Searchlight Minerals (SRCH) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2009

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

For the transition period from _______ to _______.

Commission file number 000-30995

SEARCHLIGHT MINERALS CORP.

(Exact name of registrant as specified in its charter)

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

(702) 939-5247

(Registrant’s telephone number, including area code)

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

Yes     x     No     ¨

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

Yes     ¨     No     ¨

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

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Smaller reporting company ¨

(Do not check if a smaller reporting company)

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

Yes     ¨     No     x

As of August 6, 2009, the registrant had 106,568,637 outstanding shares of common stock.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.  Controls and Procedures	55
PART II - OTHER INFORMATION	55
Item 1.  Legal Proceedings	55
Item 1A.  Risk Factors	55
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.  Defaults Upon Senior Securities	56
Item 4.  Submission of Matters to a Vote of Security Holders	56
Item 5.  Other Information	56
Item 6.  Exhibits	57
SIGNATURES	58

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2009			December 31, 2008
ASSETS
Current assets
Cash	$	2,908,814		$	7,055,591
Prepaid expenses		155,091			251,414
Total current assets		3,063,905			7,307,005
Property and equipment, net		13,976,743			13,132,282
Mineral properties		16,947,419			16,947,419
Slag project		120,766,877			120,766,877
Land - smelter site and slag pile		5,916,150			5,916,150
Land		3,300,000			3,300,000
Reclamation bond and deposits, net		103,100			109,900
Total non-current assets		161,010,289			160,172,628
Total assets	$	164,074,194		$	167,479,633
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	806,115		$	1,093,778
Accounts payable - related party		142,569			108,515
VRIC payable, current portion - related party		202,677			194,756
Capital lease payable, current portion		24,565			24,026
Total current liabilities		1,175,926			1,421,075
Long-term liabilities
VRIC payable, net of current portion - related party		1,855,416			1,958,774
Capital lease payable, net of current portion		27,873			40,291
Deferred tax liability		49,229,239			50,455,361
Total long-term liabilities		51,112,528			52,454,426
Total liabilities		52,288,454			53,875,501
Commitments and contingencies - Note 12		-			-
Stockholders' equity
Common stock, $0.001 par value; 400,000,000 shares authorized, 106,468,637 and 105,854,691 shares, respectively, issued and outstanding		106,468			105,854
Additional paid-in capital		127,094,138			126,854,760
Accumulated deficit during exploration stage		(15,414,866	)		(13,356,482	)
Total stockholders' equity		111,785,740			113,604,132
Total liabilities and stockholders' equity	$	164,074,194		$	167,479,633

See Accompanying Notes to these Consolidated Financial Statements

3

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

													For the period from
													January 14, 2000
													(Date of Inception)
	For the three months ended						For the six months ended						Through
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008			March 31, 2009
Revenue	$	-		$	-		$	-		$	-		$	-
Operating expenses
Mineral exploration and evaluation expenses		531,291			334,390			843,626			448,908			5,882,310
Mineral exploration and evaluation expenses - related party		90,000			90,000			180,000			180,000			1,395,000
Administrative - Clarkdale site		138,250			272,769			370,937			507,908			2,026,798
General and administrative		716,160			689,031			1,449,204			1,281,025			7,567,373
General and administrative - related party		67,617			10,722			89,819			27,125			205,573
Depreciation		186,657			15,430			368,615			30,552			475,694
Total operating expenses		1,729,975			1,412,342			3,302,201			2,475,518			17,552,748
Loss from operations		(1,729,975	)		(1,412,342	)		(3,302,201	)		(2,475,518	)		(17,552,748	)
Other income (expense)
Rental revenue		6,565			7,740			14,105			17,040			86,235
Loss on equipment disposition		-			-			(1,542	)		-			(6,068	)
Interest expense		(628	)		(887	)		(1,321	)		(1,837	)		(6,811	)
Interest and dividend income		680			40,479			6,453			138,839			601,637
Total other income (expense)		6,617			47,332			17,695			154,042			674,993
Loss before income taxes		(1,723,358	)		(1,365,010	)		(3,284,506	)		(2,321,476	)		(16,877,755	)
Income tax benefit		645,029			505,275			1,226,122			868,904			5,606,057
Loss from continuing operations		(1,078,329	)		(859,735	)		(2,058,384	)		(1,452,572	)		(11,271,698	)
Discontinued operations:
Loss from discontinued operations		-			-			-			-			(4,143,168	)
Net loss	$	(1,078,329	)	$	(859,735	)	$	(2,058,384	)	$	(1,452,572	)	$	(15,414,866	)
Loss per common share - basic and diluted
Loss from continuing operations	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.01	)
Net loss	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.01	)
Weighted average common shares outstanding -
Basic and diluted		106,457,962			104,276,436			106,363,518			102,853,530

See Accompanying Notes to these Consolidated Financial Statements

4

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

							Accumulated
							Deficit During			Total
	Common Stock				Additional		Exploration			Stockholders'
	Shares		Amount		Paid-in Capital		Stage			Equity
Balance, December 31, 2008		105,854,691	$	105,854	$	126,854,760	$	(13,356,482	)	$	113,604,132
Issuance of common stock for cash, $0.25 per share from exercise of nonemployee stock options		400,000		400		99,600		-			100,000
Issuance of common stock for cash, $0.25 per share from exercise of nonemployee stock options		100,000		100		24,900		-			25,000
Amortization of stock options issued to director over vesting period		-		-		19,149		-			19,149
Issuance of common stock for directors' compensation		6,568		7		17,993		-			18,000
Issuance of stock options for directors' compensation		-		-		8,010		-			8,010
Issuance of common stock for cash, $0.25 per share from exercise of nonemployee stock options		100,000		100		24,900		-			25,000
Amortization of stock options issued to director over vesting period		-		-		19,149		-			19,149
Issuance of common stock for directors' compensation		7,378		7		17,993		-			18,000
Issuance of stock options for directors' compensation		-		-		7,684		-			7,684
Net loss June 30, 2009		-		-		-		(2,058,384	)		(2,058,384	)
Balance, June 30, 2009		106,468,637	$	106,468	$	127,094,138	$	(15,414,866	)	$	111,785,740

See Accompanying Notes to these Consolidated Financial Statements

5

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

							Period from
							January 14, 2000
							(Date of inception)
	For the six months ended						through
	June 30, 2009			June 30, 2008			June 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,058,384	)	$	(1,452,572	)	$	(15,414,866	)
Deduct: Loss from discontinued operations		-			-			(4,143,168	)
Loss from continuing operations		(2,058,384	)		(1,452,572	)		(11,271,698	)
Adjustments to reconcile loss from operating to net cash used in operating activities:
Depreciation		368,615			30,552			475,694
Stock based expenses		89,992			73,316			1,184,497
Loss on disposition of fixed assets		1,542			-			7,417
Amortization of prepaid expense		114,826			86,445			469,152
Allowance for bond deposit recovery		-			-			180,500
Changes in operating assets and liabilities:
Other current assets		(18,503	)		(19,591	)		(624,243	)
Other assets		900			(101,000	)		(289,500	)
Accounts payable and accrued liabilities		(253,609	)		(269,650	)		223,126
Deferred income taxes		(1,226,122	)		(868,904	)		(5,606,057	)
Net cash used in operating activities		(2,980,743	)		(2,521,404	)		(15,251,112	)
Net cash used in operating activities from discontinued operations		-			-			(2,931,324	)
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid on mineral property claims		-			-			(87,134	)
Cash paid for joint venture and merger option		-			-			(890,000	)
Cash paid to VRIC on closing date		-			-			(9,900,000	)
Cash paid for additional acquisition costs		-			-			(130,105	)
Capitalized interest		(84,563	)		(91,877	)		(426,906	)
Purchase of property and equipment		(1,124,155	)		(3,495,044	)		(13,271,259	)
Net cash used in investing activities		(1,208,718	)		(3,586,921	)		(24,705,404	)
Net cash used in investing activities from discontinued operations		-			-			(452,618	)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from stock issuance		150,000			7,738,500			43,689,500
Stock issuance costs		-			-			(677,570	)
Principal payments on capital lease payable		(11,879	)		(11,364	)		(63,800	)
Principal payments on deferred purchase liability		(95,437	)		(88,124	)		(443,095	)
Proceeds from subscribed stock		-			-			360,000
Net cash provided by financing activities		42,684			7,639,012			42,865,035
Net cash provided by financing activities from discontinued operations		-			-			3,384,237
NET CHANGE IN CASH		(4,146,777	)		1,530,687			2,908,814
CASH AT BEGINNING OF PERIOD		7,055,591			12,007,344			-
CASH AT END OF PERIOD	$	2,908,814		$	13,538,031		$	2,908,814

See Accompanying Notes to these Consolidated Financial Statements

6

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

					Period from
					January 14, 2000
					(Date of inception)
	For the six months ended				through
	June 30, 2009		June 30, 2008		June 30, 2009
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
SUPPLEMENTAL INFORMATION
Interest Paid, net of capitalized amounts	$	1,321	$	1,837	$	57,562
Income Taxes Paid	$	-	$	-	$	-
Non-cash investing and financing activities:
Capital equipment purchased through accounts payable and financing	$	-	$	363,442	$	444,690
Assets acquired for common stock issued for the acquisition	$	-	$	-	$	66,879,375
Assets acquired for common stock issued for mineral properties	$	-	$	2,632,000	$	10,220,000
Assets acquired for liabilities incurred in the acquisition	$	-	$	-	$	2,628,188
Net deferred tax liability assumed	$	-	$	1,613,161	$	55,197,465
Merger option payment applied to the acquisition	$	-	$	-	$	200,000
Reclassify joint venture option agreement to slag project	$	-	$	-	$	690,000
Warrants issued in connection with joint venture option agreement related to slag project	$	-	$	-	$	1,310,204
Stock options for common stock issued in satisfaction of debt	$	-	$	-	$	1,500,000
Capitalization of related party liability to equity	$	-	$	-	$	742,848
Stock issued for conversion of accounts payable, 200,000 shares at $0.625	$	-	$	-	$	125,000

See Accompanying Notes to these Consolidated Financial Statements

7

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Basis of presentation – The accompanying unaudited financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-K, as amended, for the year ended December 31, 2008 of Searchlight Minerals Corp. (the “Company”).

The interim financial statements present the balance sheets, statements of operations, stockholders’ equity, and cash flows of the Company. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

These financial statements have been prepared by the Company without audit, and include all adjustments (which consist solely of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2008.

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through August 7, 2009, the date the financial statements were issued.

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

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

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

8

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Going concern - The Company incurred cumulative net losses of $15,414,866 from operations as of June 30, 2009 and has not commenced its mining and mineral processing operations, rather, still in the exploration stage, raising substantial doubt about the Company’s ability to continue as a going concern.  The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.

The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company’s plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Principles of consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Clarkdale Minerals, LLC (CML) and Clarkdale Metals Corp. (CMC).  Significant intercompany accounts and transactions have been eliminated.

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

Mineral rights - Costs of acquiring mining properties are capitalized upon acquisition.  Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations.  Costs of abandoned projects are charged to operations upon abandonment.  The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  The periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”

Capitalized interest cost - The Company capitalizes interest cost related to acquisition, development and construction of property and equipment which is designed as integral parts of the manufacturing process.  The capitalized interest is recorded as part of the asset it relates to and will be amortized over the asset’s useful life once production commences.  Interest cost capitalized from imputed interest on acquisition indebtedness was $84,563 and $91,877 for the six months ended June 30, 2009 and 2008, respectively.

9

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Exploration costs – Mineral exploration costs are expensed as incurred.

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

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

Impairment of long-lived assets – The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under SFAS No. 144 if events or circumstances indicate that their carrying amount might not be recoverable.  As of June 30, 2009 exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines that a SFAS 144 impairment analysis should be done, the analysis will be performed using the rules of EITF 04-03, “Mining Assets: Impairment and Business Combinations.”

Various factors could impact our ability to achieve forecasted production schedules. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.

Material changes to any of these factors or assumptions discussed above could result in future impairment charges to operations.

10

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Asset retirement obligation - The Company has adopted Statement of Financial Accounting Standard No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations”, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset.  The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset.  The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.  The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate.  To date, no significant asset retirement obligation exists due to the early stage of exploration.  Accordingly, no liability has been recorded.

Fair value of financial instruments - The Company’s financial instruments consist of accounts payable, accrued liabilities, capital lease payable and mineral property purchase obligations. The carrying value of these financial instruments approximates their fair value based on their liquidity or their short-term nature.  The Company is not exposed to significant interest or credit risk arising from these financial instruments.

Revenue recognition - Revenues are recognized during the period in which the revenues are earned. Costs and expenses are recognized during the period in which they are incurred.

Research and development - All research and development expenditures are expensed as incurred.

Earnings (loss) per share - The Company follows Statement of Financial Accounting Standard No. 128 (“SFAS 128”), “Earnings Per Share” and Statement of Financial Accounting Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly-held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding.  In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants.  Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Weighted average of common stock equivalents, which include stock options and warrants to purchase common stock, on June 30, 2009 and 2008 that were not included in the computation of diluted EPS because the effect would be antidilutive were, 21,953,465 and 24,361,656, respectively.

Expenses of offering – The Company accounts for specific incremental costs directly to a proposed or actual offering of securities as a direct charge against the gross proceeds of the offering.

11

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Income taxes - The Company accounts for its income taxes in accordance with the Statement of Financial Accounting No. 109 (“SFAS 109”), “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

On July 13, 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.  Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained.  Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company adopted the provision of FIN 48 on January 1, 2007, which did not have any impact on the consolidated financial statements.

For acquired properties that do not constitute a business as defined in Emerging Issues Task Force Issue No. 98-03 (“EITF 98-03”), “Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business”, deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal and state rates. The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis is computed in accordance with EITF 98-11 “Accounting for Acquired Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business Combinations” and SFAS 109, and is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence of there being a goodwill component associated with the acquisition transactions.

12

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Stock-based compensation - On December 16, 2004, the FASB issued Statement of Financial Accounting Standard No. 123R (“SFAS 123R”), “Share-Based Payment”, which replaces Statement of Financial Accounting Standard No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption option. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company adopted the requirements of SFAS No. 123R for the fiscal year beginning after December 31, 2004.

New accounting pronouncements – The FASB has issued FASB Statement No. 168, The “FASB Accounting Standards CodificationTM” and the Hierarchy of Generally Accepted Accounting Principles. Statement 168 establishes the FASB Accounting Standards CodificationTM (Codification) as the single source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  Statement 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009.

The FASB has issued FASB Statement No. 167, “Amendment to FASB Interpretation No. 46(R)”. Statement 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), ‘Consolidation of Variable Interest Entities”, and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance.  Statement 167 will require a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement.  A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. Statement 167 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Adoption of this statement is not expected to have a material impact on the Company’s consolidated financial statements.

13

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

The FASB has issued FASB Statement No. 166, “Accounting for Transfers of Financial Assets”. Statement 166 is a revision to FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”, and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risk related to the transferred financial assets.  It eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets, and requires additional disclosures.  Statement 166 enhances information reported to users of financial statements by providing greater transparency about transfers of financial assets and an entity’s continuing involvement in transferred financial assets.  Statement 166 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Adoption of this statement is not expected to have a material impact on the Company’s consolidated financial statements.

The FASB has issued FASB Statement No. 165, “Subsequent Events”. Statement 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet but before financial statements are issued or are available to be issued. Specifically, Statements 165 provides: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  Statement 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively.  The required disclosures of this statement have been incorporated into the Company’s consolidated financial statements.

In April 2009, FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1 was issued to amend SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments for interim reporting period as well as in annual financial statements. This FSP also amends APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in summarized financial information at interim reporting periods. FSP No. 107-1 and APB 28-1 is effective for interim reporting period ending after June 15, 2009. Adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2009, FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, was issued to provide additional guidance for estimating the fair value in accordance with SFAS No. 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also provides guidance on identifying circumstances that indicate a transaction is not orderly. FSP No. FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

14

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

In April 2009, FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”. This FSP amends the guidance in FASB Statement No. 141 to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value of such asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with FASB Statement No. 5, “Accounting for Contingencies”, and FASB Interpretation (FIN) No. 14, “Reasonable Estimation of the Amount of a Loss”. This FSP eliminates the requirements to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. This FSP also requires that contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in accordance with Statement 141R. This FSP is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Post-Retirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which amends FASB Statement No. 132 “Employers’ Disclosures about Pensions and Other Post-Retirement Benefits” (“FAS 132”), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other post-retirement plan. The objective of FSP FAS 132(R)-1 is to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for the Company’s fiscal year ending after December 15, 2009. Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative purposes. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In November 2008, the EITF reached consensus on Issue No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”), which clarifies the accounting for certain transactions and impairment considerations involving equity method investments. The intent of EITF 08-6 is to provide guidance on (i) determining the initial carrying value of an equity method investment, (ii) performing an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment, (iii) accounting for an equity method investee’s issuance of shares, and (iv) accounting for a change in an investment from the equity method to the cost method. EITF 08-6 is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

 In June 2008, the EITF reached consensus on Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). EITF 07-5 is effective for the Company’s fiscal years beginning January 1, 2009. Early adoption for an existing instrument is not permitted. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

15

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FAS 133. Convertible debt instruments within the scope of FSP APB 14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments within the scope of FSP APB 14-1 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This requires an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component will be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. FSP APB 14-1 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied retrospectively to all periods presented.  The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141, “Business Combinations” (“FAS 141”). FSP 142-3 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied prospectively to intangible assets acquired after the effective date. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

The FASB issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active”. The FSP clarifies the application of FASB Statement No. 157, “Fair Value Measurements”, in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP is effective October 10, 2008, and for prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in FASB Statement No. 154, “Accounting Changes and Error Corrections”. However, the disclosure provisions in Statement 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation techniques or its application. The adoption of this statement had no material effect on the Company’s consolidated financial position, results of operations, and disclosures.

16

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

On March 19, 2008, the FASB issued Statement of Financial Accounting Standard No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities.”  This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  The provisions of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January 1, 2009.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141(R) (“SFAS 141(R)”), “Business Combinations,” which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

In December 2007, the FASB issued Statement of Financial Accounting Standard  No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51” which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for the Company’s fiscal year beginning January 1, 2009. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

17

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2009 and December 31, 2008:

	June 30, 2009		December 31, 2008
Furniture and fixtures	$	36,740	$	35,813
Lab equipment		216,923		2,804
Computers and equipment		59,442		50,253
Income property		309,750		309,750
Construction in progress		5,392,815		12,289,996
Capitalized interest		426,906		342,343
Vehicles		38,175		38,175
Demo module building		6,621,980		—
Site improvements		1,132,924		—
Site equipment		214,242		168,949
		14,449,897		13,238,083
Less accumulated depreciation		473,154		105,801
	$	13,976,743	$	13,132,282

Depreciation expense was $368,615 and $30,552 for the six months ended June 30, 2009 and 2008, respectively.

18

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. CLARKDALE SLAG PROJECT

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

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

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

The Company applied EITF 98-03 with regard to the acquisition of the Clarkdale Slag Project. The Company determined that the acquisition of the Clarkdale Slag Project did not constitute an acquisition of a business, as that term is defined in EITF 98-03, and the Company recorded the acquisition as a purchase of assets.

The $130 million purchase price was comprised of a combination of the cash paid, the deferred tax liability assumed in connection with the acquisition, and the fair value of our common shares issued, based on the closing market price of our common stock, using the average of the high and low prices of our common stock on the closing date of the acquisition. The Clarkdale Slag Project is without known reserves and the project is exploratory in nature in accordance with Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As required by EITF 04-03 paragraph 2 and EITF 98-11, the Company then allocated the purchase price among the assets as follows (and also further described in this Note 3 to the financial statements): $5,916,150 of the purchase price was allocated to the slag pile site, $3,300,000 to the remaining land acquired, and $309,750 to income property and improvements. The purchase price allocation to the real properties was based on fair market values determined using an independent real estate appraisal firm (Scott W. Lindsay, Arizona Certified General Real Estate Appraiser No. 30292). The remaining $120,766,877 of the purchase price was allocated to the Slag Project, which has been capitalized as a tangible asset in accordance with EITF 04-02. Upon commencement of commercial production, the material will be amortized using the unit-of-production method over the life of the Slag Project.

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

19

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. CLARKDALE SLAG PROJECT (continued)

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

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

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

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

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

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

The acquisition agreement also contains additional contingent payment terms which are based on the Project Funding Date as defined in the agreement.

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

f) The Company has agreed to pay VRIC a minimum annual royalty of $500,000, commencing on the Project Funding Date (the “Advance Royalty”), and an additional royalty consisting of 2.5% of the “net smelter returns” on any and all proceeds of production from the Clarkdale Slag Project (the “Project Royalty”).  The Advance Royalty remains payable until the first to occur of: (1) the end of the first calendar year in which the Project Royalty equals or exceeds $500,000; or (2) February 15, 2017.  In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty and Project Royalty will not exceed $500,000 in any calendar year; and,

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

The Company has accounted for this as a contingent payment and upon meeting the contingency requirements, the purchase price of the Clarkdale Slag Project will be adjusted to reflect the additional consideration.

20

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. CLARKDALE SLAG PROJECT (continued)

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

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

The following table reflects the components of the Slag Project:

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

21

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. MINERAL PROPERTIES - MINING CLAIMS

As of June 30, 2009 mining claims consisted of 3,200 acres located near Searchlight, Nevada. The 3,200 acre property is staked as twenty 160 acre claims, most of which are also double-staked as 142 twenty acre claims. At June 30, 2009 mineral properties balance was $16,947,419.

The mining claims were acquired during 2005 with issuance of 1,400,000 shares of the Company’s common stock and the provision that the Company, at its option, issue an additional 1,400,000 shares each year in June for three remaining years.  On June 25, 2008, the Company issued the remaining 1,400,000 shares and received the title to the mining claims in consideration of the satisfaction of the option agreement.

The mining claims were capitalized as tangible assets in accordance with EITF 04-02.  Upon commencement of commercial production, the claims will be amortized using the unit-of-production method over the life of the claims.  If the Company does not continue with exploration after the completion of the feasibility study, the claims will be expensed at that time.

On August 26, 2005, the Company paid $180,500 to the Bureau of Land Management as a bond for future reclamation work in Searchlight, Nevada. As of June 30, 2009, the recovery of the reclamation bond is uncertain, therefore the Company has established a full allowance against the reclamation bond with the offsetting expense to project exploration costs.

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amount may not be recoverable. The assets are subject to impairment consideration under SFAS No. 144 if events or circumstances indicate that their carrying amount might not be recoverable. As of June 30, 2009 exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines that a SFAS 144 impairment analysis should be done, the analysis will be performed using the rules of EITF 04-03, “Mining Assets: Impairment and Business Combinations.”

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at June 30, 2009 and December 31, 2008 consisted of the following:

	June 30, 2009		December 31, 2008
Trade accounts payable	$	716,410	$	1,080,115
Accrued compensation and related taxes		61,765		7,546
Accrued property taxes		26,500		—
Other		1,440		6,117
	$	806,115	$	1,093,778

22

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6. CAPITAL LEASE PAYABLE

The Company leases equipment under a capital lease. The capital lease payable consisted of the following at June 30, 2009 and December 31, 2008,

Lender	Collateral	Monthly Payment		Interest Rate			Maturity	June 30, 2009			December 31, 2008
Caterpillar Financial Services
Corporation	Equipment	$	2,200		4.45	%	Jul-11	$	52,438		$	64,317
									52,438			64,317
Capital lease payable, current portion									(24,565	)		(24,026	)
Capital lease payable, net of current portion								$	27,873		$	40,291

The following table represents future minimum lease payments on the capital lease payable for each of the twelve month periods ending June 30,

2010	$	26,401
2011		26,401
2012		2,200
2013		—
Thereafter		—
Total future minimum lease payments	$	55,002
Imputed interest		(2,564	)
Present value of future minimum lease payments	$	52,438

The following assets acquired under the capital lease and the related amortization were included in property, plant and equipment at June 30, 2009 and December 31, 2008,

	June 30, 2009			December 31, 2008
Site Equipment	$	116,239		$	116,239
Accumulated amortization		(60,541	)		(46,011	)
	$	55,698		$	70,228

23

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. CLARKDALE ACQUISITION PAYABLE

Pursuant to the Clarkdale acquisition agreement the Company agreed to pay VRIC $30,000 per month until the Project Funding Date.

The Company has recorded a liability for this commitment using imputed interest based on its best estimate of future cash flows. The effective interest rate used was 8.00%, resulting in an initial present value of $2,501,187 and imputed interest of $1,128,813. The expected term used was 10 years which represents the maximum term the VRIC liability is payable if the Company does not obtain Project Funding.

The following table represents future principal payments on VRIC payable for each of the twelve month periods ending June 30,

2010	$	202,677
2011		219,499
2012		237,718
2013		257,448
2014		278,816
Thereafter		861,935
		2,058,093
VRIC payable, current portion		202,677
VRIC payable, net of current portion	$	1,855,416

The acquisition agreement also contains payment terms which are based on the Project Funding Date as defined in the agreement. The terms of and conditions of these payments are discussed in more detail in Note 3 and 12.

24

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. STOCKHOLDERS’ EQUITY

During the six months ended June 30, 2009 the Company’s stockholders’ equity activity consisted of the following:

a) On June 30, 2009, the Company awarded and issued 3,689 shares each to its two non officer directors pursuant to its directors’ compensation policy.  The share award was priced at $2.44 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

b) On April 14, 2009, the Company issued 100,000 shares of common stock from the exercise of stock options resulting in cash proceeds of $25,000.  Options exercised were for 100,000 shares of common stock at $0.25 per share.  These stock options were subject to an expiration date of November 23, 2010.

c) On March 31, 2009, the Company awarded and issued 3,284 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $2.74 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

d) On January 30, 2009, the Company issued 100,000 shares of common stock from the exercise of stock options resulting in cash proceeds of $25,000. Options exercised were for 100,000 shares of common stock at $0.25 per share.  These stock options were subject to an expiration date of November 23, 2010.

e) On January 12, 2009, the Company issued 400,000 shares of common stock from the exercise of stock options resulting in cash proceeds of $100,000. Options exercised were for 400,000 shares of common stock at $0.25 per share.  These stock options were subject to an expiration date of February 16, 2009.

9.  STOCKOPTION PLAN AND WARRANTS

On April 30, 2007, the Board of Directors adopted the 2007 Stock Option Plan (the “2007 Plan”) and determined to cease granting any further options under the Company’s 2006 Stock Option Plan. Under the terms of the 2007 Plan, options to purchase up to 40,000,000 shares of common stock of the Company may be granted to eligible Participants.  On May 8, 2007, the Board of Directors determined to cease granting any further options under the Company’s 2003 Nonqualified Stock Option Plan and amended the number of shares of the Company’s common stock available for issuance under the 2007 Plan to a maximum of 4,000,000. On June 15, 2007, shareholders of the Company approved the 2007 Plan.

The 2007 Plan provides that the option price for incentive stock options be the fair market value of the stock at the date of the grant and the option price for non-qualified stock options be no less than 85% of the fair market value of the stock at the date of the grant.  The maximum term of an option shall be established for that option by the Board of Directors or, if not so established, shall be ten years from the grant date. Options granted under the 2007 Plan become exercisable and expire as determined by the Board of Directors.

25

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. STOCK OPTION PLAN AND WARRANTS (continued)

During the six months ended June 30, 2009, the Company granted stock options as follows:

a) On June 30, 2009, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 7,377 shares of common stock at $2.44 per share.  The options were granted to an independent director for directors’ compensation are fully vested and expire on June 30, 2014.

b) On March 31, 2009, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 6,569 shares of common stock at $2.74 per share. The options were granted to an independent director for directors’ compensation are fully vested and expire on March 31, 2014.

Expenses for the six months ended June 30, 2009 and 2008 related to vesting and granting of stock options were $53,992 and $859, respectively and are included in general and administrative expense.

Stock options –During the six months ended June 30, 2009 the Company granted stock options to a director totaling 13,946, with a weighted average exercise price of $2.58 per share. As of June 30, 2009 stock options outstanding totaled 2,859,493 with a weighted average exercise price of $1.13 per share.

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2009:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2008		3,560,293		$	1.02
Options granted and assumed		13,946			2.58
Options expired		(114,746	)		2.43
Options cancelled		—			—
Options exercised		(600,000	)		0.25
Balance, June 30, 2009		2,859,493		$	1.13

The Company estimates the fair value of these options granted by using the Binomial Lattice option pricing-model with the following assumptions used for grants:

	2009
Dividend yield		—
Expected volatility	72.67% to 76.65%
Risk-free interest rate	1.67% to 2.54%
Expected life (years)		4.25

The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders.

26

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. STOCK OPTION PLAN AND WARRANTS (continued)

The Company estimated expected volatility using the historical volatility levels of the Company’s common stock.  The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues over equivalent lives of the options.

The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding and is a derived output of the Binomial Lattice model. The expected life of employee stock options is impacted by all of the underlying assumptions and calibration of the Company’s model. The Binomial Lattice model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations on all past option grants made by the Company.

The following table summarizes the changes of the Company’s stock options subject to vesting for the six months ended June 30, 2009:

	Number of Shares Subject to Vesting		Weighted Average Grant Date Fair Value
Unvested, December 31, 2008		200,000	$	0.79
Options granted		—		—
Options vested		—		—
Options cancelled		—		—
Unvested, June 30, 2009		200,000	$	0.79

As of June 30, 2009, there was $99,856 total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized as follows: 2009 - - $30,342, 2010 - $39,873, 2011 - $21,598, and 2012 - $8,043.

The following table summarizes information about options granted during the six months ended June 30, 2009:

Number of Options Granted During 2009	Exercise Price Equals, Exceeds Or Is Less than Mkt. Price of Stock On Grant Date	Weighted Average Exercise Price		Range of Exercise Price		Weighted Average Fair Value
13,946	Equals	$	2.58	$	2.44 to $2.74	$	1.13
—	Exceeds	$	—	$ — to $ —		$	—
��                   —	Less Than	$	—	$ — to $ —		$	—
13,946	Equals	$	2.58	$	2.44 to $2.74	$	1.13

27

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. STOCK OPTION PLAN AND WARRANTS (continued)

Stock options/warrants – During the six months ended June 30, 2009 the Company did not grant any stock warrants.

On December 29, 2008, the Company amended the private placement warrants from the February 23, 2007 and March 22, 2007 private placement offerings. The following material amendments to the private placement warrants were adopted: (i) the expiration date of the private placement warrants has been extended to March 1, 2010; (ii) the exercise price of the private placement warrants has been decreased to $2.40 per share; (iii) the call provision in the investor warrants is now included in the broker warrants; and (iv) the call provision in the private placement warrants has been amended so that all of such private placement warrants callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $4.40 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the private placement warrants at the time of the call of the private placement warrants.

On April 30, 2009, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders to amend and restate the call provisions in the private placement warrants further so that the terms of such amended and restated call provisions are identical to the terms of the private placement warrants on their original dates of issuance.  As a result: (v) all of the investor warrants are callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $6.50 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the investor warrants at the time of the call of the investor warrants, (vi) the broker warrants will not have call provision, (vii) the previously adopted amendments with respect to the extension of the expiration dates and the reduction of the exercise price for the private placement warrants will remain unchanged.

The Company determined that the amendment to extend the expiration date of the private placement warrants which were originally issued as part of equity transactions, did not result in an expense to the Company.  The warrants were not a component to any debt transaction, registration agreement or services rendered to the Company.

During the six months ended June 30, 2009 the Company issued stock options for 13,946 shares of common stock to a director with a weighted average exercise price of $2.58 per share.

The following table summarizes information about options/warrants granted during the six months ended June 30, 2009:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2008		22,602,680		$	1.11
Options/warrants granted and assumed		13,946			2.58
Options/warrants expired		(114,746	)		2.43
Options/warrants cancelled		—			—
Options/warrants exercised		(600,000	)		0.25
Balance, June 30, 2009		21,901,880		$	1.12

28

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10. PROPERTY RENTAL AGREEMENTS AND LEASES

The Company through its subsidiary CML has the following lease and rental agreements as lessor:

Clarkdale Arizona Central Railroad – Rental

CML has a month-to-month rental agreement with Clarkdale Arizona Central Railroad. The rental payment is $1,700 per month.

Commercial Building – Rental

CML rents commercial building space to various tenants. Rental arrangements are minor in amount and are typically month-to-month.

Land Lease – Wastewater Effluent

CML assumed a lease as lessor on February 15, 2007 that was entered into by TI on August 25, 2004 with the Town of Clarkdale, AZ (Clarkdale). The Company provides approximately 60 acres of land to Clarkdale for disposal of Class B effluent. In return, the Company has first right to purchase up to 46,000 gallons per day of the effluent for its use at fifty percent (50%) of the potable water rate. In addition, if Class A effluent becomes available, the Company may purchase that at seventy five percent (75%) of the potable water rate.

The term of the lease is 5 years with a one year extension available. At such time as Clarkdale no longer uses the property for effluent disposal, and for a period of twenty five (25) years measured from the date of the lease, the Company has a continuing right to purchase Class B, and if available, Class A at then market rates.

29

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. INCOME TAXES

The Company is a Nevada corporation and is subject to federal and Arizona income taxes.  Nevada does not impose a corporate income tax.

The income tax benefit consisted of the following at June 30, 2009 and 2008,

	June 30, 2009			June 30, 2008
Income tax benefit based on statutory tax rate	$	(1,262,831	)	$	(882,110	)
Non-deductible and other		1,691			2,125
Change in valuation allowance		35,018			11,081
Income tax benefit	$	(1,226,122	)	$	(868,904	)

Significant components of the Company’s net deferred income tax assets and liabilities at June 30, 2009 and December 31, 2008 were as follows:

	June 30, 2009			December 31, 2008
Deferred income tax assets
Net operating loss carryforward	$	5,885,066		$	4,742,104
Option compensation		369,929			349,412
Reclamation bond		68,590			68,590
Property, plant & equipment		83,160			—
Gross deferred income tax asset		6,406,745			5,160,106
Valuation allowance		(438,519	)		(403,501	)
		5,968,226			4,756,605
Deferred income tax liabilities
Property, plant & equipment		—			14,501
Acquisition related liabilities		55,197,465			55,197,465
Net deferred income tax liability	$	49,229,239		$	50,455,361

A valuation allowance for deferred tax related to option compensation and the reclamation bond was established for net deferred tax assets not allocated to offset acquisition related deferred tax liabilities due to the uncertainty of realizing these deferred tax assets based on conditions existing at June 30, 2009 and December 31, 2008.

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

30

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. INCOME TAXES (continued)

The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis as computed in accordance with EITF 98-11 and SFAS 109, is reflected as an increase to the total purchase price which has been applied to the underlying mineral and slag project assets in the absence of there being a goodwill component associated with the acquisition transactions.

The Company had cumulative net operating losses of approximately $15,487,017 and $12,483,860 as of June 30, 2009 and December 31, 2008, respectively for federal income tax purposes. The federal net operating loss carryforwards will be expiring between 2025 and 2029.

The Company had cumulative net operating losses of approximately $7,573,040 and $5,325,778 as of June 30, 2009 and December 31, 2008, respectively for state income tax purposes. The state net operating loss carryforwards will be expiring between 2013 and 2015.

As of January 1, 2007, the Company did not have any unrecognized tax benefits.  The adoption of FIN 48 did not result in any cumulative effect adjustment to the January 1, 2007 balance of the Company’s accumulated deficit.  Upon adoption of FIN 48, the Company did not accrue for interest and penalties as there were no unrecognized tax benefits.  If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to general and administrative expense.  It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

The Company and its subsidiary file income tax returns in the United States.  These tax returns are subject to examination by taxation authorities provided the years remain open under the relevant statutes of limitations, which may result in the payment of income taxes and/or decrease its net operating losses available for carryforwards.  The Company is no longer subject to income tax examinations by US federal and state tax authorities for years prior to 2005. While the Company believes its tax filings do not include uncertain tax positions, the results of potential examinations or the effect of changes in tax law cannot be ascertained at this time.  The Company currently has no tax years under examination.

31

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12. COMMITMENTS AND CONTINGENCIES

Lease obligations – The Company rents office space in Henderson, Nevada.  The lease terms expired in November 2006 and the Company continues to rent the existing space under month-to-month terms for $4,900 per month.

Rental expense, resulting from this operating lease agreement, approximated $29,400 for each of the six months ended June 30, 2009 and 2008, respectively.

Employment contracts – Ian R. McNeil, President and Chief Executive Officer. The Company has an employment agreement with Mr. McNeil effective since January 1, 2006. Under the terms of the agreement, as updated February 16, 2007, Mr. McNeil is paid a salary of $190,000. Mr. McNeil is also eligible for a discretionary bonus to be determined based on factors considered relevant by the Company’s board of directors, and may be granted, subject to the approval of the board of directors, incentive stock options to purchase shares of the Company’s common stock in such amounts and at such times as the board of directors, in its absolute discretion, may from time to time determine.  The term of the agreement is for an indefinite period, unless otherwise terminated pursuant to the terms of the agreement.  In the event that the agreement is terminated by the Company other than for cause, the Company will provide Mr. McNeil with six months written notice or payment equal to six months of his monthly remuneration.

Carl S. Ager, Treasurer and Secretary. The Company has an employment agreement with Mr. Ager effective since January 1, 2006. Under the terms of the agreement, as updated February 16, 2007, Mr. Ager is paid a salary of $160,000. Mr. Ager is also eligible for a discretionary bonus to be determined based on factors considered relevant by the Company’s board of directors, and may be granted, subject to the approval of the board of directors, incentive stock options to purchase shares of the Company’s common stock in such amounts and at such times as the board of directors, in its absolute discretion, may from time to time determine.  The term of the agreement is for an indefinite period, unless otherwise terminated pursuant to the terms of the agreement.  In the event that the agreement is terminated by the Company other than for cause, the Company will provide Mr. Ager with six months written notice or payment equal to six months of his monthly remuneration.

Melvin L. Williams, Chief Financial Officer. The Company has an employment agreement with Mr. Williams effective since June 14, 2006. Under the terms of the agreement, as updated February 16, 2007, Mr. Williams is paid a salary of $130,000, based on 600-800 hours worked.  Mr. Williams is also eligible for a discretionary bonus to be determined based on factors considered relevant by the Company’s board of directors, and may be granted, subject to the approval of the board of directors, incentive stock options to purchase shares of the Company’s common stock in such amounts and at such times as the board of directors, in its absolute discretion, may from time to time determine.  The term of the agreement is for an indefinite period, unless otherwise terminated pursuant to the terms of the agreement.  In the event that the agreement is terminated by the Company other than for cause, the Company will provide Mr. Williams with thirty days written notice or payment equal to three months of his monthly remuneration.

32

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12. COMMITMENTS AND CONTINGENCIES (continued)

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

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

b) The Company has agreed to pay VRIC a minimum annual royalty of $500,000, commencing on the Project Funding Date (the “Advance Royalty”), and an additional royalty consisting of 2.5% of the net smelter returns (“NSR”) on any and all proceeds of production from the Clarkdale Slag Project (the “Project Royalty”).  The Advance Royalty remains payable until the first to occur of: (1) the end of the first calendar year in which the Project Royalty equals or exceeds $500,000; or (2) February 15, 2017.  In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty and Project Royalty will not exceed $500,000; and,

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

The Advance Royalty shall continue for a period of ten (10) years from the Agreement Date or until such time that the Project Royalty shall exceed $500,000 in any calendar year, at which time the Advance Royalty requirement shall end forever.

Development agreement – In January 2009, the Company submitted a development agreement to the Town of Clarkdale for development of an Industrial Collector Road.  The purpose of the road is to provide the Company with the capability to enhance the flow of industrial traffic to and from the Clarkdale Slag Project.  The construction of the road is a required infrastructure improvement under the terms of the Company’s conditional use permit with the Town of Clarkdale.  The Town of Clarkdale approved the development agreement on January 9, 2009.

The development agreement provides that its effective date will be the later of (i) 30 days from the approving resolution of the agreement by the Clarkdale Town Council; or (ii) the date on which the Town of Clarkdale obtains a connection dedication from separate property owners who have land that will be utilized in construction of the road; or (iii) the date on which the Town of Clarkdale receives the proper effluent permit.  The Town of Clarkdale has approved the development agreement, and the remaining two contingencies with respect to the effectiveness of the development agreement are beyond the Company’s control.

Under the development agreement, the Company is obligated to complete the development of the road within two years after the effective date of the agreement.  If the Company does not complete the road within the two year period, the Company may lose the conditional use permit from the Town of Clarkdale.  Further, as a condition of the Company’s developing any of the Company’s property that is adjacent to the Clarkdale Slag Project, the Company will be required to construct additional enhancements to the road. The Company will have ten years from the start of construction on the road in which to complete the additional enhancements.  However, the Company does not currently have any defined plans for the development of the adjacent property.

33

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12. COMMITMENTS AND CONTINGENCIES (continued)

The Company estimates that the initial cost of construction of the road will be approximately $3,500,000 and that the cost of the additional enhancements will be approximately $1,200,000.  The Company will be required to fund the costs of this construction.  Based on the uncertainty of the timing of these contingencies, the Company has not included these costs in current operating plans or budgets.  However, the Company will require additional project financing or other financing in order to fund the construction of the road and the additional enhancements.  There are no assurances that the Company will be able to obtain additional financing in an amount sufficient to meet the Company’s needs or on terms that are acceptable to the Company.  The failure to complete the road and the additional enhancements in a timely manner under the development agreement would have a material adverse effect on the Clarkdale Slag Project and operations.

13. CONCENTRATION OF CREDIT RISK

The Company maintains its cash accounts in two financial institutions. Cash accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per financial institution. Additionally, through the financial institutions’ participation in the FDIC’s Transaction Account Guarantee Program, all non-interest bearing checking accounts are fully guaranteed by the FDIC for the entire amount in the account through December 31, 2009. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

The Company has never experienced a material loss or lack of access to its cash accounts; however no assurance can be provided that access to the Company’s cash accounts will not be impacted by adverse conditions in the financial markets. At June 30, 2009, the Company did not have material deposits in excess of FDIC insured limits.

14. CONCENTRATION OF ACTIVITY

For the six months ended June 30, 2009, the Company purchased services from one major vendor, Baker & Hostetler LLP, which exceeded more than 10% of total purchases and amounted to approximately $591,982.

15. RELATED PARTY TRANSACTIONS

During the six months ended June 30, 2009, the Company utilized the services of NMC to provide technical assistance and financing related activities.  These services related primarily to the Clarkdale Slag Project and the Searchlight Claims Project.  Mr. McNeil and Mr. Ager are affiliated with NMC.

In addition to the above services, NMC provided dedicated use of its laboratory, instrumentation, milling equipment and research facilities.  NMC provided invoices for these fees plus expenses.

For the six months ended June 30, 2009, the Company incurred total fees and reimbursement of expenses to NMC of $180,000 and $49,862, respectively. At June 30, 2009, the Company had an outstanding balance due to NMC of $74,951.

During the six months ended June 30, 2009, the Company utilized Cupit, Milligan, Ogden & Williams, CPAs (CMOW) to provide accounting support services.  Mr. Williams is affiliated with CMOW.

34

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

15. RELATED PARTY TRANSACTIONS (continued)

The Company incurred total fees to CMOW of $89,819 and $27,035 for the six months ended June 30, 2009 and 2008, respectively. The Company also reimbursed expenses to CMOW of $0 and $90 for the six months ended June 30, 2009 and 2008, respectively. Fees for services provided by CMOW do not include any charges for Mr. Williams’ time.  Mr. Williams is compensated for his time under his salary agreement. The approximate direct benefit to Mr. Williams was $28,742 and $7,300 of the above CMOW fees and expenses for the six months ended June 30, 2009 and 2008, respectively. The Company had an outstanding balance due to CMOW of $67,617 as of June 30, 2009.

35

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

Certain statements in this Quarterly Report on Form 10-Q, or the Report, are “forward-looking statements.”  These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Searchlight Minerals Corp., a Nevada corporation (referred to in this Report as “we,” “us,” “our” or “registrant”) and other statements contained in this Report that are not historical facts.  Forward-looking statements in this Report or hereafter included in other publicly available documents filed with the Securities and Exchange Commission, or the Commission, reports to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements.  Such future results are based upon management’s best estimates based upon current conditions and the most recent results of operations.  When used in this Report, the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions are generally intended to identify forward-looking statements, because these forward-looking statements involve risks and uncertainties.  There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled “Risk Factors,” in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2008.

The following discussion and analysis summarizes our plan of operation for the next twelve months, our results of operations for the three and six month periods ended June 30, 2009 and changes in our financial condition from our year ended December 31, 2008.  The following discussion should be read in conjunction with the Management’s Discussion and Analysis or Plan of Operation included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Executive Overview

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

Clarkdale Slag Project.  Since our acquisition of 100% of the Clarkdale Slag Project in 2007, we have devoted considerable effort designing and engineering our first production module, which included finalizing the production flow sheet, sourcing and purchasing equipment as well as refurbishing the module building and constructing the electrowinning building.  The module and electrowinning buildings house the first production module, which has been designed to allow for the grinding, leaching, filtering and extraction of precious and base metals from the slag material and is expected to process between 100 and 250 tons of slag material per day.  During 2008, we completed the refurbishing and construction of the module and electrowinning buildings, respectively, and we installed all the necessary equipment in the two buildings for the operation of the first production module.  Also in 2008, we expended approximately $1,000,000 to immediately address Phase II long lead-time items such as grading 12 acres of land, drilling a well and preparing the architecture and engineering drawings for the proposed full-scale production facility.  In the first two quarters of 2009, we have been executing our business plan on the Clarkdale Slag Project, which includes the start-up and operation of the first production module, in an effort to achieve consistent levels of gold and silver extraction that would support the economic feasibility of a commercial production facility.

36

On June 17, 2008, we received a Certificate of Occupancy for the laboratory facilities located within the module building, allowing our chemists to conduct immediate, on-site analyses of leaching results to further optimize the metals extraction process.  On August 8, 2008, we received a Certificate of Occupancy for the module building, allowing us to operate the grinding, leaching, filtering and resin extraction equipment within the module building.  On December 30, 2008, we received a Certificate of Occupancy for the electrowinning building, allowing us to operate the copper and zinc electrowinning equipment within the electrowinning building.

We have completed the construction of the production module for the Clarkdale Slag Project and are now actively engaged in the testing and start-up phase of the project.  Since the start of 2009, the primary emphasis has been placed on the crushing and grinding circuits as well as the leaching and extraction of precious metals (gold and silver).  To date, our internal laboratory testing has reflected consistent levels of extractable precious metals in pregnant leach solutions from the Clarkdale slag material.  We believe that we can improve extraction rates further by optimizing the grind, the chemical characteristics of the leach solutions and the amount of residence time required for maximum grind and leach efficiency.  We have engaged Mountain States R&D International, Inc., an independent engineering firm, to analyze, in accordance with chain-of-custody standards, the internal operating results of the gold circuit, which we believe comprises the majority of the potential value of the entire Clarkdale Slag Project.

37

We incurred delays during the construction of our production module, including delays in receiving large pieces of equipment from manufacturers, engineering related delays due to the complexity of installing the production module equipment in a World War I era module building and the decision to construct a separate building to house the electrowinning equipment after it was determined that the electrowinning equipment would not adequately fit in the module building.  Consequently, the construction timeline for completing the production module was extended by approximately twelve months from what we originally anticipated and there was an approximately 55% increase in costs from what we had originally projected.

We anticipate that the operation of our production module will allow us to determine the economics of the project and serve as the basis for the final feasibility of the project.  If the feasibility of the project establishes economic viability, we expect to commence construction of a full-scale production facility where we intend to install subsequent modules in parallel where we expect that each subsequent module would be comparable in technology and scale to the initial production module.  The number of subsequent modules required to attain full-production of 2,000 tons per day will be determined once the initial production module capacity is determined.  The cost of developing our initial production module was approximately $12,000,000.  We do not believe that the construction of subsequent modules will cost as much because: (i) of the knowledge we have developed in the construction of the initial production module, and (ii) any additional modules will be new construction, rather than rehabilitation of an older building.  However, the scope and size of our full-scale production facility, including the number of additional modules, the timing and cost of additional modules and the economies of scale of a production facility, will depend upon a number of factors, including the results of a feasibility study and the availability of funding.  A more thorough economic analysis of the full-scale production facility, including specific capital and operating costs, funding schedules and funding sources, is expected to occur during the feasibility evaluation of the initial production module.  The first stage of the feasibility evaluation began in the second quarter of 2009 when we engaged Mountain States to analyze, in accordance with chain-of-custody standards, the internal operating results of the gold circuit of the Clarkdale Slag Project.

We have budgeted $2,400,000 for our work program on the Clarkdale Slag Project over the next twelve months, which includes the operation of the production module and performing the feasibility study.  A decision on allocating approximately $6,000,000 of additional funds for the Phase II expansion and $4,700,000 to complete the development of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona by January 2011 will be made once the first production module is operational and its results are analyzed.

We expect that there will be significant financing requirements in order to finance the construction of a full-scale production facility, and cannot assure you that such funding will be available at all or on terms that are reasonably acceptable to us.  If the results from our feasibility study and the results from the operation of the production module do not support a basis for us to proceed with the construction of our proposed, full-scale production facility or we cannot obtain funding at all or on terms that are reasonably acceptable to us, we will have to scale back or abandon our proposed operations on the Clarkdale Slag Project.  If management determines, based on any factors, including the foregoing, that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a significant impairment of our investment in such property interests on our financial statements.

In January 2009, we submitted a development agreement to the Town of Clarkdale for development of an Industrial Collector Road.  The purpose of the road is to provide us with the capability to enhance the flow of industrial traffic to and from the Clarkdale Slag Project.  The construction of the road is required infrastructure improvement under the terms of our conditional use permit with the Town of Clarkdale.  The Town of Clarkdale approved the development agreement on January 9, 2009.

The development agreement provides that its effective date will be the later of (i) 30 days from the approving resolution of the agreement by the Clarkdale Town Council; or (ii) the date on which the Town of Clarkdale obtains a connection dedication from separate property owners who have land that will be utilized in construction of the road; or (iii) the date on which the Town of Clarkdale receives the proper effluent permit.  The Town of Clarkdale has approved the development agreement, and the remaining two contingencies with respect to the effectiveness of the development agreement are beyond our control.

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Under the development agreement, we are obligated to complete the development of the road within two years after the effective date of the agreement.  If we do not complete the road within the two year period, we may lose our conditional use permit from the Town of Clarkdale.  Further, as a condition of our developing any of our property that is adjacent to the Clarkdale Slag Project, we will be required to construct additional enhancements to the road.  We will have ten years from the start of construction on the road in which to complete the additional enhancements.  However, we do not currently have any defined plans for the development of the adjacent property.

We estimate that the initial cost of construction of the road will be approximately $3,500,000 and that the cost of the additional enhancements will be approximately $1,200,000.  We will be required to fund the costs of this construction.  Based on the uncertainty of the timing of these contingencies, we have not included these costs in our current operating plans or budgets.  However, we will require additional project financing or other financing in order to fund the construction of the road and the additional enhancements.  There are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.  The failure to complete the road and the additional enhancements in a timely manner under the development agreement would have a material adverse effect on the Clarkdale Slag Project and our operations.

Searchlight Gold Project.  Since 2005, we have maintained an ongoing exploration program on our Searchlight Gold Project and have contracted with Arrakis, Inc. (“Arrakis”), an unaffiliated mining and environmental firm, to perform a number of metallurgical tests on surface and bulk samples taken from the project site under strict chain-of-custody protocols.  In 2007, results from these tests validated the presence of gold on the project site, and identified reliable and consistent metallurgical protocols for the analysis and extraction of gold, such as microwave digestion and autoclave leaching.  Autoclave methods typically carry high capital and operating costs on large scale projects, however, we were encouraged by these results and in the first quarter of 2008, and we approved a continuation of the metallurgical work program with Arrakis.  The goal of this work program is to attempt to further improve upon the extraction grades of gold from samples taken from the project and explore in more detail the potential capital and operating costs of implementing methods, such as autoclave leaching.

During the second quarter of 2008, we “double staked” the Searchlight property by filing, with the United States Bureau of Land Management (“BLM”) and the Clark County, Nevada Recorder, 142 new and separate 20-acre placer claims overtop of the twenty existing 160-acre claims.  We were only able to “double stake” 2,840 acres out of the 3,200 acre site due to various regulatory restrictions on staking of certain of the smaller land parcels on the site.  We have maintained the twenty prior 160-acre claims to provide us with a basis to retain the priority of and defend our existing 160-acre mining claims.

The former Searchlight Claim owners had previously obtained a BLM approved Plan of Operations, which included permission to drill eighteen holes on the 3,200 acre project area and to mine a 36-acre pit on our RR304 claim.  We had anticipated conducting our early stage exploratory work on the Searchlight Claims property by utilizing the Plan of Operations issued to the former Searchlight Claim owners, until such time as we would obtain a permit for exploration and development in our own name or the former Searchlight Claim holder’s permit was transferred to us.  Although we did not acquire the Searchlight Claims with a written agreement to purchase the Plan of Operations, the prior owners verbally agreed to cooperate with us in attempting to transfer their Plan of Operations into our name.

Although the Plan of Operations was accepted and registered in the name of a former Searchlight Claim owner, which is an affiliate of K. Ian Matheson, one of our principal stockholders and a former officer and director, in September 2007, we learned that the BLM had issued an order (the “BLM Order”) for “Immediate Suspension of All Activities” notice on May 12, 2006 against Mr. Matheson and certain of his affiliates (Pass Minerals, Inc., Kiminco, Inc. and Pilot Plant Inc., which also were prior Searchlight Claim owners and are our stockholders) with respect to a dispute with the BLM on a project unrelated to the Searchlight Gold Project.  The dispute between the BLM and Mr. Matheson arose due to the BLM’s determination that Mr. Matheson and his affiliates had engaged in willful mineral trespass for the unauthorized removal of sand and gravel from public lands by Mr. Matheson and his affiliates or their predecessors.  The BLM had demanded payment of approximately $2,530,000 for the willful trespass.  After failure by Mr. Matheson and his affiliates to pay the amount, the BLM issued the BLM Order.  The issuance of the BLM Order restricted our ability to rely upon the Plan of Operations to conduct our early stage exploratory work on the Searchlight Claims property until such time that we may obtain our own Plan of Operations.  An appeal by Mr. Matheson of the BLM Order with the Interior Board of Land Appeals affirmed the BLM’s decision, keeping the BLM Order in effect.  The BLM Order effectively covered all projects tied to Mr. Matheson.

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As a result of the BLM Order, we have been delayed in our ability to drill on the Searchlight Gold Project property.  However, we have anticipated that regulatory and other delays would take place, which are typical in our industry.  We have applied for a new Plan of Operations in our name and are currently in the course of the BLM’s review process.  In addition, we have continued and will continue with our surface sampling and metallurgical testing program while awaiting approval of a new Plan of Operations.

In the third quarter of 2008, we submitted a Plan of Operations to the BLM in our name, substantially similar to the original Plan of Operations, which included a request to drill eighteen holes on the project area and to mine a 36-acre mining pit.  On August 27, 2008, the BLM responded, in part, by advising that the previous bond that we posted of $180,500 for the previous Plan of Operations would not be transferrable to the new one and that a new bond would have to be posted.  At the time, we considered the recovery of the reclamation bond to be uncertain and, therefore, we have established a full allowance against the reclamation bond with the offsetting expense to project exploration costs.  Based on continued discussions with the BLM, we may be able to recover the bond upon request, however, we have not chosen to make such a request at this time.

In September 2008, we decided that we would only continue to pursue the permits to drill on the project area and forgo the 36-acre pit until a later date since we believed that by keeping the pit area in the Plan of Operations, it might delay the BLM’s approval process for our Plan of Operations.  Although the 36-acre pit had been part of the Plan of Operations obtained by the prior owners of the Searchlight Claims, we do not believe that digging and mining a 36-acre pit would be a material aspect of the Plan of Operations at this stage of the Searchlight Gold Project.  Therefore, we decided to remove the 36-acre pit from the Plan of Operations.  Further, by reducing the scope of the permit, we decided that we could submit the application in the form of a Notice of Intent, a shorter and less complex application form than a Plan of Operations.  Consequently, on September 24, 2008, we withdrew the Plan of Operations and submitted a Notice of Intent with the BLM, pursuant to which we sought permission to drill eighteen 500-foot drill holes on the Searchlight project area.

After a series of correspondence between us and the BLM, on December 15, 2008, we received a letter from the BLM advising us that the BLM had closed our Notice of Intent from consideration and that a new Plan of Operations would be required based on two issues relating to the Desert Tortoise (Gopherus asassizii), a Federally listed Threatened Species: (i) the proximity of the project area to a nearby Area of Critical Environmental Concern (ACEC); and (ii) the future likelihood of tortoises being present on the land within the project area which is involved in the application.

On January 13, 2009, we filed a Notice of Appeal of the BLM’s decision regarding the closing of our Notice of Intent, and, thereafter, submitted a statement of reasons relating to the appeal, which supports our case that we should be allowed to obtain our desired drilling permits through a Notice of Intent, as opposed to a Plan of Operations, even considering the Searchlight Project’s proximity to the ACEC.

Although we are still following through with our appeal regarding the closing of our Notice of Intent, we determined that, due to the standard lengthy time required to have a Plan of Operations approved by the BLM and should we be unsuccessful with our appeal, it would be prudent to begin the approval process immediately by filing for our Plan of Operations.  Thus, on March 23, 2009, we submitted a new Plan of Operations to the BLM, taking into account the Desert Tortoise issue.  In our Plan of Operations, we have requested permission to drill eighteen drill holes on the project area.  In the event of the approval of our Plan of Operations, we will be required to post a new reclamation bond with the BLM, which we anticipate will be approximately $16,000.  After a further series of correspondence between us and the BLM, on June 3, 2009, we received a comment letter from the BLM regarding our Plan of Operations, which included requests to clarify issues related to the location of fuels and lubricants being used by us, the location of potential new disturbances in connection with new road construction, a map edit and our materials storage area.  We responded to the BLM’s questions by letter on July 2, 2009.

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There is no regulatory time frame for the BLM to review our Plan of Operations.  We understand that the average time frame for approval of a plan of operation by the Las Vegas, Nevada branch office of the BLM since January 1, 2000 has been approximately four years and five months.  Although we understand that the average time frame of the application process by the Las Vegas branch office of the BLM relating to an environmental assessment in connection with a plan of operations is approximately eleven months, the “threatened species” issue raised by the BLM requires the BLM to consult with the U.S. Fish and Wildlife Service of the Department of Interior, and the BLM has no control over the length of this consultation process in order to develop any necessary environmental mitigation measures.

Whether we obtain an approved Notice of Intent or Plan of Operations, our work on the project site will be limited to the scope within the Notice of Intent or Plan of Operations.  However, the Plan of Operations approval process will delay the start of our drilling program for an undetermined period of time.  To perform any additional drilling or mining on the project, we would be required to submit a new application to the BLM for approval prior to the commencement of any such additional activities.

We do not believe these added requirements will have a material adverse impact on our overall business plan for the Searchlight Gold Project, given that we have received no indication from the BLM, at this time, that the BLM will ultimately deny our request for approval of our Plan of Operations.  However, there is no assurance of the timeline for approval by the BLM or that the BLM will grant approval.  Our drilling and mining program on this project is dependent on obtaining the necessary approval from the BLM.  Therefore, if approval ultimately is not obtained, we may have to scale back or abandon exploration efforts on the project.  If management determines, based on any factors including the foregoing, that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a significant impairment of our investment in such property interests on our financial statements.

Further, although our ability to obtain drilling permits has been delayed, we have continued and intend to continue our current metallurgical program with Arrakis.

We have budgeted $200,000 to our twelve month work program for the Searchlight Gold Project.  Our work program is focused on continuing the testing program with Arrakis, including metallurgical tests, bulk sampling, milling, leaching and extraction tests to optimize recovery of precious metals from samples taken from the project and exploring in more detail the potential capital and operating costs of implementing methods, such as autoclave leaching.  We will also focus on our work with the BLM, our consultants and our attorneys to help us obtain approval of the Plan of Operations, containing the necessary permits to execute on our desired drilling program.  The drilling and pre-feasibility program, which we anticipate will include an eighteen-hole drill program, chain-of-custody sampling and assaying of drill hole material, pilot plant tests and a pre-feasibility report, is expected to commence shortly after receiving the BLM’s approval of the Plan of Operations.

Anticipated Cash Requirements

Our plan of operation calls for significant expenses in connection with the development of the Clarkdale Slag Project and the exploration of the Searchlight Gold Project.  Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration and development program and our continued operations will be approximately $5,300,000.  At July 31, 2009, we had cash reserves in the amount of approximately $2,300,000.  This amount is substantially less than the total expenditures that we have budgeted for the next 12 months by approximately $3,000,000.  We estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration and development programs until approximately the middle of the fourth quarter of the 2009 fiscal year.  However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration and development plans for 2009.  We do not currently have any financing arrangements in place, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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

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

	BUDGET
Administrative Expenses	$	1,400,000
Legal and Accounting Expenses	$	800,000
Consulting Services	$	500,000
SUBTOTAL	$	2,700,000
Clarkdale Slag Project
Production Module Operation	$	1,900,000
Feasibility Study	$	500,000
SUBTOTAL	$	2,400,000
Searchlight Gold Project
Metallurgical Testing and Pre-Feasibility Program	$	100,000
Permitting	$	100,000
SUBTOTAL	$	200,000
TOTAL	$	5,300,000

Critical Accounting Policies

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

Mineral rights – Cost of acquiring mining properties are capitalized upon acquisition.  Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property.  Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations.  Costs of abandoned projects are charged to operations upon abandonment.  We evaluate the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  The periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for Impairment of Disposal of Long-Lived Assets.”

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

Exploration costs – Mineral exploration costs are expensed as incurred.

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

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

Impairment of long-lived assets – We review and evaluate long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under SFAS No. 144 if events or circumstances indicate that their carrying amount might not be recoverable.  As of June 30, 2009 exploration progress is on target with our exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable.  When we determine SFAS 144 impairment analysis should be done, the analysis will be performed using the rules of EITF 04-03, “Mining Assets: Impairment and Business Combinations.”

Results of Operations

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

	Three Months Ended June 30,									Six Months Ended June 30,
	2009			2008			Percent Increase/ (Decrease)			2009			2008			Percent Increase/ (Decrease)
Revenue	$	-		$	-			n/a		$	-		$	-			n/a
Operating Expenses		(1,729,975	)		(1,412,342	)		22.5	%		(3,302,201	)		(2,475,518	)		33.4	%
Other Income		6,617			47,332			(86.0	) %		17,695			154,042			(88.5	) %
Income tax benefit		645,029			505,275			27.7	%		1,226,122			868,904			41.1	%
Net Loss	$	(1,078,329	)	$	(859,735	)		25.4	%	$	(2,058,384	)	$	(1,452,572	)		41.7	%

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Revenue

We are currently in the exploration stage of our business, and have not earned any revenues from our planned mineral operations to date.  We did not generate any revenues from inception in 2000 through the six months period ended June 30, 2009.  We do not anticipate earning revenues from our planned mineral operations until such time as we enter into commercial production of the Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties we may acquire from time to time, and of which there are no assurances.

Operating Expenses

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

	Three Months Ended June 30,							Six Months Ended June 30,
	2009		2008		Percent Increase/ (Decrease)			2009		2008		Percent Increase/ (Decrease)
Mineral exploration and evaluation expenses	$	531,291	$	334,390		58.9	%	$	843,626	$	448,908		87.9	%
Mineral exploration and evaluation expenses – related party		90,000		90,000		0.0	%		180,000		180,000		0.0	%
Administrative – Clarkdale site		138,250		272,769		(49.3	) %		370,937		507,908		(27.0	) %
General and administrative		716,160		689,031		3.9	%		1,449,204		1,281,025		13.1	%
General and administrative – related party		67,617		10,722		530.6	%		89,819		27,125		231.1	%
Depreciation		186,657		15,430		1,109.7	%		368,615		30,552		1,106.5	%
Total Operating Expenses	$	1,729,975	$	1,412,342		22.5	%	$	3,302,201	$	2,475,518		33.4	%

Six month periods ended June 30, 2009 and 2008.  Operating expenses increased by 33.4% to $3,302,201 during the six month period ended June 30, 2009 from $2,475,518 during the six month period ended June 30, 2008.  Operating expense increased during the six month period ended June 30, 2009 compared to the corresponding period in 2008 primarily as a result of increases in general and administrative expenses, increase in depreciation expense, and mineral exploration and evaluation expenses.

General and administrative expenses increased by 13.1% to $1,449,204 during the six month period ended June 30, 2009 from $1,281,025 during the six month period ended June 30, 2008.  General and administrative expenses increased primarily as a result of (i) increased professional and administrative expenses associated with the preparation of our 2008 annual report on Form 10-K, the preparation of our registration statement on Form S-1, preparation of amended periodic reports for the periods from March 31, 2005 through December 31, 2008, and legal and accounting fees; and (ii) increased director compensation due to expansion of our board of directors.  We anticipate operating expenses to continue to increase as we grow our business operations.

Included in general and administrative expenses for the six month period ended June 30, 2009 and 2008 were compensation expenses related to the option vesting and option grants of $53,992 and $859, respectively.

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On April 30, 2007, we adopted our 2007 Stock Option Plan (the “2007 Plan”).  Under the terms of the 2007 Plan, as amended May 8, 2007, options to purchase up to 4,000,000 shares of common stock may be granted to our employees, officers, directors, and eligible consultants under such plan.  On June 15, 2007, our stockholders approved the 2007 Plan. As of June 30, 2009, 321,293 options have been granted under the 2007 Plan with an exercise price ranging from $1.45 to $2.74 per share.

In addition, we incurred $89,819 and $27,125 during the six month periods ended June 30, 2009 and 2008, respectively, for general and administrative expenses for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial Officer.  These expenses increased during the six month period ended June 30, 2009 as compared to 2008 as a result of Cupit, Milligan, Ogden & Williams providing staff support related to the preparation of our registration statement on Form S-1, preparation of amended periodic reports for the periods from March 31, 2005 through December 31, 2008, and the completion of the first time filing of the Arizona Business Personal Property Statement.  These accounting support services included bookkeeping input for the Clarkdale facility, assistance in preparing working papers for quarterly and annual reporting, and preparation of federal and state tax filings.  These expenses do not include any fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation has been provided in the form of salary.  The approximate direct benefit to Mr. Williams was $28,742 and $7,300 of the above Cupit, Milligan, Ogden & Williams fees for the six months ended June 30, 2009 and 2008, respectively.

Mineral exploration and evaluation expenses increased to $843,626 during the six month period ended June 30, 2009 from $448,908 during the six month period ended June 30, 2008.  Mineral exploration and evaluation expenses increased primarily as a result of increased testing activity subsequent to receiving of Certificate of Occupancy for the demonstration module building.

Included in mineral exploration and evaluation expenses were the amounts of $180,000 and $180,000 paid during the six month period ended June 30, 2009 and 2008, respectively, to Nanominerals Corp. (one of our principal stockholders and an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a director) for technical assistance, including providing us with the use of its laboratory, instrumentation, milling equipment and research facilities with respect to our Searchlight Gold Project and Clarkdale Slag Project and financing related activities, including providing assistance to us when potential financiers performed technical due diligence on our projects and made technical presentation to potential investors in connection with the exploration and development of our mineral projects, and reimbursement of expenses provided by Nanominerals in connection with the exploration and development of our mineral projects.

Depreciation expense increased to $368,615 during the six month period ended June 30, 2009 from $30,552 during the six month period ended June 30, 2008.  Depreciation expense increased primarily because a substantial portion of property and equipment that was previously reported as construction in progress was placed in service during the six month period ended June 30, 2009.

For the six month period ended June 30, 2009, we purchased services from one major vendor, Baker & Hostetler LLP, our legal counsel, which exceeded more than 10% of total purchases and amounted to approximately $591,982.  For the six month period ended June 30, 2008, we purchased services from two major vendors, Talson Corporation and Cimetta Engineering, which exceeded more than 10% of total purchases and amounted to approximately $1,132,537 and $525,892, respectively.

Three month periods ended June 30, 2009 and 2008.  Operating expenses increased by 22.5% to $1,729,975 during the three month period ended June 30, 2009 from $1,412,342 during the three month period ended June 30, 2008.  Operating expense increased during the three month period ended June 30, 2009 compared to the corresponding period in 2008 primarily as a result of increases in general and administrative expenses, increase in depreciation expense, and mineral exploration and evaluation expenses.

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General and administrative expenses increased by 3.9% to $716,160 during the three month period ended June 30, 2009 from $689,031 during the three month period ended June 30, 2009.  General and administrative expenses increased primarily as a result of increased professional and administrative expenses associated with the preparation of our registration statement on Form S-1, and preparation of amended periodic reports for the periods from March 31, 2005 through December 31, 2008, and legal and accounting fees.  We anticipate operating expenses to continue to increase as we grow our business operations.

In addition, we incurred $67,617 and $10,722 during the three month periods ended June 30, 2009 and 2008, respectively, for general and administrative expenses for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial Officer.  These expenses increased during the three month period ended June 30, 2009 as compared to 2008 as a result of Cupit, Milligan, Ogden & Williams providing staff support related to the preparation of our registration statement on Form S-1 and preparation of amended periodic reports for the periods from March 31, 2005 and December 31, 2008.  These accounting support services included bookkeeping input for the Clarkdale facility, assistance in preparing working papers for quarterly and annual reporting, and preparation of federal and state tax filings.  These expenses do not include any fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation has been provided in the form of salary.  The approximate direct benefit to Mr. Williams was $21,637 and $2,895 of the above Cupit, Milligan, Ogden & Williams fees for the three months ended June 30, 2009 and 2008, respectively.

Mineral exploration and evaluation expenses increased to $531,291 during the three month period ended June 30, 2009 from $334,390 during the three month period ended June 30, 2008.  Mineral exploration and evaluation expenses increased primarily as a result of increased testing activity subsequent to receiving of Certificate of Occupancy for the demonstration module building.

Included in mineral exploration and evaluation expenses were the amounts of $90,000 and $90,000 paid during the three month period ended June 30, 2009 and 2008, respectively, to Nanominerals Corp. (one of our principal stockholders and an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a director) for technical assistance, including providing us with the use of its laboratory, instrumentation, milling equipment and research facilities with respect to our Searchlight Gold Project and Clarkdale Slag Project and financing related activities, including providing assistance to us when potential financiers performed technical due diligence on our projects and made technical presentation to potential investors in connection with the exploration and development of our mineral projects, and reimbursement of expenses provided by Nanominerals in connection with the exploration and development of our mineral projects.

Depreciation expense increased to $186,657 during the three month period ended June 30, 2009 from $15,430 during the three month period ended June 30, 2008.  Depreciation expense increased primarily because of further depreciation of property and equipment that was placed in service during the first quarter of 2009 that was reported as construction in progress during 2008.

Other Income and Expenses

Six month periods ended June 30, 2009 and 2008.  Total other income decreased to $17,695 during the six month period ended June 30, 2009 from $154,042 during the six month period ended June 30, 2008.  The decrease in total other income primarily resulted from a decrease in interest and dividend income.  The decrease in interest and dividend income earned was attributable to lower interest rates and lower cash reserves earning interest.

During the six month period ended June 30, 2009, we received incidental rental revenue of $14,105 compared to $17,040 for the same period in 2008 from rentals of our commercial buildings and certain facilities acquired in connection with our acquisition of Transylvania.  The property leases consist of: (i) a rental agreement with Clarkdale Arizona Central Railroad for the use of certain facilities at a rate of $1,700 per month; and (ii) rental of a commercial building space to various tenants.  The rental arrangements are on a month to month basis with no formal agreements.

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Three month periods ended June 30, 2009 and 2008.  Total other income decreased to $6,617 during the three month period ended June 30, 2009 from $47,332 during the three month period ended June 30, 2008.  The decrease in total other income primarily resulted from a decrease in interest and dividend income.  The decrease in interest and dividend income earned resulted from most cash reserves being placed in a non-interest bearing checking account during the three months ended June 30, 2009.

During the three month period ended June 30, 2009, we received incidental rental revenue of $6,565 compared to $7,740 for the same period in 2008 from rentals of our commercial buildings and certain facilities acquired in connection with our acquisition of Transylvania.

Income Tax Benefit

Six month periods ended June 30, 2009 and 2008.  Income tax benefit increased to $1,226,122 for the six months period ended June 30, 2009 from $868,904 during the six month period ended June 30, 2008.  The increase in income tax benefit primarily resulted from the increase in exploration stage losses during the six month period ended June 30, 2009 from the six month period ended June 30, 2008.

Three month periods ended June 30, 2009 and 2008.  Income tax benefit increased to $645,029 for the three months period ended June 30, 2009 from $505,275 during the three month period ended June 30, 2008.  The increase in income tax benefit primarily resulted from the increase in exploration stage losses during the three month period ended June 30, 2009 from the three month period ended June 30, 2008.

Net Loss

Six month periods ended June 30, 2009 and 2008.  The aforementioned factors resulted in a net loss of $2,058,384, or $0.02 per common share, for the six month period ended June 30, 2009, as compared to a net loss of $1,452,572, or $0.01 per common share, for the six month period ended June 30, 2008.

Three month periods ended June 30, 2009 and 2008.  The aforementioned factors resulted in a net loss of $1,078,329, or $0.01 per common share, for the three month period ended June 30, 2009, as compared to a net loss of $859,735, or $0.01 per common share, for the three month period ended June 30, 2008.

As of June 30, 2009 and December 31, 2008, we had cumulative net operating loss carryforwards of approximately $15,487,017 and $12,483,860, respectively for federal income taxes.  The federal net operating loss carryforwards expire between 2025 and 2029.

  We had cumulative state net operating losses of approximately $7,573,040 and $5,325,778 as of June 30, 2009 and December 31, 2008, respectively for state income tax purposes.  The state net operating loss carryforwards expire between 2013 and 2015.

Liquidity and Capital Resources

Historically, we have financed our operations primarily through the sale of common stock and other convertible equity securities.  During 2008, we conducted the following private placements of our securities:

· On February 7, 2008, we completed two concurrent private placement offerings for gross proceeds of $5,250,000 to non-US persons and to US accredited investors.  A total of 3,281,250 units were issued at a price of $1.60 per unit.  Each unit sold consisted of one share of our common stock and one-half of one share common stock purchase warrants.  Each whole share purchase warrant entitles the holder to purchase one additional share of our common stock at a price of $2.40 per share for a period of two years from the date of issuance.  A total of 80,000 shares of our common stock were issued as commission to agents in connection with these offerings.

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· On January 30, 2008, we received gross proceeds of $2,528,500 and issued an aggregate of 3,890,000 shares of our common stock on the exercise of warrants we issued in January, 2006.  Each warrant entitled the holder to purchase one share of our common stock at a price of $0.65 per share on or before January 18, 2008.  The warrant holders delivered their notices of exercise, and paid the exercise price of $0.65 per share, prior to the January 18, 2008 expiration date.

These agreements do not include contractual penalty provisions for failure to comply with these registration rights provisions.  Further, we are not a party to any other agreements which require us to pay liquidated damages in the future for failure to register securities for sale.

Working Capital

The following is a summary of our working capital at June 30, 2009 and December 31, 2008:

	At June 30, 2009			At December 31, 2008			Percent Increase/(Decrease)
Current Assets	$	3,063,905		$	7,307,005			(58.1	) %
Current Liabilities		(1,175,926	)		(1,421,075	)		(17.3	) %
Working Capital	$	1,887,979		$	5,885,930			(67.9	) %

As of June 30, 2009, we had an accumulated deficit of $15,414,866. As of June 30, 2009, we had working capital of $1,887,979, compared to working capital of $5,885,930 as of December 31, 2008.  The decrease in our working capital was primarily attributable to our net loss and capital expenditures partially offset by issuance of our common stock from exercise of stock options in 2009. Cash was $2,908,814 as of June 30, 2009, as compared to $7,055,591 as of December 31, 2008.  Property and equipment increased to $13,976,743 as of June 30, 2009 from $13,132,282 as of December 31, 2008.  The increase primarily resulted from site improvements and equipment acquisitions at the Clarkdale Slag Project partially offset by depreciation expense.

Included in long term liabilities in the accompanying consolidated financials statements is a balance of $49,229,239 for deferred tax liability relating to the Clarkdale Slag Project and Searchlight Gold Project.  A deferred income tax liability was recorded on the excess of fair market value for the asset acquired over income tax basis at a combined statutory federal and state rate of 38% with the corresponding increase in the purchase price allocation of the assets acquired.

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Cash Flows

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

	Six Months Ended June 30,
	2009			2008			Percent Increase/(Decrease)
Cash Flows Used in Operating Activities	$	(2,980,743	)	$	(2,521,404	)		18.2	%
Cash Flows Used in Investing Activities		(1,208,718	)		(3,586,921	)		(66.3	)%
Cash Flows Provided by Financing Activities		42,684			7,639,012			(99.4	)%
Net Change in Cash During Period	$	(4,146,777	)	$	1,530,687			(370.9	)%

Net cash used in operating activities.  Net cash used in operating activities increased to $2,980,743 during the six month period ended June 30, 2009 from $2,521,404 during the six month period ended June 30, 2008.  The increase in cash used in operating activities was primarily due to operating losses from our exploration and evaluation activity and general and administrative expenses, offset by non-cash elements which were primarily related to change in deferred tax liability of $1,226,122.

Net cash used in investing activities.  We used $1,208,718 in investing activities during the six month period ended June 30, 2009, as compared to $3,586,921 during the six month period ended June 30, 2008.  The decrease in the six month period ended June 30, 2009 was primarily a result of decrease in purchases of property and equipment relating to the Clarkdale Slag Project which decreased primarily as a result of receiving of Certificate of Occupancy for the demonstration module building and substantial completion of equipment acquisitions for the demonstration module.

Net cash provided by financing activities.  Net cash provided by financing activities was $42,684 for the six month period ended June 30, 2009 compared to $7,639,012 for the six month period ended June 30, 2008.  Net cash provided by financing activities during the six month period ended June 30, 2009 primarily resulted from the receipt of $150,000 from the exercise of stock options.  Net cash provided by financing activities during the six month period ended June 30, 2008 primarily resulted from the receipt of $5,250,000 from the proceeds of private placements of our securities and $2,528,500 from the exercise of warrants.

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

· our ability to locate a profitable mineral property;

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

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

· our ability to generate revenues.

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

Our exploration and evaluation plan calls for significant expenses in connection with the development of the Clarkdale Slag Project and the exploration of the Searchlight Gold Project.  Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration and development program and our continued operations will be approximately $5,300,000.  As of July 31, 2009, we had cash reserves in the amount of approximately $2,300,000.

This amount is substantially less than the total expenditures that we have budgeted for the next 12 months by approximately $3,000,000.  We estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration and development programs until approximately the middle of the fourth quarter of the 2009 fiscal year.  However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration and development plans for 2009.  We do not currently have any financing arrangements in place, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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

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

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

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

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

Off-Balance Sheet Arrangements

None.

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Recent Accounting Pronouncements

In June 2009, the FASB issued FASB Statement No. 168, The “FASB Accounting Standards CodificationTM” and the Hierarchy of Generally Accepted Accounting Principles. Statement 168 establishes the FASB Accounting Standards CodificationTM (Codification) as the single source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  Statement 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009.

In June 2009, the FASB issued FASB Statement No. 167, “Amendment to FASB Interpretation No. 46(R)”. Statement 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities”, and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance.  Statement 167 will require a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement.  A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements.  Statement 167 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity.  Adoption of this statement is not expected to have a material impact on our consolidated financial statements.

In June 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of Financial Assets”. Statement 166 is a revision to FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”, and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risk related to the transferred financial assets.  It eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets, and requires additional disclosures.  Statement 166 enhances information reported to users of financial statements by providing greater transparency about transfers of financial assets and an entity’s continuing involvement in transferred financial assets.  Statement 166 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity.  Adoption of this statement is not expected to have a material impact on our consolidated financial statements.

In May 2009, the FASB issued FASB Statement No. 165, “Subsequent Events”. Statement 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet but before financial statements are issued or are available to be issued.  Specifically, Statements 165 provides: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  Statement 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively.  The required disclosures of this statement have been incorporated into our consolidated financial statements.

In April 2009, FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1 was issued to amend SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments for interim reporting period as well as in annual financial statements.  This FSP also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. FSP No. 107-1 and APB 28-1 is effective for interim reporting period ending after June 15, 2009.  Adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

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In April 2009, FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” was issued to provide additional guidance for estimating the fair value in accordance with SFAS No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased.  This FSP also provides guidance on identifying circumstances that indicate a transaction is not orderly. FSP No. FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively.  Adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In April 2009, FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” This FSP amends the guidance in FASB Statement No. 141 to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonable estimated.  If fair value of such asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with FASB Statement No. 5, “Accounting for Contingencies,” and FASB Interpretation (FIN) No. 14, “Reasonable Estimation of the Amount of a Loss.”  This FSP eliminates the requirements to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date.  This FSP also requires that contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in accordance with Statement 141R.  This FSP is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Post-Retirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which amends FASB Statement No. 132 “Employers’ Disclosures about Pensions and Other Post-Retirement Benefits” (“FAS 132”), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other post-retirement plan.  The objective of FSP FAS 132(R)-1 is to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009.  Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative purposes.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In November 2008, the EITF reached consensus on Issue No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”), which clarifies the accounting for certain transactions and impairment considerations involving equity method investments.  The intent of EITF 08-6 is to provide guidance on (i) determining the initial carrying value of an equity method investment, (ii) performing an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment, (iii) accounting for an equity method investee’s issuance of shares, and (iv) accounting for a change in an investment from the equity method to the cost method.  EITF 08-6 is effective for fiscal years beginning January 1, 2009 and is to be applied prospectively.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In June 2008, the EITF reached consensus on Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”).  EITF 07-5 is effective for fiscal years beginning January 1, 2009.  Early adoption for an existing instrument is not permitted.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

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In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FAS 133.  Convertible debt instruments within the scope of FSP APB 14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments within the scope of FSP APB 14-1 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate.  This requires an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component).  The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component will be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method.  FSP APB 14-1 is effective for fiscal years beginning January 1, 2009 and will be applied retrospectively to all periods presented.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”).  The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141, “Business Combinations” (“FAS 141”).  FSP 142-3 is effective for fiscal years beginning January 1, 2009 and will be applied prospectively to intangible assets acquired after the effective date.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

The FASB issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active.”  The FSP clarifies the application of FASB Statement No. 157, “Fair Value Measurements,” in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.  The FSP is effective October 10, 2008, and for prior periods for which financial statements have not been issued.  Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in FASB Statement No. 154, “Accounting Changes and Error Corrections.”  However, the disclosure provisions in Statement 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation techniques or its application.  The adoption of this statement has had no material effect on our consolidated financial position, results of operations, and disclosures.

On March 19, 2008 the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities.”  This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures.  This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”).  FSP FAS 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  The provisions of FSP FAS 157-2 are effective for fiscal years beginning January 1, 2009.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

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In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree.  It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  SFAS No. 141(R) is effective for our fiscal year beginning January 1, 2009 and is to be applied prospectively.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51” which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated.  SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  SFAS No. 160 is effective for our fiscal year beginning January 1, 2009.  The adoption of this statement had little or no effect on our consolidated financial position, results of operations, and disclosures.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We had unrestricted cash totaling $2,908,814 at June 30, 2009 and $7,055,591 at December 31, 2008.  Our cash is invested primarily in a non-interest bearing checking account and is not materially affected by fluctuations in interest rates.  The unrestricted cash is held for working capital purposes.  We do not enter into investments for trading or speculative purposes.  Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.  Declines in interest rates, however, would reduce future investment income.

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Item 4.  Controls and Procedures

Controls and Procedures

As of June 30, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2009, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended June 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

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

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

Item 1A.  Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, which to our knowledge have not materially changed.  Those risks, which could materially affect our business, financial condition or future results, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

On April 14, 2009, we issued 100,000 shares of common stock upon the exercise of stock options at an exercise price of $0.25 per share.  These securities were issued pursuant to Section 4(2) of the Securities Act.

On June 30, 2009, we issued 7,378 shares of our common stock and options to purchase up to 7,377 shares of common stock to our non-management directors.  These shares and options were issued pursuant to the director compensation policy for our non-management directors based on a price of $2.44 per share with respect to the 7,378 shares, and an exercise price of $2.44 per share with respect to the 7,377 stock options, each being the closing price of our common stock on June 30, 2009, the last trading day of the second quarter of 2009.  These securities were issued pursuant to Section 4(2) of the Securities Act.

Item 3.  Defaults Upon Senior Securities

None.

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

No matters were submitted to our stockholders, through the solicitation of proxies or otherwise, during the quarter ended June 30, 2009.

Item 5.  Other Information

Not applicable.

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Item 6.  Exhibits

 EXHIBIT TABLE

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

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

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SIGNATURES

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

	SEARCHLIGHT MINERALS CORP. a Nevada corporation
Date: August 7, 2009	By:	/s/ Ian R. McNeil
		Ian R. McNeil
		President and Chief Executive Officer (Principal Executive Officer)
Date: August 7, 2009	By:	/s/ Melvin L. Williams
		Melvin L. Williams
		Chief Financial Officer (Principal Accounting Officer)

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