This cost is expected to be recognized as
follows:
 
 2010
                      
                      $
                      49,3992011
                      
                      
                      157,9522012
                      
                      
                      93,6942013
                      
                      
                      42,3932014
                      
                      
                      7,826Total
                      
                      $
                      351,264
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the nine months ended September 30, 2009:
 
 Number of
                        Shares Subject
                        to Vesting
                      
                      
                      Weighted Average
                        Grant Date
                        Fair ValueUnvested,
      December 31, 2008
                      
                      
                      200,000
                      
                      
                      $
                      0.79Options
      granted
                      
                      
                      —
                      
                      
                      
                      —Options
      vested
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled
                      
                      
                      —
                      
                      
                      
                      —Unvested,
      September 30, 2009
                      
                      
                      200,000
                      
                      
                      $
                      0.79
  25
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 The
following table summarizes information about options granted during the nine
months ended September 30, 2010:
 Number of Options
                                                      Granted
                                                      During 2010
                                                    
                                                    Exercise Price
                                                      Equals, Exceeds
                                                      or
                                                      is Less than Mkt.
                                                      Price of Stock
                                                      on Grant Date
                                                    
                                                    Weighted
                                                      Average
                                                      Exercise
                                                      Price
                                                    
                                                    
                                                    Range of
                                                      Exercise
                                                      Price
                                                    
                                                    
                                                    Weighted
                                                      Average Grant
                                                      Date Fair Value562,419
                                                    
                                                    Equals
                                                    
                                                    $
                                                    1.20
                                                    
                                                    
                                                    $
                                                    0.70
      to $1.59
                                                    
                                                    
                                                    $
                                                    0.81—
                                                    
                                                    Exceeds
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    $
                                                    — to
      $ —
                                                    
                                                    
                                                    $
                                                    ——
                                                    
                                                    Less
      Than
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    $
                                                    — to
      $ —
                                                    
                                                    
                                                    $
                                                    —
 
 The
following table summarizes information about options granted during the nine
months ended September 30, 2009:
 Number of Options
                                                              Granted
                                                              During 2009
                                                            
                                                            Exercise Price
                                                              Equals, Exceeds
                                                              Or
                                                              Is Less than Mkt.
                                                              Price of Stock
                                                              On Grant Date
                                                            
                                                            Weighted
                                                              Average
                                                              Exercise
                                                              Price
                                                            
                                                            
                                                            Range of
                                                              Exercise
                                                              Price
                                                            
                                                            
                                                            Weighted
                                                              Average Fair
                                                              Value23,836
                                                            
                                                            Equals
                                                            
                                                            $
                                                            2.27
                                                            
                                                            
                                                            $
                                                            1.82
      to $2.74
                                                            
                                                            
                                                            $
                                                            1.18—
                                                            
                                                            Exceeds
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            $
                                                            —to $—
                                                            
                                                            
                                                            $
                                                            ——
                                                            
                                                            Less Than
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            $
                                                            — to $ —
                                                            
                                                            
                                                            $
                                                            —23,836
                                                            
                                                            Equals
                                                            
                                                            $
                                                            2.27
                                                            
                                                            
                                                            $
                                                            1.82 to $2.74
                                                            
                                                            
                                                            $
                                                            1.18
 
 Stock
options/warrants - The Company did not grant any stock warrants during
the nine month periods ended September 30, 2010 or September 30, 2009,
respectively.
 
 During
the nine months ended September 30, 2010, the Company issued stock options for
562,419 shares of common stock to directors with a range of exercise prices of
$0.70 to $1.59 per share. During the nine months ended September 30, 2009 the
Company issued stock options for 23,836 shares of common stock to a director
with a weighted average exercise price of $2.27 per share.
 
 The
following table summarizes information about options/warrants granted during the
nine months ended September 30, 2010:
 
 Number of
                              Shares
                            
                            
                            Weighted
                              Average
                              Exercise PriceBalance,
      December 31, 2009
                            
                            
                            28,064,283
                            
                            
                            $
                            1.16Options/warrants
      granted and assumed
                            
                            
                            562,419
                            
                            
                            
                            1.20Options/warrants
      expired
                            
                            
                            —
                            
                            
                            
                            —Options/warrants
      cancelled, forfeited
                            
                            
                            —
                            
                            
                            
                            —Options/warrants
      exercised
                            
                            
                            —
                            
                            
                            
                            —Balance,
      September 30, 2010
                            
                            
                            28,626,702
                            
                            
                            $
                            1.16
  26
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
              STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 The
following table summarizes information about options/warrants granted during the
nine months ended September 30, 2009:
 
 Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Exercise PriceBalance,
      December 31, 2008
                      
                      
                      22,602,680
                      
                      
                      $
                      1.11Options/warrants
      granted and assumed
                      
                      
                      23,836
                      
                      
                      
                      2.27Options/warrants
      expired
                      
                      
                      (114,746
                      )
                      
                      
                      2.43Options/warrants
      cancelled
                      
                      
                      —
                      
                      
                      
                      —Options/warrants
      exercised
                      
                      
                      (700,000
                      )
                      
                      
                      0.25Balance,
      September 30, 2009
                      
                      
                      21,811,770
                      
                      
                      $
                      1.13
 
 10.
              STOCKHOLDER RIGHTS
      PLAN
 
 The
Company adopted a Stockholder Rights Plan (the “Rights Plan”) in August 2009 to
protect stockholders from attempts to acquire control of the Company in a manner
in which the Company’s Board of Directors determines is not in the best interest
of the Company or its stockholders.  Under the plan, each currently
outstanding share of the Company’s common stock includes, and each newly issued
share will include, a common share purchase right.  The rights are attached
to and trade with the shares of common stock and generally are not
exercisable.  The rights will become exercisable if a person or group
acquires, or announces an intention to acquire, 15% or more of the Company’s
outstanding common stock. The Rights Plan was not adopted in response to any
specific effort to acquire control of the Company.  The issuance of rights
had no dilutive effect, did not affect the Company’s reported earnings per share
and was not taxable to the Company or its stockholders.
 
 27
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 11.
              PROPERTY RENTAL
      AGREEMENTS AND LEASES
 
 The
      Company, through its subsidiary CML, has the following lease and rental
      agreements as lessor:
 
 Clarkdale Arizona
      Central Railroad - Rental
 
 CML
      has a month-to-month rental agreement with Clarkdale Arizona Central
      Railroad. The rental payment is $1,700 per
  month.
 
 Commercial Building -
      Rental
 
 CML
      rents commercial building space to various tenants. Rental arrangements
      are minor in amount and are typically
  month-to-month.
 
 Land Lease - Wastewater
Effluent
 
 CML
      assumed a lease as lessor on February 15, 2007 that was entered into by TI
      on August 25, 2004 with the Town of Clarkdale, AZ (“Clarkdale”). The
      Company provides approximately 60 acres of land to Clarkdale for disposal
      of Class B effluent. In return, the Company has first right to purchase up
      to 46,000 gallons per day of the effluent for its use at fifty percent
      (50%) of the potable water rate. In addition, if Class A effluent becomes
      available, the Company may purchase that at seventy-five percent (75%) of
      the potable water rate.
 
 The
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.
 
 28
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
              INCOME
      TAXES
 
 The
Company is a Nevada corporation and is subject to federal and Arizona income
taxes.  Nevada does not impose a corporate income tax.
 
 The
income tax benefit consisted of the following at September 30, 2010 and
2009:
 
 September 30,
                        2010
                      
                      
                      September 30,
                        2009Income
      tax benefit at statutory rates
                      
                      $
                      2,283,863
                      
                      
                      $
                      1,951,393Non-deductible
      and other
                      
                      
                      43,750
                      
                      
                      
                      (2,739
                      )Change
      in valuation allowance
                      
                      
                      2,320
                      
                      
                      
                      (47,015
                      )Income
      tax benefit
                      
                      $
                      2,329,933
                      
                      
                      $
                      1,901,639
 
 Significant
components of the Company’s net deferred income tax assets and liabilities at
September 30, 2010 and December 31, 2009 were as follows:
 
 September 30,
                        2010
                      
                      
                      December 31,
                        2009Deferred
      income tax assetsNet
      operating loss carryforward
                      
                      $
                      9,369,810
                      
                      
                      $
                      7,169,190Option
      compensation
                      
                      
                      478,328
                      
                      
                      
                      412,058Reclamation
      bond
                      
                      
                      —
                      
                      
                      
                      68,590Property,
      plant & equipment
                      
                      
                      293,718
                      
                      
                      
                      164,405Gross
      deferred income tax asset
                      
                      
                      10,141,856
                      
                      
                      
                      7,814,243Valuation
      allowance
                      
                      
                      (478,328
                      )
                      
                      
                      (480,648
                      )9,663,528
                      
                      
                      
                      7,333,595Deferred
      income tax liabilitiesAcquisition
      related liabilities
                      
                      
                      55,197,465
                      
                      
                      
                      55,197,465Net
      deferred income tax liability
                      
                      $
                      45,533,937
                      
                      
                      $
                      47,863,870
 
 A
valuation allowance for deferred tax related to option compensation was
established for net deferred tax assets not allocated to offset acquisition
related deferred tax liabilities due to the uncertainty of realizing these
deferred tax assets based on conditions existing at September 30, 2010. For the
year ended December 31, 2009, the valuation allowance also included the
reclamation bond. The bond was returned to the Company in full in June
2010.
 
 Deferred
income tax liability was recorded on GAAP basis over income tax basis using
statutory federal and state rates with the corresponding increase in the
purchase price allocation to the assets acquired.
 
 29
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
              INCOME TAXES
      (continued)
 
 The
resulting estimated future federal and state income tax liability associated
with the temporary difference between the acquisition consideration and the tax
basis as computed in accordance with ASC 740 is reflected as an increase to the
total purchase price which has been applied to the underlying mineral and slag
project assets in the absence of there being a goodwill component associated
with the acquisition transactions.
 
 The
Company had cumulative net operating losses of approximately $24,657,395 and
$18,866,291 as of September 30, 2010 and December 31, 2009, respectively for
federal income tax purposes. The federal net operating loss carryforwards will
expire between 2025 and 2030.
 
 State Income Tax
Allocation
 
 The
Company has elected to file consolidated tax returns with federal and Arizona
tax authorities.  Tax attributes are computed using an allocation and
apportionment formula as outlined in Arizona tax law.  The Company computes
its tax provision using its statutory federal rate plus a state factor that
includes the Arizona statutory rate and the current apportionment percentage,
which is then reduced by the federal tax benefit that would be obtained upon
payment of the computed state taxes.
 
 For the
nine month periods ended September 30, 2010 and 2009, the state income tax
benefit which is included in the total tax benefit was $316,393 and $265,783,
respectively.
 
 The
Company had cumulative net operating losses of approximately $14,523,444 and
$10,148,277 as of September 30, 2010 and December 31, 2009, respectively for
Arizona state income tax purposes. The Arizona state net operating loss
carryforwards will expire between 2013 and 2015.
 
 Tax Returns Subject to
Examination
 
 The
Company and its subsidiaries file income tax returns in the United States. 
These tax returns are subject to examination by taxation authorities provided
the years remain open under the relevant statutes of limitations, which may
result in the payment of income taxes and/or decreases in its net operating
losses available for carryforwards.  The Company is no longer subject to
income tax examinations by US federal and state tax authorities for years prior
to 2005. While the Company believes that its tax filings do not include
uncertain tax positions, the results of potential examinations or the effect of
changes in tax law cannot be ascertained at this time.  The Company
currently has no tax years under examination.
 
 30
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
              COMMITMENTS AND
      CONTINGENCIES
 
 Lease obligations -
The Company rents office space in Henderson, Nevada.  The lease agreement
expired in November 2006, and the Company continues to rent the existing space
under month-to-month terms. Monthly rent was decreased from $4,900 per month to
$4,000 per month beginning in August 2009 due to less office space leased. In
February 2010, the monthly rent was increased to $4,255.
 
 Rent
expense resulting from this operating lease agreement was $38,040 and $42,300
for each of the nine month periods ended September 30, 2010 and 2009,
respectively.
 
 Employment contracts
- Ian R.
McNeil.The Company entered into an employment agreement with Ian R. McNeil, its
President and Chief Executive Officer, effective January 1, 2006 and as amended
February 16, 2007.  Pursuant to the terms of the employment agreement, the
Company agreed to pay Mr. McNeil an annual salary of $190,000.
 
 Mr.
McNeil resigned from the Company on October 1, 2010. Under a Separation and
Release Agreement, the Company will make separation payments for a period of
three months of $15,833 per month and will pay for certain health benefits for
Mr. McNeil for a period of three months.
 
 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 Interim
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 Interim 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 pursuant to a non-qualified stock option
agreement, with an exercise price of $0.91 per share (based on the closing price
of the Company’s common stock on the date of grant).  Of the 300,000
options, 100,000 options vested on execution of the agreement.  The
remaining 200,000 options will vest over the term of the option in connection
with the occurrence of certain events, as follows: (i) 100,000 options will vest
in connection with an equity financing or series of financings resulting in (or
a binding commitment for such a financing which will result in) gross proceeds
to the Company of at least $5,000,000, and (ii) 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 Interim Chief Executive Officer for at least 30
months.  In addition, all of the remaining 200,000 options will vest in
connection with a significant corporate transaction generally resulting in a
sale or change of control.  The options also have certain accelerated
vesting and forfeiture provisions in the case of certain events involving his
death, disability or termination of his services.  The options each expire
on the fifth anniversary of the date that they vest, but in no event later than
the tenth anniversary of the agreement.
 
 31
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
              COMMITMENTS AND
      CONTINGENCIES (continued)
 
 Carl S. Ager.The Company entered
into an employment agreement with Carl S. Ager, its Vice President, Secretary
and Treasurer, effective January 1, 2006 and as amended February 16, 2007. 
Pursuant to the terms of the employment agreement, the Company agreed to pay Mr.
Ager an annual salary of $160,000.  On December 30, 2005, Mr. Ager received
a one time bonus of $26,666 on execution of the agreement.  In addition to
his annual salary, Mr. Ager may be granted a discretionary bonus and stock
options, to the extent authorized by the Board of Directors. The term of the
agreement is for an indefinite period, unless otherwise terminated by either
party pursuant to the terms of the agreement.  In the event that the
agreement is terminated by the Company, other than for cause, the Company will
provide Mr. Ager with six months written notice or payment equal to six months
of his monthly salary.
 
 Melvin L.
Williams.The Company entered into an employment agreement with Melvin L. Williams,
its Chief Financial Officer, effective June 14, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. Williams an annualized salary of $130,000 based on an increase
in time commitment from 300-600 hours worked to 600-800 hours worked.  On
June 14, 2006, the Company issued 50,000 restricted shares of its common stock,
as a one time bonus, and granted options to purchase 100,000 shares of its
common stock at an exercise price of $2.06 per share, exercisable for a period
of five years until June 14, 2011.  The options vested 50% on each of the
first and second anniversaries of the execution of the agreement.  The
price of the shares issued and the exercise price of the options granted were
valued based on the closing price of the common stock on the OTCBB on June 14,
2006.  In the event the employment agreement is terminated by the Company
without cause, the Company will pay Mr. Williams an amount equal to three
months’ salary in a lump sum as full and final payment of all amounts payable
under the agreement.
 
 In
September 2010, the Company and its executive officers and directors voluntarily
agreed to reduce cash compensation by 25% beginning on October 1, 2010 and
continuing for an undetermined amount of time. Employment agreements were not
affected and have not been amended.
 
 32
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
              COMMITMENTS AND
      CONTINGENCIES (continued)
 
 Purchase consideration
Clarkdale Slag Project - In consideration of the acquisition of the
Clarkdale Slag Project from VRIC, the Company has agreed to certain additional
contingent payments. The acquisition agreement contains payment terms which are
based on the Project Funding Date as defined in the agreement:
 
 a)
              The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  b)
              The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the net smelter returns (“NSR”)
      on any and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until the
      first to occur of: (i) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000 or (ii) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000; and,
  c)
              The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Advance Royalty shall continue for a period of ten years from the Agreement Date
or until such time that the Project Royalty shall exceed $500,000 in any
calendar year, at which time the Advance Royalty requirement shall
cease.
 
 Clarkdale Slag Project
royalty agreement - NMC - Under the original JV Agreement, the Company
agreed to pay NMC a 5% royalty on “net smelter returns” payable from the
Company’s 50% joint venture interest in the production from the Clarkdale Slag
Project.  Upon the assignment to the Company of VRIC’s 50% interest in the
Joint Venture Agreement in connection with the reorganization with Transylvania
International, Inc., the Company continues to have an obligation to pay
NMC a royalty consisting of 2.5% of the net smelter returns on any and all
proceeds of production from the Clarkdale Slag Project.
 
 Development agreement
- In January 2009, the Company submitted a development agreement to the Town of
Clarkdale for development of an Industrial Collector Road (the “Road”). The
purpose of the Road is to provide the Company the capability to transport
supplies, equipment and products to and from the Clarkdale Slag Project site
efficiently and to meet stipulations of the Conditional Use Permit for the full
production facility at the Clarkdale Slag Project.
 
 The
timing of the development of the Road is to be within two years of the effective
date of the agreement. The effective date shall be the later of (i) 30 days from
the approving resolution of the agreement by the Council, (ii) the date on which
the Town obtains a connection dedication from separate property owners who have
land that will be utilized in construction of the Road, or (iii) the date on
which the Town receives the proper effluent permit. The contingencies outlined
in (ii) and (iii) above are beyond control of the Company.
 
 The
Company estimates the initial cost of construction of the Road to be
approximately $3,500,000 and the cost of additional enhancements to be
approximately $1,200,000 which will be required to be funded by the Company.
Based on the uncertainty of the contingencies, this cost is not included in the
Company’s current operating plans. Funding for construction of the Road will
require obtaining project financing or other significant financing.  At
September 30, 2010 and through the date the consolidated financial statements
were issued, these contingencies had not changed.
 
 33
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 14.
              CONCENTRATION OF
      CREDIT RISK
 
 The
Company maintains its cash accounts in three financial institutions. Cash
accounts at these financial institutions are insured by the Federal Deposit
Insurance Corporation (FDIC) for up to $250,000 per institution. The Company has
never experienced a material loss or lack of access to its cash accounts;
however, no assurance can be provided that access to the Company’s cash accounts
will not be impacted by adverse conditions in the financial markets. At
September 30, 2010, the Company had deposits in excess of FDIC insured limits in
the amount of $6,121,270.
 
 15.
                CONCENTRATION OF
      ACTIVITY
 
 For the
nine months ended September 30, 2010, the Company purchased services from two
major vendors, Baker Hostetler and Arrakis, Inc., which exceeded more than 10%
of total purchases and amounted to $600,000 and $379,632,
respectively.
 
 For the
nine months ended September 30, 2009, the Company purchased services from one
major vendor, Baker Hostetler, which exceeded more than 10% of total purchases
and amounted to $958,962.
 
 16.
              RELATED PARTY
      TRANSACTIONS
 
 During
the nine months ended September 30, 2010, the Company utilized the services of
NMC to provide technical assistance and financing related activities. 
These services related primarily to the Clarkdale Slag Project and the
Searchlight Claims Project.  Mr. McNeil and Mr. Ager are affiliated with
NMC.
 
 In
addition to the above services, NMC provided dedicated use of its laboratory,
instrumentation, milling equipment and research facilities.  NMC provided
invoices for these fees plus expenses.
 
 For the
nine months ended September 30, 2010, the Company incurred total fees and
reimbursement of expenses to NMC of $252,501 and $33,621, respectively. At
September 30, 2010, the Company had an outstanding balance due to NMC of
$17,880.
 
 During
the nine months ended September 30, 2010, the Company utilized Cupit, Milligan,
Ogden & Williams, CPAs (“CMOW”) to provide accounting support
services.  Mr. Williams is affiliated with CMOW.
 
 The
Company incurred total fees to CMOW of $121,632 for the nine months ended
September 30, 2010. Fees for services provided by CMOW do not include any
charges for Mr. Williams’ time.  Mr. Williams is compensated for his time
under his salary agreement. The direct benefit to Mr. Williams was $51,085 of
the above CMOW fees and expenses for the nine months ended September 30, 2010.
The Company had an outstanding balance due to CMOW of $31,705 as of September
30, 2010.
 
 34
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 17.
              GAIN FROM DISCONTINUED
      OPERATIONS
 
 Prior to
the Company’s corporate restructuring in 2005, the Company had several accounts
payable (the “Phage Payables”) dating back to 2003 and prior. All of these Phage
Payables were incurred in the UK.  These expenses were related to business
operations which were discontinued in February 2005.  In the first quarter
of 2010, the Company updated its internal review of the status of the Phage
Payables and recorded a $120,688 gain resulting from relief of liabilities that
were cleared based on expiration of UK statutes of limitations. The gain is
reflected as a gain from discontinued operations. There was no tax impact as the
prior expenses occurred while the Company operated outside the United States,
and the losses are not included in the Company’s net operating
losses.
 
 18.
              SUBSEQUENT
      EVENTS
 
 Upon the
resignation of Mr. McNeil as Chief Executive Officer of the Company on October
1, 2010, the Company entered into an employment agreement with Martin B. Oring,
its Interim Chief Executive Officer and President.
 
 On
October 1, 2010, the Company entered into an employment agreement and
non-qualified stock option agreement with Mr. Oring as its Interim 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 Interim 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 pursuant to a non-qualified stock option
agreement, with an exercise price of $0.91 per share (based on the closing price
of the Company’s common stock on the date of grant).  Of the 300,000
options, 100,000 options vested on execution of the agreement.  The
remaining 200,000 options will vest over the term of the option in connection
with the occurrence of certain events, as follows: (i) 100,000 options will vest
in connection with an equity financing or series of financings resulting in (or
a binding commitment for such a financing which will result in) gross proceeds
to the Company of at least $5,000,000, and (ii) 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 Interim Chief Executive Officer for at least 30
months.  In addition, all of the remaining 200,000 options will vest in
connection with a significant corporate transaction generally resulting in a
sale or change of control.  The options also have certain accelerated
vesting and forfeiture provisions in the case of certain events involving his
death, disability or termination of his services.  The options each expire
on the fifth anniversary of the date that they vest, but in no event later than
the tenth anniversary of the agreement.
 
 Under a
Separation and Release Agreement with Mr. McNeil, the Company will make
separation payments for a period of three months of $15,833 per month and will
pay for certain health benefits for Mr. McNeil for a period of three
months.
  35


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




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




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




Executive
Overview




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




Clarkdale Slag Project - Current Work
Program




During
the first half of 2010, we made a strategic decision to pursue a “multi-path”
approach to the accomplishment of our technical and gold production objectives
at the Clarkdale Slag Project, in order to determine the most effective
technique for the extraction of precious and base metals from our slag
material.  In early 2010, in order to focus more effectively on alternative
approaches to the process flow sheet, we supplemented our internal technical
team with a new project manager and additional experienced engineers.  The
new engineering team consists of specialists in grinding, leaching, autoclaving,
filtration, resins, solvent extraction and electro-winning.  Of the five
experienced engineering professionals brought in to assist our internal
technical team, three are designated as registered “qualified persons” by the
Mining and Minerals Association of America.




The
technical staff focused our resources and activities in accordance with
operational and research and development objectives.  The operational team
was tasked with optimizing the existing plant to operate and produce
metal.  The research and development team was tasked with exploring new
grinding, leaching extraction, and equipment alternatives that would be suitable
and commercially viable.  As a result of these efforts, four potential flow
sheets were identified for the project: (i) the Original Halide Leach; (ii) the
Modified Halide Leach; (iii) the Three-Stage Acidic Leach; and (iv) the
Autoclave Process.  While data, to date, on the first three options remains
inconclusive, the fourth (autoclave) appears to have the most commercially
viable potential for the reasons summarized below.




36




Autoclave Process – This
leach process is known as POX, or Pressure Oxidation, and is widely used within
the precious metals mining industry, utilizes elevated temperature and pressure
in an autoclave system to dissolve and remove impurities (iron and silica) from
the ore.  In small-scale bench testing 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. To date, over 50
separate bench-scale autoclave tests have been conducted in a six-liter single
batch autoclave under a variety of operating conditions relating to pressure,
temperature, retention time and chemistry.  The most recent of these tests
have been conducted on slag material that was previously ground using high
pressure grinding rolls (HPGR). The tests thus far indicate the
following:




·
            Pressure
      Oxidation, followed by ambient leach (either halide or cyanide), has
      resulted in commercial-grade gold recovery into solution. 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 at a minus-20 mesh size 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 by the HPGR crusher, thereby dissolving the gold without having to
      employ a more expensive process to grind the material to a much finer
      particle size.




·
            Recent
      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. 
      The 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 are underway.  This 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
      Clarkdale.




·
            The
      temperatures and pressures required within the autoclave 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 are significantly higher than the costs
for the other ambient leach techniques tested thus far.  However, bench
testing by our consultants indicate that autoclaving can consistently provide
gold recoveries of approximately 0.5 ounces per ton (opt).  Autoclaving is
also a proven technology that is widely used within the mining industry, and the
effectiveness of the downstream ambient leach system will benefit from results
gleaned from earlier and extensive leach processing conducted at the
Project.




To test
the commercial viability of the autoclave approach, we have outlined a technical
program with clearly defined milestones.  We intend to systematically
advance the project to complete pre-feasibility and feasibility studies and
finally a “bankable” feasibility document.




37




Currently,
additional process optimization batch tests are being conducted as part of the
pre-feasibility study, and a matrix has been designed to isolate and determine
all variables involved.  The primary variables being tested include feed
type (different grinds), retention time, chemistry, heat and pressure. 
These tests continue to be conducted using a six-liter autoclave, processing
approximately 0.5kg of ground slag material per test.  The testing is
designed to isolate relevant parameters by changing only one variable at a time,
in order to obtain optimum results and provide real-time input into the proposed
continuous pilot test.




Once the
batch test results have been completed, analyzed and incorporated into a
pre-feasibility document, continuous pilot bulk tests will be scheduled in a
larger multi-compartment autoclave (30-50 liters) as part of the feasibility
study.  It is anticipated that these bulk tests will begin in the fourth
quarter of 2010.   This type of scale-up in testing is common in the
mining industry, and the majority of recent major autoclave installations have
proven their feasibility utilizing bulk tests conducted with 30-50 liter
autoclaves.  Reputable engineering firms with the equipment and expertise
to perform the bulk tests have been interviewed, and it is expected that one of
the firms will be placed under contract within the next 30 days.




Net
results from the batch 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” 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 (QP) with extensive experience in
autoclave development.  In anticipation of the upcoming 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 transition between technical milestones and approach the preparation of a
bankable feasibility study, plans call for further bolstering our technical
capabilities with the services of one of the few autoclave EPCM
(Engineering/Procurement/Construction/Management) firms that specializes in
commercial autoclave design and construction.  We should benefit by
involving all these parties throughout the final continuous pilot testing stage
and during the preparation of the bankable feasibility study. These firms are
currently being interviewed, and the selection of a specific firm is anticipated
within the next 30 days, thereby allowing such firm to provide input and
oversight of the upcoming bulk autoclave testing activities.




A more
thorough economic analysis of the full-scale production facility, including
specific capital and operating costs, funding schedules and funding sources, is
expected to occur during the feasibility evaluation.  The scope, size,
timing and cost of our full-scale production facility will depend upon a number
of factors, including results of the bankable feasibility study and the
availability of funding.  If we determine that we will use autoclaving, the
capital costs will likely be higher than those of open-vessel leaching, and such
costs will need to be considered when comparing the various extraction
methods.




While 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
activities.  Thus, as of early September 2010, the number of employees
working at the Clarkdale facility was reduced by approximately 50% to levels
appropriate only for essential and necessary tasks, while assuring that
important permits remain in good standing.




We have
budgeted $4,960,000 for our work program on the Clarkdale Slag Project over the
next twelve months, which includes our autoclave testing activities and the
completion of a feasibility study.  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. 
There is no assurance that such funding will be available at all, or on terms
that are reasonably acceptable to us.  If the results of our feasibility
studies do not support a basis for us to proceed with the construction of our
proposed, full-scale production facility or we cannot obtain funding at all, or
on terms that are reasonably acceptable to us, we will have to scale back or
abandon our proposed operations at the Clarkdale Slag Project.  If
management determines, based on any factors, including the foregoing, that
capitalized costs associated with any of our mineral interests are not likely to
be recovered, we would incur a significant impairment of our investment in such
property interests in our financial statements.




38




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




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




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




Our
primary goal consistently has been to demonstrate the economic viability of the
Clarkdale Project, including the generation of a bankable feasibility study for
the Clarkdale Project.  This work has required developing a technically
viable flow sheet for extracting gold, silver, copper and zinc from the slag
material at the Clarkdale Project site.  We began work on the Clarkdale
Project, under a joint venture arrangement with the then-existing owners of the
Clarkdale Project site, with qualified independent engineers, by drilling and
sampling the slag pile, under chain-of-custody standards, in order to understand
potential grades and tonnages.  After obtaining results from these efforts,
we proceeded to work on the metallurgy capable of unlocking the value of the
metals contained in the slag material.  To achieve this objective, we
operated a small pilot plant in Phoenix, Arizona, and completed an internal
pre-feasibility study.  The results of this work demonstrated that, with
proper grinding, a simple halide leach could extract the precious and base
metals in sufficient quantities which could potentially be economically
viable.  The next step involved the construction of a larger pilot plant
(test module) at the Clarkdale Project site, which was designed to test the
commercial viability of the process and to complete a feasibility study. 
The flow sheet created for the test module did not contain any proprietary or
“black box” technology, but management was also not aware of any commercial
mining operation that used this specific equipment and chemistry.  We
proceeded to build one commercial module rather than complete a theoretical
feasibility study.  Concurrently, we completed the acquisition of the
Clarkdale Project site from the previous owners.




Thereafter,
we designed and built an operational plant in order to process 100-250 tons of
slag per day based upon the pilot program in Phoenix.  The plant was
staffed and commissioned in the first quarter of 2009.  However, although
the crushing and grinding circuit was able to produce assays from small samples
of milled product that demonstrated the presence of 0.4 ounces per ton of gold
in the slag material, the benign leach chemistry used in the operational plant
was unable to duplicate the results of the liberation of gold from the slag
material achieved in the pilot plant.




Most of
2009 was devoted to attempts to commission and optimize the production module,
during which time we encountered numerous challenges involving its crushing and
grinding circuit.  In early 2010, we brought in experienced outside
engineering resources to better define and execute on a multi-pronged approach
to achieve commercial feasibility of the Clarkdale Project.  This
refocusing effort has resulted in significant progress, both operationally and
from a research and development perspective, and the technical team is in the
final stages of analyzing multiple processes in order to determine the most
efficient and productive path towards the completion of a bankable feasibility
study.




39




The key
to the potential success of the flow sheet involves the mechanical liberation of
the metals by proper grinding.  This process proved to be a significant
challenge for the larger grinding equipment installed on site.  After an
entire year of innovative attempts and modifications, the grinding circuit
failed to liberate the precious metals sufficiently to allow the simple and
benign halide leach circuit to operate effectively.  We concluded that
investigation of alternative grinding and leaching methods was necessary in
order to solve the problem.  We have conducted preliminary studies of these
alternative approaches to the process flow sheet, which have shown promising
results and are the current focus of our efforts.




Initially
during the start-up of the production module, emphasis was 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 have arisen with the equipment wear issues and our
not being able to grind the slag material in the production module continuously,
we adjusted the chemical characteristics of the leach to a more acidic leach in
an effort to put less emphasis on the mechanical liberation and put more
emphasis on the chemical liberation in an effort to maximize gold extraction
from the slag material.  Our goal was to achieve similar results in gold
extraction from the slag material to those obtained in the smaller scale pilot
plant, without significantly changing the grinding circuit or seeking
alternatives to the design of the larger scale production module that might have
a significantly greater capital cost than we had originally planned.  In
doing this testing, we 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 precipitation of gold from
the pregnant leach solution more difficult.




Despite
these difficulties, during the second quarter of 2010, we processed 100 tons of
slag material through the grinding, leaching and filtering circuits of the
production module and produced pregnant leach solution that contained gold,
silver, copper and zinc.




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




40


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




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




We have
budgeted $50,000 over the next twelve months for the Searchlight Gold Project to
file and pay the necessary fees to maintain our claims.




Anticipated
Cash Requirements




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold Project.  Over the
next twelve months, our management anticipates that the minimum cash
requirements for funding our proposed exploration, testing and construction
program and our continued operations will be approximately $7,410,000.  As
of November 8, 2010, we had cash reserves in the amount of approximately
$5,850,000.  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.




41





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




BUDGETAdministrative
      Expenses
                        
                        $
                        1,080,000Legal
      and Accounting Expenses
                        
                        
                        1,320,000SUBTOTAL
                        
                        $
                        2,400,000Clarkdale
      Slag ProjectSite
      Operations
                        
                        $
                        1,800,000Metallurgical
      Testing and Technical Consulting Services
                        
                        
                        1,800,000Pre-Feasibility
      Study
                        
                        
                        250,000Feasibility
      Study
                        
                        
                        750,000Purchase
      Payments – VRIC
                        
                        
                        360,000SUBTOTAL
                        
                        $
                        4,960,000Searchlight
      Gold ProjectClaim
      Maintenance
                        
                        $
                        50,000SUBTOTAL
                        
                        $
                        50,000TOTAL
                        
                        $
                        7,410,000




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.




42




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




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




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




Exploration
costs – Mineral exploration costs are expensed as incurred.




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




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




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




43


Results
of Operations




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




Three Months Ended September
      30,
                    
                    
                    Nine Months Ended September
    30,2010
                    
                    
                    2009
                    
                    
                    Percent
                      Increase/
                      (Decrease)
                    
                    
                    2010
                    
                    
                    2009
                    
                    
                    Percent
                      Increase/
                      (Decrease)Revenue
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    n/a
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    n/aOperating
      expenses
                    
                    
                    (2,195,920
                    )
                    
                    
                    (1,822,933
                    )
                    
                    
                    20.5
                    %
                    
                    
                    (6,166,405
                    )
                    
                    
                    (5,125,135
                    )
                    
                    
                    20.3
                    %Other
      income
                    
                    
                    14,945
                    
                    
                    
                    10,927
                    
                    
                    
                    36.8
                    %
                    
                    
                    35,550
                    
                    
                    
                    28,622
                    
                    
                    
                    24.2
                    %Income
      tax benefit
                    
                    
                    797,659
                    
                    
                    
                    675,517
                    
                    
                    
                    18.1
                    %
                    
                    
                    2,329,933
                    
                    
                    
                    1,901,639
                    
                    
                    
                    22.5
                    %Gain
      from discontinued operations
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    n/a
                    
                    
                    
                    120,688
                    
                    
                    
                    -
                    
                    
                    
                    n/aNet
      loss
                    
                    $
                    (1,383,316
                    )
                    
                    $
                    (1,136,489
                    )
                    
                    
                    21.7
                    %
                    
                    $
                    (3,680,234
                    )
                    
                    $
                    (3,194,874
                    )
                    
                    
                    15.2
                    %




Revenue




We are
currently in the exploration stage of our business, and have not earned any
revenues from our planned mineral operations to date.  We did not generate
any revenues from inception in 2000 through the nine month period ended
September 30, 2010.  We do not anticipate earning revenues from our planned
mineral operations until such time as we enter into commercial production of the
Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties
we may acquire from time to time, and of which there are no
assurances.




Operating
Expenses




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




Three Months Ended September
      30,
              
              
              Nine Months Ended September
    30,2010
              
              
              2009
              
              
              Percent
                Increase/
                (Decrease)
              
              
              2010
              
              
              2009
              
              
              Percent
                Increase/
                (Decrease)Mineral
      exploration and evaluation expenses
              
              $
              1,009,116
              
              
              $
              626,450
              
              
              
              61.1
              %
              
              $
              2,476,213
              
              
              $
              1,471,047
              
              
              
              68.3
              %Mineral
      exploration and evaluation expenses – related party
              
              
              78,865
              
              
              
              60,000
              
              
              
              31.4
              %
              
              
              286,122
              
              
              
              240,000
              
              
              
              19.2
              %Administrative
      – Clarkdale site
              
              
              196,988
              
              
              
              168,212
              
              
              
              17.1
              %
              
              
              595,714
              
              
              
              527,442
              
              
              
              12.9
              %General
      and administrative
              
              
              651,844
              
              
              
              759,839
              
              
              
              (14.2
              )
      %
              
              
              2,011,139
              
              
              
              2,219,779
              
              
              
              (9.4
              )
      %General
      and administrative – related party
              
              
              31,705
              
              
              
              22,407
              
              
              
              41.5
              %
              
              
              121,632
              
              
              
              112,226
              
              
              
              8.4
              %Depreciation
              
              
              227,402
              
              
              
              186,025
              
              
              
              22.2
              %
              
              
              675,585
              
              
              
              554,641
              
              
              
              21.8
              %Total
      operating expenses
              
              $
              2,195,920
              
              
              $
              1,822,933
              
              
              
              20.5
              %
              
              $
              6,166,405
              
              
              $
              5,125,135
              
              
              
              20.3
              %


44




Nine month
periods ended September 30, 2010 and 2009. Operating expenses increased
by 20.3% to $6,166,405 during the nine month period ended September 30, 2010
from $5,125,135 during the nine month period ended September 30, 2009. 
Operating expense increased primarily as a result of increases in mineral
exploration and evaluation expenses and administrative expenses at our Clarkdale
project site.




Mineral
exploration and evaluation expenses increased to $2,476,213 during the nine
month period ended September 30, 2010 from $1,471,047 during the nine month
period ended September 30, 2009.  Mineral exploration and evaluation
expenses increased primarily as a result of greater use of independent
consultants and engineers related to activity on the Clarkdale
project.




Included
in mineral exploration and evaluation expenses were the amounts of $252,500 in
fees and $33,622 in expense reimbursements and $240,000 in fees and $68,240 in
expense reimbursements for the nine month periods ended September 30, 2010 and
2009, 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) for technical assistance, including providing us with the use of
its laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentations to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.




Administrative
– Clarkdale site expenses increased to $595,714 during the nine month period
ended September 30, 2010 from $527,442 for the nine month period ended September
30, 2009. Administrative costs at the Clarkdale site increased due to the
increase in activity at the Clarkdale project site.




General
and administrative expenses decreased by 9.4% to $2,011,139 during the nine
month period ended September 30, 2010 from $2,219,779 during the nine month
period ended September 30, 2009.  General and administrative expenses
decreased primarily as a result of decreased professional administrative expense
from the prior comparable period due to the preparation of our registration
statement on Form S-1 and preparation of amended periodic reports for the
periods from March 31, 2005 through December 31, 2008. This decrease was
partially offset by increased director compensation due to expansion of our
board of directors.  We anticipate that operating expenses will increase as
we grow our business operations.




Included
in general and administrative expenses for the nine month periods ended
September 30, 2010 and 2009 were directors’ compensation expenses related to the
vesting of director options and option grants to directors of $219,394 and
$139,563, respectively. On October 15, 2009, the Board of Directors adopted the
2009 Stock Incentive Award Plan for Employees and Service Providers (the “2009
Incentive Plan”).  Under the terms of the 2009 Incentive Plan, options to
purchase up to 3,250,000 shares of our common stock may be granted to eligible
Participants. On December 15, 2009, our stockholders approved the 2009 Incentive
Plan. As of September 30, 2010, no options have been granted under the 2009
Incentive Plan. On October 15, 2009, we adopted the 2009 Stock Incentive Plan
for Directors (the “2009 Directors Plan”).  Under the terms of the 2009
Directors Plan, options to purchase up to 750,000 shares of our common stock may
be granted to directors under such plan.  On December 15, 2009, our
stockholders approved the 2009 Directors Plan. As of September 30, 2010, 573,669
options have been granted under the 2009 Directors Plan with an exercise price
ranging from $0.70 to $1.60 per share.




45


In
addition, we incurred $121,632 and $112,226 during the nine month periods ended
September 30, 2010 and 2009, respectively, for general and administrative
expenses for accounting support services to Cupit, Milligan, Ogden &
Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial
Officer.    These accounting support services included
bookkeeping input for the Clarkdale facility, assistance in preparing working
papers for quarterly and annual reporting, and preparation of federal and state
tax filings.  These expenses do not include any fees for Mr. Williams’ time
in directly supervising the support staff.  Mr. Williams’ compensation has
been provided in the form of salary.  The direct benefit to Mr. Williams
was $51,085 and $35,912 of the above Cupit, Milligan, Ogden & Williams fees
for the nine month periods ended September 30, 2010 and 2009,
respectively.




Depreciation
expense increased to $675,585 during the nine month period ended September 30,
2010 from $554,641 during the nine month period ended September 30, 2009. 
Depreciation expense increased as a result of bringing additional construction
in progress items into service and acquiring additional equipment.




For the
nine month period ended September 30, 2010, we purchased services from two major
vendors, Baker Hostetler LLP, our legal counsel and Arrakis, Inc. which exceeded
more than 10% of total purchases and amounted to approximately $600,000 and
$379,632, respectively.  For the nine month period ended September 30,
2009, we purchased services from one major vendor, Baker Hostetler LLP, our
legal counsel, which exceeded more than 10% of total purchases and amounted to
approximately $958,962.




Three month
periods ended September 30, 2010 and 2009. Operating expenses increased
by 20.5% to $2,195,920 during the three month period ended September 30, 2010
from $1,822,933 during the three month period ended September 30, 2009. 
Operating expense increased primarily as a result of increases in mineral
exploration and evaluation expenses and administrative expenses at our Clarkdale
project site.




Mineral
exploration and evaluation expenses increased to $1,009,116 during the three
month period ended September 30, 2010 from $626,450 during the three month
period ended September 30, 2009.  Mineral exploration and evaluation
expenses increased primarily as a result of increases in the testing phase on
the Clarkdale project.




Included
in mineral exploration and evaluation expenses were the amounts of $74,000 in
fees and $4,865 in expense reimbursements and $60,000 in fees and $15,824 in
expense reimbursements for the three month periods ended September 30, 2010 and
2009, 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) for technical assistance, including providing us with the use of
its laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentations to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.




Administrative
– Clarkdale site expenses increased to $196,988 during the three month period
ended September 30, 2010 from $168,212 for the three month period ended
September 30, 2009. Administrative costs at the Clarkdale site increased due to
the increase in activity at the Clarkdale site related to activity on the
project.




General
and administrative expenses decreased by 14.2% to $651,844 during the three
month period ended September 30, 2010 from $759,839 during the three month
period ended September 30, 2009.  General and administrative expenses
decreased primarily as a result of decreased professional administrative expense
from the prior comparable period due to the preparation of our registration
statement on Form S-1 and preparation of amended periodic reports for the
periods from March 31, 2005 through December 31, 2008. This decrease was
partially offset by increased director compensation due to expansion of our
board of directors.  We anticipate that operating expenses will increase as
we grow our business operations.




46




In
addition, we incurred $31,705 and $22,407 during the three month periods ended
September 30, 2010 and 2009, respectively, for general and administrative
expenses for accounting support services to Cupit, Milligan, Ogden &
Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial
Officer.    These accounting support services included
bookkeeping input for the Clarkdale facility, assistance in preparing working
papers for quarterly and annual reporting, and preparation of federal and state
tax filings.  These expenses do not include any fees for Mr. Williams’ time
in directly supervising the support staff.  Mr. Williams’ compensation has
been provided in the form of salary.  The direct benefit to Mr. Williams
was $13,316 and $7,170 of the above Cupit, Milligan, Ogden & Williams fees
for the three month periods ended September 30, 2010 and 2009,
respectively.




Depreciation
expense increased to $227,402 during the three month period ended September 30,
2010 from $186,025 during the three month period ended September 30, 2009. 
Depreciation expense increased as a result of bringing additional construction
in progress items into service and acquiring additional equipment.




Other
Income and Expenses




Nine month
periods ended September 30, 2010 and 2009.Total other income
increased to $35,550 during the nine month period ended September 30, 2010 from
$28,622 during the nine month period ended September 30, 2009.  The
increase was primarily due to higher levels of cash placed in interest bearing
accounts resulting in increased interest income.




During
the nine month period ended September 30, 2010, we received incidental rental
revenue of $19,440 compared to $20,400 for the same period in 2009 from rentals
of our commercial buildings and certain facilities acquired in connection with
our acquisition of Transylvania. The property leases consist of: (i) a rental
agreement with Clarkdale Arizona Central Railroad for the use of certain
facilities at a rate of $1,700 per month; and (ii) rental of commercial building
space to various tenants.  Rental arrangements are minor in amount and are
typically on a month to month basis.




Three month
periods ended September 30, 2010 and 2009.Total other income
increased to $14,945 during the three month period ended September 30, 2010 from
$10,927 during the three month period ended September 30, 2009.  The
increase in total other income primarily resulted from our placing additional
cash reserves in an interest bearing money market account.




During
the three month period ended September 30, 2010, we received incidental rental
revenue of $6,480 compared to $6,295 for the same period in 2009 from rentals of
our commercial buildings and certain facilities acquired in connection with our
acquisition of Transylvania.




Income
Tax Benefit




Nine month
periods ended September 30, 2010 and 2009.Income tax benefit
increased to $2,329,933 for the nine month period ended September 30, 2010 from
$1,901,639 during the nine month period ended September 30, 2009.  The
increase in income tax benefit primarily resulted from the increase in
exploration stage losses during the nine month period ended September 30, 2010
from the nine month period ended September 30, 2009.




Three month
periods ended September 30, 2010 and 2009.Income tax benefit
increased to $797,659 for the three month period ended September 30, 2010 from
$675,517 during the three month period ended September 30, 2009.  The
increase in income tax benefit primarily resulted from the increase in
exploration stage losses during the three month period ended September 30, 2010
from the three month period ended September 30, 2009.




47


Gain
from Discontinued Operations




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




Net
Loss




Nine month
periods ended September 30, 2010 and 2009.The aforementioned
factors resulted in a net loss of $3,680,234, or $0.03 per common share, for the
nine month period ended September 30, 2010, as compared to a net loss of
$3,194,874, or $0.03 per common share, for the nine month period ended September
30, 2009.




Three month
periods ended September 30, 2010 and 2009.The aforementioned
factors resulted in a net loss of $1,383,316, or $0.01 per common share, for the
three month period ended September 30, 2010, as compared to a net loss of
$1,136,489, or $0.01 per common share, for the three month period ended
September 30, 2009.




As of
September 30, 2010 and December 31, 2009, we had cumulative net operating loss
carryforwards of approximately $24,657,395 and $18,866,291, respectively for
federal income taxes.  The federal net operating loss carryforwards expire
between 2025 and 2030.




We had
cumulative state net operating losses of approximately $14,523,444 and
$10,148,277 as of September 30, 2010 and December 31, 2009, respectively for
state income tax purposes.  The state net operating loss carryforwards
expire between 2013 and 2015.




Liquidity
and Capital Resources




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




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




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




48




The 2009
private placement agreements included contractual penalty provisions for failure
to comply with these registration rights provisions. However, we are in
compliance with these registration rights provisions. We are not a party to any
other agreements which require us to pay liquidated damages in the future for
failure to register securities for sale.




Working
Capital




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




At September 30,
                  2010
                
                
                At December 31,
                  2009
                
                
                Percent
                  Increase/(Decrease)Current
      Assets
                
                $
                6,673,811
                
                
                $
                13,221,823
                
                
                
                (49.5
                )%Current
      Liabilities
                
                
                (406,752
                )
                
                
                (874,470
                )
                
                
                (53.5
                )%Working
      Capital
                
                $
                6,267,059
                
                
                $
                12,347,353
                
                
                
                (49.2
                )%




As of
September 30, 2010, we had an accumulated deficit of $21,172,140. As of
September 30, 2010, we had working capital of $6,267,059, compared to working
capital of $12,347,353 as of December 31, 2009.  The decrease in our
working capital was primarily attributable to our net loss, capital expenditures
and principal payments on our long term liabilities. Working capital was
increased during the fourth quarter of 2009 by the receipt of gross proceeds of
$15,098,245 from our November 2009 private placement. Cash was $6,552,359 as of
September 30, 2010, as compared to $13,099,562 as of December 31, 2009. 
Net property and equipment increased to $14,095,809 as of September 30, 2010
from $13,994,934 as of December 31, 2009.  The increase primarily resulted
from equipment acquisitions and additions to the leaching and filtration circuit
at the Clarkdale Slag Project partially offset by depreciation
expense.




Included
in long term liabilities in the accompanying consolidated financials statements
is a balance of $45,533,937 for deferred tax liability relating to the Clarkdale
Slag Project and Searchlight Gold Project.  A deferred income tax liability
was recorded on the excess of fair market value for the asset acquired over
income tax basis at a combined statutory federal and state rate of 38% with the
corresponding increase in the purchase price allocation of the assets
acquired.




Cash
Flows




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




Nine Months Ended September
    30,2010
                
                
                2009
                
                
                Percent
                  Increase/(Decrease)Cash
      Flows Used in OperatingActivities
                
                $
                (5,595,407
                )
                
                $
                (4,544,023
                )
                
                
                23.1
                %Cash
      Flows Used in InvestingActivities
                
                
                (776,460
                )
                
                
                (1,446,443
                )
                
                
                (46.3
                )%Cash
      Flows (Used) Provided by  Financing Activities
                
                
                (175,336
                )
                
                
                12,481
                
                
                
                (1504.8
                )%Net
      Change in Cash During Period
                
                $
                (6,547,203
                )
                
                $
                (5,977,985
                )
                
                
                9.5
                %




49




Net Cash Used in
Operating Activities.Net cash used in operating activities
increased to $5,595,407 during the nine month period ended September 30, 2010
from $4,544,023 during the nine month period ended September 30, 2009.  The
increase in cash used in operating activities was primarily due to operating
losses resulting from increased activity on our Clarkdale project.




Net Cash Used in
Investing Activities.We used $776,460 in investing activities
during the nine month period ended September 30, 2010, as compared to $1,446,443
during the nine month period ended September 30, 2009.  The decrease was
primarily a result of decrease in purchases of property and equipment relating
to the Clarkdale Slag Project after receiving the Certificate of Occupancy for
the demonstration module building and our substantial completion of equipment
acquisitions for the demonstration module.




Net Cash (Used)
Provided by Financing Activities.Net cash used by financing
activities was $175,336 for the nine month period ended September 30, 2010
compared to net cash provided by financing activities of $12,481 for the nine
month period ended September 30, 2009.  Net cash used by financing
activities during the nine month period ended September 30, 2010 primarily
resulted from principal payments on the capital lease and the VRIC
payable.  Net cash provided by financing activities during the nine month
period ended September 30, 2009 primarily resulted from the receipt of $175,000
from the exercise of stock options offset by principal payments on the capital
lease and the VRIC payable.




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




·
            our
      ability to locate a profitable mineral
property;




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




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




·
            our
      ability to generate revenues.




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




Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold Project.  Over the
next twelve months, our management anticipates that the minimum cash
requirements for funding our proposed exploration, testing and construction
program and our continued operations will be approximately $7,410,000.  As
of November 8, 2010, we had cash reserves in the amount of approximately
$5,850,000.  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.




50




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.




Recent
Accounting Pronouncements




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




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




51




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




Item
3.  Quantitative and Qualitative Disclosures About Market Risk




We had
unrestricted cash totaling $6,552,359 at September 30, 2010 and $13,099,562 at
December 31, 2009.  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 investment income.




Item
4.  Controls and Procedures




Controls
and Procedures




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




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




Changes
in Internal Control Over Financial Reporting




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




PART
II - OTHER INFORMATION




Item
1.  Legal Proceedings




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




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




52




Item
1A.  Risk Factors




In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in the section entitled “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2009, which to our
knowledge have not materially changed.  Those risks, which could materially
affect our business, financial condition or future results, are not the only
risks we face. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.




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




On
September 30, 2010, we issued 9,231 shares of our common stock to a
non-management director, pursuant to the director compensation policy for this
non-management director. The 9,231 shares were issued based on a price of $0.975
per share, the closing price of our common stock on September 30, 2010, the last
trading day of the third quarter of 2010.  These securities were issued
pursuant to Section 4(2) of the Securities Act.




On
September 30, 2010, we issued options to purchase up to 73,848 shares of our
common stock to four non-management directors, pursuant to the director
compensation policy for these four non-management directors.  The 73,848
options were issued at an exercise price of $0.975 per share, the closing price
of our common stock on September 30, 2010, the last trading day of the third
quarter of 2010.  These securities were issued pursuant to Section 4(2) of
the Securities Act.




Item
3.  Defaults Upon Senior Securities




None.




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




No
matters were submitted to our stockholders, through the solicitation of proxies
or otherwise, during the quarter ended September 30, 2010.




Item
5.  Other Information




Rule
10b5-1 Plans




The board
of directors has authorized directors and other executive officers who are
subject to our stock-trading pre-clearance and quarterly blackout requirements,
at their election, to enter into plans, at a time they are not in possession of
material non-public information, to purchase or sell shares of our common stock
that satisfy the requirements of Exchange Act Rule 10b5-1.  Rule 10b5-1
permits trading on a pre-arranged, “automatic-pilot” basis subject to certain
conditions, including that the person for whom the plan is created (or anyone
else aware of material non-public information acting on such person’s behalf)
not exercise any subsequent influence regarding the amount, price and dates of
transactions under the plan.  Using these plans, officers and directors can
gradually diversify their investment portfolios and spread stock trades over a
period of time regardless of any material, non-public information they may
receive after adopting their plans.  As a result, trades under 10b5-1
plans by our directors, and other executive officer may not be indicative of
their respective opinions of our performance at the time of the trade or of our
potential future performance.  The board believes that it is
appropriate to permit directors and senior executives, whose ability to purchase
or sell our common stock is otherwise substantially restricted by quarterly and
special stock-trading blackouts and by their possession from time to time of
material nonpublic information, to engage in pre-arranged trading in accordance
with Rule 10b5-1.  Trades by our directors and executive officers
pursuant to 10b5-1 trading plans will be disclosed publicly through Form 144 and
Form 4 filings with the SEC, as required by applicable law.




53




On
September 29, 2010, each of Carl S. Ager and Robert D. McDougal, who are our
directors, and Ian R. McNeil, who is a former director and Chief Executive
Officer, entered into Rule 10b5-1 trading plans.  The trading plans
are agreements between each of Mr. Ager, Mr. McDougal and Mr. McNeil and their
respective brokers to sell the following number of shares of our common stock:
(i) Carl S. Ager (251,969 shares); (ii) Robert D. McDougal (500,000 shares); and
(iii) Ian R. McNeil (500,000 shares).  Each of these persons informed
us that he will be selling shares of our common stock under his plan and he
intends to use the proceeds from sales of his shares to pay the exercise price
of $0.44 per share and the taxes on all of his stock options which are set to
expire on November 21, 2010, and further that he intends only to sell that
number of shares which will be sufficient to generate the amount of proceeds
necessary to pay the exercise price and the taxes on the stock options, and to
stop selling under the plan after he has received such amount of proceeds from
the sales.  Shares will be sold under the plans on the open market at
prevailing market prices and subject to minimum price thresholds specified in
the plans.  The trading plan for Mr. McNeil terminates on November 19,
2010.  Mr. McDougal terminated his trading plan on November 2, 2010
and Mr. Ager completed his trading plan on November 4, 2010.  The Rule
10b5-1 plans were set up in accordance with Rule 10b5-1 under the Exchange Act
and our policies regarding stock transactions.  As of November 4,
2010, these persons had sold the following number of shares pursuant to their
respective trading plans: (i) Carl S. Ager (251,969 shares); (ii) Robert D.
McDougal (198,366 shares); and (iii) Ian R. McNeil (347,665
shares).




On
November 25, 2009, and as modified on August 20, 2010, one of our former
directors, Harry B. Crockett, entered into a Rule 10b5-1 trading plan to sell up
to 1,000,0000 of his shares of our common stock.  Mr. Crockett passed
away on September 29, 2010.  As of November 1, 2010, 640,561 of these
shares were sold pursuant to the trading plan.  Mr. Crockett had
informed us that this plan was part of his individual long-term strategy for
asset diversification, tax and estate planning.  The Rule 10b5-1 plan
was set up in accordance with Rule 10b5-1 under the Exchange Act and our
policies regarding stock transactions.




54


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
            
            Item10.1
            
            Amendment
      to Employment Agreement With Martin B. Oring31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
            
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
            
            Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002




55





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




SEARCHLIGHT
      MINERALS CORP.
              a Nevada corporationDate:
      November 9, 2010
            By:
            /s/MARTIN B.
      ORINGMartin
      B. OringPresident
      and Chief Executive Officer(Principal
      Executive Officer)Date:
      November 9, 2010
            By:
            /s/MELVIN
      L. WILLIAMSMelvin
      L. WilliamsChief
      Financial Officer(Principal
      Accounting Officer)




56