Unassociated Document

On behalf of Searchlight Minerals Corp. (the “Company”), we write in response to the supplemental comment letter of the staff of the Securities and Exchange Commission (the “Commission”), dated October 13, 2011 (the “Comment Letter”), relating to the above-referenced Annual Report on Form 10-K. The Company also has responded to the Comment Letter by the filing of a formal response letter (the “Response Letter”) with the Commission, which has been filed electronically on EDGAR.

The following responses correspond to the numbered paragraphs in your Comment Letter. The responses and undertakings contained in this letter are the positions of the Company. For your convenience, we have set forth each comment in bold typeface and included the Company’s response below the relevant comment:

We have read your response to our prior comments and the details you provided pertaining to issues raised in the course of an earlier review in formulating the additional comments in this letter. We have endeavored to further clarify aspects of the accounting and reporting that is required in your periodic reports, with emphasis on matters or circumstances which have either subsequently changed or which were not otherwise included in the scope of correspondence. We suggest that you contact us by telephone if you require further clarification or guidance in preparing your response.

Response: In response to your comments and based on discussions with the Staff, the Company has updated its disclosure with respect to its autoclaving study in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview - Clarkdale Slag Project”). The Company intends to use this form of disclosure in the future, subject to updates regarding the status of the Clarkdale Slag Project.

We note that you identify in the Form 8-K that you filed on September 6, 2011, SGS Lakefield Research Chile, S.A. as the independent engineering company that performed a number of your autoclave tests. Please submit the consent that you obtained from SGS Lakefield Research Chile, S.A. in making this disclosure. Also tell us whether this company has prepared an independent technical report.

Response: In response to your comments, the Company has enclosed with this letter, which is attached hereto as Exhibit A for your reference, the signed consent from SGS Lakefield Research Chile, S.A. with respect to the Company’s Report on Form 8-K, filed on September 6, 2011. In addition, the Company has filed a consent from SGS Lakefield Research Chile, S.A. with respect to the Company’s Report on Form 10-Q for the quarter ended September 30, 2011, filed on November 14, 2011, as Exhibit 23.1, which references the autoclave tests.

We note your response to prior comment 3 explaining that the current audit report encompasses the inception to date period with the language “inception cumulative data prospectively from January 1, 2006.” However, since your inception date was January 14, 2000 rather than January 1, 2006 the audit report does not conform to the fourth standard of reporting in AU §508.04, requiring auditors to express an opinion regarding the financial statements “taken as a whole” or to make an assertion indicating that such an opinion cannot be expressed. The guidance in AU §508.65 clarifies that this extends to comparative financial information. We have guidance in SAB Topic 1.E.2 precluding our acceptance of any audit report that is qualified as to the scope of the audit; and the guidance in AU §508.64 advises auditors against issuing piecemeal opinions when the auditor is unable to express an opinion on the financial statements taken as a whole.

Please direct your current auditor to the guidance on issuing an opinion that is based in part on the report of another auditory in AU §508.12, and obtain and file an audit report from your current auditor which conforms to this guidance. If your current auditor places reliance on the work of your prior auditor and makes reference to that effect in its report in covering the entire inception-to-date period, then you will need to follow the guidance in Rule 2-05 of Regulation S-X, and continue to obtain and file a reissued audit report from the prior auditor each time you file an annual report with the cumulative amounts.

In response to the Staff’s comment that the inception date was actually January 14, 2000 rather than January 1, 2006, the Company’s current auditor has corrected that date to read from January 14, 2000. The Company’s current auditor has advised the Company that it takes responsibility for the financial statements being presented fairly, as a whole.

In response to the Staff’s comment regarding other auditor reliance, the Company requested its current auditor to research the guidance in AU Section 508.12 on issuing an opinion that is based in part on the report of another auditor. The Company’s auditor has informed the Company that as to cumulative data, the current auditor places reliance on the work of the prior auditor. In response, the current auditor has amended its 2010 audit opinion, dated March 4, 2011, to include the following language:

“We did not audit the financial statements from which the inception cumulative data prospectively from January 14, 2000 through January 1, 2006 which is included for comparative analysis. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Searchlight Minerals Corp. (An Exploration stage Company), is based solely on the report of other auditors.”

Using the guidance of Rule 2-05 of Regulation S-X, the Company also will obtain and file a reissued audit report from this prior auditor each time the Company files an annual report with the cumulative amounts, so long as the Company’s current (or then current) auditor continues to file its opinion with reliance placed on the work of the prior auditor. In addition, the Company will file an amendment to the Form 10-K for the year ended December 31, 2010, which includes the entire 2010 financial statement, together with the related auditor reports (including the enclosed amended form of auditor report from the Company’s current auditor).

We understand from your response to prior comment 4 that you have not conducted impairment testing of the amounts capitalized as long-lived assets. While we ordinarily find that documentation generated in the course of justifying a mineral interest purchase decision is also useful in supporting the amounts assigned when conducting an impairment test shortly after acquisition, as the period of ownership extends, information gathered about mineralization on the properties or other aspects of the project or operations which had been contemplated, must be taken into account.

Under FASB ASC 360-10-35-21.c you must conduct impairment testing whenever you report a current period operating or cash flow loss, while also having a history of such losses. The event which creates this requirement is your current period loss. Therefore, as an exploration stage company, you need to update your impairment testing each period that you continue to report an operating or cash flow loss to comply with GAAP. If you have information about mineralization that is reliable, and you are able to estimate value beyond proven and probable reserves following the guidance in FASB ASC 930-360-35, such value should be considered in your impairment testing.

Response: In response to your Comment 5, at December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011, the Company considered ASC 360 in its internal impairment review. For these periods, the Company did not believe that an event had occurred that indicated the carrying amount of the Clarkdale Project assets may not be recoverable.

No specific impairment test was performed for December 31, 2010, March 31, 2011 and June 30, 2011. However, in light of the Staff’s comments, the Company conducted an impairment test under ASC 360 for September 30, 2011 and included a statement to that effect in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. The Company will continue to conduct an impairment test under ASC 360 in the future for each succeeding quarterly period until such time as the Company is no longer required to do so.

Prior to filing the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2011 and June 30, 2011, the Company contemporaneously completed multiple processes to obtain internal assurance that no impairment had occurred for the respective periods covered by such reports.

As detailed in the separate cover letter transmitting a further confidential submission to the Staff, the Company is requesting confidential treatment of this information and that it be returned to the Company under the guidelines of Rule 418(b) under the Securities Act and Rule 12b-4 under the Exchange Act.

We have read your response to prior comment 5 explaining that while you believe no accounting is required for your modification to the terms of “subject warrants” you have determined that liability accounting is required for your “offering warrants.” However, you propose to commence your accounting in the 2011 third quarter rather than restate earlier periods as you do not believe the differences are material.

We understand that you evaluated the need for derivative accounting in your earlier analysis of the subject warrants but did not address the prospect of accounting for the value conveyed in the modification alone, apart from that consideration. You state that you lowered the exercise price and extended the exercise period of the subject warrants because you believed this “could potentially induce the exercise of the Subject Warrants and raise additional capital.” As it appears that you have conveyed value that was not contemplated in the original placements, we believe that recognition of an investor relations expense for the incremental value of the warrant modifications would be required based on analogous guidance contained in FASB ASC Section 718-20-35-3 and 4. This guidance is clear in characterizing an equity instrument modification as incremental value which should receive accounting recognition.

The guidance in SAB Topic 14:A clarifies our view on the applicability of this guidance by analogy to share based payments with non-employees. We have also expressed our view on the accounting for offering costs in SAB Topic 5:A, which while contemplating the deferral and offsetting of costs directly attributable to a proposed or actual offering of securities against proceeds, does not accommodate similar treatment of costs which are unrelated and subsequent to an offering. Given the foregoing, we believe that you should expand your materiality analysis to encompass the accounting required for modifications to the subject warrants and to address the impact on all annual periods.

Response: In response to Comment 6, the Company has reviewed its accounting treatment of the modifications of the “subject warrants.” Upon review of SAB Topic 5:A, the Company does not necessarily agree with the Staff’s position that the Company’s deemed dividend treatment should be updated based on the costs being not directly related to and subsequent to the original financing transactions, and that the modifications resulted in incremental value to the warrant holders. The Company notes the absence of U.S. GAAP literature that directly addresses transactions of this type (see also the response of Geos Communications, Inc., dated February 8, 2011, to the Staff’s Comment No. 3 on the accounting treatment regarding the exchange of warrants).

The Company believes that the deemed dividend accounting treatment is the best approach for the Company (given that the Company did not receive any consideration for the adjustment of the “subject warrants”). The Company would be prepared to accept and not appeal the Staff’s position. However, the decision of the Company’s board of directors ultimately rests on whether the Staff accepts the Company’s position that, although the original accounting treatment for the modifications of the “subject warrants” resulted in misstatements, the misstatements related to warrant modification expense are immaterial based on the Company’s qualitative analysis, and therefore, no restatement of the prior periods is necessary or required. This would avoid the time and expense of a restatement of the Company’s prior financial statements, which the Company believes is not necessary or required. Please advise if this is acceptable.

In furtherance of the Company’s position, in following the guidance contained in FASB ASC Section 718-20-35-3 and 4, as prescribed by SAB Topic 14:A, the Company utilized a Binomial Lattice option pricing model to estimate the incremental fair values of the warrants as a result of the modifications. This model resulted in incremental fair values of $1.8 million and $3.2 million as of December 29, 2008 (date of the first revision) and November 12, 2009 (date of the second revision), respectively.

The Company has reflected the modification of the “subject warrants” as warrant modification expense in the operating expense section of the operation statement information reflected in the tables below. As requested, the Company has expanded its materiality analysis to encompass the accounting required for the modifications of the “subject warrants” and the “offering warrants.” The effects of correcting these errors for the annual periods are shown in the following table:

	12/31/2008			12/31/2009			12/31/2010

Total Liabilities as Reported	$	53,875,501		$	50,501,368		$	46,781,075
Total Liabilities as Adjusted		53,875,501			54,754,777			47,774,461
$ Difference	$	-		$	4,253,409		$	993,386
% Difference		0.00	%		8.42	%		2.12	%

Total Equity as Reported	$	113,604,132		$	123,656,737		$	121,135,521
Total Equity as Adjusted		113,604,132			119,403,328			120,142,135
$ Difference	$	-		$	(4,253,409	)	$	(993,386	)
% Difference		0.00	%		-3.44	%		-0.82	%

Total Loss from Operations as Reported	$	(5,141,957	)	$	(7,001,187	)	$	(8,302,650	)
Total Loss from Operations as Adjusted		(5,141,957	)		(7,001,187	)		(8,302,650	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Other Income (Expense) as Reported	$	236,113		$	3,815		$	30,590
Total Other Income (Expense) as Adjusted		(1,590,557	)		(3,137,890	)		3,290,613
$ Difference	$	(1,826,670	)	$	(3,141,705	)	$	3,260,023
% Difference		-773.64	%		-82351.38	%		10657.15	%

Total Net Income (Loss) as Reported	$	(3,128,386	)	$	(4,135,424	)	$	(5,000,138	)
Total Net Income (Loss) as Adjusted		(4,955,056	)		(7,277,129	)		(1,740,115	)
$ Difference	$	(1,826,670	)	$	(3,141,705	)	$	3,260,023
% Difference		58.39	%		75.97	%		-65.20	%

Total Cash Flows used in Operating Activities as Reported	$	(4,382,549	)	$	(6,050,198	)	$	(7,086,859	)
Total Cash Flows used in Operating Activities as Adjusted		(4,382,549	)		(6,050,198	)		(7,086,859	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

	3/31/2009			6/30/2009			9/30/2009

Total Liabilities as Reported	$	52,937,786		$	52,288,454		$	51,429,384
Total Liabilities as Adjusted		52,937,786			52,288,454			51,429,384
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Equity as Reported	$	112,794,236		$	111,785,740		$	110,723,821
Total Equity as Adjusted		112,794,236			111,785,740			110,723,821
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Loss from Operations as Reported	$	(1,572,226	)	$	(3,302,201	)	$	(5,125,135	)
Total Loss from Operations as Adjusted		(1,837,981	)		(3,302,201	)		(5,125,135	)
$ Difference	$	(265,755	)	$	-		$	-
% Difference		16.90	%		0.00	%		0.00	%

Total Other Income (Expense) as Reported	$	11,078		$	17,695		$	28,622
Total Other Income (Expense) as Adjusted		11,078			17,695			28,622
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Net Income (Loss) as Reported	$	(980,055	)	$	(2,058,384	)	$	(3,194,874	)
Total Net Income (Loss) as Adjusted		(980,055	)		(2,058,384	)		(3,194,874	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Cash Flows used in Operating Activities as Reported	$	(1,548,896	)	$	(2,980,743	)	$	(4,544,023	)
Total Cash Flows used in Operating Activities as Adjusted		(1,548,896	)		(2,980,743	)		(4,544,023	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

	3/31/2010			6/30/2010			9/30/2010

Total Liabilities as Reported	$	49,446,648		$	48,530,744		$	47,518,941
Total Liabilities as Adjusted		52,658,026			50,127,905			50,863,532
$ Difference	$	3,211,378		$	1,597,161		$	3,344,591
% Difference		6.49	%		3.29	%		7.04	%

Total Equity as Reported	$	122,676,178		$	121,490,101		$	120,195,897
Total Equity as Adjusted		119,464,800			119,892,940			116,851,306
$ Difference	$	(3,211,378	)	$	(1,597,161	)	$	(3,344,591	)
% Difference		-2.62	%		-1.31	%		-2.78	%

Total Loss from Operations as Reported	$	(1,837,981	)	$	(3,969,983	)	$	(6,166,405	)
Total Loss from Operations as Adjusted		(1,837,981	)		(3,969,983	)		(6,166,405	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Other Income (Expense) as Reported	$	5,740		$	20,603		$	35,550
Total Other Income (Expense) as Adjusted		1,047,771			2,676,851			944,368
$ Difference	$	1,042,031		$	2,656,248		$	908,818
% Difference		18153.85	%		12892.53	%		2556.45	%

Total Net Income (Loss) as Reported	$	(1,026,677	)	$	(2,296,418	)	$	(3,680,234	)
Total Net Income (Loss) as Adjusted		15,354			359,830			(2,771,416	)
$ Difference	$	1,042,031		$	2,656,248		$	908,818
% Difference		-101.50	%		-115.67	%		-24.69	%

Total Cash Flows used in Operating Activities as Reported	$	(1,841,719	)	$	(3,595,295	)	$	(5,595,407	)
Total Cash Flows used in Operating Activities as Adjusted		(1,841,719	)		(3,595,295	)		(5,595,407	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

	3/31/2011			6/30/2011			9/30/2011

Total Liabilities as Reported	$	45,702,437		$	45,074,141		$	46,936,330
Total Liabilities as Adjusted		45,702,437			45,074,141			46,936,330
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Equity as Reported	$	121,419,101		$	120,898,061		$	117,900,796
Total Equity as Adjusted		121,419,101			120,898,061			117,900,796
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Loss from Operations as Reported	$	(1,739,638	)	$	(3,376,897	)	$	(2,055,300	)
Total Loss from Operations as Adjusted		(1,739,638	)		(3,376,897	)		(2,055,300	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

Total Other Income (Expense) as Reported	$	(517,859	)	$	(507,928	)	$	(2,619,938	)
Total Other Income (Expense) as Adjusted		475,527			485,458			(2,619,938	)
$ Difference	$	993,386		$	993,386		$	-
% Difference		-191.83	%		-195.58	%		0.00	%

Total Net Income (Loss) as Reported	$	(1,436,566	)	$	(2,471,222	)	$	(3,493,663	)
Total Net Income (Loss) as Adjusted		(443,180	)		(1,477,836	)		(3,493,663	)
$ Difference	$	993,386		$	993,386		$	-
% Difference		-69.15	%		-40.20	%		0.00	%

Total Cash Flows used in Operating Activities as Reported	$	(1,562,567	)	$	(2,657,066	)	$	(3,995,217	)
Total Cash Flows used in Operating Activities as Adjusted		(1,562,567	)		(2,657,066	)		(3,995,217	)
$ Difference	$	-		$	-		$	-
% Difference		0.00	%		0.00	%		0.00	%

The Company believes that the correction of the accounting for the modifications of the “subject warrants” does not change its qualitative assessment of materiality conducted on the “offering warrants” in the response to Comment 5 in the Company’s letter, dated September 15, 2011, which is further supported by the following:

Although the Company agrees that the original accounting treatment for the modifications of the “subject warrants” resulted in misstatements, the Company continues to believe that the misstatements are immaterial based on its qualitative analysis, and therefore, no restatement of the prior periods is necessary or required. Effective September 30, 2011, the Company recorded the incremental fair value of the modifications as a deemed dividend and reclassified $4,996,955 from paid-in capital to accumulated deficit. For future filing periods, the Company will include $4,996,955 of warrant modification expense as an operating expense in the cumulative information from the date of inception and will update its disclosures accordingly.

Further, the Company hereby submits, as Exhibit C to this letter, a form of disclosure regarding Footnote 20 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, assuming the Company had applied the accounting treatment described above to the “subject warrants” in such report.

We have read your response to prior comment 6 concerning your rationale in offsetting losses each period by recognizing tax benefits. You state that future reversals of existing temporary differences are the primary source of taxable income you expect to generate in order to utilize your accumulating tax assets. You also explain that if these do not arise you will sell assets in order to generate income to support your more-likely-than-not view of tax asset realization. We believe that you need to revisit and update your analysis of negative and positive evidence underpinning your view about the need for a valuation allowance to reflect the changes in circumstances which occur each period.

Given that you have no source of revenues, no mineral reserves, and cumulative losses since inception; further details will be necessary to understand how you have complied with FASB ASC 740-10-30-21 and 23, in overcoming the preponderance of negative evidence apparent in your filing. Accordingly, please submit the analysis underlying your accounting. It should be clear how the weights you have assigned to each element are commensurate with the extent to which the element can be objectively verified.

If you continue to believe that you complied with GAAP in recognizing tax benefits each period, then please address each of the following disclosure excerpts pertaining to your unprofitable operations and unsettled circumstances, all of which appear to constitute negative evidence, and explain how you have overcome these circumstances in your analysis, i.e. identify the more compelling positive evidence compiled.

Page 22: “In order for us to assert a valid right in the 160 acre Searchlight Claims which we acquired in June 2008, there must have been a discovery with respect to the Searchlight Claims prior to their transfer…if the BLM was to determine that a discovery was not made on any of the 10-acre portions of the association placer claims before any of such claims were conveyed to us [this could]…result in the loss of our rights in the surrounding 150 acres of the particular claim”

If you have relied on tax planning strategy in determining that you would not recognize a valuation allowance then also include details sufficient to understand which assets you intend to sell in order to utilize the tax benefits, the periods in which these would be sold, the book and tax values assigned, and your underlying computations. Please explain how selling these assets would be consistent with your operations as a going concern.

Response: In response to the Staff’s Comment 7, the Company continues to believe that the Company has complied with GAAP in recognizing tax benefits in each of the periods reported. In support of this assertion, the Company considered the guidance in ASC 740-10-30-18, which identifies the four “sources of income” that a company may rely upon to support the validity of the deferred tax assets, and therefore not require a valuation allowance.

The Company notes that Comment 7 requests that the Company provide an analysis of how the Company overcame the “negative evidence” contained in its annual report in the operational section on pages 4 and 9, and further discussed in the risk factors section on pages 17, 19, 20, 22 and 25. Each of the items noted in the comment, address questions related to the Company’s past, present and future profitability, which is a source of income defined in the standard under paragraph (b) which can be used to support a deferred tax asset. The Company does not disagree with the Staff’s comments that risks and uncertainty exist regarding the Company’s future profitability and, therefore, future profitability cannot be used to support the deferred tax assets, and hence the Company has not relied on this “source of income” to arrive at its conclusion that no valuation allowance is required on our deferred tax assets.

However, the Company has relied on ASC 740-10-30-18, paragraph (a), which states that the “future reversals of existing taxable temporary differences” are a source of income. The Company has concluded that its deferred tax liabilities are amortizable, and that this amortization will begin (in the form of depletion) with the processing of the mineralized material once production has commenced, and therefore, will reverse in sufficient similar time periods as the deferred tax assets. In terms of weighting, processing of mineralized material is the overriding source of reversal. As such, the deferred tax liabilities provide a “source of income” sufficient to support the Company’s deferred tax assets and its conclusion that no valuation allowance is necessary.

In prior communications to the Staff, the Company indicated that an additional source of income could be obtained by selling assets. However, the Company notes that this is not its primary strategy of obtaining sufficient sources of income to support the deferred tax assets. The Company notes that because ASC 740-10-30-18 indicates that if one source of income is sufficient to support the deferred tax assets, then other sources of income need not be considered. Therefore, the Company is relying solely on the reversal of the deferred tax liabilities to support the deferred tax assets.

We have audited the accompanying consolidated balance sheets of Searchlight Minerals Corp. (An Exploration Stage Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, including inception cumulative data prospectively from January 14, 2000, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010. Searchlight Mineral Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements from which the inception cumulative data prospectively from January 14, 2000 through January 1, 2006, which is included for comparative analysis. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Searchlight Minerals Corp. (An Exploration Stage Company), is based solely on the report of the other auditors.

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, based on our audits and the report of other auditors, 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, 2010 and 2009, 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, 2010, in conformity with accounting principles generally accepted in the United States of America.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Searchlight Mineral Corp.’s internal control over financial reporting as of December 31, 2010, 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 4, 2011, expressed an unqualified opinion.

During the third quarter of 2011, the Company identified errors related to the accounting treatment of private placement warrants containing non-customary anti-dilutive provisions and for modifications of the term and exercise price of certain private placement warrants. The Company assessed the materiality of these errors in accordance with Staff Accounting Bulletin No. 108 and determined that the errors were qualitatively immaterial to previously reported amounts contained in its periodic reports. The Company intends to correct the errors through subsequent periodic filings.

The effects of recording these immaterial errors to the consolidated balance sheets for each of the reporting periods from December 31, 2008 through September 30, 2011 are provided in the tables below. The effects of recording these immaterial errors to the consolidated statements of operations for the three month periods ended March 31, 2009, 2010 and 2011, for the three and six month periods ended June 30, 2009, 2010 and 2011, for the three and nine month periods ended September 30, 2009, 2010 and 2011 for the years ended December 31, 2008, 2009 and 2010 and for the periods of inception through December 31, 2008, 2009, 2010 and September 30, 2011 are presented in the tables below. None of the adjustments had an impact on cash flows for any of the periods presented.

Summarized Consolidated Balance Sheet - December 31, 2008	As Previously Reported			Adjustment			Notes	As Revised

Additional paid-in capital	$	126,854,760		$	1,826,670		(a)		128,681,430
Accumulated deficit during exploration stage		(13,356,482	)		(1,826,670	)	(a)		(15,183,152	)
Total stockholders’ equity		113,604,132			-				113,604,132

Summarized Statement of Operations - For the Year Ended December 31, 2008	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	1,826,670		(a)	$	1,826,670
Loss from operations		(5,141,957	)		(1,826,670	)	(a)		(6,968,627	)
Net loss		(3,128,386	)		(1,826,670	)	(a)		(4,955,056	)
Net loss per common share – basic and diluted	$	(0.03	)	$	(0.02	)		$	(0.05	)

Summarized Statement of Operations - For the period from January 14, 2000 (Date of Inception) through December 31, 2008	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	1,826,670		(a)	$	1,826,670
Loss from operations		(14,250,547	)		(1,826,670	)	(a)		(16,077,217	)
Net loss		(13,356,482	)		(1,826,670	)	(a)		(15,183,152	)

Summarized Consolidated Balance Sheet – March 31, 2009	As Previously Reported			Adjustment			Notes	As Revised

Additional paid-in capital	$	127,024,412		$	1,826,670		(a)	$	128,851,082
Accumulated deficit during exploration stage		(14,336,537	)		(1,826,670	)	(a)		(16,163,207	)
Total stockholders’ equity		112,794,236			-				112,794,236

Summarized Consolidated Balance Sheet - June 30, 2009	As Previously Reported			Adjustment			Notes	As Revised

Additional paid-in capital	$	127,094,138		$	1,826,670		(a)	$	128,920,808
Accumulated deficit during exploration stage		(15,414,866	)		(1,826,670	)	(a)		(17,241,536	)
Total stockholders’ equity		111,785,740			-				111,785,740

Summarized Consolidated Balance Sheet - September 30, 2009	As Previously Reported			Adjustment			Notes	As Revised

Additional paid-in capital	$	127,168,599		$	1,826,670		(a)	$	128,995,269
Accumulated deficit during exploration stage		(16,551,356	)		(1,826,670	)	(a)		(18,378,026	)
Total stockholders’ equity		110,723,821			-				110,723,821

Summarized Consolidated Balance Sheet - December 31, 2009	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	4,253,409		(c)(d)	$	4,253,409
Total liabilities		50,501,368			4,253,409				54,754,777
Additional paid-in capital		141,029,875			714,966		(a)(b)(c)		141,744,841
Accumulated deficit during exploration stage		(17,491,906	)		(4,968,375	)	(a)(b)(d)		(22,460,281	)
Total stockholders’ equity		123,656,737			(4,253,409	)			119,403,328

Summarized Statement of Operations - For the Year Ended December 31, 2009	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	3,170,285			$	3,170,285
Loss from operations		(7,001,187	)		(3,170,285	)	(b)		(10,171,472	)
Change in fair value of derivative warrant liability		-			28,580		(d)		28,580
Total other income (expense)		3,815			28,580		(d)		32,395
Net income (loss)		(4,135,424	)		(3,141,705	)	(b)(d)		(7,277,129	)
Net income (loss) per common share – basic and diluted	$	(0.04	)	$	(0.03	)		$	(0.07	)

Summarized Statement of Operations - For the period from January 14, 2000 (Date of Inception) through December 31, 2009	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	4,996,955		(a)(b)	$	4,996,955
Loss from operations		(21,251,734	)		(4,996,955	)	(a)(b)		(26,248,689	)
Change in fair value of derivative warrant liability		-			28,580		(d)		28,580
Total other income (expense)		661,113			28,580		(d)		689,693
Net income (loss)		(17,491,906	)		(4,968,375	)	(a)(b)(d)		(22,460,281	)

Summarized Consolidated Balance Sheet - March 31, 2010	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	3,211,378		(c)(d)(e)	$	3,211,378
Total liabilities		49,446,648			3,211,378				52,658,026
Additional paid-in capital		141,075,978			714,966		(a)(b)(c)		141,790,944
Accumulated deficit during exploration stage		(18,518,583	)		(3,926,344	)	(a)(b)(d)(e)		(22,444,927	)
Total stockholders’ equity		122,676,178			(3,211,378	)			119,464,800

Summarized Statement of Operations - For the three months ended March 31, 2010	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	1,042,031	(e)	$	1,042,031
Total other income (expense)		5,740			1,042,031	(e)		1,047,771
Net income (loss)		(1,026,677	)		1,042,031	(e)		15,354
Net income (loss) per common share – basic and diluted	$	(0.01	)	$	0.01		$	-

Summarized Consolidated Balance Sheet - June 30, 2010	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	1,597,161		(c) through (f)	$	1,597,161
Total liabilities		48,530,744			1,597,161				50,127,905
Additional paid-in capital		141,159,616			714,966		(a)(b)(c)		141,874,582
Accumulated deficit during exploration stage		(19,788,324	)		(2,312,127	)	(a)(b) and (d) through (f)		(22,100,451	)
Total stockholders’ equity		121,490,101			(1,597,161	)			119,892,940

Summarized Statement of Operations - For the three months ended June 30, 2010	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	1,614,217	(f)	$	1,614,217
Total other income (expense)		14,865			1,614,217	(f)		1,629,082
Net income (loss)		(1,269,242	)		1,614,217	(f)		344,975
Net income (loss) per common share – basic and diluted	$	(0.01	)	$	0.01		$	-

Summarized Statement of Operations - For the six months ended June 30, 2010	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	2,656,248	(e)(f)	$	2,656,248
Total other income (expense)		20,603			2,656,248	(e)(f)		2,676,851
Net income (loss)		(2,296,418	)		2,656,248	(e)(f)		359,830
Net income (loss) per common share – basic and diluted	$	(0.02	)	$	0.02		$	-

Summarized Consolidated Balance Sheet - September 30, 2010	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	3,344,591		(c) through (g)	$	3,344,591
Total liabilities		47,518,941			3,344,591				50,863,532
Additional paid-in capital		141,249,219			714,966		(a)(b)(c)		141,964,185
Accumulated deficit during exploration stage		(21,172,140	)		(4,059,557	)	(a)(b) and (d) through (g)		(25,231,697	)
Total stockholders’ equity		120,195,897			(3,344,591	)			116,851,306

Summarized Statement of Operations - For the three months ended September 30, 2010	As Previously Reported			Adjustment			Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	(1,747,430	)	(g)	$	(1,747,430	)
Total other income (expense)		14,945			(1,747,430	)	(g)		(1,732,485	)
Net loss		(1,383,316	)		(1,747,430	)	(g)		(3,130,746	)
Net loss per common share – basic and diluted	$	(0.01	)	$	(0.01	)		$	(0.03	)

Summarized Statement of Operations - For the nine months ended September 30, 2010	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	908,818	(e)(f)(g)	$	908,818
Total other income (expense)		35,550			908,818	(e)(f)(g)		944,368
Net income (loss)		(3,680,234	)		908,818	(e)(f)(g)		(2,771,416	)
Net income (loss) per common share – basic and diluted	$	(0.03	)	$	0.01		$	(0.02	)

Summarized Consolidated Balance Sheet - December 31, 2010	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	993,386		(c) through (i)	$	993,386
Total liabilities		46,781,075			993,386				47,774,461
Additional paid-in capital		143,504,547			714,966		(a)(b)(c)		144,219,513
Accumulated deficit during exploration stage		(22,492,044	)		(1,708,352	)	(a)(b) and (d) through (i)		(24,200,396	)
Total stockholders’ equity		121,135,521			(993,386	)			120,142,135

Summarized Statement of Operations - For the Year Ended December 31, 2010	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	3,260,023	(e) through (i)	$	3,260,023
Total other income (expense)		30,590			3,260,023	(e) through (i)		3,290,613
Net income (loss)		(5,000,138	)		3,260,023	(e) through (i)		(1,740,115	)
Net income (loss) per common share – basic and diluted	$	(0.04	)	$	0.03		$	(0.01	)

Summarized Statement of Operations - For the period from January 14, 2000 (Date of Inception) through December 31, 2010	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	4,996,955		(a)(b)	$	4,996,955
Loss from operations		(29,554,384	)		(4,996,955	)	(a)(b)		(34,551,339	)
Change in fair value of derivative warrant liability		-		$	3,288,603		(d) through (i)	$	3,288,603
Total other income (expense)		691,703			3,288,603		(d) through (i)		3,980,306
Net income (loss)		(22,492,044	)		(1,708,352	)	(a)(b) (d) through (i)		(24,200,396	)

Summarized Consolidated Balance Sheet - March 31, 2011	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	-			$	-
Total liabilities		45,702,437			-				45,702,437
Additional paid-in capital		145,221,693			714,966		(a)(b)(c)		145,936,659
Accumulated deficit during exploration stage		(23,928,610	)		(714,966	)	(a)(b) and (d) through (k)		(24,643,576	)
Total stockholders’ equity		121,419,101			-				121,419,101

Summarized Statement of Operations - For the three months ended March 31, 2011	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	993,386	(j)(k)	$	993,386
Total other income (expense)		(517,859	)		993,386	(j)(k)		475,527
Net income (loss)		(1,436,566	)		993,386	(j)(k)		(443,180	)
Net income (loss) per common share – basic and diluted	$	(0.01	)	$	0.01		$	-

Summarized Consolidated Balance Sheet - June 30, 2011	As Previously Reported			Adjustment			Notes	As Revised

Derivative warrant liability	$	-		$	-			$	-
Total liabilities		45,074,141			-				45,074,141
Additional paid-in capital		145,734,309			714,966		(a)(b)(c)		146,449,275
Accumulated deficit during exploration stage		(24,963,266	)		(714,966	)	(a)(b) and (d) through (k)		(25,678,232	)
Total stockholders’ equity		120,898,061			-				120,898,061

Summarized Statement of Operations - For the three months ended June 30, 2011	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	-		$	-
Total other income (expense)		9,815			-			9,815
Net loss		(1,034,798	)		-			(1,034,798	)
Net loss per common share – basic and diluted	$	(0.01	)	$	-		$	(0.01	)

Summarized Statement of Operations - For the six months ended June 30, 2011	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	-		$	993,386	(j)(k)	$	993,386
Total other income (expense)		(507,928	)		993,386	(j)(k)		485,458
Net income (loss)		(2,471,222	)		993,386	(j)(k)		(1,477,836	)
Net income (loss) per common share – basic and diluted	$	(0.02	)	$	0.01		$	(0.01	)

Summarized Consolidated Balance Sheet - September 30, 2011	As Previously Reported			Adjustment		Notes	As Revised

Derivative warrant liability	$	3,122,678		$	-		$	3,122,678
Total liabilities		46,936,330			-			46,936,330
Additional paid-in capital		146,944,799			-			146,944,799
Accumulated deficit during exploration stage		(29,172,021	)					(29,172,021	)
Total stockholders’ equity		117,900,796			-			117,900,796

Summarized Statement of Operations - For the three months ended September 30, 2011	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	(3,122,678	)	$	-		$	(3,122,678	)
Total other income (expense)		(2,619,938	)		-			(2,619,938	)
Net loss		(3,493,663	)		-			(3,493,663	)
Net loss per common share – basic and diluted	$	(0.03	)	$	-		$	(0.03	)

Summarized Statement of Operations - For the nine months ended September 30, 2011	As Previously Reported			Adjustment		Notes	As Revised

Change in fair value of derivative warrant liability	$	(5,432,322	)	$	-		$	(5,432,322	)
Total other income (expense)		(3,127,867	)		-			(3,127,867	)
Net income (loss)		(5,965,011	)		-			(5,965,011	)
Net income (loss) per common share – basic and diluted	$	(0.05	)	$	-		$	(0.05	)

Summarized Statement of Operations - For the period from January 14, 2000 (Date of Inception) through September 30, 2011	As Previously Reported			Adjustment			Notes	As Revised

Warrant modification expense	$	-		$	4,996,955		(l)	$	4,996,955
Loss from operations		(34,986,706	)		(4,996,955	)	(l)		(39,983,661	)
Change in fair value of derivative warrant liability		1,159,311			-				1,159,311
Total other income (expense)		1,845,825			-				1,845,825
Net income (loss)		(24,175,066	)		(4,996,955	)	(l)		(29,172,021	)

(a)

Additional paid-in capital and warrant modification expense were increased by $1,826,670 as a result of the first amendment to the February 23, 2007 and March 22, 2007 private placement warrants, which included extending the term to March 1, 2010 and reducing the exercise price to $2.40 per share.

(b)

Additional paid-in capital and warrant modification expense were increased by $3,170,285 as a result of the second amendment to the February 23, 2007 and March 22, 2007 private placement warrants and the first amendment to the December 26, 2007 and February 7, 2008 private placement warrants, which included extending the term to November 12, 2012 and reducing the exercise price to $1.85 per share.

(c)

Additional paid-in capital was decreased and the derivative warrant liability was increased by $4,281,989 as a result of recognizing the fair value of the warrants issued with the November 12, 2009 private placement as a derivative warrant liability due to the warrants containing non-customary anti-dilution provisions.

(h)

The derivative warrant liability was increased by $1,186 and a loss on the change in fair value of derivative warrant liability was recognized in the same amount as a result of the first adjustment to the November 12, 2009 private placement warrants for the first closing of the Seaside equity funding transaction completed on December 23, 2010.

(j)

The derivative warrant liability was increased by $3,006 and a loss on the change in fair value of derivative warrant liability was recognized in the same amount as a result of the second adjustment to the November 12, 2009 private placement warrants for the second closing of the Seaside equity funding transaction completed on January 18, 2011.

The derivative warrant liability was not changed by the third, fourth or fifth closings of the Seaside equity funding transactions completed on February 15, 2011, March 15, 2011 and April 15, 2011, respectively, as the fair value of the warrants was determined to be zero at each of those dates. Additionally, the fair market value of the derivative warrant liability was determined to be zero as of June 30, 2011.

	Very truly yours,

	/s/ Jeffrey P. Berg

	Jeffrey P. Berg
	of BAKER & HOSTETLER LLP