UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 3

Form 10-K

FORM 10-K/A

(Mark One)

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

For the fiscal year ended December 31, 2008.

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

For the transition period from to

Commission File Number 000-30995

SEARCHLIGHT MINERALS CORP.

(Name of registrant as specified in its charter)

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

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

(702) 939-5247

Registrant’s telephone number, including area code

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

Large accelerated filer ¨	Accelerated filer x

Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2008 (75,279,081 shares) was approximately $156,580,200 (computed based on the closing sale price of the common stock at $2.08 per share as of such date). Shares of common stock held by each officer and director and each person owning more than ten percent of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of the affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of common stock of the issuer outstanding as of November 30, 2009 was 118,757,123.

EXPLANATORY NOTE

This Amendment No. 3 on Form 10-K/A (the “Amendment”) amends our Annual Report on Form 10-K for the year ended December 31, 2008, originally filed with the Securities and Exchange Commission (“SEC”) on March 16, 2009, and as amended by that Amendment No. 1 on Form 10-K/A filed with the SEC on July 24, 2009 and by that Amendment No. 2 on Form 10-K/A filed with the SEC on September 11, 2009 and October 1, 2009 (as amended, the “2008 10-K”). We are filing this amendment primarily in response to a comment letter received from the SEC dated August 7, 2009.

Item 15 of Part IV of this Amendment has been amended to contain the currently-dated certifications from our principal executive officer and principal financial officer, as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002 and Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We also have filed, as exhibits to this Amendment, the consents of Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter and Kyle L. Tingle CPA, LLC, with respect to the Company’s financial statements filed herewith.

Other than the amending of the foregoing matters and responding to the staff’s comments, no other modifications or updates have been made to the 2008 10-K. Information not affected by items described above remains unchanged and reflects the disclosures made at the time of, and as of the dates described in, the 2008 10-K. This Amendment does not describe events occurring after the 2008 10-K (including with respect to exhibits, except as noted otherwise above), or modify or update disclosures (including forward-looking statements) which may have been affected by events or changes in facts occurring after the date of the 2008 10-K. Accordingly, this Amendment should be read in its historical context and in conjunction with our filings made with the SEC subsequent to the filing of the 2008 10-K, as information in such filings may update or supersede certain information contained in this Amendment.

TABLE OF CONTENTS

		PAGE

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	43
Item 1B.	Unresolved Staff Comments	67
Item 2.	Properties	68
Item 3.	Legal Proceedings	69
Item 4.	Submission of Matters to a Vote of Security Holders	69
PART II		70
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	70
Item 6.	Selected Financial Data	72
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	73
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	97
Item 8.	Financial Statements and Supplementary Data	97
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	98
Item 9A.	Controls and Procedures	98
Item 9B.	Other Information	102
PART III		103
Item 10.	Directors, Executive Officers and Corporate Governance	103
Item 11.	Executive Compensation	114
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	127
Item 13.	Certain Relationships and Related Transactions, and Director Independence	129
Item 14.	Principal Accountant Fees and Services	139
PART IV		140
Item 15.	Exhibits and Financial Statement Schedules	140

PART I

Item 1. Business

General

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

the Clarkdale Slag Project, located in Clarkdale, Arizona, which is a reclamation project to recover precious and base metals from the reprocessing of slag produced from the smelting of copper ore mined at the United Verde Copper Mine in Jerome, Arizona; and

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

Clarkdale Slag Project. The Clarkdale Slag Project, located in Clarkdale, Arizona, is a reclamation project to recover precious and base metals from the reprocessing of slag produced from the smelting of copper ore mined at the United Verde Copper Mine in Jerome, Arizona. Metallurgical testing and project construction on the Clarkdale Slag Project have been ongoing since 2005, initially under the direction of the prior owners, thereafter with our participation in a joint venture with the prior owners in 2005, and currently solely by us since we acquired 100% of the Clarkdale Slag Project in 2007.

Since our acquisition of 100% of the Clarkdale Slag Project in 2007, we have devoted considerable effort to the designing and engineering of our first production module, which included finalizing the production flow sheet, sourcing and purchasing equipment as well as refurbishing the module building and constructing the electrowinning building. The module and electrowinning buildings house the first production module, which has been designed to allow for the grinding, leaching, filtering and extraction of precious and base metals from the slag material and is expected to process between 100 and 250 tons of slag material per day. During 2008, we completed the refurbishing and construction of the module and electrowinning buildings, respectively, and we installed all the necessary equipment in the two buildings for the operation of the first production module. During 2009, we have been executing our plan of operation on the Clarkdale Slag Project, which includes the start-up and operation of the first production module, in an effort to achieve consistent levels of gold and silver extraction that would support the economic feasibility of a commercial production facility.

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

The former Searchlight Claim owners had previously obtained a BLM approved Plan of Operations, which included permission to drill eighteen holes on the 3,200 acre project area and to mine a 36-acre pit on our RR304 claim. We had anticipated conducting our early stage exploratory work on the Searchlight Claims property by utilizing the Plan of Operations issued to the former Searchlight Claim owners, until such time as we would obtain a permit for exploration and development in our own name or the former Searchlight Claim holder’s permit was transferred to us.

Although the Plan of Operations was accepted and registered in the name of a former Searchlight Claim owner, which is an affiliate of K. Ian Matheson, one of our principal stockholders and a former officer and director, in September 2007, we learned that the BLM had issued an order (the “BLM Order”) for “Immediate Suspension of All Activities” notice on May 12, 2006 against Mr. Matheson and certain of his affiliates with respect to a dispute with the BLM on a project unrelated to the Searchlight Gold Project. The issuance of the BLM Order restricted our ability to rely upon the Plan of Operations to conduct our early stage exploratory work on the Searchlight Claims property until such time that we may obtain our own Plan of Operations. The BLM Order effectively covered all projects tied to Mr. Matheson.

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

After a series of correspondence between us and the BLM, we received a letter from the BLM advising us that a new Plan of Operations would be required based on two issues relating to the Desert Tortoise (Gopherus asassizii), a Federally listed Threatened Species: (i) the proximity of the project area to a nearby “Areas of Critical Environmental Concern” (ACEC); and (ii) the future likelihood of tortoises being present on the land within the project area which is involved in the application. We have submitted a new Plan of Operations to the BLM, taking into account the Desert Tortoise issue. In our Plan of Operations, we have requested permission to drill eighteen drill holes on the project area.

We conformed the new Plan of Operations with the previously approved Environmental Assessment and, after a further series of correspondence between us and the BLM, on October 13, 2009, we received a letter from the BLM regarding our Plan of Operations confirming that the BLM considers our Plan of Operations to conduct drilling complete and that the BLM will conduct a final review of the previously approved Environmental Assessment to determine its adequacy. The BLM’s letter also advised that they would be sending letters addressing the Conditions of Approval and the bond determination under separate cover.

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

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

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

We have not been profitable since inception and there is no assurance that we will develop profitable operations in the future. Our net loss for the years ended December 31, 2008, 2007 and 2006 was $3,128,386, $2,221,818 and $2,540,978, respectively. As of December 31, 2008, we had an accumulated deficit of $13,356,482. We cannot assure you that we will have profitable operations in the future.

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

Corporate History

We were incorporated on January 12, 1999 pursuant to the laws of the State of Nevada under the name L.C.M. Equity, Inc. From 1999 to 2005, we operated primarily as a biotechnology research and development company with headquarters in Canada and an office in the United Kingdom. On November 2, 2001, we acquired all of the outstanding shares of Regma Bio Technologies, Ltd., a corporation organized under the laws of the United Kingdom. The share exchange transaction resulted in a change of control with the former principals of Regma Bio Limited owning approximately 80% of our outstanding shares of common stock (including Caisey Harlingten, who became the beneficial owner of approximately 66% of our outstanding shares). In connection with this acquisition, on February 1, 2002, we changed our name to “Regma Bio Technologies Limited.” On November 26, 2003, we changed our name from “Regma Bio Technologies Limited” to “Phage Genomics, Inc.”

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

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

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

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

Acquisition of Searchlight Gold Project Claims

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

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

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

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

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

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

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

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

Acquisition of Clarkdale Slag Project

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

Pursuant to the terms of the Assignment Agreement, we:

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

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

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

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

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

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

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

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

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

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

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

drilling and ore reserve studies (Phase 1);

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

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

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

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

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

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

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

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

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

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

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

The acquisition agreement also contains additional contingent payment terms which are based on the Project Funding Date:

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

we have agreed to pay VRIC a minimum annual royalty of $500,000, commencing 90 days after we receive a bankable feasibility study, and an additional royalty consisting of 2.5% of the “net smelter returns” on any and all proceeds of production from the Clarkdale Slag Project. The minimum royalty remains payable until the first to occur of: (1) the end of the first calendar year in which the percentage royalty equals or exceeds $500,000; or (2) February 15, 2017. In any calendar year in which the minimum royalty remains payable, the combined minimum royalty and percentage royalty will not exceed $500,000; and

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

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

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

Clarkdale Slag Project

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

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

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

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

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

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

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

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

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

We have completed the construction of the production module for the Clarkdale Slag Project and are now actively engaged in the testing and start-up phase of the project. Since the start of 2009, the primary emphasis has been placed on the crushing and grinding circuit as well as the leaching and extraction of precious metals (gold and silver). 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. The crushing and grinding circuit effectively liberates gold, silver, copper and zinc from the slag material. Further, management believes that extraction results from preliminary internal laboratory testing have been consistent with the results of earlier assay testing conducted by our independent consultants. We believe that we can improve extraction rates further by optimizing the grind, the chemical characteristics of the leach solutions and the amount of residence time required for maximum grind and leach efficiency.

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. These materials were fabricated by third parties. We, along with our consulting engineers, believe that the issues relating to the throughput rate of the crushing and grinding circuit have now been resolved. We are now capable of operating the throughput in the crushing and grinding circuit on a continuous basis.

With the gold and silver ion exchange resin circuit currently operational and the solvent extraction and electrowinning circuits currently operational for copper and approaching operational status for zinc, once the leach circuit has been configured to run continuously at optimum productivity levels, we believe that we will be able to proceed with the operation of all circuits within the production module. Our technical team is currently focused on optimizing the leach circuit with the grind/leach combination that will optimize metal extraction, which can then be filtered and run through the ion exchange resin extraction, and solvent extraction and electrowinning circuits in order to extract precious and base metals in marketable forms.

On May 6, 2009, we entered into a new engagement of Mountain States to conduct a technical analysis of our gold recovery process, which we believe comprises the majority of the potential value of the entire Clarkdale Slag Project. Such technical analysis was to consist of the observation and analysis of our gold recovery process in accordance with chain-of-custody standards. The technical analysis was not intended for the purpose of determining the economic feasibility of the Clarkdale Slag Project.

However, during our work program with Mountain States, we jointly determined with Mountain States that we would need specialty expertise in dealing with the abrasiveness of the slag material. As a result, Mountain States agreed to withdraw from its engagement and we have engaged a new team of independent metallurgical engineers, with extensive international experience in milling and leaching hard, abrasive and refractory material similar to that found in the slag pile. We have engaged the new engineering team to provide us with recommendations regarding further optimization of all four primary processing circuits, with their initial recommendations focusing upon the crushing, grinding, leaching and filtration circuits. Once we are able to resolve these issues, we intend to engage an independent engineer to conduct a technical analysis of our gold recovery process.

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

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

We have budgeted $5,500,000 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 by January 2011 will be made once the first production module is operational and its results are analyzed.

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

Estimate of Projected Expenditures. Since our involvement in the Clarkdale Slag Project in June 2005, we have incurred project expenses of approximately $6,121,000, including metallurgical testing, mineralogical studies, drilling program, pilot plant operation and site administrative expenses. In addition, as of December 31, 2008, we have recorded capital expenditures on the Clarkdale Slag Project of approximately $12,431,000, including building construction, production module equipment (grinding, leaching, filtering, extraction and laboratory equipment), site improvements and administration equipment. The following is an outline of the proposed milestones and estimated costs for anticipated work on the Clarkdale Slag Project for the next twelve months (subject to funding availability, we also anticipate spending approximately $6,000,000 on Phase II of our Clarkdale Slag Project – preparation for expansion to 2,000 tons of slag material per day and $4,700,000 to complete the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona by January 2011):

Work	Budget

1. Production Module Operation	$	3,500,000

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

2. Technical Consulting Services	$	1,000,000

3. Feasibility Study and Expansion Preparation	$	1,000,000

• Third-party feasibility study performed on operating production module
• Preparation for expansion to 2,000 tons per day
SUBTOTAL	$	5,500,000

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

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

Figure 1 - Clarkdale Project Site

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

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

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

Figure 2A –Clarkdale Project Aerial View

Figure 2B –Clarkdale Project Area Map

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

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

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

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

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

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

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

Drilling and Bulk Sampling Tests

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

Figure 3 – Clarkdale Project Plan View of Drilling Program

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

Summary of Results of Drill Hole Testing
			Gold		Silver		Copper		Zinc		Iron
			Au (opt)*		Ag (opt)*		Cu (%)		Zn (%)		Fe (%)
18 Drill Hole Average				0.46		0.13		0.37		2.47		33.1
Drill Hole Results
Drill Hole	Composite Footage		Gold		Silver		Copper		Zinc		Iron

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

*opt (ounces per ton)

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

Summary of Bulk Sample Results

Gold

Silver

Copper

Zinc

Iron

Au (opt)*

Ag (opt)*

Cu (%)

Zn (%)

Fe (%)

750-pound Bulk Sample Average

0.42

0.06

0.35

2.88

31.0

Surface Bulk

Sample Results

Sample

Composite

Gold

Silver

Copper

Zinc

Iron

Detail

Cu (%)

Zn (%)

Fe (%)

(opt)*

SS1B-1

Surface Bulk Sample

0.361

0.285

0.36

3.00

33.8

SS1B-2

Surface Bulk Sample

0.422

0.35

2.80

30.4

SS1B-3

Surface Bulk Sample

0.428

0.33

2.90

30.4

SS1B-4

Surface Bulk Sample

0.444

0.36

2.80

29.8

SS1B-5

Surface Bulk Sample

0.434

0.34

2.90

30.6

Average

0.42

0.06

0.35

2.88

31.0

*opt (ounces per ton)

**ND (None Detected)

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

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

Slag Pile	Volume Estimate		Tons in		Au (opt)*		Ag( opt)*		Cu (%)		Zn (%)		Fe (%)

	(million cubic feet)		Millions
East		198.0		19.86		0.50		0.10		0.34		2.47		33.18
West		3.4		0.34		0.39		0.07		0.22		1.70		31.30
Combined		201.4		20.20		0.50		0.10		0.34		2.46		33.15

*opt (ounces per ton)

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

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

Figure 4 – Clarkdale Project Flow Chart

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

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

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

Filtration. The contents from the leach tanks are then passed through pressure filters through which the solids are separated from the liquid. The solids, or filtered “byproduct” are a ferrosilicate product and are stored for later removal. The liquid, or “pregnant solution,” contains the gold, silver, copper and zinc in solution.

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

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

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

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

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

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

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

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

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

Searchlight Gold Project

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

Figure 5 – Searchlight Gold Project Location

BROWN ARMSTRONG PAULDEN

McCOWN STARBUCK THORNBURGH & KEETER

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Searchlight Minerals Corp.

We have audited the accompanying consolidated balance sheets of Searchlight Minerals Corp. (An Exploration Stage Company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, including inception cumulative data prospectively from January 1, 2006, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008. Searchlight Minerals Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Searchlight Minerals Corp. (An Exploration Stage Company) as of December 31, 2008 and 2007, and the results of its operations, stockholders’ equity, including inception cumulative data, and its cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Searchlight Minerals Corp.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2009 expressed an unqualified opinion.

	BROWN ARMSTRONG PAULDEN
	McCOWN STARBUCK THORNBURGH & KEETER
	ACCOUNTANCY CORPORATION
March 10, 2009 Bakersfield, California

F-1

F-2

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

	December 31, 2008			December 31, 2007

ASSETS

Current assets
Cash	$	7,055,591		$	12,007,344
Prepaid expenses		251,414			192,789

Total current assets		7,307,005			12,200,133

Property and equipment, net		13,132,282			5,064,460
Mineral properties		16,947,419			12,702,258
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		109,900			183,000

Total non-current assets		160,172,628			147,932,745

Total assets	$	167,479,633		$	160,132,878

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	1,093,778		$	849,910
Accounts payable - related party		108,515			41,974
VRIC payable, current portion - related party		194,756			179,830
Capital lease payable, current portion		24,026			22,983

Total current liabilities		1,421,075			1,094,697

Long-term liabilities
VRIC payable, net of current portion - related party		1,958,774			2,153,530
Capital lease payable, net of current portion		40,291			64,317
Deferred tax liability		50,455,361			50,619,658

Total long-term liabilities		52,454,426			52,837,505

Total liabilities		53,875,501			53,932,202

Commitments and contingencies - Note 11		-			-

Stockholders' equity
Common stock, $0.001 par value; 400,000,000 shares authorized, 105,854,691 and 96,865,391 shares, respectively, issued and outstanding		105,854			96,865
Additional paid-in capital		126,854,760			116,223,907
Common stock subscribed		-			108,000
Accumulated deficit during exploration stage		(13,356,482	)		(10,228,096	)

Total stockholders' equity		113,604,132			106,200,676

Total liabilities and stockholders' equity	$	167,479,633		$	160,132,878

See Accompanying Notes to these Consolidated Financial Statements

F-3

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

										For the period from
										January 14, 2000
										(Date of Inception)
	For the Year Ended			For the Year Ended			For the Year Ended			Through
	December 31, 2008			December 31, 2007			December 31, 2006			December 31, 2008

Revenue	$	-		$	-		$	-		$	-

Operating expenses
Mineral exploration and evaluation expenses		976,974			1,149,755			2,024,932			5,038,684
Mineral exploration and evaluation expenses - related party		360,000			360,000			495,000			1,215,000
Administrative - Clarkdale site		1,142,102			513,759			-			1,655,861
General and administrative		2,517,479			1,557,048			1,209,838			6,118,169
General and administrative - related party		83,333			32,421			-			115,754
Depreciation		62,069			37,751			6,309			107,079

Total operating expenses		5,141,957			3,650,734			3,736,079			14,250,547

Loss from operations		(5,141,957	)		(3,650,734	)		(3,736,079	)		(14,250,547	)

Other income (expense):
Rental revenue		35,720			36,410			-			72,130
Loss on equipment disposition		-			(138	)		(4,388	)		(4,526	)
Interest expense		(3,428	)		(2,062	)		-			(5,490	)
Interest and dividend income		203,821			314,331			77,032			595,184

Total other income (expense)		236,113			348,541			72,644			657,298

Loss before income taxes		(4,905,844	)		(3,302,193	)		(3,663,435	)		(13,593,249	)

Income tax benefit		1,777,458			1,080,375			1,122,457			4,379,935

Loss from continuing operations		(3,128,386	)		(2,221,818	)		(2,540,978	)		(9,213,314	)

Discontinued operations:
Loss from discontinued operations		-			-			-			(4,143,168	)

Net loss	$	(3,128,386	)	$	(2,221,818	)	$	(2,540,978	)	$	(13,356,482	)

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

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

Weighted average common shares outstanding -Basic and diluted		104,338,284			88,942,414			62,075,707

See Accompanying Notes to these Consolidated Financial Statements

F-4

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

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

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

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

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

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

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

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

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

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

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

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

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

Deferred compensation		-			-			12,583			-		-			-

Amortization of deferred compensation		-			-			-			-		-			10,387
Loss from discontinued operations
Net loss		-			-			-			-		(1,283,872	)		(1,283,872	)

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

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

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

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

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

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

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

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

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

See Accompanying Notes to these Consolidated Financial Statements

F-5

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See Accompanying Notes to these Consolidated Financial Statements

F-6

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See Accompanying Notes to these Consolidated Financial Statements

F-7

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See Accompanying Notes to these Consolidated Financial Statements

F-8

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

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

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

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

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

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

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

Balance, December 31, 2008		105,854,691	$	105,854	$	126,854,760	$	-		$	(13,356,482	)	$	113,604,132

See Accompanying Notes to these Consolidated Financial Statements

F-9

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

										Period from
										January 14, 2000
										(Date of inception)
	For the Year Ended									through
	December 31, 2008			December 31, 2007			December 31, 2006			December 31, 2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,128,386	)	$	(2,221,818	)	$	(2,540,978	)	$	(13,356,482	)
Deduct: Loss from discontinued operations		-			-			-			(4,143,168	)
Loss from continuing operations		(3,128,386	)		(2,221,818	)		(2,540,978	)		(9,213,314	)

Adjustments to reconcile loss from operating to net cash used in operating activities:
Depreciation		62,069			37,751			6,309			107,079
Stock based expenses		136,342			269,287			289,094			1,094,505
Loss on disposition of fixed assets		-			138			4,388			5,875
Amortization of prepaid expense		183,913			170,413			-			354,326
Allowance for bond deposit recovery		180,500			-			-			180,500
Changes in operating assets and liabilities:
Other current assets		(242,538	)		(256,967	)		(106,235	)		(605,740	)
Other assets		(107,400	)		40			(2,540	)		(290,400	)
Accounts payable and accrued liabilities		310,409			(277,026	)		420,183			476,735
Deferred income taxes		(1,777,458	)		(1,080,375	)		(1,122,457	)		(4,379,935	)

Net cash used in operating activities		(4,382,549	)		(3,358,557	)		(3,052,236	)		(12,270,369	)
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		-			-			(200,000	)		(890,000	)
Cash paid to VRIC on closing date		-			(9,900,000	)		-			(9,900,000	)
Cash paid for additional acquisition costs		-			(130,105	)		-			(130,105	)
Capitalized interest		(180,170	)		(162,173	)		-			(342,343	)
Purchase of property and equipment		(7,949,722	)		(4,155,549	)		(25,748	)		(12,147,104	)

Net cash used in investing activities		(8,129,892	)		(14,347,827	)		(225,748	)		(23,496,686	)
Net cash used in investing activities from discontinued operations		-			-			-			(452,618	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from stock issuance		7,763,500			26,813,817			6,271,376			43,539,500
Stock issuance costs		-			(677,570	)		-			(677,570	)
Principal payments on capital lease payable		(22,982	)		(28,939	)		(15,000	)		(51,921	)
Principal payments on deferred purchase liability		(179,830	)		(167,828	)		-			(347,658	)
Proceeds from subscribed stock		-			90,000			-			360,000

Net cash provided by financing activities		7,560,688			26,029,480			6,256,376			42,822,351
Net cash provided by financing activities from discontinued operations		-			-			-			3,384,237

NET CHANGE IN CASH AND CASH EQUIVALENTS		(4,951,753	)		8,323,096			2,978,392			7,055,591

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		12,007,344			3,684,248			705,856			-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	7,055,591		$	12,007,344		$	3,684,248		$	7,055,591

See Accompanying Notes to these Consolidated Financial Statements

F-10

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

							Period from
							January 14, 2000
							(Date of inception)
	For the Year Ended						through
	December 31, 2008		December 31, 2007		December 31, 2006		December 31, 2008

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

SUPPLEMENTAL INFORMATION

Interest Paid, net of capitalized amounts	$	3,428	$	2,062	$	-	$	56,241

Income Taxes Paid	$	-	$	-	$	-	$	-

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

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

Assets acquired for common stock issued for mineral properties	$	2,632,000	$	4,508,000	$	3,530,000	$	10,220,000

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

Net deferred tax liability assumed	$	1,613,161	$	50,839,702	$	1,614,147	$	55,197,465

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

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

Warrants issued in connection with joint venture option agreement related to slag project	$	-	$	-	$	-	$	1,310,204

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

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

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

See Accompanying Notes to these Consolidated Financial Statements

F-11

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Basis of presentation– These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year-end is December 31.

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

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

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

Going concern - The Company incurred cumulative net losses of $13,356,482 from operations as of December 31, 2008 and has not commenced its mining and mineral processing operations, rather, still in the exploration stage, raising substantial doubt about the Company’s ability to continue as a going concern.

The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.

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

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

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

F-12

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Mineral rights - The Company capitalizes acquisition and option costs of mineral property rights. The amount capitalized represents fair value of the mineral rights acquired.

The Company capitalizes acquisition and option costs of mineral rights as tangible assets in accordance with Emerging Issues Task Force abstract 04-02 (“EITF 04-02”), “Whether Mineral Rights are Tangible or Intangible Assets and Related Issues”. Upon commencement of commercial production, the mineral rights will be amortized using the unit-of-production method over the life of the mineral rights. If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”

Capitalized interest cost - The Company capitalizes interest cost related to acquisition, development and construction of property and equipment which is designed as integral parts of the manufacturing process. The capitalized interest is recorded as part of the asset it relates to and will be amortized over the asset’s useful life once production commences. Interest cost capitalized from imputed interest on acquisition indebtedness was $180,170 and $162,173 for the years ended December 31, 2008 and 2007, respectively.

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.

F-13

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Impairment of long-lived assets – The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under SFAS No. 144 if events or circumstances indicate that their carrying amount might not be recoverable. As of December 31, 2008 exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines that a SFAS 144 impairment analysis should be done, the analysis will be performed using the rules of EITF 04-03, “Mining Assets: Impairment and Business Combinations.”

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

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

Reclassifications – Certain amounts in the prior period financial statements have been reclassified to conform to current period presentation.

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

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

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

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

F-14

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Earnings (loss) per share - The Company follows Statement of Financial Accounting Standard No. 128 (“SFAS 128”), “Earnings Per Share” and Statement of Financial Accounting Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly-held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Weighted average of common stock equivalents, which include stock options and warrants to purchase common stock, on December 31, 2008, 2007 and 2006 that were not included in the computation of diluted EPS because the effect would be antidilutive were, 23,418,739, 25,352,207 and 23,666,088, respectively.

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

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

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

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

F-15

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

F-16

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141, “Business Combinations” (“FAS 141”). FSP 142-3 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied prospectively to intangible assets acquired after the effective date. The Company does not expect the adoption of FSP 142-3 to have an impact on the Company’s consolidated financial position, results of operations or cash flows.

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

F-17

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In May 2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting Principles”. This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the U.S. Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendment to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 162 on its consolidated financial statements.

On March 19, 2008, the FASB issued Statement of Financial Accounting Standard No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities.” This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the impact that SFAS 161 will have on the consolidated financial statements.

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

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

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

F-18

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In September 2007, the FASB published Proposed FASB Staff Position (“FSP”) No. APB 14-a, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion.” The proposed FSP applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under SFAS 133. Convertible debt instruments within the scope of the proposed FSP are not addressed by the existing APB 14. The proposed FSP would require that the liability and equity components of convertible debt instruments within the scope of the proposed FSP shall be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This will require an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component would be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. FSP No. APB 14-a is effective for the Company’s fiscal year beginning January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the impact that Proposed FSP may have on the consolidated financial statements of the Company.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115”, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value, nor eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in Statement of Financial Accounting No. 157 (“SFAS 157”), “Fair Value Measurements,” and SFAS 107. SFAS 159 is effective for our fiscal year beginning after November 15, 2007. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.

F-19

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.	PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of December 31, 2008 and 2007:

	December 31, 2008		December 31, 2007

Furniture and fixtures	$	35,813	$	34,694
Lab equipment		2,804		2,804
Computers and equipment		50,253		32,594
Income property		309,750		309,750
Construction in progress		12,289,996		4,408,796
Capitalized interest		342,343		162,173
Vehicles		38,175		38,175
Site equipment		168,949		119,203
		13,238,083		5,108,189
Less accumulated depreciation		105,801		43,729

	$	13,132,282	$	5,064,460

Depreciation expense was $62,069, $37,751 and $6,309 for the years ended December 31, 2008, 2007 and 2006, respectively.

3.	CLARKDALE SLAG PROJECT

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

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

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

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

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

F-20

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.	CLARKDALE SLAG PROJECT (continued)

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

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 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: (1) the end of the first calendar year in which the Project Royalty equals or exceeds $500,000; or (2) February 15, 2017. In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty and Project Royalty will not exceed $500,000 in any calendar year; and,

F-21

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.	CLARKDALE SLAG PROJECT (continued)

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.

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

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

Total purchase price		82,216,043

Net deferred income tax liability assumed - slag project		48,076,734

	$	130,292,777

The following table reflects the components of the Slag Project:

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

Net assets acquired	$	130,292,777

F-22

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.	MINERAL PROPERTIES - MINING CLAIMS

As of December 31, 2008 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.

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

On August 26, 2005, the Company paid $180,500 to the Bureau of Land Management as a bond for future reclamation work in Searchlight, Nevada. As of December 31, 2008, the recovery of the reclamation bond is uncertain, therefore the Company has established a full allowance against the reclamation bond with the offsetting expense to project exploration costs.

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

The following table summarizes the changes of mineral properties for the years ended December 31, 2007 and 2008:

Total mineral properties balance, December 31, 2006	$	5,431,290

Share issuance to obtain mineral properties, June 29, 2007		4,508,000
Net deferred income tax liability assumed		2,762,968

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

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

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

F-23

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.	CAPITAL LEASE PAYABLE

The Company leases equipment under a capital lease. The capital lease payable consisted of the following at December 31, 2008 and 2007,

Lender	Collateral	Monthly Payment		Interest Rate			Maturity	December 31, 2008			December 31, 2007
Caterpillar Financial Services
Corporation	Equipment	$	2,200		4.45	%	Jul-11	$	64,317		$	87,300

									64,317			87,300
Capital lease payable, current portion									(24,026	)		(22,983	)

Capital lease payable, net of current portion								$	40,291		$	64,317

The following table represents future minimum lease payments on the capital lease for the years ending December 31,

2009	$	26,401
2010		26,401
2011		15,401
2012		—
Thereafter		—

Total future minimum lease payments	$	68,203
Imputed interest		(3,886	)

Present value of future minimum lease payments	$	64,317

The following assets acquired under the capital lease and the related amortization were included in property, plant and equipment at December 31, 2008 and 2007,

	December 31, 2008			December 31, 2007

Site Equipment	$	116,239		$	116,239
Accumulated amortization		(46,011	)		(16,952	)

	$	70,228		$	99,287

F-24

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.	CLARKDALE ACQUISITION PAYABLE

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

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

The following table represents future principal payments on VRIC payable for the years ending December 31,

2009	$	194,756
2010		210,921
2011		228,427
2012		247,386
2013		267,919
Thereafter		1,004,121

		2,153,530

VRIC payable, current portion		194,756

VRIC payable, net of current portion	$	1,958,774

The acquisition agreement also contains payment terms which are based on the Project Funding Date as defined in the agreement. The terms of and conditions of these payments are discussed in more detail in Note 3 and 11.

F-25

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY

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

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

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

Subsequent to December 31, 2008, on April 30, 2009, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders to amend and restate the call provisions in the private placement warrants further so that the terms of such amended and restated call provisions are identical to the terms of the private placement warrants on their original dates of issuance. As a result: (v) all of the investor warrants are callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $6.50 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the investor warrants at the time of the call of the investor warrants, (vi) the broker warrants will not have call provision, (vii) the previously adopted amendments with respect to the extension of the expiration dates and the reduction of the exercise price for the private placement warrants will remain unchanged.

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

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

F-26

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

On August 26, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee stock options resulting in cash proceeds of $25,000. Options exercised were for 100,000 shares of common stock at $0.25 per share. These stock options were subject to an expiration date of November 22, 2010.

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

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

On June 16, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee stock options resulting in cash proceeds of $25,000. Options exercised were for 100,000 shares of common stock at $0.25 per share. These stock options were subject to an expiration date of November 23, 2010.

On May 5, 2008, the Company issued 100,000 shares of common stock from the exercise of nonemployee stock options resulting in cash proceeds of $25,000, which were received on August 16, 2007. Options exercised were for 100,000 shares of common stock at $0.25 per share. These stock options were subject to an expiration date of February 16, 2009.

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

On February 7, 2008, the Company completed a private placement offering for gross proceeds of $2,620,000 to non-US persons in reliance of Regulation S promulgated under the Securities Act of 1933. A total of 1,637,500 units were issued at a price of $1.60. Each unit sold consisted of one share of the Company’s common stock and one-half of one share purchase warrants. Each whole share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.40 per share for a period of two years from the date of issuance. A total of 80,000 shares of the Company’s common stock were issued by the Company as commission to agents in connection with the offering.

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

F-27

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

On January 30, 2008, the Company received gross proceeds of $2,528,500 by issuing an aggregate of 3,890,000 shares of its common stock on the exercise of warrants issued by the Company in January, 2006. Each warrant entitled the holder to purchase one share of the Company’s common stock at a price of $0.65 per share on or before January 18, 2008. The warrant holders delivered their notices of exercise, and paid the exercise price of $0.65 per share, prior to January 18, 2008 expiration date. A total of 3,690,000 shares were issued to US accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. An additional 200,000 shares were issued to one non-US person as defined in Regulation S of the Securities Act.

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

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

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

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

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

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

F-28

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

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

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

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

On March 22, 2007, the Company closed a private placement offering for gross proceeds of $6,678,483 (the "March Offering"). The securities sold pursuant to the March Offering were issued to non-US investors in accordance with the terms of Regulation S of the Securities Act of 1933. In connection with the March Offering, the Company entered into an Agency Agreement dated March 21, 2007 (the "Agency Agreement"). The securities were sold to subscribers on a best efforts agency basis. Pursuant to the terms of the Agency Agreement, the Company sold an aggregate of 2,226,161 units for gross proceeds of $6,678,483, with each unit consisting of one share of its common stock and one half of one share purchase warrant with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by Searchlight if its common stock trades above $6.50 per share for 20 consecutive trading days. Also under the terms of the March Offering the Company agreed to use its best efforts to file with the Securities and Exchange Commission a registration statement on Form SB-2, or on such other form as is available, registering the offered securities within four months after the closing of the March Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. An aggregate commission and corporate finance fee totaling $525,386 was paid by the company to the Agent in connection with the March Offering and the Agent also received warrants to purchase 75,175 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following material amendments to the private placement warrants: (i) the expiration date of the private placement warrants has been extended to March 1, 2010; (ii) the exercise price of the private placement warrants has been decreased to $2.40 per share; (iii) the call provision in the investor warrants is now included in the broker warrants; and (iv) the call provision in the private placement warrants has been amended so that all of such private placement warrants callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $4.40 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the private placement warrants at the time of the call of the private placement warrants.

F-29

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

On February 23, 2007, the Company closed a private placement offering and issued 4,520,666 units for aggregate gross proceeds of $13,562,002 to accredited investors resident in the United States pursuant to Regulation D of the Securities Act (the “US Offering”). Each unit consisted of one share of its common stock and one half of one share purchase warrant with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by the Company if its common stock trades above $6.50 per share for 20 consecutive trading days. Pursuant to the terms of the US Offering, the Company agreed to use its best efforts to file a registration statement declared effective by the SEC within four months of the closing date of the US Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. The Company further agreed to keep the registration statement effective pursuant to Rule 415 of the Securities Act for a period of eighteen months following the date the registration statement is declared effective by the SEC. A portion of the US Offering was sold on a best efforts agency basis. Commissions paid to agents in connection with the US Offering totaled $381,990 and the agents also received warrants to purchase 90,870 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following material amendments to the private placement warrants: (i) the expiration date of the private placement warrants has been extended to March 1, 2010; (ii) the exercise price of the private placement warrants has been decreased to $2.40 per share; (iii) the call provision in the investor warrants is now included in the broker warrants; and (iv) the call provision in the private placement warrants has been amended so that all of such private placement warrants callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $4.40 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the private placement warrants at the time of the call of the private placement warrants.

F-30

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

Also on February 23, 2007, the Company closed a private placement offering and issued 575,000 units for aggregate gross proceeds of $1,725,000 to non-US investors pursuant to Regulation S of the Securities Act (the “February Offering”). Each unit consisted of one share of its common stock and one half of one share purchase warrant with each whole warrant entitling the subscriber to purchase one additional share for a period of two years from the closing date at an exercise price of $4.50 per share. The warrants are callable by us if its common stock trades above $6.50 per share for 20 consecutive trading days. Pursuant to the terms of the Non-US Offering, the Company agreed to use its best efforts to file a registration statement declared effective by the SEC within four months of the closing date of the February Offering. The Company agreed not to exercise its call rights until the registration statement registering the securities underlying the units sold has been declared effective by the SEC. The Company further agreed to keep the registration statement effective pursuant to Rule 415 of the Securities Act for a period of eighteen months following the date the registration statement is declared effective by the SEC. Commissions paid to agents in connection with the February Offering totaled $111,100 and the agents also received warrants to purchase 12,300 shares of its common stock at a price of $4.50 per share, exercisable for a period of two years from the closing date. On December 29, 2008, the Company made the following material amendments to the private placement warrants: (i) the expiration date of the private placement warrants has been extended to March 1, 2010; (ii) the exercise price of the private placement warrants has been decreased to $2.40 per share; (iii) the call provision in the investor warrants is now included in the broker warrants; and (iv) the call provision in the private placement warrants has been amended so that all of such private placement warrants callable for cancellation by the Company if the volume weighted average price of the common stock exceeds $4.40 per share for 20 consecutive trading days and there is an effective registration statement registering the shares of common stock underlying the private placement warrants at the time of the call of the private placement warrants.

On February 15, 2007, the Company approved the issuance of 16,825,000 shares of its common stock to five investors in connection with the Agreement and Plan of Merger dated February 15, 2007. The issuance was completed pursuant to Section 4(2) and Regulation D of the Securities Act on the basis that each investor was a sophisticated investor and was in a position of access to relevant material information regarding its operations. Each investor delivered appropriate investment representations satisfactory to us with respect to this transaction and consented to the imposition of restrictive legends upon the certificates evidencing such share certificates.

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

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

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

F-31

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

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

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

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

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

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

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

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

F-32

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.	STOCKHOLDERS’ EQUITY (continued)

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

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

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

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

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

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

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

F-33

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS

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

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

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

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

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

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

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

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

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

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

F-34

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

During the year ended December 31, 2006, the Company issued granted stock options as follows:

On June 14, 2006, the Company granted nonqualified stock options for the purchase of 50,000 shares of common stock at $2.06 per share. The options were granted as a recruitment incentive to an employee and vest 50% on December 14, 2006 and the remaining 50% on June 14, 2007. The options contained an original expiration date of June 14, 2008 and were subsequently extended on May 30, 2008 to expire on June 14, 2011.

On June 14, 2006, the Company granted nonqualified stock options for the purchase of 100,000 shares of common stock at $2.06 per share. The options were granted as a recruitment incentive to the Chief Financial Officer and vest 50% on June 14, 2007 and the remaining 50% on June 14, 2008. The options contain an expiration date of June 14, 2011.

On June 6, 2006, the Company granted nonqualified stock options for the purchase of 100,000 shares of common stock at $2.40 per share. The options were granted to equally to two directors, are fully vested and expire on June 6, 2011.

On June 6, 2006, the Company granted nonqualified stock options for the purchase of 500,000 shares of common stock at $2.40 per share. The options were granted to equally to two officer/directors, are fully vested and expire on June 6, 2011.

On April 7, 2006, the Company granted stock options for the purchase of 120,000 shares of common stock at $1.70 per share. The options were granted equally to two officers, are fully vested and expire on April 7, 2011.

Expenses for the years ended December 31, 2008, 2007 and 2006 related to vesting and granting of stock options were $27,885, $233,286 and $186,094, respectively and are included in general and administrative expense. The Company recorded $36,457 in stock option modification expense for one employee during the year ended December 31, 2008. No such stock option modifications occurred before.

Stock options – During the years ended December 31, 2008, 2007 and 2006, the Company granted stock options to employees and directors totaling 207,347, 182,946 and 870,000, respectively, with a weighted average exercise price of $1.49, $2.76 and $2.25 per share, respectively. As of December 31, 2008 stock options outstanding totaled 3,560,293 with a weighted average exercise price of $1.02 per share.

On May 30, 2008, the Company extended the term of stock options previously issued to an employee for 50,000 shares of common stock for an additional 3 years. The Company accounted for the impact of the amended stock option grant as a stock option modification under SFAS 123R. As a result of the modification, the Company recognized $36,457 of additional stock-based compensation expense due to the increase in the fair market value of this stock option grant that is recorded in general and administrative expense.

F-35

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes the Company’s stock option activity for the years ended December 31, 2008, 2007 and 2006:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2005		3,000,000		$	0.35
Options granted and assumed		870,000			2.25
Options expired		—			—
Options cancelled		—			—
Options exercised		—			—

Balance, December 31, 2006		3,870,000			0.77
Options granted and assumed		182,946			2.76
Options expired		—			—
Options cancelled		—			—
Options exercised		(400,000	)		0.25

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

Balance, December 31, 2008		3,560,293		$	1.02

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

	2008		2007		2006

Dividend yield		—		—		—
Expected volatility		76.59%		76.6%		85%
Risk-free interest rate	1.55% to 3.48%		2.88% to 4.68%		4.89% to 5.08%
Expected life (years)	4.25 to 9		2 to 4.25			4.25

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

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

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

F-36

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes the changes of the Company’s stock options subject to vesting for the years ended December 31, 2008, 2007 and 2006:

	Number of Shares Subject to Vesting			Weighted Average Grant Date Fair Value
Unvested, December 31, 2005		—		$	—
Options granted		150,000			0.21
Options vested		(25,000	)		0.21
Options cancelled		—			—

Unvested, December 31, 2006		125,000			0.21
Options granted		—			—
Options vested		(75,000	)		0.21
Options cancelled		—			—

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

Unvested, December 31, 2008		200,000		$	0.79

As of December 31, 2008, there was $138,154 total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized as follows: 2009 - $68,640, 2010 - $39,873, 2011 - $21,598, and 2012 - $8,043.

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

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

207,347	Equals	$	1.49		$ 1.45	$	0.80

F-37

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

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

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

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

The following table summarizes information about options granted during the year ended December 31, 2006:

Number of Options Granted During 2006	Exercise Price Equals, Exceeds Or Is Less than Mkt. Price of Stock On Grant Date	Weighted Average Exercise Price		Range of Exercise Price		Weighted Average Fair Value
—	Equals	$	—	$	— to $ —	$	—
—	Exceeds	$	—	$	— to $ —		—
870,000	Less Than	$	2.25	$	1.70 to $2.40	$	0.10

870,000	Less Than	$	2.25	$	1.70 to $2.40	$	0.10

F-38

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

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

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

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

Stock options/warrants – During the year ended December 31, 2007 the Company granted stock warrants related to common stock issued through a private placement totaling 3,660,913 with a strike price of $4.50 per share and 1,562,500 with a strike price of $2.40 per share and stock warrants totaling 178,345 were issued to underwriters of the private placement with a strike price of $4.50 per share.

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

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

Stock options/warrants - During the year ended December 31, 2006 the Company granted stock warrants related to common stock issued through a private placement totaling 3,900,000 with a strike price of $0.65 per share and stock warrants totaling 390,000 were issued to underwriters of the private placement with a strike price of $0.65 per share.

The Company also granted warrants related to common stock totaling 612,500 which were granted in accordance with registration provisions of the September 2005 financing with a strike price of $0.625 per share.

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

During the year ending December 31, 2006 the Company issued stock options for 870,000 shares of common stock to directors, officers and an employee with strike price ranging from $1.70 to $2.40 per share.

F-39

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.	STOCK OPTION PLAN AND WARRANTS (continued)

The following table summarizes information about options/warrants granted during the years ended December 31, 2008, 2007 and 2006:

	Number of Shares			Weighted Average Exercise Price
Balance, December 31, 2005		24,118,500		$	0.42
Options/warrants granted and assumed		5,772,500			0.55
Options/warrants expired		—			—
Options/warrants cancelled		—			—
Options/warrants exercised		(9,731,000	)		0.50

Balance, December 31, 2006		20,160,000			0.51
Options/warrants granted and assumed		5,584,704			3.86
Options/warrants expired		—			—
Options/warrants cancelled		—			—
Options/warrants exercised		(800,000	)		0.45

Balance, December 31, 2007		24,944,704			1.26
Options/warrants granted and assumed		1,847,972			2.30
Options/warrants expired		—			—
Options/warrants cancelled		—			—
Options/warrants exercised		(4,190,000	)		0.62

Balance, December 31, 2008		22,602,680		$	1.11

F-40

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.	PROPERTY RENTAL AGREEMENTS AND LEASES

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

Clarkdale Arizona Central Railroad – Lease

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

Commercial Building – Lease

CML rents commercial building space to two tenants. The rental arrangements for both tenants stem from expired leases and are month-to-month. Rent under these agreements was on average $1,277 per month.

Land Lease – Wastewater Effluent

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

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

F-41

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.	INCOME TAXES

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

The income tax benefit consisted of the following at December 31, 2008, 2007 and 2006,

	December 31, 2008			December 31, 2007			December 31, 2006

Income tax benefit per financial statements	$	(1,864,221	)	$	(1,254,833	)	$	(1,278,083	)
Non-deductible and other		6,460			4,807			3,294
Change in valuation allowance		80,303			119,193			64,694
Release of valuation allowance related to acquisition		—			—			82,299
Rate change		—			50,458			5,339

Income tax benefit	$	(1,777,458	)	$	(1,080,375	)	$	(1,122,457	)

Significant components of the Company’s net deferred income tax assets and liabilities at December 31, 2008 and 2007 were as follows:

	December 31, 2008			December 31, 2007
Deferred income tax assets

Net operating loss carryforward	$	4,742,104		$	2,964,646
Option compensation		349,412			324,962
Reclamation bond		68,590			—

Gross deferred income tax asset		5,160,106			3,289,608
Valuation allowance		(403,501	)		(323,198	)
		4,756,605			2,966,410
Deferred income tax liabilities

Property, plant & equipment		14,501			1,764
Acquisition related liabilities		55,197,465			53,584,304

Net deferred income tax liability	$	50,455,361		$	50,619,658

A valuation allowance for deferred tax related to option compensation and the reclamation bond was established for net deferred tax assets not allocated to offset acquisition related deferred tax liabilities due to the uncertainty of realizing these deferred tax assets based on conditions existing at December 31, 2008 and 2007.

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

F-42

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.	INCOME TAXES (continued)

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

The Company had cumulative net operating losses of approximately $12,479,222 and $7,801,699 as of December 31, 2008 and 2007, respectively for federal income tax purposes. The federal net operating loss carryforwards will be expiring between 2025 and 2028.

The Company had cumulative net operating losses of approximately $5,292,772 and $1,795,792 as of December 31, 2008 and 2007, respectively for state income tax purposes. The state net operating loss carryforwards will be expiring between 2013 and 2014.

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

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

F-43

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.	COMMITMENTS AND CONTINGENCIES

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

Rental expense, resulting from this operating lease agreement, approximated $58,800, $46,700 and $43,613 for the years ended December 31, 2008, 2007 and 2006, respectively.

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

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

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

F-44

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.	COMMITMENTS AND CONTINGENCIES (continued)

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

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: (1) the end of the first calendar year in which the Project Royalty equals or exceeds $500,000; or (2) February 15, 2017. In any calendar year in which the Advance Royalty remains payable, the combined Advance Royalty and Project Royalty will not exceed $500,000; and,

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

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

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

The timing of the development of the Road is to be within two years of the effective date of the agreement. The effective date shall be the later of (i) 30 days from the approving resolution of the agreement by the Council; or (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 (i), (ii), and (iii) above are beyond control of the Company.

The Company estimates construction of the Road to cost approximately $3,500,000 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.

F-45

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.	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. To date, the Company has not experienced a material loss or lack of access to its cash accounts; however no assurance can be provided that access to the Company’s cash accounts will not be impacted by adverse conditions in the financial markets. At December 31, 2008, the Company had deposits in excess of FDIC insured limits in the amount of $6,642,418. Subsequent to year end, the Company placed substantial portion of its cash balances in United States Treasury instruments.

13.	CONCENTRATION OF ACTIVITY

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

For the year ended December 31, 2007, the Company purchased services from one major vendor, Talson Corporation, which exceeded more than 10% of total purchases and amounted to approximately $2,123,833.

14.	RELATED PARTY TRANSACTIONS

During the years ended December 31, 2008, 2007 and 2006, the Company utilized the services of NMC to provide technical assistance and financing related activities. These services related primarily to the Clarkdale Slag Project and the Searchlight Claims Project. Mr. McNeil and Mr. Ager are affiliated with NMC.

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

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

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

For the year ended December 31, 2006, the Company incurred total fees and reimbursements of expenses to NMC of $495,000 and $271,103, respectively. At December 31, 2006, the Company had an outstanding balance due to NMC of $311,863.

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

F-46

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.	RELATED PARTY TRANSACTIONS (continued)

The Company incurred total fees to CMOW of $83,213 and $31,277 for the years ended December 31, 2008 and 2007, respectively. The Company also reimbursed expenses to CMOW of $120 and $1,144 for the years ended December 31, 2008 and 2007, respectively. Fees for services provided by CMOW do not include any charges for Mr. Williams’ time. Mr. Williams is compensated for his time under his salary agreement. The direct benefit to Mr. Williams was $22,468 and $11,260 of the above CMOW fees and expenses for the years ended December 31 2008 and 2007, respectively. The Company had an outstanding balance due to CMOW of $14,575 and $2,244 as of December 31, 2008 and 2007, respectively.

During 2006, the Company did not utilize services of CMOW.

15.	SUBSEQUENT EVENTS

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

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

On February 16, 2009, stock options for the purchase of 50,000 shares of common stock expired.

Amendment and revision to warrant provisions – On April 30, 2009 the Company further amended its warrant call provisions. See Note 7, for further discussion.

F-47

SEARCHLIGHT MINERALS CORP.

(AN EXPLORATION STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.	UNAUDITED SUPPLEMENTARY DATA

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

		Q1			Q2			Q3			Q4
Year Ended December 31, 2008
Expenses	$	1,063,985		$	1,412,342		$	1,415,440		$	1,250,190
Loss from operations		(1,063,985	)		(1,412,342	)		(1,415,440	)		(1,250,190	)
Net loss		(592,696	)		(859,735	)		(910,900	)		(765,055	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

Year Ended December 31, 2007
Expenses	$	721,547		$	986,687		$	795,897		$	1,146,603
Loss from operations		(721,547	)		(986,687	)		(795,897	)		(1,146,603	)
Net loss		(409,935	)		(586,835	)		(423,757	)		(801,291	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

F-48

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

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

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

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

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

Work	Budget

1. Metallurgical Testing and Pre-Feasibility Program	$	100,000
• Continue independent metallurgical testing program, bulk sampling, milling, leaching and extraction tests to optimize recovery of precious metals

• Update independent engineering report with results from metallurgical testing program

2. Permitting and Drilling Program	$	400,000
• Obtain permit to drill 18 holes (Plan of Operations)
• Execute on drilling program following approval of Plan of Operations

TOTAL	$	500,000

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

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

Location	Parcel No.	General Description of Property
Clarkdale, Arizona	Parcel I	Lots 1 and 2, Block 44, town of Clarkdale according to the plat of record in Book 5 of Maps, page 85, records of Yavapai County, Arizona, including the commercial building located thereon.

Clarkdale, Arizona	Parcel II	A portion of the Northeast quarter of Section 20, Township 16 North, Range 3 East of the Gila and Salt River Base and Meridian, Yavapai County, Arizona.

Clarkdale, Arizona	Parcel III	A parcel of land located in the Southeast quarter of Section 19, and the Southwest quarter of Section 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.

Clarkdale, Arizona	Parcel IV	A parcel of land located in the North half of Section 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.

Clarkdale, Arizona	Parcel V	A portion of Sections 17, 18, 19 and 20, Township 16 North, Range 3 East, Gila and Salt River Base and Meridian, Yavapai County, Arizona.

	Closing Sale Price
	High		Low
Year Ending December 31, 2009
Third Quarter	$	2.64	$	1.70
Second Quarter		2.75		1.93
First Quarter		2.80		1.60
Year Ended December 31, 2008
Fourth Quarter		2.45		1.35
Third Quarter		3.00		1.72
Second Quarter		3.30		1.88
First Quarter		4.18		2.25
Year Ended December 31, 2007
Fourth Quarter		3.25		1.65
Third Quarter		3.40		2.60
Second Quarter		4.00		2.80
First Quarter		4.35		3.10

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in Column A (C)
Equity compensation plans approved by security holders		314,593	$	1.61		3,685,407
Equity compensation plans not approved by security holders		3,245,700	$	0.96		-
TOTAL		3,560,293	$	1.02		3,685,407

Statement of Operations Data	Year ended December 31,

	2008			2007			2006			2005			2004
Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil

Operating Expenses		5,141,957			3,650,734			3,736,079			1,721,777			-

Income tax benefit		1,777,458			1,080,375			1,122,457			399,645			-

Loss from continuing operations		(3,128,386	)		(2,221,818	)		(2,540,978	)		(1,322,132	)		-

Gain (loss) from discontinued operations		-			-			-			120,708			(700,444	)

Net loss		(3,128,386	)		(2,221,818	)		(2,540,978	)		(1,201,424	)		(700,444	)

Loss per share - Basic and diluted		-			-			-			-			-

Loss from continuing operations		(0.03	)		(0.02	)		(0.04	)		(0.03	)		-

Gain (loss) from discontinued operations		-			-			-			-			(0.01	)

Balance Sheet Data	Year Ended December 31,

	2008		2007		2006		2005			2004
Cash	$	7,055,591	$	12,007,344	$	3,684,248	$	705,856		$	295

Working capital (deficiency)		5,885,930		11,105,436		2,207,177		(472,267	)		(1,685,366	)

Total assets		167,479,633		160,132,878		12,243,481		4,329,415			1,644

Total liabilities		53,875,501		53,932,202		2,443,637		1,629,063			1,685,661

Total stockholders’ equity (deficit)		113,604,132		106,200,676		9,799,844		2,700,352			(1,684,017	)

Long-term debt, including current portion		2,217,847		2,420,660		-		-			-

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

Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil		$	Nil

Expenses		1,251,140			1,415,440			1,412,342			1,063,035			1,146,603			795,897

Loss from operations		(1,251,140	)		(1,415,440	)		(1,412,342	)		(1,063,035	)		(1,146,603	)		(795,897	)

Net loss		(765,055	)		(910,900	)		(859,735	)		(592,696	)		(801,291	)		(423,757	)

Basic and diluted loss per share		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Selected Quarterly Financial Data				Three Months Ended
	6/30/07			3/31/07			12/31/06			9/30/06			6/30/06			3/31/06

Revenues	$	Nil		$	Nil		$	Nil		$	Nil		$	Nil		$	Nil

Expenses		986,687			721,547			1,168,423			875,181			1,064,487			627,988

Loss from operations		(986,687	)		(721,547	)		(1,168,423	)		(875,181	)		(1,064,487	)		(627,988	)

Net loss		(586,835	)		(409,935	)		(834,872	)		(570,461	)		(788,271	)		(347,374	)

Basic and diluted loss per share		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)

	BUDGET

Administrative Expenses	$	1,500,000
Legal and Accounting Expenses	$	1,500,000

SUBTOTAL	$	3,000,000

Clarkdale Slag Project
Production Module Operation	$	3,500,000
Technical Consulting Services	$	1,000,000
Feasibility Study and Expansion Preparation	$	1,000,000

SUBTOTAL	$	5,500,000

Searchlight Gold Project
Metallurgical Testing and Pre-Feasibility Program	$	100,000
Permitting & Drilling Program	$	400,000

SUBTOTAL	$	500,000

TOTAL	$	9,000,000

	At December 31, 2008			At December 31, 2007			At December 31, 2006
Current Assets	$	7,307,005		$	12,200,133		$	3,790,483
Current Liabilities		(1,421,075	)		(1,094,697	)		(1,583,306	)
Working Capital	$	5,885,930		$	11,105,436		$	2,207,177

	Year Ended December 31, 2008			Year Ended December 31, 2007
Cash Flows used in Operating Activities	$	(4,382,549	)	$	(3,358,558	)
Cash Flows used in Investing Activities		(8,129,892	)		(14,347,827	)
Cash Flows provided by Financing Activities		7,560,688			26,029,481
Net (Decrease) Increase in Cash During Period	$	(4,951,753	)	$	8,323,096

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

Long-term obligation	$	360,000	$	720,000	$	720,000	$	1,140,000	$	2,940,000
Capital lease obligation		26,401		41,802		-		-		68,203

Total	$	386,401	$	761,802	$	720,000	$	1,140,000	$	3,008,203

Name	Position	Age

Ian R. McNeil	Director (Class I), Chief Executive Officer and President	37
Carl S. Ager	Director (Class II), Vice President, Secretary and Treasurer	35
Melvin L. Williams	Chief Financial Officer	49
Harry B. Crockett	Director (Class II)	67
Robert D. McDougal	Director (Class III)	77
Martin B. Oring	Director (Class III)	63

Name	Principal Position	2006 Salary		2007 Salary		Base Salary % Change
Ian R. McNeil	President, Chief Executive Officer and Chairman of the Board	$	108,000	$	190,000		76	%

Melvin L. Williams	Chief Financial Officer	$	60,000	$	130,000		117	%

Carl S. Ager	Vice President, Treasurer, and Director	$	80,000	$	160,000		100	%

												Non-
										Non-Equity		qualified
Name and										Incentive		Deferred		All Other
Principal		Salary		Bonus		Stock		Option		Plan		Compensation		Compensation		Total
Position	Year	($)		($)		Awards		Awards (1)		Compensation		Earnings		($)		($)

Ian R.	2008		190,000		-		-		-		-		-		-		190,000
McNeil,	2007		179,750		-		-		40,643		-		-		-		220,393
Director,	2006		108,000		-		-		71,642		-		-		-		179,642
President and
CEO (2)
Carl S. Ager,	2008		160,000		-		-		-		-		-		-		160,000
Director,	2007		150,000		-		-		40,643		-		-		-		190,643
Vice	2006		80,000		-		-		71,642		-		-		-		151,642
President
and
Secretary (3)
Melvin L.	2008		130,000		-		-		-		-		-		22,468		152,468
Williams,	2007		121,250		-		-		40,958		-		-		11,260		173,468
Chief	2006		32,500		-		103,000		9,163		-		-		-		144,663
Financial
Officer (4)

			Option Awards							Stock Awards

					Equity
					Incentive
			Number of		Plan Awards:
	Number of		Securities		Number of					Number of
	Securities		Underlying		Securities					Shares or
	Underlying		Unexercised		Underlying					Units
	Unexercised		Options		Unexercised		Option		Option	of Stock that
	Options (#)		(#)		Unearned		Exercise		Expiration	Have Not
Name and Position	Exercisable		Unexercisable		Options		Price		Date	Vested (#)
Ian R. McNeil		500,000		-		-	$	0.44	11/11/10		-
Director, President		60,000		-		-	$	1.70	4/7/11		-
and CEO		250,000		-		-	$	2.40	6/6/11		-
		24,800		-		-	$	4.04	2/16/12	–
Carl S. Ager		500,000		-		-	$	0.44	11/11/10		-
Director, Vice		60,000		-		-	$	1.70	4/7/11		-
President,		250,000		-		-	$	2.40	6/6/11		-
Treasurer and		24,800		-		-	$	4.04	2/16/12		-
Secretary
Melvin L. Williams		100,000		-		-	$	2.06	6/14/11		-
Chief Financial Officer		18,600		-		-	$	4.04	2/16/12		-

	Fees
	Earned or						Non-Equity
	Paid in		Stock		Option		Incentive Plan		All Other
	Cash		Awards		Awards		Compensation		Compensation		Total
Name	($)		($)(1)< /font>		($)(1)		($)		($)		($)
Martin B. Oring (2)		9,000		-		27,026		-		-		36,026
Robert D. McDougal (3)		36,000		36,000		-		-		-		72,000
Harry B. Crockett (4)		36,000		36,000		-		-		-		72,000

(1)	The dollar value of stock awards and options awards are calculated in accordance with Statement of Financial Accounts (“SFAS”) 123R, Share Based Payments.

	Name and Address	Amount and Nature of			Percentage of
	of Beneficial Owner	Beneficial Ownership			Common Stock(1)
DIRECTORS AND OFFICERS
	Ian R. McNeil		17,842,394	(2)(8)		14.89	%
	Carl S. Ager		17,842,394	(3)(8)		14.89	%
	Melvin L. Williams		174,600	(4)		*
	Robert D. McDougal		813,214	(5)		*
	Harry B. Crockett		7,642,982	(6)		6.44	%
	Martin B. Oring		853,683	(7)		*
	All officers and directors as a group (6 persons)		28,569,267			23.50	%
HOLDERS OF MORE THAN 5% OF OUR COMMON STOCK
	Nanominerals Corp. 3500 Lakeside Court, Suite 206 Reno, Nevada 89509		16,600,000	(8)		13.95	%

	K. Ian Matheson 2215 Lucerne Circle Henderson, Nevada 89014		10,782,004	(9)		8.51	%

	Dr. Charles A. Ager 17146 – 20th Avenue Surrey, British Columbia, Canada V3S 9N4		17,645,190	(8)(10)		14.83	%

	Luxor Capital Group, LP 767 Fifth Avenue, 19th Floor New York, New York 10153		12,000,000	(11)		9.77	%

(4)	Consists of 56,000 shares held directly by Melvin L. Williams and options to acquire an additional 118,600 shares of our common stock.

(5)	Consists of 238,155 shares held directly by Robert D. McDougal, 25,059 shares held by Robert D. McDougal as Trustee of the Robert D. McDougal and Edna D. McDougal Family Trust Dated December 13, 2007 and options to acquire an additional 550,000 shares of our common stock.

(6)	Consists of 7,608,882 shares held by Harry B. Crockett, as Trustee of the Marcia and Harry Crockett 2004 Family Trust UA dated April 24, 2004 and 34,100 shares held directly by Mr. Crockett.

	Total Payments		Amount Applied to Interest		Amount Applied to Principal		Balance

2/15/07 Discounted Acquisition Liability							$	2,501,187

Quarter Ended 3/31/07	$	60,000	$	17,942	$	42,058		2,459,129
Quarter Ended 6/30/07		90,000		48,910		41,090		2,418,039
Quarter Ended 9/30/07		90,000		48,082		41,918		2,376,121
Quarter Ended 12/31/07		90,000		47,239		42,761		2,333,360

2007 Totals		330,000		162,173		167,827		2,333,360

Quarter Ended 3/31/08		90,000		46,378		43,622		2,289,738
Quarter Ended 6/30/08		90,000		45,499		44,501		2,245,237
Quarter Ended 9/30/08		90,000		44,603		45,397		2,199,840
Quarter Ended 12/31/08		90,000		43,690		46,310		2,153,530

2008 Totals	$	270,000	$	136,480	$	133,520	$	2,153,530

	2008		2007

Audit Fees	$	80,436	$	66,000
Audit-Related Fees		-		29,917

Tax Fees		-		-

All Other Fees		34,643		-

Total	$	115,079	$	95,917

Reference Number		Item

3.1		Articles of Incorporation, as amended and restated to date (1)
3.2		Amended and Restated Bylaws (2)
4.1		Specimen Stock Certificate (3)
4.2		Form of US Warrant Certificate dated February 23, 2007, as amended (4)
4.3		Form of US Broker’s Warrant Certificate dated February 23, 2007, as amended (4)
4.4		Form of Non-US Warrant Certificate dated February 23, 2007, as amended (4)
4.5		Form of Non-US Broker’s Warrant Certificate dated February 23, 2007, as amended (4)
4.6		Form of Warrant Certificate dated March 21, 2007, as amended (4)
4.7		Form of Broker’s Warrant Certificate dated March 21, 2007, as amended (4)
4.8		Form of subscription agreement for February 2007 private placement (US investors) (5)
4.9		Form of subscription agreement for February 2007 private placement (non-US investors) (5)
4.10		Form of subscription agreement for March 2007 private placement (non-US investors) (5)
4.11		Rights Agreement, dated as of August 24, 2009, between Searchlight Minerals Corp. and Empire Stock Transfer Inc. (6)
10.1		2002 Nonqualified Stock Option Plan (7)

10.2		2003 Nonqualified Stock Option Plan (8)
10.3		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals Inc., Kiminco Inc., Pass Minerals Inc., Debra L. Matheson, and Pilot Plant Inc. dated February 8, 2005 (9)
10.4		Letter Agreement between Phage Genomics Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Pilot Plant Inc. dated February 8, 2005 (9)
10.5		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Bear Dog Mines Inc. dated February 8, 2005 (9)
10.6		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Gold Hunter Inc. dated February 8, 2005 (9)
10.7		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., Michael D. Anderson, Farrell Drozd, Michael I. Matheson, and Pass Minerals Inc. dated February 8, 2005 (9)
10.8		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Britti Gold Inc. dated February 8, 2005 (9)
10.9		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., Michael D. Anderson, Geosearch Inc., Patrick I. Matheson, and Geotech Mining Inc. dated February 8, 2005 (9)
10.10		Letter Agreement between Phage Genomics, Inc., Searchlight Minerals, Inc., Kiminco Inc., Pass Minerals Inc., and Gold Crown Inc. dated February 8, 2005 (9)
10.11		Engagement Letter dated June 17, 2005 between Searchlight Minerals Corp. and Clarion Finanz AG (10)
10.11		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Pilot Plant Inc. (10)
10.12		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Bear Dog Mines Inc. (10)
10.13		Extension Agreement dated effective June 22, 2005 among Phage Genomics, Inc., Searchlight Minerals, Inc., K. Ian Matheson, and Gold Hunter Inc. (10)
10.14		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp.,, K. Ian Matheson, Searchlight Minerals, Inc., Pass Minerals Inc., Michael D. Anderson, Farrell Drozd and Michael I. Matheson (10)
10.15		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Britti Gold Inc. (10)
10.16		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc., Geotech Mining Inc., Michael D. Anderson, Geosearch Inc. and Patrick B. Matheson (10)
10.17		Extension Agreement dated effective June 22, 2005 among Searchlight Minerals Corp., K. Ian Matheson, Searchlight Minerals, Inc. and Gold Crown Minerals Inc. (10)
10.18		Assignment Agreement dated for reference June 1, 2005 between Searchlight Minerals Corp. and Nanominerals Corp. (11)
10.19		First Amendment to Assignment Agreement between Nanominerals Corp. and Searchlight Minerals Corp. dated August 31, 2005 (12)
10.20		Second Amendment to Assignment Agreement between Nanominerals Corp. and Searchlight Minerals Corp. dated October 24, 2005 (13)
10.21		Office Suite Lease Agreement between Burnett & Williams Executive Suites and Searchlight Minerals Corp. dated September 6, 2005 (12)
10.22		Employment Agreement between Searchlight Minerals Corp. and Carl S. Ager dated as of January 1, 2006 (13)
10.23		Employment Agreement between Searchlight Minerals Corp. and Ian R. McNeil dated as of January 1, 2006 (14)
10.24		Employment Agreement between Searchlight Minerals Corp. and Melvin L. Williams dated as of June 14, 2006 (15)
10.25		2007 Stock Option Plan (16)
10.26		Engineering Services Agreement dated as of May 1, 2006 with Cimetta Engineering and Construction Co. (17)
10.27		Office Suite Lease Agreement between Burnett & Williams Executive Suites and Searchlight Minerals Corp. dated July 20, 2006 (18)
10.28		Contract for Engineering Services dated March 21, 2005 (18)
10.29		Contract for Drilling Services dated May 23, 2006 between Boart Longyear Company and Searchlight Minerals Corp. and Contact for Services dated October 17, 2005 between Boart Longyear Company and Searchlight Minerals Corp. (18)
10.30		Letter Agreement dated November 22, 2006 among Verde River Iron Company, LLC, Harry B. Crockett, Gerald Lembas and Searchlight Minerals Corp. (19)

10.31		Notice of Exercise Option (20)
10.32		Amendment No. 1 to Letter Agreement dated February 15, 2007 (5)
10.33		Agreement and Plan of Merger dated February 15, 2007 between Verde River Iron Company, LLC, Transylvania International, Inc., Clarkdale Minerals LLC and Searchlight Minerals Corp. (21)
10.34		Special Warranty Deed dated February 15, 2007 (21)
10.35		Bill of Sale dated February 15, 2007 (21)
10.36		Agreement between Transylvania International, Inc. and Architecture Works Inc. (Reynold P. Radoccia, Architect) dated November 14, 2005 (21)
10.38		Effluent lease dated August 25, 2004 between Town of Clarkdale, Transylvania International, Inc. and Verde River Iron Company, LLC (21)
10.39		Articles of Merger between Transylvania International, Inc. and Clarkdale Minerals LLC dated February 15, 2007 (21)
10.40		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Ian R. McNeil. (22)
10.41		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Carl S. Ager. (22)
10.42		First Amendment to Employment Agreement dated February 16, 2007 between Searchlight Minerals Corp. and Melvin L. Williams. (22)
10.43		Non-Exclusive Agency Agreement dated February 9, 2007 between Empire Financial Group, Inc. and Searchlight Minerals Corp. (23)
10.44		Agency Agreement dated January 30, 2007 between S&P Investors, Inc. and Searchlight Minerals Corp.(23)
10.45		Agency Agreement dated January 31, 2007 between Zuri Invest Limited and Searchlight Minerals Corp.(23)
10.46		Agency Agreement dated March 21, 2007 between D&D Securities Company and Searchlight Minerals Corp.(24)
10.47		Consulting Agreement dated January 31, 2008 between Searchlight Minerals Corp. and RJ Falkner and Company, Inc. (25)
10.48		Letter of Engagement with DCM Structured Finance dated September 6, 2007 (26)
10.49		General Contractor Agreement, dated May 4, 2007 (and addendums thereto) between the Company and Talson Corporation (27)
10.50		Engineering Services Agreement, dated April 4, 2006 (and addendum thereto) between the Company and Cimetta Engineering and Construction Co., Inc. (27)
10.51		Agreement for Architectural Services, dated November 14, 2005 (and addendum thereto) between the Company and Architecture Works Inc. (27)
10.52		Mining Claim Purchase Agreements regarding transfer of title to Searchlight Claims (1)
10.53		Independent Contractor Agreement with Donald Wohl, dated May 1, 2008 (1)
10.54		General Contractor Agreement, dated August, 2008 (and addendums thereto) between the Company and Talson Corporation (1)
10.55		Development Agreement, dated as of January 9, 2009, between Clarkdale Minerals, LLC and the Town of Clarkdale, Arizona (5)
14.1		Code of Ethics (28)
16.1		Letter re change in certifying accountant (29)
21.1		List of Wholly Owned Subsidiaries
23.1		Consent of Dr. Richard F. Hewlett
23.2		Consent of Nanominerals Corp.
23.3		Consent of Mountain States R&D International Inc.
23.4		Consent of Independent Mining Consultants, Inc.
23.5		Consent of Arrakis, Inc.
23.6		Consent of Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation
23.7		Consent of Scott W. Lindsay

23.8		Consent of Canadian Environmental & Metallurgical Inc.
23.9		Consent of SGS Lakefield Research Limited
23.10		Consent of Kyle L. Tingle, CPA, LLC
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Audit Committee Charter (28)
99.2		Disclosure Committee Charter (30)
99.3		Related Party Transactions Policy (31)