Quarterly Report (10-q)

Share Name	Share Symbol	Market	Type
Searchlight Minerals Corp (PK)	USOTC:SRCH	OTCMarkets	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.00315	0.0023	0.004				0.00	14:46:09

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2016

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.

(Exact name of registrant as specified in its charter)

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

#100 - 2360 West Horizon Ridge Pkwy. Henderson, Nevada (Address of principal executive offices)	89052 (Zip code)

(702) 939-5247
(Registrant’s telephone number, including area code)

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

Yes x No ¨

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

Yes x No ¨

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

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

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

Yes ¨ No x

As of November 14, 2016, the registrant had 345,600,029 outstanding shares of common stock.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEARCHLIGHT MINERALS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2016			December 31, 2015
ASSETS
Current assets
Cash	$	968,187		$	453,744
Prepaid expenses		14,912			87,325
Total current assets		983,099			541,069

Property and equipment, net		5,442,377			6,301,953
Restricted cash		-			227,345
Slag project		121,890,366			121,874,102
Land - smelter site and slag pile		5,916,150			5,916,150
Land		1,696,242			1,696,242
Reclamation bond and deposits, net		14,566			14,566
Total non-current assets		134,959,701			136,030,358

Total assets	$	135,942,800		$	136,571,427
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	1,556,069		$	1,151,183
Accounts payable - related party		532,656			348,916
VRIC payable, current portion - related party		698,144			657,295
Convertible debt, net of discount		-			3,252,212
Derivative liability - convertible debt		-			590,536
Derivative warrant liability		-			53,141
Total current liabilities		2,786,869			6,053,283

Long-term liabilities
VRIC payable, net of current portion - related party		-			40,849
Deferred tax liability		48,224,926			48,224,926
Total long-term liabilities		48,224,926			48,265,775

Total liabilities		51,011,795			54,319,058
Commitments and contingencies - Note 12

Stockholders' equity
Common stock, $0.001 par value; 400,000,000 shares
authorized, 345,600,029 and 154,306,537 shares,
respectively, issued and outstanding		345,600			154,306
Additional paid-in capital		180,930,619			164,590,647
Accumulated deficit		(96,345,214	)		(82,492,584	)
Total stockholders' equity		84,931,005			82,252,369

Total liabilities and stockholders' equity	$	135,942,800		$	136,571,427

See Accompanying Notes to these Condensed Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	For the three months ended						For the nine months ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015

Revenue	$	-		$	-		$	-		$	-

Operating expenses
Mineral exploration and evaluation expenses		480,754			674,637			1,427,774			1,770,453
Mineral exploration and evaluation
expenses - related party		45,000			60,000			135,000			180,360
Administrative - Clarkdale site		-			26,682			-			91,244
General and administrative		355,399			590,130			1,311,998			1,285,513
General and administrative - related party		5,202			46,674			66,082			152,281
(Gain) on asset disposition		-			-			-			(2,548	)
Depreciation		286,353			352,988			859,576			1,068,325
Total operating expenses		1,172,708			1,751,111			3,800,430			4,545,628

Loss from operations		(1,172,708	)		(1,751,111	)		(3,800,430	)		(4,545,628	)

Other income (expense)
Rental revenue		5,100			5,100			13,600			15,300
Other expense		-			(10,591	)		-			(10,591	)
Loss on conversion of notes payable		-			-			(8,437,121	)		-
Change in fair value of derivative liabilities		-			224,943			(748,988	)		753,260
Interest expense		(114	)		(139,820	)		(880,603	)		(413,475	)
Interest and dividend income		287			791			912			1,451
Total other income (expense)		5,273			80,423			(10,052,200	)		345,945

Loss before income taxes		(1,167,435	)		(1,670,688	)		(13,852,630	)		(4,199,683	)
Income tax (expense)		-			(21,795,143	)		-			(20,677,458	)
Net loss	$	(1,167,435	)	$	(23,465,831	)	$	(13,852,630	)	$	(24,877,141	)

Comprehensive loss	$	(1,167,435	)	$	(23,465,831	)	$	(13,852,630	)	$	(24,877,141	)

Loss per common share - basic and diluted
Net loss	$	(0.00	)	$	(0.15	)	$	(0.05	)	$	(0.17	)

Weighted average common shares outstanding -
Basic		345,600,029			153,298,984			278,404,143			149,390,171
Diluted		345,600,029			153,298,984			278,404,143			149,390,171

See Accompanying Notes to these Condensed Consolidated Financial Statements

SEARCHLIGHT MINERALS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	September 30, 2016			September 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(13,852,630	)	$	(24,877,141	)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation		859,576			1,068,325
Stock based compensation		16,606			228,732
Stock based expenses		-			41,588
(Gain) on asset dispositions and impairment		-			(2,548	)
Loss incurred in connection with conversion of notes payable and accrued interest		8,437,121			-
Amortization of prepaid expense		-			235,024
Amortization of debt financing fees and debt discount		816,789			194,801
Deferred income taxes		-			20,677,458
Change loss (gain) in fair value of derivative liabilities		748,988			(753,260	)
Loss on interest settled in shares		-			10,666
Accounts payable settlement		-			(378,136	)
Changes in operating assets and liabilities:
Restricted cash		-			(227,345	)
Prepaid expenses		72,412			(256,183	)
Accounts payable and accrued liabilities		699,436			982,360
Net cash used in operating activities		(2,201,702	)		(3,055,659	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property and equipment dispositions		-			457,548
Purchase of property and equipment		-			(4,786	)
Net cash provided by investing activities		-			452,762
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock issuance		2,488,800			3,270,451
Stock issuance costs		-			(22,172	)
Cash restricted for debt collateral		227,345			-
Net cash provided by financing activities		2,716,145			3,248,279

NET CHANGE IN CASH		514,443			645,382
CASH AT BEGINNING OF PERIOD		453,744			584,976
CASH AT END OF PERIOD	$	968,187		$	1,230,358

SUPPLEMENTAL INFORMATION
Interest paid, net of capitalized amounts	$	-		$	46,011
Income taxes paid	$	-		$	-

Non-cash investing and financing activities:
Common stock issued in satisfaction of accrued interest	$	-		$	243,880
Common stock issued in satisfaction of accrued interest and convertible notes payable	$	14,025,858		$	-
Conversion of notes payable and accrued interest	$	(4,196,073	)	$	-

See Accompanying Notes to these Condensed Consolidated Financial Statements

NOTE 1 – DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES

Description of business - Searchlight Minerals Corp. (the “Company”) is an exploration stage company engaged in a slag reprocessing project and the acquisition and exploration of mineral properties. The Company is presently focused on 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.

Since the Company’s involvement in the Clarkdale Slag Project began, the goal has been to demonstrate the economic feasibility of the project by determining a commercially viable method to extract precious and base metals from the slag material.

The Company has not yet realized any revenues from its planned operations. 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 United Kingdom. On November 2, 2001, the Company entered into an acquisition agreement with Regma Bio Technologies, Ltd. pursuant to which Regma Bio Technologies, Ltd. entered into a reverse merger with the Company with the surviving entity named “Regma Bio Technologies Limited”. On November 26, 2003, the Company changed its name from “Regma Bio Technologies Limited” to “Phage Genomics, Inc.” (“Phage”).

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 and its Board of Directors approved a change in its name from Phage to "Searchlight Minerals Corp.” effective June 23, 2005.

Going concern - The accompanying condensed consolidated financial statements were prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The going concern basis of presentation assumes that the Company will continue in operation for the next twelve months and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the Company’s inability to continue as a going concern. The Company’s history of losses, working capital deficit, minimal liquidity and other factors raise substantial doubt about the Company’s ability to continue as a going concern. In order for the Company to continue operations beyond the next twelve months and be able to discharge its liabilities and commitments in the normal course of business it must raise additional equity or debt capital and continue cost cutting measures. There can be no assurance that the Company will be able to achieve sustainable profitable operations or obtain additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to management.

If the Company continues to incur operating losses and does not raise sufficient additional capital, material adverse events may occur including, but not limited to: a reduction in the nature and scope of the Company’s operations; and the Company’s inability to fully implement its current business plan. There can be no assurance that the Company will successfully improve its liquidity position. The accompanying consolidated financial statements do not reflect any adjustments that might be required resulting from the adverse outcome relating to this uncertainty.

As of September 30, 2016, the Company had cumulative net losses of $96,345,214 from operations and had not commenced commercial mining and mineral processing operations; rather it is still in the exploration stage. For the nine months ended September 30, 2016, the Company incurred a net loss of $13,852,630, had negative cash flows from operating activities of $2,201,702 and will incur additional future losses due to planned continued exploration expenses. In addition, the Company had a working capital deficit totaling $1,803,770 at September 30, 2016.

To address ongoing liquidity constraints, the Company continues to seek additional sources of capital through the issuance of equity, debt financing or a combination of both. The Company has reduced general and administrative expenses and elected to defer payment of certain obligations. Cash conservation measures include, but are not limited to, the deferred payment where available of outsourced consulting fees, current and future board fees, certain officer salaries, certain monthly professional fees, and the Verde River Iron Company, LLC (“VRIC”) monthly payable. These activities have reduced the required cash outlay of the Company’s business significantly. The Company is focused on continuing to reduce costs and obtaining additional funding. There is no assurance that such funding will be available on terms acceptable to the Company, or at all. If the Company raises additional funds by selling additional shares of capital stock, securities convertible into shares of capital stock or the issuance of convertible debt, the ownership interest of the Company’s existing common stock holders will be diluted.

Basis of presentation - The accompanying financial statements have been prepared in accordance with U.S. GAAP. The Company’s fiscal year-end is December 31.

These condensed consolidated financial statements have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments that are, in the opinion of management necessary for the fair presentation of the Company's Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015; the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015; and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, are included herein. The Company’s balance sheet at December 31, 2015 is derived from the audited financial statements at that date. The results reported in these interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on April 5, 2016.

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 U.S. GAAP 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. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include the valuation of stock-based compensation and derivative liabilities, impairment analysis of long-lived assets, and realizability of deferred tax assets. Actual results could differ from those estimates.

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.

Mineral properties - Costs of acquiring mineral properties are capitalized upon acquisition. Exploration costs and costs to maintain mineral properties are expensed as incurred while the project is in the exploration stage. Once mineral reserves are established, development costs and costs to maintain mineral properties are capitalized as incurred while the property is in the development stage. When a property reaches the production stage, the related capitalized costs will be amortized using the units-of-production method over the proven and probable reserves.

Mineral exploration and development costs - Exploration expenditures incurred prior to entering the development stage are expensed and included in mineral exploration and evaluation expense.

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 15 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 operating expenses.

Impairment of long-lived assets - The Company reviews and evaluates its long-lived assets for impairment at each balance sheet date due to its planned exploration stage losses and documents such impairment testing. Mineral properties in the exploration stage are monitored for impairment based on factors such as the Company’s continued right to explore the property, exploration reports, drill results, technical reports and continued plans to fund exploration programs on the property.

The tests for long-lived assets in the exploration, development or production stage that would have a value beyond proven and probable reserves would be monitored for impairment based on factors such as current market value of the mineral property and results of exploration, future asset utilization, business climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset, including evaluating its reserves beyond proven and probable amounts.

The Company's policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable either by impairment or by abandonment of the property. The impairment loss is calculated as the amount by which the carrying amount of the assets exceeds its fair value.

Deferred financing fees – Deferred financing fees represent fees paid in connection with obtaining debt financing. These fees are amortized using the effective interest method over the term of the financing. If a conversion of the underlying note occurs, a proportionate share of the unamortized amount is immediately expensed.

Convertible notes – derivative liabilities – The Company evaluates the embedded features of convertible notes to determine if they are required to be bifurcated and recorded as a derivative liability. If more than one feature is required to be bifurcated, the features are accounted for as a single compound derivative. The fair value of the compound derivative is recorded as a derivative liability and a debt discount. The carrying value of the convertible notes is recorded on the date of issuance at its original value less the fair value of the compound derivative.

The derivative liability is measured at fair value on a recurring basis with changes reported in other income (expense). Fair value is determined using a model which incorporates estimated probabilities and inputs calculated by both the Binomial Lattice model and present values. The debt discount is amortized to non-cash interest expense using the effective interest method over the life of the notes. If a conversion of the underlying note occurs, a proportionate share of the unamortized amount is immediately expensed.

Reclamation and remediation costs - For its exploration stage properties, the Company accrues the estimated costs associated with environmental remediation obligations in the period in which the liability is incurred or becomes determinable. Until such time that a project life is established, the Company records the corresponding cost as an exploration stage expense. The costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule.

Future reclamation and environmental-related expenditures are difficult to estimate in many circumstances due to the early stage nature of the exploration project, the uncertainties associated with defining the nature and extent of environmental disturbance, the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. The Company periodically reviews accrued liabilities for such reclamation and remediation costs as evidence indicating that the liabilities have potentially changed becomes available. Changes in estimates are reflected in the consolidated statement of operations in the period an estimate is revised.

The Company is in the exploration stage and is unable to determine the estimated timing of expenditures relating to reclamation accruals. It is reasonably possible that the ultimate cost of reclamation and remediation could change in the future and that changes to these estimates could have a material effect on future operating results as new information becomes known.

Fair value of financial instruments - The Company’s financial instruments consist principally of derivative liabilities and the VRIC payable. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels defined as follows:

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

The Company’s financial instruments consist of the VRIC payable, derivative liabilities (described in Notes 5 and 7) and convertible notes (described in Note 6). The VRIC payable and the convertible notes are classified within Level 2 of the fair value hierarchy. The fair value of the VRIC payable approximates carrying value as the imputed interest rate is considered to approximate a market interest rate. The fair value of the convertible notes approximates carrying value as the interest rate is considered to approximate a market interest rate.

The Company calculates the fair value of its derivative liabilities using various models which are all Level 3 inputs. The fair value of the derivative warrant liability (described in Note 5) is calculated using the Binomial Lattice model, and the fair value of the derivative liability - convertible notes (described in Note 7) was calculated using a model which incorporated estimated probabilities and inputs calculated by both the Binomial Lattice model and present values. The change in fair value of the derivative liabilities is classified in other income (expense) in the condensed consolidated statement of operations. The Company generally does not use derivative financial instruments to hedge exposures to cash flow, market or foreign currency risks.

There have been no changes in the valuation techniques used for the derivative liabilities. The Company does not have any non-financial assets or liabilities that it measures at fair value. During the nine months ended September 30, 2016 and 2015, there were no transfers of assets or liabilities between levels.

Per share amounts - Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. Potentially dilutive shares, such as stock options and warrants, are excluded from the calculation when their inclusion would be anti-dilutive, such as when the exercise price of the instrument exceeds the fair market value of the Company’s common stock and when a net loss is reported. The dilutive effect of convertible debt securities is reflected in the diluted earnings (loss) per share calculation using the if-converted method. Conversion of the debt securities is not assumed for purposes of calculating diluted earnings (loss) per share if the effect is anti-dilutive. 72,034,507 and 73,162,932 stock options, warrants and common shares issuable upon the conversion of notes were outstanding as of September 30, 2016 and September 30, 2015, respectively, but were not considered in the computation of diluted earnings per share as their inclusion would be anti-dilutive.

Stock-based compensation - Stock-based compensation awards are recognized in the consolidated financial statements based on the grant date fair value of the award which is estimated using the Binomial Lattice option pricing model. The Company believes that this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for the actual exercise behavior of option holders. The compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

The fair value of performance-based stock option grants is determined on their grant date through the use of the Binomial Lattice option pricing model. The total value of the award is recognized over the requisite service period only if management has determined that achievement of the performance condition is probable. The requisite service period is based on management’s estimate of when the performance condition will be met. Changes in the requisite service period or the estimated probability of achievement can materially affect the amount of stock-based compensation recognized in the financial statements.

Income taxes - For interim reporting periods, the Company uses the annualized effective tax rate (“AETR”) method to calculate its income tax provision. Under this method, the AETR is applied to the interim year-to-date pre-tax losses to determine the income tax benefit or expense for the year-to-date period. The income tax benefit or expense for a quarter represents the difference between the year-to-date income tax benefit or expense for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual operating results and AETR.

The Company follows the liability method of accounting for income taxes. This method recognizes certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset as measured by the statutory tax rates in effect. The effect of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

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

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, “Improvements on Employee Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2016 and interim periods within those years. Early adoption is permitted. The standard will be effective for the Company beginning January 1, 2017. The Company is currently evaluating the impact to its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The new standard is effective for annual periods beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The standard will be effective for the Company beginning January 1, 2019. The Company is currently evaluating the impact to its condensed consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies income tax accounting. The update requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This update is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. Adoption of the new guidance is not expected to have an impact on the condensed consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs”, which simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015, and early adoption was permitted. We adopted the provisions of ASU 2015-03 on a retrospective basis for our annual period ended December 31, 2015. The retrospective adoption of this standard resulted in the reclassification of approximately $0.1 million of current assets as a direct reduction against the balance of our current debt in the accompanying condensed consolidated balance sheet at December 31, 2015, but had no effect on our condensed consolidated net loss or stockholders’ equity.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about and Entity’s Ability to Continue as a Going Concern”. This update requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company is currently evaluating the impact to its condensed consolidated financial statements.

NOTE 2 – RESTRICTED CASH

At September 30, 2016 and December 31, 2015, restricted cash amounted to $0 and $227,345, respectively, and had consisted of funds designated for debt collateral. During the nine months ended September 30, 2016, the Company reduced the restricted cash requirement by $227,345, in connection with the conversion of the Company’s convertible notes payable (as described in Note 6).

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	September 30, 2016							December 31, 2015
	Cost		Accumulated Depreciation			Net Book Value		Cost		Accumulated Depreciation			Net Book Value
Furniture and fixtures	$	38,255	$	(38,172	)	$	83	$	38,255	$	(37,963	)	$	292
Lab equipment		249,061		(249,061	)		-		249,061		(249,061	)		-
Computers and equipment		71,407		(65,924	)		5,483		71,407		(61,644	)		9,763
Vehicles		47,675		(46,683	)		992		47,675		(46,158	)		1,517
Slag conveyance
equipment		300,916		(300,916	)		-		300,916		(300,916	)		-
Demo module building		6,630,063		(5,024,122	)		1,605,941		6,630,063		(4,526,867	)		2,103,196
Grinding circuit		913,679		(29,167	)		884,512		913,679		(21,667	)		892,012
Extraction circuit		938,352		(603,420	)		334,932		938,352		(462,668	)		475,684
Leaching and filtration		1,300,618		(1,300,618	)		-		1,300,618		(1,300,618	)		-
Fero-silicate storage		4,326		(2,488	)		1,838		4,326		(2,163	)		2,163
Electrowinning building		1,492,853		(858,390	)		634,463		1,492,853		(746,426	)		746,427
Site improvements		1,677,844		(809,120	)		868,724		1,677,844		(715,775	)		962,069
Site equipment		360,454		(357,059	)		3,395		360,454		(353,638	)		6,816
Construction in progress		1,102,014		-			1,102,014		1,102,014		-			1,102,014

	$	15,127,517	$	(9,685,140	)	$	5,442,377	$	15,127,517	$	(8,825,564	)	$	6,301,953

Depreciation expense was $286,353 and $352,988 for the three months ended September 30, 2016 and 2015, respectively, and $859,576 and $1,068,325 for the nine months ended September 30, 2016 and 2015, respectively. At September 30, 2016 and December 31, 2015, construction in progress included the gold, copper, and zinc extraction circuits and electrowinning equipment at the Clarkdale Slag Project.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
Trade accounts payable	$	586,365	$	589,657
Accrued compensation and related taxes		908,171		435,469
Accrued interest		61,533		126,057
	$	1,556,069	$	1,151,183

Amounts due to related parties are discussed in Note 13.

NOTE 5 – DERIVATIVE WARRANT LIABILITY

Related to a private placement completed on November 12, 2009, the Company issued 6,341,263 warrants to purchase shares of common stock. The warrants had an initial expiration date of November 12, 2012 and an initial exercise price of $1.85 per share. The warrants have anti-dilution provisions, including provisions for the adjustment to the exercise price and to the number of warrants granted if the Company issues common stock or common stock equivalents at a price less than the exercise price.

The Company determined that the warrants were not afforded equity classification because the warrants are not considered to be indexed to the Company’s own stock due to the anti-dilution provisions. In addition, the Company determined that the anti-dilution provisions shield the warrant holders from the dilutive effects of subsequent security issuances and therefore the economic characteristics and risks of the warrants are not clearly and closely related to the Company’s common stock. Accordingly, the warrants are treated as a derivative liability and are carried at fair value.

On various dates commencing in November 2012, the latest being March 18, 2016, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders, to amend these private placement warrants. The expiration date of the warrants was extended for approximately one year at each extension. The current expiration date is November 30, 2017. In all other respects, the terms and conditions of the warrants remained the same.

With respect to the March 18, 2016 extension, the Company did not recognize any additional expense as the fair values of the warrants were calculated at zero using the Binomial Lattice model with the following assumptions:

	September 30, 2016
Risk-free interest rate	0.64% - 0.87%
Expected volatility	122.95% - 176.27%
Expected life (years)	1.75

As of September 30, 2016, the cumulative adjustment to the warrants was as follows: (i) the exercise price was adjusted from $1.85 per share to $0.59 per share for warrants held by Luxor Capital Partners, L.P. and its affiliates (“Luxor”) and to $0.58 per share for all other warrant holders (“all others”), and (ii) the number of warrants during the nine months ended September 30, 2016 was increased by a total of 10,859,777, being 6,392,803 warrants for Luxor and its affiliates and 4,466,974 warrants for all others. In connection with the financing completed with Luxor on June 7, 2012, Luxor waived its right to the anti-dilution adjustments on 4,252,883 warrants it holds from the 2009 private placement. Future anti-dilution adjustments were not waived. The adjusted exercise price of those warrants is $0.59 per share. The total warrants accounted for as a derivative liability were 20,006,807 and 9,147,029 as of September 30, 2016 and December 31, 2015, respectively. The total warrants accounted for as a derivative liability were not material as of September 30, 2016 and were valued at $53,141 as of December 31, 2015.

The following table sets forth the changes in the fair value of derivative liability for the nine months ended September 30, 2016 and the year ended December 31 2015:

	September 30, 2016			December 31, 2015
Beginning balance	$	(53,141	)	$	-
Adjustment to warrants		(104,075	)		-
Change in fair value		157,216			(53,141	)
Ending balance	$	-		$	(53,141	)

The Company estimates the fair value of the derivative liabilities by using the Binomial Lattice pricing-model, with the following assumptions used for the nine months ended September 30, 2016 and the year ended December 31, 2015:

	September 30, 2016	December 31, 2015
Expected volatility	122.95% - 176.27%	30.46% - 141.15%
Risk-free interest rate	0.45% - 0.84%	0.00% - 0.65%
Expected life (years)	0.75 - 1.75	0.10 - 0.90
Suboptimal exercise factor	2.0	2.5

The expected volatility is based on the historical volatility levels on the Company’s common stock. The risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues over equivalent lives of the options. The expected life is impacted by all of the underlying assumptions and calibration of the Company’s model. Significant increases or decreases in inputs would result in a significantly lower or higher fair value measurement.

NOTE 6 – CONVERTIBLE NOTES

On September 18, 2013, the Company completed a private placement of secured convertible notes (the “Notes”) resulting in gross proceeds of $4,000,000. At issuance, the Notes were convertible into shares of common stock at $0.40 per share, subject to certain adjustments. The term of the Notes was five years, but the Notes could be demanded by the holders. The Notes bore interest at 7% which was payable semi-annually. The Notes had customary provisions relating to events of default including an increase in the interest rate to 9%. The Notes were secured by a first priority lien on all of the assets of the Company including its subsidiaries. At September 30, 2016, all of the convertible notes were converted and cancelled and the first priority lien was released.

The Company was not able to incur additional secured indebtedness or other indebtedness with a maturity prior to that of the Notes without the written consent of the holders of the majority-in-interest of the Notes. In the event of a change of control of the Company, the Notes would have become due and payable at 120% of the principal balance. The holders of the Notes had the right to purchase, pro rata, up to $600,000 of additional separate notes by September 18, 2014 on the same general terms and conditions as the original Notes. In September 2014, $69,000 of additional notes were purchased and issued.

At December 31, 2015, the Notes were convertible into 10,433,333 shares of common stock at $0.39 per share, as adjusted for anti-dilutive provisions and the if-converted value equaled the principal amount of the Notes. Certain embedded features in the Notes were required to be bifurcated and accounted for as a single compound derivative and reported at fair value as discussed in Note 7.

During the nine months ended September 30, 2016, Luxor, on behalf of itself and certain of its affiliates (collectively, the “Luxor Group”), demanded repayment from the Company, of all of the outstanding principal and interest owing on the Luxor Group’s Secured Convertible Promissory Notes, each dated September 18, 2013 (the “Luxor Notes”). Lacking sufficient funds to make such repayments, on March 18, 2016 the Company agreed, pursuant to an Amendment to Secured Convertible Promissory Note, dated September 18, 2013, to allow the Luxor Group to convert all of the outstanding principal amount and accrued but unpaid interest owing on the Luxor Notes into shares of the Company’s common stock, at a rate of $0.035 per share. In the aggregate, the Luxor Group converted $2,600,000 of principal owing on the Luxor Notes and $91,000 of interest owing on the Luxor Notes in exchange for 76,885,714 shares of the Company’s common stock. As a condition of the Private Placement Offering on March 18, 2016, as discussed in Notes 8 and Note 12, the Luxor Group had agreed that all of its 12,128,708 currently owned warrants would not be exercised until at least September 18, 2016, as of September 30, 2016 this agreement was not renewed. The Company has subsequently cancelled the Luxor Notes. In connection with the conversion of the Luxor Notes the Company has recognized a loss on conversion of $6,998,571.

On March 18, 2016, Martin Oring, one of our directors and our Chief Executive Officer, and members of his family, pursuant to Amendments to Convertible Promissory Notes, dated March 18, 2016, provided us with Conversion Notices whereby they elected to convert all of the principal and accrued but unpaid interest owing on their Secured Convertible Promissory Notes (“Oring Notes”), each dated September 18, 2013, into shares of the Company’s common stock at a rate of $0.035 per share. In the aggregate, Mr. Oring and his family members converted $414,000 in principal and $14,491 in accrued interest owing on such notes in exchange for 12,242,600 shares of the Company’s common stock. The Company has subsequently cancelled the Oring Notes. In connection with the conversion of the Oring Notes the Company has recognized a loss on conversion of $1,114,391.

On March 17, 2016, the Board of Directors of the Company approved an offer to the remaining nine holders of the Secured Convertible Promissory Notes. The offer, effective March 18, 2016, included the conversion of principal and interest outstanding as of March 18, 2016 at a rate of $0.035 per share. On April 27, 2016, the remaining nine holders of the Secured Convertible Promissory Notes converted $1,055,000 in principal and $21,583 in accrued interest in exchange for 31,037,855 shares of the Company’s common stock. The Company subsequently cancelled the Notes. In connection with the conversion of the Notes the Company has recognized a loss on conversion of $324,159.

As a result of the aforementioned conversions, as of September 30, 2016, all the Secured Convertible Promissory Notes and associated accrued interest have been converted and cancelled.

At issuance, the fair value of the compound derivative was $1,261,285 and was recorded as both a derivative liability and a debt discount. The debt discount was being amortized to interest expense over the term of the Notes and the derivative liability was carried at fair value through the conversion dates. The Company incurred $126,446 of financing fees related to the Notes. Such amounts were capitalized and were amortized to interest expense over the term of the Notes. The carrying value of the convertible debt, net of discount was comprised of the following:

	September 30, 2016			December 31, 2015
Convertible notes at face value	$	4,069,000		$	4,069,000
Conversion of notes at face value		(4,069,000	)		-
Unamortized discount and deferred financing fees		-			(816,788	)
Convertible notes, net of discount	$	-		$	3,252,212

Interest expense related to the Notes included the following for the three and nine months ended September 30, 2016 and September 30, 2015:

	Three months ended				Nine months ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Interest rate at 7%	$	-	$	71,217	$	63,702	$	213,612
Amortization of debt discount		-		59,942		744,058		176,473
Amortization of deferred financing fees		-		6,225		72,729		18,327
Total interest expense on convertible notes	$	-	$	137,384	$	880,489	$	408,412

Included in amortization of debt discount for the nine months ended September 30, 2016 is expense of $738,748 related to the conversion of $4,069,000 Secured Convertible Promissory Notes payable in March and April 2016. These amounts have been recorded as interest expense on our condensed consolidated statements of operations and comprehensive loss. The Company recorded total interest expense of $114 and $880,603 and $139,820 and $413,475 for the three and nine months ended September 30, 2016 and 2015, respectively.

NOTE 7 – DERIVATIVE LIABILITY – CONVERTIBLE NOTES

As further discussed in Note 6, the Company had issued $4,069,000 of secured convertible notes between September, 2013 and September, 2014. The Notes were convertible at any time into shares of common stock at $0.39 per share. As discussed further in Note 6, during the nine months ended September 30, 2016 all of the notes were converted and cancelled.

The Notes had several embedded conversion and redemption features. The Company determined that two of the features were required to be bifurcated and accounted for under derivative accounting as follows:

The embedded conversion feature included a provision for the adjustment to the conversion price if the Company issued common stock or common stock equivalents at a price less than the exercise price. Derivative accounting was required for this feature due to this anti-dilution provision.

One embedded redemption feature required the Company to pay 120% of the principal balance due upon a change of control. Derivative accounting was required for this feature as the debt involved a substantial discount, the option was only contingently exercisable and its exercise was not indexed to either an interest rate or credit risk.

These two embedded features had been accounted for together as a single compound derivative. The Company estimated the fair value of the compound derivative using a model with estimated probabilities and inputs calculated by the Binomial Lattice model and present values. The assumptions included in the calculations were highly subjective and subject to interpretation. Assumptions used for the nine months ended September 30, 2016 and the year ended December 31, 2015 included redemption and conversion estimates/behaviors, estimates regarding future anti-dilutive financing agreements and the following other significant estimates:

	September 30, 2016	December 31, 2015
Expected volatility	20.57% – 222.29%	101.46 – 139.57%
Risk-free interest rate	0.29% – 1.04%	0.92 - 1.31%
Expected life (years)	1.0 – 2.51	2.0 – 2.75
Suboptimal exercise factor	1.0 – 2.0	2.5

The expected volatility was based on the historical volatility levels on the Company’s common stock. The risk-free interest rate was based on the implied yield available on US Treasury zero-coupon issues over equivalent lives of the options. The expected life was impacted by all of the underlying assumptions and calibration of the Company’s model. Significant increases or decreases in inputs would result in a significantly lower or higher fair value measurement.

The following table sets forth the changes in the fair value of the derivative liability for the nine months ended September 30, 2016 and the year ended December 31, 2015:

	September 30, 2016			December 31, 2015
Beginning balance	$	590,536		$	1,218,619
Conversion of convertible debt		(1,694,693	)		-
Change in fair value		1,104,157			(628,083	)
Ending balance	$	-		$	590,536

NOTE 8 – STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2016, the Company’s stockholders’ equity activity consisted of the following:

On March 18, 2016, the Company issued 76,885,714 shares of common stock at $0.035 per share to the Luxor noteholders as consideration for the conversion of $2,600,000 in principal and $91,000 in accrued interest. In connection with the conversion of the notes payable, a loss on conversion of $6,998,571 has been recognized as discussed in Note 6.

On March 18, 2016, the Company issued 12,242,600 shares of common stock at $0.035 per share to the Oring noteholders as consideration for the conversion of $414,000 in principal and $14,491 in accrued interest. In connection with the conversion of the notes payable, a loss on conversion of $1,114,391 has been recognized as discussed in Note 6.

On March 18, 2016, the Company completed a private placement offering with the Luxor Group for proceeds of $1,500,000. A total of 42,857,143 shares of common stock at $0.035 were issued in connection with this offering. As a condition of the Private Placement Offering on March 18, 2016, as discussed in Note 6 and Note 12, the Luxor Group agreed that all of its 12,128,708 currently owned warrants would not be exercised until at least September 18, 2016.

On March 17, 2016, the Board of Directors has also authorized, subject to stockholder approval, which has yet to occur certain amendments to our Articles of Incorporation and Amended and Restated Bylaws that, would increase the number of authorized shares of our capital stock.

On March 31, 2016, the Company issued 18,750 shares of common stock at $0.08 per share to the estate of the late Robert McDougal. Mr. McDougal had been a director of the Company through January 15, 2016, the date that Mr. McDougal passed away. The shares were issued as consideration for his services a director of the Company.

On April 27, 2016, the Company issued 31,037,855 shares of common stock at $0.035 per share to various convertible note holders, as consideration for the conversion of $1,055,000 in principal and $21,583 in accrued interest. In connection with the conversion of the notes payable, a loss on conversion of $324,159 has been recognized as discussed in Note 6.

On May 23, 2016, the Company completed a private placement offering with various qualified investors for proceeds of $988,800. A total of 28,251,430 shares of common stock at $0.035 were issued in connection with this offering.

During the nine months ended September 30, 2015, the Company’s stockholders’ equity activity consisted of the following:

On September 18, 2015, the Company issued 327,900 units to certain convertible note holders for settlement of $114,765 interest due to them. Each unit consists of one share of the Company’s common stock at $0.35 per share and one share purchase warrant exercisable at $0.50 per share. Such warrants will expire five years from the date of issuance and are considered to be indexed to the Company’s common stock. The Company recognized a loss on the settlement of $10,666.

On July 30, 2015, the Company completed a private placement offering for gross proceeds of $775,400. A total of 2,215,429 units were issued at a price of $0.35. Each unit consists of one share of the Company’s common stock and one share purchase warrant exercisable at $0.50 per share. Such warrants will expire five years from the date of issuance and are considered to be indexed to the Company’s common stock. Financing fees related to this placement were $9,468.

On May 21, 2015, the Company completed a private placement offering for gross proceeds of $995,050. A total of 2,843,000 units were issued at a price of $0.35. Each unit consists of one share of the Company’s common stock and one share purchase warrant exercisable at $0.50 per share. Such warrants will expire five years from the date of issuance and are considered to be indexed to the Company’s common stock.

On March 25, 2015, the Company completed a private placement offering for gross proceeds of $1,500,000 with Luxor. A total of 4,250,000 units were issued at a price of $0.3529. Each unit consists of one share of the Company’s common stock and one share purchase warrant exercisable at $0.50 per share. Such warrants will expire five years from the date of issuance and are considered to be indexed to the Company’s common stock.

On March 18, 2015, the Company issued 516,460 shares of common stock at a price of $0.25 per share to certain convertible note holders as consideration for cancellation of an aggregate of $129,115 for interest payments due on the convertible notes as of March 18, 2015. The remaining note holders received interest payments in cash.

The following summarizes the exercise price per share and expiration date of the Company’s outstanding warrants issued to investors and vendors to purchase common stock at September 30, 2016:

Shares Underlying Outstanding Warrants		Exercise Price		Expiration Date
	3,410,526	$	0.58	November 2017
	5,736,501		0.59	November 2017
	7,042,387		1.85	November 2017
	3,000,000		0.375	June 2017
	316,752		0.30	September 2019
	2,197,496		0.30	October 2019
	1,000,000		0.30	November 2019
	1,498,750		0.30	December 2019
	3,981,000		0.50	December 2019
	4,250,000		0.50	March 2020
	2,843,000		0.50	May 2020
	2,215,429		0.50	July 2020
	327,900		0.50	September 2020
	27,067		0.58	November 2017
	44,816		0.59	November 2017
	2,750,045		0.58	November 2017
	4,641,296		0.59	November 2017
	687,511		0.58	November 2017
	1,139,968		0.59	November 2017
	592,682		0.58	November 2017
	976,393		0.59	November 2017
	48,679,519

NOTE 9 – STOCK-BASED COMPENSATION

Stock-based compensation includes grants of stock options and purchase warrants to eligible directors, employees and consultants as determined by the board of directors.

Stock option plans - The Company has adopted several stock option plans, all of which have been approved by the Company’s stockholders that authorize the granting of stock option awards subject to certain conditions. At September 30, 2016, the Company had 5,263,576 of its common shares available for issuance for stock option awards under the Company’s stock option plans.

At September 30, 2016, the Company had the following stock option plans available:

2009 Incentive Plan – The terms of the 2009 Incentive Plan, as amended, allow for up to 7,250,000 options to be issued to eligible participants. Under the plan, the exercise price is generally equal to the fair market value of the Company’s common stock on the grant date and the maximum term of the options is generally ten years. No participants shall receive more than 500,000 options under this plan in any one calendar year. For grantees who own more than 10% of the Company’s common stock on the grant date, the exercise price may not be less than 110% of the fair market value on the grant date and the term is limited to five years. The plan was approved by the Company’s stockholders on December 15, 2009, and the amendment was approved by the Company’s stockholders on May 8, 2012. As of September 30, 2016, the Company had granted 3,437,500 options under the 2009 Incentive Plan with a weighted average exercise price of $0.68 per share, of which 3,078,598 were outstanding. At September 30, 2016, options available for issuance under this plan amounted to 3,812,500.

2009 Directors Plan - The terms of the 2009 Directors Plan, as amended, allow for up to 2,750,000 options to be issued to eligible participants. Under the plan, the exercise price may not be less than 100% of the fair market value of the Company’s common stock on the grant date and the term may not exceed ten years. No participant shall receive more than 250,000 options under this plan in any one calendar year. The plan was approved by the Company’s stockholders on December 15, 2009, and the amendment was approved by the Company’s stockholders on May 8, 2012. As of September 30, 2016, the Company had granted 2,346,877 options under the 2009 Directors Plan with a weighted average exercise price of $0.65 per share, of which 2,168,646 were outstanding. As of September 30, 2016, options available for issuance under this plan amounted to 403,123.

2007 Plan - Under the terms of the 2007 Plan, options to purchase up to 4,000,000 shares of common stock may be granted to eligible participants. Under the plan, the option price for incentive stock options is the fair market value of the stock on the grant date and the option price for non-qualified stock options shall be no less than 85% of the fair market value of the stock on the grant date. The maximum term of the options under the plan is ten years from the grant date. The 2007 Plan was approved by the Company’s stockholders on June 15, 2007. As of September 30, 2016, the Company had granted 2,952,047 options under the 2007 Plan with a weighted average exercise price of $0.61 per share, of which 2,697,027 were outstanding. As of September 30, 2016, options available for issuance under this plan amounted to 1,047,953.

As of September 30, 2016, the Company had granted 15,610,714 options and warrants outside of the aforementioned stock option plans with a weighted average exercise price of $0.48 per share. As of September 30, 2016, 15,410,714 options and warrants granted were outstanding.

Amendment to Certain Outstanding Stock Options – On March 17, 2016, the Company’s Board of Directors unilaterally determined to amend: 570,000 options issued under the 2009 Incentive Plan; 188,469 options issued under the 2009 Directors Plan; 470,280 stock options issued under the 2007 plan; and 200,000 options issued outside all plans, by extending their expiration dates. The options were granted at various dates between October 6, 2008 and December 31, 2011 and have a weighted average exercise price of $0.98 per share. The expiration dates of all of the options were extended by twelve months. In all other respects, the terms and conditions of the extended options remain the same. With respect to the extensions, the Company did not recognize any additional expense as the fair values of the warrants were calculated at zero using the Binomial Lattice model.

Non-Employee Directors Equity Compensation Policy – Non-employee directors have a choice between receiving $9,000 value of common stock per quarter, where the number of shares is determined by the closing price of the Company’s stock on the last trading day of each quarter, or a number of options, limited to 18,000, to purchase twice the number of shares of common stock that the director would otherwise receive if the director elected to receive shares, with an exercise price based on the closing price of the Company’s common stock on the last trading day of each quarter.

Stock warrants – Upon approval of the Board of Directors, the Company may grant stock warrants to consultants for services performed.

Valuation of awards – At September 30, 2016, the Company had options outstanding that vest on two different types of vesting schedules, service-based and performance-based. For both service-based and performance-based stock option grants, the Company estimates the fair value of stock-based compensation awards by using the Binomial Lattice option pricing model with the following assumptions used for the nine month periods ended September 30, 2016 and September 30, 2015 respectively:

	September 30, 2016	September 30, 2015
Risk-free interest rate	1.01% - 1.21%	0.24% - 1.75%
Dividend yield	-	-
Expected volatility	252.08% - 257.96%	91.23% - 110.32%
Suboptimal exercise factor	2.00	2.00
Expected life (years)	4.5 – 5.0	0.30 – 4.75

The expected life of awards represents the weighted-average period the stock options or warrants are expected to remain outstanding and is a derived output of the Binomial Lattice model. The expected life is impacted by all of the underlying assumptions and calibration of the Company’s model.

Stock-based compensation activity – During the nine months ended September 30, 2016, the Company granted stock-based awards as follows:

On March 31, 2016, the Company granted stock options under the 2009 Directors Plan for the purchase of 36,000 shares of common stock at $0.08 per share. The options were granted to two of the Company’s non-management directors for directors’ compensation, are fully vested and expire on March 31, 2021. The exercise price of the stock options equaled the closing price of the Company’s common stock for the grant date.

On March 17, 2016, the Company’s Board of Directors unilaterally determined, without any negotiations with the warrant holders, to amend the expiration dates of certain outstanding warrants to purchase up to an aggregate of 16,189,414 shares of the Company’s common stock. The expiration date of the warrants was extended from November 30, 2016 to November 30, 2017. In all other respects, the terms and conditions of the warrants remain the same. The warrants were originally issued in connection with the Company’s February 23, 2007, March 22, 2007, December 26, 2007, February 7, 2008 and November 12, 2009 private placements. The Company calculated the fair value of the warrants to be immaterial.

On June 30, 2016, the Company granted stock options under the 2009 Directors Plan for the purchase of 36,000 shares of common stock at $0.08 per share. The options were granted to two of the Company’s non-management directors for directors’ compensation, are fully vested and expire on June 30, 2021. The exercise price of the stock options equaled the closing price of the Company’s common stock for the grant date.

On September 30, 2016, the Company granted stock options under the 2009 Directors Plan for the purchase of 36,000 shares of common stock at $0.08 per share. The options were granted to two of the Company’s non-management directors for directors’ compensation, are fully vested and expire on September 30, 2021. The exercise price of the stock options equaled the closing price of the Company’s common stock for the grant date.

Expenses related to the vesting, modifying and granting of stock-based compensation awards were $16,607 and $228,732 for the nine months ended September 30, 2016 and 2015, respectively. Such expenses have been included in general and administrative expense.

The following table summarizes the Company’s stock-based compensation activity for the nine-month period ended September 30, 2016:

	Number of Shares			Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value

Outstanding, December 31, 2015		23,936,162		$	0.21	$	0.53		3.88	$	-
Exercisable, December 31, 2015		23,636,162		$	0.20	$	0.52		3.89	$	-
Options/warrants granted		108,000			0.11		0.08		4.75	$	3,240
Options/warrants expired		(689,177	)		0.49		0.82		-		-
Options/warrants exercised		-			-		-		-		-
Outstanding, September 30, 2016		23,354,985		$	0.20	$	0.52		3.23	$	3,240
Exercisable, September 30, 2016		23,104,985		$	0.19	$	0.51		3.24	$	3,240

Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the quarter ended September 30, 2016, in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable.

Unvested awards -The following table summarizes the changes of the Company’s stock-based compensation awards subject to vesting for the nine-month period ended September 30, 2016

	Number of Shares Subject to Vesting		Weighted Average Grant Date Fair Value

Unvested, December 31, 2015		300,000	$	0.99
Options/warrants granted		-		-
Options/warrants vested		50,000	$	0.87
Unvested, September 30, 2016		250,000	$	1.19

A total of 50,000 shares vested during the nine-month period ended September 30, 2016. As of September 30, 2016, there was $nil of total unrecognized compensation cost related to unvested stock-based compensation awards. Included in the total of unvested stock options at September 30, 2016, was 250,000 performance-based stock options. At September 30, 2016, management determined that achievement of the performance targets was probable. The weighted average period over which the related expense will be recognized is 0.25 years as of September 30, 2016.

NOTE 10 – STOCKHOLDER RIGHTS AGREEMENT

The Company adopted a Stockholder Rights Agreement (the “Rights Agreement”) in August 2009 to protect stockholders from attempts to acquire control of the Company in a manner in which the Company’s Board of Directors determines is not in the best interest of the Company or its stockholders. Under the Rights Agreement, each currently outstanding share of the Company’s common stock includes, and each newly issued share will include, a common share purchase right. The rights are attached to and trade with the shares of common stock and generally are not exercisable. The rights will become exercisable if a person or group acquires, or announces an intention to acquire, 15% or more of the Company’s outstanding common stock. The Company’s Board of Directors had previously waived the 15% limitation in the Rights Agreement with respect to Luxor, to allow Luxor to become the beneficial owner of up to 26% of the shares of our Common Stock, without being deemed to be an “acquiring person” under the Rights Agreement. In connection with the Offering, completed on March 18, 2016 the Company agreed to further waive all of the existing limitations under the Rights Agreement so that Luxor would not be considered an “acquiring person” under the Rights Agreement under any circumstance. Following the Offering, Luxor is the beneficial owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, the “Exchange Act”) of approximately 49.83% of our Common Stock. As of September 30, 2016, Luxor was the beneficial owner of approximately 44.27% of our common stock. The Rights Agreement was not adopted in response to any specific effort to acquire control of the Company. The issuance of rights had no dilutive effect, did not affect the Company’s reported earnings per share and was not taxable to the Company or its stockholders.

NOTE 11 – INCOME TAXES

The Company is a Nevada corporation and is subject to federal and Arizona income taxes. Nevada does not impose a corporate income tax. The Company recognized no income tax expense for the period ended September 30, 2016 as compared to September 30, 2015. The Company has recorded a full valuation allowance for any income tax benefits recognized in the current period. The effective tax rate for the period ended September 30, 2016 was 0% as compared to 38% for the 2015 period. The overall effective income tax rate for the year could be different from the effective tax rate for the nine months ended September 30, 2016. A summary of our deferred tax assets and liabilities as well as the Company’s federal and state net operating loss carryforwards are included in Note 14 “Income Taxes” in our Annual Report on Form 10-K for the year ended December 31, 2015.

The Company and its subsidiaries file income tax returns in the United States. These tax returns are subject to examination by taxation authorities provided the years remain open under the relevant statutes of limitations, which may result in the payment of income taxes and/or decreases in its net operating losses available for carryforward. The Company has losses from inception to date, and thus all years remain open for examination. While the Company believes that its tax filings do not include uncertain tax positions, the results of potential examinations or the effect of changes in tax law cannot be ascertained at this time. The Company does not have any tax returns currently under examination by the Internal Revenue Service.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Severance agreements – The Company has a severance agreement with an executive officer that provides for various payments if the officer’s employment agreement is terminated by the Company, other than for cause. At September 30, 2016, the total potential liability for the severance agreement was $80,000.

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

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

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

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

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

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

On July 25, 2011, the Company and NMC entered into an amendment (the “Third Amendment”) to the assignment agreement between the parties dated June 1, 2005. Pursuant to the Third Amendment, the Company agreed to pay Advance Royalties to NMC of $15,000 per month (the “Minimum Royalty Amount”) effective as of January 1, 2011. The Third Amendment also provides that the Minimum Royalty Amount will continue to be paid to NMC in every month where the amount of royalties otherwise payable would be less than the Minimum Royalty Amount, and such Advance Royalties will be treated as a prepayment of future royalty payments. In addition, fifty percent of the aggregate consulting fees paid to NMC from 2005 through December 31, 2010 were deemed to be prepayments of any future royalty payments. As of December 31, 2010, aggregate consulting fees previously incurred amounted to $1,320,000, representing credit for advance royalty payments of $660,000.

Total Advance Royalty fees were $45,000 for the three months ended September 30, 2016 and 2015, respectively, and $135,000 for the nine months ended September 30, 2016 and 2015 respectively. Advance Royalty fees have been included in mineral exploration and evaluation expenses – related party on the statements of operations.

Development agreement - In January 2009, the Company submitted a development agreement to the Town of Clarkdale for development of an Industrial Collector Road (the “Road”). The purpose of the Road is to provide the Company the capability to transport supplies, equipment and products to and from the Clarkdale Slag Project site efficiently and to meet stipulations of the Conditional Use Permit 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 Town Council, (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 contingencies outlined in (ii) and (iii) above are beyond control of the Company.

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

Registration Rights Agreement - In connection with the June 7, 2012 private placement, the Company entered into a Registration Rights Agreement (“RRA”) with the purchasers. Pursuant to the RRA, the Company agreed to certain demand registration rights. These rights include the requirement that the Company file certain registration statements within a specified time period and to have these registration statements declared effective within a specified time period. The Company also agreed to file and keep continuously effective such additional registration statements until all of the shares of common stock registered thereunder have been sold or may be sold without volume restrictions. If the Company is not able to comply with these registration requirements, the Company will be required to pay cash penalties equal to 1.0% of the aggregate purchase price paid by the investors for each 30-day period in which a registration default, as defined by the RRA, exists. The maximum penalty is equal to 3.0% of the purchase price which amounts to $121,500. As of the date of this filing, the Company does not believe the penalty to be probable and accordingly, no liability has been accrued.

Litigation – From time to time the Company may become involved in litigation in the ordinary course of trade or business. As of September 30, 2016, the Company has recorded amounts in accounts payable and accrued liabilities equal to any potential litigation liabilities.

NOTE 13 – RELATED PARTY TRANSACTIONS

NMC - The Company utilizes the services of NMC to provide technical assistance and financing related activities. In addition, NMC provides the Company with use of its laboratory, instrumentation, milling equipment and research facilities. One of the Company’s executive officers, Mr. Ager, is affiliated with NMC. In 2011, the Company and NMC agreed to an advance royalty of $15,000 per month and to reimburse NMC for actual expenses incurred and consulting services provided. In 2016, the Company incurred no expense for consulting services.

The Company has an existing obligation to pay NMC a royalty consisting of 2.5% of the NSR on any and all proceeds of production from the Clarkdale Slag Project. The royalty agreement and Advance Royalty payments are more fully discussed in Note 11.

The following table provides details of transactions between the Company and NMC for the three and nine months ended:

	Three Months Ended				Nine Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015

Reimbursement of expenses	$	-	$	-	$	-	$	360
Consulting services provided		-		15,000		-		45,000
Advance royalty payments		45,000		45,000		135,000		135,000
Mineral and exploration expense – related party	$	45,000	$	60,000	$	135,000	$	180,360

The Company had outstanding balances due to NMC of $323,725 and $188,725 at September 30, 2016 and December 31, 2015, respectively.

Cupit, Milligan, Ogden & Williams, CPAs – The Company utilized CMOW to provide accounting support services through April 11, 2016. CMOW is an affiliate of the Company’s former CFO, Mr. Williams. Fees for services provided by CMOW do not include any charges that had been incurred for Mr. Williams’ time. Mr. Williams was compensated for his time under his employment agreement.

The following table provides details of transactions between the Company and CMOW and the direct benefit to Mr. Williams for the three and nine months ended:

	Three Months Ended				Nine Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015

Accounting support services	$	-	$	41,606	$	50,474	$	137,211
Direct benefit to CFO	$	-	$	12,066	$	17,161	$	39,791

The Company had an outstanding balance due to CMOW of $208,931 and $158,457 as of September 30, 2016 and December 31, 2015, respectively. Subsequent to September 30, 2016 the Company paid $208,931 to CMOW.

Financial Consulting Services – Beginning in October of 2014, the Company utilized five individuals to provide financial consulting services. During the third quarter of 2015, the Company entered into consulting agreements with three of these individuals, all of the consultants provided similar services. One of these individuals is the son of the Company’s CEO. In consideration for his services, the Company issued to him 2,063,143 warrants to purchase common stock at an exercise price of $0.50 per share, which the Company has valued at an aggregate of $258,553. The warrants are fully vested and expire five years from the date of grant.

Ireland Inc. – The Company leases corporate office space on month-to-month terms from Ireland Inc. (“Ireland”). NMC is a shareholder in both the Company and Ireland. Additionally, one of the Company’s late directors was the former CFO, Treasurer and a director of Ireland and the Company’s CEO provides consulting services to Ireland.

Total rent expense incurred to Ireland was $5,202 and $15,606, and $5,068 and $15,070, for the three and nine months ended September 30, 2016 and 2015, respectively. At September 30, 2016, no amounts were due to Ireland. At December 31, 2015, $1,734 was due to Ireland.

Luxor – As of September 30, 2016 Luxor owned an aggregate of 142,665,754 shares of common stock and warrants to purchase up to an additional 18,525,032 shares of common stock. All 18,525,032 warrants, however, are not exercisable until September 18, 2016.

As of September 30, 2016, no amounts were payable to Luxor.

During the nine months ended September 30, 2016 the Company recognized a loss on conversion of $6,998,571 related to the conversion $2,691,000 in convertible notes payable and accrued interest owing to the Luxor Group. In connection with this conversion the Company issued to the Luxor Group 76,885,714 shares of common stock, as discussed in Note 6.

During the nine months ended September 30, 2016 The Luxor Group purchased from the Company 42,857,143 shares of common stock at $0.035 per share in exchange for $1,500,000 cash, as discussed in Note 8.

NOTE 14 – SUBSEQUENT EVENTS

The Company has evaluated events through November 14, 2016, and has determined there are no material subsequent events.

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

Certain statements in this Quarterly Report on Form 10-Q, or (the “Report”), are “forward-looking statements.” These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Searchlight Minerals Corp., a Nevada corporation (referred to in this Report as “we,” “us,” “our” or “registrant”) and other statements contained in this Report that are not historical facts. Forward-looking statements in this Report or hereafter included in other publicly available documents filed with the Securities and Exchange Commission, (the “SEC”) , reports to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management’s best estimates based upon current conditions and the most recent results of operations. When used in this Report, the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions are generally intended to identify forward-looking statements, because these forward-looking statements involve risks and uncertainties. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled “Risk Factors,” in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2015.

The following discussion and analysis summarizes our plan of operation for the next twelve months, our results of operations for the three and nine-month periods ended September 30, 2016 and changes in our financial condition from our year ended December 31, 2015. The following discussion should be read in conjunction with the Management’s Discussion and Analysis or Plan of Operation included in our Annual Report on Form 10-K for the year ended December 31, 2015.

We are an exploration stage company engaged in a slag reprocessing project and the acquisition and exploration of mineral properties. Our business is presently focused on 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.

Since our involvement in the Clarkdale Slag Project, our goal has been to demonstrate the economic feasibility of the project by determining a commercially viable method to extract precious and base metals from the slag material. We believe that in order to demonstrate this, we must successfully operate four major steps of our production process: crushing and grinding, leaching, continuous process operation, and extraction of gold from solution.

Our Production Process

Crushing and Grinding. The first step of our production process involves grinding the slag material from rock-size chunks into sand-size grains (minus-20 mesh size). Because of the high iron content and the glassy/siliceous nature of the slag material, grinding the slag material creates significant wear on grinding equipment. Batch testing with various grinders produced significant wear on the equipment to render them unviable for a continuous production facility.

High pressure grinding rolls (“HPGR”) are commonly used in the mining industry to crush ore and have shown an ability to withstand very hard and abrasive ores. Tests using HPGRs on our slag material showed that grinding our slag material on a continuous basis did not produce wear on the equipment beyond the expected levels.

When we tested the HPGR-ground slag in our autoclave process, results showed liberation of gold, which our technical team believes is due to the micro-fractures imparted to the slag during the HPGR grinding process. The technical team also believes that the high pressures that exist in the autoclave (see autoclave discussion in 2. below) environment are able to drive the leach solution into the micro-fracture cracks created in the slag material by the HPGR crusher, thereby dissolving the gold without having to employ a more expensive process to grind the slag material to a much finer particle size.

We believe that the HPGR is a viable grinder for our production process because it appears to have solved our grinding equipment wear issue and the HPGR produces ground slag from which gold can be leached into solution in an autoclave process.

Leaching. The second step of our production process involves leaching gold from the ground slag material using the autoclave process. Autoclaving, a proven technology that is widely used within the mining industry, is a chemical leach process that utilizes elevated temperature and pressure in a closed autoclave system to extract precious and base metals from the slag material. Our independent consultant, Arrakis Inc. (“Arrakis”) has performed over 200 batch autoclave tests under various leach protocols and grind sizes as well as numerous pilot-scale autoclave tests in our 900-liter autoclave. Arrakis’ test results have consistently leached approximately 0.5 ounces per ton (opt) of gold into solution. In addition, these results indicate that autoclaving does not dissolve significant levels of iron and silica into solution, will improve our ability to recover gold from solution and thus improve process technical feasibility. The operating conditions identified by Arrakis thus far are mild to moderate compared with most current autoclaves and are anticipated to result in lower capital, operating and maintenance costs.

Continuous Operation. The third step in our production process involves being able to perform the leaching step in a larger continuous operation. While lab and bench-scale testing provides critical data for the overall development of a process, economic feasibility can only be achieved if the process can be performed in a continuous operation.

During the second quarter of 2012, we received the results of tests conducted by an independent Australian metallurgical testing firm whereby they conducted autoclave tests under various conditions, using the pressure oxidative leach (“POL”) method in a four-compartment, 25-liter autoclave. The completion of a continuous 14-hour test with 100% mechanical availability (i.e. no “down time”) demonstrates the ability of a pilot autoclave to process the Clarkdale slag material on a continuous basis. The pilot multi-compartment autoclave is routinely used to simulate operating performance in a full-scale commercial autoclave as part of a bankable feasibility study.

In addition, the pregnant leech solution (“PLS”) that was produced from the 14-hour continuous run was analyzed by the Australian testing firm. Analysis using the AAS/ICP-OES method resulted in approximately 0.2 - 0.6 opt of gold extracted into solution. The 0.2 opt was achieved during the startup of the test run. After making adjustments to the pH, volume of the leach solution and other process parameters, the higher 0.6 opt was obtained toward the completion of the test. Our independent technical consultants believe we can replicate these higher test results in future test runs.

We believe that the POL autoclave method in a large multi-compartment autoclave has shown to be viable for our production process because it can operate on a continuous basis and leaches higher levels of gold and much lower levels of iron and silica into solution than other methods. The results from POL autoclaving testing were comparable to bench-scale and pilot-scale autoclave tests performed.

Extraction. The fourth and final step in our production process involves being able to extract and recover metallic gold from PLS. Economic feasibility can only be achieved if a commercially viable method of metallic gold recovery is determined. In addition, the recovery of metallic gold will not only define the most cost-effective method of such recovery, but will also provide a better definition to the total process system mass balance and help reduce any discrepancy in analytical tests. Recovery of gold beads provides the ability to determine more accurately the amount of gold that was recovered from leach solution. Simple weighing of the gold bead and having the weight of the initial slag sample used to provide the bead gives a more accurate determination of an extractable gold grade in the slag sample. In this effort, we and our consultants are continuing to perform tests to recover gold from solution, using carbon, ion exchange resin technologies, or other commonly used methods of extracting gold from solution.

To provide additional PLS which is necessary to expedite the gold recovery tests and commercial viability of the project, we acquired and have been operating a large batch titanium autoclave (approximately 900-liter capacity). Numerous tests have been conducted in this autoclave in an effort to optimize the process parameters in order to maximize gold extraction from the slag material. Such tests have resulted in gold metal recovery of 0.38 opt, with a back-calculated average slag head grade of 0.46 opt, resulting in an average 84% recovery of the gold in the slag material.

We have been performing tests whereby the slag material is pretreated prior to processing it in the autoclave. These tests indicate that pretreatment, by melting the slag at high temperature, aids in the recovery of the gold from solution derived from the autoclave. We believe that the high temperature process aids in breaking down the refractory coating on the gold particles that are subsequently put into solution after the autoclaving of the slag material and also separates out the iron that makes up approximately one third of the untreated slag material.

The heat treated slag material, after the removal of the iron is, for ease of reference, hereinafter referred to as glass. This processed glass material contains the gold and, because of the heat treatment process, is now easily and readily assayed by standard fire assay techniques. It is anticipated that incorporating this additional step into our flow chart renders process optimization testing much easier and will allow this phase of the development program to be concluded more quickly.

Significant Technical Achievements

In 2014, the precise nature of the gold contained in the Clarkdale slag was determined. Test work done with high resolution microscopes – a Scanning Electron Microscope and a Transmission Electron Microscope have photographed and measured the gold contained within sulfides and further encapsulated by a highly refractory silicate very resistant to thermal and chemical attack. This explains the difficulty in fire assaying the gold or using ambient temperature strong reagent leaching. Further, the gold is present as colloids (very small particles) less than 100 nm in size which is 1,000 times less than the width of a human hair. (This microscopic size is in the range of most of the gold contained within the Carlin Trend in Nevada – one of North America’s richest gold deposits that went undetected for decades due to the small “invisible” gold particles. The Carlin Trend material was also very difficult to assay and process until the true nature and deportment of the gold was determined.) The temperature required to break the silicate coating of the Clarkdale slag material exceeds standard fire assay temperature which is why the gold is not captured in the lead collector used in a standard fire assay. Specialized grinding using HPGR and high temperature leaching used in the current proposed process flow diagram aid in breaking this coating, oxidizing the sulfide, and converting the gold from a colloid to a charged ionic form in solution.

Testing using this process thus far has verified the prior test results achieved and reported by us of gold grades between 0.4 to 0.6 ounces per ton (average). The processed material being derived from the heat treated slag is also much easier to be analyzed using standard analytical techniques. Small autoclave tests conducted on the glass from the heat treatment have produced up to an 85% extraction of gold into the PLS solution.

Other Positive Developments

In addition to the breakthrough discussed above, as a byproduct of this new process, the high temperature pre-treatment produces a high quality iron product grading over 95% iron content in a pelletized form. The high quality of the iron and its pellet size form make it a readily marketable product for sale to the China, Korea, or India markets. We believe that this high-grade iron product will secure a premium price selling either into the scrap iron or pig iron market. Test work is continuing in an effort to maximize iron content while maintaining gold recovery.

The existing railroad spur on the Clarkdale Project Site connects to a major railroad for low cost transportation to a seaport or domestic market. It is believed that this pre-treatment process may pay for itself or provide a net cash flow from the sale of the iron. To examine the efficacy of this concept, we engaged Samuel Engineering of Denver, Colorado to perform a preliminary assessment and marketing study. This study suggests that a marketable high-grade iron product could be made and sold as a byproduct to generate net cash flow or reduce the overall costs of producing gold. Toward this end we have commenced contacting commercial iron producers for expressions of interest.

Pilot Autoclave Test Results

In the fourth quarter of 2014, three successful pilot autoclave tests, which consisted of heat treating the Clarkdale slag material prior to autoclave processing, confirmed feed grades of 0.3 to 0.6 opt gold contained in the slag material and gold recoveries of 0.25 to 0.50 ounces per ton. The percentage recoveries ranged from 79% to 94%, with an 84% average recovery. The first two tests (the highest recovered gold values) were conducted from fresher ground slag material that was pulverized using high pressure grinding rolls (HPGR). A third test was conducted from older HPGR-pulverized material and resulted in the lowest recovered gold value referred to above. We believe the third test was negatively affected by oxide layers that commonly form on the surface of older (aged) ground slag material.

A fourth pilot autoclave test was unable to be completed due to a mechanical problem with the autoclave. Even though it was pronounced a failed test and not included in the above results, the fourth test nonetheless produced a gold grade of 0.2 opt.

Two of the successful tests included processing the pre-treated slag through the autoclave twice. This simulates, to a degree, what is commonly done in large commercial multi-compartment autoclaves to achieve optimum extraction. One of the tests involved a single autoclave run. Therefore, a total of five pilot-scale autoclave tests were successfully conducted with the high temperature pre-treatment. These tests resulted in the processing of over 1,200 kg of raw slag and the production of over 3,800 liters of gold-bearing solutions. The gold contained in these solutions is now being recovered as metallic gold.

High temperature pre-treatment allows the refractory material from the Clarkdale Slag Project to be fire assayed, resulting in the recovery of gold beads, and all results have been reported by fire assay.

Whereas previously reported slag material gold grade results were similar to those reported above, the most recent tests resulted in higher percentage recoveries of the gold from solution (as gold beads) using a variety of standard processes (i.e., electro-winning, direct precipitation, activated carbon, and ion exchange resins). All of these commonly used processes represent “off the shelf” technologies utilized globally in base and precious metals processing.

The methodology that consistently provided the highest percentage recovery of metal from solution in the most recent tests was an ion exchange resin process, which was originally used in our plant in Clarkdale, Arizona.

An additional benefit of utilizing the large-capacity heat treating unit prior to the large-capacity pilot autoclave is that high-grade ‘pig iron’ has been produced, containing a greater than 95% iron content, whereas previously reported results at bench-scale levels resulted in 75% - 85% iron extraction. The 95%-plus iron product commands a much higher price, and we believe that it may be able to profitably sell such pig iron into the domestic scrap iron market. If such sales of pig iron can be realized, we can eliminate the cost of overseas transport while simultaneously obtaining a much higher price per ton. In addition, the original railroad line to the Clarkdale Slag Project site is intact and has been well maintained. The cost of upgrading the line for pig iron transport would be minimal relative to the cost of new railroad construction. It is currently anticipated that this additional by-product, if buyers are found, will further enhance the commercial profitability of the Clarkdale Slag Project by improving recoverable gold grades and generating an additional revenue stream.

Current Work Program

We are currently working on the following key steps in an effort to move expeditiously towards commercial operation:

Thermal Pre-treatment Testing and Iron Production: Previous testing on slag material conducted by us on material from our Clarkdale Slag Project indicated that a high quality iron product could be produced from the slag material by using a thermal pre-treatment step prior to the autoclave process, which is designed to extract the gold. We conducted such tests to determine whether high quality iron could be produced from the slag material with the goal that the resulting iron may be sold at a price, which could at a minimum, pay for the cost of producing it and perhaps produce an additional cash flow above and beyond the revenue that we may receive from the extraction of gold from the slag pile. We also believe that the iron-removing pre-treatment of the slag material in this manner results in greater gold extraction from the autoclave process.

In 2015, we contracted Midrex Technologies, Inc. (“Midrex”) to run bench scale testing in their facility in Charlotte, N.C. to determine if their technology could produce a high-quality iron product from the Company’s slag material. Midrex reported that their technology was successful in producing “up to 97.8% iron metallization in bench scale box furnace testing, exceeding the goal of 90.0% iron metallization.”

In a continuing effort to produce high quality iron in a cost effective manner, we are in the process of engaging additional firms to determine if their equipment and technology can be used on our slag material. In the coming months, we intend to continue this pursuit and perform the necessary tests to make this determination.

Autoclave Optimization: We have installed certain required components to switch from using chlorine reagents to chlorine gas for the autoclave process. We believe that this will not only significantly lower supply costs on the commercial unit but will eliminate the potential problems of salt formation in the autoclave. We anticipate that this will also simplify and increase recovery of gold from the pregnant leach solution (PLS) derived from the autoclave process.

Initial test work conducted with the chlorine gas system has indicated that this system, used in lieu of the previous chlorine chemical system, provides a much higher oxidizing capability at a much lower total reagent cost, reduces the salt load in solution and therefore, eliminates the piping plugging problems encountered in previous autoclave test runs. Once additional bench autoclave tests have been completed to finalize the chemical and operating conditions, the 900-liter pilot autoclave will be operated to verify results to date at a larger scale.

Third Party Review and Verification: We have hired an independent team of well qualified and experienced experts to complete a technical review of the project. It is anticipated that a favorable report from this review would be used to facilitate the financing of the bankable feasibility study and commercial production facility.

Critical Accounting Policies

Use of estimates - The preparation of financial statements in conformity with U.S. GAAP requires us 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. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring estimates and assumptions include the valuation of stock-based compensation and derivative liabilities, impairment analysis of long-lived assets, and realizability of deferred tax assets. Actual results could differ from those estimates.

Mineral properties - Costs of acquiring mineral properties are capitalized upon acquisition. Exploration costs and costs to maintain mineral properties are expensed as incurred while the project is in the exploration stage. Development costs and costs to maintain mineral properties are capitalized as incurred while the property is in the development stage. When a property reaches the production stage, the related capitalized costs are amortized using the units-of-production method over the proven and probable reserves.

Mineral exploration and development costs - Exploration expenditures incurred prior to entering the development stage are expensed and included in “Mineral exploration and evaluation expenses.”

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

Property and Equipment - Property and equipment is stated at cost less accumulated depreciation. Depreciation is principally provided on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 15 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 operating expenses.

Impairment of long-lived assets - We review and evaluate our long-lived assets for impairment at each balance sheet date due to our planned exploration stage losses and document such impairment testing. Mineral properties in the exploration stage are monitored for impairment based on factors such as our continued right to explore the property, exploration reports, drill results, technical reports and continued plans to fund exploration programs on the property.

The tests for long-lived assets in the exploration, development or production stage that would have a value beyond proven and probable reserves would be monitored for impairment based on factors such as current market value of the mineral property and results of exploration, future asset utilization, business climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset, including evaluating its reserves beyond proven and probable amounts.

Our policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable either by impairment or by abandonment of the property. The impairment loss is calculated as the amount by which the carrying amount of the assets exceeds its fair value.

Stock-based compensation - Stock-based compensation awards are recognized in the consolidated financial statements based on the grant date fair value of the award which is estimated using the Binomial Lattice option pricing model. We believe that this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for the actual exercise behavior of option holders. The compensation cost is recognized over the requisite service period, which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

We account for stock options issued to non-employees based on the estimated fair value of the awards using the Binomial Lattice option pricing model. The measurement of stock-based compensation to non-employees is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in our consolidated statements of operations during the period the related services are rendered.

Derivative warrant liability - We have certain warrants with anti-dilution provisions, including provisions for the adjustment to the exercise price and to the number of warrants granted if we issue common stock or common stock equivalents at a price less than the exercise price. We determined that these warrants were not afforded equity classification because they embody risks not clearly and closely related to the host contract. Accordingly, the warrants are treated as a derivative liability and are carried at fair value.

We calculate the fair value of the derivative liability using the Binomial Lattice model, a Level 3 input. The change in fair value of the derivative liability is classified in other income (expense) in the consolidated statement of operations. We generally do not use derivative financial instruments to hedge exposures to cash flow, market or foreign currency risks. We are not exposed to significant interest or credit risk arising from these financial instruments.

Convertible notes – derivative liabilities - We evaluate the embedded features of convertible notes to determine if they are required to be bifurcated and recorded as a derivative liability. If more than one feature is required to be bifurcated, the features are accounted for as a single compound derivative. The fair value of the compound derivative is recorded as a derivative liability and a debt discount. The carrying value of the convertible notes was recorded on the issuance date at its original value less the fair value of the compound derivative.

Income taxes – We follow the liability method of accounting for income taxes. This method recognizes certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset as measured by the statutory tax rates in effect. The effect of a change in tax rates is recognized in operations in the period that includes the enactment date. We record a valuation allowance against any portion of those deferred income tax assets when we believe, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

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

Results of Operations

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

	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Percent Increase/ (Decrease)			2016			2015			Percent Increase/ (Decrease)
Revenue	$	-		$	-			-		$	-		$	-			-
Operating expenses		(1,172,708	)		(1,751,111	)		33.0	%		(3,800,430	)		(4,545,628	)		16.4	%
Other income (expense)		5,273			80,423			(93.4)	%		(10,052,200	)		345,945			(3,005.7)	%
Income tax benefit		-			(21,795,143	)		n/a	%		-			(20,677,458	)		n/a	%
Net loss	$	(1,167,435	)	$	(23,465,831	)		95.0	%	$	(13,852,630	)	$	(24,877,141	)		44.3	%

Revenue . We are currently in the exploration stage of our business, and have not earned any revenues from our planned mineral operations to date. We did not generate any revenues from inception in 2000 through the nine months ended September 30, 2016. We do not anticipate earning revenues from our planned mineral operations until such time as we enter into commercial production of the Clarkdale Slag Project or other mineral properties we may acquire from time to time, and of which there are no assurances.

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

	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		Percent Increase/ (Decrease)			2016		2015			Percent Increase/ (Decrease)
Mineral exploration and evaluation expenses	$	480,754	$	674,637		(28.7	)%	$	1,427,774	$	1,770,453			(19.4	)%
Mineral exploration and evaluation expenses – related party		45,000		60,000		(25.0	)%		135,000		180,360			(25.1	)%
Administrative – Clarkdale site		-		26,682		(100.0	)%		-		91,244			(100.0	)%
General and administrative		355,399		590,130		(39.8	)%		1,311,998		1,285,513			2.1	%
General and administrative – related party		5,202		46,674		(88.9	)%		66,082		152,281			(56.6	)%
Gain (loss) on asset disposition		-		-		-	%		-		(2,548	)		100.0	%
Depreciation		286,353		352,988		(18.9	)%		859,576		1,068,325			(19.5	)%
Total operating expenses	$	1,172,708	$	1,751,111		(33.0	)%	$	3,800,430	$	4,545,628			(16.4	)%

Three-month period ended September 30, 2016 and 2015. Operating expenses decreased to $1,172,708 during the three-month period ended September 30, 2016 from $1,751,111 during the three-month period ended September 30, 2015 as further discussed below.

Mineral exploration and evaluation expenses decreased to $480,754 during the three-month period ended September 30, 2016 from $674,637 during the three-month period ended September 30, 2015. The decrease is attributed to a reduction in engineering consulting and property taxes.

Mineral exploration and evaluation expenses – related party decreased to $45,000 during the three-month period ended September 30, 2016 from $60,000 during the three-month period ended September 30, 2015. The decrease is attributable to a decrease in expenditures associated with metallurgical consulting services in 2016. These expenses include fees paid to NMC for technical assistance and financing related activities. One of our officers, Mr. Ager, is affiliated with NMC.

General and administrative expenses (including the Clarkdale site) decreased to $355,399 during the three-month period ended September 30, 2016 from $616,812 during the three-month period ended September 30, 2015. The decrease was primarily attributable to a decrease in stock based compensation of $161,734, a decrease in salaries and wages of $62,813, and a decrease in legal costs in the 2016 period of $74,351, partially offset by slight increases in medical insurance expenses and accounting/auditing expenses.

General and administrative expenses – related party decreased to $5,202 during the three-month period ended September 30, 2016 from $46,674 during the three-month period ended September 30, 2015. The 2015 expenses include accounting support services related to the filing of the 2014 Form 10K, and rent expense. The accounting support services were performed by Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our former Chief Financial Officer through April 8, 2016. Rent payments are made to Ireland Inc. for corporate office space. NMC is a shareholder in both Searchlight and Ireland. Additionally, one of our late directors was the CFO, Treasurer and a director of Ireland and our CEO provides consulting services to Ireland.

Depreciation expense decreased to $286,353 during the three-month period ended September 30, 2016 from $352,988 during the three-month period ended September 30, 2015. The decrease was due to the slag conveyance equipment (leaching and filtering) becoming fully depreciated in the fourth quarter of 2015.

Other Income and Expenses . Total other income (expense) amounted to income of $5,273 during the three-month period ended September 30, 2016, as compared to income of $80,423 during the three-month period ended September 30, 2015. The decrease was due the net decrease in fair value of the derivative liabilities and decrease in interest expense. There was no change in the fair value of our derivative liabilities, and only nominal interest expense, for the three-month period ending September 30, 2016.

Income Tax Benefit (Expense) . Income tax benefit (expense) decreased to $0 for the three-month period ended September 30, 2016 from $(21,795,143) during the three-month period ended September 30, 2015. The decrease in benefit was due to an increase in valuation allowance recorded during the quarter ended September 30, 2015.

Net Loss. The aforementioned factors resulted in a net loss of $1,167,435, or $0.00 per common share, for the three-month period ended September 30, 2016, as compared to a net loss of $23,465,831, or $0.15 per common share, for the three-month period ended September 30, 2015. The decrease in our net loss for the 2016 period results primarily from the decreases in mineral exploration and evaluation and general administrative expense as described above. In addition, the net loss for the 2015 period was affected by the income tax expense noted above of $(21,795,143).

Nine-month period ended September 30, 2016 and 2015. Operating expenses decreased to $3,800,430 during the nine-month period ended September 30, 2016 from $4,545,628 during the nine-month period ended September 30, 2015 as further discussed below.

Mineral exploration and evaluation expenses decreased to $1,427,774 during the nine-month period ended September 30, 2016 from $1,770,453 during the nine-month period ended September 30, 2015. The decrease is attributed to a reduction in engineering consulting and property taxes.

Mineral exploration and evaluation expenses – related party decreased to $135,000 during the nine-month period ended September 30, 2016 from $180,360 during the nine-month period ended September 30, 2015. The decrease is due to a decrease in expenditures associated with metallurgical consulting services in 2016. These expenses include fees paid to NMC for technical assistance and financing related activities. One of our officers, Mr. Ager, is affiliated with NMC.

General and administrative expenses (including the Clarkdale site) decreased to $1,311,998 during the nine-month period ended September 30, 2016 from $1,376,757 during the nine-month period ended September 30, 2015. The decrease was primarily due to a reduction in stock based compensation expense of $240,530, a decrease in salaries and wages of $120,007, an increase in other general and administrative expense of $61,378, and an increase legal costs of $234,400 (net of a 2015 reduction pursuant to settlement of accounts payable in the amount of $378,136, in the period ended September 30, 2015).

General and administrative expenses – related party, decreased to $66,082 during the nine-month period ended September 30, 2016 from $152,281 during the nine-month period ended September 30, 2015. The 2015 expenses include accounting support services related to the filing of the 2014 Form 10K and rent expense. The accounting support services were performed by Cupit, Milligan, Ogden & Williams, CPAs, an affiliate of Melvin L. Williams, our former Chief Financial Officer through April 8, 2016. Rent payments are made to Ireland Inc. for corporate office space. NMC is a shareholder in both Searchlight and Ireland. Additionally, one of our late directors was the CFO, Treasurer and a director of Ireland and our CEO provides consulting services to Ireland.

Accounting expenses – related party decreased to $50,476 during the nine months ended September 30, 2016 from $137,211 for the nine months ended September 30, 2015. These fees did not include any fees for Mr. Williams’ time in directly supervising the support staff. Mr. Williams’ compensation had been provided in the form of salary. The direct benefit to Mr. Williams was $17,161 and $39,791 of the above fees for the nine months ended September 30, 2016 and 2015, respectively. The decrease in fees resulted from a decrease in the volume and complexity of equity transactions in 2016 coupled with Mr. Williams’ resignation from the Company.

Rent expense – related party increased to $15,606 from $15,070 for the nine-month periods ended September 30, 2016 and 2015, respectively. The increase is due to an increase in the monthly rent paid under the terms of the lease agreement.

Depreciation expense decreased to $859,576 during the nine-month period ended September 30, 2016 from $1,068,325 during the nine-month period ended September 30, 2015. The decrease was due to the slag conveyance equipment (leaching and filtering) becoming fully depreciated in the fourth quarter of 2015.

Other Income and Expenses . Total other income (expense) amounted to expense of $10,052,200 during the nine-month period ended September 30, 2016, as compared to income of $345,945 during the nine-month period ended September 30, 2015. The increase was due the loss on conversion of convertible notes payable and related accrued interest expense of $8,437,121 and $880,489, respectively, and a change in the fair value of our derivative liabilities, resulting in a loss of $748,988 for the nine-month period ending September 30, 2016.

Income Tax Benefit (Expense) . Income tax benefit (expense) decreased to $nil for the nine-month period ended September 30, 2016 from $(20,677,458) during the nine-month period ended September 30, 2015. The decrease in expense was due to an increase in valuation allowance recorded during the quarter ended September 30, 2015.

Net Loss. The aforementioned factors resulted in a net loss of $13,852,630, or $0.05 per common share, for the nine-month period ended September 30, 2016, as compared to a net loss of $24,877,141, or $0.17 per common share, for the nine-month period ended September 30, 2015. The increase in our net loss for the 2016 period results primarily from losses incurred in connection with the conversion of notes payable of $8,437,121, an unfavorable change in fair value of derivative liabilities of $748,988, and an increase in interest expense of $606,834 related to amortization of the debt discount on convertible notes. In addition, the net loss for the 2015 period was affected by the income tax expense noted above of $20,677,458, and the $378,136 settlement of accounts payable noted above.

Liquidity and Capital Resources

Historically, we have financed our operations primarily through the sale of common stock and other convertible equity securities.

During the nine-month period ended September 30, 2016, we completed the following offerings:

Completion of Private Placements

On March 18, 2016, we completed a private placement of our securities to Luxor. Luxor and certain of its affiliates are principal stockholders of the Company. The securities were issued in reliance on exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D thereunder. In the private placement, we sold 42,857,143 shares of the Company’s common stock at a purchase price of $0.035 per share, resulting in aggregate gross proceeds to us of $1,500,000. We intend to use the net proceeds from the private placement for general working capital purposes.

In connection with the private placement, we entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and a Registration Rights Agreement, each dated March 18, 2016, with Luxor. The Common Stock Purchase Agreement contains representations and warranties of the Company and Luxor that are customary for transactions of the type contemplated in connection with the Offering. Pursuant to the Registration Rights Agreement, we have agreed to file a Form S-3 registration statement with the SEC within 90 calendar days after the Company is permitted under the Securities Act and any SEC guidance to file such registration statement and we will use our commercial best efforts to cause such registration statement to become effective as promptly as possible. The registration statement shall cover the resale of the shares of common stock issued to Luxor in the Offering, as well as any shares issuable upon the exercise of the warrants (assuming that on the date of determination the warrants are exercised in full).

We also have agreed to file and keep continuously effective such additional registration statements until all of the shares of common stock registered thereunder have been sold or may be sold without volume restrictions pursuant to Rule 144 of the Securities Act. Luxor will also be granted piggyback registration rights with respect to such shares.

In connection with the private placement, our Board of Directors agreed to waive certain provisions of our Rights Agreement, dated August 24, 2009, with respect to accounts managed by Luxor. In connection with the Rights Agreement, the Board of Directors previously declared a dividend of one common share purchase right for each outstanding share of our common stock. The rights become exercisable, under certain circumstances, in the event that a person or group of affiliated or associated persons has acquired beneficial ownership of 15% or more of the outstanding shares of our common stock (an “acquiring person”). The Company’s Board of Directors had previously waived the 15% limitation in the Rights Agreement with respect to Luxor, to allow Luxor to become the beneficial owner of up to 26% of the shares of our Common Stock, without being deemed to be an “acquiring person” under the Rights Agreement. In connection with the Offering, completed on March 18, 2016 the Company agreed to further waive all of the existing limitations under the Rights Agreement so that Luxor would not be considered an “acquiring person” under the Rights Agreement under any circumstance. Following the Offering, Luxor is the beneficial owner (as defined in Rule 13d-3 of the Securities Exchange Act) of approximately 49.83% of our Common Stock. (Including giving effect to any warrants or other rights to purchase share of our common stock).

During the three months ended June 30, 2016, the Company completed a private placement offering with various qualified investors for proceeds of $988,800. The securities were issued in reliance on exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D thereunder. A total of 28,251,430 shares of common stock at $0.035 were issued in connection with this offering. We intend to use the net proceeds from the private placement for general working capital purposes.

Conversion of Notes Payable

During the nine months ended September 30, 2016, the Luxor Group, demanded repayment from the Company, of all of the outstanding principal and interest owing on the Luxor Group’s Secured Convertible Promissory Notes, each dated September 18, 2013. Lacking sufficient funds to make such repayments, on March 18, 2016 the Company agreed, pursuant to an Amendment to Secured Convertible Promissory Note, dated September 18, 2013, to allow the Luxor Group to convert all of the outstanding principal amount and accrued but unpaid interest owing on the Luxor Notes into shares of the Company’s common stock, at a rate of $0.035 per share. In the aggregate, the Luxor Group converted $2,600,000 of principal owing on the Luxor Notes and $91,000 of interest owing on the Luxor Notes in exchange for 76,885,714 shares of the Company’s common stock. The Company has subsequently cancelled the Luxor Notes. In connection with the conversion of the Luxor Notes the Company has recognized a loss on conversion of $6,998,571.

On March 18, 2016, Martin Oring, one of our directors and our Chief Executive Officer, and members of his family, pursuant to Amendments to Convertible Promissory Notes, dated March 18, 2016, provided us with Conversion Notices whereby they elected to convert all of the principal and accrued but unpaid interest owing on their Secured Convertible Promissory Notes, each dated September 18, 2013, into shares of the Company’s common stock at a rate of $0.035 per share. In the aggregate, Mr. Oring and his family members converted $414,000 in principal and $14,491 in accrued interest owing on such notes in exchange for 12,242,600 shares of the Company’s common stock. The Company has subsequently cancelled the Oring Notes. In connection with the conversion of the Oring Notes the Company has recognized a loss on conversion of $1,114,391.

On March 17, 2016, the Board of Directors of the Company approved an offer to the remaining holders of the Secured Convertible Promissory Notes. The offer, effective March 18, 2016, included the conversion of principal and interest outstanding as of March 18, 2016 at a rate of $0.035 per share. On April 27, 2016, nine Secured Convertible Promissory Noteholders converted $1,055,000 in principal and $21,583 in accrued interest in exchange for 31,037,855 shares of the Company’s common stock. The Company subsequently cancelled the Notes. In connection with the conversion of the Notes the Company has recognized a loss on conversion of $324,159.

In connection with the issuance of such shares, we entered a Registration Rights Agreement, dated March 18, 2016, with the holders of the Notes.

Pursuant to the Registration Rights Agreement, we have agreed to file a Form S-3 registration statement with the SEC within 90 calendar days after the Company is permitted under the Securities Act and any SEC guidance to file such registration statement and we will use our commercial best efforts to cause such registration statement to become effective as promptly as possible. The registration statement shall cover the resale of the shares of common stock issued to holders of the Notes in exchange for the cancellation of the March, 2016, Interest Payment.

We also have agreed to file and keep continuously effective such additional registration statements until all of the shares of common stock registered thereunder have been sold or may be sold without volume restrictions pursuant to Rule 144 of the Securities Act. The holders of the Notes will also be granted piggyback registration rights with respect to such shares.

Working Capital Deficit

The following is a summary of our working capital deficit at September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015			Percent Increase/(Decrease)
Current Assets	$983,099			$541,069			81.7		%
Current Liabilities		(2,786,869	)		(6,053,283	)		(54.0)	%
Working Capital Deficit	$	(1,803,770	)	$	(5,512,214	)		(67.3)	%

The decrease in our working capital deficit was primarily attributable to conversion of $3,324,942 of convertible notes (net of discount) and a decrease in the related derivative liability of $590,536. In addition to the decrease in liabilities above, the Company’s cash balance increased $514,443 from December 31, 2015 to September 30, 2016, due to the unused proceeds from the March 18, 2016 and May 23, 2016 private placements. Unrestricted cash was $968,187 as of September 30, 2016, as compared to $453,744 as of December 31, 2015.

Cash Flows

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

	Nine Months Ended September 30,
	2016			2015			Percent Increase/(Decrease)
Cash Flow Used in Operating Activities	$	(2,201,702	)	$	(3,055,659	)		(27.9	)%
Cash Flow Provided by Investing Activities		-			452,762			(100.0	)%
Cash Flow Provided by Financing Activities		2,716,145			3,248,279			(16.4	)%
Net Change in Cash During Period	$	514,443		$	645,382			(20.3	)%

Net Cash Used in Operating Activities . Net cash used in operating activities decreased to $2,201,702 during the nine-month period ended September 30, 2016 from $3,055,659 during the nine-month period ended September 30, 2015. The decrease after non-cash adjustments related to the conversion of notes payable and accrued interest in March and April, 2016 and the change in fair value of our derivative liability was due primarily to decreased depreciation expense and decreased changes to our operating liabilities in 2016 as compared to the 2015 period, and a reclassification in 2015 of $227,345 to restricted cash which consisted of funds designated for debt collateral.

Net Cash Provided by Investing Activities . Net cash provided by investing activities was $0 during the nine-month period ended September 30, 2016, as compared to net cash used in investing activities of $452,762 during the nine-month period ended September 30, 2015. The decrease was due to proceeds received from the sale of land in the first quarter of 2015.

Net Cash Provided by Financing Activities . Net cash provided by financing activities was $2,716,145 during the nine-month period ended September 30, 2016, as compared to net cash provided by financing activities of $3,248,279 during the nine-month period ended September 30, 2015. The decrease was due primarily to the difference in proceeds received from private placements of $706,650, offset by a reclassification in 2016 of $227,344 to restricted cash, which consisted of funds designated for debt collateral.

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

our ability to locate a profitable mineral property;

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

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

our ability to generate revenues.

We may not generate sufficient revenue from our proposed business plan in the future to achieve profitable operations. As of September 30, 2016, we had an accumulated deficit of $96,345,214. As of September 30, 2016, we had a working capital deficit of $1,803,770, compared to a working capital deficit of $5,512,214 as of December 31, 2015. If we are not able to achieve profitable operations at some point in the future, we eventually will have insufficient working capital to maintain our operations as we presently intend to conduct them or to fund our expansion plans. In addition, our losses may increase in the future as we expand our business plan. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders’ equity. If we are unable to achieve profitability, the market value of our common stock will decline and there would be a material adverse effect on our financial condition.

Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project. For the next twelve months, our management anticipates that the minimum cash requirements for funding our proposed testing and feasibility programs and our continued operations will be approximately $3,500,000. As of November 14, 2016, we had operating cash reserves of approximately $400,000. Our current financial resources are not sufficient to allow us to meet the anticipated costs of our testing and feasibility programs and operating overhead during the next twelve months and we will require additional financing in order to fund these activities . As of September 30, 2016, our financial statements and this report do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

A decision on allocating additional funds for the Clarkdale Slag Project will be forthcoming if and once the feasibility study is completed and analyzed. The Clarkdale Slag Project work program is expected to include the preparation of a bankable feasibility study, engineering and design of the full-scale production facility and planning for the construction of an Industrial Collector Road pursuant to an agreement with the Town of Clarkdale, Arizona. We estimate that our monthly expenses will increase substantially once the feasibility study is completed and analyzed and we may require the necessary funding to fulfill this anticipated work program.

If the actual costs are significantly greater than anticipated, if we proceed with our exploration, testing and construction activities beyond what we currently have planned, or if we experience unforeseen delays during our activities during 2016, we will need to obtain additional financing. There are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.

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

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

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

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

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

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs”, which simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015, and early adoption was permitted. We adopted the provisions of ASU 2015-03 on a retrospective basis for our annual period ended December 31, 2015. The retrospective adoption of this standards resulted in the reclassification of approximately $0.1 million of current assets as a direct reduction against the balance of our current debt in the accompanying condensed consolidated balance sheet at December 31, 2015, but had no effect on our condensed consolidated net loss or stockholders’ equity.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about and Entity’s Ability to Continue as a Going Concern”. This update requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Adoption of the new guidance will affect only the presentation and disclosures of the Company’s condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We had unrestricted cash totaling $968,187 at September 30, 2016 and $453,744 at December 31, 2015. Our cash is held primarily in an interest bearing bank account, a savings account and non-interest bearing checking accounts and is not materially affected by fluctuations in interest rates. The unrestricted cash is held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these cash holdings, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future interest income.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, the phrase “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure. We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. This evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer. Based on this evaluation, our Chief Executive Officer concluded that, as of September 30, 2016, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

On April 8, 2016, our CFO Melvin Williams resigned pursuant to which we no longer utilize the services of Cupit, Milligan, Ogden and Williams an affiliate of our former CFO. We believe that with the transition inherently there are changes in our internal controls over financial reporting during the quarter ended September 30, 2016. We have continued to utilize the system of internal controls in place prior to the resignation of our CFO and primary accounting resource. We have engaged an independent consulting, and financial accounting resource while we continue to pursue a permanent replacement for our former CFO.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

We believe that there are no material litigation matters against us at the current time.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which to our knowledge have not materially changed. Those risks, which could materially affect our business, financial condition or future results, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K for the quarter ended September 30, 2016 is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Item 5. Other Information

None.

Item 6. Exhibits

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

Reference Number	Item

31.1	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95.1	Mine Safety Disclosures

101	101.INS	XBRL Instance
	101.SCH	XBRL Taxonomy Extension Schema
	101.CAL	XBRL Taxonomy Extension Calculation
	101.DEF	XBRL Taxonomy Extension Definition
	101.LAB	XBRL Taxonomy Extension Labels
	101.PRE	XBRL Taxonomy Extension Presentation

SIGNATURES

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

	SEARCHLIGHT MINERALS CORP. a Nevada corporation

Date: November 14, 2016	By:	/s/ Martin B. Oring
		Martin B. Oring Chief Executive Officer, President and Director (Principal Executive Officer and Principal Financial Officer)

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