Searchlight Minerals 10Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2010

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

For the transition period from _______ to _______.

Commission file number 000-30995

SEARCHLIGHT MINERALS CORP.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	98-0232244 (I.R.S. Employer Identification No.)

#120 - 2441 West Horizon Ridge Pkwy. Henderson, Nevada (Address of principal executive offices)	89052 (Zip code)

(702) 939-5247

(Registrant’s telephone number, including area code)

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

Yes x No o

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 o No o

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

Large accelerated filer o Accelerated filer x

Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

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

Yes o No x

As of May 6, 2010, the registrant had 118,783,373 outstanding shares of common stock.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3

Item 1. Financial Statements	3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	47

PART II - OTHER INFORMATION	47

Item 1. Legal Proceedings	47

Item 1A. Risk Factors	47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3. Defaults Upon Senior Securities	48

Item 4. Submission of Matters to a Vote of Security Holders	48

Item 5. Other Information	48

Item 6. Exhibits	49

SIGNATURES	50

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2010			December 31, 2009

ASSETS

Current assets
Cash	$	10,893,483		$	13,099,562
Prepaid expenses		204,900			122,261

Total current assets		11,098,383			13,221,823

Property and equipment, net		14,080,455			13,994,934
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		13,542			10,902

Total non-current assets		161,024,443			160,936,282

Total assets	$	172,122,826		$	174,158,105

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	248,987		$	443,742
Accounts payable - related party		76,940			194,690
VRIC payable, current portion - related party		215,167			210,921
Capital lease payable, current portion		25,397			25,117

Total current liabilities		566,491			874,470

Long-term liabilities
VRIC payable, net of current portion - related party		1,692,443			1,747,853
Capital lease payable, net of current portion		8,720			15,175
Deferred tax liability		47,178,994			47,863,870

Total long-term liabilities		48,880,157			49,626,898

Total liabilities		49,446,648			50,501,368

Commitments and contingencies - Note 13		-			-

Stockholders' equity
Common stock, $0.001 par value; 400,000,000 shares authorized, 118,783,373 and 118,768,373 shares, respectively, issued and outstanding		118,783			118,768
Additional paid-in capital		141,075,978			141,029,875
Accumulated deficit during exploration stage		(18,518,583	)		(17,491,906	)

Total stockholders' equity		122,676,178			123,656,737

Total liabilities and stockholders' equity	$	172,122,826		$	174,158,105

See Accompanying Notes to these Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

							For the period from
							January 14, 2000
							(Date of inception)
	For the three months ended						through
	March 31, 2010			March 31, 2009			March 31, 2010

Revenue	$	-		$	-		$	-

Operating expenses
Mineral exploration and evaluation expenses		716,876			312,334			7,782,374
Mineral exploration and evaluation expenses - related party		117,857			90,000			1,809,002
Administrative - Clarkdale site		99,515			232,688			2,539,810
General and administrative		645,114			733,043			9,593,037
General and administrative - related party		37,119			22,202			291,884
Depreciation		221,500			181,959			1,073,608

Total operating expenses		1,837,981			1,572,226			23,089,715

Loss from operations		(1,837,981	)		(1,572,226	)		(23,089,715	)

Other income (expense)
Rental revenue		6,480			7,540			105,490
Loss on equipment disposition		-			(1,542	)		(35,067	)
Interest expense		(1,048	)		(694	)		(11,068	)
Interest and dividend income		308			5,774			607,498

Total other income (expense)		5,740			11,078			666,853

Loss before income taxes and discontinued operations		(1,832,241	)		(1,561,148	)		(22,422,862	)

Income tax benefit		684,876			581,093			7,656,302

Loss from continuing operations		(1,147,365	)		(980,055	)		(14,766,560	)

Discontinued operations:
Gain (loss) from discontinued operations		120,688			-			(3,752,023	)

Net loss	$	(1,026,677	)	$	(980,055	)	$	(18,518,583	)

Loss per common share - basic and diluted
Loss from continuing operations	$	(0.01	)	$	(0.01	)
Gain (loss) from discontinued operations		-			-

Net loss	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding - basic and diluted		118,768,373			106,268,024

See Accompanying Notes to these Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

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

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

Amortization of stock options issued to directors over vesting period		-		-		19,560		-			19,560

Issuance of common stock for directors' compensation		15,000		15		17,985		-			18,000

Issuance of stock options for directors' compensation		-		-		8,558		-			8,558

Net loss March 31, 2010		-		-		-		(1,026,677	)		(1,026,677	)

Balance, March 31, 2010		118,783,373	$	118,783	$	141,075,978	$	(18,518,583	)	$	122,676,178

See Accompanying Notes to these Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

							Period from
							January 14, 2000
							(Date of inception)
	For the three months ended						through
	March 31, 2010			March 31, 2009			March 31, 2010

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,026,677	)	$	(980,055	)	$	(18,518,583	)
Gain (loss) from discontinued operations		120,688			-			(3,752,023	)
Loss from continuing operations		(1,147,365	)		(980,055	)		(14,766,560	)

Adjustments to reconcile loss from operating to net cash used in operating activities:
Depreciation		221,500			181,959			1,073,608
Stock based expenses		46,118			45,159			1,377,480
Loss on disposition of fixed assets		-			1,542			36,416
Amortization of prepaid expense		74,944			57,413			726,972
Allowance for bond deposit recovery		-			-			180,500
Changes in operating assets and liabilities:
Other current assets		(157,583	)		29,052			(931,872	)
Other assets		(2,640	)		600			(194,042	)
Accounts payable and accrued liabilities		(191,817	)		(303,473	)		(8,486	)
Deferred income taxes		(684,876	)		(581,093	)		(7,656,302	)

Net cash used in operating activities		(1,841,719	)		(1,548,896	)		(20,162,286	)
Net cash used in operating activities from discontinued operations		-			-			(2,931,324	)

CASH FLOW FROM INVESTING ACTIVITIES
Cash paid on mineral property claims		-			-			(87,134	)
Cash paid for joint venture and merger option		-			-			(890,000	)
Cash paid to VRIC on closing date		-			-			(9,900,000	)
Cash paid for additional acquisition costs		-			-			(130,105	)
Capitalized interest - related party		(38,836	)		(42,757	)		(546,423	)
Proceeds from property and equipment disposition		-			-			400
Purchase of property and equipment		(268,185	)		(803,854	)		(13,888,667	)

Net cash used in investing activities		(307,021	)		(846,611	)		(25,441,929	)
Net cash used in investing activities from discontinued operations		-			-			(452,618	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from stock issuance		-			125,000			58,837,745
Stock issuance costs		-			-			(2,024,643	)
Principal payments on capital lease payable		(6,175	)		(5,906	)		(82,121	)
Principal payments on VRIC payable - related party		(51,164	)		(47,243	)		(593,578	)
Proceeds from subscribed stock		-			-			360,000

Net cash (used) provided by financing activities		(57,339	)		71,851			56,497,403
Net cash provided by financing activities from discontinued operations		-			-			3,384,237

NET CHANGE IN CASH		(2,206,079	)		(2,323,656	)		10,893,483

CASH AT BEGINNING OF PERIOD		13,099,562			7,055,591			-

CASH AT END OF PERIOD	$	10,893,483		$	4,731,935		$	10,893,483

See Accompanying Notes to these Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

					Period from
					January 14, 2000
					(Date of inception)
	For the three months ended				through
	March 31, 2010		March 31, 2009		March 31, 2010

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

SUPPLEMENTAL INFORMATION

Interest paid, net of capitalized amounts	$	1,048	$	694	$	61,819

Income taxes paid	$	-	$	-	$	-

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

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

Assets acquired for common stock issued for mineral properties	$	-	$	-	$	10,220,000

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

Net deferred tax liability assumed	$	-	$	-	$	55,197,465

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

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

Warrants issued in connection with joint venture option agreement related to slag project	$	-	$	-	$	1,918,481

Stock options for common stock issued in satisfaction of debt	$	-	$	-	$	1,500,000

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

Stock issued for conversion of accounts payable, 200,000 shares at $0.625	$	-	$	-	$	125,000

See Accompanying Notes to these Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Basis of presentation - - The accompanying unaudited consolidated financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-K for the year ended December 31, 2009 of Searchlight Minerals Corp. (the “Company”).

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

These consolidated financial statements have been prepared by the Company without audit, and include all adjustments (which consist solely of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2009.

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

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Going concern - The Company incurred cumulative net losses of $18,518,583 from operations as of March 31, 2010 and has not commenced its commercial mining and mineral processing operations; rather, it is still in the exploration stage, raising substantial doubt about the Company’s ability to continue as a going concern. The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.

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

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

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

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

Capitalized interest cost - The Company capitalizes interest cost related to acquisition, development and construction of property and equipment which is designed as integral parts of the manufacturing process. The capitalized interest is recorded as part of the asset it relates to and will be amortized over the asset’s useful life once production commences. Interest cost capitalized from imputed interest on acquisition indebtedness was $38,836 and $42,757 for the three months ended March 31, 2010 and 2009, respectively.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Exploration costs - Mineral exploration costs are expensed as incurred.

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

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

Impairment of long-lived assets - The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable. As of March 31, 2010, exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate that the related carrying values of the properties may not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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


Level 1		Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2		Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; 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 (loss) by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Weighted average of common stock equivalents, which include stock options and warrants to purchase common stock, on March 31, 2010 and 2009 that were not included in the computation of diluted EPS because the effect would be antidilutive were 28,130,950 and 22,165,458, respectively.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

Effective July 1, 2009, the FASB Accounting Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single source for authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. 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 January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The Company does not have any assets or liabilities classified as Level 3. The Company has adopted the Level 1 and Level 2 amendments accordingly. As the update only pertained to disclosures, it had no impact on the Company’s financial position, results of operations, or cash flows upon adoption.

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2.	PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of March 31, 2010 and December 31, 2009:

	March 31, 2010		December 31, 2009

Furniture and fixtures	$	38,480	$	36,740
Lab equipment		237,341		228,052
Computers and equipment		77,999		67,791
Income property		309,750		309,750
Construction in progress		5,750,029		5,523,620
Capitalized interest		546,423		507,587
Vehicles		44,175		44,175
Slag conveyance equipment		44,375		44,375
Demo module building		6,630,063		6,625,603
Site improvements		1,252,141		1,241,468
Site equipment		220,747		215,341

		15,151,523		14,844,502
Less accumulated depreciation		1,071,068		849,568

	$	14,080,455	$	13,994,934

Depreciation expense was $221,500 and $181,959 for the three months ended March 31, 2010 and 2009, respectively.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3.	CLARKDALE SLAG PROJECT

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

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

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

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

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3.	CLARKDALE SLAG PROJECT (continued)

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

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 TI the Company continues to have an obligation to pay NMC a royalty consisting of 2.5% of the net smelter returns on any and all proceeds of production from the Clarkdale Slag Project.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3.	CLARKDALE SLAG PROJECT (continued)

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

Purchase price:
Cash payments	$	10,100,000
Joint venture option acquired in 2005 for cash		690,000
Warrants issued for joint venture option		1,918,481
Common stock issued		66,879,375
Monthly payments, current portion		167,827
Monthly payments, net of current portion		2,333,360
Acquisition costs		127,000

Total purchase price		82,216,043

Net deferred income tax liability assumed – Clarkdale Slag Project		48,076,734

Total	$	130,292,777

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

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

Total	$	130,292,777

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4.	MINERAL PROPERTIES - MINING CLAIMS

As of March 31, 2010, mining claims consisted of 3,200 acres located near Searchlight, Nevada. The 3,200 acre property is staked as twenty 160 acre claims, most of which are also double-staked as 142 twenty acre claims. At March 31, 2010, the mineral properties balance was $16,947,419.

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

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

On August 26, 2005, the Company paid $180,500 to the Bureau of Land Management (“BLM”) as a bond for future reclamation work in Searchlight, Nevada. As of March 31, 2010, the recovery of the reclamation bond is uncertain; therefore, the Company has established a full allowance against the reclamation bond with the offsetting expense to project exploration costs.

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

The Company reviews and evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the related carrying amount may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. As of March 31, 2010, exploration progress is on target with the Company’s exploration and evaluation plan, and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules ASC 930-360-35 and 360-10-15-3 through 15-5.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at March 31, 2010 and December 31, 2009 consisted of the following:

	March 31, 2010		December 31, 2009

Trade accounts payable	$	188,435	$	414,279
Accrued property taxes		15,815		—
Accrued compensation and related taxes		44,737		29,463
	$	248,987	$	443,742

Prior to the Company’s corporate restructuring in 2005, the Company had several accounts payable (the “Phage Payables”) included in trade accounts payable, dating back to 2003 and prior. All of these Phage Payables were incurred in the United Kingdom (“UK”). These expenses were related to business operations which were discontinued in February 2005. In the first quarter of 2010, the Company updated its internal review of the status of the Phage Payables and recorded a $120,688 gain from discontinued operations resulting from relief of liabilities that were cleared based on expiration of UK statutes of limitations. The Phage Payables are further discussed in Note 17.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6.	CAPITAL LEASE PAYABLE

The Company leases equipment under a capital lease. The capital lease payable consisted of the following at March 31, 2010 and December 31, 2009,

Lender	Collateral	Monthly Payment		Interest Rate			Maturity	March 31, 2010			December 31, 2009
Caterpillar Financial Services
Corporation	Equipment	$	2,200		4.45	%	Jul-11	$	34,117		$	40,292

									34,117			40,292
Capital lease payable, current portion									(25,397	)		(25,117	)

Capital lease payable, net of current portion								$	8,720		$	15,175

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

2011	$	26,401
2012		8,801
Thereafter		—

Total future minimum lease payments		35,202
Imputed interest		(1,085	)

Present value of future minimum lease payments	$	34,117

The following assets acquired under the capital lease and the related amortization were included in property, plant and equipment at March 31, 2010 and December 31, 2009,

	March 31, 2010			December 31, 2009

Site equipment	$	116,239		$	116,239
Accumulated amortization		(82,336	)		(75,071	)

	$	33,903		$	41,168

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7.	VRIC PAYABLE – RELATED PARTY

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

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

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

2011	$	215,167
2012		233,026
2013		252,367
2014		273,313
2015		295,999
Thereafter		637,738

		1,907,610
VRIC payable, current portion		215,167

VRIC payable, net of current portion	$	1,692,443

The acquisition agreement also contains payment terms which are based on the Project Funding Date as defined in the agreement. The terms of and conditions of these payments are discussed in more detail in Notes 3 and 13.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8.	STOCKHOLDERS’ EQUITY

During the three months ended March 31, 2010 the Company’s stockholders’ equity activity consisted of the following:

On March 31, 2010, the Company awarded and issued 7,500 shares each to two non officer directors pursuant to its directors’ compensation policy. The share award was priced at $1.20 per share and has been recorded as directors’ compensation expense of $18,000 and as common stock and additional paid-in capital.

9.	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 approved by the Company’s stockholders on December 15, 2009.

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

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

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.	STOCK OPTION PLAN AND WARRANTS (continued)

During the three months ended March 31, 2010, the Company granted stock options as follows:

On March 31, 2010, the Company granted nonqualified stock options under the 2009 Directors Plan for the purchase of 15,000 and 5,000 shares of common stock at $1.20 per share. The options were granted to the Company’s two independent directors for directors’ compensation, are fully vested and expire on March 31, 2015.

On March 1, 2010, the Company granted nonqualified stock options under the 2009 Directors Plan for the purchase of 200,000 shares of common stock at $1.59 per share. The options were granted to an independent director upon his appointment to the Board of Directors. The options vest pro rata over four years, from March 1, 2011 through March 1, 2014. The options expire on the five year anniversary of the date that they vest.

Expenses for the three months ended March 31, 2010 and 2009 related to vesting and granting of stock options were $28,118 and $27,159, respectively and are included in general and administrative expense.

Stock options – During the three months ended March 31, 2010, the Company granted stock options to directors totaling 220,000, with a weighted average exercise price of $1.55 per share. As of March 31, 2010 stock options outstanding totaled 2,900,633 with a weighted average price of $1.23 per share.

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2010:

	Number of Shares		Weighted Average Exercise Price
Balance, December 31, 2009		2,680,633	$	1.20
Options granted and assumed		220,000		1.55
Options expired		—		—
Options cancelled, forfeited		—		—
Options exercised		—		—

Balance, March 31, 2010		2,900,633	$	1.23

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

	2010

Dividend yield	—
Expected volatility	105.85%
Risk-free interest rate	3.04% to 3.28%
Expected life (years)	4.25 to 4.94

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.	STOCK OPTION PLAN AND WARRANTS (continued)

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

For stock options awarded during 2010, the expected volatility is based on the historical volatility levels on our common stock. The risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues over equivalent lives of the options.

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

The following table summarizes the changes of the Company’s stock options subject to vesting for the three months ended March 31, 2010:

	Number of Shares Subject to Vesting		Weighted Average Grant Date Fair Value
Unvested, December 31, 2009		150,000	$	0.84
Options granted		200,000		1.17
Options vested		—		—
Options cancelled		—		—

Unvested, March 31, 2010		350,000	$	1.03

As of March 31, 2010, there was $283,505 total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized as follows:

2010	$	104,014
2011		98,636
2012		55,166
2013		22,575
2014		3,114

Total	$	283,505

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes information about options granted during the three months ended March 31, 2010:

Number of Options Granted During 2010		Exercise Price Equals, Exceeds or is Less than Mkt. Price of Stock on Grant Date	Weighted Average Exercise Price		Range of Exercise Price		Weighted Average Grant Date Fair Value
	220,000	Equals	$	1.55	$	1.20 to $1.59	$	1.10
	—	Exceeds	$	—	$	— to $ —	$	—
	—	Less Than	$	—	$	— to $ —	$	—

	220,000	Equals	$	1.55	$	1.20 to $1.59	$	1.10

Stock options/warrants – During the three months ended March 31, 2010 the Company did not grant any stock warrants.

During the three months ended March 31, 2010, the Company issued stock options for 220,000 shares of common stock to directors with a range of exercise prices of $1.20 to $1.59 per share.

The following table summarizes information about options/warrants granted during the three months ended March 31, 2010:

	Number of Shares		Weighted Average Exercise Price
Balance, December 31, 2009		28,064,283	$	1.16
Options/warrants granted and assumed		220,000		1.55
Options/warrants expired		—		—
Options/warrants cancelled, forfeited		—		—
Options/warrants exercised		—		—

Balance, March 31, 2010		28,284,283	$	1.16

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10.	STOCKHOLDER RIGHTS PLAN

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

11.	PROPERTY RENTAL AGREEMENTS AND LEASES

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

Clarkdale Arizona Central Railroad – Rental

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

Commercial Building – Rental

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

Land Lease – Wastewater Effluent

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

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12.	INCOME TAXES

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

The income tax benefit consisted of the following at March 31, 2010 and 2009:

	March 31, 2010			March 31, 2009

Income tax benefit at statutory rates	$	(650,390	)	$	(606,916	)
Non-deductible and other		(45,171	)		1,002
Change in valuation allowance		10,685			24,821

Income tax benefit	$	(684,876	)	$	(581,093	)

Significant components of the Company’s net deferred income tax assets and liabilities at March 31, 2010 and December 31, 2009 were as follows:

	March 31, 2010			December 31, 2009
Deferred income tax assets

Net operating loss carryforward	$	7,810,584		$	7,169,190
Option compensation		422,743			412,058
Reclamation bond		68,590			68,590
Property, plant & equipment		207,887			164,405

Gross deferred income tax asset		8,509,804			7,814,243
Valuation allowance		(491,333	)		(480,648	)

		8,018,471			7,333,595
Deferred income tax liabilities

Property, plant & equipment		—			—
Acquisition related liabilities		55,197,465			55,197,465

Net deferred income tax liability	$	47,178,994		$	47,863,870

A valuation allowance for deferred tax related to option compensation and the reclamation bond was established for net deferred tax assets not allocated to offset acquisition related deferred tax liabilities due to the uncertainty of realizing these deferred tax assets based on conditions existing at March 31, 2010 and December 31, 2009.

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12.	INCOME TAXES (continued)

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

The Company had cumulative net operating losses of approximately $20,554,170 and $18,866,291 as of March 31, 2010 and December 31, 2009, respectively for federal income tax purposes. The federal net operating loss carryforwards will be expiring between 2025 and 2030.

State Income Tax Allocation

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

For the three month periods ended March 31, 2010 and 2009, the state income tax benefit which is included in the total tax benefit was $90,101 and $81,414, respectively.

The Company had cumulative net operating losses of approximately $11,423,466 and $10,148,277 as of March 31, 2010 and December 31, 2009, respectively for Arizona state income tax purposes. The Arizona state net operating loss carryforwards will be expiring between 2013 and 2015.

Tax Returns Subject to Examination

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

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

13.	COMMITMENTS AND CONTINGENCIES

Lease obligations – The Company rents office space in Henderson, Nevada. The lease terms expired in November 2006, and the Company continues to rent the existing space under month-to-month terms. Monthly rent was decreased from $4,900 per month to $4,000 per month beginning in August 2009 due to less office space leased. In February 2010 the monthly rent was increased to $4,255.

Rent expense resulting from this operating lease agreement was $12,510 and $14,700 for each of the three months ended March 31, 2010 and 2009, respectively.

Employment contracts – Ian R. McNeil. The Company entered into an employment agreement with Ian R. McNeil, its President and Chief Executive Officer, effective January 1, 2006 and as amended February 16, 2007. Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. McNeil an annual salary of $190,000. On December 30, 2005, Mr. McNeil received a one time bonus of $36,000 on execution of the agreement. In addition to his annual salary, Mr. McNeil may be granted a discretionary bonus and stock options, to the extent authorized by the Board of Directors. The term of the agreement is for an indefinite period, unless otherwise terminated by either party pursuant to the terms of the agreement. In the event that the agreement is terminated by the Company, other than for cause, the Company will provide Mr. McNeil with six months written notice or payment equal to six months of his monthly salary.

Carl S. Ager. The Company entered into an employment agreement with Carl S. Ager, its Vice President, Secretary and Treasurer, effective January 1, 2006 and as amended February 16, 2007. Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. Ager an annual salary of $160,000. On December 30, 2005, Mr. Ager received a one time bonus of $26,666 on execution of the agreement. In addition to his annual salary, Mr. Ager may be granted a discretionary bonus and stock options, to the extent authorized by the Board of Directors. The term of the agreement is for an indefinite period, unless otherwise terminated by either party pursuant to the terms of the agreement. In the event that the agreement is terminated by the Company, other than for cause, the Company will provide Mr. Ager with six months written notice or payment equal to six months of his monthly salary.

Melvin L. Williams. The Company entered into an employment agreement with Melvin L. Williams, its Chief Financial Officer, effective June 14, 2006 and as amended February 16, 2007. Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. Williams an annualized salary of $130,000 based on an increase in time commitment from 300-600 hours worked to 600-800 hours worked. On June 14, 2006, the Company issued 50,000 restricted shares of its common stock, as a one time bonus, and granted options to purchase 100,000 shares of its common stock at an exercise price of $2.06 per share, exercisable for a period of five years until June 14, 2011. The options vested 50% on each of the first and second anniversaries of the execution of the agreement. The price of the shares issued and the exercise price of the options granted were valued based on the closing price of the common stock on the OTCBB on June 14, 2006. In the event the employment agreement is terminated by the Company without cause, the Company agreed to pay Mr. Williams an amount equal to three months’ salary in a lump sum as full and final payment of all amounts payable under the agreement.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

13.	COMMITMENTS AND CONTINGENCIES (continued)

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

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 years from the Agreement Date or until such time that the Project Royalty shall exceed $500,000 in any calendar year, at which time the Advance Royalty requirement shall end forever.

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

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

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

The Company estimates the initial cost of construction of the Road to cost approximately $3,500,000 and the cost of additional enhancements to be approximately $1,200,000 which will be required to be funded by the Company. Based on the uncertainty of the contingencies, this cost is not included in the Company’s current operating plans. Funding for construction of the Road will require obtaining project financing or other significant financing. At March 31, 2010 and through the date the consolidated financial statements were issued, these contingencies had not changed.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

14.	CONCENTRATION OF CREDIT RISK

The Company maintains its cash accounts in two financial institutions. Cash accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per financial institution. The Company has never experienced a material loss or lack of access to its cash accounts; however, no assurance can be provided that access to the Company’s cash accounts will not be impacted by adverse conditions in the financial markets. At March 31, 2010, the Company had deposits in excess of FDIC insured limits in the amount of $10,501,775.

15.	CONCENTRATION OF ACTIVITY

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

For the three months ended March 31, 2009, the Company purchased services from two major vendors, Baker Hostetler and Cimetta Engineering, which exceeded more than 10% of total purchases and amounted to approximately $257,519 and $296,754, respectively.

16.	RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2010, the Company utilized the services of NMC to provide technical assistance and financing related activities. These services related primarily to the Clarkdale Slag Project and the Searchlight Claims Project. Mr. McNeil and Mr. Ager are affiliated with NMC.

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

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

During the three months ended March 31, 2010, the Company utilized Cupit, Milligan, Ogden & Williams, CPAs (CMOW) to provide accounting support services. Mr. Williams is affiliated with CMOW.

The Company incurred total fees to CMOW of $37,119 for the three months ended March 31, 2010. Fees for services provided by CMOW do not include any charges for Mr. Williams’ time. Mr. Williams is compensated for his time under his salary agreement. The direct benefit to Mr. Williams was $15,590 of the above CMOW fees and expenses for the three months ended March 31, 2010. The Company had an outstanding balance due to CMOW of $37,119 as of March 31, 2010.

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

17.	GAIN FROM DISCONTINUED OPERATIONS

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

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

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

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

Executive Overview

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

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

We have completed the main construction of the first production module for the Clarkdale Slag Project. Since the start of 2009, we have been executing our business plan which includes the start-up and operation of the production module in an effort to achieve consistent levels of gold, silver, copper and zinc extraction that would support the economic feasibility of a commercial production facility. During this period, the primary emphasis has been placed on the crushing and grinding circuit as well as the leaching and extraction of gold, silver, copper and zinc. We have completed continuous runs of up to 16 hours through the crushing and grinding circuit. To date, our internal laboratory testing has reflected consistent levels of extractable precious and base metals in pregnant leach solutions from the Clarkdale slag material. Management believes that extraction results from preliminary internal laboratory testing have been consistent with the results of earlier assay testing conducted by our independent consultants. We believe that we can improve extraction rates further by optimizing the grind, the chemical characteristics of the leach solutions and the amount of residence time required for maximum grind and leach efficiency.

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

Because of challenges with operating certain equipment on a continuous basis we made a strategic decision to pursue a “dual-path” approach to the accomplishment of our technical and gold production objectives at the Clarkdale Slag Project. Our short-term goal is now to run the production module in a “proof of concept” operational mode, so that it may begin producing precious and base metals, while the medium-term objective is to run the production module continuously and complete a feasibility study on the project. In the first quarter of 2010, we scaled-up from laboratory and pilot plant leaching to the operation of the production module leaching circuit. During this time, we continued to adjust the chemical characteristics of the leach solution in an effort to maximize gold extraction from the slag material and as a consequence, we also began to leach more iron into solution. This additional iron in solution needs to be removed in order for the effective extraction of gold, silver, copper and zinc from the leach solution. Our technical team and consultants have reviewed this issue and have advised us that iron in solution is a common metallurgical concern in the mining industry and they believe that it is readily solvable with the insertion of an “iron circuit” which would remove the iron from the leach solution. Equipment for this iron circuit has been ordered. However, the continuous operation of the production module may be delayed while it is being shipped, installed and tested. To achieve our near-term operational objectives, we believe the production module should commence producing precious and base metals following the installation and commissioning of the iron circuit.

Since the third quarter of 2009, we have been engaged with a team of independent engineers, with extensive experience in start-up and mining operations. These engineers are working closely with the project’s internal scientific and operating team to expedite the achievement of our strategic objectives. With their assistance, we have made progress in resolving some of our operational issues of the production module. In order to achieve our short-term goal of “proof of concept” and our medium-term goal of continuous production, we are focused on resolving the remaining equipment wear issues in the crushing and grinding circuit, addressing the iron in solution issue and improving the leach circuit with the grind/leach combination to optimize metal extraction.

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

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

We have budgeted $6,100,000 for our work program on the Clarkdale Slag Project over the next twelve months, which includes the operation of the production module and performing the feasibility study. A decision on allocating approximately $6,000,000 of additional funds for the Phase II expansion and $4,700,000 to complete the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona will be made once the first production module is operational and its results are analyzed.

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

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

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

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

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

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

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

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

Anticipated Cash Requirements

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program and our continued operations will be approximately $9,700,000. As of April 30, 2010, we had cash reserves in the amount of approximately $10,200,000. We believe our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration, testing and construction programs for the next 12 months. However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration, testing and construction plans for the next 12 months. We do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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	1,500,000
	Feasibility Study and Expansion Preparation	800,000
	Purchase Payments – VRIC	360,000

	SUBTOTAL	$6,100,000

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

	SUBTOTAL	$500,000

	TOTAL	$9,700,000

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

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

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

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

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

Critical Accounting Policies

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

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

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

Exploration costs – Mineral exploration costs are expensed as incurred.

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

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

Impairment of long-lived assets – We review and evaluate long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. As of March 31, 2010 exploration progress is on target with our exploration and evaluation plan and no events or circumstances have happened to indicate that the related carrying values of the properties may not be recoverable. When we determine that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and ASC 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

Results of Operations

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

	Three Months Ended March 31,
	2010			2009			Percent Increase/ (Decrease)
Revenue	$	-		$	-			n/a
Operating Expenses		(1,837,981	)		(1,572,226	)		16.9	%
Other Income		5,740			11,078			(48.2	)%
Income tax benefit		684,876			581,093			17.9	%
Gain from discontinued operations		120,688			--			100.0	%
Net Loss	$	(1,026,677	)	$	(980,055	)		4.8	%

Revenue

We are currently in the exploration stage of our business, and have not earned any revenues from our planned mineral operations to date. We did not generate any revenues from inception in 2000 through the three month period ended March 31, 2010. We do not anticipate earning revenues from our planned mineral operations until such time as we enter into commercial production of the Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties we may acquire from time to time, and of which there are no assurances.

Operating Expenses

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

	Three Months Ended March 31,
	2010		2009		Percent Increase/ (Decrease)
Mineral exploration and evaluation expenses	$	716,876	$	312,334		129.5	%
Mineral exploration and evaluation expenses – related party		117,857		90,000		31.0	%
Administrative – Clarkdale site		99,515		232,688		(57.2	) %
General and administrative		645,114		733,043		(12.0	) %
General and administrative – related party		37,119		22,202		67.2	%
Depreciation		221,500		181,959		21.7	%
Total Operating Expenses	$	1,837,981	$	1,572,226		16.9	%

Operating expenses increased by 16.9% to $1,837,981 during the three month period ended March 31, 2010 from $1,572,226 during the three month period ended March 31, 2009. Operating expense increased primarily as a result of increases in mineral exploration and evaluation expenses at our Clarkdale project.

Mineral exploration and evaluation expenses increased to $716,876 during the three month period ended March 31, 2010 from $312,334 during the three month period ended March 31, 2009. Mineral exploration and evaluation expenses increased primarily as a result of greater use of independent consultants and engineers related to pre-production activity on the Clarkdale project.

Included in mineral exploration and evaluation expenses were the amounts of $117,857 and $90,000 paid in the three month period ended March 31, 2010 and 2009, respectively, to Nanominerals Corp. (one of our principal stockholders and an affiliate of Ian R. McNeil, our Chief Executive Officer and President and a director, and Carl S. Ager, our Vice President, Secretary and Treasurer and a director) for technical assistance, including providing us with the use of its laboratory, instrumentation, milling equipment and research facilities with respect to our Searchlight Gold Project and Clarkdale Slag Project and financing related activities, including providing assistance to us when potential financiers performed technical due diligence on our projects and made technical presentations to potential investors in connection with the exploration, testing and construction of our mineral projects, and reimbursement of expenses provided by Nanominerals in connection with the exploration, testing and construction of our mineral projects.

Administrative – Clarkdale site expenses decreased to $99,515 during the three month period ended March 31, 2010 from $232,688 for the three month period ended March 31, 2009. Administrative costs at the Clarkdale site decreased due to a change in focus from administrative activities to project operation and pre-production activities.

General and administrative expenses decreased by 12.0% to $645,114 during the three month period ended March 31, 2010 from $733,043 during the three month period ended March 31, 2009. General and administrative expenses decreased primarily as a result of increased professional administrative expense in the prior comparable period due to the preparation of our registration statement on From S-1 and preparation of amended periodic reports for the periods from March 31, 2005 through December 31, 2008. This decrease was partially offset by increased director compensation due to expansion of our board of directors. We anticipate that operating expenses will increase as we grow our business operations.

Included in general and administrative expenses for the three month periods ended March 31, 2010 and 2009 were compensation expenses related to the option vesting and option grants of $28,118 and $27,159, respectively. On October 15, 2009, the Board of Directors adopted the 2009 Stock Incentive Award Plan for Employees and Service Providers (the “2009 Incentive Plan”). Under the terms of the 2009 Incentive Plan, options to purchase up to 3,250,000 shares of our common stock may be granted to eligible Participants. On December 15, 2009, our stockholders approved the 2009 Incentive Plan. As of March 31, 2010, no options have been granted under the 2009 Incentive Plan. On October 15, 2009, we adopted the 2009 Stock Incentive Plan for Directors (the “2009 Directors Plan”). Under the terms of the 2009 Directors Plan, options to purchase up to 750,000 shares of our common stock may be granted to directors under such plan. On December 15, 2009, our stockholders approved the 2009 Directors Plan. As of March 31, 2010, 231,250 options have been granted under the 2009 Directors Plan with an exercise price ranging from $1.20 to $1.60 per share.

In addition, we incurred $37,119 and $22,202 during the three month periods ended March 31, 2010 and 2009, respectively, for general and administrative expenses for accounting support services to Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our Chief Financial Officer. These expenses increased as a result of accounting for increased transactional volume related to the additional activity on the Clarkdale Slag Project and increased equity transactions related to our private placements in the fourth quarter of 2009 and to additional equity compensation arising from expansion of our board of directors in the first quarter of 2010. These accounting support services included bookkeeping input for the Clarkdale facility, assistance in preparing working papers for quarterly and annual reporting, and preparation of federal and state tax filings. These expenses do not include any fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation has been provided in the form of salary. The direct benefit to Mr. Williams was $15,590 and $9,768 of the above Cupit, Milligan, Ogden & Williams fees for the three month periods ended March 31, 2010 and 2009, respectively.

Depreciation expense increased to $221,500 during the three month period ended March 31, 2010 from $181,959 during the three month period ended March 31, 2009. Depreciation expense increased as a result of bringing additional construction in progress items into service and acquiring additional equipment.

For the three month period ended March 31, 2010, we purchased services from two major vendors, Baker Hostetler LLP, our legal counsel, and Nanominerals Corp which exceeded more than 10% of total purchases and amounted to approximately $225,000 and $117,857, respectively. For the three month period ended March 31, 2009, we purchased services from two major vendors, Baker Hostetler LLP and Cimetta Engineering, which exceeded more than 10% of total purchases and amounted to approximately $257,519 and $296,754, respectively.

Other Income and Expenses

Total other income decreased to $5,740 during the three month period ended March 31, 2010 from $11,078 during the three month period ended March 31, 2009. The decrease in total other income primarily resulted from a decrease in interest and dividend income. The decrease in interest and dividend income earned was attributable to lower interest rates and to lower cash reserves earning interest.

During the three month period ended March 31, 2010, we received incidental rental revenue of $6,480 compared to $7,540 for the same period in 2009 from rentals of our commercial buildings and certain facilities acquired in connection with our acquisition of Transylvania. The property leases consist of: (i) a rental agreement with Clarkdale Arizona Central Railroad for the use of certain facilities at a rate of $1,700 per month; and (ii) rental of commercial building space to various tenants. Rental arrangements are minor in amount and are typically on a month to month basis.

Income Tax Benefit

Income tax benefit increased to $684,876 for the three month period ended March 31, 2010 from $581,093 during the three month period ended March 31, 2009. The increase in income tax benefit primarily resulted from the increase in exploration stage losses during the three month period ended March 31, 2010 from the three month period ended March 31, 2009.

Gain from Discontinued Operations

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

Net Loss

The aforementioned factors resulted in a net loss of $1,026,677, or $0.01 per common share, for the three month period ended March 31, 2010, as compared to a net loss of $980,055, or $0.01 per common share, for the three month period ended March 31, 2009.

As of March 31, 2010 and December 31, 2009, we had cumulative net operating loss carryforwards of approximately $20,554,170 and $18,866,291, respectively for federal income taxes. The federal net operating loss carryforwards expire between 2025 and 2030.

We had cumulative state net operating losses of approximately $11,423,466 and $10,148,277 as of March 31, 2010 and December 31, 2009, respectively for state income tax purposes. The state net operating loss carryforwards expire between 2013 and 2015.

Liquidity and Capital Resources

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

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

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

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

Working Capital

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

	At March 31, 2010			At December 31, 2009			Percent Increase/(Decrease)
Current Assets	$	11,098,383		$	13,221,823			(16.1	) %
Current Liabilities		(566,491	)		(874,470	)		(35.2	) %
Working Capital	$	10,531,892		$	12,347,353			(14.7	) %

As of March 31, 2010, we had an accumulated deficit of $18,518,583. As of March 31, 2010, we had working capital of $10,531,892, compared to working capital of $12,347,353 as of December 31, 2009. The decrease in our working capital was primarily attributable to our net loss and capital expenditures. Working capital was increased during the fourth quarter of 2009 by the receipt of gross proceeds of $15,098,245 from our November 2009 private placement. Cash was $10,893,483 as of March 31, 2010, as compared to $13,099,562 as of December 31, 2009. Net property and equipment increased to $14,080,455 as of March 31, 2010 from $13,994,934 as of December 31, 2009. The increase primarily resulted from site improvements and equipment acquisitions at the Clarkdale Slag Project partially offset by depreciation expense.

Included in long term liabilities in the accompanying consolidated financials statements is a balance of $47,178,994 for deferred tax liability relating to the Clarkdale Slag Project and Searchlight Gold Project. A deferred income tax liability was recorded on the excess of fair market value for the asset acquired over income tax basis at a combined statutory federal and state rate of 38% with the corresponding increase in the purchase price allocation of the assets acquired.

Cash Flows

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

	Three Months Ended March 31,
	2010			2009			Percent Increase/(Decrease)
Cash Flows Used in Operating Activities	$	(1,841,719	)	$	(1,548,896	)		18.9	%
Cash Flows Used in Investing Activities		(307,021	)		(846,611	)		(63.7	)%
Cash Flows (Used) Provided by Financing Activities		(57,339	)		71,851			(179.8	)%
Net Change in Cash During Period	$	(2,206,079	)	$	(2,323,656	)		(5.1	)%

Net Cash Used in Operating Activities. Net cash used in operating activities increased to $1,841,719 during the three month period ended March 31, 2010 from $1,548,896 during the three month period ended March 31, 2009. The increase in cash used in operating activities was primarily due to operating losses from our exploration and evaluation activity and general and administrative expenses, offset by non-cash elements which were primarily related to depreciation expense of $221,500.

Net Cash Used in Investing Activities. We used $307,021 in investing activities during the three month period ended March 31, 2010, as compared to $846,611 during the three month period ended March 31, 2009. The decrease was primarily a result of decrease in purchases of property and equipment relating to the Clarkdale Slag Project after receiving the Certificate of Occupancy for the demonstration module building and our substantial completion of equipment acquisitions for the demonstration module.

Net Cash (Used) Provided by Financing Activities. Net cash used by financing activities was $57,339 for the three month period ended March 31, 2010 compared to net cash provided by financing activities of $71,851 for the three month period ended March 31, 2009. Net cash used by financing activities during the three month period ended March 31, 2010 primarily resulted from principal payments on the capital lease and the deferred purchase liability. Net cash provided by financing activities during the three month period ended March 31, 2009 primarily resulted from the receipt of $125,000 from the exercise of warrants offset by principal payments on the capital lease and the deferred purchase liability.

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

·	our ability to locate a profitable mineral property;

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

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

·	our ability to generate revenues.

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

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the exploration of the Searchlight Gold Project. Over the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed exploration, testing and construction program and our continued operations will be approximately $9,700,000. As of March 31, 2010, we had cash reserves in the amount of approximately $10,893,483. On November 12, 2009, we completed a private placement of 12,078,596 units of our securities at a purchase price of $1.25 per unit, resulting in aggregate gross proceeds to us of $15,098,245. Based on the net proceeds received by us from the private placement, we estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration, testing and construction programs for the 2010 fiscal year. However, if actual costs are greater than we have anticipated, we will require additional financing in order to fund our exploration, testing and construction plans for 2010. We do not currently have any financing arrangements in place for such additional financing, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

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

Effective July 1, 2009, the FASB Accounting Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single source for authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. Th e 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 th e ASC as the sole source of authoritative literature.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We had unrestricted cash totaling $10,893,483 at March 31, 2010 and $13,099,562 at December 31, 2009. Our cash is held primarily in non-interest bearing checking accounts and a money market account and is not materially affected by fluctuations in interest rates. The unrestricted cash is held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these cash holdings, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future investment income.

Item 4. Controls and Procedures

Controls and Procedures

As of March 31, 2010, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2010, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2010 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

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

Item 1A. Risk Factors

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

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

On March 1, 2010, we issued options to purchase up to 200,000 shares of common stock to an independent director upon his appointment to the Board. The options have an exercise price of $1.59 per share, vest pro rata over four years, from March 1, 2011 through March 1, 2014, and expire on the five year anniversary of the vesting date. These securities were issued pursuant to Section 4(2) of the Securities Act.

On March 31, 2010, we issued 15,000 shares of our common stock to two non-management directors, pursuant to the director compensation policy for these two non-management directors. The 15,000 shares were issued based on a price of $1.20 per share, the closing price of our common stock on March 31, 2010, the last trading day of the first quarter of 2010. These securities were issued pursuant to Section 4(2) of the Securities Act.

On March 31, 2010, we issued options to purchase up to 20,000 shares of our common stock to two non-management directors, pursuant to the director compensation policy for these two non-management directors. The 20,000 options were issued at an exercise price of $1.20 per share, the closing price of our common stock on March 31, 2010, the last trading day of the first quarter of 2010. These securities were issued pursuant to Section 4(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

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

No matters were submitted to our stockholders, through the solicitation of proxies or otherwise, during the quarter ended March 31, 2010.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

EXHIBIT TABLE

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

Reference Number	Item

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

SIGNATURES

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

	SEARCHLIGHT MINERALS CORP. a Nevada corporation

Date: May 7, 2010	By:	/s/ Ian R. McNeil
		Ian R. McNeil
		President and Chief Executive Officer (Principal Executive Officer)

Date: May 7, 2010	By:	/s/ Melvin L. Williams
		Melvin L. Williams
		Chief Financial Officer (Principal Accounting Officer)

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Searchlight Minerals (SRCH) Inactive 10-Q2010 Q1 Quarterly report

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