UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  Form
10-Q
  Quarterly
      report pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the
quarterly period ended March 31, 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.
  YesxNoo
  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  oNo   o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large
accelerated filer     o                                                                Accelerated
filer x
  Non-accelerated
filer       o                                                                Smaller
reporting company o
 (Do not
check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  Yes  o No   x
  As of May
6, 2010, the registrant had 118,783,373 outstanding shares of common
stock.
 
 
 
  TABLE OF
CONTENTS
  
 PART I – FINANCIAL
    INFORMATION
              3Item 1. Financial
Statements
              3Item 2. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
              33Item 3. Quantitative and Qualitative Disclosures
      About Market Risk
              46Item 4. Controls and
    Procedures
              47PART II - OTHER INFORMATION
              47Item 1. Legal Proceedings
              47Item 1A. Risk Factors
              47Item 2. Unregistered Sales of Equity Securities
      and Use of Proceeds
              48Item 3. Defaults Upon Senior
      Securities
              48Item 4. Submission of Matters to a Vote of
      Security Holders
              48Item 5. Other Information
              48Item 6. Exhibits
              49SIGNATURES
              50
  
  PART
I – FINANCIAL INFORMATION
  Item
1. Financial Statements
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)
 
 March 31, 2010
                                  
                                  
                                  December 31,
      2009ASSETSCurrent
      assetsCash
                                  
                                  $
                                  10,893,483
                                  
                                  
                                  $
                                  13,099,562Prepaid
      expenses
                                  
                                  
                                  204,900
                                  
                                  
                                  
                                  122,261Total
      current assets
                                  
                                  
                                  11,098,383
                                  
                                  
                                  
                                  13,221,823Property
      and equipment, net
                                  
                                  
                                  14,080,455
                                  
                                  
                                  
                                  13,994,934Mineral
      properties
                                  
                                  
                                  16,947,419
                                  
                                  
                                  
                                  16,947,419Slag
      project
                                  
                                  
                                  120,766,877
                                  
                                  
                                  
                                  120,766,877Land
      - smelter site and slag pile
                                  
                                  
                                  5,916,150
                                  
                                  
                                  
                                  5,916,150Land
                                  
                                  
                                  3,300,000
                                  
                                  
                                  
                                  3,300,000Reclamation
      bond and deposits, net
                                  
                                  
                                  13,542
                                  
                                  
                                  
                                  10,902Total
      non-current assets
                                  
                                  
                                  161,024,443
                                  
                                  
                                  
                                  160,936,282Total
      assets
                                  
                                  $
                                  172,122,826
                                  
                                  
                                  $
                                  174,158,105LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                                  
                                  $
                                  248,987
                                  
                                  
                                  $
                                  443,742Accounts
      payable - related party
                                  
                                  
                                  76,940
                                  
                                  
                                  
                                  194,690VRIC
      payable, current portion - related party
                                  
                                  
                                  215,167
                                  
                                  
                                  
                                  210,921Capital
      lease payable, current portion
                                  
                                  
                                  25,397
                                  
                                  
                                  
                                  25,117Total
      current liabilities
                                  
                                  
                                  566,491
                                  
                                  
                                  
                                  874,470Long-term
      liabilitiesVRIC
      payable, net of current portion - related party
                                  
                                  
                                  1,692,443
                                  
                                  
                                  
                                  1,747,853Capital
      lease payable, net of current portion
                                  
                                  
                                  8,720
                                  
                                  
                                  
                                  15,175Deferred
      tax liability
                                  
                                  
                                  47,178,994
                                  
                                  
                                  
                                  47,863,870Total
      long-term liabilities
                                  
                                  
                                  48,880,157
                                  
                                  
                                  
                                  49,626,898Total
      liabilities
                                  
                                  
                                  49,446,648
                                  
                                  
                                  
                                  50,501,368Commitments
      and contingencies - Note 13
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Stockholders'
      equityCommon
      stock, $0.001 par value; 400,000,000 shares authorized, 118,783,373 and
      118,768,373 shares, respectively, issued and outstanding
                                  
                                  
                                  118,783
                                  
                                  
                                  
                                  118,768Additional
      paid-in capital
                                  
                                  
                                  141,075,978
                                  
                                  
                                  
                                  141,029,875Accumulated
      deficit during exploration stage
                                  
                                  
                                  (18,518,583
                                  )
                                  
                                  
                                  (17,491,906
                                  )Total
      stockholders' equity
                                  
                                  
                                  122,676,178
                                  
                                  
                                  
                                  123,656,737Total
      liabilities and stockholders' equity
                                  
                                  $
                                  172,122,826
                                  
                                  
                                  $
                                  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
                                                          
                                                          
                                                          throughMarch
      31, 2010
                                                          
                                                          
                                                          March
      31, 2009
                                                          
                                                          
                                                          March
      31, 2010Revenue
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -Operating
      expensesMineral
      exploration and evaluation expenses
                                                          
                                                          
                                                          716,876
                                                          
                                                          
                                                          
                                                          312,334
                                                          
                                                          
                                                          
                                                          7,782,374Mineral
      exploration and evaluation expenses - related party
                                                          
                                                          
                                                          117,857
                                                          
                                                          
                                                          
                                                          90,000
                                                          
                                                          
                                                          
                                                          1,809,002Administrative
      - Clarkdale site
                                                          
                                                          
                                                          99,515
                                                          
                                                          
                                                          
                                                          232,688
                                                          
                                                          
                                                          
                                                          2,539,810General
      and administrative
                                                          
                                                          
                                                          645,114
                                                          
                                                          
                                                          
                                                          733,043
                                                          
                                                          
                                                          
                                                          9,593,037General
      and administrative - related party
                                                          
                                                          
                                                          37,119
                                                          
                                                          
                                                          
                                                          22,202
                                                          
                                                          
                                                          
                                                          291,884Depreciation
                                                          
                                                          
                                                          221,500
                                                          
                                                          
                                                          
                                                          181,959
                                                          
                                                          
                                                          
                                                          1,073,608Total
      operating expenses
                                                          
                                                          
                                                          1,837,981
                                                          
                                                          
                                                          
                                                          1,572,226
                                                          
                                                          
                                                          
                                                          23,089,715Loss
      from operations
                                                          
                                                          
                                                          (1,837,981
                                                          )
                                                          
                                                          
                                                          (1,572,226
                                                          )
                                                          
                                                          
                                                          (23,089,715
                                                          )Other
      income (expense)Rental
      revenue
                                                          
                                                          
                                                          6,480
                                                          
                                                          
                                                          
                                                          7,540
                                                          
                                                          
                                                          
                                                          105,490Loss
      on equipment disposition
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (1,542
                                                          )
                                                          
                                                          
                                                          (35,067
                                                          )Interest
      expense
                                                          
                                                          
                                                          (1,048
                                                          )
                                                          
                                                          
                                                          (694
                                                          )
                                                          
                                                          
                                                          (11,068
                                                          )Interest
      and dividend income
                                                          
                                                          
                                                          308
                                                          
                                                          
                                                          
                                                          5,774
                                                          
                                                          
                                                          
                                                          607,498Total
      other income (expense)
                                                          
                                                          
                                                          5,740
                                                          
                                                          
                                                          
                                                          11,078
                                                          
                                                          
                                                          
                                                          666,853Loss
      before income taxes and discontinued operations
                                                          
                                                          
                                                          (1,832,241
                                                          )
                                                          
                                                          
                                                          (1,561,148
                                                          )
                                                          
                                                          
                                                          (22,422,862
                                                          )Income
      tax benefit
                                                          
                                                          
                                                          684,876
                                                          
                                                          
                                                          
                                                          581,093
                                                          
                                                          
                                                          
                                                          7,656,302Loss
      from continuing operations
                                                          
                                                          
                                                          (1,147,365
                                                          )
                                                          
                                                          
                                                          (980,055
                                                          )
                                                          
                                                          
                                                          (14,766,560
                                                          )Discontinued
      operations:Gain
      (loss) from discontinued operations
                                                          
                                                          
                                                          120,688
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (3,752,023
                                                          )Net
      loss
                                                          
                                                          $
                                                          (1,026,677
                                                          )
                                                          
                                                          $
                                                          (980,055
                                                          )
                                                          
                                                          $
                                                          (18,518,583
                                                          )Loss
      per common share - basic and dilutedLoss
      from continuing operations
                                                          
                                                          $
                                                          (0.01
                                                          )
                                                          
                                                          $
                                                          (0.01
                                                          )Gain
      (loss) from discontinued operations
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Net
      loss
                                                          
                                                          $
                                                          (0.01
                                                          )
                                                          
                                                          $
                                                          (0.01
                                                          )Weighted
      average common shares outstanding -basic
      and diluted
                                                          
                                                          
                                                          118,768,373
                                                          
                                                          
                                                          
                                                          106,268,024
 
 See
Accompanying Notes to these Consolidated Financial Statements
  4
 
 SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 (UNAUDITED)
 
 AccumulatedDeficit
      During
                    
                    
                    TotalCommon
      Stock
                    
                    
                    Additional
                    
                    
                    Exploration
                    
                    
                    Stockholders'Shares
                    
                    
                    Amount
                    
                    
                    Paid-in
      Capital
                    
                    
                    Stage
                    
                    
                    EquityBalance,
      December 31, 2009
                    
                    
                    118,768,373
                    
                    
                    $
                    118,768
                    
                    
                    $
                    141,029,875
                    
                    
                    $
                    (17,491,906
                    )
                    
                    $
                    123,656,737Amortization
      of stock options issued to directors over vesting period
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    19,560
                    
                    
                    
                    -
                    
                    
                    
                    19,560Issuance
      of common stock for directors' compensation
                    
                    
                    15,000
                    
                    
                    
                    15
                    
                    
                    
                    17,985
                    
                    
                    
                    -
                    
                    
                    
                    18,000Issuance
      of stock options for directors' compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    8,558
                    
                    
                    
                    -
                    
                    
                    
                    8,558Net
      loss March 31, 2010
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,026,677
                    )
                    
                    
                    (1,026,677
                    )Balance,
      March 31, 2010
                    
                    
                    118,783,373
                    
                    
                    $
                    118,783
                    
                    
                    $
                    141,075,978
                    
                    
                    $
                    (18,518,583
                    )
                    
                    $
                    122,676,178
 
 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 three months ended
                                  
                                  
                                  throughMarch
      31, 2010
                                  
                                  
                                  March
      31, 2009
                                  
                                  
                                  March
      31, 2010CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                  
                                  $
                                  (1,026,677
                                  )
                                  
                                  $
                                  (980,055
                                  )
                                  
                                  $
                                  (18,518,583
                                  )Gain
      (loss) from discontinued operations
                                  
                                  
                                  120,688
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (3,752,023
                                  )Loss
      from continuing operations
                                  
                                  
                                  (1,147,365
                                  )
                                  
                                  
                                  (980,055
                                  )
                                  
                                  
                                  (14,766,560
                                  )Adjustments
      to reconcile loss from operating to net cash used in operating
      activities:Depreciation
                                  
                                  
                                  221,500
                                  
                                  
                                  
                                  181,959
                                  
                                  
                                  
                                  1,073,608Stock
      based expenses
                                  
                                  
                                  46,118
                                  
                                  
                                  
                                  45,159
                                  
                                  
                                  
                                  1,377,480Loss
      on disposition of fixed assets
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,542
                                  
                                  
                                  
                                  36,416Amortization
      of prepaid expense
                                  
                                  
                                  74,944
                                  
                                  
                                  
                                  57,413
                                  
                                  
                                  
                                  726,972Allowance
      for bond deposit recovery
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  180,500Changes
      in operating assets and liabilities:Other
      current assets
                                  
                                  
                                  (157,583
                                  )
                                  
                                  
                                  29,052
                                  
                                  
                                  
                                  (931,872
                                  )Other
      assets
                                  
                                  
                                  (2,640
                                  )
                                  
                                  
                                  600
                                  
                                  
                                  
                                  (194,042
                                  )Accounts
      payable and accrued liabilities
                                  
                                  
                                  (191,817
                                  )
                                  
                                  
                                  (303,473
                                  )
                                  
                                  
                                  (8,486
                                  )Deferred
      income taxes
                                  
                                  
                                  (684,876
                                  )
                                  
                                  
                                  (581,093
                                  )
                                  
                                  
                                  (7,656,302
                                  )Net
      cash used in operating activities
                                  
                                  
                                  (1,841,719
                                  )
                                  
                                  
                                  (1,548,896
                                  )
                                  
                                  
                                  (20,162,286
                                  )Net
      cash used in operating activities from discontinued
    operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,931,324
                                  )CASH
      FLOW FROM INVESTING ACTIVITIESCash
      paid on mineral property claims
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (87,134
                                  )Cash
      paid for joint venture and merger option
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (890,000
                                  )Cash
      paid to VRIC on closing date
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (9,900,000
                                  )Cash
      paid for additional acquisition costs
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (130,105
                                  )Capitalized
      interest - related party
                                  
                                  
                                  (38,836
                                  )
                                  
                                  
                                  (42,757
                                  )
                                  
                                  
                                  (546,423
                                  )Proceeds
      from property and equipment disposition
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  400Purchase
      of property and equipment
                                  
                                  
                                  (268,185
                                  )
                                  
                                  
                                  (803,854
                                  )
                                  
                                  
                                  (13,888,667
                                  )Net
      cash used in investing activities
                                  
                                  
                                  (307,021
                                  )
                                  
                                  
                                  (846,611
                                  )
                                  
                                  
                                  (25,441,929
                                  )Net
      cash used in investing activities from discontinued
    operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (452,618
                                  )CASH
      FLOW FROM FINANCING ACTIVITIESProceeds
      from stock issuance
                                  
                                  
                                  -
                                  
                                  
                                  
                                  125,000
                                  
                                  
                                  
                                  58,837,745Stock
      issuance costs
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,024,643
                                  )Principal
      payments on capital lease payable
                                  
                                  
                                  (6,175
                                  )
                                  
                                  
                                  (5,906
                                  )
                                  
                                  
                                  (82,121
                                  )Principal
      payments on VRIC payable - related party
                                  
                                  
                                  (51,164
                                  )
                                  
                                  
                                  (47,243
                                  )
                                  
                                  
                                  (593,578
                                  )Proceeds
      from subscribed stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  360,000Net
      cash (used) provided by financing activities
                                  
                                  
                                  (57,339
                                  )
                                  
                                  
                                  71,851
                                  
                                  
                                  
                                  56,497,403Net
      cash provided by financing activities from discontinued
      operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,384,237NET
      CHANGE IN CASH
                                  
                                  
                                  (2,206,079
                                  )
                                  
                                  
                                  (2,323,656
                                  )
                                  
                                  
                                  10,893,483CASH
      AT BEGINNING OF PERIOD
                                  
                                  
                                  13,099,562
                                  
                                  
                                  
                                  7,055,591
                                  
                                  
                                  
                                  -CASH
      AT END OF PERIOD
                                  
                                  $
                                  10,893,483
                                  
                                  
                                  $
                                  4,731,935
                                  
                                  
                                  $
                                  10,893,483
 
 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 three months ended
                          
                          
                          throughMarch
      31, 2010
                          
                          
                          March
      31, 2009
                          
                          
                          March
      31, 2010CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)SUPPLEMENTAL
      INFORMATIONInterest
      paid, net of capitalized amounts
                          
                          $
                          1,048
                          
                          
                          $
                          694
                          
                          
                          $
                          61,819Income
      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
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          1,918,481Stock
      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 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 $18,518,583 from operations as of
March 31, 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 $38,836 and
$42,757 for the three months ended March 31, 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 March 31, 2010,
exploration progress is on target with the Company’s exploration and evaluation
plan and 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 our ability to achieve forecasted production schedules.
Additionally, commodity prices, capital expenditure requirements and reclamation
costs could differ from the assumptions the Company may use in cash flow models
used to assess impairment. The ability to achieve the estimated quantities of
recoverable minerals from exploration stage mineral interests involves further
risks in addition to those factors applicable to mineral interests where proven
and probable reserves have been identified, due to the lower level of confidence
that the identified mineralized material can ultimately be mined
economically.
 
 Material
changes to any of these factors or assumptions discussed above could result in
future impairment charges to operations.
  10
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                DESCRIPTION OF
      BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
      (continued)
 
 Asset retirement
obligation - The Company follows ASC 410, Asset Retirement and Environmental
Obligations, which requires that an asset retirement obligation (“ARO”)
associated with the retirement of a tangible long-lived asset be recognized as a
liability in the period in which it is incurred and becomes determinable, with
an offsetting increase in the carrying amount of the associated
asset.  The cost of the tangible asset, including the initially
recognized ARO, is depleted, such that the cost of the ARO is recognized over
the useful life of the asset.  The ARO is recorded at fair value, and
accretion expense is recognized over time as the discounted liability is
accreted to its expected settlement value.  The fair value of the ARO
is measured using expected future cash flow, discounted at the Company’s
credit-adjusted risk-free interest rate.  To date, no significant
asset retirement obligation exists due to the early stage of
exploration.  Accordingly, no liability has been
recorded.
 
 Fair value of financial
instruments - Fair value accounting establishes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy are described below:
 Level 1
                
                Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or liabilities;Level 2
                
                Quoted
      prices in markets that are not active, or inputs that are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability; 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.
 
 Revenue recognition -
Revenues are recognized during the period in which the revenues are earned.
Costs and expenses are recognized during the period in which they are
incurred.
  Research and
development - All research and development expenditures are expensed as
incurred.
  Earnings (loss) per
share - The Company follows 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 March 31, 2010 and 2009 that were not included in the computation of diluted
EPS because the effect would be antidilutive were 28,130,950 and 22,165,458,
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 directly 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 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 FASB (Financial Accounting Standards Board) 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.
 
 Effective
July 1, 2009, the FASB Accounting Standards Codification
(ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single
source for authoritative nongovernmental U.S. generally accepted accounting
principles. Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative U.S. GAAP for SEC
registrants.  The ASC does not change US GAAP
but is intended to simplify user access to all authoritative U.S. GAAP by
providing all the authoritative literature related to a particular topic in one
place. Effective September 15, 2009, all public filings of the Company will
reference the ASC as the sole source of authoritative
literature.
 
 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 issuedASU 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 March 31, 2010 and December 31,
2009:
 
 March
      31, 2010
                        
                        
                        December
      31,
                          2009Furniture
      and fixtures
                        
                        $
                        38,480
                        
                        
                        $
                        36,740Lab
      equipment
                        
                        
                        237,341
                        
                        
                        
                        228,052Computers
      and equipment
                        
                        
                        77,999
                        
                        
                        
                        67,791Income
      property
                        
                        
                        309,750
                        
                        
                        
                        309,750Construction
      in progress
                        
                        
                        5,750,029
                        
                        
                        
                        5,523,620Capitalized
      interest
                        
                        
                        546,423
                        
                        
                        
                        507,587Vehicles
                        
                        
                        44,175
                        
                        
                        
                        44,175Slag
      conveyance equipment
                        
                        
                        44,375
                        
                        
                        
                        44,375Demo
      module building
                        
                        
                        6,630,063
                        
                        
                        
                        6,625,603Site
      improvements
                        
                        
                        1,252,141
                        
                        
                        
                        1,241,468Site
      equipment
                        
                        
                        220,747
                        
                        
                        
                        215,34115,151,523
                        
                        
                        
                        14,844,502Less
      accumulated depreciation
                        
                        
                        1,071,068
                        
                        
                        
                        849,568$
                        14,080,455
                        
                        
                        $
                        13,994,934
 
 Depreciation
expense was $221,500 and $181,959 for the three months ended March 31, 2010 and
2009, respectively.
  14
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 3.
                    CLARKDALE SLAG
      PROJECT
  On
February 15, 2007, the Company completed a merger with Transylvania
International, Inc. (TI) which provided the Company with 100% ownership of the
Clarkdale Slag Project in Clarkdale Arizona, through its wholly owned subsidiary
CML.  This acquisition superseded the joint venture option agreement
to acquire a 50% ownership interest as a joint venture partner pursuant to
Nanominerals Corp. (“NMC”) interest in a joint venture agreement (“JV
Agreement”) dated May 20, 2005 between NMC and Verde River Iron Company, LLC
(“VRIC”). Subsequent to the acquisition, Mr. Harry Crockett joined the Company’s
Board of Directors. VRIC is an affiliate of Mr. Crockett.
  The
Company believes the acquisition of the Clarkdale Slag Project was beneficial
because it provides for 100% ownership of the properties, thereby eliminating
the need to finance and further develop the projects in a joint venture
environment.
  This
merger was treated as a statutory merger for tax purposes whereby CML was the
surviving merger entity.
  The
Company applied EITF 98-03 (which has been superseded by ASC 805-10-25-1) with
regard to the acquisition of the Clarkdale Slag Project. The Company determined
that the acquisition of the Clarkdale Slag Project did not constitute an
acquisition of a business as that term is defined in ASC 805-10-55-4, and the
Company recorded the acquisition as a purchase of assets.
  The
Company also formed a second wholly owned subsidiary, CMC, for the purpose of
developing a processing plant at the Clarkdale Slag Project.
  The $130
million purchase price was comprised of a combination of the cash paid, the
deferred tax liability assumed in connection with the acquisition, and the fair
value of our common shares issued, based on the closing market price of our
common stock, using the average of the high and low prices of our common stock
on the closing date of the acquisition. The Clarkdale Slag Project is without
known reserves and the project is exploratory in nature in accordance with
Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As
required by ASC 930-805-30, Mining – Business Combinations –
Initial Recognition, and ASC
740-10-25-49-55, Income Taxes
– Overall – Recognition – Acquired Temporary Differences in Certain Purchase
Transactions that are Not Accounted for as Business Combinations, the
Company then allocated the purchase price among the assets as follows (and also
further described in this Note 3 to the financial statements): $5,916,150 of the
purchase price was allocated to the slag pile site, $3,300,000 to the remaining
land acquired, and $309,750 to income property and improvements. The purchase
price allocation to the real properties was based on fair market values
determined using an independent real estate appraisal firm (Scott W. Lindsay,
Arizona Certified General Real Estate Appraiser No. 30292). The remaining
$120,766,877 of the purchase price was allocated to the Clarkdale Slag Project,
which has been capitalized as a tangible asset in accordance 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
March 31, 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 March 31, 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 remaining
years.  On June 25, 2008, the Company issued the remaining 1,400,000
shares and received the title to the mining claims in consideration of the
satisfaction of the option agreement.
 
 The
mining claims were capitalized as tangible assets in accordance with ASC
805-20-55-37, Use
Rights.  Upon commencement of commercial production, the claims
will be amortized using the unit-of-production method over the life of the
claims.  If the Company does not continue with exploration after the
completion of the feasibility study, the claims will be expensed at that
time.
 
 On August
26, 2005, the Company paid $180,500 to the Bureau of Land Management (“BLM”) as
a bond for future reclamation work in Searchlight, Nevada. As of March 31, 2010,
the recovery of the reclamation bond is uncertain; therefore, the Company has
established a full allowance against the reclamation bond with the offsetting
expense to project exploration costs.
 
 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.
  The
Company reviews and evaluates long-lived assets for impairment whenever events
or changes in circumstances indicate the related carrying amount 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 March 31, 2010, exploration progress is on
target with the Company’s exploration and evaluation plan, and no events or
circumstances have happened to indicate the related carrying values of the
properties may not be recoverable. When the Company determines that an
impairment analysis should be done, the analysis will be performed using the
rules ASC 930-360-35 and 360-10-15-3 through 15-5.
  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 March 31, 2010 and December 31, 2009
consisted of the following:
  March 31,
                        2010
                      
                      
                      December 31,
                        2009Trade
      accounts payable
                      
                      $
                      188,435
                      
                      
                      $
                      414,279Accrued
      property taxes
                      
                      
                      15,815
                      
                      
                      
                      —Accrued
      compensation and related taxes
                      
                      
                      44,737
                      
                      
                      
                      29,463$
                      248,987
                      
                      
                      $
                      443,742
  Prior to
the Company’s corporate restructuring in 2005, the Company had several accounts
payable (the “Phage Payables”) included in trade accounts payable, dating back
to 2003 and prior.  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, the
Company updated its internal review of the status of the Phage Payables and
recorded a $120,688 gain from discontinued operations resulting from relief of
liabilities that were cleared based on expiration of UK statutes of
limitations.  The Phage Payables are further discussed in Note
17.
  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 March 31, 2010 and December 31, 2009,
  Lender
                                
                                Collateral
                                
                                Monthly
                                  Payment
                                
                                
                                Interest
                                  Rate
                                
                                Maturity
                                
                                March 31,
                                  2010
                                
                                
                                December 31,
                                  2009Caterpillar
      FinancialServicesCorporation
                                
                                Equipment
                                
                                $
                                2,200
                                
                                
                                
                                4.45
                                %
                                Jul-11
                                
                                $
                                34,117
                                
                                
                                $
                                40,29234,117
                                
                                
                                
                                40,292Capital
      lease payable, current portion
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (25,397
                                )
                                
                                
                                (25,117
                                )Capital
      lease payable, net of current portion
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                8,720
                                
                                
                                $
                                15,175
 
 The
following table represents future minimum lease payments on the capital lease
payable for each of the twelve month periods ending March 31,
 
 2011
                      
                      $
                      26,4012012
                      
                      
                      8,801Thereafter
                      
                      
                      —Total
      future minimum lease payments
                      
                      
                      35,202Imputed
      interest
                      
                      
                      (1,085
                      )Present
      value of future minimum lease payments
                      
                      $
                      34,117
 
 The
following assets acquired under the capital lease and the related amortization
were included in property, plant and equipment at March 31, 2010 and December
31, 2009,
 
 March 31,
                        2010
                      
                      
                      December 31,
                        2009Site
      equipment
                      
                      $
                      116,239
                      
                      
                      $
                      116,239Accumulated
      amortization
                      
                      
                      (82,336
                      )
                      
                      
                      (75,071
                      )$
                      33,903
                      
                      
                      $
                      41,168
  20
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
                VRIC PAYABLE – RELATED
      PARTY
 
 Pursuant
to the Clarkdale acquisition agreement the Company agreed to pay VRIC $30,000
per month until the Project Funding Date.  Mr. Harry Crockett, one of
the Company’s directors, is an affiliate of VRIC.  Mr. Crocket joined the
Board of Directors subsequent to the acquisition.
 
 The
Company has recorded a liability for this commitment using imputed interest
based on its best estimate of future cash flows. The effective interest rate
used was 8.00%, resulting in an initial present value of $2,501,187 and imputed
interest of $1,128,813. The expected term used was 10 years which represents the
maximum term the VRIC liability is payable if the Company does not obtain
project funding.
 
 The
following table represents future principal payments on VRIC payable for each of
the twelve month periods ending March 31,
 
 2011
                            
                            $
                            215,1672012
                            
                            
                            233,0262013
                            
                            
                            252,3672014
                            
                            
                            273,3132015
                            
                            
                            295,999Thereafter
                            
                            
                            637,7381,907,610VRIC
      payable, current portion
                            
                            
                            215,167VRIC
      payable, net of current portion
                            
                            $
                            1,692,443
 
 The
acquisition agreement also contains payment terms which are based on the Project
Funding Date as defined in the agreement. The terms of and conditions of these
payments are discussed in more detail in Notes 3 and 13.
  21
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
                STOCKHOLDERS’
      EQUITY
 
 During
the three months ended March 31, 2010 the Company’s stockholders’ equity
activity consisted of the following:
 
 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
award was priced at $1.20 per share and has been recorded as directors’
compensation expense of $18,000 and as common stock and additional paid-in
capital.
 
 9.
                STOCKOPTION PLAN AND
      WARRANTS
 
 On
October 15, 2009, the Board of Directors adopted the 2009 Stock Option Plan (the
“2009 Plan”). Under the terms of the 2009 Plan, options to purchase up to
3,250,000 shares of common stock of the Company may be granted to eligible
participants.
 
 The
      2009 Plan was approved by the Company’s stockholders on December 15,
      2009.
 
 The
      2009 Plan provides that the option price for incentive stock options be
      the fair market value of the stock at the date of the grant, except that
      with respect to an incentive stock option, for holders of awards who, on
      the date of grant, own more than 10% of the total combined voting power of
      all classes of the Company’s stock (or any parent or subsidiary thereof),
      the exercise price may not be less than 110% of the fair market value of a
      share of common stock on the date of grant.  The maximum term of
      an option shall be established for that option by the Board of Directors
      or, if not so established, shall be ten years from the grant date, except
      that the term for incentive stock options may not exceed five years for
      award holders who, on the date of grant, own more then 10% of the voting
      power of all classes of stock. Options granted under the 2009 Plan become
      exercisable and expire as determined by the Board of
      Directors.
 
 On
      October 15, 2009, the Board of Directors approved the 2009 Stock Incentive
      Plan for Directors (the “2009 Directors Plan”). Under the terms of the
      2009 Directors Plan, options to purchase up to 750,000 shares of common
      stock may be granted to the Company’s
directors.
 
 The
      2009 Directors Plan was approved by the Company’s stockholders on December
      15, 2009.
 
 Under
      the 2009 Directors Plan, no participant may receive awards with respect to
      more than 250,000 common shares during any calendar year. Stock options
      will be exercisable and will vest at such time or times as the Board or
      Compensation Committee determines at the time of grant. The exercise price
      of a stock option granted under the 2009 Directors Plan may not be less
      than 100% of the fair market value of a share of the Company’s common
      stock on the date the stock option is granted. The term of each stock
      option will be established at the time of grant by the Compensation
      Committee and may not exceed ten years from the date the stock option is
      granted.
  22
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 During the three months ended March
31, 2010, the Company granted stock options as follows:
 
 a)
                On
      March 31, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 15,000 and 5,000 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.
  b)
                On
      March 1, 2010, the Company granted nonqualified stock options under the
      2009 Directors Plan for the purchase of 200,000 shares of common stock at
      $1.59 per share.  The options were granted to an independent
      director upon his appointment to the Board of Directors. The options vest
      pro rata over four years, from March 1, 2011 through March 1, 2014. The
      options expire on the five year anniversary of the date that they
      vest.
  Expenses
for the three months ended March 31, 2010 and 2009 related to vesting and
granting of stock options were $28,118 and $27,159, respectively and are
included in general and administrative expense.
 
 Stock options –During
the three months ended March 31, 2010, the Company granted stock options to
directors totaling 220,000, with a weighted average exercise price of $1.55 per
share. As of March 31, 2010 stock options outstanding totaled 2,900,633 with a
weighted average price of $1.23 per share.
 
 The
following table summarizes the Company’s stock option activity for the three
months ended March 31, 2010:
  Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Exercise PriceBalance,
      December 31, 2009
                      
                      
                      2,680,633
                      
                      
                      $
                      1.20Options
      granted and assumed
                      
                      
                      220,000
                      
                      
                      
                      1.55Options
      expired
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled, forfeited
                      
                      
                      —
                      
                      
                      
                      —Options
      exercised
                      
                      
                      —
                      
                      
                      
                      —Balance,
      March 31, 2010
                      
                      
                      2,900,633
                      
                      
                      $
                      1.23
 
 The
Company estimates the fair value of options granted by using the Binomial
Lattice option pricing-model with the following assumptions used for
grants:
 
 2010Dividend
      yield
                      —Expected
      volatility
                      105.85%Risk-free
      interest rate
                      3.04%
      to 3.28%Expected
      life (years)
                      4.25
      to 4.94
  23
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                STOCKOPTION PLAN AND
      WARRANTS (continued)
 
 The
Company believes that this model provides the best estimate of fair value due to
its ability to incorporate inputs that change over time, such as volatility and
interest rates, and to allow for actual exercise behavior of option holders.
 
 For stock
options awarded during 2010, the expected volatility is based on the historical
volatility levels on our common stock. The risk-free interest rate is based on
the implied yield available on US Treasury zero-coupon issues over equivalent
lives of the options.
  The
expected life of employee stock options represents the weighted-average period
the stock options are expected to remain outstanding and is a derived output of
the Binomial Lattice model. The expected life of employee stock options is
impacted by all of the underlying assumptions and calibration of the Company’s
model. The Binomial Lattice model estimates the probability of exercise as a
function of these two variables based on the entire history of exercises and
cancellations on all past option grants made by the Company.
 
 The
following table summarizes the changes of the Company’s stock options subject to
vesting for the three months ended March 31, 2010:
 
 Number
      of
                        Shares
      Subject
                        to
      Vesting
                      
                      
                      Weighted
      Average
                        Grant
      Date
                        Fair
      ValueUnvested,
      December 31, 2009
                      
                      
                      150,000
                      
                      
                      $
                      0.84Options
      granted
                      
                      
                      200,000
                      
                      
                      
                      1.17Options
      vested
                      
                      
                      —
                      
                      
                      
                      —Options
      cancelled
                      
                      
                      —
                      
                      
                      
                      —Unvested,
      March 31, 2010
                      
                      
                      350,000
                      
                      
                      $
                      1.03
 
 As of
March 31, 2010, there was $283,505 total unrecognized compensation cost related
to unvested stock options. This cost is expected to be recognized as
follows:
 
 2010
                        
                        $
                        104,0142011
                        
                        
                        98,6362012
                        
                        
                        55,1662013
                        
                        
                        22,5752014
                        
                        
                        3,114Total
                        
                        $
                        283,505
  24
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 9.
                STOCK OPTION PLAN AND
      WARRANTS (continued)
 
 The
following table summarizes information about options granted during the three
months ended March 31, 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
                                    AverageGrant
                                    Date FairValue220,000
                                  
                                  Equals
                                  
                                  $
                                  1.55
                                  
                                  
                                  $
                                  1.20
      to $1.59
                                  
                                  
                                  $
                                  1.10—
                                  
                                  Exceeds
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  — to
      $ —
                                  
                                  
                                  $
                                  ——
                                  
                                  Less
      Than
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  — to
      $ —
                                  
                                  
                                  $
                                  —220,000
                                  
                                  Equals
                                  
                                  $
                                  1.55
                                  
                                  
                                  $
                                  1.20
      to $1.59
                                  
                                  
                                  $
                                  1.10
 
 Stock
options/warrants – During the three months ended March 31, 2010 the
Company did not grant any stock warrants.
 
 During
the three months ended March 31, 2010, the Company issued stock options for
220,000 shares of common stock to directors with a range of exercise prices of
$1.20 to $1.59 per share.
 
 The
following table summarizes information about options/warrants granted during the
three months ended March 31, 2010:
 
 Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        ExercisePriceBalance,
      December 31, 2009
                      
                      
                      28,064,283
                      
                      
                      $
                      1.16Options/warrants
      granted and assumed
                      
                      
                      220,000
                      
                      
                      
                      1.55Options/warrants
      expired
                      
                      
                      —
                      
                      
                      
                      —Options/warrants
      cancelled, forfeited
                      
                      
                      —
                      
                      
                      
                      —Options/warrants
      exercised
                      
                      
                      —
                      
                      
                      
                      —Balance,
      March 31, 2010
                      
                      
                      28,284,283
                      
                      
                      $
                      1.16
  25
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                    STOCKHOLDER RIGHTS
      PLAN
 
 The
      Company adopted a Stockholder Rights Plan (the “Rights Plan”) in August
      2009 to protect stockholders from attempts to acquire control of the
      Company in a manner in which the Company’s Board of Directors determines
      is not in the best interest of the Company or its stockholders. 
      Under the plan, each currently outstanding share of the Company’s common
      stock includes, and each newly issued share will include, a common share
      purchase right.  The rights are attached to and trade with the
      shares of common stock and generally are not exercisable.  The
      rights will become exercisable if a person or group acquires, or announces
      an intention to acquire, 15% or more of the Company’s outstanding common
      stock. The Rights Plan was not adopted in response to any specific effort
      to acquire control of the Company.  The issuance of rights had
      no dilutive effect, did not affect the Company’s reported earnings per
      share, and was not taxable to the Company or its
      stockholders.
 
 11.
                PROPERTY RENTAL
      AGREEMENTS AND LEASES
 
 The
      Company through its subsidiary CML has the following lease and rental
      agreements as lessor:
 
 Clarkdale Arizona
      Central Railroad – Rental
 
 CML
      has a month-to-month rental agreement with Clarkdale Arizona Central
      Railroad. The rental payment is $1,700 per
  month.
 
 Commercial Building –
      Rental
 
 CML
      rents commercial building space to various tenants. Rental arrangements
      are minor in amount and are typically
  month-to-month.
 
 Land Lease – Wastewater
Effluent
 
 CML
      assumed a lease as lessor on February 15, 2007 that was entered into by TI
      on August 25, 2004 with the Town of Clarkdale, AZ (Clarkdale). The Company
      provides approximately 60 acres of land to Clarkdale for disposal of Class
      B effluent. In return, the Company has first right to purchase up to
      46,000 gallons per day of the effluent for its use at fifty percent (50%)
      of the potable water rate. In addition, if Class A effluent becomes
      available, the Company may purchase that at seventy-five percent (75%) of
      the potable water rate.
 
 The term
of the lease is five years with a one year extension available. At such time as
Clarkdale no longer uses the property for effluent disposal, and for a period of
25 years measured from the date of the lease, the Company has a continuing right
to purchase Class B effluent, and if available, Class A effluent at then market
rates.
  26
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                  INCOME
      TAXES
 
 The
Company is a Nevada corporation and is subject to federal and Arizona income
taxes.  Nevada does not impose a corporate income tax.
 
 The
income tax benefit consisted of the following at March 31, 2010 and
2009:
 
 March
      31, 2010
                        
                        
                        March
      31, 2009Income
      tax benefit at statutory rates
                        
                        $
                        (650,390
                        )
                        
                        $
                        (606,916
                        )Non-deductible
      and other
                        
                        
                        (45,171
                        )
                        
                        
                        1,002Change
      in valuation allowance
                        
                        
                        10,685
                        
                        
                        
                        24,821Income
      tax benefit
                        
                        $
                        (684,876
                        )
                        
                        $
                        (581,093
                        )
 
 Significant
components of the Company’s net deferred income tax assets and liabilities at
March 31, 2010 and December 31, 2009 were as follows:
 
 March 31, 2010
                          
                          
                          December 31,
                            2009Deferred
      income tax assetsNet
      operating loss carryforward
                          
                          $
                          7,810,584
                          
                          
                          $
                          7,169,190Option
      compensation
                          
                          
                          422,743
                          
                          
                          
                          412,058Reclamation
      bond
                          
                          
                          68,590
                          
                          
                          
                          68,590Property,
      plant & equipment
                          
                          
                          207,887
                          
                          
                          
                          164,405Gross
      deferred income tax asset
                          
                          
                          8,509,804
                          
                          
                          
                          7,814,243Valuation
      allowance
                          
                          
                          (491,333
                          )
                          
                          
                          (480,648
                          )8,018,471
                          
                          
                          
                          7,333,595Deferred
      income tax liabilitiesProperty,
      plant & equipment
                          
                          
                          —
                          
                          
                          
                          —Acquisition
      related liabilities
                          
                          
                          55,197,465
                          
                          
                          
                          55,197,465Net
      deferred income tax liability
                          
                          $
                          47,178,994
                          
                          
                          $
                          47,863,870
 
 A
valuation allowance for deferred tax related to option compensation and the
reclamation bond was established for net deferred tax assets not allocated to
offset acquisition related deferred tax liabilities due to the uncertainty of
realizing these deferred tax assets based on conditions existing at March 31,
2010 and December 31, 2009.
 
 Deferred
income tax liability was recorded on GAAP basis over income tax basis using
statutory federal and state rates with the corresponding increase in the
purchase price allocation to the assets acquired.
  27
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                INCOME TAXES
      (continued)
 
 The
resulting estimated future federal and state income tax liability associated
with the temporary difference between the acquisition consideration and the tax
basis as computed in accordance with ASC 740 is reflected as an increase to the
total purchase price which has been applied to the underlying mineral and slag
project assets in the absence of there being a goodwill component associated
with the acquisition transactions.
 
 The
Company had cumulative net operating losses of approximately $20,554,170 and
$18,866,291 as of March 31, 2010 and December 31, 2009, respectively for federal
income tax purposes. The federal net operating loss carryforwards will be
expiring 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, the current apportionment percentage, which is then reduced by the federal
tax benefit that would be obtained upon payment of the computed state
taxes.
 
 For the
three month periods ended March 31, 2010 and 2009, the state income tax benefit
which is included in the total tax benefit was $90,101 and $81,414,
respectively.
 
 The
Company had cumulative net operating losses of approximately $11,423,466 and
$10,148,277 as of March 31, 2010 and December 31, 2009, respectively for Arizona
state income tax purposes. The Arizona state net operating loss carryforwards
will be expiring between 2013 and 2015.
 
 Tax Returns Subject to
Examination
 
 The
Company and its subsidiaries file income tax returns in the United
States.  These tax returns are subject to examination by taxation
authorities provided the years remain open under the relevant statutes of
limitations, which may result in the payment of income taxes and/or decreases in
its net operating losses available for carryforwards.  The Company is
no longer subject to income tax examinations by US federal and state tax
authorities for years prior to 2005. While the Company believes that its tax
filings do not include uncertain tax positions, the results of potential
examinations or the effect of changes in tax law cannot be ascertained at this
time.  The Company currently has no tax years under
examination.
  28
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
                  COMMITMENTS AND
      CONTINGENCIES
 
 Lease obligations –
The Company rents office space in Henderson, Nevada.  The lease terms
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 $12,510 and $14,700
for each of the three months ended March 31, 2010 and 2009,
respectively.
 
 Employment contracts
– Ian R.
McNeil.  The Company
entered into an employment agreement with Ian R. McNeil, its President and Chief
Executive Officer, effective January 1, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. McNeil an annual salary of $190,000.  On December
30, 2005, Mr. McNeil received a one time bonus of $36,000 on execution of the
agreement.  In addition to his annual salary, Mr. McNeil may be
granted a discretionary bonus and stock options, to the extent authorized by the
Board of Directors.  The term of the agreement is for an indefinite
period, unless otherwise terminated by either party pursuant to the terms of the
agreement.  In the event that the agreement is terminated by the
Company, other than for cause, the Company will provide Mr. McNeil with six
months written notice or payment equal to six months of his monthly
salary.
 
 Carl S. Ager.  The Company
entered into an employment agreement with Carl S. Ager, its Vice President,
Secretary and Treasurer, effective January 1, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. Ager an annual salary of $160,000.  On December 30,
2005, Mr. Ager received a one time bonus of $26,666 on execution of the
agreement.  In addition to his annual salary, Mr. Ager may be granted
a discretionary bonus and stock options, to the extent authorized by the Board
of Directors. The term of the agreement is for an indefinite period, unless
otherwise terminated by either party pursuant to the terms of the
agreement.  In the event that the agreement is terminated by the
Company, other than for cause, the Company will provide Mr. Ager with six months
written notice or payment equal to six months of his monthly
salary.
  Melvin L.
Williams.  The Company
entered into an employment agreement with Melvin L. Williams, its Chief
Financial Officer, effective June 14, 2006 and as amended February 16,
2007.  Pursuant to the terms of the employment agreement, the Company
agreed to pay Mr. Williams an annualized salary of $130,000 based on an increase
in time commitment from 300-600 hours worked to 600-800 hours
worked.  On June 14, 2006, the Company issued 50,000 restricted shares
of its common stock, as a one time bonus, and granted options to purchase
100,000 shares of its common stock at an exercise price of $2.06 per share,
exercisable for a period of five years until June 14, 2011.  The
options vested 50% on each of the first and second anniversaries of the
execution of the agreement.  The price of the shares issued and the
exercise price of the options granted were valued based on the closing price of
the common stock on the OTCBB on June 14, 2006.  In the event the
employment agreement is terminated by the Company without cause, the Company
agreed to pay Mr. Williams an amount equal to three months’ salary in a lump sum
as full and final payment of all amounts payable under the
agreement.
  29
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 13.
                  COMMITMENTS AND
      CONTINGENCIES
(continued)
 
 Purchase consideration
Clarkdale Slag Project – In consideration of the acquisition of the
Clarkdale Slag Project from VRIC, the Company has agreed to certain additional
contingent payments. The acquisition agreement contains payment terms which are
based on the Project Funding Date as defined in the agreement:
 
 a)
                The
      Company has agreed to pay VRIC $6,400,000 on the Project Funding
      Date;
  b)
                The
      Company has agreed to pay VRIC a minimum annual royalty of $500,000,
      commencing on the Project Funding Date (the “Advance Royalty”), and an
      additional royalty consisting of 2.5% of the net smelter returns (“NSR”)
      on any and all proceeds of production from the Clarkdale Slag Project (the
      “Project Royalty”).  The Advance Royalty remains payable until
      the first to occur of: (i) the end of the first calendar year in which the
      Project Royalty equals or exceeds $500,000 or (ii) February 15,
      2017.  In any calendar year in which the Advance Royalty remains
      payable, the combined Advance Royalty and Project Royalty will not exceed
      $500,000; and,
  c)
                The
      Company has agreed to pay VRIC an additional amount of $3,500,000 from the
      net cash flow of the Clarkdale Slag
Project.
  The
Advance Royalty shall continue for a period of ten years from the Agreement Date
or until such time that the Project Royalty shall exceed $500,000 in any
calendar year, at which time the Advance Royalty requirement shall end
forever.
 
 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 (CUP) 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 cost
approximately $3,500,000 and the cost of additional enhancements to be
approximately $1,200,000 which will be required to be funded by the Company.
Based on the uncertainty of the contingencies, this cost is not included in the
Company’s current operating plans. Funding for construction of the Road will
require obtaining project financing or other significant
financing.  At March 31, 2010 and through the date the consolidated
financial statements were issued, these contingencies had not
changed.
  30
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 14.
                  CONCENTRATION OF
      CREDIT RISK
 
 The
Company maintains its cash accounts in two financial institutions. Cash accounts
at these financial institutions are insured by the Federal Deposit Insurance
Corporation (FDIC) for up to $250,000 per financial institution. The Company has
never experienced a material loss or lack of access to its cash accounts;
however, no assurance can be provided that access to the Company’s cash accounts
will not be impacted by adverse conditions in the financial markets. At March
31, 2010, the Company had deposits in excess of FDIC insured limits in the
amount of $10,501,775.
 
 15.
                  CONCENTRATION OF
      ACTIVITY
 
 For the
three months ended March 31, 2010, the Company purchased services from two major
vendors, Baker Hostetler and NMC, which exceeded more than 10% of total
purchases and amounted to $225,000 and $117,857, respectively.
 
 For the
three months ended March 31, 2009, the Company purchased services from two major
vendors, Baker Hostetler and Cimetta Engineering, which exceeded more than 10%
of total purchases and amounted to approximately $257,519 and $296,754,
respectively.
 
 16.
                  RELATED PARTY
      TRANSACTIONS
 
 During
the three months ended March 31, 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
three months ended March 31, 2010, the Company incurred total fees and
reimbursement of expenses to NMC of $90,000 and $27,857, respectively. At March
31, 2010, the Company had an outstanding balance due to NMC of
$39,821.
 
 During
the three months ended March 31, 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 $37,119 for the three months ended March
31, 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 $15,590 of the above
CMOW fees and expenses for the three months ended March 31, 2010. The Company
had an outstanding balance due to CMOW of $37,119 as of March 31,
2010.
  31
  SEARCHLIGHT
MINERALS CORP.
 (AN
EXPLORATION STAGE ENTERPRISE)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 17.
                GAIN FROM DISCONTINUED
      OPERATIONS
 
 Prior to
the Company’s corporate restructuring in 2005, the Company had several accounts
payable (the “Phage Payables”) dating back to 2003 and prior. All of these Phage
Payables were incurred in the United Kingdom (“UK”).  These expenses
were related to business operations which were discontinued in February
2005.  In the first quarter of 2010, the Company updated its internal
review of the status of the Phage Payables and recorded a $120,688 gain
resulting from relief of liabilities that were cleared based on expiration of UK
statutes of limitations. The gain is reflected as a gain from discontinued
operations. There was no tax impact as the prior expenses occurred while the
Company operated outside the United States and the losses are not included in
the Company’s net operating losses.
  32
  Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
  Certain
statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.”  These forward-looking statements
include, but are not limited to, statements about the plans, objectives,
expectations and intentions of Searchlight Minerals Corp., a Nevada corporation
(referred to in this Report as “we,” “us,” “our” or “registrant”) and other
statements contained in this Report that are not historical
facts.  Forward-looking statements in this Report or hereafter
included in other publicly available documents filed with the Securities and
Exchange Commission, or the Commission, reports to our stockholders and other
publicly available statements issued or released by us involve known and unknown
risks, uncertainties and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements.  Such future results are
based upon management’s best estimates based upon current conditions and the
most recent results of operations.  When used in this Report, the
words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate”
and similar expressions are generally intended to identify forward-looking
statements, because these forward-looking statements involve risks and
uncertainties.  There are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including our plans, objectives, expectations and
intentions and other factors that are discussed under the section entitled “Risk
Factors,” in this Report and in our Annual Report on Form 10-K for the year
ended December 31, 2009.
  The
following discussion and analysis summarizes our plan of operation for the next
twelve months, our results of operations for the three month period ended March
31, 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.  Since our acquisition of 100% of the Clarkdale Slag
Project in 2007, we have devoted considerable effort to the designing and
engineering of our first production module, which included finalizing the
production flow sheet, sourcing and purchasing equipment as well as refurbishing
the module building and constructing the electrowinning building.  The
module and electrowinning buildings house the first production module, which has
been designed to allow for the grinding, leaching, filtering and extraction of
precious and base metals from the slag material and is expected to process
between 100 and 250 tons of slag material per day.
  33
  
  We have
completed the main construction of the first production module for the Clarkdale
Slag Project.  Since the start of 2009, we have been executing our
business plan which includes the start-up and operation of the production module
in an effort to achieve consistent levels of gold, silver, copper and zinc
extraction that would support the economic feasibility of a commercial
production facility.  During this period, the primary emphasis has
been placed on the crushing and grinding circuit as well as the leaching and
extraction of gold, silver, copper and zinc.  We have completed
continuous runs of up to 16 hours through the crushing and grinding
circuit.  To date, our internal laboratory testing has reflected
consistent levels of extractable precious and base metals in pregnant leach
solutions from the Clarkdale slag material.  Management believes that
extraction results from preliminary internal laboratory testing have been
consistent with the results of earlier assay testing conducted by our
independent consultants.  We believe that we can improve extraction
rates further by optimizing the grind, the chemical characteristics of the leach
solutions and the amount of residence time required for maximum grind and leach
efficiency.
  The
crushing and grinding circuit liberates gold, silver, copper and zinc from the
slag material.  However, we have faced challenges involving the amount
of wear on certain grinding components caused by the abrasiveness of the slag
material and the rate of throughput.  Highly abrasive carbon-rich
ferro-silicates (containing carbon, iron and silica) comprise about 90% of the
slag material, which required us to seek out more advanced hard facing
technology and wear-resistant surfacing media on our crushing and grinding
equipment.  Although we previously believed that the wear issues
relating to the throughput rate of the crushing and grinding circuit had been
resolved, further testing in the first quarter of 2010 showed that some of these
issues are still present and further work will be required to address these
remaining issues.  We are also testing additional equipment that may
be added to the crushing and grinding circuit to help with the equipment wear
issues.
  34
  Because
of challenges with operating certain equipment on a continuous basis we made a
strategic decision to pursue a “dual-path” approach to the accomplishment of our
technical and gold production objectives at the Clarkdale Slag
Project.  Our short-term goal is now to run the production module in a
“proof of concept” operational mode, so that it may begin producing precious and
base metals, while the medium-term objective is to run the production module
continuously and complete a feasibility study on the project.  In the
first quarter of 2010, we scaled-up from laboratory and pilot plant leaching to
the operation of the production module leaching circuit.  During this
time, we continued to adjust the chemical characteristics of the leach solution
in an effort to maximize gold extraction from the slag material and as a
consequence, we also began to leach more iron into solution.  This
additional iron in solution needs to be removed in order for the effective
extraction of gold, silver, copper and zinc from the leach
solution.  Our technical team and consultants have reviewed this issue
and have advised us that iron in solution is a common metallurgical concern in
the mining industry and they believe that it is readily solvable with the
insertion of an “iron circuit” which would remove the iron from the leach
solution.  Equipment for this iron circuit has been
ordered.  However, the continuous operation of the production module
may be delayed while it is being shipped, installed and tested. To achieve our
near-term operational objectives, we believe the production module should
commence producing precious and base metals following the installation and
commissioning of the iron circuit.
  Since the
third quarter of 2009, we have been engaged with a team of independent
engineers, with extensive experience in start-up and mining
operations.  These engineers are working closely with the project’s
internal scientific and operating team to expedite the achievement of our
strategic objectives.  With their assistance, we have made progress in
resolving some of our operational issues of the production module.  In
order to achieve our short-term goal of “proof of concept” and our medium-term
goal of continuous production, we are focused on resolving the remaining
equipment wear issues in the crushing and grinding circuit, addressing the iron
in solution issue and improving the leach circuit with the grind/leach
combination to optimize metal extraction.
  We
incurred delays during the construction of our production module, including
delays in receiving large pieces of equipment from manufacturers, engineering
related delays due to the complexity of installing the production module
equipment in a World War I era module building and the decision to construct a
separate building to house the electrowinning equipment after it was determined
that the electrowinning equipment would not adequately fit in the module
building.  Consequently, the construction timeline for completing the
production module was extended by approximately twelve months from what we
originally anticipated and there was an approximately 55% increase in costs from
what we had originally projected.
  We
anticipate that the operation of our production module will allow us to
determine the economics of the project and serve as the basis for the final
feasibility of the project.  If the feasibility of the project
establishes economic viability, we expect to commence construction of a
full-scale production facility where we intend to install subsequent modules in
parallel.  We expect that each subsequent module would be comparable
in technology and scale to the initial production module.  The number
of subsequent modules required to attain full-production of 2,000 tons per day
will be determined once the initial production module capacity is
determined.  The cost of designing and constructing our initial
production module was approximately $12,700,000.  We do not believe
that the construction of subsequent modules will cost as much because: (i) of
the knowledge we have developed in the construction of the initial production
module, and (ii) any additional modules will be new construction, rather than
rehabilitation of an older building.  However, the scope and size of
our full-scale production facility, including the number of additional modules,
the timing and cost of additional modules and the economies of scale of a
production facility, will depend upon a number of factors, including the results
of a feasibility study and the availability of funding.  A more
thorough economic analysis of the full-scale production facility, including
specific capital and operating costs, funding schedules and funding sources, is
expected to occur during the feasibility evaluation of the initial production
module.  The first stage of the feasibility evaluation began in the
second quarter of 2009, and has continued into the first quarter of 2010 with
our team of metallurgical engineers, with specialty expertise in dealing with
milling and leaching hard, abrasive and refractory material, to work with our
Clarkdale personnel and consultants to achieve optimum continuous
production.
  35
  We have
budgeted $6,100,000 for our work program on the Clarkdale Slag Project over the
next twelve months, which includes the operation of the production module and
performing the feasibility study.  A decision on allocating
approximately $6,000,000 of additional funds for the Phase II expansion and
$4,700,000 to complete the construction of an Industrial Collector Road pursuant
to an agreement with the Town of Clarkdale, Arizona will be made once the first
production module is operational and its results are analyzed.
  We expect
that there will be significant financing requirements in order to finance the
construction of a full-scale production facility, and cannot assure you that
such funding will be available at all or on terms that are reasonably acceptable
to us.  If the results from our feasibility study and the results from
the operation of the production module do not support a basis for us to proceed
with the construction of our proposed, full-scale production facility or we
cannot obtain funding at all or on terms that are reasonably acceptable to us,
we will have to scale back or abandon our proposed operations on the Clarkdale
Slag Project.  If management determines, based on any factors,
including the foregoing, that capitalized costs associated with any of our
mineral interests are not likely to be recovered, we would incur a significant
impairment of our investment in such property interests on our financial
statements.
  In
January 2009, we submitted a development agreement to the Town of Clarkdale for
the construction of an Industrial Collector Road.  The purpose of the
road is to provide us with the capability to enhance the flow of industrial
traffic to and from the Clarkdale Slag Project.  The construction of
the road is a required infrastructure improvement under the terms of our
conditional use permit with the Town of Clarkdale.  The Town of
Clarkdale approved the development agreement on January 9, 2009.
  The
development agreement provides that its effective date will be the later of (i)
30 days from the approving resolution of the agreement by the Clarkdale Town
Council; or (ii) the date on which the Town of Clarkdale obtains a connection
dedication from separate property owners who have land that will be utilized in
construction of the road; or (iii) the date on which the Town of Clarkdale
receives the proper effluent permit.  The Town of Clarkdale has
approved the development agreement, and the remaining two contingencies with
respect to the effectiveness of the development agreement are beyond our
control.
  Under the
development agreement, we are obligated to complete the construction of the road
within two years after the effective date of the agreement.  If we do
not complete the road within the two year period, we may lose our conditional
use permit from the Town of Clarkdale.  Further, as a condition of our
developing any of our property that is adjacent to the Clarkdale Slag Project,
we will be required to construct additional enhancements to the
road.  We will have ten years from the start of construction on the
road in which to complete the additional enhancements.  However, we do
not currently have any defined plans for the development of the adjacent
property.
  We
estimate that the initial cost of construction of the road will be approximately
$3,500,000 and that the cost of the additional enhancements will be
approximately $1,200,000.  We will be required to fund the costs of
this construction.  Based on the uncertainty of the timing of these
contingencies, we have not included these costs in our current operating plans
or budgets.  However, we will require additional project financing or
other financing in order to fund the construction of the road and the additional
enhancements.  There are no assurances that we will be able to obtain
additional financing in an amount sufficient to meet our needs or on terms that
are acceptable to us.  The failure to complete the road and the
additional enhancements in a timely manner under the development agreement would
have a material adverse effect on the Clarkdale Slag Project and our
operations.
  36
  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.  During 2010, we intend to perform the first phase of our
drilling program, which we expect will include detailed surface sampling along
with the drilling of approximately four holes, as defined within our Plan of
Operations.  The purpose of this first phase will be to understand the
mineralogy of the material on the project area, identify the presence of
precious metals within the material and determine analytical and extraction
protocols for the precious metals, if present.  Following the analysis
of the first phase of the drilling program, we intend to continue to drill the
remainder of the 18 holes within our Plan of Operations.  Our 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 $500,000 for our twelve month work program for the Searchlight Gold
Project.  Our work program is focused on performing the first phase of
our drilling program, continuing our metallurgical testing program and pilot
plant tests in an attempt to optimize recovery of precious metals from samples
taken from the project and exploring in more detail the potential capital and
operating costs of implementing methods, such as autoclave
leaching.
  Anticipated
Cash Requirements
  Our
exploration and evaluation plan calls for significant expenses in connection
with the Clarkdale Slag Project and the Searchlight Gold
Project.  Over the next twelve months, our management anticipates that
the minimum cash requirements for funding our proposed exploration, testing and
construction program and our continued operations will be approximately
$9,700,000.  As of April 30, 2010, we had cash reserves in the amount
of approximately $10,200,000.  We believe our current financial
resources are sufficient to allow us to meet the anticipated costs of our
exploration, testing and construction programs for the next 12
months.  However, if actual costs are greater than we have
anticipated, we will require additional financing in order to fund our
exploration, testing and construction plans for the next 12
months.  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.
  37
  Our
estimated cash requirements for the next twelve months are as
follows:
  BUDGETAdministrative
      Expenses
              $1,700,000Legal
      and Accounting Expenses
              1,400,000SUBTOTAL
              $3,100,000Clarkdale Slag
      ProjectProduction
      Module Operation
              $3,440,000Technical
      Consulting Services
              1,500,000Feasibility
      Study and Expansion Preparation
              800,000Purchase
      Payments – VRIC
              360,000SUBTOTAL
              $6,100,000Searchlight Gold
      ProjectSampling
      and Drilling Program
              $200,000Metallurgical
      Testing and Pre Feasibility Program
              300,000SUBTOTAL
              $500,000TOTAL
              $9,700,000
  Our
current twelve month plan also includes anticipated expenditure of approximately
$6,000,000 on Phase II of our Clarkdale Slag Project and $4,700,000 to complete
the construction of an Industrial Collector Road pursuant to an agreement with
the Town of Clarkdale, Arizona, subject to funding availability.  We
will require additional funding to fulfill our entire anticipated plan of
operations.  In addition, the actual costs of completing those
activities may be greater than anticipated.
  If the
actual costs are significantly greater than anticipated, if we proceed with our
exploration, testing and construction activities beyond what we currently have
planned, or if we experience unforeseen delays during our activities over the
next twelve months, we will need to obtain additional
financing.  There are no assurances that we will be able to obtain
additional financing in an amount sufficient to meet our needs or on terms that
are acceptable to us.
  Obtaining
additional financing is subject to a number of factors, including the market
prices for the mineral property and base and precious metals.  These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.  If adequate funds are not available or if they are
not available on acceptable terms, our ability to fund our business plan could
be significantly limited and we may be required to suspend our business
operations.  We cannot assure you that additional financing will be
available on terms favorable to us, or at all. The failure to obtain such a
financing would have a material, adverse effect on our business, results of
operations and financial condition.
  If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of current stockholders will be reduced and
these securities may have rights and preferences superior to that of current
stockholders.  If we raise capital through debt financing, we may be
forced to accept restrictions affecting our liquidity, including restrictions on
our ability to incur additional indebtedness or pay dividends.
  For these
reasons, our financial statements filed herewith include a statement that these
factors raise substantial doubt about our ability to continue as a going
concern.  Our ability to continue as a going concern will be dependent
on our raising of additional capital and the success of our business
plan.
  38
   Critical
Accounting Policies
  Use of
estimates – The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period.  Actual results could differ
from those estimates.
  Mineral
rights – Costs of acquiring mining properties are capitalized upon
acquisition.  Mine development costs incurred to develop new ore
deposits, to expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially mineable
property. Costs incurred to maintain current production or to maintain assets on
a standby basis are charged to operations.  Costs of abandoned
projects are charged to operations upon abandonment.  The Company
evaluates the carrying value of capitalized mining costs and related property
and equipment costs, to determine if these costs are in excess of their
recoverable amount whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable.  Evaluation of the
carrying value of capitalized costs and any related property and equipment costs
would be based upon expected future cash flows and/or estimated salvage value in
accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived
Assets.
  Capitalized
interest cost - We capitalize interest cost related to acquisition,
development and construction of property and equipment which is designed as
integral parts of the manufacturing process of this project.  The
capitalized interest is recorded as part of the asset it relates to and will be
amortized over the asset’s useful life once production commences.
  Exploration
costs – Mineral exploration costs are expensed as incurred.
  Property and
Equipment –Property and equipment is stated at cost less accumulated
depreciation.  Depreciation is principally provided on the
straight-line method over the estimated useful lives of the assets, which are
generally 3 to 39 years.  The cost of repairs and maintenance is
charged to expense as incurred.  Expenditures for property betterments
and renewals are capitalized.  Upon sale or other disposition of a
depreciable asset, cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in other income
(expense).
  We
periodically evaluate whether events and circumstances have occurred that may
warrant revision of the estimated useful lives of property and equipment or
whether the remaining balance of property and equipment should be evaluated for
possible impairment.  If events and circumstances warrant evaluation,
we use an estimate of the related undiscounted cash flows over the remaining
life of the fixed assets in measuring their recoverability.
  Impairment of
long-lived assets–We review and evaluate long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17 if events or circumstances indicate that their carrying amount
might not be recoverable.  As of March 31, 2010 exploration progress
is on target with our exploration and evaluation plan and 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.
  39
   Results
of Operations
  The
following table illustrates a summary of our results of operations for the
periods listed below:
  Three
      Months Ended March 31,2010
              
              
              2009
              
              
              Percent
                Increase/
                (Decrease)Revenue
              
              $
              -
              
              
              $
              -
              
              
              
              n/aOperating
                Expenses
              
              
              (1,837,981
              )
              
              
              (1,572,226
              )
              
              
              16.9
              %Other
      Income
              
              
              5,740
              
              
              
              11,078
              
              
              
              (48.2
              )%Income
      tax benefit
              
              
              684,876
              
              
              
              581,093
              
              
              
              17.9
              %Gain
      from discontinued operations
              
              
              120,688
              
              
              
              --
              
              
              
              100.0
              %Net
      Loss
              
              $
              (1,026,677
              )
              
              $
              (980,055
              )
              
              
              4.8
              %
  Revenue
  We are
currently in the exploration stage of our business, and have not earned any
revenues from our planned mineral operations to date.  We did not
generate any revenues from inception in 2000 through the three month period
ended March 31, 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 March 31,2010
              
              
              2009
              
              
              Percent
                Increase/
                (Decrease)Mineral
      exploration and evaluation expenses
              
              $
              716,876
              
              
              $
              312,334
              
              
              
              129.5
              %Mineral
      exploration and evaluation expenses – related party
              
              
              117,857
              
              
              
              90,000
              
              
              
              31.0
              %Administrative
      – Clarkdale site
              
              
              99,515
              
              
              
              232,688
              
              
              
              (57.2
              )
      %General
      and administrative
              
              
              645,114
              
              
              
              733,043
              
              
              
              (12.0
              )
      %General
      and administrative –
                related
      party
              
              
              37,119
              
              
              
              22,202
              
              
              
              67.2
              %Depreciation
              
              
              221,500
              
              
              
              181,959
              
              
              
              21.7
              %Total
      Operating Expenses
              
              $
              1,837,981
              
              
              $
              1,572,226
              
              
              
              16.9
              %
  40
  Operating
expenses increased by 16.9% to $1,837,981 during the three month period ended
March 31, 2010 from $1,572,226 during the three month period ended March 31,
2009.  Operating expense increased primarily as a result of increases
in mineral exploration and evaluation expenses at our Clarkdale
project.
  Mineral
exploration and evaluation expenses increased to $716,876 during the three month
period ended March 31, 2010 from $312,334 during the three month period ended
March 31, 2009.  Mineral exploration and evaluation expenses increased
primarily as a result of greater use of independent consultants and engineers
related to pre-production activity on the Clarkdale project.
  Included
in mineral exploration and evaluation expenses were the amounts of $117,857 and
$90,000 paid in the three month period ended March 31, 2010 and 2009,
respectively, to Nanominerals Corp. (one of our principal stockholders and an
affiliate of Ian R. McNeil, our Chief Executive Officer and President and a
director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a
director) for technical assistance, including providing us with the use of its
laboratory, instrumentation, milling equipment and research facilities with
respect to our Searchlight Gold Project and Clarkdale Slag Project and financing
related activities, including providing assistance to us when potential
financiers performed technical due diligence on our projects and made technical
presentations to potential investors in connection with the exploration, testing
and construction of our mineral projects, and reimbursement of expenses provided
by Nanominerals in connection with the exploration, testing and construction of
our mineral projects.
  Administrative
– Clarkdale site expenses decreased to $99,515 during the three month period
ended March 31, 2010 from $232,688 for the three month period ended March 31,
2009. Administrative costs at the Clarkdale site decreased due to a change in
focus from administrative activities to project operation and pre-production
activities.
  General
and administrative expenses decreased by 12.0% to $645,114 during the three
month period ended March 31, 2010 from $733,043 during the three month period
ended March 31, 2009.  General and administrative expenses decreased
primarily as a result of increased professional administrative expense in the
prior comparable period due to the preparation of our registration statement on
From 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 three month periods ended March
31, 2010 and 2009 were compensation expenses related to the option vesting and
option grants of $28,118 and $27,159, 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 March 31, 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 March 31, 2010, 231,250 options have been granted
under the 2009 Directors Plan with an exercise price ranging from $1.20 to $1.60
per share.
  In
addition, we incurred $37,119 and $22,202 during the three month periods ended
March 31, 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 expenses increased as a result of accounting for
increased transactional volume related to the additional activity on the
Clarkdale Slag Project and increased equity transactions related to our private
placements in the fourth quarter of 2009 and to additional equity compensation
arising from expansion of our board of directors in the first quarter of
2010.  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 $15,590 and $9,768 of the above Cupit, Milligan,
Ogden & Williams fees for the three month periods ended March 31, 2010 and
2009, respectively.
  41
 Depreciation
expense increased to $221,500 during the three month period ended March 31, 2010
from $181,959 during the three month period ended March 31,
2009.  Depreciation expense increased as a result of bringing
additional construction in progress items into service and acquiring additional
equipment.
  For the
three month period ended March 31, 2010, we purchased services from two major
vendors, Baker Hostetler LLP, our legal counsel, and Nanominerals Corp which
exceeded more than 10% of total purchases and amounted to approximately $225,000
and $117,857, respectively.  For the three month period ended March
31, 2009, we purchased services from two major vendors, Baker Hostetler LLP and
Cimetta Engineering, which exceeded more than 10% of total purchases and
amounted to approximately $257,519 and $296,754, respectively.
  Other
Income and Expenses
  Total
other income decreased to $5,740 during the three month period ended March 31,
2010 from $11,078 during the three month period ended March 31,
2009.  The decrease in total other income primarily resulted from a
decrease in interest and dividend income.  The decrease in interest
and dividend income earned was attributable to lower interest rates and to lower
cash reserves earning interest.
  During
the three month period ended March 31, 2010, we received incidental rental
revenue of $6,480 compared to $7,540 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.
  Income
Tax Benefit
  Income
tax benefit increased to $684,876 for the three month period ended March 31,
2010 from $581,093 during the three month period ended March 31,
2009.  The increase in income tax benefit primarily resulted from the
increase in exploration stage losses during the three month period ended March
31, 2010 from the three month period ended March 31, 2009.
  Gain
from Discontinued Operations
  Prior to
our corporate restructuring in 2005, we had several accounts payable (the “Phage
Payables”) dating back to 2003 and prior. All of these Phage Payables were
incurred in the United Kingdom (“UK”).  These expenses were related to
business operations which were discontinued in February 2005.  In the
first quarter of 2010, we updated our internal review of the status of the Phage
Payables and recorded a $120,688 gain resulting from relief of liabilities that
were cleared based on expiration of UK statutes of limitations. The gain is
reflected as a gain from discontinued operations. There was no tax impact as the
prior expenses occurred while we operated outside the United States and the
losses are not included in our net operating losses.
  42
 Net
Loss
  The
aforementioned factors resulted in a net loss of $1,026,677, or $0.01 per common
share, for the three month period ended March 31, 2010, as compared to a net
loss of $980,055, or $0.01 per common share, for the three month period ended
March 31, 2009.
  As of
March 31, 2010 and December 31, 2009, we had cumulative net operating loss
carryforwards of approximately $20,554,170 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 $11,423,466 and
$10,148,277 as of March 31, 2010 and December 31, 2009, respectively for state
income tax purposes.  The state net operating loss carryforwards
expire between 2013 and 2015.
  Liquidity
and Capital Resources
  Historically, we have financed our operations primarily through the
sale of common stock and other convertible equity securities.  During
2009, we conducted the following private placement of our
securities:
  ·
              On
      November 12, 2009, we completed a private placement offering for gross
      proceeds of $15,098,245 to US accredited investors. A total of 12,078,596
      units were issued at a price of $1.25. Each unit sold consisted of one
      share of common stock and one-half of one share common stock purchase
      warrants. Each whole share purchase warrant entitles the folder to
      purchase one additional share of our common stock at a price of $1.85 per
      share for a period of three years form the date of issuance. In connection
      with this offering, we paid commissions to agents in the amount of
      $1,056,877 and issued warrants to purchase up to 301,965 shares of common
      stock. Additional costs related to this financing issuance were
      $290,196.
  On
November 12, 2009, immediately prior to the closing of the November 12, 2009
private placement, we made several amendments to our outstanding common stock
purchase warrants. The warrants that were amended were issued in connection with
our February 23, 2007, March 22, 2007, December 26, 2007 and February 7, 2008
private placements. In connection with these private placements, we issued
warrants to purchase up to an aggregate of 7,042,387 shares of common stock.
Based on these amendments, the exercise price of these warrants was reduced to
$1.85 per share and their expiration dates were extended to November 12, 2012.
In all other respects, the terms and conditions of these warrants remain the
same.
  The 2009
private placement agreements included contractual penalty provisions for failure
to comply with these registration rights provisions. However, we are in
compliance with these registration rights provisions. We are not a party to any
other agreements which require us to pay liquidated damages in the future for
failure to register securities for sale.
  Working
Capital
  The
following is a summary of our working capital at March 31, 2010 and December 31,
2009:
  At
      March 31,
                2010
              
              
              At
      December 31,
                2009
              
              
              Percent
                Increase/(Decrease)Current
      Assets
              
              $
              11,098,383
              
              
              $
              13,221,823
              
              
              
              (16.1
              )
      %Current
      Liabilities
              
              
              (566,491
              )
              
              
              (874,470
              )
              
              
              (35.2
              )
      %Working
      Capital
              
              $
              10,531,892
              
              
              $
              12,347,353
              
              
              
              (14.7
              )
      %
  43
  As of
March 31, 2010, we had an accumulated deficit of $18,518,583. As of March 31,
2010, we had working capital of $10,531,892, 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 and capital expenditures.
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 $10,893,483 as of March 31, 2010, as compared to $13,099,562 as of December
31, 2009.  Net property and equipment increased to $14,080,455 as of
March 31, 2010 from $13,994,934 as of December 31, 2009.  The increase
primarily resulted from site improvements and equipment acquisitions at the
Clarkdale Slag Project partially offset by depreciation expense.
  Included
in long term liabilities in the accompanying consolidated financials statements
is a balance of $47,178,994 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:
  Three
      Months Ended March 31,2010
              
              
              2009
              
              
              Percent
                Increase/(Decrease)Cash
      Flows Used in Operating
                Activities
              
              $
              (1,841,719
              )
              
              $
              (1,548,896
              )
              
              
              18.9
              %Cash
      Flows Used in Investing
                Activities
              
              
              (307,021
              )
              
              
              (846,611
              )
              
              
              (63.7
              )%Cash
      Flows (Used) Provided by  Financing Activities
              
              
              (57,339
              )
              
              
              71,851
              
              
              
              (179.8
              )%Net
      Change in Cash During Period
              
              $
              (2,206,079
              )
              
              $
              (2,323,656
              )
              
              
              (5.1
              )%
  Net Cash Used in
Operating Activities.  Net cash used in operating activities
increased to $1,841,719 during the three month period ended March 31, 2010 from
$1,548,896 during the three month period ended March 31, 2009.  The
increase in cash used in operating activities was primarily due to operating
losses from our exploration and evaluation activity and general and
administrative expenses, offset by non-cash elements which were primarily
related to depreciation expense of $221,500.
  Net Cash Used in
Investing Activities.  We used $307,021 in investing activities
during the three month period ended March 31, 2010, as compared to $846,611
during the three month period ended March 31, 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 $57,339 for the three month period ended March 31, 2010 compared
to net cash provided by financing activities of $71,851 for the three month
period ended March 31, 2009.  Net cash used by financing activities
during the three month period ended March 31, 2010 primarily resulted from
principal payments on the capital lease and the deferred purchase
liability.  Net cash provided by financing activities during the three
month period ended March 31, 2009 primarily resulted from the receipt of
$125,000 from the exercise of warrants offset by principal payments on the
capital lease and the deferred purchase liability.
  44
 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 exploration of the Searchlight Gold
Project.  Over the next twelve months, our management anticipates that
the minimum cash requirements for funding our proposed exploration, testing and
construction program and our continued operations will be approximately
$9,700,000.As of
March 31, 2010, we had cash reserves in the amount of approximately
$10,893,483.  On November 12, 2009, we completed a private placement
of 12,078,596 units of our securities at a purchase price of $1.25 per unit,
resulting in aggregate gross proceeds to us of $15,098,245.  Based on
the net proceeds received by us from the private placement, we estimate that our
current financial resources are sufficient to allow us to meet the anticipated
costs of our exploration, testing and construction programs for the 2010 fiscal
year.  However, if actual costs are greater than we have anticipated,
we will require additional financing in order to fund our exploration, testing
and construction plans for 2010.  We do not currently have any
financing arrangements in place for such additional financing, and there are no
assurances that we will be able to obtain additional financing in an amount
sufficient to meet our needs or on terms that are acceptable to us.
  Our
current twelve month plan also includes anticipated expenditure of approximately
$6,000,000 on Phase II of our Clarkdale Slag Project and $4,700,000 to complete
the construction of an Industrial Collector Road pursuant to an agreement with
the Town of Clarkdale, Arizona by January 2011, subject to funding
availability.  We will require additional funding to fulfill our
entire anticipated plan of operations.  In addition, the actual costs
of completing those activities may be greater than anticipated.
  If the
actual costs are significantly greater than anticipated, if we proceed with our
exploration, testing and construction activities beyond what we currently have
planned, or if we experience unforeseen delays during our activities over the
next twelve months, we will need to obtain additional
financing.  There are no assurances that we will be able to obtain
additional financing in an amount sufficient to meet our needs or on terms that
are acceptable to us.
  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.
  45
 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 FASB (Financial
Accounting Standards Board) 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.
  Effective
July 1, 2009, the FASB Accounting Standards Codification
(ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single
source for authoritative nongovernmental U.S. generally accepted accounting
principles.  Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants.  The ASC does not change
U.S. GAAP, but is intended to simplify user access to all authoritative U.S.
GAAP by providing all the authoritative literature related to a particular topic
in one place.  Effective September 15, 2009, all of our public filings
will reference the ASC as the sole source of
authoritative literature.
  In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair
Value Measurements, which requires reporting entities to make new
disclosures about recurring or nonrecurring fair value measurements including
significant transfers into and out of Level 1 and Level 2 fair value
measurements and information on purchases, sales, issuances, and settlements on
a gross basis in the reconciliation of Level 3 fair value measurements.
ASU 2010-6 is effective for annual reporting periods beginning after
December 15, 2009, except for Level 3 reconciliation disclosures which
are effective for annual periods beginning after December 15, 2010. We do
not have any assets or liabilities classified as Level 3. We have adopted the
Level 1 and Level 2 amendments accordingly. As the update only pertained to
disclosures, it had no impact on our financial position, results of operations,
or cash flows upon adoption.
  In
February 2010, the FASB issuedASU 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 $10,893,483 at March 31, 2010 and $13,099,562 at
December 31, 2009.  Our cash is held primarily in non-interest bearing
checking accounts and a money market account and is not materially affected by
fluctuations in interest rates.  The unrestricted cash is held for
working capital purposes.  We do not enter into investments for
trading or speculative purposes.  Due to the short-term nature of
these cash holdings, we believe that we do not have any material exposure to
changes in the fair value of our investment portfolio as a result of changes in
interest rates.  Declines in interest rates, however, would reduce
future investment income.
  46
  Item
4.  Controls and Procedures
  Controls
and Procedures
  As of
March 31, 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 March 31, 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.
  In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
  Changes
in Internal Control Over Financial Reporting
  There
were no changes in our internal controls over financial reporting during the
quarter ended March 31, 2010 that materially affected, or are reasonably likely
to materially affect, our internal controls over financial
reporting.
  PART II - OTHER INFORMATION
  Item
1.  Legal Proceedings
  From time
to time, we are a party to claims and legal proceedings arising in the ordinary
course of business.  Our management evaluates our exposure to these
claims and proceedings individually and in the aggregate and provides for
potential losses on such litigation if the amount of the loss is determinable
and the loss is probable.
  We
believe that there are no material litigation matters at the current
time.  Although the results of such litigation matters and claims
cannot be predicted with certainty, we believe that the final outcome of such
claims and proceedings will not have a material adverse impact on our financial
position, liquidity, or results of operations.
  Item
1A.  Risk Factors
  In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in the section entitled “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2009, which to our
knowledge have not materially changed.  Those risks, which could
materially affect our business, financial condition or future results, are not
the only risks we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.
  47
  Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
  On March
1, 2010, we issued options to purchase up to 200,000 shares of common stock to
an independent director upon his appointment to the Board.  The
options have an exercise price of $1.59 per share, vest pro rata over four
years, from March 1, 2011 through March 1, 2014, and expire on the five year
anniversary of the vesting date. These securities were issued pursuant to
Section 4(2) of the Securities Act.
  On March
31, 2010, we issued 15,000 shares of our common stock to two non-management
directors, pursuant to the director compensation policy for these two
non-management directors. The 15,000 shares were issued based on a price of
$1.20 per share, the closing price of our common stock on March 31, 2010, the
last trading day of the first quarter of 2010.  These securities were
issued pursuant to Section 4(2) of the Securities Act.
  On March
31, 2010, we issued options to purchase up to 20,000 shares of our common stock
to two non-management directors, pursuant to the director compensation policy
for these two non-management directors.  The 20,000 options were
issued at an exercise price of $1.20 per share, the closing price of our common
stock on March 31, 2010, the last trading day of the first quarter of
2010.  These securities were issued pursuant to Section 4(2) of the
Securities Act.
  Item
3.  Defaults Upon Senior Securities
  None.
  Item
4.  Submission of Matters to a Vote of Security Holders
  No
matters were submitted to our stockholders, through the solicitation of proxies
or otherwise, during the quarter ended March 31, 2010.
  Item
5.  Other Information
  Not
applicable.
  48
 Item
6.  Exhibits
 EXHIBIT TABLE
  The
following is a complete list of exhibits filed as part of the Quarterly Report
on Form 10-Q, some of which are incorporated herein by reference from the
reports, registration statements and other filings of the issuer with the
Securities and Exchange Commission, as referenced below:
   Reference
                Number
              Item31.1
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
              Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
              Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002
 
 
 49
  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:
      May 7, 2010
              By:
              /s/ Ian R.
      McNeilIan
      R. McNeilPresident
      and Chief Executive Officer
                (Principal
      Executive Officer)Date:
      May 7, 2010
              By:
              /s/Melvin L.
      WilliamsMelvin
      L. WilliamsChief
      Financial Officer
                (Principal
      Accounting Officer)
 
  50