Searchlight Minerals 10K 2009 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2009.

¨	Transition report pursuant to 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.

(Name of registrant as specified in its charter)

Nevada	98-0232244
State or other jurisdiction of incorporation or organization	I.R.S. Employer Identification Number

#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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

Common Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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. (Check one):

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2009 (80,911,141 shares) was approximately $196,560,290 (computed based on the closing sale price of the common stock at $2.44 per share as of such date). Shares of common stock held by each officer and director and each person owning more than ten percent of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of the affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of common stock of the issuer outstanding as of March 10, 2010 was 118,768,373.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.

TABLE OF CONTENTS

		PAGE

PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	35
Item 1B.	Unresolved Staff Comments	55
Item 2.	Properties	56
Item 3.	Legal Proceedings	57
Item 4.	Reserved	57

PART II		58
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	58
Item 6.	Selected Financial Data	61
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	62
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 8.	Financial Statements and Supplementary Data	79
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	80
Item 9A.	Controls and Procedures	80
Item 9B.	Other Information	83

PART III		84
Item 10.	Directors, Executive Officers and Corporate Governance	84
Item 11.	Executive Compensation	84
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	84
Item 13.	Certain Relationships and Related Transactions, and Director Independence	84
Item 14.	Principal Accountant Fees and Services	84

PART IV		85
Item 15.	Exhibits and Financial Statement Schedules	85

PART I

Item 1.

Business

General

Exploration Stage Company. We are an exploration stage company engaged in the acquisition and exploration of mineral properties and slag reprocessing projects. We hold interests in two mineral projects, our Clarkdale Slag Project and our Searchlight Gold Project. Our business is presently focused on our two mineral projects:

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

the Searchlight Gold Project, which involves exploration for precious metals on mining claims near Searchlight, Nevada.

Clarkdale Slag Project. The Clarkdale Slag Project, located in Clarkdale, Arizona, 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. Metallurgical testing and project construction on the Clarkdale Slag Project have been ongoing since 2005, initially under the direction of the prior owners, thereafter with our participation in a joint venture with the prior owners in 2005, and currently solely by us since we acquired 100% of the Clarkdale Slag Project in 2007.

Since our acquisition of 100% of the Clarkdale Slag Project in 2007, we have devoted considerable effort to the designing and engineering of our first production module, which included finalizing the production flow sheet, sourcing and purchasing equipment as well as refurbishing the module building and constructing the electrowinning building. The module and electrowinning buildings house the first production module, which has been designed to allow for the grinding, leaching, filtering and extraction of precious and base metals from the slag material and is expected to process between 100 and 250 tons of slag material per day. 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. Since 2009, we have been executing our plan of operation 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, silver, copper and zinc extraction that would support the economic feasibility of a commercial production facility.

Searchlight Gold Project. The Searchlight Gold Project involves exploration for precious metals on mining claims near Searchlight, Nevada. We have been engaged in an exploration program on our Searchlight Gold Project since 2005. Our Searchlight Claims are comprised of non-patented placer mining claims located on federal land administered by the United States Bureau of Land Management (“BLM”). Drilling and mining activities on the Searchlight Claims must be carried out in accordance with a Plan of Operations or permit issued by the BLM.

On February 11, 2010, we received final approval of our Plan of Operations from the BLM, which allows us to conduct an 18-hole drill program on our project area. During 2010, we intend to perform the first phase of our drilling program, which we expect will include detailed surface sampling along with the drilling of approximately four holes, as defined within our Plan of Operations. The purpose of this first phase will be to understand the mineralogy of the material on the project area, identify the presence of precious metals within the material and determine analytical and extraction protocols for the precious metals, if present. Following the analysis of the first phase of the drilling program, we intend to continue to drill the remainder of the 18 holes within our Plan of Operations. Our work on the project site will be limited to the scope within the Plan of Operations. To perform any additional drilling or mining on the project, we would be required to submit a new application to the BLM for approval prior to the commencement of any such additional activities.

We have not been profitable since inception and there is no assurance that we will develop profitable operations in the future. Our net loss for the years ended December 31, 2009, 2008 and 2007 was $4,135,424, $3,128,386 and $2,221,818, respectively. As of December 31, 2009, we had an accumulated deficit of $17,491,906. We cannot assure you that we will have profitable operations in the future.

Our principal executive offices are located at 2441 W. Horizon Ridge Pkwy., Suite 120, Henderson, Nevada, 89052. Our telephone number is (702) 939-5247. Our Internet address is www.searchlightminerals.com. Through a link on the “Recent Filings” section of our website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. All such filings are available free of charge. Information contained on our website or that is accessible through our website should not be considered to be part of this report.

Corporate History

We were 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, we operated primarily as a biotechnology research and development company with headquarters in Canada and an office in the United Kingdom. On November 2, 2001, we acquired all of the outstanding shares of Regma Bio Technologies, Ltd., a corporation organized under the laws of the United Kingdom. The share exchange transaction resulted in a change of control with the former principals of Regma Bio Limited owning approximately 80% of our outstanding shares of common stock (including Caisey Harlingten, who became the beneficial owner of approximately 66% of our outstanding shares). In connection with this acquisition, on February 1, 2002, we changed our name to “Regma Bio Technologies Limited.” On November 26, 2003, we changed our name from “Regma Bio Technologies Limited” to “Phage Genomics, Inc.”

In February 2005, we changed our business from a biotechnology research and development company to a company focused on the exploration and acquisition of mineral properties in the Searchlight, Nevada area. Intangible assets of $173,234 and property and equipment of $20,002 related to the prior biotechnology research operations were fully written off and included in discontinued operations. No sales proceeds were received from such discontinued operations. In connection with the change of our business, we entered into option agreements with the owners of 20 contiguous placer mineral claims with respect to an approximately 3,200-acre site located on federal land administered by the BLM near Searchlight, Nevada (the “Searchlight Claims”). Under the option agreements, we issued 1,400,000 shares of our common stock and agreed to issue an additional 4,200,000 shares of our common stock during the following three year period to the holders of the Searchlight Claims in consideration of an option to purchase the Searchlight Claims.

Further, on April 12, 2005, Mr. Harlingten and his affiliates transferred 95,400,000 shares of our common stock to Mr. Matheson in connection with Mr. Matheson’s bringing the business opportunity relating to the Searchlight Claims to us. The 95,400,000 shares represented approximately 88% of the outstanding shares of common stock at the time of such transfer. Subsequently, on April 29, 2005, Mr. Matheson cancelled 70,000,000 shares of our common stock held by him for no consideration for the purpose of making our capitalization more attractive to future equity investors. Immediately following these transactions, Mr. Matheson became the beneficial owner of approximately 70% of our outstanding shares.

On June 23, 2005, we changed our name from “Phage Genomics, Inc.” to “Searchlight Minerals Corp.”

On September 30, 2005, we effected a forward split of our common stock on a two-for-one basis. All per share amounts and number of shares outstanding in this report have been retroactively adjusted and restated to give effect to the forward split.

Acquisition of Searchlight Gold Project Claims

On February 8, 2005, and as amended June 22, 2005, we entered into option agreements with the owners of the Searchlight Claims. Each claim relates to a separate 160 acre parcel on the 3,200-acre site. Prior to entering into the option agreements with us, the Searchlight Claim owners had optioned their respective interests in the claims to Searchlight Minerals, Inc. (“SMI”), a company controlled by Mr. Matheson. Under the terms of the option agreements with us, each claim owner, SMI and we agreed, among other things, to:

the assignment to us of SMI’s rights in the Searchlight Claims under the prior option agreements with the claim owners;

our reimbursement of Mr. Matheson and his related companies for amounts advanced to SMI, for which we have reimbursed Mr. Matheson in the amount of $85,000;

the issuance of an aggregate of 5,600,000 shares of our common stock in four equal installments of 1,400,000 shares over a three year period to the claim owners, after which all of the claim owner’s rights and interests in the Searchlight Claims would be assigned to us;

the appointment of Mr. Matheson as our director and officer to proceed with a restructuring of our business;

during the term of the option agreement, our obligation to make all regulatory or government payments required to maintain the Searchlight Claims in good standing; and

during the term of the option agreement, our exclusive right to access the Searchlight Claims for all purposes, including the right to prospect, explore, develop, trench, strip, excavate, test pit, sample and conduct any and all exploration and development activities for the purpose of determining the mineral or metal content of the properties, to remove from the properties all such materials and minerals deemed necessary to properly test, explore or develop the properties (but not for sale), and to use all structures, tools and facilities located on the properties, and the right to place and use thereon, and to remove, all such equipment, vehicles, machinery, buildings, structures, and facilities as it may deem desirable from time to time.

We issued the initial 4,200,000 shares of the 5,600,000 shares in three installments of 1,400,000 shares on July 7, 2005, July 27, 2006 and June 29, 2007. During the second quarter of 2008, the Searchlight Claim owners transferred title to the Searchlight Claims to us in consideration of our agreement to issue to the claim owners the remaining 1,400,000 shares of common stock by June 30, 2008. We issued the remaining 1,400,000 shares to the Searchlight Claim owners in June 2008, and now have issued all 5,600,000 of the shares of our common stock required to be issued to the Searchlight Claim owners.

Acquisition of Clarkdale Slag Project

Assignment Agreement with Nanominerals. Under the terms of an Assignment Agreement, dated June 1, 2005, and as amended on August 31, 2005 (for the purpose of extending the closing date of the transaction by requiring us to confirm receipt of $1.5 million in financing by September 15, 2005), and October 24, 2005, Nanominerals Corp. (“Nanominerals”), a privately owned Nevada corporation (and one of our current principal stockholders, and an affiliate of Ian R. McNeil and Carl S. Ager, our current Chief Executive Officer and Vice President/Secretary/Treasurer, respectively, and each of whom is a current member of our board of directors), assigned to us its 50% financial interest and the related obligations arising under a Joint Venture Agreement, dated May 20, 2005, between Nanominerals and Verde River Iron Company, LLC (“VRIC”), an affiliate of another member of our board of directors, Harry B. Crockett. Each of the August 31, 2005 and October 24, 2005 amendments were negotiated on our behalf by K. Ian Matheson, who served as an executive officer and director at the time of the execution of the August 31, 2005 amendment and as a director at the time of the execution of the October 24, 2005 amendment. The joint venture related to the exploration, testing, construction and funding of the Clarkdale Slag Project.

Pursuant to the terms of the Assignment Agreement, we:

paid Nanominerals $690,000 in respect of certain payments made by Nanominerals towards the acquisition of the Clarkdale Slag Project, including reimbursement of payments previously made by Nanominerals to VRIC under the Joint Venture Agreement, and reimbursement of other previously paid expenses incurred by Nanominerals relating to the Clarkdale Slag Project;

issued to Nanominerals warrants to purchase 12,000,000 shares of our common stock exercisable through June 1, 2015, at an exercise price of $0.375 per share (at the instruction of Nanominerals, we issued 2,000,000 of the warrants to Clarion Finanz AG, a designate of Nanominerals); and

appointed Ian R. McNeil, Carl S. Ager and Robert D. McDougal, as nominees of Nanominerals, to serve on our board of directors, thereby constituting a majority of the board members.

The value of the warrants issued to Nanominerals was computed using the binomial lattice method and was allocated to the acquisition cost of the project and was computed based on the following assumptions:

Dividend yield	—
Expected volatility	79	%
Risk-free interest rate	3.91	%
Expected life (years)	9.6

Further, under the terms of the Assignment Agreement, we have a continuing obligation to pay Nanominerals a royalty consisting of 2.5% of the “net smelter returns” on any and all proceeds of production from the Clarkdale Slag Project. Under the agreements, we agreed to pay Nanominerals a 5% royalty on “net smelter returns” payable from our 50% joint venture interest in the production from the Clarkdale Slag Project. The original June 1, 2005 assignment agreement did not include a specific definition of the term “net smelter returns.” However, the parties agreed to a specific definition of the term “net smelter returns” in the October 24, 2005 amendment, which specific definition we believe conforms with the industry standard interpretation of such term. Upon the assignment to us of VRIC’s 50% interest in the Joint Venture Agreement in connection with our reorganization with Transylvania International, Inc., we continue to have an obligation to pay Nanominerals a royalty consisting of 2.5% of the net smelter returns on any and all proceeds of production from the Clarkdale Slag Project.

For purposes of this agreement, the term “net smelter returns” means the actual proceeds received by us, from any mint, smelter or other purchaser for the sale of bullion, concentrates or ores produced from the Clarkdale Slag Project and sold, after deducting from such proceeds the following charges to the extent that they are not deducted by the smelter or purchaser in computing payment:

in the case of the sale of bullion, refining charges (including penalties) only;

in the case of the sale of concentrates, smelting and refining charges, penalties and the cost of transportation, including related insurance, of such concentrates from the Clarkdale Slag Project property to any smelter or other purchaser; and

in the case of any material containing a mineral or minerals of commercial economic value mined or processed from the Clarkdale Slag Project which may be shipped to a purchaser, refining charges for bullion and charges for smelting, refining and the cost of transportation, including related insurance, from the mill to any smelter or other purchaser for concentrates.

Further, under the terms of the Assignment Agreement, we assumed the obligations of Nanominerals under the Joint Venture Agreement relating to the Clarkdale Slag Project, including the funding of a four phase program:

drilling and ore reserve studies (Phase 1);

a report of the commercial, technical and environmental feasibility of the processing and smelting of metals and other mineral materials from a deposit that is prepared in such depth and detail as would be acceptable to lending institutions in the United States, or a “bankable feasibility study” (Phase 2);

the construction of a commercial production facility to process slag materials, as recommended by the bankable feasibility study (Phase 3); and

the expansion of additional commercial production capacity to process slag materials (Phase 4).

On January 17, 2006, Nanominerals acquired 16,000,000 shares of our common stock from K. Ian Matheson in consideration of a payment of $4,640.50, to Mr. Matheson, and, on the same date, Nanominerals sold 8,000,000 warrants to K. Ian Matheson in consideration of a payment of $5,000 from Mr. Matheson. On January 31, 2006, Nanominerals transferred the remaining 2,000,000 warrants in the following transactions: (i) 1,000,000 warrants to Richard J. Werdesheim and Lynne Werdesheim, as trustees for the Werdesheim Family Trust, for a payment of $625, and (iii) 1,000,000 warrants to Craigen L.T. Maine, as trustee for the Maine Rev. Family Trust, for a payment of $625.

Following these transactions, Nanominerals and its affiliates became the beneficial owner of approximately 29% of our outstanding shares.

Reorganization with Transylvania International, Inc. Under the terms of a letter agreement, dated November 22, 2006 and as amended on February 15, 2007, with VRIC, Harry B. Crockett, one of our current directors, and Gerald Lembas, and an Agreement and Plan of Merger with VRIC and Transylvania, dated and completed on February 15, 2007, we acquired all of the outstanding shares of Transylvania from VRIC through the merger of Transylvania into our wholly-owned subsidiary, Clarkdale Minerals LLC, a Nevada limited liability company. As a result of the merger, we own title to the approximately 200 acre property underlying a slag pile located in Clarkdale, Arizona from which we are seeking to recover base and precious metals through the reprocessing of slag material, approximately 600 acres of additional land adjacent to the project property and a commercial building in the town of Clarkdale, Arizona. In accordance with the terms of these agreements, we:

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

paid $9,900,000 in cash to VRIC on the Closing Date; and

issued 16,825,000 shares of our common stock , valued at $3.975 per share, using the average of the high and low prices of our common stock on the closing date, to Harry B. Crockett and Gerald Lembas, the equity owners of VRIC, and certain designates of VRIC under the agreements, who are not our affiliates.

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

we agreed to continue to pay VRIC $30,000 per month until the earlier of: (i) the date that is 90 days after we receive a report of the commercial, technical and environmental feasibility of the processing and smelting of metals and other mineral materials from a deposit that is prepared in such depth and detail as would be acceptable to lending institutions in the United States, or a “bankable feasibility study,” 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:

we have agreed to pay VRIC $6,400,000 within 90 days after we receive a bankable feasibility study;

we have agreed to pay VRIC a minimum annual royalty of $500,000, commencing 90 days after we receive a bankable feasibility study, 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 minimum royalty remains payable until the first to occur of: (1) the end of the first calendar year in which the percentage royalty equals or exceeds $500,000; or (2) February 15, 2017. In any calendar year in which the minimum royalty remains payable, the combined minimum royalty and percentage royalty will not exceed $500,000; and

we have agreed to pay VRIC an additional amount of $3,500,000 from the net cash flow of the Clarkdale Slag Project after such time that we have constructed and are operating a processing plant or plants that are capable of processing approximately 2,000 tons of slag material per day at the Clarkdale Slag Project. The acquisition agreement does not include a specific provision with respect to the periods at the end of which “net cash flow” is measured, once the production threshold has been reached. Therefore, the timing and measurement of specific payments may be subject to dispute. The parties intend to negotiate a clarification of this provision in good faith before the production threshold has been reached.

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

Under the terms of these agreements, the parties terminated the Joint Venture Agreement. However, we continue to have an obligation to pay Nanominerals a royalty consisting of 2.5% of the net smelter returns on any and all proceeds of production from the Clarkdale Slag Project. Therefore, when added to VRIC’s 2.5% royalty, we have an obligation to pay an aggregate of 5% of the net smelters returns to Nanominerals and VRIC on any and all proceeds of production from the Clarkdale Slag Project.

Clarkdale Slag Project

Background and Plan of Operation. In June 2005, we engaged Dr. Richard F. Hewlett as a consultant to serve as the technical project manager for the Clarkdale Slag Project. Since that time, we have been working on the design and testing of a method for extracting precious and base metals from the slag material. Dr. Hewlett initially conducted laboratory tests and analysis on the slag material at a metallurgical facility in Phoenix, Arizona. We rented the facility from a third party in which Mr. Crockett had a minor financial interest, although our rental arrangement occurred prior to the time that we acquired Transylvania.

Initially, we conducted small-scale testing, including grinding, assaying, leaching and extraction of metals from samples of slag material taken from the project site. In addition, recovery of metals was made using ion-exchange technology. Concurrently, Nanominerals conducted mineralogical studies, including Scanning Electron Microscopy/Energy Dispersive Spectroscopy (SEM/EDS) analysis of samples of slag material to determine the presence of the metals and the form in which the metals are contained within the slag, as a potential guide for determining methods of potential liberation and extraction of the metals from the slag. SEM/EDS was also used to evaluate the efficiency of the grinding methods in liberating the metals.

Although the technologies used by us and Nanominerals existed prior to 2005, Transylvania, the prior owner of the Clarkdale Slag Project from 1983 until 2007, did not possess the technical expertise or understanding to be able to perform the necessary analyses on the slag material in order to understand the extent of potential precious metal mineralization within the slag material and its potential recoverability. Consequently, the prior owner was not aware that the slag material had a potential to possess a significant quantity of precious metals. They also did not have the desire to expend the necessary funds, nor have an investment vehicle necessary to provide access to the required funds, in order to hire the specialized scientists, engineers and firms to perform the studies and analyses that were required to determine the presence, liberation and extraction of precious metals. Their lack of technical expertise and access to financing served as the basis for entering into their joint venture agreement with Nanominerals in 2005 and, subsequently, agreeing to be acquired by us in 2007. We do not have any specific information regarding efforts (or the lack of efforts) of owners of the Clarkdale Slag Pile prior to Transylvania and prior to 1983 with respect to attempts to extract metals from the slag material.

In 2005, we retained Mountain States, an independent engineering consultant, to implement a drilling and sampling program under strict chain-of-custody sampling, at the Clarkdale Slag Project. The drill hole samples were taken between the fourth quarter of 2005 and the third quarter of 2006. Boart Longyear Company, a subcontractor under the chain-of-custody supervision of Mountain States, drilled a total of eighteen holes (SD 1-18) in the slag pile using sonic drills, comprising more than 1,700 feet on individual 2.5 foot intervals over the project site. Mountain States had chain of custody over the samples from the time they were recovered from the drill through the analytical process. In the third quarter of 2006, Mountain States also conducted chain-of-custody tests on bulk samples obtained from the slag pile.

In the first quarter of 2006, we began to conduct larger scale, pilot testing at the Phoenix facility on slag samples obtained from the Clarkdale site. In connection with the testing, we purchased equipment, which we installed at the pilot plant and used in conjunction with leaching, filtering and metal recovery equipment already at the pilot plant.

In the second quarter of 2007, we received a report from Independent Mining Consultants, Inc. (“IMC”), an unaffiliated mining consultant located in Tucson, Arizona, which outlined the volume, tonnage and grade estimates of the slag pile at the Clarkdale site. This report constituted the first independent analysis of the estimated tonnage and grade of slag at the project site.

Since 2006, we have been in the process of designing a production module with the intended purpose of processing and extracting precious and base metals from the slag pile in a commercially viable manner. We retained Architecture Works Inc., an unaffiliated architectural firm, to perform the architecture work for the retrofitting of one of our existing structures at the Clarkdale site to house the proposed production module. We then engaged Talson Corporation, an unaffiliated general contractor, to perform the construction work on the structure of the production module building, and additional site work in accordance with the site plan that was approved by the town of Clarkdale. We also retained Cimetta Engineering and Construction Co., Inc., an unaffiliated engineering firm, to collaborate with Dr. Hewlett in the design, engineering and installation of the production module. In February 2007, we moved our equipment from the Phoenix facility into an existing structure on the Clarkdale site, adjacent to the production module building, under the direction of Dr. Hewlett.

The process design and equipment selection for the initial production module was designed to process between 100 and 250 tons of slag material per day. The results from its operation are anticipated to serve as the basis for a proposed full-scale production facility. The full-scale production facility is intended to house a number of modules which will allow for a production capacity of 2,000 tons of slag material per day. All required buildings and services are currently available at the site for the initial production module. Buildings and services on site include office, laboratory and processing buildings, as well as road, rail, power, telephone, water, storm drain and sewage. However, we will need to construct a larger building to house the full-scale production facility.

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 main 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 circuit as well as the leaching and extraction of gold, silver, copper and zinc. We have completed continuous runs of up to 16 hours through the crushing and grinding circuit. To date, our internal laboratory testing on ground slag material has reflected consistent levels of extractable precious and base metals in pregnant leach solutions. Further, management believes that extraction results from preliminary internal laboratory testing have been consistent with the results of earlier assay testing conducted by our independent consultants. We believe that we can improve extraction rates further by optimizing the grind, the chemical characteristics of the leach solutions and the amount of residence time required for maximum grind and leach efficiency.

The crushing and grinding circuit liberates gold, silver, copper and zinc from the slag material. However, we have faced challenges involving the amount of wear on certain grinding components caused by the abrasiveness of the slag material and the rate of throughput. Highly abrasive carbon-rich ferro-silicates (containing carbon, iron and silica) comprise about 90% of the slag material, which required us to seek out more advanced hard facing technology and wear-resistant surfacing media on our crushing and grinding equipment. Although we previously believed that the wear issues relating to the throughput rate of the crushing and grinding circuit had been resolved, further testing in the first quarter of 2010 showed that some of these issues are still present and further work will be required to address these remaining issues. We are also testing additional equipment that may be added to the crushing and grinding circuit to help with the equipment wear issues.

In the first quarter of 2010, we scaled-up from laboratory and pilot plant leaching to the operation of the production module leaching circuit. During this time, we continued to adjust the chemical characteristics of the leach solution in an effort to maximize gold extraction from the slag material and as a consequence, we also began to leach more iron into solution. This excess iron in solution needs to be removed in order for the effective extraction of gold, silver, copper and zinc from the leach solution. Our technical team and consultants have reviewed this issue and have advised us that iron in solution is a common metallurgical concern in the mining industry and they believe that it is readily solvable with the insertion of an “iron circuit” which would remove the iron from the leach solution. Equipment for this iron circuit has been ordered. However, the continuous operation of the production module may be delayed while it is being shipped, installed and tested.

Since the third quarter of 2009, we have been engaged with a team of independent metallurgical engineers, with extensive international experience in milling and leaching hard, abrasive and refractory material similar to that found in the slag pile. The engineers have provided us with recommendations regarding further optimization of the four primary processing circuits (crushing, grinding, leaching and filtration) with particular emphasis on the grinding and leaching circuits. We have made progress in resolving some of these issues and our technical team is currently focused on resolving the remaining equipment wear issues in the crushing and grinding circuit, addressing the iron in solution issue and improving the leach circuit with the grind/leach combination in order to optimize metal extraction.

Once we are able to resolve the grinding, iron and leach circuit issues and configure the circuits to run at effective productivity levels, we believe that we will be able to proceed with the continuous operation of all circuits within the production module. We intend to process enough slag material through the production module on a continuous basis to produce gold, silver, copper and zinc metal in marketable forms. Once we are able to achieve continuous operation of the production module, we intend to engage an independent engineer to conduct a technical analysis of our metals recovery process.

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

We anticipate that the operation of our production module will allow us to determine the economics of the project and serve as the basis for the final feasibility of the project. If the feasibility of the project establishes economic viability, we expect to commence construction of a full-scale production facility where we intend to install subsequent modules in parallel. We expect that each subsequent module would be comparable in technology and scale to the initial production module. The number of subsequent modules required to attain full-production of 2,000 tons per day will be determined once the initial production module capacity is determined. The cost of designing and constructing our initial production module was approximately $12,700,000. We do not believe that the construction of subsequent modules will cost as much because: (i) of the knowledge we have developed in the construction of the initial production module, and (ii) any additional modules will be new construction, rather than rehabilitation of an older building. However, the scope and size of our full-scale production facility, including the number of additional modules, the timing and cost of additional modules and the economies of scale of a production facility, will depend upon a number of factors, including the results of a feasibility study and the availability of funding. A more thorough economic analysis of the full-scale production facility, including specific capital and operating costs, funding schedules and funding sources, is expected to occur during the feasibility evaluation of the initial production module. The first stage of the feasibility evaluation began in the second quarter of 2009, and has continued into the first quarter of 2010 with our team of metallurgical engineers, with specialty expertise in dealing with milling and leaching hard, abrasive and refractory material, to work with our Clarkdale personnel and consultants to achieve optimum continuous production.

We have budgeted $5,600,000 for our work program on the Clarkdale Slag Project over the next twelve months, which includes the operation of the production module and performing the feasibility study. A decision on allocating approximately $6,000,000 of additional funds for the Phase II expansion and $4,700,000 to complete the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona will be made once the first production module is operational and its results are analyzed.

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

Estimate of Projected Expenditures. Since our involvement in the Clarkdale Slag Project in June 2005, we have incurred project expenses of approximately $9,140,000, including metallurgical testing, mineralogical studies, drilling program, pilot plant operation and site administrative expenses. In addition, as of December 31, 2009, we have recorded capital expenditures on the Clarkdale Slag Project of approximately $13,988,000, including building construction, production module equipment (grinding, leaching, filtering, extraction and laboratory equipment), site improvements and administration equipment. The following is an outline of the proposed milestones and estimated costs for anticipated work on the Clarkdale Slag Project for the next twelve months (subject to funding availability, we also anticipate spending approximately $6,000,000 on Phase II of our Clarkdale Slag Project – preparation for expansion to 2,000 tons of slag material per day and $4,700,000 to complete the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona):

Work	Budget

1. Production Module Operation	$	3,440,000

• Address start-up issues
• Optimize module operation
• Operate Module Continuously

2. Technical Consulting Services	$	1,000,000

3. Feasibility Study and Expansion Preparation	$	800,000

• Third-party feasibility study performed on operating production module
• Preparation for expansion to 2,000 tons per day

4. Purchase Payments – VRIC		360,000

SUBTOTAL	$	5,600,000

These estimated costs are preliminary in nature, and actual costs may be significantly higher once we have completed the feasibility study and received results from the construction and testing of our proposed production module. Further, these estimated costs do not take into account possible delays that may arise. If we experience any difficulties or delays during our plan of operation, it could take substantially longer and be more costly for us to complete construction of the production module or complete a feasibility study. In addition, if our feasibility study establishes the project is economically viable and “bankable,” we will have to pay $6,400,000 to VRIC in connection with our Agreement and Plan of Merger with VRIC and Transylvania. To satisfy this obligation, we will be required to obtain additional financing within 90 days of receipt of such a bankable feasibility study.

Location, Access and History. The Clarkdale Slag Project is located in Clarkdale, Arizona, approximately 107 miles north of Phoenix, Arizona and about 50 miles southwest of Flagstaff, Arizona in Yavapai County (see Figure 1, below). The project site is located at a 3,480 feet elevation on approximately 833 deeded acres of industrial zoned land near the town of Clarkdale.

Figure 1 - Clarkdale Project Site

Slag is the waste product of the smelting process. The slag at the Clarkdale Slag Project originated from a large, copper ore smelting operation located on our property in Clarkdale. The copper ore was mined in Jerome, Arizona during the period 1915-1952, when the Clarkdale smelter was one of the largest copper smelters in the world. Jerome is a historic mining district, located approximately 6 miles west of Clarkdale at an elevation of 5,435 feet, which produced copper extracted from massive sulfide deposits mined at Jerome (1889-1952) and smelted at both Jerome (1889-1915) and Clarkdale (1915-1952).

Molten slag from the Clarkdale smelter was hauled by rail to the deposit site and poured onto the property, much like a lava flow. The slag cooled and hardened into the large slag pile which now exists at the Clarkdale site. The hardened slag has a glassy, volcanic lava-like appearance, and has a high iron and silica content. It contains some thin layers of coarse material which appear to have been undigested from the smelter. The hardening process causes fracturing at the surface and within the layers beneath the surface. As a result, the slag pile consists of both solid sheets and coarse material deposited layer upon layer.

The slag pile currently occupies approximately 45 acres on the property and, as determined from the drilling and analysis programs, has a graduating thickness of between 60 and 130 feet and contains approximately 20 million tons of slag material. The slag pile borders the Verde River and an active railroad track. The track divides the pile into two sections located east and west of the track (See Figures 2A and 2B below). The eastern portion of the slag pile is the larger of the two, as approximately 98% of the slag pile is located in the east section of the property.

Figure 2A –Clarkdale Project Aerial View

Figure 2B –Clarkdale Project Area Map

Mineralogy and Metallurgy. Metallurgical testing between 2005 and 2007 by Dr. Richard F. Hewlett, the technical project manager of our Clarkdale Slag Project, on bench and bulk scale samples from the slag pile has indicated that gold, silver, copper and zinc exists in and may potentially be extractable from the slag pile. The filtered byproduct remaining after slag has been processed is a ferrosilicate product (containing iron and silica). Canadian Environmental & Metallurgical, Inc., an independent laboratory which we retained, reported to us the results of a leaching test they performed on a sample of the byproduct. Based on these results, Dr. Hewlett concluded and reported to us that the byproduct may consist of relatively inert materials. We do not currently know whether the byproduct will have any significant commercial value. However, we intend to conduct testing and analysis in the future to explore this possibility.

Nanominerals conducted a SEM/EDS analysis of the slag pile, which was supported by a report by SGS Lakefield Research, an independent consultant, in October, 2005, which showed that there are three distinct ferrosilicate phases which form the bulk matrix of the slag pile and that:

copper-zinc is contained within small, irregular shaped particles of iron-copper-zinc sulfides of dimensions of less than 0.3-20 microns;

gold occurs as very fine particles (less than 1 micron) entombed within larger grains of iron sulphides (less than 30 microns);

zinc occurs as zinc-oxides and forms part of the slag matrix; and

iron occurs as iron-metal, iron-silicates, iron-sulfides and iron-oxide of dimensions of less than 5 microns.

The studies by SGS Lakefield and Nanominerals showed that all of these metal phases are contained in an amorphous, nano-crystalline matrix of calcium-iron-aluminum-silicate. These studies also demonstrate the existence of the various metals that are not generally visible due to their extreme small size. Studies of these SEM/EDS micrographs make possible the evaluation of the grinding and leaching efficiencies which aid in flow-sheet design and process optimization.

Drilling and Bulk Sampling Tests

Drilling Hole Tests. In 2005, we retained Mountain States to implement a drilling and sampling program under strict chain-of-custody sampling at the Clarkdale Slag Project. In the fourth quarter of 2005 and the first and second quarters of 2006, Boart Longyear Company, an unaffiliated drilling subcontractor under the chain-of-custody supervision of Mountain States, drilled a total of eighteen holes (SD 1-18) in the slag pile using sonic drills, comprising more than 1,700 feet on individual 2.5 foot intervals over the project site (See Figure 3 below – “plan view of drilling program”). Mountain States had complete control over the samples from the time they were recovered from the drill through the analytical process. Holes SD-1 to SD-6 were drilled by a mini-sonic drill and SD-7 to SD-18 were drilled by a large sonic drill. Sonic drills produce sonic waves that are directed down a hollow drill-pipe to the bottom of the hole where the sonic waves perform the breaking of the slag material. The broken slag cuttings were collected into a casing and discharged directly into buckets every 2.5 feet of vertical depth, and each bucket was marked by drill hole number and depth interval and then sealed in order to retain the integrity of the sample. This drilling method provides highly representative, continuous core samples without the use of water or air.

Figure 3 – Clarkdale Project Plan View of Drilling Program

For drill holes SD-1 through SD-18, Mountain States performed the copper, zinc, and iron analysis using the fusion assay method, followed by atomic absorption. Arrakis, an unaffiliated mining and environmental technology firm, performed gold and silver analysis under chain of custody analysis of Mountain States, using an acid total digestion method followed by atomic absorption. The composite footage referenced in the table below approximately reflects the base of the slag pile, and therefore, the relative thickness of the slag pile above the ground. Mountain States reported the following analysis of the drill hole samples:

Summary of Results of Drill Hole Testing
		Gold		Silver		Copper		Zinc		Iron
		Au (opt)*		Ag (opt)*		Cu (%)		Zn (%)		Fe (%)
18 Drill Hole Average			0.46		0.13		0.37		2.47		33.1
Drill Hole Results		Gold		Silver		Copper		Zinc		Iron
Drill Hole	Composite Footage	Au (opt)*		Ag (opt)*		Cu (%)		Zn (%)		Fe (%)
SD-1	0.0 – 55.0		0.210		-		0.70		2.10		32.1
SD-2	0.0 – 60.0		0.213		-		0.73		2.13		34.6
SD-3	0.0 – 109.0		0.228		-		0.37		2.99		33.4
SD-4	0.0 – 80.0		0.190		-		0.39		3.29		32.3
SD-5	0.0 – 89.0		0.229		-		0.39		2.29		30.2
SD-6	0.0 – 50.0		0.216		-		0.36		3.04		32.5
SD-7	0.0 – 111.5		0.667		0.249		0.26		3.10		36.2
SD-8	0.0 – 117.5		0.716		0.140		0.29		2.79		33.3
SD-9	0.0 – 114.0		0.633		0.153		0.34		2.43		32.7
SD-10	0.0 – 112.5		0.669		0.110		0.32		2.57		33.5
SD-11	0.0 – 131.0		0.571		0.127		0.32		2.18		33.4
SD-12	0.0 – 89.0		0.428		0.109		0.31		1.99		32.1
SD-13	0.0 – 127.5		0.590		0.114		0.39		2.86		33.3
SD-14	0.0 – 107.5		0.538		0.139		0.36		2.14		33.0
SD-15	0.0 – 89.0		0.483		0.143		0.33		1.96		32.8
SD-16	0.0 – 118.0		0.633		0.125		0.31		2.49		34.8
SD-17	0.0 – 116.0		0.657		0.116		0.30		2.36		35.0
SD-18	0.0 – 36.0		0.390		0.070		0.22		1.70		31.3
Average			0.46		0.13		0.37		2.47		33.1

*opt (ounces per ton)

Bulk Sampling Tests. In the third quarter of 2006, Mountain States collected a 4,000 pound bulk sample, under chain of custody, comprised of material taken over the entire surface of the 45-acre slag pile. Mountain States divided the 4,000 pound bulk sample into five approximately 750 pound lots and milled each 750 pound lot through our mill located at the leased pilot plant in Phoenix, Arizona. Mountain States subsequently performed the copper, zinc, and iron analysis at its own facility using the fusion assay method, followed by atomic absorption. Mountain States also performed gold and silver analysis of the bulk sample using the fire assay method followed by atomic absorption. Mountain States reported the following analysis of the bulk sample:

Summary of Bulk Sample Results

Gold

Silver

Copper

Zinc

Iron

Au (opt)*

Ag (opt)*

Cu (%)

Zn (%)

Fe (%)

750-pound Bulk Sample Average

0.42

0.06

0.35

2.88

31.0

Surface Bulk Sample Results
		Gold		Silver
	Composite	Au		Ag		Copper		Zinc		Iron
Sample	Detail	(opt)*		(opt)*		Cu (%)		Zn (%)		Fe (%)
SS1B-1	Surface Bulk Sample		0.361		0.285		0.36		3.00		33.8
SS1B-2	Surface Bulk Sample		0.422	ND**			0.35		2.80		30.4
SS1B-3	Surface Bulk Sample		0.428	ND**			0.33		2.90		30.4
SS1B-4	Surface Bulk Sample		0.444	ND**			0.36		2.80		29.8
SS1B-5	Surface Bulk Sample		0.434	ND**			0.34		2.90		30.6
Average			0.42		0.06		0.35		2.88		31.0

	*opt (ounces per ton)
	**ND (None Detected)

Volume, Tonnage and Grade Estimates. On May 21, 2007, we received a report from IMC outlining the volume, tonnage and grade estimate of the slag pile in Clarkdale, Arizona. In compiling the report, IMC relied on the drill hole depths and gold, silver, copper and zinc analysis provided by Mountain States and did not perform independent verification of such data. Further, IMC calculated the volume of the east (larger) side of the slag pile based on the assumption that the depth of each drill hole (other than SD-18) conducted under the supervision of Mountain States reflected the thickness of the slag pile within the area of each drill hole. Dr. Hewlett provided calculations for the volume of the west (smaller) side of the slag pile and topographic maps showing the present day surface of the slag pile and surrounding topography.

From the drill hole samples, IMC calculated the average bulk density of the slag to be 200.6 pounds per cubic foot which equates to an average tonnage factor of 9.97 cubic feet per ton. With this analysis as well as the drill hole depths and the assay data provided by Mountain States, IMC produced a three dimensional computer model of the slag pile to estimate the volume, tonnage and average metal grades within the pile as follows:

	Volume Estimate
Slag Pile	(million cubic feet)		Tons in Millions		Au (opt)*		Ag( opt)*		Cu (%)		Zn (%)		Fe (%)
East		198.0		19.86		0.50		0.10		0.34		2.47		33.18
West		3.4		0.34		0.39		0.07		0.22		1.70		31.30
Combined		201.4		20.20		0.50		0.10		0.34		2.46		33.15

*opt (ounces per ton)

Proposed Production Module. Since 2006, we have been in the process of designing a production module with the intended purpose of processing and extracting precious and base metals from the slag pile in a commercially viable manner. The flow-sheet and equipment selection for the initial production module was designed to process between 100 and 250 tons of slag material per day. The results from its operation are anticipated to serve as the basis for a proposed full-scale production facility. The production facility is intended to house a number of modules which will allow for a production capacity of 2,000 tons of slag material per day.

Below is a basic flow chart of the intended operations of the proposed initial production module at the Clarkdale site (See Figure 4 below).

Figure 4 – Clarkdale Project Flow Chart

The following is a description of the anticipated operations of the four major sections of the production module:

Crushing and Grinding. The flow sheet begins with the slag being dug from the slag pile with an excavator and run through a jaw crusher (takes material down to roughly 5/8” material). The output from the crusher is scooped into a dump truck, transported a short distance to be stockpiled on a storage pad near the processing building (roughly 2,800 feet from slag pile to the stockpile). It is then run through an impact mill and fed into a vibratory mill, the final stage of grinding. The vibratory mill is a “wet” mill, which means that water is added, along with the slag inside the mill. The output from the vibratory mill is a black, wet slurry with paint-like consistency.

Leaching. After the grinding circuit, the slurry will be pumped into a series of leach tanks into which chemicals and water are added.

Filtration. The contents from the leach tanks are then passed through pressure filters through which the solids are separated from the liquid. The solids, or filtered “byproduct” are a ferrosilicate product and are stored for later removal. We do not currently know whether the byproduct will have any significant commercial value. However, we intend to conduct testing and analysis in the future to explore this possibility. The liquid, or “pregnant solution,” contains the gold, silver, copper and zinc in solution.

Extraction. The extraction process starts by pumping the pregnant solution through a series of resin columns, also referred to as the ion exchange circuit. Resins are manmade collectors (functionalized plastic), each specifically designed to selectively collect specific metals. Our resin columns are designed to extract the gold and silver, respectively. At this stage, the gold and silver are “loaded’ on the resins. We expect that the resins will recover the gold and silver from the pregnant solution, however, the exact recovery rates will not be known until data is analyzed from the operation of the production module. Due to cost and efficiency, it is anticipated that the gold and silver loaded resins will be sold directly to a refinery instead of purifying the metal on site (the value of the gold and silver is anticipated to outweigh the value of the resins).

After the pregnant solution has passed through the resin columns, the solution is passed through the solvent extraction and electrowinning circuits where the copper and zinc are extracted from the pregnant solution and then purified into copper and zinc metal. The electrowinning process uses electrical current to extract metal from solution and is a widely used extraction method for copper and zinc.

Permitting. The site for the Clarkdale Slag Project is located in the Town of Clarkdale, Arizona and as a result, most of the operational permits are subject to their authority. The environmental permits, however, are subject to the authority of the State of Arizona.

We were granted a Class II Synthetic Air Quality permit from the Arizona Department of Environmental Quality (“ADEQ”) for quarrying and metals recovery operations for the Clarkdale Slag Project. A Class II permit is required because the ADEQ determined that our project is not a “major source” of air pollution after reviewing the description of our on-site activities, and the modeling done by us with the assistance of our consultant, an unaffiliated international engineering company, which shows the potential areas where the project could possibly emit substances into the air. We received a “Synthetic” permit because we voluntarily worked with ADEQ to agree on limits of production that would assure that we would not exceed the acceptable limits of regulated air pollutants. The agreement permits us to operate the demonstration module at a maximum capacity of 240 tons per day. The Class II permit is the only air quality permit required for us to operate the demonstration module. During the operation of the module, we intend to collect data to demonstrate the actual amount of air pollutants generated by each process that we use. We also intend to prepare a computer model of those activities with the assistance of our consultant. We then intend to submit that data to ADEQ in support of our full production module.

We have obtained an approved use permit from the Town of Clarkdale to process up to 250 tons of slag per day for project operations, and a conditional use permit from Clarkdale for our planned activities for up to 2,000 tons of slag material per day on the Clarkdale Slag Project, subject to final approval of our plans and approval from ADEQ with respect to our air permit. We have obtained a Determination of Non-Applicability from the ADEQ with regard to an aquifer protection permit for the proposed production module. The effect of this determination will exempt us from requiring a water permit for the processing of up to 250 tons of slag per day for project operations.

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

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

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

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

Searchlight Gold Project

Location, Access and History of Exploration. The Searchlight Gold Project is a 3,200-acre placer gold project located about 50 miles south of Las Vegas and 2 miles south of Searchlight, Nevada. (See Figure 5 below.) Access is by vehicle from Highway 95. The mining claims were staked in the period between 1998 and 2003 as 160-acre association placer mining claims on federal land administered by the BLM. We own title to the Searchlight Claims.

Figure 5 – Searchlight Gold Project Location

The Searchlight Claims are located in parts of Sections 1, 12-13 and 24-25 of Township 29 South, Range 63 East and Sections 19 and 30 of Township 29 South, Range 64 East Clark County, Nevada. The names of the 160-acre claims and their federal serial numbers are as described below:

Nevada Mining Claim	BLM Number
Rio Raga 300	600834
Rio Raga 301	600835
Rio Raga 302	600836
Rio Raga 303	600837
Rio Raga 304	600838
Rio Raga 305	600839
Rio Raga 306	715676
Rio Raga 307	600841
Rio Raga 308	600842
Rio Raga 309	600843
Rio Raga 310	699996
Rio Raga 311	699997
Rio Raga 312	600846
Rio Raga 313	600847
PV Brown 193	854993
PV Brown 301	854994
P V Red #11	791232
P V Red #12	791233
P V Red #13	791234
P V Red #14	791235

During the second quarter of 2008, we “double staked” the Searchlight property by filing, with the 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 names of the 20-acre claims and their corresponding federal serial numbers are as described below:

Nevada Mining Claim		BLM Number	Nevada Mining Claim		BLM Number
SMC	001	0989708	SMC	039	0989743
SMC	002	0989709	SMC	041	0989744
SMC	003	0989710	SMC	043	0989745
SMC	004	0989711	SMC	045	0989746
SMC	005	0989712	SMC	046	0989747
SMC	006	0989713	SMC	047	0989748
SMC	007	0989714	SMC	048	0989749
SMC	008	0989715	SMC	050	0989750
SMC	009	0989716	SMC	052	0989751
SMC	010	0989717	SMC	054	0989752
SMC	011	0989718	SMC	056	0989753
SMC	012	0989719	SMC	057	0989754
SMC	013	0989720	SMC	058	0989755
SMC	014	0989721	SMC	059	0989756
SMC	015	0989722	SMC	060	0989757
SMC	016	0989723	SMC	061	0989758
SMC	017	0989724	SMC	062	0989759
SMC	018	0989725	SMC	063	0989760
SMC	019	0989726	SMC	064	0989761
SMC	020	0989727	SMC	065	0989762
SMC	021	0989728	SMC	066	0989763
SMC	022	0989729	SMC	067	0989764
SMC	023	0989730	SMC	068	0989765
SMC	024	0989731	SMC	069	0989766
SMC	025	0989732	SMC	070	0989767
SMC	026	0989733	SMC	071	0989768
SMC	027	0989734	SMC	072	0989769
SMC	028	0989735	SMC	073	0989770
SMC	029	0989736	SMC	074	0989771
SMC	030	0989737	SMC	075	0989772
SMC	031	0989738	SMC	076	0989773
SMC	032	0989739	SMC	077	0989774
SMC	033	0989740	SMC	078	0989775
SMC	035	0989741	SMC	079	0989776
SMC	037	0989742	SMC	080	0989777

Nevada Mining Claim		BLM Number	Nevada Mining Claim		BLM Number
SMC	081	0989778	SMC	120	0989813
SMC	082	0989779	SMC	121	0989814
SMC	083	0989780	SMC	122	0989815
SMC	084	0989781	SMC	123	0989816
SMC	085	0989782	SMC	126	0989819
SMC	086	0989783	SMC	127	0989820
SMC	087	0989784	SMC	128	0989821
SMC	088	0989785	SMC	129	0989822
SMC	089	0989786	SMC	130	0989823
SMC	090	0989787	SMC	131	0989824
SMC	091	0989788	SMC	132	0989825
SMC	092	0989789	SMC	133	0989826
SMC	093	0989790	SMC	134	0989827
SMC	094	0989791	SMC	135	0989828
SMC	095	0989792	SMC	136	0989829
SMC	096	0989793	SMC	141	0989830
SMC	097	0989794	SMC	142	0989831
SMC	098	0989795	SMC	143	0989832
SMC	099	0989796	SMC	144	0989833
SMC	100	0989797	SMC	145	0989834
SMC	101	0989798	SMC	146	0989835
SMC	102	0989799	SMC	147	0989836
SMC	103	0989800	SMC	148	0989837
SMC	104	0989801	SMC	149	0989838
SMC	105	0989802	SMC	150	0989839
SMC	106	0989803	SMC	151	0989840
SMC	107	0989804	SMC	152	0989841
SMC	108	0989805	SMC	153	0989842
SMC	109	0989806	SMC	154	0989843
SMC	110	0989807	SMC	155	0989844
SMC	111	0989808	SMC	156	0989845
SMC	112	0989809	SMC	157	0989846
SMC	117	0989810	SMC	158	0989847
SMC	118	0989811	SMC	159	0989848
SMC	119	0989812	SMC	160	0989849

The Searchlight District is a well known, historic gold camp. Mining occurred in the area during the period 1900-1950, where some 250,000 ounces of gold were produced from quartz-sulphide-hematite veins to depths of greater than 1,000 feet with minor placer gold produced. However, there has been no prior history of mining on the land related to the Searchlight Claims.

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

We have budgeted $500,000 to our twelve month work program for the Searchlight Gold Project. Our work program is focused on performing the first phase of our drilling program, continuing our metallurgical testing program and pilot plant tests in an attempt to optimize recovery of precious metals from samples taken from the project and exploring in more detail the potential capital and operating costs of implementing methods, such as autoclave leaching.

Estimate of Projected Expenditures. Since our involvement in the Searchlight Gold Project in February 2005, we have incurred project expenses of approximately $764,000 on metallurgical testing and mineralogical studies. The following is an outline of the proposed milestones and expenditures on the Searchlight Gold Project for the next twelve months:

Work	Budget

1. Sampling and Drilling Program	$	200,000
• First phase of drilling program – surface sampling and approximately four drill holes
• Prepare for second phase of drilling program

2. Metallurgical Testing and Pre Feasibility Program	$	300,000
• Metallurgical testing of material in the first phase of drilling program
• Continue metallurgical testing program on bulk samples to optimize precious metal recovery with methods such as autoclave leaching

TOTAL	$	500,000

Background of Metallurgical Testing at the Searchlight Gold Project. In May 2005, we retained Arrakis to take preliminary chain of custody surface samples from the Searchlight site and test the samples for precious metals. The results indicated that there was a presence of gold in the samples. However, they represented only an “assay” of the sample and are not indicative of the potential extraction of gold from the material. Results of the chain of custody surface samples are provided below:

	Feed Grade
	Au
Surface Sample I.D.	(opt)*
SS5		0.39
SS6		0.48
SS7		0.55
SS8		0.69
* opt (ounces per ton)

Following this initial testing, Arrakis tested a variety of bench scale leach methods in order to test for extraction of the gold from the samples. The bench testing and optimization of leach conditions improved the extraction efficiency to 72% and outlined a protocol for bulk leach testing. In September 2005, Arrakis collected a six-ton bulk sample from the project site. Results from analyses of the bulk samples were as follows:

	Feed Grade
	Au		Extracted Grade Au
Bulk Test I.D.	(opt)*		(opt)*
BL1		0.58		0.25
BL2		0.58		0.22
BL3		0.90		0.21
* opt (ounces per ton)

Subsequent metallurgical testing in 2006 and 2007 by Arrakis using the process of total digestion has consistently revealed a feed grade of 0.37 ounces per ton (opt) gold or better in the Searchlight Gold Project samples. Preliminary tests indicate that gravity concentration of the material does not improve on the extracted recovery of gold.

Arrakis performed a number of tests to examine pressure leaching via autoclave to enhance both the kinetics and extraction efficiency of gold from solution and conducted a series of 11 autoclave tests using 200-gram samples in a Parr 1 liter pressure reactor. In January 2007, Arrakis reported the results of such tests, as are summarized in the following table:

	Feed Grade		Extracted Grade
	Au		Au
Autoclave Test I.D.*	(opt)**		(opt)**
TP2		0.37		0.07
TP3		0.39		0.08
TP4		0.38		0.03
TP5		0.37		0.15
TP6		0.34		0.19
TP7		0.37		0.03
TP8		0.37		0.16
TP9		0.37		0.14
TP10		0.37		0.23
TP11		0.37		0.26
TP12		0.37		0.15

All samples approximated 200 grams in 1 liter of solution. Leach time for all samples approximated 90 min. and the sample for TP7 was dead roasted prior to leaching.

opt (ounces per ton)

Metallurgical extraction, using autoclave leaching, has been successful in extracting 70% of the gold into solution. However, as seen from the table above, precipitation of gold from the leach solution has been challenging and work is continuing to better optimize this process.

Arrakis performed gravity concentration testing on the Searchlight Claims material. Although gravity concentration testing produced an upgraded precious metal concentrate, it did not provide sufficient total recovery of metal to support pursuing gravity separation as a commercially viable option for extraction. Arrakis has advised us that the gravitational forces acting on the denser precious metal particles may not be significant enough to cause separation from the host material due to the small size of the precious metal particles.

With respect to our leach testing, Arrakis found that leaching under high temperature and pressure (i.e. autoclaving) produced more consistent results for precious metals, as opposed to extraction without high temperature and pressure (i.e. open vat leaching). Arrakis has advised us that the aluminum-silicate (aluminum and silica) coating, which we believe to be coating the gold particles in this refractory material, may be the reason for the required high temperature and pressure in the leach procedure.

The table below provides an overview of the results from metallurgical tests completed, to date, by Arrakis:

	Feed Grade*		Extracted Grade
COC Tests(1)	Gold (opt)**		Gold (opt)**		Leach Method
Bench Leach Tests
SP4 – 500grams		0.58		0.24 – 0.42	48 hr Leach
SP4 – 50lbs head		0.54
Con 1		1.56		0.36	96 hr leach
Con 2		0.93		0.75	96 hr leach
Bulk Leach Tests
BL1 - 1,000 lbs		0.58		0.25	48 hr Leach
BL2 - 1,000 lbs		0.58		0.22	48 hr Leach
BL3 – 9,000 lbs head
1,674 lbs cons		0.90		0.21	72 hr Leach
Autoclave Tests
TP2-12 – 200 grams		0.34 – 0.39		0.030 – 0.264	1.5 hr Autoclave
TP8 – 200 grams		0.37		0.158	1.5 hr Autoclave
TP9 (TP8 tails)				0.142	1.5 hr Autoclave
Total				0.300	3.0 hr Autoclave

*	Feed Grade is the initial gold content in the sample. Extracted Grade is the amount of gold leached into solution.

**	opt (ounces per ton)

(1) With respect to the results set forth in the table above, Arrakis performed gold analysis under chain-of-custody parameters. Analysis of all head ore samples was done by 3 acid digestion in a Milestone Ethos Plus microwave sample digester and analyzed by a Perkin Elmer 5100 graphite furnace atomic adsorption system with Zeeman background correction. Pregnant solutions from all bench and bulk tests were analyzed for gold using calibration blanks and standards corrected with matching sample matrix to the specific solution being read.

Permitting. Our Searchlight Claims are comprised of non-patented placer mining claims located on federal land administered by the BLM. Mining activities on the Searchlight Claims must be carried out in accordance with a Plan of Operations or permit issued by the BLM.

Double Staking. During the second quarter of 2008, we “double staked” the Searchlight property by filing, with the 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. However, we are subject to the risk that when we, a single entity, acquire title to association placer claims from an association of prior, multiple locators, there could be potential problems for us in the future:

First, the validity of the association of the prior locators could always be challenged by the BLM if the BLM believed that the association was not properly assembled or if there were any “dummy locators” (place-holder locators who did not contribute to the association). A “properly assembled” placer association is comprised of 2–8 individuals or companies who each may claim 20 acres and each owns a full interest in the claim. The individuals may not be employees of one of the companies. These individuals and/or entities must be involved actively in the business of developing the claim. Use of an uninvolved individual or entity as a locator for the purpose of acquiring additional acreage may constitute fraud, and the entire claim could be declared void. A “dummy locator” is an individual or entity who is not actively involved with the development of the claims, and whose name has been used for the purpose of acquiring additional acreage. The action of using dummy locator(s) may constitute fraud, and under existing laws, the claim located by use of dummy locator(s) can be declared void from its inception.

Second, if there was deemed to be a discovery on any 160-acre claim following the transfer to us, the claims could implode to a 20-acre parcel surrounding the point of discovery of each claim and potentially leave the surrounding 140 acres unavailable for re-staking, and potentially to a 10-acre parcel and leave the surrounding 150 acres unavailable for re-staking.

Third, the location of the 20-acre claims may cause an implied abandonment of the older claims. Should a problem occur in the future with the 160-acre claims, we could revert to the 20-acre or 10-acre claims, if necessary. Also, we will incur additional costs because we have to maintain two sets of claims.

We believe that “double staking” the property enhances our existing claims because “double staking” with 20-acre claims provides a more secure basis for asserting our claim rights than our existing 160-acre claims because they were located and are held solely by us, as a single entity and not as an association of two or more entities. Holding 20-acre claims as a single entity reduces the likelihood that the BLM will challenge the validity of the claims based on the existence of “dummy locators.” If the BLM challenges the validity of the 160-acre claims or we are forced to abandon such claims, we would revert to the 20-acre claims covering only the 2,840 acres. Any regulatory permits that we have applied or may apply for (i.e., drilling, and mining) would have to be conducted within the related 2,840 acres. However, if the BLM was to determine that a discovery was not made on any of the 10-acre portions of the 20-acre association placer claims, any of such claims could implode to a 10-acre parcel and potentially result in the loss of our rights in the adjoining 10 acres of the particular claim.

Further, we are required to make annual rental payments to the Federal government in connection with our claims. If we fail to make our required payments in the future, the related claims would be void.

In addition, the BLM has been excluding significant amounts of land in southern Nevada from mining and development over the past few decades. The BLM has designated this excluded land as an “Area of Critical Environmental Concern” (ACEC). Any person that wishes to stake mining claims would not be able to do so in these affected areas. However, if a person already owns valid claims before the land is designated as an ACEC, the claimant would have those claims grandfathered in. In the case of the Searchlight Claims, the Searchlight Project has not been designated as an ACEC and our 160-acre claims were originally located between 1990 and 2003. If the BLM decides in the future to designate the Searchlight Project site as an ACEC, and also challenges our 160-acre claims, we would have to rely on our “double staked” claims to preserve the Searchlight Claims. Although we believe that, in such event, our “double staked” claims would survive a challenge by the BLM, there can be no assurances to that effect and the successful challenge of some or all of the Searchlight Claims would have a material adverse effect on the Searchlight Project and our operations.

In order to maintain our Searchlight Claims, we must pay an annual maintenance fee of $140 per claim to the Nevada State Office of the BLM. We have paid the required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2010.

Competition

We are an exploration stage company. We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration. This competition could adversely impact on our ability to finance further exploration on our mineral properties.

Compliance With Government Regulation

The mining industry in the United States is highly regulated. We intend to secure all necessary permits for the exploration and development of the Clarkdale Slag Project and the Searchlight Gold Project. The technical consultants that we hire are experienced in conducting mineral exploration and metallurgical activities and are familiar with the necessary governmental regulations and permits required to conduct such activities. As such, we expect that our consultants will inform us of any government permits that we will be required to obtain prior to conducting any planned activities on our two aforementioned projects. We are not able to estimate the full costs of complying with environmental laws at this time since the full nature and extent of our proposed processing and mining activities cannot be determined until we complete and operate our first production module on the Clarkdale Slag Project and complete our exploration program on the Searchlight Gold Project.

If we enter into full scale production on our Clarkdale Slag Project or the development of our Searchlight Gold Project, of which there are no assurances, the cost of complying with environment laws, regulations and permitting requirements will be substantially greater than in the exploration or preliminary development phases because the increase in the size of the project. Permits and regulations will control all aspects of any development or production program if the project continues to those stages because of the potential impact on the environment. Examples of regulatory requirements include:

water discharge will have to meet water standards;

dust generation will have to be minimal or otherwise remediated;

dumping of material on the surface will have to be re-contoured and re-vegetated;

an assessment of all material to be left on the surface will need to be environmentally benign;

ground water will have to be monitored for any potential contaminants;

the socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be remediated; and

there will have to be an impact report of the work on the local fauna and flora.

Employees

As of December 31, 2009, we had thirty-three full-time and four part-time employees. We also had two full-time consultants who provide services to our Clarkdale Slag Project operations. None of our employees are currently represented by a union or covered by a collective bargaining agreement. Management believes its employee relations are satisfactory.

Item 1A.

Risk Factors

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This report contains forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

The risk factors referred to in this report could materially and adversely affect our business, financial conditions and results of operations and cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The risks and uncertainties described below are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.

The industry and market data contained in this report are based either on our management’s own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. We have not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be verifiable or reliable.

RISK FACTORS

An investment in our common stock is very risky. Our financial condition is unsound. You should not invest in our common stock unless you can afford to lose your entire investment. You should carefully consider the risk factors described below, together with all other information in this report, before making an investment decision. If an active market is ever established for our common stock, the trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You also should refer to the other information set forth in this report, including our financial statements and the related notes.

Risks Relating to Our Business

We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease exploration activities if we do not obtain additional financing, and our business will fail.

We were incorporated on January 12, 1999 and initially were engaged in the business of biotechnology research and development. In February, 2005, we changed our business to mineral exploration. We have a limited history upon which we may make an evaluation of the future success or failure of our current business plan.

We have a history of operating losses and have an accumulated deficit. We recorded a net loss of $4,135,424, $3,128,386 and $2,221,818 for the years ended December 31, 2009, 2008 and 2007, respectively, and have incurred cumulative net losses from operations of $17,491,906, $13,356,482 and $10,228,096 as of December 31, 2009, 2008 and 2007, respectively. In addition, we had cash reserves of approximately $13,099,562, $7,055,591 and $12,007,344 at December 31, 2009, 2008 and 2007, respectively. We have not commenced our proposed mineral processing and mining operations and are still in the exploration stages of our proposed operations. Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future.

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

our ability to locate a profitable mineral property;

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

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

our ability to generate revenues.

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

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program and our continued operations will be approximately $9,200,000. On November 12, 2009, we completed a private placement of 12,078,596 units of our securities at a purchase price of $1.25 per unit, resulting in aggregate gross proceeds to us of $15,098,245. Based on the net proceeds received by us from the private placement, we estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration, testing and construction programs for the 2010 fiscal year. However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration, testing and construction plans for 2010. We do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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, the report of our auditor accompanying our financial statements filed herewith includes 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.

Actual capital costs, operating costs and economic returns may differ significantly from our estimates and there are no assurances that any future activities will result in profitable mining operations.

We are an exploration stage company and are still in the process of exploring and testing our mineral projects. We do not have any historical mineral operations upon which to base our estimates of costs. Decisions about the exploration, testing and construction of our mineral properties will ultimately be based upon feasibility studies. Feasibility studies derive cost estimates based primarily upon:

anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;

anticipated recovery rates of gold and other metals from the ore;

cash operating costs of comparable facilities and equipment; and

anticipated weather/climate conditions.

To date, we have only conducted an internal pre-feasibility study of the Clarkdale Slag Project. In particular:

we have conducted limited amounts of drilling at the site;

process testing has been limited to smaller scale pilot plants and bench scale testing;

our mine plans, slag processing concepts, metallurgical flow sheets and estimated recoveries are still in exploration stages; and

actual metallurgical recoveries may fail to meet preliminary estimates when scaled up from pilot plant scale to production scale.

In order to demonstrate the large scale viability of the project, we will need to complete final feasibility studies that address the economic viability of the project. Capital and operating costs and economic returns, and other estimates contained in our final feasibility studies may differ significantly from our current estimates. There is no assurance that our actual capital and operating costs will not exceed our current estimates. In addition, delays to construction schedules may negatively impact the net present value and internal rates of return for our mineral properties. There are no assurances that actual recoveries of base and precious metals or other minerals processed from our mineral projects will be economically feasible or that actual costs will match our pre-feasibility estimates.

Feasibility estimates typically underestimate future capital needs and operating costs. Our projected operating and capital cost estimates are in preliminary stages and may be subject to significant, upward adjustment based on future events, including the results of any final feasibility study which we may develop.

If the results from our feasibility studies and the results from the operation of our first proposed production module are not sufficiently positive for us to proceed with the construction of our processing facility we will have to scale back or abandon our proposed operations on the Clarkdale Slag Project.

We intend to continue the exploration and testing of our production module at the Clarkdale Slag Project site, which is anticipated to consist of a full scale production and processing cycle. This first production module is expected to be used to conduct a final test of the economic feasibility of the Clarkdale Slag Project. However, if the results of our pre-feasibility studies on the Clarkdale Slag Project and the results from the operation of the first production module are not positive, we will have to scale back or abandon our proposed operations of the Clarkdale Slag Project. There is no assurance that actual recoveries of base and precious metals or other minerals re-processed from the slag pile will be economically feasible. If metal recoveries are less than projected, then our metal sales will be less than anticipated and may not equal or exceed the cost of mining and recovery. In such event, we will have difficulty in raising additional capital to maintain operations and that would result in a material adverse effect on our operating results, financial condition and our ability to remain in business.

If we are unable to achieve projected mineral recoveries from our exploration mining activities at the Clarkdale Slag Project and Searchlight Gold Project, then our financial condition will be adversely affected.

As we have not established any reserves on either our Clarkdale Slag Project or Searchlight Gold Project to date, there is no assurance that actual recoveries of minerals from material mined during exploration mining activities will equal or exceed our exploration costs on our mineral properties. To date, we have completed only a limited amount of drilling and sampling on the Clarkdale Slag Project site and the process testing of results has been limited to small pilot plants and bench scale testing. There is no assurance that if we move to production scale from pilot plant scale that our actual results will match pre-feasibility estimates. If mineral recoveries are less than projected, then our sales of minerals will be less than anticipated and may not equal or exceed the cost of exploration and recovery, in which case our operating results and financial condition will be materially, adversely affected.

We have no known mineral reserves and if we cannot find any, we will have to cease operations.

We have no known mineral reserves. Mineral exploration is highly speculative. It involves many risks and is often non-productive. Even if we are able to find mineral reserves on our property our production capability is subject to further risks including:

costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities;

availability and costs of financing;

ongoing costs of production; and

environmental compliance regulations and restraints.

The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near the Searchlight Gold Project, the success of our drilling and sampling activities on the Clarkdale Slag Project and such other factors as government regulations, including regulations relating to allowable production, exporting of minerals, and environmental protection. If we do not find a mineral reserve or if we cannot explore the mineral reserve, either because we cannot obtain an approved Plan of Operations, do not have the money to do so or because it will not be economically feasible to do so, we will have to cease operations.

Our rights under the Searchlight Claims may be difficult to retain and may not apply to all metals and minerals located on the Searchlight property.

Our rights in the 20 placer mineral claims with respect to a contiguous, approximately 3,200-acre site located (the “Searchlight Claims”) on Federal land administered by the BLM near Searchlight, Nevada are the subject of unpatented mining claims (mining claims to which the deeds from the U.S. Government have not been received) made under the General Mining Law of 1872. The Searchlight Claims were assigned to us in June 2008 by the original locators (those persons who locate, or are entitled to locate, land or mining claims, and fix the boundaries of land claims) of such claims under an Option Agreement for the Searchlight Claims. Legal title to the Searchlight property is held by the United States and there are numerous conditions that must be met for a mining claimant to obtain and retain legal rights in the land and minerals claimed. Because title to unpatented mining claims is subject to inherent uncertainties, it is difficult to determine conclusively the ownership of such claims. These uncertainties relate to such things as sufficiency of mineral discovery, proper posting and marking of boundaries and possible conflicts with other claims not determinable from descriptions of record. Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry.

The present status of our unpatented mining claims located on public lands allows us the exclusive right to mine and remove valuable metals, such as precious and base metals, that are in placer form (mineral which has been separated from its host rock by natural processes). We also are allowed to use the surface of the land solely for purposes related to mining and processing the metal-bearing ores. However, legal ownership of the land remains with the United States. Placer mining claims (ground with defined boundaries that contains metals in the earth, sand, or gravel, and is not fixed in the rock) are not sufficient to claim lode mineralization (a deposit in consolidated rock as opposed to a placer deposit), and any metals in veins or in bedrock need to be separately claimed by lode claims. Therefore, we may not have legal rights with respect to any lode deposits within the property that is the subject of the Searchlight Claims.

In order for us to assert a valid right in the 160 acre Searchlight Claims which we acquired in June 2008, there must have been a discovery with respect to the Searchlight Claims prior to their transfer. The concept of the validity of the “discovery” of a mining claim is a legal standard. Generally, the BLM considers a discovery to be the identification of adequate amounts of minerals such that a reasonable person would seek to develop the claim as a commercial enterprise. Based on the results of our testing and sampling on the properties prior to transfer of title to the related Searchlight Claims to us, we believe that we have a valid basis to assert that we have made a discovery with respect to the claims located on the contiguous property that is the subject of the Searchlight Claims. Further, we are working to explore the Searchlight property and to evaluate and plan for the exploration of the Searchlight Claims. However, if the BLM was to determine that a discovery was not made on any of the 20 (160 acre) association placer claims (a placer location made by an association of persons in one location covering up to 160 acres) before any of such claims were conveyed by the related group of locators of a particular claim to us, any of such claims could implode to a 20-acre parcel surrounding the point of discovery and potentially result in the loss of our rights in the surrounding 140 acres of the particular claim. Further, placer mining claims ultimately are required to have discovery on each 10-acre portion in order to be considered valid in their entirety. Therefore, if the BLM was to determine that a discovery was not made on any of the 10-acre portions of the association placer claims before any of such claims were conveyed to us, any of such claims could implode to a 10-acre parcel and potentially result in the loss of our rights in the surrounding 150 acres of the particular claim. At this time, there are no adversarial proceedings by the BLM to challenge any of the 20 association placer claims. However, there can be no assurances that adversarial proceedings will not occur in the future, and if such proceedings occur, the BLM will not successfully challenge these claims, which could have a material adverse effect on the Searchlight Project and our operations.

In addition, the BLM has been excluding significant amounts of land in southern Nevada from mining and development over the past few decades. The BLM has designated this excluded land as an ACEC. Any person that wishes to stake mining claims would not be able to do so in these affected areas. However, if a person already owns valid claims before the land is designated as an ACEC, the claimant would have those claims grandfathered in. In the case of the Searchlight Claims, the Searchlight Project has not been designated as an ACEC and our 160-acre claims were originally located between 1990 and 2003. If the BLM decides in the future to designate the Searchlight Project site as an ACEC, and also challenges our 160-acre claims, we would have to rely on our “double staked” claims to preserve the Searchlight Claims. Although we believe that, in such event, our “double staked” claims would survive a challenge by the BLM, there can be no assurances to that effect and the successful challenge of some or all of the Searchlight Claims would have a material adverse effect on the Searchlight Project and our operations.

If we do not complete the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona within two years after the effective date of the agreement, we may lose our conditional use permit from the Town of Clarkdale with respect to the Clarkdale Slag Project, and we do not currently have sufficient funds to complete construction of the road. The loss of the permit would have a material adverse effect on the Clarkdale Slag Project and our operations.

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 although the remaining two contingencies with respect to the effectiveness of the development agreement have not yet been met, such contingencies are beyond our control.

The nature of mineral exploration and production activities involves a high degree of risk; we could incur a write-down on our investment in any project.

Exploration for minerals is highly speculative and involves greater risk than many other businesses. Investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. If funding is not available, we may be forced to abandon our operations.

Many exploration programs do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Uncertainties as to the metallurgical amenability of any minerals discovered may not warrant the mining of these minerals on the basis of available technology. Our operations are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as:

encountering unusual or unexpected formations;

environmental pollution;

personal injury and flooding;

decrease in recoverable reserves due to lower precious and base metal prices; and

changing environmental laws and regulations.

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 write-down on our investment in such property interests on our financial statements. Further, we may become subject to liability for such hazards, including pollution and other hazards against which we cannot insure or against which we may elect not to insure. At the present time, we have no coverage to insure against these hazards. Such a write-down or the payment of such liabilities may have a material adverse effect on our financial position.

Our industry is highly competitive, mineral lands are scarce and we may not be able to obtain quality properties.

In addition to us, many companies and individuals engage in the mining business, including large, established mining companies with substantial capabilities and long earnings records. There is a limited supply of desirable mineral lands available for claim staking, lease, or acquisition in the United States and other areas where we may conduct exploration activities. We may be at a competitive disadvantage in acquiring mining properties since we must compete with these individuals and companies, many of which have greater financial resources and larger technical staffs. Mineral properties in specific areas which may be of interest or of strategic importance to us may be unavailable for exploration or acquisition due to their high cost or they may be controlled by other companies who may not want to sell or option their interests at reasonable prices. In addition, the Clarkdale slag pile is a finite, depleting asset. Therefore, the life of the Clarkdale Slag Project will be finite, if it is ever developed to the point of economic feasibility. Our long-term viability depends upon finding and acquiring new resources from different sites or properties. There can be no assurances that the Clarkdale Slag Project will become economically viable, and if so, that we will achieve or obtain additional successful economic opportunities.

As we undertake exploration of our mineral claims, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration program.

There are several governmental regulations that materially restrict mineral exploration. We will be subject to the laws of the State of Nevada and applicable federal laws as we carry out our exploration program on the Searchlight Gold Project. We are required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. Further, the United States Congress is actively considering amendment of the federal mining laws. Among the amendments being considered are imposition of significant royalties payable to the United States and more stringent environmental and reclamation standards, either of which would increase the cost of operations of mining projects. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program.

We are required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:

water discharge will have to meet drinking water standards;

dust generation will have to be minimal or otherwise remediated;

dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;

an assessment of all material to be left on the surface will need to be environmentally benign;

ground water will have to be monitored for any potential contaminants;

the socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be remediated; and

there will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.

There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. If remediation costs exceed our cash reserves we may be unable to complete our exploration program and have to abandon our operations.

We must comply with complex environmental regulations which are increasing and costly.

Our exploration operations are regulated by both Federal and State environmental laws that relate to the protection of air and water quality, hazardous waste management and mine reclamation. These regulations will impose operating costs on us. If the regulatory environment for our operations changes in a manner that increases the costs of compliance and reclamation, then our operating expenses may increase. This would result in an adverse effect on our financial condition and operating results.

Compliance with environmental quality requirements and reclamation laws imposed by Federal, State and local governmental authorities may:

require significant capital outlays;

materially affect the economics of a given property;

cause material changes or delays in our intended activities; and

expose us to lawsuits.

These authorities may require us to prepare and present data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. The requirements imposed by any such authorities may be costly, time consuming, and may delay operations. Future legislation and regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require substantial increases in equipment and operating costs and delays, interruptions, or a termination of operations. We cannot accurately predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations, on our operations.

Affiliates of our management and principal stockholders have conflicts of interest which may differ from those of ours and yours and we only have two independent board members.

We have ongoing business relationships with affiliates of our management and principal stockholders. In particular, we have continuing obligations under the agreements under which we acquired the assets relating to our Clarkdale Slag Project. We remain obligated to pay a royalty which may be generated from the operations of the Clarkdale Slag Project to Nanominerals, one of our principal stockholders, which is an affiliate of two members of our executive management and board of directors, Carl S. Ager and Ian R. McNeil. We also have engaged Nanominerals as a paid consultant to provide technical services to us. In addition, we have a similar royalty arrangement with VRIC, an affiliate of another member of our board of directors, Harry B. Crockett. Further, one of our board members, Robert D. McDougal, serves as the chief financial officer and a director of Ireland Inc., a publicly traded, mining related company, which is an affiliate of Nanominerals. For these reasons, Martin B. Oring and Jordan M. Estra are the only independent members of our board of directors. We had negotiated the revenue sharing agreements with each of Nanominerals and VRIC prior to the time that Messrs. Ager, McNeil and Crockett, as applicable, became board members. These persons are subject to a fiduciary duty to exercise good faith and integrity in handling our affairs. However, the existence of these continuing obligations may create a conflict of interest between us and our board members and senior executive management, and any disputes between us and such persons over the terms and conditions of these agreements that may arise in the future may raise the risk that the negotiations over such disputes may not be subject to being resolved in an arms’ length manner. In addition, Nanominerals’ interest in Ireland Inc. and its other mining related business interests may create a conflict of interest between us and our board members and senior executive management who are affiliates of Nanominerals. Further, the interests of K. Ian Matheson (one of our principal stockholders and a former officer and director) in Royal Mines and Minerals Corp., a publicly traded mining company based in Nevada, of which Mr. Matheson is an affiliate, and other mining related business interests may create a conflict of interest between us and Mr. Matheson.

Although our management intends to avoid situations involving conflicts of interest and is subject to a Code of Ethics, there may be situations in which our interests may conflict with the interests of those of our management or their affiliates. These could include:

competing for the time and attention of management;

potential interests of management in competing investment ventures; and

the lack of independent representation of the interests of the other stockholders in connection with potential disputes or negotiations over ongoing business relationships.

Although we only have two independent directors, the board of directors has adopted a written Related Person Transactions Policy, that describes the procedures used to identify, review, approve and disclose, if necessary, any transaction or series of transactions in which: (i) we were, are or will be a participant; (ii) the amount involved exceeds $120,000; and (iii) a related person had, has or will have a direct or indirect material interest. There can be no assurance that the above conflicts will not result in adverse consequences to us and the interests of the other stockholders.

We may suffer adverse consequences as a result of our reliance on outside contractors to conduct our operations.

A significant portion of our operations are currently conducted by outside contractors. As a result, our operations are subject to a number of risks, some of which are outside our control, including:

negotiating agreements with contractors on acceptable terms;

the inability to replace a contractor and its operating equipment in the event that either party terminates the agreement;

reduced control over those aspects of operations which are the responsibility of the contractor;

failure of a contractor to perform under its agreement with us;

interruption of operations in the event that a contractor ceases its business due to insolvency or other unforeseen events;

failure of a contractor to comply with applicable legal and regulatory requirements, to the extent it is responsible for such compliance; and

problems of a contractor with managing its workforce, labor unrest or other employment issues.

In addition, we may incur liability to third parties as a result of the actions of our contractors. The occurrence of one or more of these risks could have a material adverse effect on our business, results of operations and financial condition.

Because our management does not have formal training specific to the technicalities of mineral exploration, there may be a higher risk that our business will fail.

Our executive officers and directors do not have any formal training as geologists or in the technical aspects of management of a mineral exploration company. With no direct training or experience in these areas, our management may not be fully aware of the specific requirements related to working within this industry. Our management's decisions and choices may not take into account standard engineering or managerial approaches mineral exploration companies commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.

Mineral, and base and precious metal prices are volatile and declines may have an adverse effect on our share price and business plan.

The market price of minerals is extremely volatile and beyond our control. Basic supply/demand fundamentals generally influence gold prices. The market dynamics of supply/demand can be heavily influenced by economic policy. Fluctuating metal prices will have a significant impact on our results of operations and operating cash flow. Furthermore, if the price of a mineral should drop dramatically, the value of our properties which are being explored or developed for that mineral could also drop dramatically and we might not be able to recover our investment in those properties. The decision and investment necessary to put a mine into production must be made long before the first revenues from production will be received. Price fluctuations between the time that we make such a decision and the commencement of production can completely change the economics of the mine. Although it is possible for us to protect against some price fluctuations by entering into derivative contracts (hedging) in certain circumstances, the volatility of mineral prices represents a substantial risk which no amount of planning or technical expertise can eliminate.

If the price of base and precious metals declines, our financial condition and ability to obtain future financings will be impaired.

The price of base and precious metals is affected by numerous factors, all of which are beyond our control. Factors that tend to cause the price of base and precious metals to decrease include the following:

sales or leasing of base and precious metals by governments and central banks;

a low rate of inflation and a strong U.S. dollar;

speculative trading;

decreased demand for base and precious metals in industrial, jewelry and investment uses;

high supply of base and precious metals from production, disinvestment, scrap and hedging;

sales by base and precious metals producers, foreign transactions and other hedging transactions; and

devaluing local currencies (relative to base and precious metals prices in U.S. dollars) leading to lower production costs and higher production in certain major base and precious metals producing regions.

Our business is dependent on the price of base and precious metals. We have not undertaken hedging transactions in order to protect us from a decline in the price of base and precious metals. A decline in the price of base and precious metals may also decrease our ability to obtain future financings to fund our planned exploration programs.

The restatement of certain of our historical consolidated financial statements may have an adverse effect on us.

We have restated certain items on our consolidated balance sheets and statements of operations. On our consolidated balance sheets: (i) mineral properties have been restated to include the market value of certain shares issued by us under the terms of our option agreements for the acquisition of the mineral claims making up the Searchlight Gold Project and for the computation of deferred tax liability assumed in the acquisition; and (ii) the Clarkdale Slag Project has been restated to include revision of acquisition costs related to issuance of warrants, consideration of certain terms with respect to future payments that should have been recorded as contingent consideration and related deferred future income tax liability in connection with our acquisition of Transylvania International, Inc. (“Transylvania”). Our statement of operations for the year ended December 31, 2005, has been restated to reclassify other comprehensive income as discontinued operations and to reflect income tax benefit related to the acquisition accounting for the Searchlight Claims and the Clarkdale Slag Project. Our statement of operations for the year ended December 31, 2006 has been restated to reclassify foreign currency translation adjustments as general and administrative expenses and to reflect income tax benefit related to the acquisition accounting for Searchlight Claims. Our consolidated statement of operations for the year ended December 31, 2007, has been restated to reflect the recomputation of the income tax benefit related to net operating losses as a result of changes to the purchase accounting for the Clarkdale Slag Project. There was no other impact on the results of operations. Our consolidated statement of operations for the period from inception to December 31, 2007 has been restated to reflect the cumulative totals impacted by the 2005, 2006 and 2007 restated amounts, as well as to reclassify net losses prior to January 1, 2005 as losses from discontinued operations. Related to these issues, our balance sheets for the periods ended December 31, 2005, 2006 and consolidated balance sheet for 2007 have been restated to reclassify accumulated other comprehensive loss as accumulated deficit during the exploration stage. As a result of the events described above, we may become subject to a number of significant risks, which could have an adverse effect on our business, financial condition and results of operations, including: we may be subject to potential civil litigation, including shareholder class action lawsuits and derivative claims made on behalf of us, and regulatory proceedings or actions, the defense of which may require us to devote significant management attention and to incur significant legal expense and which litigation, proceedings or actions, if decided against us, could require us to pay substantial judgments, settlements or other penalties.

If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results. We can provide no assurance that we will at all times in the future be able to report that our internal control is effective.

As a registrant under the Exchange Act and a public company, and under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include a management report of our internal controls over financial reporting in our annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. We are required to report, among other things, control deficiencies that constitute material weaknesses or changes in internal control that are reasonably likely to, materially affect internal control over financial reporting. A “material weakness” is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 or report a material weakness, we might be subject to regulatory sanction and investors may lose confidence in our financial statements, which may be inaccurate if we fail to remedy such material weakness.

Our independent registered public accounting firm is required to attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

Based on the restatements described above, our management concluded that our system of internal control over financial reporting was not effective during the period from March 31, 2005 through September 30, 2008, which resulted in the restatements described above. Management had identified internal control deficiencies which, in management’s judgment, represented material weakness in internal control over financial reporting. The control deficiencies generally related to controls over the accounting for complex transactions to ensure such transactions are recorded as necessary to permit preparation of financial statements and disclosure in accordance with generally accepted accounting principles. Such complex transactions included capital asset acquisitions and accounting for income taxes. At this time, management has remediated all of our deficiencies in internal controls which, in management’s judgment, represented material weakness in internal control over financial reporting. We can provide no assurance that we will at all times in the future be able to report that our internal control over financial reporting is effective. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Risks Relating to Our Securities

There has been a very limited public trading market for our securities, and the market for our securities may continue to be limited and be sporadic and highly volatile.

There is currently a limited public market for our common stock. Our common stock is quoted on the National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board (the “OTCBB”). We cannot assure you that an active market for our shares will be established or maintained in the future. The OTCBB is not a national securities exchange, and many companies have experienced limited liquidity when traded through this quotation system. Holders of our common stock may, therefore, have difficulty selling their shares, should they decide to do so. In addition, there can be no assurances that such markets will continue or that any shares, which may be purchased, may be sold without incurring a loss. The market price of our shares, from time to time, may not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for the shares in the future.

In addition, the market price of our common stock may be volatile, which could cause the value of our common stock to decline. Securities markets experience significant price and volume fluctuations. This market volatility, as well as general economic conditions, could cause the market price of our common stock to fluctuate substantially. Many factors that are beyond our control may significantly affect the market price of our shares. These factors include:

price and volume fluctuations in the stock markets;

changes in our earnings or variations in operating results;

any shortfall in revenue or increase in losses from levels expected by securities analysts;

changes in regulatory policies or law;

operating performance of companies comparable to us; and

general economic trends and other external factors.

Even if an active market for our common stock is established, stockholders may have to sell their shares at prices substantially lower than the price they paid for the shares or might otherwise receive than if an active public market existed.

Future financings could adversely affect common stock ownership interest and rights in comparison with those of other security holders.

Our board of directors has the power to issue additional shares of common stock without stockholder approval. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our existing stockholders will be reduced, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.

If we issue any additional common stock or securities convertible into common stock, such issuance will reduce the proportionate ownership and voting power of each other stockholder. In addition, such stock issuances might result in a reduction of the per share book value of our common stock.

We do not currently have an authorized class of preferred stock. However, we intend to submit a proposal to our stockholders to authorize a class of up 40,000,000 shares of preferred stock. There can be no assurances that our stockholders will approve the proposed authorization of a class of preferred stock.

The proposed class of preferred stock is commonly known as “blank check” preferred stock. The preferred stock may be issued from time to time in one or more series, and the board of directors, without further approval of our stockholders, would be authorized to fix the relative rights, preferences, privileges and restrictions applicable to each series of preferred stock. Such shares of preferred stock, if and when issued, may have rights, powers and preferences superior to those of our common stock. Although there are no current plans, commitments or understandings, written or oral, to issue any preferred stock, in the event of any issuances, the holders of common stock will not have any preemptive or similar rights to acquire any preferred stock.

The proposed class of preferred stock could, under certain circumstances, have an anti-takeover effect. For example, in the event of a hostile attempt to take over control of us, it may be possible for us to endeavor to impede the attempt by issuing shares of preferred stock, thereby diluting or impairing the voting power of the other outstanding shares of common stock and increasing the potential costs to acquire control of us. The proposed class of preferred stock therefore may have the effect of discouraging unsolicited takeover attempts, thereby potentially limiting the opportunity for our stockholders to dispose of their shares at the higher price generally available in takeover attempts or that may be available under a merger proposal. The proposed class of preferred stock may have the effect of permitting our current management, including the current board of directors, to retain its position, and place it in a better position to resist changes that stockholders may wish to make if they are dissatisfied with the conduct of our business.

Our anti-takeover provisions or provisions of Nevada law, in our articles of incorporation and bylaws and the common share purchase rights that accompany shares of our common stock could prevent or delay a change in control of us, even if a change of control would benefit our stockholders.

Provisions of our articles of incorporation and bylaws, as well as provisions of Nevada law, could discourage, delay or prevent a merger, acquisition or other change in control of us, even if a change in control would benefit our stockholders. These provisions:

classify our board of directors so that only one-third of the directors are elected each year and require the vote of 66 2/3% of the outstanding stock entitled to vote in the election of directors to amend these provisions;

prohibit stockholder action by written consent and require that all stockholder actions be taken at a meeting of our stockholders; and

establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings and require the vote of 66 2/3% of the outstanding stock entitled to vote in the election of directors to amend these provisions,

In addition, the Nevada Revised Statutes contain provisions governing the acquisition of a controlling interest in certain publicly held Nevada corporations. These laws provide generally that any person that acquires 20% or more of the outstanding voting shares of certain publicly held Nevada corporations, such as us, in the secondary public or private market must follow certain formalities before such acquisition or they may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. These laws provide that a person acquires a "controlling interest" whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the Nevada Revised Statutes, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. The Control Share Acquisition Statute generally applies only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada. Our Bylaws provide that the provisions of the Nevada Revised Statutes, known as the “Control Share Acquisition Statute” apply to the acquisition of a controlling interest in us, irrespective of whether we have 200 or more stockholders of record, or whether at least 100 of our stockholders have addresses in the State of Nevada appearing on our stock ledger. These laws may have a chilling effect on certain transactions if our articles of incorporation or bylaws are not amended to provide that these provisions do not apply to us or to an acquisition of a controlling interest, or if our disinterested stockholders do not confer voting rights in the control shares.

Each currently outstanding share of our common stock includes, and each newly issued share of our common stock will include, a common share purchase right. The rights are attached to and trade with the shares of common stock and generally are not exercisable. The rights will become exercisable if a person or group acquires, or announces an intention to acquire, 15% or more of our outstanding common stock. However, the applicable threshold percentage will not exceed 20% or more of our outstanding common stock in the case of any person or group who owned 15% or more of our outstanding common stock as of August 24, 2009. These persons may be deemed to include certain of our officers, directors and principal stockholders. The rights have some anti-takeover effects and generally will cause substantial dilution to a person or group that attempts to acquire control of us without conditioning the offer on either redemption of the rights or amendment of the rights to prevent this dilution. The rights are designed to provide additional protection against abusive or unfair takeover tactics, such as offers for all shares at less than full value or at an inappropriate time (in terms of maximizing long-term stockholder value), partial tender offers and selective open-market purchases. The rights are intended to assure that our board of directors has the ability to protect stockholders and us if efforts are made to gain control of us in a manner that is not in the best interests of us and our stockholders. The rights could have the effect of delaying, deferring or preventing a change of control that is not approved by our board of directors, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of the common stock.

A substantial number of our shares are available for sale in the public market and sales of those shares could adversely affect our stock price.

Sales of a substantial number of shares of common stock into the public market, or the perception that such sales could occur, could substantially reduce our stock price in the public market for our common stock, and could impair our ability to obtain capital through a subsequent sale of our securities.

Our common stock is subject to “penny stock” regulations that may affect the liquidity of our common stock.

Our common stock is subject to the rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges, for which current price and volume information with respect to transactions in such securities is provided by the exchange or system).

The penny stock rules require that a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which contains the following:

a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation of such duties or other requirements of securities laws;

a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and significance of the spread between the “bid” and “ask” price;

a toll-free telephone number for inquiries on disciplinary actions, definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and

such other information and in such form (including language, type, size and format), as the SEC shall require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:

the bid and offer quotations for the penny stock;

the compensation of the broker-dealer and its salesperson in the transaction;

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock;

the liquidity of the market for such stock; and

monthly account statements showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock such as our common stock if it is subject to the penny stock rules.

If we are, or were, a U.S. real property holding corporation, non-U.S. holders of our common stock or other security convertible into our common stock could be subject to U.S. federal income tax on the gain from the sale, exchange, or other disposition of such security.

If we are or ever have been a U.S. real property holding corporation (a “USRPHC”) under the Foreign Investment Real Property Tax Act of 1980, as amended (“FIRPTA”) and applicable United States Treasury regulations (collectively, the “FIRPTA Rules”), unless an exception described below applies, certain non-U.S. investors in our common stock (or options or warrants for our common stock would be subject to U.S. federal income tax on the gain from the sale, exchange or other disposition of shares of our common stock (or such options or warrants), and such non-U.S. investor would be required to file a United States federal income tax return. In addition, the purchaser of such common stock, option or warrant would be required to withhold from the purchase price an amount equal to 10% of the purchase price and remit such amount to the U.S. Internal Revenue Service.

In general, under the FIRPTA Rules, a company is a USRPHC if its interests in U.S. real property comprise at least 50% of the fair market value of its assets. If we are or were a USRPHC, so long as our common stock is “regularly traded on an established securities market” (as defined under the FIRPTA Rules), a non-U.S. holder who, actually or constructively, holds or held no more than 5% of our common stock is not subject to U.S. federal income tax on the gain from the sale, exchange, or other disposition of our common stock under FIRPTA. In addition, other interests in equity of a USRPHC may qualify for this exception if, on the date such interest was acquired, such interests had a fair market value no greater than the fair market value on that date of 5% of our common stock. Any of our common stockholders (or owners of options or warrants for our common stock) that are non-U.S. persons and own or anticipate owning more than 5% of our common stock (or, in the case of options or warrants, of a value greater than the fair market value of 5% of our common stock) should consult their tax advisors to determine the consequences of investing in our common stock (or options or warrants). We have not conducted a formal analysis of whether we are or have ever been a USRPHC. We do not believe that we are or have ever been a USRPHC. However, if we later determine that we were a USRPHC, then we believe that we would have ceased to be a USRPHC as of June 1, 2005 and that non-U.S. holders would not be subject to FIRPTA with respect to a sale, exchange, or other disposition of shares of our common stock (or options or warrants) after June 1, 2010.

Item 1B.

Unresolved Staff Comments

Not applicable.

Item 2.

Properties

We currently rent the office space for our corporate headquarters at the current rate of $4,255 on a month-to-month basis from Horizon View, LLC (formerly Burnett & Williams, LLC), a Nevada limited liability company. The office space, located at 2441 West Horizon Ridge Parkway, Suite 120, Henderson, Nevada 89052, consists of approximately 1,150 square feet.

We have a month-to month rental agreement with Clarkdale Arizona Central Railroad. We receive rental income of $1,700 per month.

We rent a commercial building space to various tenants. The rental arrangements are minor in amount and are typically on a month-to-month basis. We currently receive rental income under these agreements of less than $1,000 per month.

Subject to certain exceptions and encumbrances, including, among others, certain easements and rights of way, we hold title to the following real properties located in Clarkdale, Arizona which relate to the Clarkdale Slag Project:

Location	Parcel No.	General Description of Property
Clarkdale, Arizona	Parcel I	Lots 1 and 2, Block 44, town of Clarkdale according to the plat of record in Book 5 of Maps, page 85, records of Yavapai County, Arizona, including the commercial building located thereon.
Clarkdale, Arizona	Parcel II	A portion of the Northeast quarter of Section 20, Township 16 North, Range 3 East of the Gila and Salt River Base and Meridian, Yavapai County, Arizona.
Clarkdale, Arizona	Parcel III	A parcel of land located in the Southeast quarter of Section 19, and the Southwest quarter of Section 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.
Clarkdale, Arizona	Parcel IV	A parcel of land located in the North half of Section 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.
Clarkdale, Arizona	Parcel V	A portion of Sections 17, 18, 19 and 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.

We entered into a lease on August 25, 2004 with the Town of Clarkdale, Arizona. We provide approximately 60 acres of land to the Town of Clarkdale for disposal of Class B effluent. We have a first right to purchase up to 46,000 gallons per day of the effluent for its use at 50% of the potable water rate. In addition, if Class A effluent becomes available, we may purchase the Class A effluent at 75% of the potable water rate. The term of the lease is five years with a one year extension available. At such time as Clarkdale no longer uses the property for effluent disposal, and for a period of 25 years measured from the date of the lease, we have a continuing right to purchase Class B effluent, and if available, Class A effluent at then market rates.

Effluent is water that is reclaimed from a wastewater treatment process to remove toxins. The classifications of reclaimed effluent ranging from A+ (the best) to C (the worst), are indicative of the level of treatment that has been performed on the effluent. Treated effluents under all of these classifications may be reused, within defined parameters. The classifications determine what direct reuse is permitted for that effluent. Currently, no class of treated effluent may be used for direct human consumption. Based on the classification, reclaimed water may be used for dust control, agricultural irrigation, livestock watering, landscape irrigation, and human contact. Water quality criteria include standards regulating turbidity, fecal coliform bacteria, enteric viruses and other pathogenic organisms, and mean concentration of total nitrogen. The Town of Clarkdale has obtained an Aquifer Protection Permit to discharge the Class B effluent on to our property. The water is discharged through a sprinkler system onto the ground, where it percolates down through to the underlying aquifer.

Item 3.

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.

Item 4.

Reserved

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Trading History

Our common stock is quoted on the OTCBB under the symbol “SRCH.” Trading in our common stock has not been extensive and such trades cannot be characterized as constituting an active trading market. The following is a summary of the high and low closing prices of our common stock on the OTCBB during the periods presented, as reported on the website of the NASDAQ Stock Market. Such prices represent inter-dealer prices, without retail mark-up, mark down or commissions, and may not necessarily represent actual transactions:

	Closing Sale Price
	High		Low
Year Ended December 31, 2009
Fourth Quarter	$	2.27	$	1.30
Third Quarter		2.64		1.70
Second Quarter		2.75		1.93
First Quarter		2.80		1.60
Year Ended December 31, 2008
Fourth Quarter		2.45		1.35
Third Quarter		3.00		1.72
Second Quarter		3.30		1.88
First Quarter		4.18		2.25

On March 10, 2010, the closing sales price on the OTCBB for the common stock was $1.66, as reported on the website of the NASDAQ Stock Market. As of March 10, 2010, there were 118,768,373 outstanding shares of common stock and approximately 164 stockholders of record of the common stock (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms). However, the number of holders of record of our shares of common stock (including the number of persons or entities holding stock in nominee or street name through various brokerage firms) exceeds the number of holders which would permit us to terminate the registration of our common stock under Section 12(g) of the Exchange Act.

Performance Graph

The following graph compares our cumulative total stockholder return from December 31, 2004 with those of the AMEX Composite Index and the Philadelphia Gold and Silver (XAU) Index and assumes that all dividends were reinvested. The graph also assumes that U.S. $100 was invested on December 31, 2004 in (i) our common stock, (ii) the AMEX Composite Index, and (iii) the Philadelphia Gold and Silver (XAU) Index. The measurement points utilized in the graph consist of the last trading day in each calendar year, which closely approximates the last day of our fiscal year. The historical stock performance presented below is not intended to and may not be indicative of future stock performance.

	12/31/04		12/31/05		12/31/06		12/31/07		12/31/08		12/31/09

Searchlight Minerals Corp.	$	100	$	447.62	$	4,285.71	$	2,666.67	$	2,333.33	$	1,523.81
AMEX Composite Index	$	100	$	126.17	$	151.23	$	181.81	$	108.34	$	146.73
Philadelphia Gold and Silver (XAU) Index	$	100	$	130.55	$	146.90	$	180.54	$	130.48	$	178.25

The stock performance graph should not be deemed filed or incorporated by reference into any other filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the stock performance graph by reference in another filing.

Dividend Policy

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

we would not be able to pay our debts as they become due in the usual course of business; or

our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution, unless otherwise permitted under our articles of incorporation.

Equity Compensation Plan Information

The following table provides information, as of December 31, 2009, with respect to options outstanding and available under our equity compensation plans, other than any employee benefit plan meeting the qualification requirements of Section 401(a) of the Internal Revenue Code:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in Column A (C)
Equity compensation plans approved by security holders		342,433	$	1.62		7,657,567

Equity compensation plans not approved by security holders		2,338,200	$	1.14		-

TOTAL		2,680,633	$	1.20		7,657,567

Recent Sales of Unregistered Securities

The following sets forth information regarding unregistered securities sold in the fourth quarter of 2009:

On December 31, 2009, we issued an aggregate of 11,250 shares of our common stock and options to purchase up to 11,250 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 $1.60 per share with respect to the 11,250 shares, and an exercise price of $1.60 per share with respect to the 11,250 stock options, each being the closing price of our common stock on December 31, 2009, the last trading day of the fourth quarter of 2009. These securities were issued pursuant to Section 4(2) of the Securities Act.

On November 16, 2009, we issued 100,000 shares of common stock from the exercise of stock options resulting in cash proceeds of $25,000 based on an exercise price of $0.25 per share. These securities were issued pursuant to Section 4(2) of the Securities Act.

On November 12, 2009, we completed a private placement of our securities for gross proceeds of $15,098,245 to certain investors, including Nanominerals Corp. The securities were issued in reliance on exemptions from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. A total of 12,078,596 units were issued at a price of $1.25. 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 $1.85 per share for a period of three years from the date of issuance. In connection with this offering, we paid commissions to agents in the amount of $1,056,877 and issued warrants to purchase up to 301,965 shares of our common stock at a price of $1.85 per share for a period of three years from the date of issuance. Additional costs related to this financing issuance were $290,196.

Item 6. Selected Financial Data

The following statements of operations data for fiscal years 2007, and consolidated statement of operations for 2008 and 2009 and consolidated balance sheet data for fiscal years 2008 and 2009 have been derived from our consolidated financial statements and related notes which have been audited by Brown Armstrong, Paulden, McCown, Starbuck, Thornburgh & Keeter Accountancy Corporation for the years ended December 31, 2007, 2008 and 2009, and are included elsewhere in this document. The statements of operations data for fiscal years 2005 and 2006, and the balance sheet data for fiscal years 2005, 2006 and 2007 have been derived from our financial statements and related notes not included in this report. The following selected financial data should be read together with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report:

Statement of Operations Data	Year Ended December 31,

	2009			2008			2007			2006			2005
Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil
Operating expenses		7,001,187			5,141,957			3,650,734			3,736,079			1,721,777
Income tax benefit		2,591,491			1,777,458			1,080,375			1,122,457			399,645
Loss from continuing operations		(4,405,881	)		(3,128,386	)		(2,221,818	)		(2,540,978	)		(1,322,132	)
Gain (loss) from discontinued operations		270,457			-			-			-			120,708
Net loss		(4,135,424	)		(3,128,386	)		(2,221,818	)		(2,540,978	)		(1,201,424	)
Loss per share - basic and diluted		-			-			-			-			-
Loss from continuing operations		(0.04	)		(0.03	)		(0.02	)		(0.04	)		(0.03	)
Gain (loss) from discontinued operations		-			-			-			-			-

Balance Sheet Data	Year Ended December 31,

	2009		2008		2007		2006		2005
Cash	$	13,099,562	$	7,055,591	$	12,007,344	$	3,684,248	$	705,856
Working capital (deficiency)		12,347,353		5,885,930		11,105,436		2,207,177		(472,267	)
Total assets		174,158,105		167,479,633		160,132,878		12,243,481		4,329,415
Total liabilities		50,501,368		53,875,501		53,932,202		2,443,637		1,629,063
Total stockholders’ equity (deficit)		123,656,737		113,604,132		106,200,676		9,799,844		2,700,352
Long-term debt, including current portion		1,999,066		2,217,847		2,420,660		-		-

Selected Quarterly Financial Data	Three Months Ended
	12/31/09			9/30/09			6/30/09			3/31/09			12/31/08			9/30/08

Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil		$	Nil
Expenses		1,876,053			1,822,933			1,729,975			1,572,226			1,251,140			1,415,440
Loss from operations		(1,876,053	)		(1,822,933	)		(1,729,975	)		(1,572,226	)		(1,251,140	)		(1,415,440	)
Net loss		(940,551	)		(1,136,489	)		(1,078,329	)		(980,055	)		(765,055	)		(910,900	)
Basic and diluted loss per share		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Selected Quarterly Financial Data	Three Months Ended
	6/30/08			3/31/08			12/31/07			9/30/07			6/30/07			3/31/07

Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil		$	Nil
Expenses		1,412,342			1,063,035			1,146,603			795,897			986,687			721,547
Loss from operations		(1,412,342	)		(1,063,035	)		(1,146,603	)		(795,897	)		(986,687	)		(721,547	)
Net loss		(859,735	)		(592,696	)		(801,291	)		(423,757	)		(586,835	)		(409,935	)
Basic and diluted loss per share		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” and elsewhere in this report.

This discussion presents management’s analysis of our results of operations and financial condition as of and for each of the years in the three-year period ended December 31, 2009. The discussion should be read in conjunction with our financial statements and the notes related thereto which appear elsewhere in this report.

Executive Overview

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

Clarkdale Slag Project. Since our acquisition of 100% of the Clarkdale Slag Project in 2007, we have devoted considerable effort to the designing and engineering of our first production module, which included finalizing the production flow sheet, sourcing and purchasing equipment as well as refurbishing the module building and constructing the electrowinning building. The module and electrowinning buildings house the first production module, which has been designed to allow for the grinding, leaching, filtering and extraction of precious and base metals from the slag material and is expected to process between 100 and 250 tons of slag material per day.

Since the start 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, silver, copper and zinc extraction that would support the economic feasibility of a commercial production facility. During this period, the primary emphasis has been placed on the crushing and grinding circuit as well as the leaching and extraction of gold, silver, copper and zinc. We have completed continuous runs of up to 16 hours through the crushing and grinding circuit. To date, our internal laboratory testing has reflected consistent levels of extractable precious and base metals in pregnant leach solutions from the Clarkdale slag material. Management believes that extraction results from preliminary internal laboratory testing have been consistent with the results of earlier assay testing conducted by our independent consultants. We believe that we can improve extraction rates further by optimizing the grind, the chemical characteristics of the leach solutions and the amount of residence time required for maximum grind and leach efficiency.

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

Our work on the project site will be limited to the scope within the Plan of Operations. To perform any additional drilling or mining on the project, we would be required to submit a new application to the BLM for approval prior to the commencement of any such additional activities.

Anticipated Cash Requirements

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program and our continued operations will be approximately $9,200,000. As of December 31, 2009, we had cash reserves in the amount of approximately $13,099,562. On November 12, 2009, we completed a private placement of 12,078,596 units of our securities at a purchase price of $1.25 per unit, resulting in aggregate gross proceeds to us of $15,098,245. Based on the net proceeds received by us from the private placement, we estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration, testing and construction programs for the 2010 fiscal year. However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration, testing and construction plans for 2010. We do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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

	BUDGET

Administrative Expenses	$	1,700,000
Legal and Accounting Expenses	$	1,400,000

SUBTOTAL	$	3,100,000

Clarkdale Slag Project
Production Module Operation	$	3,440,000
Technical Consulting Services	$	1,000,000
Feasibility Study and Expansion Preparation	$	800,000
Purchase Payments – VRIC		360,000

SUBTOTAL	$	5,600,000

Searchlight Gold Project
Sampling and Drilling Program	$	200,000
Metallurgical Testing and Pre Feasibility Program		300,000

SUBTOTAL	$	500,000

TOTAL	$	9,200,000

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

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

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

Critical Accounting Policies

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

Mineral Rights – Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred 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. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

Capitalized Interest Cost - We capitalize interest cost related to acquisition, development and construction of property and equipment which is designed as integral parts of the manufacturing process. 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 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).

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

Impairment of Long-Lived Assets – We review and evaluate long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable. As of December 31, 2009 exploration progress is on target with our exploration and evaluation plan of operations and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When we determine that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

Results of Operations

Years Ended December 31, 2009, 2008 and 2007

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

	Year Ended December 31,
	2009			2008			2007
Revenue	$	-		$	-		$	-
Operating expenses		(7,001,187	)		(5,141,957	)		(3,650,734	)
Rental revenue		26,880			35,720			36,410
Interest and dividend income		12,006			203,821			314,331
Interest expense		(4,530	)		(3,428	)		(2,062	)
Loss on equipment disposition		(30,541	)		-			(138	)
Income tax benefit		2,591,491			1,777,458			1,080,375
Gain (loss) from discontinued operations		270,457			-			-
Net loss	$	(4,135,424	)	$	(3,128,386	)	$	(2,221,818	)

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 year ended December 31, 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:

	Year Ended December 31,
	2009		2008		2007

Mineral exploration and evaluation expenses	$	2,026,814	$	976,974	$	1,149,755
Mineral exploration and evaluation expenses – related party		476,145		360,000		360,000
Administrative – Clarkdale site		784,434		1,142,102		513,759
General and administrative		2,829,754		2,517,479		1,557,048
General and administrative – related party		139,011		83,333		32,421
Depreciation		745,029		62,069		37,751
Total operating expenses	$	7,001,187	$	5,141,957	$	3,650,734

Operating expenses increased by 36.2% to $7,001,187 during the year ended December 31, 2009 from $5,141,957 during the year ended December 31, 2008 and increased by 40.8% from $3,650,734 during the year ended December 31, 2007. Operating expenses increased in 2009 compared to the corresponding period in 2008 primarily as a result of increases in general and administrative expenses for legal expenses related to SEC filings and the commencement of start-up testing of a demonstration module at the Clarkdale Slag Project. Operating expenses increased in 2008 compared to the corresponding period in 2007 primarily as a result of increases in general and administrative expenses and site administrative expenses for increased staffing during construction, offset by decreases in mineral exploration and evaluation expenses.

General and administrative expenses increased by 12.4% to $2,829,754 during the year ended December 31, 2009 from $2,517,479 during the year ended December 31, 2008 and 61.7% from $1,557,048 during the year ended December 31, 2007. General and administrative expenses increased during 2009 primarily as a result of (i) increased professional and administrative expenses associated with the completion of our equity financing, preparation of our registration statement on Forms S-1 and S-3 and the preparation of amended periodic reports for the periods from March 31, 2005 through December 31, 2008; and (ii) increased expenses related to the administration of the Clarkdale Slag Project site during the start-up phase, which are expected to continue as the start-up phase progresses. We anticipate operating expenses to continue to increase if we grow our business operations. General and administrative expenses increased in 2008 primarily as a result of (i) increased professional and administrative expenses associated with the completion of our equity financing, the preparation of our 2007 annual report on Form 10-KSB, the preparation of our registration statement on Form S-1, and legal and accounting fees; and (ii) increased expenses related to the administration of the Clarkdale Slag Project site during construction, which are expected to continue as construction progresses. We anticipate operating expenses to continue to increase if we grow our business operations.

Included in general and administrative expenses for the years ended December 31, 2009, 2008 and 2007 were compensation expenses related to stock based compensation of $236,857, $136,342 and $269,287, respectively. On October 15, 2009, we adopted our 2009 Stock Incentive Award Plan for Employees and Service Providers (the “2009 Incentive Plan”). Under the terms of the 2009 Incentive Plan, options to purchase up to 3,250,000 shares of common stock may be granted to eligible participants under such plan. On December 15, 2009, our stockholders approved the 2009 Incentive Plan. As of December 31, 2009, no options have been granted under the 2009 Incentive Plan. On October 15, 2009, we adopted our 2009 Stock Incentive Plan for Directors (the “2009 Directors Plan”). Under the terms of the 2009 Directors Plan, options to purchase up to 750,000 shares of common stock may be granted to our directors under such plan. On December 15, 2009, our stockholders approved the 2009 Directors Plan. As of December 31, 2009, 11,250 options have been granted under the 2009 Directors Plan with an exercise price of $1.60 per share.

In addition, we incurred $139,011, $83,213 and $32,421 during the years ended December 31, 2009, 2008 and 2007, 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 year ended December 31, 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 From 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 expenses increased during the year ended December 31, 2008 as compared to 2007 because we did not incur such expenses to such firm prior to the third quarter of 2007.

These accounting support services included bookkeeping input for the Clarkdale facility, assistance in preparing working papers for quarterly and annual reporting, and preparation of federal and state tax filings. These expenses do not include any fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation has been provided in the form of salary. The direct benefit to Mr. Williams was $61,165, $22,468 and $11,260 of the above Cupit Milligan fees and expenses for the years ended December 31, 2009, 2008 and 2007, respectively.

Mineral exploration and evaluation expenses increased by 107.5% to $2,026,814 during the year ended December 31, 2009 from $976,974 in the year ended December 31, 2008 and decreased by 15.0% from $1,149,755 during the year ended December 31, 2007. Mineral exploration and evaluation expenses increased for the year ended December 31, 2009 as compared to 2008 as a result of increased costs of the start-up phase at our Clarkdale Slag Project. Mineral exploration and evaluation expenses decreased for the year ended December 31, 2008 as compared to 2007 as a result of our focus on our construction efforts for the Clarkdale Slag Project during the years ending December 31, 2008 and 2007.

Included in mineral exploration and evaluation expenses were the amounts of $360,000 paid in each of the years ended December 31, 2009, 2008 and 2007 to Nanominerals (one of our principal stockholders and an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a director) for technical assistance, including providing us with the use of its laboratory, instrumentation, milling equipment and research facilities with respect to our Searchlight Gold Project and Clarkdale Slag Project and financing related activities, including providing assistance to us when potential financiers performed technical due diligence on our projects and made technical presentations to potential investors in connection with the exploration, testing and construction of our mineral projects, and reimbursement of expenses provided by Nanominerals in connection with the exploration, testing and construction of our mineral projects.

Further, we incurred $784,434, $1,142,102 and $513,759 of administrative expenses relating to the Clarkdale Slag Project during the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in these expenses for the year ended December 31, 2009 as compared to 2008 was due to the use of personnel and consultants for the start-up phase of our Clarkdale Slag Project who had previously been working in an administrative capacity during the construction phase. The increase in these expenses for the year ended December 31, 2008 as compared to 2007 was due to increased activity at the Clarkdale Slag Project site, which commenced during the second quarter of 2007.

For the year ended December 31, 2009, we purchased services from one major vendor, Baker Hostetler LLP, which exceeded more than 10% of total purchases and amounted to approximately $1,355,136. For the year ended December 31, 2008, we purchased services from two major vendors, Talson Corporation and Cimetta Engineering, which exceeded more than 10% of total purchase and amounted to $2,123,096 and $1,476,744, respectively.

Other Income and Expenses. Total other income decreased to $3,815 during the year ended December 31, 2009 from $236,113 during the year ended December 31, 2008 and decreased from $348,541 during the year ended December 31, 2007. The decrease in total other income during 2009, as compared to 2008, 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. The decrease in total other income during 2008 as compared to 2007 was primarily attributable to 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.

We received incidental rental revenue of $26,880, $35,720 and $36,410 during the years ended December 31, 2009, 2008 and 2007, respectively, from leases and rentals of our commercial buildings and certain facilities acquired in connection with our acquisition of Transylvania. The property leases consist of: (i) a rental agreement with Clarkdale Arizona Central Railroad for the use of certain facilities at a rate of $1,700 per month; and (ii) rental of commercial building space to various tenants. Rental arrangements are minor in amount and are typically on a month to month basis.

Income Tax Benefit. Income tax benefit increased by 45.8% to $2,591,491 during the year ended December 31, 2009 from $1,777,458 during the year ended December 31, 2008 and increased by 64.5% from $1,080,375 during the year ended December 31, 2007. The increase in income tax benefit from 2008 to 2009 and from 2007 to 2008 primarily resulted from the increase in exploration stage losses.

Gain from Discontinued Operations. Prior to our corporate restructuring in 2005, we had several accounts payable dating back and prior to 2003 which were incurred in the United Kingdom. These expenses were related to business operations which were discontinued in February 2005. In 2009, we updated our internal review of the status of the payables and recorded a $270,457 gain resulting from relief of liabilities that were cleared based on expiration of United Kingdom statutes of limitations. The gain was reflected as a gain from discontinued operations. There was no tax impact as the prior expenses occurred while we operated outside the United States and the losses were not included in our net operating losses.

Net Loss. The aforementioned factors resulted in a net loss of $4,135,424, or $0.04 per common share, for the year ended December 31, 2009, as compared to a net loss of $3,128,386, or $0.03 per common share, for the year ended December 31, 2008, and a net loss of $2,221,818, or $0.02 per common share, for the year ended December 31, 2007.

As of December 31, 2009, 2008 and 2007, we had cumulative net operating loss carryforwards of approximately $18,866,291, $12,483,109 and $7,837,699, respectively, for federal income tax purposes. The federal net operating loss carryforwards expire between 2025 and 2029.

We had cumulative state net operating losses of approximately $10,148,277, $5,325,797 and $1,795,792 as of December 31, 2009, 2008, and 2007. The state net operating loss carryforwards will be expiring between 2013 and 2015.

Liquidity and Capital Resources

Historically, we have financed our operations primarily through the sale of common stock and other convertible equity securities. During 2009 and 2008, we conducted the following private placements of our securities:

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

On 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.

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.

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

The 2009 private placement agreements included contractual penalty provisions for failure to comply with these registration rights provisions. However, we are in compliance with these registration rights provisions. The 2008 private placement 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 December 31, 2009, 2008 and 2007:

	At December 31,
	2009			2008			2007
Current assets	$	13,221,823		$	7,307,005		$	12,200,133
Current liabilities		(874,470	)		(1,421,075	)		(1,094,697	)
Working capital	$	12,347,353		$	5,885,930		$	11,105,436

As of December 31, 2009, we had an accumulated deficit of $17,491,906. As of December 31, 2009, we had working capital of $12,347,353, compared to working capital of $5,885,930 as of December 31, 2008. The increase in our working capital was primarily attributable to completion of our private placement on November 12, 2009 for gross proceeds of $15,098,245, offset by the purchase of property and equipment of $1,473,378 and our net loss. Cash was $13,099,562 as of December 31, 2009, as compared to $7,055,591 as of December 31, 2008. Property and equipment increased to $13,994,934 as of December 31, 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 offset by depreciation of $745,029.

Included in long-term liabilities in the accompanying consolidated financials statements is a balance of $47,863,870 for deferred tax liability relating to the Clarkdale Slag Project and Searchlight Gold Project. A deferred income tax liability was recorded on the excess of fair market value for the asset acquired over income tax basis at a combined statutory federal and state rate of 38% with the corresponding increase in the purchase price allocation of the assets acquired.

Cash Flows

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

	Year Ended December 31,
	2009			2008			2007
Cash flows used in operating activities	$	(6,050,198	)	$	(4,382,549	)	$	(3,358,557	)
Cash flows used in investing activities		(1,638,222	)		(8,129,892	)		(14,347,827	)
Cash flows provided by financing activities		13,732,391			7,560,688			26,029,480
Net increase (decrease) in cash during period	$	6,043,971		$	(4,951,753	)	$	8,323,096

Net Cash Used in Operating Activities. Net cash used in operating activities increased to $6,050,198 during the year ended December 31, 2009 from $4,382,549 during the year ended December 31, 2008. The increase in cash used in operating activities was primarily due to operating losses from our exploration activity and general and administrative expenses, offset by non-cash elements which were primarily related to change in deferred tax liability of $2,591,491. Net cash used in operating activities increased to $4,382,549 during the year ended December 31, 2008 from $3,358,557 during the year ended December 31, 2007. The increase in cash used in operating activities was primarily due to operating losses from our exploration activity and general and administrative expenses, offset by non-cash elements which were primarily related to change in deferred tax liability of $1,777,458.

Net Cash Used in Investing Activities. We used $1,638,222 in investing activities during the year ended December 31, 2009, as compared to $8,129,892 during the year ended December 31, 2008. The decrease in the year ended December 31, 2009 was primarily the result of a decrease of $6,476,344 in property and equipment purchases due to substantial completion in 2008 of our demonstration module at the Clarkdale Slag Project. We used $8,129,892 in investing activities during the year ended December 31, 2008, as compared to $14,347,827 during the year ended December 31, 2007. The decrease in the year ended December 31, 2008 was primarily a result of the payment to VRIC, an affiliate of a member of our board of directors, Harry B. Crockett, of $9,900,000 in connection with the acquisition of VRIC’s wholly owned subsidiary, Transylvania, during the year ended December 31, 2007, offset by property and equipment purchases of $7,949,722 relating to the Clarkdale Slag Project during the year ended December 31, 2008.

Net Cash Provided by Financing Activities. Net cash provided by financing activities was $13,732,391 for the year ended December 31, 2009 compared to $7,560,688 for the year ended December 31, 2008. Net cash provided by financing activities during the year ended December 31, 2009 primarily resulted from the receipt of $15,098,245 from the proceeds of private placements of our securities and $200,000 from the exercise of options, offset by $194,756 of cash paid to VRIC based on our $30,000 monthly obligation to VRIC under the terms of the Transylvania reorganization agreement. Net cash provided by financing activities during the year ended December 31, 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, offset by $179,830 of cash paid to VRIC based on our $30,000 monthly obligation to VRIC under the terms of the Transylvania reorganization agreement. Net cash provided by financing activities was $7,560,688 for the year ended December 31, 2008 compared to $26,029,480 for the year ended December 31, 2007. Net cash provided by financing activities during the year ended December 31, 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, offset by $179,830 of cash paid to VRIC based on our $30,000 monthly obligation to VRIC under the terms of the Transylvania reorganization agreement. Net cash provided by financing activities during the year ended December 31, 2007 primarily resulted from the receipt of $26,813,817 from the gross proceeds of private placements of our securities.

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.

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program and our continued operations will be approximately $9,200,000. As of December 31, 2009, we had cash reserves in the amount of approximately $13,099,562. On November 12, 2009, we completed a private placement of 12,078,596 units of our securities at a purchase price of $1.25 per unit, resulting in aggregate gross proceeds to us of $15,098,245. Based on the net proceeds received by us from the private placement, we estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration, testing and construction programs for the 2010 fiscal year. However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration, testing and construction plans for 2010. We do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

Contractual Obligations

The following table represents our aggregate contractual obligations (principal and interest) to make future payments as of December 31, 2009:

	One Year or Less		Over One Year To Three Years		Over Three Years To Five Years		Over Five Years		Total

Long-term obligation	$	360,000	$	720,000	$	720,000	$	780,000	$	2,580,000
Capital lease obligation		26,401		15,401		-		-		41,802

Total	$	386,401	$	735,401	$	720,000	$	780,000	$	2,621,802

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

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

Effective July 1, 2009, the FASB Accounting Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single source for authoritative nongovernmental U.S. generally accepted accounting principles (U.S. GAAP). Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The ASC does not change U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. Effective September 15, 2009, all of our public filings will reference the ASC as the sole source of authoritative literature.

In April 2009, the FASB issued SFAS No. 165, Subsequent Events (ASC 855-10-05), which provides guidance to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Under ASC 855-10-05, entities are required to disclose the date through which subsequent events were evaluated, as well as the rationale for why that date was selected. ASC 855-10-05 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We had unrestricted cash totaling $13,099,562 at December 31, 2009 and $7,055,591 at December 31, 2008. Our cash is invested primarily in money market funds and are 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.

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			F-1

CONSOLIDATED BALANCE SHEETS			F-3

CONSOLIDATED STATEMENTS OF OPERATIONS			F-4

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY			F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS			F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			F-13

BROWN ARMSTRONG

ACCOUNTANCY CORPORATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Searchlight Minerals Corp.

We have audited the accompanying consolidated balance sheets of Searchlight Minerals Corp. (An Exploration Stage Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, including inception cumulative data prospectively from January 1, 2006, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009. Searchlight Mineral Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Searchlight Minerals Corp. (An Exploration Stage Company) as of December 31, 2009 and 2008, and the results of its operations, stockholders’ equity, including inception cumulative data, and its cash flows for each of the years in the three-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company’s operating losses raise substantial doubt about its ability to continue as a going concern, unless the Company attains future profitable operations and/or obtains additional financing. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Searchlight Mineral Corp.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2010 expressed an unqualified opinion.

	BROWN ARMSTRONG
	ACCOUNTANCY CORPORATION
March 10, 2010 Bakersfield, California

F-1

F-2

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

	December 31, 2009			December 31, 2008

ASSETS

Current assets
Cash	$	13,099,562		$	7,055,591
Prepaid expenses		122,261			251,414

Total current assets		13,221,823			7,307,005

Property and equipment, net		13,994,934			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		10,902			109,900

Total non-current assets		160,936,282			160,172,628

Total assets	$	174,158,105		$	167,479,633

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	443,742		$	1,093,778
Accounts payable - related party		194,690			108,515
VRIC payable, current portion - related party		210,921			194,756
Capital lease payable, current portion		25,117			24,026

Total current liabilities		874,470			1,421,075

Long-term liabilities
VRIC payable, net of current portion - related party		1,747,853			1,958,774
Capital lease payable, net of current portion		15,175			40,291
Deferred tax liability		47,863,870			50,455,361

Total long-term liabilities		49,626,898			52,454,426

Total liabilities		50,501,368			53,875,501

Commitments and contingencies - Note 13		-			-

Stockholders' equity
Common stock, $0.001 par value; 400,000,000 shares authorized, 118,768,373 and 105,854,691 shares, respectively, issued and outstanding		118,768			105,854
Additional paid-in capital		141,029,875			126,854,760
Accumulated deficit during exploration stage		(17,491,906	)		(13,356,482	)

Total stockholders' equity		123,656,737			113,604,132

Total liabilities and stockholders' equity	$	174,158,105		$	167,479,633

See Accompanying Notes to these Consolidated Financial Statements

F-3

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

										For the period from
										January 14, 2000
										(Date of inception)
	For the Year Ended			For the Year Ended			For the Year Ended			through
	December 31, 2009			December 31, 2008			December 31, 2007			December 31, 2009

Revenue	$	-		$	-		$	-		$	-

Operating expenses
Mineral exploration and evaluation expenses		2,026,814			976,974			1,149,755			7,065,498
Mineral exploration and evaluation expenses - related party		476,145			360,000			360,000			1,691,145
Administrative - Clarkdale site		784,434			1,142,102			513,759			2,440,295
General and administrative		2,829,754			2,517,479			1,557,048			8,947,923
General and administrative - related party		139,011			83,333			32,421			254,765
Depreciation		745,029			62,069			37,751			852,108

Total operating expenses		7,001,187			5,141,957			3,650,734			21,251,734

Loss from operations		(7,001,187	)		(5,141,957	)		(3,650,734	)		(21,251,734	)

Other income (expense)
Rental revenue		26,880			35,720			36,410			99,010
Loss on equipment disposition		(30,541	)		-			(138	)		(35,067	)
Interest expense		(4,530	)		(3,428	)		(2,062	)		(10,020	)
Interest and dividend income		12,006			203,821			314,331			607,190

Total other income (expense)		3,815			236,113			348,541			661,113

Loss before income taxes and discontinued operations		(6,997,372	)		(4,905,844	)		(3,302,193	)		(20,590,621	)

Income tax benefit		2,591,491			1,777,458			1,080,375			6,971,426

Loss from continuing operations		(4,405,881	)		(3,128,386	)		(2,221,818	)		(13,619,195	)

Discontinued operations:		270,457			-			-			(3,872,711	)
Gain (loss) from discontinued operations

Net loss	$	(4,135,424	)	$	(3,128,386	)	$	(2,221,818	)	$	(17,491,906	)

Loss per common share - basic and diluted
Loss from continuing operations	$	(0.04	)	$	(0.03	)	$	(0.02	)
Gain (loss) from discontinued operations		-			-			-

Net loss	$	(0.04	)	$	(0.03	)	$	(0.02	)

Weighted average common shares outstanding - basic and diluted		108,059,201			104,338,284			88,942,414

See Accompanying Notes to these Consolidated Financial Statements

F-4

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

												Accumulated
										Common		Deficit During			Total
	Common Stock						Additional			Stock		Exploration			Stockholders'
	Shares			Amount			Paid-in Capital			Subscribed		Stage			Equity

Balance, January 14, 2000		-		$	-		$	-		$	-	$	-		$	-

Issuance of common stock (recapitalized)		50,000,000			50,000			(25,000	)		-		(24,999	)		1

Net loss		-			-			-			-		(231,969	)		(231,969	)

Balance, December 31, 2000		50,000,000			50,000			(25,000	)		-		(256,968	)		(231,968	)

Issuance of common stock in reverse merger		10,300,000			10,300			(5,150	)		-		(5,150	)		-

Net loss		-			-			-			-		(767,798	)		(767,798	)

Balance, December 31, 2001		60,300,000			60,300			(30,150	)		-		(1,029,916	)		(999,766	)

Capital contribution		-			-			1,037,126			-		-			1,037,126

Beneficial conversion feature associated with debt		-			-			300,000			-		-			300,000

Net loss		-			-			-			-		(1,249,644	)		(1,249,644	)

Balance, December 31, 2002		60,300,000			60,300			1,306,976			-		(2,279,560	)		(912,284	)

Debt exchanged for common stock		48,000,000			48,000			1,152,000			-		-			1,200,000

Deferred compensation		-			-			12,583			-		-			-

Amortization of deferred compensation		-			-			-			-		-			10,387

Net loss		-			-			-			-		(1,283,872	)		(1,283,872	)

Balance, December 31, 2003		108,300,000			108,300			2,471,559			-		(3,563,432	)		(985,769	)

Amortization of deferred compensation		-			-			-			-		-			2,196

Net loss		-			-			-			-		(700,444	)		(700,444	)

Balance, December 31, 2004		108,300,000			108,300			2,471,559			-		(4,263,876	)		(1,684,017	)

Issuance of stock options for 1,000,000 shares of common stock to two officers		-			-			133,062			-		-			133,062

Issuance of stock options for 500,000 shares of common stock in satisfaction of debt		-			-			300,000			-		-			300,000

Return and cancellation of 70,000,000 shares of common stock		(70,000,000	)		(70,000	)		70,000			-		-			-

Issuance of 12,000,000 warrants in consideration of joint venture option		-			-			1,310,204			-		-			1,310,204

Issuance of common stock for 20 mining claims		1,400,000			1,400			488,600			-		-			490,000

See Accompanying Notes to these Consolidated Financial Statements

F-5

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

											Accumulated
								Common			Deficit During			Total
	Common Stock				Additional			Stock			Exploration			Stockholders'
	Shares		Amount		Paid-in Capital			Subscribed			Stage			Equity
Issuance of common stock in satisfaction of debt, $0.625 per share		200,000		200		124,800			-			-			125,000

Issuance of common stock for cash, Reg. S - Private Placement, $0.25 per share, net of $205,250 commissions		6,390,000		6,390		1,369,070			-			-			1,375,460

Issuance of common stock for cash, Reg. S - Private Placement, $0.25 per share, net of $135,000 commission		5,400,000		5,400		1,194,947			-			-			1,200,347

Issuance of common stock for cash, Reg. D 506 - Private Placement, $0.25 per share		460,000		460		114,540			-			-			115,000

Issuance of stock options for 1,500,000 shares of common stock to three directors		-		-		266,720			-			-			266,720

Common stock subscribed		-		-		-			270,000			-			270,000

Net loss		-		-		-			-			(1,201,424	)		(1,201,424	)

Balance, December 31, 2005		52,150,000		52,150		7,843,502			270,000			(5,465,300	)		2,700,352

Issuance of common stock for cash, Reg. D - Private Placement, $0.45 per share, net of $87,750 commission		3,900,000		3,900		1,663,350			(270,000	)		-			1,397,250

Issuance of common stock related to exercise of warrants		1,225,000		1,225		(1,225	)		-			-			-

Issuance of stock options for 120,000 shares of common stock to two officers		-		-		20,864			-			-			20,864

Issuance of stock options for 500,000 shares of common stock to two directors		-		-		122,420			-			-			122,420

Issuance of stock options for 100,000 shares of common stock to two directors		-		-		24,484			-			-			24,484

Issuance of common stock for cash Reg. S - Private Placement, $0.625 per share from exercise of warrants		6,125,000		6,125		3,822,000			-			-			3,828,125

Issuance of common stock for cash Reg. S - Private Placement, $0.375 per share from exercise of warrants		1,768,500		1,768		661,420			-			-			663,188

See Accompanying Notes to these Consolidated Financial Statements

F-6

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

									Accumulated
							Common		Deficit During			Total
	Common Stock				Additional		Stock		Exploration			Stockholders'
	Shares		Amount		Paid-in Capital		Subscribed		Stage			Equity
Issuance of common stock for cash Reg. S - Private Placement, $0.625 per share from exercise of warrants		612,500		613		382,200		-		-			382,813

Issuance of stock options for 100,000 shares of common stock to officer for recruitment amortized over vesting period		-		-		1,309		-		-			1,309

Issuance of common stock to officer for recruitment		50,000		50		102,950		-		-			103,000

Issuance of stock options for 50,000 shares of common stock to employee for recruitment amortized over vesting period		-		-		1,309		-		-			1,309

Issuance of common stock for mining claims		1,400,000		1,400		3,078,600		-		-			3,080,000

Amortization of stock options issued to employee and officer over vesting period		-		-		15,708		-		-			15,708

Net loss December 31, 2006		-		-		-	��	-		(2,540,978	)		(2,540,978	)

Balance, December 31, 2006		67,231,000		67,231		17,738,891		-		(8,006,278	)		9,799,844

Issuance of common stock in connection with the acquisition to five investors, $3.975 per share		16,825,000		16,825		66,862,550		-		-			66,879,375

Issuance of stock options for 182,946 shares of common stock to three officers, two employees and a consultant		-		-		220,194		-		-			220,194

lIssuance of common stock for cash Reg. D - Private Placement, $3.00 per share, net of $381,990 commission and $79,513 issuance costs		4,520,666		4,521		13,095,978		-		-			13,100,499

Issuance of common stock for cash Reg. S - Private Placement, $3.00 per share, net of $111,100 commission and $8,842 issuance costs		575,000		575		1,604,483		-		-			1,605,058

Issuance of common stock for cash Reg. S - Private Placement, $3.00 per share, net of $525,386 commission and $85,513 issuance costs		2,226,161		2,226		6,065,358		-		-			6,067,584

Amortization of stock options issued to employee and officer over vesting period		-		-		13,092		-		-			13,092

Issuance of common stock for mining claims		1,400,000		1,400		4,506,600		-		-			4,508,000

See Accompanying Notes to these Consolidated Financial Statements

F-7

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

											Accumulated
								Common			Deficit During			Total
	Common Stock				Additional			Stock			Exploration			Stockholders'
	Shares		Amount		Paid-in Capital			Subscribed			Stage			Equity
Issuance of common stock related to exercise of warrants		400,000		400		259,600			-			-			260,000

Common stock subscribed for exercise of warrants and options		-		-		-			90,000			-			90,000

Issuance of common stock for directors' compensation		6,314		6		17,994			-			-			18,000

Issuance of common stock related to exercise of options		400,000		400		99,600			-			-			100,000

Issuance of common stock for cash Reg. S - Private Placement, $1.60 per share		3,125,000		3,125		4,996,875			-			-			5,000,000

Issuance of common stock as commission in connection with foreign offering		156,250		156		(156	)		-			-			-

Common stock subscribed for directors' compensation		-		-		-			18,000			-			18,000

Capitalization of Phage related party liability to equity		-		-		742,848			-			-			742,848

Net loss December 31, 2007		-		-		-			-			(2,221,818	)		(2,221,818	)

Balance, December 31, 2007		96,865,391		96,865		116,223,907			108,000			(10,228,096	)		106,200,676

Issuance of common stock for cash, $0.65 per share from exercise of warrants		3,890,000		3,890		2,524,610			(65,000	)		-			2,463,500

Issuance of common stock for cash Reg. S - Private Placement, $1.60 per share		1,637,500		1,638		2,618,362			-			-			2,620,000

Issuance of common stock for cash Reg. D - Private Placement, $1.60 per share		1,643,750		1,644		2,628,356			-			-			2,630,000

Issuance of common stock as commission in connection with foreign offering		80,000		80		(80	)		-			-			-

Amortization of stock options issued to officer over vesting period		-		-		859			-			-			859

Issuance of common stock for cash, $0.25 per share exercise of nonemployee stock options		200,000		200		49,800			(25,000	)		-			25,000

Issuance of common stock for directors' compensation		11,768		11		35,989			(18,000	)		-			18,000

Issuance of common stock for mining claims		1,400,000		1,400		2,630,600			-			-			2,632,000

Effect of modification of stock options issued to an employee		-		-		36,457			-			-			36,457

See Accompanying Notes to these Consolidated Financial Statements

F-8

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

										Accumulated
							Common			Deficit During			Total
	Common Stock				Additional		Stock			Exploration			Stockholders'
	Shares		Amount		Paid-in Capital		Subscribed			Stage			Equity
Common stock subscribed for directors' compensation		-		-		-		18,000			-			18,000

Issuance of common stock for cash, $0.25 per share from exercise of nonemployee stock options		100,000		100		24,900		-			-			25,000

Issuance of common stock for directors' compensation		18,936		19		35,981		(18,000	)		-			18,000

Amortization of stock options issued to director over vesting period		-		-		19,149		-			-			19,149

Issuance of common stock for directors' compensation		7,346		7		17,993		-			-			18,000

Issuance of stock options for directors' compensation		-		-		7,877		-			-			7,877

Net loss December 31, 2008		-		-		-		-			(3,128,386	)		(3,128,386	)

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

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		9,890		10		17,990		-			-			18,000

Issuance of stock options for directors' compensation		-		-		12,422		-			-			12,422

See Accompanying Notes to these Consolidated Financial Statements

F-9

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

									Accumulated
							Common		Deficit During			Total
	Common Stock				Additional		Stock		Exploration			Stockholders'
	Shares		Amount		Paid-in Capital		Subscribed		Stage			Equity
Issuance of common stock for cash Reg. D - Private Placement, $1.25 per share, net of $1,056,877 commissions and $290,196 issuance fees		12,078,596		12,079		13,739,093		-		-			13,751,172

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		-		-		11,193		-		-			11,193

Issuance of common stock for directors' compensation		11,250		11		17,989		-		-			18,000

Issuance of stock options for directors' compensation		-		-		6,315		-		-			6,315

Effect of modification of stock options issued to employees		-		-		61,786		-		-			61,786

Net loss December 31, 2009		-		-		-		-		(4,135,424	)		(4,135,424	)

Balance, December 31, 2009		118,768,373	$	118,768	$	141,029,875	$	-	$	(17,491,906	)	$	123,656,737

See Accompanying Notes to these Consolidated Financial Statements

F-10

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

											Period from
											January 14, 2000
											(Date of inception)
		For the Year Ended			For the Year Ended			For the Year Ended			through
		December 31, 2009			December 31, 2008			December 31, 2007			December 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(4,135,424	)	$	(3,128,386	)	$	(2,221,818	)	$	(17,491,906	)
Gain (loss) from discontinued operations			270,457			-			-			(3,872,711	)
Loss from continuing operations			(4,405,881	)		(3,128,386	)		(2,221,818	)		(13,619,195	)

Adjustments to reconcile loss from operating to net cash used in operating activities:
Depreciation			745,029			62,069			37,751			852,108
Stock based expenses			236,857			136,342			269,287			1,331,362
Loss on disposition of fixed assets			30,541			-			138			36,416
Amortization of prepaid expense			297,702			183,913			170,413			652,028
Allowance for bond deposit recovery			-			180,500			-			180,500
Changes in operating assets and liabilities:
Other current assets			(168,549	)		(242,538	)		(256,967	)		(774,289	)
Other assets			98,998			(107,400	)		40			(191,402	)
Accounts payable and accrued liabilities			(293,404	)		310,409			(277,026	)		183,331
Deferred income taxes			(2,591,491	)		(1,777,458	)		(1,080,375	)		(6,971,426	)

Net cash used in operating activities			(6,050,198	)		(4,382,549	)		(3,358,557	)		(18,320,567	)
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	)		(9,900,000	)
Cash paid for additional acquisition costs			-			-			(130,105	)		(130,105	)
Capitalized interest - related party			(165,244	)		(180,170	)		(162,173	)		(507,587	)
Proceeds from property and equipment disposition			400			-			-			400
Purchase of property and equipment			(1,473,378	)		(7,949,722	)		(4,155,549	)		(13,620,482	)

Net cash used in investing activities			(1,638,222	)		(8,129,892	)		(14,347,827	)		(25,134,908	)
Net cash used in investing activities from discontinued operations			-			-			-			(452,618	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from stock issuance			15,298,245			7,763,500			26,813,817			58,837,745
Stock issuance costs			(1,347,073	)		-			(677,570	)		(2,024,643	)
Principal payments on capital lease payable			(24,025	)		(22,982	)		(28,939	)		(75,946	)
Principal payments on deferred purchase liability - related party			(194,756	)		(179,830	)		(167,828	)		(542,414	)
Proceeds from subscribed stock			-			-			90,000			360,000

Net cash provided by financing activities			13,732,391			7,560,688			26,029,480			56,554,742
Net cash provided by financing activities from discontinued operations			-			-			-			3,384,237

NET CHANGE IN CASH			6,043,971			(4,951,753	)		8,323,096			13,099,562

CASH AT BEGINNING OF PERIOD			7,055,591			12,007,344			3,684,248			-

CASH AT END OF PERIOD	$		13,099,562		$	7,055,591		$	12,007,344		$	13,099,562

See Accompanying Notes to these Consolidated Financial Statements

F-11

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

							Period from
							January 14, 2000
							(Date of inception)
	For the Year Ended		For the Year Ended		For the Year Ended		through
	December 31, 2009		December 31, 2008		December 31, 2007		December 31, 2009

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

SUPPLEMENTAL INFORMATION

Interest paid, net of capitalized amounts	$	4,530	$	3,428	$	2,062	$	60,771

Income taxes paid	$	-	$	-	$	-	$	-

Non-cash investing and financing activities:
Capital equipment purchased through accounts payable and financing	$	-	$	-	$	444,690	$	444,690

Assets acquired for common stock issued for the acquisition	$	-	$	-	$	66,879,375	$	66,879,375

Assets acquired for common stock issued for mineral properties	$	-	$	2,632,000	$	4,508,000	$	10,220,000

Assets acquired for liabilities incurred in the acquisition	$	-	$	-	$	2,628,188	$	2,628,188

Net deferred tax liability assumed	$	-	$	1,613,161	$	50,839,702	$	55,197,465

Merger option payment applied to the acquisition	$	-	$	-	$	200,000	$	200,000

Reclassify joint venture option agreement to slag project	$	-	$	-	$	690,000	$	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	$	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

F-12

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Basis of presentation - - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year-end is December 31.

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 11, 2010, 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 the Company with the surviving entity named “Regma Bio Technologies Limited”. On November 26, 2003, the Company changed its name from “Regma Bio Technologies Limited” to “Phage Genomics, Inc.”

In February, 2005, the Company announced its reorganization from a biotechnology research and development company to a company focused on the development and acquisition of mineral properties. In connection with its reorganization the Company entered into mineral option agreements to acquire an interest in the Searchlight Claims. The Company has consequently been considered 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.

F-13

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Going concern - The Company incurred cumulative net losses of $17,491,906 from operations as of December 31, 2009 and has not commenced its mining and mineral processing operations; rather, it is still in the exploration stage, raising substantial doubt about the Company’s ability to continue as a going concern. The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.

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

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

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

Mineral rights - Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred 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. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

Capitalized interest cost - The Company capitalizes interest cost related to acquisition, development and construction of property and equipment which is designed as integral parts of the manufacturing process. The capitalized interest is recorded as part of the asset it relates to and will be amortized over the asset’s useful life once production commences. Interest cost capitalized from imputed interest on acquisition indebtedness was $165,244 and $180,170 for the years ended December 31, 2009 and 2008, respectively.

F-14

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Exploration costs - Mineral exploration costs are expensed as incurred.

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

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

Impairment of long-lived assets - The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable. As of December 31, 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 an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

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

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

F-15

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Asset retirement obligation - The Company follows ASC 410, Asset Retirement and Environmental Obligations, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.

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

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

The Company’s financial instruments consist of mineral property purchase obligations. These obligations are classified within Level 2 of the fair value hierarchy as their fair value is determined using interest rates which approximate market rates. The Company is not exposed to significant interest or credit risk arising from these financial instruments.

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

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

Earnings (loss) per share - The Company follows ASC 260, Earnings Per Share, and ASC 480, Distinguishing Liabilities from Equity, which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly-held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income 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 December 31, 2009, 2008 and 2007 that were not included in the computation of diluted EPS because the effect would be antidilutive were 22,758,926, 23,418,739 and 25,352,207 respectively.

F-16

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Stock-based compensation - The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For this purpose, the Company uses the Binomial Lattice option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

Income taxes - The Company accounts for its income taxes in accordance with ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

For acquired properties that do not constitute a business as defined in ASC 805-10-55-4, Definition of a Business, deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal and state rates. The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis is computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in Certain Purchase Transactions that are Not Accounted for as Business Combinations, and is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence of there being a goodwill component associated with the acquisition transactions.

F-17

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Recent accounting standards - From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.

Effective July 1, 2009, the FASB (Financial Accounting Standards Board) Accounting Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single source for authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. Th e ASC does not change US GAAP but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. Effective September 15, 2009, all public filings of the Company will reference th e ASC as the sole source of authoritative literature.

In April 2009, the FASB issued SFAS No. 165, Subsequent Events (ASC 855-10-05), which provides guidance to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Und er ASC 855-10-05, entities are required to disclose the date through which subsequent events were evaluated, as well as the rationale for why that date was selected. ASC 855-10-05 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.

F-18

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.	PROPERTY AND EQUIPMENT

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

	December 31, 2009		December 31, 2008

Furniture and fixtures	$	36,740	$	35,813
Lab equipment		228,052		2,804
Computers and equipment		67,791		50,253
Income property		309,750		309,750
Construction in progress		5,523,620		12,289,996
Capitalized interest		507,587		342,343
Vehicles		44,175		38,175
Slag conveyance equipment		44,375		—
Demo module building		6,625,603		—
Site improvements		1,241,468		—
Site equipment		215,341		168,949

		14,844,502		13,238,083
Less accumulated depreciation		849,568		105,801

	$	13,994,934	$	13,132,282

Depreciation expense was $745,029, $62,069 and $37,751 for the years ended December 31, 2009, 2008 and 2007, respectively.

F-19

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.	CLARKDALE SLAG PROJECT

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

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

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

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

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

The $130 million purchase price was comprised of a combination of the cash paid, the deferred tax liability assumed in connection with the acquisition, and the fair value of our common shares issued, based on the closing market price of our common stock, using the average of the high and low prices of our common stock on the closing date of the acquisition. The Clarkdale Slag Project is without known reserves and the project is exploratory in nature in accordance with Industry Guides promulgated by the Commission, Guide 7 paragraph (a)(4)(i). As required by ASC 930-805-30, Mining – Business Combinations – Initial Recognition, and ASC 740-10-25-49-55, Income Taxes – Overall – Recognition – Acquired Temporary Differences in Certain Purchase Transactions that are Not Accounted for as Business Combinations, the Company then allocated the purchase price among the assets as follows (and also further described in this Note 3 to the financial statements): $5,916,150 of the purchase price was allocated to the slag pile site, $3,300,000 to the remaining land acquired, and $309,750 to income property and improvements. The purchase price allocation to the real properties was based on fair market values determined using an independent real estate appraisal firm (Scott W. Lindsay, Arizona Certified General Real Estate Appraiser No. 30292). The remaining $120,766,877 of the purchase price was allocated to the Slag Project, which has been capitalized as a tangible asset in accordance ASC 805-20-55-37, Use Rights. Upon commencement of commercial production, the material will be amortized using the unit-of-production method over the life of the Slag Project.

F-20

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

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

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

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:

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.

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

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

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

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

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

F-21

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

F-22

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.	MINERAL PROPERTIES - MINING CLAIMS

As of December 31, 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 December 31, 2009, the mineral properties balance was $16,947,419.

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

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

On August 26, 2005, the Company paid $180,500 to the Bureau of Land Management (“BLM”) as a bond for future reclamation work in Searchlight, Nevada. As of December 31, 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.

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

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amount may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. As of December 31, 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 an impairment analysis should be done, the analysis will be performed using the rules ASC 930-360-35 and 360-10-15-3 through 15-5.

The following table summarizes the changes of mineral properties for the years ended December 31, 2008 and 2009:

Total mineral properties balance, December 31, 2007	$	12,702,258

Share issuance to obtain mineral properties, June 25, 2008		2,632,000
Net deferred income tax liability assumed		1,613,161

Total mineral properties balance, December 31, 2008 and December 31, 2009	$	16,947,419

F-23

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

	December 31, 2009		December 31, 2008

Trade accounts payable	$	414,279	$	1,080,115
Accrued compensation and related taxes		29,463		7,546
Other		—		6,117

	$	443,742	$	1,093,778

Prior to the Company’s corporate restructuring in 2005, the Company had several accounts payable (the “Phage Payables”) included in trade accounts payable, dating back to 2003 and prior. These expenses were related to business operations which were discontinued in February 2005. In 2009, the Company updated its internal review of the status of the Phage Payables and recorded a $270,457 gain from discontinued operations resulting from relief of liabilities that were cleared based on expiration of UK statutes of limitations. The Phage Payables are further discussed in Note 18.

F-24

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.	CAPITAL LEASE PAYABLE

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

Lender	Collateral	Monthly Payment		Interest Rate			Maturity	December 31, 2009			December 31, 2008
Caterpillar Financial Services Corporation	Equipment	$	2,200		4.45	%	Jul-11	$	40,292		$	64,317

									40,292			64,317
Capital lease payable, current portion									(25,117	)		(24,026	)

Capital lease payable, net of current portion								$	15,175		$	40,291

The following table represents future minimum lease payments on the capital lease payable for each of the twelve month periods ending December 31,

2010	$	26,401
2011		15,401
Thereafter		—

Total future minimum lease payments	$	41,802
Imputed interest		(1,510	)

Present value of future minimum lease payments	$	40,292

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

	December 31, 2009			December 31, 2008

Site equipment	$	116,239		$	116,239
Accumulated amortization		(75,071	)		(46,011	)

	$	41,168		$	70,228

F-25

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	VRIC PAYABLE – RELATED PARTY

Pursuant to the Clarkdale acquisition agreement the Company agreed to pay VRIC $30,000 per month until the Project Funding Date. Mr. Harry Crockett, one of the Company’s directors, is an affiliate of VRIC. Mr. Crocket joined the Board of Directors subsequent to the acquisition.

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

The following table represents future principal payments on VRIC payable for each of the twelve month periods ending December 31,

2010	$	210,921
2011		228,427
2012		247,386
2013		267,919
2014		290,156
Thereafter		713,965

		1,958,774

VRIC payable, current portion		210,921

VRIC payable, net of current portion	$	1,747,853

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 13.

F-26

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY

During the year ended December 31, 2009 the Company’s stockholders’ equity activity consisted of the following:

On December 31, 2009, the Company awarded and issued 5,625 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $1.60 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

On November 16, 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.

On November 12, 2009, the Company completed a private placement offering for gross proceeds of $15,098,245 to US accredited investors pursuant to Rule 506 of Regulation D promulgated by the Securities Act of 1933. A total of 12,078,596 units were issued at a price of $1.25. Each unit sold consisted of one share of the Company’s common stock and one-half of one share purchase warrants. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock at a price of $1.85 per share for a period of three years from the date of issuance. Under certain specified circumstances, the warrants may be exercised by means of a “cashless exercise”.

If at any time after one year from the Closing there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the trading day immediately preceding the date of such election;

(B) = the exercise price of this warrant, as adjusted; and

(X) = the number of warrant shares issuable upon exercise of this warrant in accordance with the terms of this warrant by means of a cash exercise rather than a cashless exercise.

The cashless exercise provision will not be available until after November 12, 2010. The warrants have customary anti-dilution provisions. In connection with this offering, the Company paid commissions to agents in the amount of $1,056,877 and issued warrants to purchase up to 301,965 shares of common stock. Additional costs related to this financing issuance were $290,196.

F-27

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On November 12, 2009, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders to amend the private placement warrants from the February 23, 2007, March 22, 2007, December 26, 2007 and February 7, 2008 private placement offerings. The following amendments to the private placement warrants were adopted: (i) the expiration date of the private placement warrants has been extended to November 12, 2012 and (ii) the exercise price of the private placement warrants has been decreased to $1.85 per share. In all other respects, the terms and conditions of the warrants remain the same. The Company determined that the amendments to 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.

On September 30, 2009, the Company awarded and issued 4,945 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $1.82 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

On July 29, 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.

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.

On April 30, 2009, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders, to amend the private placement warrants from the February 23, 2007 and March 22, 2007 private placement offerings. The call provisions in the private placement warrants were restated 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: (i) 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, (ii) the broker warrants will not have a call provision, and (iii) 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.

F-28

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

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.

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.

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.

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.

F-29

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

During the year ended December 31, 2008, the Company’s stockholders’ equity activity consisted of the following:

On December 31, 2008, the Company awarded and issued 3,673 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $2.45 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

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 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. These warrants were further amended on April 30, 2009.

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.

On September 30, 2008, the Company awarded and issued 5,142 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $1.75 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital.

F-30

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On August 26, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee 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 22, 2010.

On June 30, 2008, the Company awarded 4,326 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $2.08 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital. The Company issued the shares on September 30, 2008.

On June 25, 2008, the Company issued 1,400,000 shares to the owners of the Searchlight Claims. This issuance is the final of four required share payments to complete the acquisition of the mining claims totaling 5,600,000 shares.

On June 16, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee 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.

On May 5, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee stock options resulting in cash proceeds of $25,000, which were received on August 16, 2007. 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 February 16, 2009.

On March 31, 2008, the Company awarded 2,670 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $3.37 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital. The Company issued the shares on May 15, 2008.

On February 7, 2008, the Company completed a private placement offering for gross proceeds of $2,620,000 to non-US persons in reliance of Regulation S promulgated under the Securities Act of 1933. A total of 1,637,500 units were issued at a price of $1.60. Each unit sold consisted of one share of the Company’s common stock and one-half of one share purchase warrants. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company’s 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 the Company’s common stock were issued by the Company as commission to agents in connection with the offering.

On February 7, 2008, the Company completed a private placement offering for gross proceeds of $2,630,000 to US accredited investors pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933. A total of 1,643,750 units were issued at a price of $1.60. Each unit sold consisted of one share of the Company’s common stock and one-half of one share purchase warrants. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.40 per share for a period of two years from the date of issuance. There was no commission paid or payable to agents in connection with this offering.

F-31

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On January 30, 2008, the Company received gross proceeds of $2,528,500 by issuing an aggregate of 3,890,000 shares of its common stock on the exercise of warrants issued by the Company in January 2006. Each warrant entitled the holder to purchase one share of the Company’s 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. A total of 3,690,000 shares were issued to US accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. An additional 200,000 shares were issued to one non-US person as defined in Regulation S of the Securities Act.

During the year ended December 31, 2007, the Company’s stockholders’ equity activity consisted of the following:

On December 31, 2007, the Company awarded 3,214 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $2.80 per share and has been recorded as directors’ compensation expense of $18,000 and common stock subscribed as of December 31, 2007.

On December 26, 2007, the Company completed a private placement to the Arlington Group Limited of a total of 3,125,000 units at $1.60 per unit for total proceeds of $5,000,000. Each unit is comprised of one share of the Company’s common stock and one-half of one share purchase warrant. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.40 per share for a period of two years from the date of issuance. In addition, the Company has issued an additional 156,250 shares of its common stock to the Arlington Group Limited, equal to 5% of the total number of units subscribed for by the Arlington Group Limited. Including the shares issued as a commission, the Company has issued an aggregate of 3,281,250 shares of its common stock and 1,562,500 share purchase warrants to the Arlington Group Limited under the private placement. The private placement was completed pursuant to the provisions of Regulation S under the Securities Act of 1933.

On December 13, 2007, the Company issued 400,000 shares of common stock from the exercise of stock options resulting in cash proceeds of $100,000. Stock options exercised were for 400,000 shares at $0.25 per share. Each of the stock options was set to expire on November 23, 2010.

On December 12, 2007, the Company received $65,000 for exercise of warrants to purchase 100,000 shares at $0.65 per share. The transaction was recorded as common stock subscribed as of December 31, 2007 pending execution of documents and issuance of shares.

On September 30, 2007, the Company awarded 3,157 shares each to its two non officer directors pursuant to its directors’ compensation policy. The share award was priced at the nearest closing date to quarter end of $2.85 per share and has been recorded as directors’ compensation expense of $18,000 and additional paid-in capital. The Company issued the shares on November 13, 2007.

F-32

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On August 16, 2007, the Company received $25,000 for exercise of options to purchase 100,000 shares at $0.25 per share. The transaction was recorded as common stock subscribed as of December 31, 2007 pending execution of documents and issuance of shares.

On August 9, 2007, the Company issued 400,000 shares of common stock from the exercise of warrants resulting in cash proceeds of $260,000. Warrants exercised were for 400,000 shares at $0.65 per share. Each of the warrants was set to expire on January 18, 2008.

On June 29, 2007, the Company issued 1,400,000 shares to the owners of the Searchlight Claims. This issuance is the third of four required share payments to complete the acquisition of the mining claims totaling 5,600,000 shares.

On March 22, 2007, the Company closed a private placement offering for gross proceeds of $6,678,483 (the "March Offering"). The securities sold pursuant to the March Offering were issued to non-US investors in accordance with the terms of Regulation S of the Securities Act of 1933. In connection with the March Offering, the Company entered into an Agency Agreement dated March 21, 2007 (the "Agency Agreement"). The securities were sold to subscribers on a best efforts agency basis. Pursuant to the terms of the Agency Agreement, the Company sold an aggregate of 2,226,161 units for gross proceeds of $6,678,483, with each unit consisting of one share of its common stock and one half of one share purchase warrant, with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by Searchlight if its common stock trades above $6.50 per share for 20 consecutive trading days. Also under the terms of the March Offering, the Company agreed to use its best efforts to file with the Securities and Exchange Commission a registration statement on Form SB-2, or on such other form as is available, registering the offered securities within four months after the closing of the March Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. An aggregate commission and corporate finance fee totaling $525,386 was paid by the company to the Agent in connection with the March Offering, and the Agent also received warrants to purchase 75,175 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following amendments to the private placement warrants: (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.

F-33

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On February 23, 2007, the Company closed a private placement offering and issued 4,520,666 units for aggregate gross proceeds of $13,562,002 to accredited investors resident in the US pursuant to Regulation D of the Securities Act of 1933 (the “US Offering”). Each unit consisted of one share of its common stock and one half of one share purchase warrant, with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by the Company if its common stock trades above $6.50 per share for 20 consecutive trading days. Pursuant to the terms of the US Offering, the Company agreed to use its best efforts to file a registration statement declared effective by the SEC within four months of the closing date of the US Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. The Company further agreed to keep the registration statement effective pursuant to Rule 415 of the Securities Act for a period of eighteen months following the date the registration statement is declared effective by the SEC. A portion of the US Offering was sold on a best efforts agency basis. Commissions paid to agents in connection with the US Offering totaled $381,990, and the agents also received warrants to purchase 90,870 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following amendments to the private placement warrants: (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.

F-34

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

Also on February 23, 2007, the Company closed a private placement offering and issued 575,000 units for aggregate gross proceeds of $1,725,000 to non-US investors pursuant to Regulation S of the Securities Act of 1933 (the “February Offering”). Each unit consisted of one share of its common stock and one half of one share purchase warrant, with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by us if its common stock trades above $6.50 per share for 20 consecutive trading days. Pursuant to the terms of the Non-US Offering, the Company agreed to use its best efforts to file a registration statement declared effective by the SEC within four months of the closing date of the February Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. The Company further agreed to keep the registration statement effective pursuant to Rule 415 of the Securities Act for a period of eighteen months following the date the registration statement is declared effective by the SEC. Commissions paid to agents in connection with the February Offering totaled $111,100 and the agents also received warrants to purchase 12,300 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following amendments to the private placement warrants: (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 February 15, 2007, the Company approved the issuance of 16,825,000 shares of its common stock to five investors in connection with the Agreement and Plan of Merger dated February 15, 2007. The issuance was completed pursuant to Section 4(2) and Regulation D of the Securities Act of 1933 on the basis that each investor was a sophisticated investor and was in a position of access to relevant material information regarding its operations. Each investor delivered appropriate investment representations satisfactory to us with respect to this transaction and consented to the imposition of restrictive legends upon the certificates evidencing such share certificates.

During the year ended December 31, 2006, the Company’s stockholders’ equity activity consisted of the following:

On July 27, 2006, the Company issued 1,400,000 shares to the owners of the Searchlight Claims. This issuance is the second of four required share payments to complete the acquisition of the searchlight claims totaling 5,600,000 shares.

On June 21, 2006, the Company issued 8,506,000 shares of common stock from the exercise of warrants resulting in cash proceeds of $4,874,126. Warrants exercised were for 7,327,000 shares at $0.625 per share and 1,179,000 shares at $0.25 per share. Each of the warrants was set to expire between June 2 and June 7, 2006, and all were exercised.

F-35

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On June 14, 2006, the Company issued 50,000 shares at $2.06 per share as consideration for an employment contract entered into on June 14, 2006 with a new Chief Financial Officer. In addition, the Company advanced $33,084 for withholding taxes required to be paid on total compensation of $103,000. The advance was repaid in full on December 31, 2006.

On February 9, 2006, the Company issued 1,225,000 shares of common stock and warrants to purchase an additional 612,500 shares of common stock with an exercise price of $0.625 expiring between June 2 and June 7, 2006. These are related to the penalty shares and warrants for the late registration of shares with the Securities and Exchange Commission pursuant to the private placements completed in September 2005. Pursuant to the private placements, subscribers received penalty units consisting of one share and one half of one share purchase warrant. The penalty units were exercisable into 1/10th of the total number of units issued in the private placement if a registration statement on Form SB-2 was not declared effective within four months and one day of the closing date of the private placements. The Registration Statement was not effective prior to the filing deadline resulting in the issuance of the penalty units.

On January 18, 2006, the Company issued 39 units for $45,000 per unit where each unit consisted of 100,000 shares and 100,000 purchase warrants. Each purchase warrant was exercisable into one share at a price of $0.65 expiring on January 18, 2008. Total gross proceeds for this offering were $1,775,000.

Warrants associated with the 2009, 2008, 2007 and 2006 equity issuances do not constitute a registration payment arrangement.

During 2005, the Company’s stockholders’ activities consisted of the following:

On September 30, 2005, the Company effectuated a two-for-one forward stock split on its common stock. As a result of the stock split, the Company’s authorized number of common stock increased from 200,000,000 shares to 400,000,000 shares. Accordingly, the accompanying financial statements have been adjusted on a retroactive basis for the forward stock split to the Company’s date of inception.

On September 7, 2005, the Company issued 5,400,000 units for $0.25 per unit, where each unit consisted of one common share, one half of one purchase warrant and one nontransferable warrant exercisable into one tenth (1/10) of one unit for no additional consideration if registration requirements are not met within four months after the closing. Each purchase warrant was exercisable into one share at a price of $0.625 and expired on June 7, 2006. Total gross proceeds of this offering were $1,350,000. In connection with this brokered offering, 540,000 Brokers Warrants, exercisable at $0.25 and expiring on June 7, 2006, were issued. Each Broker Warrant was exercisable into one common share and one half of one purchase warrant. Each purchase warrant was exercisable into one common share at $0.625 and expired on June 7, 2006.

F-36

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCKHOLDERS’ EQUITY (continued)

On September 6, 2005, the Company issued 460,000 units for $0.25 per unit, where each unit consisted of one common share, one half of one purchase warrant and one nontransferable warrant exercisable into one tenth (1/10) of one unit for no additional consideration if registration requirements are not met within four months after the closing. Each purchase warrant was exercisable into one share at a price of $0.625 and expired on June 6, 2006. Total gross proceeds of this offering were $115,000.

On September 2, 2005, the Company issued 6,390,000 units for $0.25 per unit, where each unit consisted of one common share, one half of one purchase warrant and one nontransferable warrant exercisable into one tenth (1/10) of one unit for no additional consideration if registration requirements were not met within four months after the closing. Each purchase warrant was exercisable into one share at a price of $0.625 and expired on June 2, 2006. Total gross proceeds of this offering were $1,597,500. In connection with this brokered offering, 639,000 Brokers Warrants, exercisable at $0.25 and expiring on June 2, 2006, were issued. Each Broker Warrant was exercisable into one common share and one half of one purchase warrant. Each purchase warrant was exercisable into one common share at $0.625 and expired on June 2, 2006.

On July 7, 2005, the Company issued 1,400,000 shares (post stock split) of common stock for the purchase of 20 mineral claims. The Company initially valued the total transaction based on actual costs incurred by the former owner of $87,134, plus $40,000, represented by $2,000 per claim, for a total acquisition price of $127,134. This issuance has been restated to reflect payments made by issuance of 1,400,000 shares at the market value on the date of issuance of $0.35.

On July 6, 2005, the Company issued 200,000 shares (post stock split) of common stock at $0.625 per share for reduction of debt at $125,000 as negotiated with the debtor.

On June 1, 2005, the Company approved the issuance of stock warrants for 12,000,000 shares of common stock with a strike price of $0.375 per share in connection with the Clarkdale Slag Project option. Satisfaction of the financing related closing conditions of the assignment agreement were met on September 7, 2005. On October 24, 2005, the issuance of the warrants was completed. The warrants contain an expiration date of June 1, 2015.

On February 14, 2005, the Company cancelled all of the stock options that were outstanding at December 31, 2004.

On February 11, 2005, 70,000,000 shares (post stock split) of the Company were returned to the Company and cancelled at its par value of $0.001 per share.

F-37

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS

On October 15, 2009, the Board of Directors adopted the 2009 Stock Option Plan (the “2009 Plan”). Under the terms of the 2009 Plan, options to purchase up to 3,250,000 shares of common stock of the Company may be granted to eligible participants.

The 2009 Plan was adopted by the Company’s stockholders on December 15, 2009.

The 2009 Plan provides that the option price for incentive stock options be the fair market value of the stock at the date of the grant, except that with respect to an incentive stock option, for holders of awards who, on the date of grant, own more than 10% of the total combined voting power of all classes of the Company’s stock (or any parent or subsidiary thereof), the exercise price may not be less than 110% of the fair market value of a share of common stock on the date of grant. The maximum term of an option shall be established for that option by the Board of Directors or, if not so established, shall be ten years from the grant date, except that the term for incentive stock options may not exceed five years for award holders who, on the date of grant, own more then 10% of the voting power of all classes of stock. Options granted under the 2009 Plan become exercisable and expire as determined by the Board of Directors.

On October 15, 2009, the Board of Directors approved the 2009 Stock Incentive Plan for Directors (the “2009 Directors Plan”). Under the terms of the 2009 Directors Plan, options to purchase up to 750,000 shares of common stock may be granted to the Company’s directors.

The 2009 Directors Plan was approved by the Company’s stockholders on December 15, 2009.

Under the 2009 Directors Plan, no participant may receive such awards with respect to more than 250,000 common shares during any calendar year. Stock options will be exercisable and will vest at such time or times as the Board or Committee determines at the time of grant. The exercise price of a stock option granted under the 2009 Directors Plan may not be less than 100% of the fair market value of a share of the Company’s common stock on the date the stock option is granted. The term of each stock option will be established at the time of grant by the Committee and may not exceed ten years from the date the stock option is granted.

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.

F-38

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

During the year ended December 31, 2009, the Company granted stock options as follows:

On December 31, 2009, the Company granted nonqualified stock options under the 2009 Plan for the purchase of 11,250 shares of common stock at $1.60 per share. The options were granted to an independent director for directors’ compensation, are fully vested and expire on December 31, 2014.

On September 30, 2009, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 9,890 shares of common stock at $1.82 per share. The options were granted to an independent director for directors’ compensation, are fully vested and expire on September 30, 2014.

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.

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.

During the year ended December 31, 2008, the Company granted stock options as follows:

On December 31, 2008, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 7,347 shares of common stock at $2.45 per share. The options were granted to an independent director for directors’ compensation, are fully vested and expire on December 31, 2013.

On October 6, 2008, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 200,000 shares of common stock at $1.45 per share. The options were granted to an independent director and vest 25% each year over a four year period with each tranche expiring five years after the respective vesting period.

F-39

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

During the year ended December 31, 2007, the Company granted stock options as follows:

On December 14, 2007, the Company granted incentive stock options under the 2007 Plan for the purchase of 50,000 shares of common stock at $1.75 per share. The incentive stock options were granted to an employee, are fully vested and were set to expire on December 14, 2009.

As discussed below, on November 5, 2009, the Company extended the term of these options for an additional three years.

On December 14, 2007, the Company granted nonqualified stock options under the 2007 Plan for the purchase of 50,000 shares of common stock at $1.75 per share. The nonqualified stock options were granted to a consultant, are fully vested and were set to expire on December 14, 2009.

As discussed below, on November 5, 2009, the Company extended the term of these options for an additional three years.

On June 15, 2007, the Company granted incentive stock options under the 2007 Plan for the purchase of 7,246 shares of common stock at $3.45 per share. The options were granted to an employee, are fully vested and expire on June 15, 2009.

On February 16, 2007, the Company granted nonqualified stock options under the 2006 Plan for the purchase of 75,700 shares of common stock at $4.04 per share. The options were granted to three officers and one employee, are fully vested and expire on February 16, 2012.

Expenses for the years ended December 31, 2009, 2008 and 2007 related to vesting and granting of stock options were $103,071, $27,885 and $233,286, respectively and are included in general and administrative expense. The Company recorded $61,786 in stock option modification expense for two employees during the year ended December 31, 2009. The Company recorded $36,457 in stock option modification expense for one employee during the year ended December 31, 2008. No stock option modifications occurred during the year ended December 31, 2007.

F-40

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

Stock options – During the year ended December 31, 2009, the Company granted stock options to directors totaling 35,086, with a weighted average exercise price of $2.05 per share. During the years ended December 31, 2008 and 2007, the Company granted stock options to employees and directors totaling 207,347 and 182,946, respectively, with a weighted average exercise price of $1.49 and $2.76 per share, respectively. As of December 31, 2009, stock options outstanding totaled 2,680,633 with a weighted average exercise price of $1.20 per share.

On November 5, 2009, the Company extended the term of stock options previously issued to one employee and one outside consultant for 50,000 shares of common stock each for an additional 3 years. The Company accounted for the impact of the amended stock option grant as a stock option modification under ASC 718. As a result of the modification, the Company recognized $61,786 of additional stock-based compensation expense due to the increase in the fair market value of this stock option grant that is recorded in general and administrative expense.

On May 30, 2008, the Company extended the term of stock options previously issued to an employee for 50,000 shares of common stock for an additional 3 years. The Company accounted for the impact of the amended stock option grant as a stock option modification under ASC 718. As a result of the modification, the Company recognized $36,457 of additional stock-based compensation expense due to the increase in the fair market value of this stock option grant that is recorded in general and administrative expense.

F-41

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes the Company’s stock option activity for the years ended December 31, 2009, 2008 and 2007:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2006		3,870,000		$	0.77
Options granted and assumed		182,946			2.76
Options expired		—			—
Options cancelled, forfeited		—			—
Options exercised		(400,000	)		0.25

Balance, December 31, 2007		3,652,946			0.93
Options granted and assumed		207,347			1.49
Options expired		—			—
Options cancelled, forfeited		—			—
Options exercised		(300,000	)		0.25

Balance, December 31, 2008		3,560,293			1.02
Options granted and assumed		35,086			2.05
Options expired		(57,246	)		2.53
Options cancelled, forfeited		(57,500	)		2.32
Options exercised		(800,000	)		0.25

Balance, December 31, 2009		2,680,633		$	1.20

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	2008			2007

Dividend yield	—	—			—
Expected volatility	72.67% - 104.25%		76.59%		76.59%
Risk-free interest rate	1.67% to 3.39%	1.55% to 3.48%		2.88% to 4.68%
Expected life (years)	2.75 to 4.25	4.25 to 9			2 to 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.

For stock options awarded during 2009 and 2008, the expected volatility is based on the historical volatility levels on our common stock. For stock options awarded prior to 2008, the Company estimated expected volatility using a representative peer group average, because of limited historical equity transactions of the Company. The risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues over equivalent lives of the options.

F-42

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

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 years ended December 31, 2009, 2008 and 2007:

	Number of Shares Subject to Vesting			Weighted Average Grant Date Fair Value
Unvested, December 31, 2006		125,000		$	0.79
Options granted		—			—
Options vested		(75,000	)		0.21
Options cancelled

Unvested, December 31, 2007		50,000			0.21
Options granted		200,000			0.79
Options vested		(50,000	)		0.21
Options cancelled		—			—

Unvested, December 31, 2008		200,000			0.79
Options granted		—			—
Options vested		(50,000	)		0.64
Options cancelled		—			—

Unvested, December 31, 2009		150,000		$	0.84

As of December 31, 2009, there was $69,514 total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized as follows: 2010 - $39,873, 2011 - $21,598, and 2012 - $8,043.

F-43

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes information about options granted during the year ended December 31, 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 Grant Date Fair Value
35,086	Equals	$	2.05	$1.60 to $2.74	$	0.98
—	Exceeds	$	—	$ — to $ —	$	—
—	Less Than	$	—	$ — to $ —	$	—

35,086	Equals	$	2.05	$1.60 to $2.74	$	0.98

The following table summarizes information about options granted during the year ended December 31, 2008:

Number of Options Granted During 2008	Exercise Price Equals, Exceeds or is Less than Mkt. Price of Stock on Grant Date	Weighted Average Exercise Price		Range of Exercise Price	Weighted Average Grant Date Fair Value
207,347	Equals	$	1.49	$1.45 to $2.45	$	0.80
—	Exceeds	$	—	$ — to $ —	$	—
—	Less Than	$	—	$ — to $ —	$	—

207,347	Equals	$	1.49	$1.45 to $2.45	$	0.80

The following table summarizes information about options granted during the year ended December 31, 2007:

Number of Options Granted During 2007	Exercise Price Equals, Exceeds or is Less than Mkt. Price of Stock on Grant Date	Weighted Average Exercise Price		Range of Exercise Price	Weighted Average Grant Date Fair Value
182,946	Equals	$	2.76	$1.75 to $4.04	$	0.44
—	Exceeds	$	—	$ — to $ —	$	—
—	Less Than	$	—	$ — to $ —	$	—

182,946	Equals	$	2.76	$1.75 to $4.04	$	0.44

F-44

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

Stock options/warrants – During the year ended December 31, 2009, the Company granted stock warrants related to common stock issued through a private placement totaling 6,039,298 with a strike price of $1.85 per share. Stock warrants totaling 301,965 were issued to brokers of the private placement with a strike price of $1.85 per share.

The value of the warrants was allocated against additional paid in capital as part of the overall offering cost of the private placement.

The Company determined that the amendments to 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 year ended December 31, 2009, the Company issued stock options for 35,086 shares of common stock to a director with an exercise price ranging from $1.60 to $2.74 per share.

F-45

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

Stock options/warrants – During the year ended December 31, 2008, the Company granted stock warrants related to common stock issued through a private placement totaling 1,640,625 with a strike price of $2.40 per share. The strike price of all 2008 warrants was subsequently amended to $1.85 per share.

The value of the warrants was allocated against additional paid in capital as part of the overall offering cost of the private placement.

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, and (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 year ended December 31, 2008, the Company issued stock options for 207,347 shares of common stock to a director with an exercise price ranging from $1.45 to $2.45 per share.

F-46

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	STOCK OPTION PLAN AND WARRANTS (continued)

Stock options/warrants – During the year ended December 31, 2007, the Company granted stock warrants related to common stock issued through private placements totaling 3,660,917 with a strike price of $4.50 per share and 1,562,500 with a strike price of $2.40 per share. Stock warrants totaling 178,345 were issued to underwriters of the private placement with a strike price of $4.50 per share. The strike price of all 2007 warrants was subsequently amended to $1.85 per share.

The value of the warrants was allocated against additional paid-in capital as part of the overall offering cost of the private placement.

During the year ended December 31, 2007, the Company issued stock options for 182,946 shares of common stock to three officers, two employees and a consultant with a strike price ranging from $1.75 to $4.04 per share.

The following table summarizes information about options/warrants granted during the years ended December 31, 2009, 2008 and 2007:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2006		20,160,000		$	0.51
Options/warrants granted and assumed		5,584,708			3.86
Options/warrants expired		—			—
Options/warrants cancelled, forfeited		—			—
Options/warrants exercised		(800,000	)		0.45

Balance, December 31, 2007		24,944,708			1.26
Options/warrants granted and assumed		1,847,972			2.30
Options/warrants expired		—			—
Options/warrants cancelled, forfeited		—			—
Options/warrants exercised		(4,190,000	)		0.62

Balance, December 31, 2008		22,602,680			1.11
Options/warrants granted and assumed		6,376,349			1.85
Options/warrants expired		(57,246	)		2.53
Options/warrants cancelled, forfeited		(57,500	)		2.32
Options/warrants exercised		(800,000	)		0.25

Balance, December 31, 2009		28,064,283		$	1.16

10.	SHAREHOLDER RIGHTS PLAN

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

F-47

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.	PROPERTY RENTAL AGREEMENTS AND LEASES

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

Clarkdale Arizona Central Railroad – Rental

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

Commercial Building – Rental

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

Land Lease – Wastewater Effluent

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

The term of the lease is 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.

F-48

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.	INCOME TAXES

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

The income tax benefit consisted of the following at December 31, 2009, 2008 and 2007,

	December 31, 2009			December 31, 2008			December 31, 2007

Income tax benefit at statutory rates	$	(2,569,623	)	$	(1,864,221	)	$	(1,254,833	)
Non-deductible and other		(99,015	)		6,460			4,807
Change in valuation allowance		77,147			80,303			119,193
Rate change		—			—			50,458

Income tax benefit	$	(2,591,491	)	$	(1,777,458	)	$	(1,080,375	)

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

	December 31, 2009			December 31, 2008
Deferred income tax assets

Net operating loss carryforward	$	7,169,190		$	4,742,104
Option compensation		412,058			349,412
Reclamation bond		68,590			68,590
Property, plant & equipment		164,405			—

Gross deferred income tax asset		7,814,243			5,160,106
Valuation allowance		(480,648	)		(403,501	)

		7,333,595			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	$	47,863,870		$	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 December 31, 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.

F-49

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.	INCOME TAXES (continued)

The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis as computed in accordance with ASC 740 is reflected as an increase to the total purchase price which has been applied to the underlying mineral and slag project assets in the absence of there being a goodwill component associated with the acquisition transactions.

The Company had cumulative net operating losses of approximately $18,866,291 and $12,483,109 as of December 31, 2009 and December 31, 2008, respectively for federal income tax purposes. The federal net operating loss carryforwards will be expiring between 2025 and 2029.

State Income Tax Allocation

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

For the years ended December 31, 2009, 2008 and 2007, the state income tax benefit which is included in the total tax benefit was $354,125, $255,840 and $139,135, respectively.

The Company had cumulative net operating losses of approximately $10,148,277 and $5,325,797 as of December 31, 2009 and December 31, 2008, respectively for Arizona state income tax purposes. The Arizona state net operating loss carryforwards will be expiring between 2013 and 2015.

Tax Returns Subject to Examination

The Company and its 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 decreases in its net operating losses available for carryforwards. The Company is no longer subject to income tax examinations by US federal and state tax authorities for years prior to 2005. While the Company believes 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.

F-50

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.	COMMITMENTS AND CONTINGENCIES

Lease obligations – The Company rents office space in Henderson, Nevada. The lease terms expired in November 2006, and the Company continues to rent the existing space under month-to-month terms. Monthly rent was decreased from $4,900 per month to $4,000 per month beginning in August 2009 due to less office space leased.

Rental expense resulting from this operating lease agreement was $54,300, $58,800 and $46,700 for the years ended December 31, 2009, 2008 and 2007, 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.

F-51

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.	COMMITMENTS AND CONTINGENCIES (continued)

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

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

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

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.

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

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

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

The Company estimates the initial cost of construction of the Road to cost approximately $3,500,000 and the cost of additional enhancements to be approximately $1,200,000 which will be required to be funded by the Company. Based on the uncertainty of the contingencies, this cost is not included in the Company’s current operating plans. Funding for construction of the Road will require obtaining project financing or other significant financing. At December 31, 2009 and through the date the consolidated financial statements were issued, these contingencies had not changed.

F-52

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.	CONCENTRATION OF CREDIT RISK

The Company maintains its cash accounts in two financial institutions. Cash accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per financial institution. 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 December 31, 2009, the Company did not have material deposits in excess of FDIC insured limits.

15.	CONCENTRATION OF ACTIVITY

For the year ended December 31, 2009, the Company purchased services from one major vendor, Baker Hostetler, which exceeded more than 10% of total purchases and amounted to approximately $1,355,136.

For the year ended December 31, 2008, the Company purchased services from two major vendors, Talson Corporation and Cimetta Engineering, which exceeded more than 10% of total purchases and amounted to approximately $2,123,096 and $1,476,744, respectively.

16.	RELATED PARTY TRANSACTIONS

During the year ended December 31, 2009, 2008 and 2007, 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 year ended December 31, 2009, the Company incurred total fees and reimbursement of expenses to NMC of $360,000 and $116,145, respectively. At December 31, 2009, the Company had an outstanding balance due to NMC of $167,905.

For the year ended December 31, 2008, the Company incurred total fees and reimbursement of expenses to NMC of $360,000 and $104,269, respectively. At December 31, 2008, the Company had an outstanding balance due to NMC of $93,940.

For the year ended December 31, 2007, the Company incurred total fees and reimbursement of expenses to NMC of $360,000 and $105,346, respectively. At December 31, 2007, the Company had an outstanding balance due to NMC of $39,730.

In connection with the private placement completed on November 12, 2009, NMC purchased 400,000 units of securities at an aggregate purchase price of $500,000.

F-53

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.	RELATED PARTY TRANSACTIONS (continued)

During the years ended December 31, 2009, 2008 and 2007, the Company utilized Cupit, Milligan, Ogden & Williams, CPAs (CMOW) to provide accounting support services. Mr. Williams is affiliated with CMOW.

The Company incurred total fees to CMOW of $139,011, $83,213 and $31,277 for the years ended December 31, 2009, 2008 and 2007, respectively. The Company also reimbursed expenses to CMOW of $120 and $1,144 for the years ended December 31, 2008 and 2007, 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 direct benefit to Mr. Williams was $61,165, $22,468 and $11,260 of the above CMOW fees and expenses for the years ended December 31 2009, 2008 and 2007, respectively. The Company had an outstanding balance due to CMOW of $26,785, $14,575 and $2,244 as of December 31, 2009, 2008 and 2007, respectively.

17.	GAIN FROM DISCONTINUED OPERATIONS

Prior to the Company’s corporate restructuring in 2005, the Company had several accounts payable dating back to 2003 and prior (the “Phage Payables”). All of these Phage Payables were incurred in the United Kingdom (“UK”). These expenses were related to business operations which were discontinued in February 2005. In 2009, the Company updated its internal review of the status of the Phage Payables and recorded a $270,457 gain resulting from relief of liabilities that were cleared based on expiration of UK statutes of limitations. The gain is reflected as a gain from discontinued operations. There was no tax impact as the prior expenses occurred while the Company operated outside the United States and the losses are not included in the Company’s net operating losses.

18.	UNAUDITED SUPPLEMENTARY DATA

The following is a summary of selected quarterly financial information (unaudited):

		Q1			Q2			Q3			Q4
Year Ended December 31, 2009
Expenses	$	1,572,226		$	1,729,975		$	1,822,933		$	1,876,053
Loss from operations		(1,572,226	)		(1,729,975	)		(1,822,933	)		(1,876,053	)
Net loss		(980,055	)		(1,078,329	)		(1,136,489	)		(940,551	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

Year Ended December 31, 2008
Expenses	$	1,063,035		$	1,412,342		$	1,415,440		$	1,251,140
Loss from operations		(1,063,035	)		(1,412,342	)		(1,415,440	)		(1,251,140	)
Net loss		(592,696	)		(859,735	)		(910,900	)		(765,055	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

F-54

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Controls and Procedures

As of December 31, 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 December 31, 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.

Management’s Report on Internal Control over Financial Reporting

Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our system of internal control over financial reporting was effective as of December 31, 2009.

Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting and has issued a report on our internal control over financial reporting, which is included in their report, which is included herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Searchlight Minerals Corp.

We have audited Searchlight Minerals Corp.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Searchlight Minerals Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying report from management. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Searchlight Minerals Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2009 and 2008, and the related consolidated statements of operations, including inception cumulative data prospectively from January 1, 2006, stockholders’ equity and cash flows for each of the years ended in the three year period ended December 31 2009 of Searchlight Minerals Corp., and our report dated March 10, 2010 expressed an unqualified opinion.

BROWN ARMSTRONG PAULDEN

McCOWN STARBUCK THORNBURGH & KEETER

ACCOUNTANCY CORPORATION

March 10, 2010

Bakersfield, California

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

Submission of Matters to a Vote of Security Holders

At our annual meeting of stockholders held on December 15, 2009, the following individuals were elected as our Class II and Class III directors and received the number of votes set opposite their respective names:

Name and Class	Votes For	Votes Against	Votes Withheld
Harry B. Crockett (Class II)	59,356,764	0	11,180,828
Carl S. Ager (Class II)	68,244,148	0	2,293,444
Robert D. McDougal (Class III)	68,048,268	0	2,489,324
Martin B. Oring (Class III)	69,043,515	0	1,494,077

In addition, at the annual meeting, the following proposals received the number of votes set opposite the respective proposals:

Proposals	Votes For	Votes Against	Abstentions
Authorization of class of up to 40,000,000 shares of preferred stock	55,092,599	15,431,243	13,750

Amendment and restatement of articles of incorporation to limit liability of directors and officers and permit indemnification of directors, officers and certain other persons	68,828,068	761,100	948,424

Adoption of 2009 Stock Incentive Award Plan and reservation of up to 3,250,000 shares for issuance thereunder	67,431,748	2,214,020	891,824

Adoption of 2009 Equity Incentive Plan for Directors and reservation of up to 750,000 shares for issuance thereunder	67,603,215	2,044,553	889,824

Ratification of appointment of Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation as independent registered public accounting firm for the year ending December 31, 2009	69,202,738	430,030	904,824

All of the foregoing proposals were adopted at the annual meeting by the vote of the stockholders, other than the proposal to authorize a class of up to 40,000,000 shares of preferred stock.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009.

Item 11. Executive Compensation

Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009.

Item 14. Principal Accountant Fees and Services

Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009.

PART IV

Item 15. Exhibits and Financial Statement Schedules

EXHIBIT INDEX

The following is a complete list of exhibits filed as part of this Report, 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
3.1		Amended and Restated Articles of Incorporation (1)
3.2		Amended and Restated Bylaws (2)
4.1		Specimen Stock Certificate (3)
4.2		Form of US Warrant Certificate dated February 23, 2007, as amended (4)
4.3		Form of US Broker’s Warrant Certificate dated February 23, 2007, as amended (4)
4.4		Form of Non-US Warrant Certificate dated February 23, 2007, as amended (4)
4.5		Form of Non-US Broker’s Warrant Certificate dated February 23, 2007, as amended (4)
4.6		Form of Warrant Certificate dated March 22, 2007, as amended (4)
4.7		Form of Broker’s Warrant Certificate dated March 22, 2007, as amended (4)
4.8		Form of Warrant Certificate, dated December 26, 2007, as amended (4)
4.9		Form of US Warrant Certificate, dated February 7, 2008, as amended (4)
4.10		Form of Non-US Warrant Certificate, dated February 7, 2008, as amended (4)
4.11		Form of Common Stock Purchase Warrant, dated November 12, 2009 (4)
4.12		Rights Agreement, dated August 24, 2009, between Searchlight Minerals Corp. and Empire Stock Transfer Inc. (5)
10.1		2002 Nonqualified Stock Option Plan (6)
10.2		2003 Nonqualified Stock Option Plan (7)
10.3		2009 Stock Incentive Award Plan, adopted December 15, 2009 (8)
10.4		2009 Stock Incentive Plan for Directors, adopted December 15, 2009 (8)
10.5		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals Inc., Kiminco Inc., Pass Minerals Inc., Debra L. Matheson, and Pilot Plant Inc. dated February 8, 2005 (9)
10.6		Letter Agreement between Phage Genomics Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Pilot Plant Inc. dated February 8, 2005 (9)
10.7		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Bear Dog Mines Inc. dated February 8, 2005 (9)
10.8		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Gold Hunter Inc. dated February 8, 2005 (9)
10.9		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., Michael D. Anderson, Farrell Drozd, Michael I. Matheson, and Pass Minerals Inc. dated February 8, 2005 (9)
10.10		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Britti Gold Inc. dated February 8, 2005 (9)
10.11		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., Michael D. Anderson, Geosearch Inc., Patrick I. Matheson, and Geotech Mining Inc. dated February 8, 2005 (9)

10.12		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., and Gold Crown Inc. dated February 8, 2005 (9)
10.13		Engagement Letter dated June 17, 2005 between Searchlight Minerals Corp. and Clarion Finanz AG (10)
10.14		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Pilot Plant Inc. (10)
10.15		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Bear Dog Mines Inc. (10)
10.16		Extension Agreement dated effective June 22, 2005 among Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Gold Hunter Inc. (10)
10.17		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp.,, K. Ian Matheson, Searchlight Minerals, Inc., Pass Minerals Inc., Michael D. Anderson, Farrell Drozd and Michael I. Matheson (10)
10.18		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Britti Gold Inc. (10)
10.19		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc., Geotech Mining Inc., Michael D. Anderson, Geosearch Inc. and Patrick B. Matheson (10)
10.20		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Gold Crown Minerals Inc. (10)
10.21		Assignment Agreement dated for reference June 1, 2005 between Searchlight Minerals Corp. and Nanominerals Corp. (11)
10.22		First Amendment to Assignment Agreement between Nanominerals Corp. and Searchlight Minerals Corp. dated August 31, 2005 (12)
10.23		Second Amendment to Assignment Agreement between Nanominerals Corp. and Searchlight Minerals Corp. dated October 24, 2005 (13)
10.24		Office Suite Lease Agreement between Burnett & Williams Executive Suites and Searchlight Minerals Corp. dated September 6, 2005 (12)
10.25		Employment Agreement between Searchlight Minerals Corp. and Carl S. Ager dated as of January 1, 2006 (13)
10.26		Employment Agreement between Searchlight Minerals Corp. and Ian R. McNeil dated as of January 1, 2006 (14)
10.27		Employment Agreement between Searchlight Minerals Corp. and Melvin L. Williams dated as of June 14, 2006 (15)
10.28		2007 Stock Option Plan (16)
10.29		Engineering Services Agreement dated as of May 1, 2006 with Cimetta Engineering and Construction Co. (17)
10.30		Office Suite Lease Agreement between Burnett & Williams Executive Suites and Searchlight Minerals Corp. dated July 20, 2006 (18)
10.31		Contract for Engineering Services dated March 21, 2005 (18)
10.32		Contract for Drilling Services dated May 23, 2006 between Boart Longyear Company and Searchlight Minerals Corp. and Contact for Services dated October 17, 2005 between Boart Longyear Company and Searchlight Minerals Corp. (18)
10.33		Letter Agreement dated November 22, 2006 among Verde River Iron Company, LLC, Harry B. Crockett, Gerald Lembas and Searchlight Minerals Corp. (19)
10.34		Notice of Exercise Option (20)
10.35		Amendment No. 1 to Letter Agreement dated February 15, 2007 (5)
10.36		Agreement and Plan of Merger dated February 15, 2007 between Verde River Iron Company, LLC, Transylvania International, Inc., Clarkdale Minerals LLC and Searchlight Minerals Corp. (21)
10.37		Special Warranty Deed dated February 15, 2007 (21)
10.38		Bill of Sale dated February 15, 2007 (21)
10.39		Agreement between Transylvania International, Inc. and Architecture Works Inc. (Reynold P. Radoccia, Architect) dated November 14, 2005 (21)
10.40		Effluent lease dated August 25, 2004 between Town of Clarkdale, Transylvania International, Inc. and Verde River Iron Company, LLC (21)
10.41		Articles of Merger between Transylvania International, Inc. and Clarkdale Minerals LLC dated February 15, 2007 (21)
10.42		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Ian R. McNeil. (22)

10.43		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Carl S. Ager. (22)
10.44		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Melvin L. Williams. (22)
10.45		Non-Exclusive Agency Agreement dated February 9, 2007 between Empire Financial Group, Inc. and Searchlight Minerals Corp. (23)
10.46		Agency Agreement dated January 30, 2007 between S&P Investors, Inc. and Searchlight Minerals Corp.(23)
10.47		Agency Agreement dated January 31, 2007 between Zuri Invest Limited and Searchlight Minerals Corp.(23)
10.48		Agency Agreement dated March 21, 2007 between D&D Securities Company and Searchlight Minerals Corp.(24)
10.49		Consulting Agreement dated January 31, 2008 between Searchlight Minerals Corp. and RJ Falkner and Company, Inc. (25)
10.50		Letter of Engagement with DCM Structured Finance dated September 6, 2007 (26)
10.51		General Contractor Agreement, dated May 4, 2007 (and addendums thereto) between the Company and Talson Corporation (27)
10.52		Engineering Services Agreement, dated April 4, 2006 (and addendum thereto) between the Company and Cimetta Engineering and Construction Co., Inc. (27)
10.53		Agreement for Architectural Services, dated November 14, 2005 (and addendum thereto) between the Company and Architecture Works Inc. (27)
10.54		Mining Claim Purchase Agreements regarding transfer of title to Searchlight Claims (1)
10.55		Independent Contractor Agreement with Donald Wohl, dated May 1, 2008 (1)
10.56		General Contractor Agreement, dated August, 2008 (and addendums thereto) between the Company and Talson Corporation (1)
10.57		Development Agreement, dated as of January 9, 2009, between Clarkdale Minerals, LLC and the Town of Clarkdale, Arizona (5)
14.1		Code of Ethics (28)
21.1		List of Wholly Owned Subsidiaries
23.1		Consent of Dr. Richard F. Hewlett
23.2		Consent of Nanominerals Corp.
23.3		Consent of Mountain States R&D International Inc.
23.4		Consent of Independent Mining Consultants, Inc.
23.5		Consent of Arrakis, Inc.
23.6		Consent of Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation
23.7		Consent of Scott W. Lindsay
23.8		Consent of Canadian Environmental & Metallurgical Inc.
23.9		Consent of SGS Lakefield Research Limited
23.10		Consent of Kyle L. Tingle, CPA, LLC
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Audit Committee Charter (28)
99.2		Disclosure Committee Charter (29)
99.3		Related Party Transactions Policy (30)

__________________________________

(1)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on December 28, 2009.
(2)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on April 29, 2009.
(3)	Filed with the SEC as an exhibit to our Registration Statement on Form 10-SB originally filed on July 11, 2000.
(4)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on November 13, 2009.
(5)	Filed with the SEC as an exhibit to our Registration Statement on Form 8-A filed on August 25, 2009 (No. 000-30995), which includes as Exhibit A thereto the Form of Right Certificate and as Exhibit B thereto the Summary of Common Share Purchase Rights.
(6)	Filed with the SEC as an exhibit to our Form S-8 Registration Statement filed on April 10, 2002.
(7)	Filed with the SEC as an exhibit to our Form S-8 filed on June 30, 2003.
(8)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on December 28, 2009.
(9)	Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on April 15, 2005.
(10)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on June 24, 2005.
(11)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on June 16, 2005.
(12)	Filed with the SEC as an exhibit to our Quarterly Report on Form 10-QSB filed on November 21, 2005.
(13)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 28, 2005.
(14)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on March 2, 2006.
(15)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on June 20, 2006.
(16)	Filed with the SEC as an exhibit to our proxy statement on Schedule 14A filed on May 22, 2007.
(17)	Filed with the SEC as an exhibit to our Quarterly Report on Form 10-QSB filed on August 14, 2006.
(18)	Filed with the SEC as an exhibit to our Registration Statement on Form SB-2/A (No. 333-133929) filed on October 30, 2006.
(19)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on November 28, 2006.
(20)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on January 16, 2007.
(21)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on February 22, 2007.
(22)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on February 23, 2007.
(23)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on March 5, 2007.
(24)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on March 29, 2007.
(25)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on February 21, 2008.
(26)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 10, 2007.
(27)	Filed with the SEC as an exhibit to our Registration Statement on Form S-1/A (No. 333-132929) filed on July 17, 2008.
(28)	Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on September 27, 2006.
(29)	Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on April 13, 2004.
(30)	Filed with the SEC as an exhibit to our registration statement on Form S-1/A (No. 333-132929) filed on September 2, 2009.

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.
Date: March 12, 2010	a Nevada corporation

	By:	/s/ IAN R. MCNEIL
		Ian R. McNeil
		President and Chief Executive Officer
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ IAN R. MCNEIL	Chief Executive Officer, President and Director	March 12, 2010
Ian R. McNeil	(Principal Executive Officer)

/s/ CARL S. AGER	Vice President, Secretary, Treasurer and Director	March 12, 2009
Carl S. Ager

/s/ MELVIN L. WILLIAMS	Chief Financial Officer	March 12, 2010
Melvin L. Williams	(Principal Accounting Officer)

	Director
Harry B. Crockett

/s/ ROBERT D. MCDOUGAL	Director	March 12, 2010
Robert D. McDougal

/s/ MARTIN B. ORING	Director	March 12, 2010
Martin B. Oring

/s/ JORDAN M. ESTRA	Director	March 12, 2010
Jordan M. Estra

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

Searchlight Minerals (SRCH) Inactive 10-K2009 FY Annual report

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