Table ofContents

 

 

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-K**

 

**(Mark One)**

 

**x****      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31, 2009**

** **

**or**

 

**o****         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                   to                   **

 

**Commissionfile number 001-33404**

 

**URANIUM RESOURCES, INC.**

(Exact name of Registrant as specified in itscharter)

 

| **DELAWARE**                             | ** ** | **75-2212772**                       |
|------------------------------------------|------------|--------------------------------------|
| (State of Incorporation)                 |       | (I.R.S. Employer Identification No.) |
|                                     |       |                                 |
| **405 State Highway Bypass 121,**        | ** ** | ** **                           |
| **Building A, Suite 110**                | ** ** | ** **                           |
| **Lewisville, Texas**                    | ** ** | **75067**                            |
| (Address of principal executive offices) |       | (Zip code)                           |

 

**(972) 219-3330**(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) ofthe Act: **None**

 

Securities registered pursuant to Section 12(g) ofthe Act:

 

**Common Stock, $0.001 par valueper share**(Title of class)

 

Indicate by check mark if the Registrant is awell-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o    No x

 

Indicate by check mark if the Registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o    No x

 

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the Registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past90 days. Yes x    No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceeding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files). Yes o No o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of Registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the Registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act.

 

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

 

Indicate by check mark whether the Registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

 

The aggregate market value of the Common Stock heldby non-affiliates of the Registrant at June 30, 2009, was approximately$61,457,206. Number of shares of Common Stock, $0.001 par value, outstanding asof March 12, 2010:  56,847,612shares.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

Items 10, 11, 12, 13 and 14 of Part III ofthis Form 10-K report are incorporated by reference to the Registrant’sDefinitive Proxy Statement for the Registrant’s 2009 Annual Meeting ofStockholders.

 

 

 

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** **

**URANIUM RESOURCES, INC.**

 

**ANNUAL REPORT ON FORM 10-K**

 

**FOR THE FISCAL YEAR ENDED DECEMBER31, 2009**

 

**TABLE OF CONTENTS**

 
| PART I                                                                                                                     | 1      |
|---------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                            |   |
| Item 1. Business                                                                                                           | 1      |
|                                                                                                                            |   |
| The Company                                                                                                                     | 1      |
|                                                                                                                            |   |
| New Mexico Assets                                                                                                               | 1      |
|                                                                                                                            |   |
| Texas  Production History and Current Status                                                                                    | 1      |
|                                                                                                                            |   |
| 2009 Events                                                                                                                     | 2      |
|                                                                                                                            |   |
| Review of 2009  Operations                                                                                                      | 2      |
|                                                                                                                            |   |
| Strategy                                                                                                                        | 3      |
|                                                                                                                            |   |
| Uranium  Reserves/Mineralized Material                                                                                          | 3      |
|                                                                                                                            |   |
| Long-Term  Delivery Contracts                                                                                                   | 4      |
|                                                                                                                            |   |
| Joint  Venture for Churchrock Property                                                                                          | 5      |
|                                                                                                                            |   |
| Overview  of the Uranium Industry                                                                                               | 5      |
|                                                                                                                            |   |
| The  ISR Mining Process                                                                                                         | 6      |
|                                                                                                                            |   |
| Environmental Considerations and Permitting                                                                                     | 7      |
|                                                                                                                            |   |
| Reclamation and Restoration Costs and Bonding  Requirements                                                                     | 8      |
|                                                                                                                            |   |
| Water Rights                                                                                                                    | 8      |
|                                                                                                                            |   |
| Competition                                                                                                                     | 9      |
|                                                                                                                            |   |
| Available  Information                                                                                                          | 9      |
|                                                                                                                            |   |
| Item 1A.  Risk Factors                                                                                                     | 9      |
|                                                                                                                            |   |
| General Risks and Uncertainties                                                                                                 | 9      |
|                                                                                                                            |   |
| Item 1B. Unresolved Staff Comments                                                                                         | 14     |
|                                                                                                                            |   |
| Item 2.  Properties                                                                                                        | 15     |
|                                                                                                                            |   |
| South Texas                                                                                                                     | 15     |
|                                                                                                                            |   |
| New  Mexico Properties                                                                                                          | 22     |
|                                                                                                                            |   |
| Insurance                                                                                                                       | 31     |
|                                                                                                                            |   |
| Reclaimed  Properties                                                                                                           | 31     |
|                                                                                                                            |   |
| Item 3.  Legal Proceedings                                                                                                 | 32     |
|                                                                                                                            |   |
| New Mexico Radioactive Material License                                                                                         | 32     |
|                                                                                                                            |   |
| New  Mexico UIC Permit                                                                                                          | 32     |
|                                                                                                                            |   |
| Bonding for Texas Groundwater Restoration Obligations                                                                           | 33     |
|                                                                                                                            |   |
| Dispute over Kleberg County Settlement Agreement                                                                                | 33     |
|                                                                                                                            |   |
| Kingsville Dome Production Disposal Well Permit  Renewals and Area Authorization 3                                              | 33     |
|                                                                                                                            |   |
| Navajo EPA Letter and UNC/GE Demand for Indemnity                                                                               | 34     |
|                                                                                                                            |   |
| Kingsville Dome Lessor Legal Action                                                                                             | 34     |
|                                                                                                                            |   |
| Other                                                                                                                           | 34     |
|                                                                                                                            |   |
| Item 4. Submission of Matters to a Vote of  Security Holders                                                               | 35     |
|                                                                                                                            |   |
| GLOSSARY OF CERTAIN URANIUM INDUSTRY TERMS                                                                                      | 35     |
|                                                                                                                            |   |
| PART II                                                                                                                    | 36     |
|                                                                                                                            |   |
| Item 5. Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities | 36     |
|                                                                                                                            |   |
| Dividends                                                                                                                       | 37     |
|                                                                                                                            |   |
| Securities Authorized for Issuance Under Equity  Compensation Plans                                                             | 37     |
|                                                                                                                            |   |
| Performance  Graph                                                                                                              | 38     |
|                                                                                                                            |   |
| Item 6. Selected Financial Data                                                                                            | 38     |

 

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| Item 7. Management’s Discussion and Analysis of  Financial Condition and Results of Operation       | 39     |
|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                          |   |
| Forward  Looking Statements                                                                                   | 39     |
|                                                                                                          |   |
| Overview                                                                                                      | 39     |
|                                                                                                          |   |
| Financial Condition and Results of Operations                                                                 | 40     |
|                                                                                                          |   |
| Liquidity—Cash Sources and Uses for 2010                                                                 | 45     |
|                                                                                                          |   |
| Off Balance Sheet Arrangements                                                                                | 45     |
|                                                                                                          |   |
| Contractual  Obligations                                                                                      | 45     |
|                                                                                                          |   |
| Critical  Accounting Policies                                                                                 | 45     |
|                                                                                                          |   |
| Impact of Recent Accounting Pronouncements                                                                    | 46     |
|                                                                                                          |   |
| Item 7A. Quantitative and Qualitative Disclosures  About Market Risk                                     | 47     |
|                                                                                                          |   |
| Uranium  Price Volatility                                                                                     | 47     |
|                                                                                                          |   |
| Item 8. Financial Statements and Supplementary  Data                                                     | 47     |
|                                                                                                          |   |
| Financial  Statements                                                                                         | 47     |
|                                                                                                          |   |
| Supplementary Financial Data Tables                                                                           | 48     |
|                                                                                                          |   |
| Item 9. Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure            | 48     |
|                                                                                                          |   |
| Item 9A. Controls and Procedures                                                                         | 48     |
|                                                                                                          |   |
| Evaluation of Disclosure Controls and Procedures                                                              | 48     |
|                                                                                                          |   |
| Management’s Report on Internal Control Over Financial  Reporting                                        | 48     |
|                                                                                                          |   |
| Report of Independent Registered Public Accounting  Firm                                                      | 50     |
|                                                                                                          |   |
| Item 9B.  Other Information                                                                              | 51     |
|                                                                                                          |   |
| PART III                                                                                                 | 51     |
|                                                                                                          |   |
| Item 10. Directors, Executive Officers and  Corporate Governance                                         | 51     |
|                                                                                                          |   |
| Item 11. Executive Compensation                                                                          | 51     |
|                                                                                                          |   |
| Item 12. Security Ownership of Certain Beneficial  Owners and Management and Related Shareholder Matters | 51     |
|                                                                                                          |   |
| Item 13. Certain Relationship and Related  Transactions and Director Independence                        | 51     |
|                                                                                                          |   |
| Item 14. Principal Accountant Fees and Services                                                          | 51     |
|                                                                                                          |   |
| PART IV                                                                                                  | 51     |
|                                                                                                          |   |
| Item 15. Exhibits and Financial Statement  Schedules                                                     | 51     |
|                                                                                                          |   |
| SIGNATURES                                                                                                    | 52     |
|                                                                                                          |   |
| Index to Consolidated Financial Statements                                                                    | F1     |
|                                                                                                          |   |
| Exhibit Index                                                                                            | E1     |

 

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**PART I**

 

*The “Company” or “Registrant” or “URI” is used in thisreport to refer to Uranium Resources, Inc. and its consolidatedsubsidiaries. This 10-K contains “forward-looking statements.” These statementsinclude, without limitation, statements relating to management’s expectationsregarding the Company’s ability to remain solvent, capital requirements,mineralized materials, timing of receipt of mining permits, production capacityof mining operations planned for properties in South Texas and New Mexico andplanned dates for commencement of production at such properties, businessstrategies and other plans and objectives of the Company’s management forfuture operations and activities and other such matters. The words “believes,” “plans,”“intends,” “strategy,” “projects,” “targets,” or “anticipates” and similarexpressions identify forward-looking statements. The Company does not undertaketo update, revise or correct any of the forward-looking information. Readersare cautioned that such forward-looking statements should be read inconjunction with the Company’s disclosures under the heading: “Risk Factors”beginning on page **9*.

 

*Certain terms used in this Form 10-K and other industryterms are defined in the “Glossary of Certain Terms” appearing at the end of Part Ihereto.*

 

**Item 1.    Business.**

 

***The Company***

 

UraniumResources, Inc. (URI) is a uranium exploration, mine development andproduction company. We were organized in 1977 to acquire and develop uraniummines in South Texas using the in-situ recovery mining process (ISR). Since itsfounding, URI has produced over 8 million pounds U3O8 from five Texas projects, two of which havebeen fully restored and returned to the land owners. The Company currently hastwo fully licensed ISR processing facilities in Texas: Kingsville Dome andRosita. Since 1986, the Company has built a significant asset base in NewMexico that includes 101.4 million pounds U3O8 of in-placemineralized uranium material on 183,000 acres of uranium mineral holdings. Wehave also been issued a Nuclear Regulatory Commission (NRC) license to build a3 million pound U3O8 per year ISR processing facility atCrownpoint, New Mexico.  As of March 12,2010 we had 30 employees.

 

***New Mexico Assets***

 

URIholds a NRC source materials license to build and operate an ISR uraniumprocessing facility on company-owned property at Crownpoint, New Mexico. Thelicense allows for ISR mining at the Churchrock and Crownpoint projects thattogether hold nearly 34 million pounds U3O8 of in-placemineralized uranium material. The license allows for the production of up to1 million pounds per year from Churchrock until a successful commercialdemonstration of restoration is made; after which the quantity of productioncan be increased and mining on other properties can begin. Total productionunder the license is limited to 3 million pounds U3O8 per year. This project is currently beingdelayed due to depressed uranium prices and by a lawsuit to determine whetherthe U.S. Environmental Protection Agency (“USEPA”) or the State of New Mexicohas the jurisdiction to issue the Underground Injection Control (UIC) programpermits. The Company believes production could begin within 18 - 24 monthsafter obtaining this permit assuming the market for uranium improves.

 

Overallin New Mexico, the Company owns 183,000 acres of mineral holdings that containapproximately 101.4 million pounds U3O8 of in-placemineralized uranium material that has been verified by an independentengineering firm. A substantial amount of our total acreage remains unexploredor currently has insufficient data to estimate in-place mineralized materials.These properties were acquired during the 1980s and 1990s along with a vastdatabase of exploration logs and drill results that were developed by Conoco,Homestake Mining, Mobil Oil, Kerr-McGee, Phillips Petroleum, United Nuclear andWestinghouse Electric Corporation. Three of our properties were in variousstages of being developed as conventional underground mines in the early 1980swith a total designed capacity to produce approximately 4.5 million poundsU3O8 per year. We also possess a 16.5% royaltyinterest on a partial section of the Mount Taylor Mine owned by Rio GrandeResources, a division of General Atomics.

 

Since2007, we have digitized approximately 18,800 drill logs in order to secure thedata and allow for easier analysis of drill hole information. These logs totalnearly 23 million feet of hole drilled in the 1970s and 1980s with anestimated drilling and logging replacement cost of $700 million.

 

The Company plansto develop its uranium assets in New Mexico using the most economic andefficient method for each project and will be subject to improvements in uraniumprices. These mining methods may include the use of ISR, old stope leaching,and conventional mining techniques.

 

***Texas Production History and Current Status***

 

TheCompany developed and produced over 560,000 pounds U3O8 from theLongoria and Benavides projects in the early 1980s. These properties were fullyrestored between 1986 and 1991. From 1988 through 1999, we producedapproximately 6.1 million pounds U3O8 from two SouthTexas projects: 3.5 million pounds from the Kingsville Dome project and2.6 million pounds U3O8 from the Rositaproject. In 1999, we shut-down production at both projects due to depresseduranium prices. We had no revenue from 

 

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uranium sales between2000 and the fourth quarter of 2004, and therefore had to rely on equityinfusions to fund operations and maintain our critical employees and assets.

 

Afteruranium prices rose significantly in 2004, we placed our South Texas Vasquezproperty into production during the fourth quarter of that year. In April 2006,Kingsville Dome returned to production followed by a startup of Rosita in June 2008.From 2004 to the end of 2009, these three projects produced a total of1.4 million pounds of U3O8.

 

TheVasquez project was mined out in 2008 and is now being restored. Rositaproduction was shut-in in October 2008 due to depressed pricing andtechnical challenges in the first new wellfield that made mining uneconomical.The decline in uranium prices throughout 2008 also led to a decision in October 2008to defer new wellfield development at Rosita and Kingsville Dome. Productioncontinued in two existing wellfields at Kingsville Dome and was completed in July 2009.  The Company has not had any operating minesin Texas since that time, and does not plan to return to production untiluranium prices recover.

 

TheCompany believes it has sufficient in-place mineralized uranium material toproduce a total of 300,000 to 500,000 pounds U3O8 over a one totwo year period should realized uranium prices recover to a profitable level. Productioncould begin within 6 - 12 months after a decision to restart is made.Longer-term, additional production could come from new production areaauthorizations at Kingsville Dome, however, this may take a considerable periodof time given local opposition and there can be no assurance that suchproduction will be realized.

 

***2009 Events***

 

On March 6,2009, URI received notification from Itochu Corporation (“Itochu”) terminatingURI’s joint venture with Itochu to develop our Churchrock property in NewMexico.  The Joint Venture providedItochu an opportunity to participate in New Mexico uranium production inexchange for renegotiating their sales contract with the Company. The contracthad also included a provision that allowed the Company to receive up to anadditional $2.10 per pound for certain South Texas uranium production sold toItochu from 2006 through the termination of the Joint Venture on March 6,2009.

 

As aresult of the termination of the joint venture, URI now retains 100% ownershipof the 18.6 million pounds of in place mineralized uranium material subject toapplicable royalties based on sales at Churchrock.  However we presently have no committed sourceof financing for development of this project.

 

On April 17,2009, a three-judge panel of the United States Court of Appeals for the TenthCircuit affirmed the USEPA decision and held that Section 8 of URI’sChurchrock property in New Mexico is Indian Country.  One of the membersof the panel dissented.  The Company petitioned the Tenth Circuit forand was granted an en banc review of the panel’s decision.  Oral argumentswere presented to the Court on January 12, 2010 and we are waiting for theCourt to render a decision.

 

In July, 2009, URIentered into a definitive agreement to purchase from NZ Uranium, LLC (NZU)113,000 acres of mineral rights in the Crownpoint area of New Mexico, howeverin September, 2009, the agreement for the acquisition was terminated because ofthe existence of title issues that were not resolved.

 

On September 3,2009, David N. Clark stepped down as the President and Chief Executive Officerand a Director of the Company.  At thattime, the Board appointed Donald C. Ewigleben as President, CEO and COO tosucceed Mr. Clark and also named Mr. Ewigleben as a director to fillthe vacancy on the Board created by Mr. Clark’s resignation.

 

In October 2009, theNew Mexico Mining and Minerals Division approved the Company’s request for arenewal of the Minimal Impact Exploration Permit Application on its Section 13in-situ (ISR) exploration project. Section 13 is in Ambrosia Lake (See NewMexico Properties-Potential ISR and OSL areas), the historic mining districtnear Grants, New Mexico.  The permitallows URI to drill up to 10 holes for the purpose of extracting core samplesto evaluate the suitability of the property for ISR mining and we intend toperform these drilling activities within the current permitting period.  URI owns the Section 13 property in feeand the permit renewal is now valid until November 2010.

 

***Review of 2009 Operations***

 

TheCompany produced 59,000 pounds U3O8 in 2009primarily from our Kingsville Dome project. This production was sourced from the two remaining Kingsville Domeoperating wellfields as we had shut in production at Rosita and produced outthe Vasquez project at the end of 2008. The Company’s focus in 2009 was on restoration activities at Vasquez,Kingsville Dome and Rosita.  Full scalerestoration activities of the groundwater at the Vasquez project commenced inthe 4th quarter of 2008 and substantial progress hasbeen made towards completion of the groundwater restoration. At KingsvilleDome, the Company has been conducting full-scale 

 

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restoration in ProductionAreas (“PA”) #1 and #2 and began pre-restoration preparations on PA#3 inthe 3rd quarter of 2009.  Full-scale restoration in the fully depletedwellfields of PA#3 is expected to begin in the 1st quarter of 2010.

 

TheCompany in conjunction with the Kenedy Memorial Foundation (the “Foundation”),conducted testing on 165 water wells on a portion of the Kenedy Ranch, locatedin South Texas for the presence of radium and radon to determine if there is apotential for uranium mineralization. These tests were conducted in 2009, theresults have been evaluated and the Company is in the process of presenting thefindings to the Foundation.

 

TheCompany is also working with Texas A&M-Kingsville to evaluate the use ofdissolved hydrogen to enhance bioremediation of mined zones at Kingsville Dome.A test was completed on a small portion of a previously mined wellfield atKingsville Dome in 2009. The analysis of the test results is ongoing and isexpected to be completed by the end of 2010. We are also working with otheractive ISR mining companies as well as several government labs and agenciesincluding Sandia National Laboratory, Los Alamos National Laboratory and theUnited States Geological Service, on methods to improve the efficiency ofgroundwater restoration at ISR wellfields.

 

During2009, our focus in New Mexico was on government and public relations activitiesneeded to advance toward production at all of our projects, with our fullylicensed Churchrock mine of the Crownpoint Project as a priority.  The Company also undertook a study with theNavajo Nation EPA to perform a comprehensive environmental characterization ofthe Churchrock mine site at Section 17 and lands adjacent to the sitearea. This study was completed in September 2009 and concluded that anyoff-site mine-related impacts at Section 17 and adjacent lands are expectedto be minor.  We will continue to workwith the Navajo Nation in this endeavor to achieve the remediation objectives.

 

***Strategy***

 

The Company has adopted anew strategic plan which emphasizes cash preservation as its priority.  The Company is committed to seeking sourcesof near to mid-term sources of capital to provide sufficient working capitalfor the Company to maintain its liquidity through at least 2011.  The strategic plan also includes thedevelopment of options for unlocking potential value for shareholders byutilizing the Companys current assets and by evaluating possible regional andstructural synergies.  Key operationalpoints of the strategic plan for our Texas properties include (1) positioningthe Company to return to production in Texas should the price of uranium returnto a level sufficient to generate positive cash flow; (2) complete an analysisof the exploration potential in South Texas and enhance the Company’sexploration capabilities; (3) continue to maintain our restoration activitiesin South Texas in accordance with the Company’s existing agreements andregulatory requirements and (4) analyze any synergistic opportunities andpotential asset monetization prospects in Texas.

 

In NewMexico, our strategic plan calls for continuing to advance our discussions withothers in the region that also hold uranium assets, as well as with entitiesthat would benefit from the production of the uranium.  In addition, we will continue ourcommunication efforts with the local communities, State and local governmentsand the Navajo Nation to address legacy issues while continuing educationefforts on the safety of today’s uranium mining practices with the objective ofbridging the gap that currently exists between uranium mining entities andothers with stakeholder interests in the State.

 

***Uranium Reserves/Mineralized Material***

 

Inaccordance with the SEC’s Guideline on Non-Reserve Mineralized Material, and asshown in the following table, we estimate 101.4 million pounds of in-placemineralized uranium material on our New Mexico properties as of December 31,2009. This estimate reflects our ongoing reevaluation of our New Mexicoproperties, including our decision to consider development of certainproperties by conventional mining and milling methods in addition to ISRmethods. The estimate for each New Mexico property is based on studies andgeologic reports prepared by prior owners, along with studies and reportsprepared by geologists engaged by the Company. The estimates presented belowwere reviewed and affirmed by Behre Dolbear & Company (USA) anindependent private engineering firm in their report dated February 26,2008.  Since the date of the report, theCompany has maintained its ownership position on these properties, theproperties have not been subject to any production activities and the estimatesremain unchanged.

 

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**SUMMARY OF IN-PLACE NON-RESERVEMINERALIZED**

**MATERIAL IN NEW MEXICO**

 
| **Property**   | ** ** | **Tonnage  Millions** | ** ** | **Grade  Percent** | ** ** | **Non-Reserve  Mineralized  Material  Millions of Lbs U****3****O****8** | ** ** |
|----------------|------------|-----------------------|------------|--------------------|------------|--------------------------------------------------------------------------|------------|
| Mancos         |       | 5.2                   |       | 0.11               | %          | 11.3                                                                     |       |
| Churchrock     |       | 7.8                   |       | 0.12               | %          | 18.6                                                                     |       |
| Nose  Rock     |       | 7.6                   |       | 0.15               | %          | 21.9                                                                     |       |
| West  Largo    |       | 2.8                   |       | 0.30               | %          | 17.2                                                                     |       |
| Roca  Honda    |       | 3.9                   |       | 0.19               | %          | 14.7                                                                     |       |
| Crownpoint     |       | 4.8                   |       | 0.16               | %          | 15.3                                                                     |       |
| Ambrosia  Lake |       | 0.71                  |       | 0.17               | %          | 2.4                                                                      |       |
|           |       |                  |       | Total              |       | 101.4                                                                    |       |

 

Thefollowing table summarizes our estimates of Proven Reserves for our KingsvilleDome and Rosita properties in South Texas. These estimates have been produced by the Company’s professionalengineering and geologic staff.

 

**SUMMARY OF IN-PLACE RESERVES IN SOUTHTEXAS**

 
| **Property**     | ** ** | **Tonnage  Millions** | ** ** | **Grade  Percent** | ** ** | **Proven Uranium Reserves  Millions of Lbs U****3****O****8****at 12/31/09** | ** ** |
|------------------|------------|-----------------------|------------|--------------------|------------|------------------------------------------------------------------------------|------------|
| Kingsville  Dome |       | 0.033                 |       | 0.075              | %          | 0.050                                                                        |       |
| Rosita           |       | 0.138                 |       | 0.081              | %          | 0.224                                                                        |       |
|             |       |                  |       | Total              |       | 0.274                                                                        |       |

 

***Long-Term Delivery Contracts***

 

Priorto March 2006 we had two contracts with Itochu Corporation and two with UGUSA, Inc. Under those contracts we were obligated to deliver an aggregateof 600,000 pounds in each of the years 2005 through 2008, and the buyer had theright to increase or decrease those deliveries by 15%. The average price forsuch deliveries was $17.95 per pound in 2005 and was anticipated to have been$14.58 per pound in 2006. These contracts were entered into at a time when thespot price for uranium was less than $15 per pound, substantially below the $40per pound in effect as of March 25, 2006. Two other contracts with thesebuyers called for aggregate deliveries of 645,000 pounds by December 31,2007 priced at the spot price at the time of delivery less an average of $3.80per pound.

 

In March 2006we entered into new contracts with Itochu and UG that superseded the existingcontracts. Each of the new contracts calls for delivery of one-half of ouractual production from our Vasquez property and other properties in Texascurrently owned or hereafter acquired by the Company (excluding certain largepotential exploration plays). The terms of these new contracts are summarized below.

 

*The Itochu Contract.*    Under the Itochu contract allproduction from the Vasquez property will be sold at a price equal to theaverage spot price for the eight weeks prior to the date of delivery less $6.50per pound, with a floor for the spot price of $37.00 per pound and a ceiling of$46.50 per pound. Other Texas production will be sold at a price equal to theaverage spot price for the eight weeks prior to the date of delivery less $7.50per pound, with a floor for the spot price of $37.00 per pound and a ceiling of$43.00 per pound. On non-Vasquez production the price paid will be increased by30% of the difference between the actual spot price and the $43.00 ceiling upto and including $50.00 per pound. If the spot price is over $50.00 per pound,the price on all Texas production will be increased by 50% of such excess. Thefloor and ceiling and sharing arrangement over the ceiling applies to3.65 million pounds of deliveries, after which there is no floor orceiling. Itochu has the right to cancel any deliveries on six-month’snotice.  Since the inception of the newcontract through December 31, 2009 we have delivered approximately 510,000pounds to Itochu.

 

On December 5,2006, HRI-Churchrock, Inc., a wholly-owned subsidiary of the Company, enteredinto an agreement with a wholly-owned subsidiary of Itochu to develop jointlyour Churchrock property in New Mexico (the “Joint Venture”). This agreement wasterminated on March 6, 2009. (See “**Business—JointVenture for Churchrock Property**”, below).

 

*The UG Contract.*    Under the UG contract allproduction from the Vasquez property and other Texas production will be sold ata price equal to the month-end long-term contract price for the second monthprior to the month of delivery less $6 per pound until (i) 600,000 poundshave been sold in a particular delivery year and (ii) an aggregate of3 million pounds of uranium has been sold. After the 600,000 pounds in anyyear and 3 million pounds total have been sold, UG will have a right offirst refusal to purchase other Texas production at a price equal to theaverage spot price for a period prior to the date of delivery less 4%. Inconsideration of UG’s agreement to restructure its previously existingcontract, we paid UG $12 million in cash with funds raised in our equityoffering 

 

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completed in April 2006.  Since the inception of the new contractthrough December 31, 2009 we have delivered approximately 482,000 poundsto UG.

 

***Joint Venture for Churchrock Property***

 

On December 5,2006, HRI-Churchrock, Inc., a wholly-owned subsidiary of the Company,entered into a Joint Venture with a wholly-owned subsidiary of Itochu todevelop jointly our Churchrock property in New Mexico. The Joint Ventureprovided Itochu an opportunity to participate in New Mexico uranium productionin exchange for renegotiating their sales contract with the Company. The newcontract included a provision to allow the Company to receive up to anadditional $2.10 per pound for certain South Texas uranium production sold toItochu.

 

Afeasibility study was completed and delivered at the end of 2006 at a cost of$675,000 that was funded by Itochu. Under the terms of the Joint Venture, bothparties had until April 2, 2007 to make a decision regarding whether tomove forward with the Joint Venture. That date was ultimately extended until March 2,2009.

 

On March 6,2009 we received notification that Itochu had decided to terminate the JointVenture. This eliminated the potential for reinstatement of the originaldelivery contracts with Itochu for South Texas production. However, dependingon spot market prices, our sales price may be reduced by up to $2.10 per poundon some of our South Texas production for future deliveries under the Itochucontract.  As a result of the terminationof the joint venture, the Company now retains 100% ownership of the18.6 millions pounds of in place mineralized uranium material subject toapplicable royalties based on sales at Churchrock.  However, we presently have no committedsource of financing for development of this project.

 

***Overview of the Uranium Industry***

 

Theonly significant commercial use for uranium is as a fuel for nuclear powerplants for the generation of electricity. According to the World NuclearAssociation (“WNA”), as of February 2010 there were 436 nuclear powerplants operating in the world with an annual consumption of about162 million pounds of uranium. In addition, the WNA lists 53 reactorsunder construction, 142 being planned, and 327 being proposed.

 

Basedon reports by Ux Consulting Company, LLC, or Ux, the preliminary estimatefor worldwide production of uranium in 2009 is 120 million pounds. Ux reportedthat the gap between production and demand was filled by secondary supplies,such as inventories held by governments, utilities and others in the fuelcycle, including the highly enriched uranium, or HEU, inventories which are aresult of the agreement between the US and Russia to blend down nuclearwarheads. These secondary supplies are currently meeting nearly a third ofworldwide demand, but are depleting.

 

Spotmarket prices rose from $21.00 per pound in January 2005 to a high of$136.00 per pound in June 2007 in anticipation of sharply higher projecteddemand as a result of a resurgence in nuclear power, and by the fact thatsecondary supplies are either becoming depleted or will not be available. Thesharp price increase was driven in part by high levels of utility buying, whichresulted in most utilities covering their requirements through 2009. A decreasein near-term utility demand coupled with rising levels of supplies fromproducers and traders led to downward pressure being placed on uranium pricessince the third quarter of 2007. The spot market price for uranium began in January 2009at $53.00 per pound and ranged between a low of $40.00 per pound in April toa high of $54.00 per pound in June. The spot price closed 2009 at $44.50 perpound  As of March 8, 2010, the spotprice was $40.75 per pound and the long-term contract price was $60.00 perpound.  We believe the higher long-termprice reflects the continued strong future fundamentals for the uranium market.

 

Thefollowing graph shows annual average spot prices per pound from 1982 to 2009and the average price for the period January 1, 2010 to March 8,2010, as reported by Trade Tech and Ux.

 

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** **

**Ux Average Annual U****3****O****8**** Spot Price**

 

 

***The ISR Mining Process***

 

TheISR mining process is a form of solution mining. It differs dramatically fromconventional mining techniques. The ISR technique avoids the movement andmilling of significant quantities of rock and ore as well as mill tailing wasteassociated with more traditional mining methods. It is generally morecost-effective and environmentally benign than conventional mining.Historically, the majority of United States uranium production resulted fromeither open pit surface mines or underground shaft operations.

 

TheISR process was first tested for the production of uranium in the mid-1960s andwas first applied to a commercial-scale project in 1975 in South Texas. It waswell established in South Texas by the late 1970’s, where it was employed inabout twenty commercial projects, including two operated by us.

 

In theISR process, groundwater fortified with oxygen and other solubilizing agents ispumped into a permeable ore body causing the uranium contained in the ore todissolve. The resulting solution is pumped to the surface. The fluid-bearinguranium is then circulated to an ion exchange column on the surface whereuranium is extracted from the fluid onto resin beads. The fluid is thenreinjected into the ore body. When the ion exchange column’s resin beads areloaded with uranium, they are removed and flushed with a salt-water solution,which strips the uranium from the beads. This leaves the uranium in slurry,which is then dried and packaged for shipment as uranium concentrates.

 

Forgreater operating efficiency and lower capital expenditures, when developingnew wellfields we use a wellfield-specific remote ion exchange methodology asopposed to a central plant as we had done historically. Instead of piping thesolutions over large distances through large diameter pipelines and mixing thewaters of several wellfields together, each wellfield is being mined using adedicated satellite ion exchange facility. This allows ion exchange to takeplace at the wellfield instead of at the central plant. A wellfield consists ofa series of injection wells, production (extraction) wells and monitoring wellsdrilled in specified patterns. Wellfield pattern is crucial to minimizing costsand maximizing efficiencies of production. The satellite facilities allowmining of each wellfield using its own native groundwater.

 

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***Environmental Considerations and Permitting***

 

Uraniummining is regulated by the federal government, states and, where conducted inIndian Country, by Indian tribes. Compliance with such regulation has amaterial effect on the economics of our operations and the timing of projectdevelopment. Our primary regulatory costs have been related to obtaininglicenses and permits from federal and state agencies before the commencement ofmining activities.

 

U.S. regulationspertaining to climate change continue to evolve in both the U.S. andinternationally. We do not anticipate any adverse impact from these regulationsthat would be unique to our operations.

 

***Radioactive Material License.***    Before commencingoperations in both Texas and New Mexico, we must obtain a radioactive materiallicense. Under the federal Atomic Energy Act, the United States NuclearRegulatory Commission has primary jurisdiction over the issuance of aradioactive material license. However, the Atomic Energy Act also allows forstates with regulatory programs deemed satisfactory by the Commission to takeprimary responsibility for issuing the radioactive material license. TheCommission has ceded jurisdiction for such licenses to Texas, but not to NewMexico. Such ceding of jurisdiction by the Commission is hereinafter referredto as the “granting of primacy.”

 

TheTexas Commission of Environmental Quality (TCEQ) is the administrative agencywith jurisdiction over the radioactive material license. For operations in NewMexico, radioactive material licensing is handled directly by the United StatesNuclear Regulatory Commission.

 

See “**Properties**” and “**Legal Proceedings**” for the status of our radioactive materiallicense for New Mexico and our Texas properties.

 

***Underground Injection Control Permits (“UIC”).***    The federal SafeDrinking Water Act creates a nationwide regulatory program protectinggroundwater. This law is administered by the United States EnvironmentalProtection Agency (the “USEPA”). However, to avoid the burden of dual federaland state (or Indian tribal) regulation, the Safe Drinking Water Act allows forthe UIC permits issued by states (and Indian tribes determined eligible fortreatment as states) to satisfy the UIC permit required under the Safe DrinkingWater Act under two conditions. First, the state’s program must have beengranted primacy. Second, the USEPA must have granted, upon request by thestate, an aquifer exemption. The USEPA may delay or decline to process thestate’s application if the USEPA questions the state’s jurisdiction over themine site.

 

Texashas been granted primacy for its UIC programs, and the Texas Commission onEnvironmental Quality administers UIC permits. In addition to the radioactivematerials license described above, the TCEQ also regulates air quality andsurface deposition or discharge of treated wastewater associated with the ISRmining process.

 

NewMexico has also been granted primacy for its program. The Navajo Nation hasbeen determined eligible for treatment as a state, but it has not requested thegrant of primacy from the USEPA for uranium related UIC activity. Until theNavajo Nation has been granted primacy, ISR uranium mining activities withinNavajo Nation jurisdiction will require a UIC permit from the USEPA. Despitesome procedural differences, the substantive requirements of the Texas, NewMexico and USEPA underground injection control programs are very similar.

 

Propertieslocated in Indian Country remain subject to the jurisdiction of the USEPA. Someof our properties are located in areas that are in Indian Country or in areasthat are in dispute.

 

See “**Properties**” and “**Legal Proceedings**” for a description of the status of our UICpermits in Texas and New Mexico.

 

***Other.***    In addition to radioactivematerial licenses and underground injection control permits, we are alsorequired to obtain from governmental authorities a number of other permits orexemptions, such as for wastewater discharge, for land application of treatedwastewater, and for air emissions.

 

Inorder for a licensee to receive final release from further radioactive materiallicense obligations after all of its mining and post-mining clean up have beencompleted in Texas, approval must be issued by the TCEQ along with concurrencefrom the United States Nuclear Regulatory Commission and in New Mexico by theUnited States Nuclear Regulatory Commission.

 

Inaddition to the costs and responsibilities associated with obtaining andmaintaining permits and the regulation of production activities, we are subjectto environmental laws and regulations applicable to the ownership and operationof real property in general, including, but not limited to, the potentialresponsibility for the activities of prior owners and operators.

 

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Thecurrent environmental regulatory program for the ISR industry is wellestablished. Many ISR mines have gone full cycle without any significantenvironmental impact. However, the public anti-nuclear lobby can makeenvironmental permitting difficult and timing unpredictable.

 

***Reclamation and Restoration Costs and BondingRequirements***

 

At theconclusion of mining, a mine site is decommissioned and decontaminated, andeach wellfield is restored and reclaimed. Restoration involves returning theaquifer to its pre-mining use and removing evidence of surface disturbance. Restorationcan be accomplished by flushing the ore zone with native ground water and/orusing reverse osmosis to remove ions, minerals and salts to provide clean waterfor reinjection to flush the ore zone. Decommissioning and decontaminationentails dismantling and removing the structures, equipment and materials usedat the site during the mining and restoration activities.

 

TheCompany is required by the State of Texas regulatory agencies to obtainfinancial surety relating to certain of its future restoration and reclamationobligations. The Company has a combination of bank Letters of Credit (the “L/C’s)and performance bonds issued for the benefit of the Company to satisfy suchregulatory requirements. The L/C’s were issued by Bank of America and the performancebonds have been issued by United States Fidelity and Guaranty Company (“USF&G”).The L/C’s relate primarily to our operations at our Kingsville Dome and Vasquezprojects and amounted to $5,761,000 and $5,629,000, at December 31, 2009and 2008, respectively. The L/C’s are collateralized in their entirety bycertificates of deposit.

 

Theperformance bonds were $2,835,000 on December 31, 2009 and 2008, andrelated primarily to our operations at Kingsville Dome and Rosita. USF&Ghas required that the Company deposit funds collateralizing a portion of thebonds, and we have deposited approximately $386,000 and $385,000 at December 31,2009 and 2008, respectively, as cash collateral for such bonds. We areobligated by agreement with the bonding company to increase the cash collateralto an amount equal to 50% of the amount of the bonds, plus an additional $0.50for each pound of uranium produced until the account accumulates an additional$1.0 million.

 

Weestimate that our actual reclamation liabilities for prior operations atKingsville Dome, Vasquez and Rosita at December 31, 2009, are about $8.4 millionof which the net present value of $5.5 million is recorded as a liabilityon our balance sheet as of December 31, 2009. Under an agreement reachedon March 1, 2004 with the Texas regulatory agencies and our bondingcompany, we agreed to fund ongoing groundwater restoration at the KingsvilleDome and Rosita mine sites at specified treatment rates, utilizing a portion ofour cash flow from sales of uranium from the Vasquez site as a substitute foradditional bonding. This agreement expired on August 31, 2007. As aresult, the Company is now required to post adequate financial surety, and asof December 31, 2009 has posted letters of credit in the amount of $5.8 million,which are cash collateralized in full.

 

Thesefinancial surety obligations are reviewed and revised periodically by the Texasregulators.

 

In NewMexico, surety bonding will be required before commencement of mining and willbe subject to annual review and revision by the United States NuclearRegulatory Commission and the State of New Mexico or the USEPA.

 

***Water Rights***

 

Wateris essential to the ISR process. It is readily available in South Texas. InTexas, water is subject to capture, and we do not have to acquire water rightsthrough a state administrative process. In New Mexico, water rights areadministered through the New Mexico State Engineer and can be subject to Indiantribal jurisdictional claims. New water rights or changes in purpose or placeof use or points of diversion of existing water rights, such as those in theSan Juan and Gallup Basins where our properties are located, must be obtainedby permit from the State Engineer. Applications may be approved subject toconditions that govern exercise of the water rights.

 

Jurisdictionover water rights becomes an issue in New Mexico when an Indian nation, such asthe Navajo Nation, objects to the State Engineer’s authority and claims tribaljurisdiction over Indian Country. This issue may result in litigation betweenthe Indian nation and the state, which may delay action on water rightapplications, and can require applications to the appropriate Indian nation andcontinuing jurisdiction by the Indian nation over use of the water. The foregoingissues arise in connection with certain of our New Mexico properties.

 

In NewMexico, we hold approved water rights to provide sufficient water to conductmining at the Churchrock project and Section 24 for the Crownpoint projectfor the projected life of these mines. We also hold two unprotested seniorwater rights applications that, when approved, would provide sufficient waterfor future extensions of the Crownpoint project.

 

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***Competition***

 

Aprimary area of competition is in the identification and acquisition ofproperties with high prospects of potential producible reserves that aresuitable for our size operation. We believe that we compete with multiplejunior exploration companies for both properties as well as skilled personnel.

 

TheCompany competes for markets for our uranium primarily based on price. Wemarket uranium to utilities and commodity brokers and are in direct competitionwith supplies available from various sources worldwide. We believe we competewith approximately multiple operating companies in the mining and sale ofuranium.

 

***Available Information***

 

OurInternet website address is www.uraniumresources.com.  Our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports of Form 8-K, andamendments to those reports filed or furnished pursuant to section 13(a) of15(d) of the Exchange Act, are available free of charge through ourwebsite under the tab “Investor Relations” as soon as reasonably practicableafter they are electronically filed with, or furnished to, the Securities andExchange Commission.  We also makeavailable on our website copies of materials regarding our corporate governancepolicies and practices, including our Code of Ethics, Nominating CommitteeCharter, Audit Committee Charter and Compensation Committee Charter.  You may also obtain a printed copy of theforegoing materials by sending written request to: Uranium Resources, Inc.,405 State Highway 121 Bypass, Building A, Suite 110, Lewisville, Texas75067, Attention:  Information Request orby calling 972.219.3330.

 

**Item 1A.    Risk Factors.**

 

Thefactors identified below are important factors (but not necessarily all of theimportant factors) that could cause actual results to differ materially fromthose expressed in any forward-looking statement made by, or on behalf of, theCompany. Where any such forward-looking statement includes a statement of the assumptionsor bases underlying such forward-looking statement, we caution that, while webelieve such assumptions or bases to be reasonable and make them in good faith,assumed facts or bases almost always vary from actual results, and thedifferences between assumed facts or bases and actual results can be material,depending upon the circumstances. Where, in any forward-looking statement, theCompany, or its management, expresses an expectation or belief as to the futureresults, such expectation or belief is expressed in good faith and believed tohave a reasonable basis, but there can be no assurance that the statement ofexpectation or belief will result, or be achieved or accomplished. Taking intoaccount the foregoing, the following are identified as important risk factorsthat could cause actual results to differ materially from those expressed inany forward-looking statement made by, or on behalf of, the Company.

 

**General Risks and Uncertainties**

 

***We are not producing uranium at this time,nor do we expect to begin production in the near future unless uranium pricesrecover to a profitable level.  As aresult, we currently have no sources of operating cash.  If we cannot monetize certain existingCompany assets, partner with another Company that has cash resources, findother means of generating revenue other than uranium production and/or have theability to access additional sources of private or public capital we may not beable to remain in business.***

 

We willnot commence production at our existing properties until uranium prices recoverto a profitable level.  Until uraniumprices recover we will have no way to generate cash inflows unless we monetizecertain Company assets or find other means to generate cash.  In addition, our Vasquez project has beendepleted of its economically recoverable reserves and our Rosita and KingsvilleDome projects have limited identified economically recoverable reserves. Ourfuture uranium production, cash flow and income are dependent upon our abilityto bring on new, as yet unidentified wellfields and to acquire and developadditional reserves. We can provide no assurance that our properties will beplaced into production or that we will be able to continue to find, develop,acquire and finance additional reserves.

 

***We are presently out of compliance with thecontinuing listing requirements of the NASDAQ Global Market, the exchange onwhich our common stock is traded.  If ourstock is delisted from NASDAQ, a reliable trading market for our securitiescould cease to exist, the market price of our common stock could be negativelyimpacted and we could face difficulty raising additional capital.***

 

On January 10,2010, the NASDAQ Stock Market, the exchange on which our common stock istraded, notified us that the bid price for our common stock closed below theminimum $1.00 per share for a period of 30 consecutive business days, whichmeans that we fail to meet the requirements for continued listing set forth inMarketplace Rule 5550(a)(1).  If wecannot regain compliance with the minimum bid requirements before July 7,2010, NASDAQ may take steps to delist our common stock from the NASDAQ.  

 

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Delisting would have anadverse effect on the liquidity of our common stock and, as a result, themarket price for our common stock might decline.  Delisting could also make it more difficultfor us to raise additional capital.

 

***Our ability to function as an operatingmining company will be dependent on our ability to mine our properties at aprofit sufficient to finance further mining activities and for the acquisitionand development of additional properties. The volatility of uranium prices makeslong-range planning uncertain and raising capital difficult.***

 

Inaddition to ceasing all production, we have deferred all activities fordelineation and development of new wellfields at our South Texas projects. Thisdecision limits our ability to be immediately ready to begin production shoulduranium prices improve suddenly. Our ability to operate on a positive cash flowbasis will be dependent on mining sufficient quantities of uranium at a profitsufficient to finance our operations and for the acquisition and development ofadditional mining properties. Any profit will necessarily be dependent upon,and affected by, the long and short term market prices of uranium, which aresubject to significant fluctuation. Uranium prices have been and will continueto be affected by numerous factors beyond our control. These factors includethe demand for nuclear power, political and economic conditions in uraniumproducing and consuming countries, uranium supply from secondary sources anduranium production levels and costs of production. A significant, sustaineddrop in uranium prices may make it impossible to operate our business at alevel that will permit us to cover our fixed costs or to remain in operation.

 

***We face risks related to exploration anddevelopment, if warranted, on our properties.***

 

Ourlevel of profitability, if any, in future years will depend to a great degreeon uranium prices and whether any of our exploration stage properties can bebrought into production. The exploration for and development of uraniumdeposits involves significant risks. It is impossible to ensure that thecurrent and future exploration programs and/or feasibility studies on ourexisting properties will establish reserves. Whether a uranium ore body will becommercially viable depends on a number of factors, including, but not limitedto: the particular attributes of the deposit, such as size, grade and proximityto infrastructure; uranium prices, which cannot be predicted and which havebeen highly volatile in the past; mining, processing and transportation costs;perceived levels of political risk and the willingness of lenders and investorsto provide project financing; labor costs and possible labor strikes; andgovernmental regulations, including, without limitation, regulations relatingto prices, taxes, royalties, land tenure, land use, importing and exportingmaterials, foreign exchange, environmental protection, employment, workersafety, transportation, and reclamation and closure obligations. Mostexploration projects do not result in the discovery of commercially mineabledeposits of uranium and there can be no assurance that any of our explorationstage properties will be commercially mineable or can be brought intoproduction.

 

***The only market for uranium is nuclearpower plants world-wide, and there are a limited number of customers.***

 

We aredependent on a limited number of electric utilities that buy uranium fornuclear power plants. Because of the limited market for uranium, a reduction inpurchases of newly produced uranium by electric utilities for any reason (suchas plant closings) would adversely affect the viability of our business.

 

***The price of alternative energy sourcesaffects the demand for and price of uranium.***

 

Theattractiveness of uranium as an alternative fuel to generate electricity may tosome degree be dependent on the relative prices of oil, gas, coal andhydro-electricity and the possibility of developing other low cost sources forenergy.  If the price of alternativeenergy sources decrease or new low-cost alternative energy sources aredeveloped, the demand for uranium could decrease, which may result in thedecrease in the price of uranium.

 

***Public acceptance of nuclear energy isuncertain.***

 

Maintainingthe demand for uranium at current levels and future growth in demand willdepend upon acceptance of nuclear technology as a means of generatingelectricity. Lack of public acceptance of nuclear technology would adverselyaffect the demand for nuclear power and potentially increase the regulation ofthe nuclear power industry.

 

***The Navajo Nation ban on uranium mining inIndian Country encompasses approximately 84% of our in-place mineralizeduranium material on our properties in New Mexico and will adversely affect ourability to mine unless the ban is overturned.***

 

In April 2005,the Navajo Nation Council passed the Diné Natural Resources Protection Act of2005 prohibiting uranium mining and processing on any sites within IndianCountry as defined under 18 U.S.C. § 1151. We believe that theban is beyond the jurisdiction of the Navajo Nation. However, the ban mayprevent us from developing and operating our properties located in IndianCountry until the jurisdictional issue is resolved.

 

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In February 2007,the United States Environmental Protection Agency, or USEPA, determined that Section 8of our Churchrock property was Indian Country and that the USEPA and not thestate of New Mexico has the authority to issue the Underground InjectionControl, or UIC, permits for Section 8 that are a precondition to mining.We appealed that decision to the United States Court of Appeals for the TenthCircuit, which ruled 2 to 1 that Section 8 of the Churchrock property isIndian Country.  The Company was grantedan en banc review of the Tenth Circuit’s decision and oral arguments werepresented to the Court on January 12, 2010.  We are waiting for the Court to render a decision. Theexpansive definition of Indian Country adopted by the USEPA may encompassproperties owned by non-Indians within Navajo chapters in New Mexico. If thatexpansive definition prevails, as much as 84% of our in-place mineralizeduranium materials in New Mexico could be deemed to be in Indian Country, whichcould subject these properties to the Navajo Nation ban on uranium mining.  Our inability to mine our New Mexicoproperties could have a material adverse impact on our results of operations.

 

***We may not be able to mine a substantialportion of our uranium in New Mexico until a mill is built in New Mexico.***

 

Asubstantial portion of our uranium in New Mexico lends itself most readily toconventional mining methods and may not be able to be mined unless a mill isbuilt in New Mexico.  We have noimmediate plans to build, nor are we aware of any third party’s plan to build,a mill in New Mexico and there can be no guaranty that a mill will be built.  In the event that a mill is not built asubstantial portion of our uranium may not be able to be mined.  Our inability to mine all or a portion of oururanium in New Mexico would have a material adverse effect on futureoperations.

 

***Itochu elected to terminate our JointVenture with them for the development of the Churchrock Property and we do nothave a committed source of financing for the development of our ChurchrockProperty.***

 

On December 5,2006, HRI-Churchrock, Inc., a wholly owned subsidiary of the Company,entered into a joint venture with a wholly owned subsidiary of ItochuCorporation to develop jointly our Churchrock property in New Mexico. Under theterms of the joint venture, both parties had until April 2, 2007 to make apreliminary investment decision whether to move forward with the joint venture.The parties agreed to extend that date to March 2, 2009. On March 6,2009, we received notification that Itochu had elected to terminate the JointVenture. As a result, we no longer have a committed source of financing for thedevelopment of our Churchrock property. There can be no assurance that we will be able to obtain financing forthis project.  Our inability to developthe Churchrock property would have a material adverse effect on our futureoperations.

 

***Our operations are subject to environmentalrisks.***

 

We arerequired to comply with environmental protection laws and regulations andpermitting requirements, and we anticipate that we will be required to continueto do so in the future. We have expended significant resources, both financialand managerial, to comply with environmental protection laws, regulations andpermitting requirements and we anticipate that we will be required to continueto do so in the future. The material laws and regulations within the U.S. thatthe Company must comply with include the Atomic Energy Act, Uranium MillTailings Radiation Control Act of 1978, or UMTRCA, Clean Air Act, Clean WaterAct, Safe Drinking Water Act, Federal Land Policy Management Act, National ParkSystem Mining Regulations Act, and the State Mined Land Reclamation Acts orState Department of Environmental Quality regulations, as applicable.

 

We arerequired to comply with the Atomic Energy Act, as amended by UMTRCA, byapplying for and maintaining an operating license from the NRC and the state ofTexas. Uranium operations must conform to the terms of such licenses, whichinclude provisions for protection of human health and the environment fromendangerment due to radioactive materials. The licenses encompass protectivemeasures consistent with the Clean Air Act and the Clean Water Act. We intendto utilize specific employees and consultants in order to comply with andmaintain our compliance with the above laws and regulations. Mining operationsmay be subject to other laws administered by the federal EnvironmentalProtection Agency and other agencies.

 

Theuranium industry is subject not only to the worker health and safety andenvironmental risks associated with all mining businesses, but also toadditional risks uniquely associated with uranium mining and milling. Thepossibility of more stringent regulations exists in the areas of worker healthand safety, storage of hazardous materials, standards for heavy equipment usedin mining or milling, the disposition of wastes, the decommissioning andreclamation of exploration, mining and in-situ sites, climate change and otherenvironmental matters, each of which could have a material adverse effect onthe cost or the viability of a particular project.

 

Wecannot predict what environmental legislation, regulation or policy will beenacted or adopted in the future or how future laws and regulations will beadministered or interpreted. The recent trend in environmental legislation andregulation, generally, is toward stricter standards, and this trend is likelyto continue in the future. This recent trend includes, without limitation, lawsand regulations relating to air and water quality, mine reclamation, wastehandling and disposal, the protection of certain species and the 

 

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preservation of certainlands. These regulations may require the acquisition of permits or otherauthorizations for certain activities. These laws and regulations may alsolimit or prohibit activities on certain lands. Compliance with more stringentlaws and regulations, as well as potentially more vigorous enforcement policiesor stricter interpretation of existing laws, may necessitate significantcapital outlays, may materially affect our results of operations and business,or may cause material changes or delays in our intended activities.

 

Ouroperations may require additional analysis in the future includingenvironmental, cultural and social impact and other related studies. Certainactivities require the submission and approval of environmental impactassessments. Environmental assessments of proposed projects carry a heighteneddegree of responsibility for companies and directors, officers, and employees.We cannot provide assurance that we will be able to obtain or maintain allnecessary permits that may be required to continue our operation or ourexploration of our properties or, if feasible, to commence development,construction or operation of mining facilities at such properties on termswhich enable operations to be conducted at economically justifiable costs. Ifwe are unable to obtain or maintain permits or water rights for development ofour properties or otherwise fail to manage adequately future environmentalissues, our operations could be materially and adversely affected.

 

***Because mineral exploration and developmentactivities are inherently risky, we may be exposed to environmental liabilitiesand other dangers. If we are unable to maintain adequate insurance, orliabilities exceed the limits of our insurance policies, we may be unable tocontinue operations.***

 

Thebusiness of mineral exploration and extraction involves a high degree of risk.Few properties that are explored are ultimately developed into production.Unusual or unexpected formations, formation pressures, fires, power outages,labor disruptions, flooding, explosions, cave-ins, landslides and the inabilityto obtain suitable or adequate machinery, equipment or labor are other risksinvolved in extraction operations and the conduct of exploration programs.Previous mining operations may have caused environmental damage at certain ofour properties. It may be difficult or impossible to assess the extent to whichsuch damage was caused by us or by the activities of previous operators, inwhich case, any indemnities and exemptions from liability may be ineffective.If any of our properties are found to have commercial quantities of uranium, wewould be subject to additional risks respecting any development and productionactivities.

 

Althoughwe carry liability insurance with respect to our mineral explorationoperations, we may become subject to liability for damage to life and property,environmental damage, cave-ins or hazards against which we cannot insure oragainst which we may elect not to insure because of cost or other businessreasons. In addition, the insurance industry is undergoing change and premiumsare being increased. If we are unable to procure adequate insurance because ofcost, unavailability or otherwise, we might be forced to cease operations.

 

***Our inability to obtain financial suretywould threaten our ability to continue in business.***

 

Futurebonding requirements to comply with federal and state environmental andremediation requirements and to secure necessary licenses and approvals willincrease significantly when future development and production occurs at oursites in Texas and New Mexico. The amount of the bonding for each producingproperty is subject to annual review and revision by regulators. We expect thatthe issuer of the bonds will require us to provide cash collateral equal to theface amount of the bond to secure the obligation. In the event we are not ableto raise, secure or generate sufficient funds necessary to satisfy thesebonding requirements, we will be unable to develop our sites and bring theminto production, which inability will have a material adverse impact on ourbusiness and may negatively affect our ability to continue to operate.

 

***Competition from better-capitalizedcompanies affects prices and our ability to acquire properties and personnel.***

 

Thereis global competition for uranium properties, capital, customers and theemployment and retention of qualified personnel. In the production andmarketing of uranium, there are a number of producing entities, some of whichare government controlled and all of which are significantly larger and bettercapitalized than we are. Many of these organizations also have substantiallygreater financial, technical, manufacturing and distribution resources than wehave.

 

Oururanium production also competes with uranium recovered from the de-enrichmentof highly enriched uranium obtained from the dismantlement of United States andRussian nuclear weapons and imports to the United States of uranium from theformer Soviet Union and from the sale of uranium inventory held by the UnitedStates Department of Energy.  Inaddition, there are numerous entities in the market that compete with us forproperties and are attempting to become licensed to operate ISRfacilities.  If we are unable tosuccessfully compete for properties, capital, customers or employees oralternative uranium sources, it could have a materially adverse effect on ourresults of operations.

 

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***Because we have limited capital, inherentmining risks pose a significant threat to us compared with our largercompetitors.***

 

Becausewe have limited capital, we are unable to withstand significant losses that canresult from inherent risks associated with mining, including environmentalhazards, industrial accidents, flooding, interruptions due to weatherconditions and other acts of nature which larger competitors could withstand.Such risks could result in damage to or destruction of our infrastructure andproduction facilities, as well as to adjacent properties, personal injury,environmental damage and processing and production delays, causing monetarylosses and possible legal liability.

 

***We may need to obtain additional financingin order to implement our business plan, and the inability to obtain it couldcause our business plan to fail.***

 

As of December 31,2009, we had approximately $6.1 million in cash. We may require additionalfinancing in order to complete our plan of operations. We may not be able toobtain all of the financing we require. Our ability to obtain additionalfinancing is subject to a number of factors, including the market price ofuranium, market conditions, investor acceptance of our business plan, andinvestor sentiment. These factors may make the timing, amount, terms andconditions of additional financing unattractive or unavailable to us. Inrecognition of current economic conditions and the planned shut-down ofproduction, we have significantly reduced our spending, delayed or cancelledplanned activities and substantially changed our current corporate structure. However,these actions may not be sufficient to offset the detrimental effects of theweak economy and cessation of production, which could result in materialadverse effects on our business, revenues, operating results, and prospects.

 

***Our business could be harmed if we lose theservices of our key personnel.***

 

Ourbusiness and mineral exploration programs depend upon our ability to employ theservices of geologists, engineers and other experts. In operating our businessand in order to continue our programs, we compete for the services ofprofessionals with other mineral exploration companies and businesses. Inaddition, several entities have expressed an interest in hiring certain of ouremployees. Our ability to maintain and expand our business and continue ourexploration programs may be impaired if we are unable to continue to employ orengage those parties currently providing services and expertise to us oridentify and engage other qualified personnel to do so in their place. Toretain key employees, we may face increased compensation costs, includingpotential new stock incentive grants and there can be no assurance that theincentive measures we implement will be successful in helping us retain our keypersonnel.

 

***Approximately 21.2% of our Common Stock iscontrolled by one record owner and management.***

 

Approximately13.1% of our common stock is controlled by one significant stockholder. Inaddition, our directors and officers are the beneficial owners of approximately8.1% of our common stock. This includes, with respect to both groups, sharesthat may be purchased upon the exercise of outstanding options. Such ownershipby the Company’s principal shareholders, executive officers and directors mayhave the effect of delaying, deferring, preventing or facilitating a sale ofthe Company or a business combination with a third party.

 

***The availability for sale of a large amountof shares may depress the market price of our Common Stock.***

 

As of December 31,2009, 56,781,792 shares of our Common Stock were currently outstanding, all ofwhich are registered or otherwise transferable. The availability for sale of alarge amount of shares or conversion of the Company’s outstanding warrants byany one or several shareholders may depress the market price of our CommonStock and impair our ability to raise additional capital through the publicsale of our Common Stock. We have no arrangement with any of the holders of theforegoing shares to address the possible effect on the price of our CommonStock of the sale by them of their shares.

 

***Terms of subsequent financings mayadversely impact our stockholders.***

 

Inorder to finance our working capital needs, we may have to raise funds throughthe issuance of equity or debt securities in the future. We currently have noauthorized preferred stock. Depending on the type and the terms of anyfinancing we pursue, stockholder’s rights and the value of their investment inour Common Stock could be reduced. For example, if we have to issue secureddebt securities, the holders of the debt would have a claim to our assets thatwould be prior to the rights of stockholders until the debt is paid. Intereston these debt securities would increase costs and negatively impact operatingresults.  If the issuance of newsecurities results in diminished rights to holders of our common stock, themarket price of our common stock could be negatively impacted.

 

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***Shareholders could be diluted if we were touse Common Stock to raise capital.***

 

Aspreviously noted, we may need to seek additional capital in the future tosatisfy our working capital requirements. This financing could involve one or more types of securities includingcommon stock, convertible debt, preferred stock or warrants to acquire commonor preferred stock.  These securitiescould be issued at or below the then prevailing market price for our common stock.  Any issuance of additional shares of ourcommon stock could be dilutive to existing stockholders and could adverselyaffect the market price of our common stock.

 

**Item 1B.    UnresolvedStaff Comments.**

 

None.

 

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** **

**Item 2.    Properties.**

 

**South Texas**

 

Wecurrently control 3 major properties in the state of Texas. The KingsvilleDome, Rosita and Vasquez properties are shown in Figure No. 2.1 and aredescribed below.

 

**Figure No 2.1. Texas PropertiesLocation Map**

 

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***Kingsville Dome (Figure 2.2)***

 

*The Property.*    The Kingsville Dome propertyconsists of mineral leases from private landowners on about 2,424 gross and2,227 net acres located in central Kleberg County, Texas. The leases providefor royalties based upon a percentage of uranium sales of 6.25%. The leaseshave expiration dates ranging from 2000 to 2007, however we hold most of theseleases by production; and with a few minor exceptions, all the leases containclauses that permit us to extend the leases not held by production by paymentof a per acre royalty ranging from $10 to $30. We have paid such royalties onall material acreage. Mineralization is found in the Goliad formation at depthsof 600 to 750 feet.

 

*Production History.*    Initial production commencedin May 1988. From then until July 1999, we produced a total of3.5 million pounds. Production was stopped in July 1999, because ofdepressed uranium prices. We resumed production at Kingsville Dome in April 2006and produced 94,100 pounds of uranium in 2006; 338,100 pounds in 2007, 254,000pounds in 2008 and 56,000 pounds in 2009. We made approximately$8.0 million in capital expenditures in 2007, $3.6 million in 2008and $159,000 in 2009.

 

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*Permitting Status.*    A radioactive material licenseand underground injection control permit have been issued. As new areas areproposed for production, additional authorizations under the area permit arerequired. Approval of our Production Area Authorization (“PA”) #3 wasre-authorized in May 2006.  In April 2006we re-started production in PA #2 followed by production in PA #3 in February 2008.  Production from PA#3 wellfields continueduntil July 2009. See “**Legal Proceedings**.”

 

*Restoration and Reclamation.*    During 2009, we conductedrestoration activities as required by the permits and licenses on this projectspending approximately $963,000 on restoration activities. In 2008 and 2007, wespent approximately $349,000 and $595,000, respectively. Since we began ourgroundwater activities in 1998, we have processed and cleaned approximately 2.0billion gallons of groundwater at the Kingsville Dome project.

 

**Figure No. 2.2. Kingsville DomeProperty**

 

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***Rosita (Figure 2.3)***

 

*The Property:*    The Rosita property consistsof mineral leases from private landowners on about 3,377 gross and net acresand the Rosita South property consists of mineral leases from private landowners on about 2,130 gross acres and 1,984 net acres located in north-centralDuval County, Texas. The leases provide for sliding scale royalties based on apercentage of uranium sales. Royalty percentages on average increase from 6.25%up to 18.25% when uranium prices reach $80.00 per pound. The leases haveexpiration dates ranging from 2012 to 2015. We are holding these leases bypayment of rental fees ranging from $10 to $30 per acre. Mineralization isfound in the Goliad Formation at depths of 125 to 350 feet.

 

*Production History:*    Initial production commencedin 1990. From then until July 1999, URI produced a total of2.64 million pounds. Production was stopped in July of 1990 becauseof depressed uranium prices. Production from a new wellfield at Rositawellfield was begun in June 2008. However, technical difficulties thatraised the cost of production coupled with a sharp drop in uranium prices ledto the decision to shut-in this wellfield after 10,200 pounds were produced.

 

Ourcapital expenditures were approximately $40,000, $4.5 million and$5.0 million in 2009, 2008 and 2007, respectively primarily for plantrefurbishment and wellfield development.

 

*Restoration and Reclamation.*    We are conducting restorationand reclamation activities at this project and are currently in stabilizationin our first two PA’s.  During 2009, ourprimary groundwater activity consisted of collecting groundwater samplesthroughout the year for stability testing. We spent approximately $247,000, $465,000 and $820,000 on restorationactivities in 2009, 2008 and 2007, respectively. Since we began our groundwateractivities in 2000, we have processed and cleaned approximately 1.3 billiongallons of groundwater at the Rosita project.

 

*Permitting Status:*    A radioactive material licenseand an underground injection control permit have been issued for the Rositaproperty. The underground injection control permit is being amended to includethe Rosita South property. Production could resume in areas already included inexisting Production Area Authorizations. As new areas are proposed forproduction, additional authorizations under the permit will be required.

 

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**Figure No. 2.3. Rosita PropertyMineral Ownership**

 

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***Vasquez (Figure 2.4)***

 

*The Property.*    We have a mineral lease on 872gross and net acres located in southwestern Duval County, in South Texas. Theprimary term expired in February 2008; however, we held the lease byproduction and are currently in restoration. The lease provides for royaltiesbased upon 6.25% of uranium sales below $25.00 per pound and royalty rateincreases on a sliding scale up to 10.25% for uranium sales occurring at orabove $40.00 per pound. Mineralization is found in the Oakville formation atdepths of 200 to 250 feet.

 

*Production History.*    We commenced production fromthis property in October 2004. Our capital expenditures in 2009 wereapproximately $194,000.  We hadapproximately $355,000 in capital expenditures at Vasquez and produced 36,600pounds of uranium in 2008. We had approximately $1.3 million in capitalexpenditures at Vasquez and produced 78,600 pounds of uranium in 2007.

 

*Restoration and Reclamation.*    We are conducting ongoingrestoration and reclamation activities at this project and have spent $591,000,$224,000 and $33,000 in 2009, 2008 and 2007, respectively for suchactivities.  Since the commencement ofgroundwater restoration activities at the end of 2007, we have treatedapproximately 161 million gallons of groundwater.

 

*Permitting Status.*    All of the required permitsfor this property have been received.

 

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**Figure No. 2.4. Vasquez Property**

 

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***Marshall Exploration Property (figure 2.6).***

 

TheMarshall Property is a Goliad and Oakville prospect consisting of 1953 grossand net acres. It is located in Duval and McMullen counties, Texas. During 2008we drilled 280 exploration holes and discovered significant mineralization.Further evaluation will need to be conducted to determine if this property canbe mined using ISR methods.

 

**Figure No. 2.6. MarshallExploration Property**

 

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**New Mexico Properties**

 

***General.***    We have various interests inproperties located in New Mexico (Figure 2.7). We have fee lands, patentedand unpatented mining claims, mineral leases and some surface leases. We havespent $13.1 million to date on permitting for New Mexico. Additionalexpenditures will be required and could be material. We are unable to estimatethe amount. We expect that these costs will be incurred over multiple years.See “***Legal*Proceedings**”for a discussion of the current status of our license for New Mexico

 

**Figure No. 2.7. Location of NewMexico Properties**

 

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*The Property.*    The Churchrock projectencompasses about 2,200 gross and net acres. The properties are located inMcKinley County, New Mexico and consist of three parcels, known as Section 8,Section 17 and Mancos. None of these parcels lies within the areagenerally recognized as constituting the Navajo Reservation.  However, Section 8 has been designatedby the USEPA as Indian Country.  See, “Item3.  Legal Proceedings.”  Access to the Churchrock property is viaState Highway 566 and access to Mancos is via 4-wheel drive ranch roads west ofState Highway 566.

 

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***Churchrock/Mancos (Figure 2.8)***

 

We ownthe mineral estate in fee for the NE 1/4 and the SW 1/4 ofthe NW 1/4 of Section 17, T16N, R16W. In Section 8,T16N, R16W, we own the SE 1/4 in fee and holdthe minerals in the rest of the section with 26 unpatented federal miningclaims (UNC1A thru UNC 26). For the Mancos Property, we own the minerals in Section 13,T16N, R17W, in fee, the minerals in the NW 1/4 of Section 7,T16N, R16W, in fee and hold the minerals in the E 1/2 of Section 12,T16N, R17W, with 20 unpatented federal mining claims (KP1A thru KP5A, KP19,KP36, 121617-14A thru 121617-18A, 121617-20A thru 121617-23A and 121617-32Athru 121617-35A). The federal unpatented mining claims are all held through thepayment of a $125.00 assessment fee each year on each claim.

 

Mineralizationoccurs in the Westwater Member of the Morrison Formation at depths of 800 to1700 feet.

 

Thesurface estate on Section 17, Mancos Section 13 and Mancos Section 7is owned by the United States Government and held in trust for the NavajoNation. On those sections we have royalty obligations ranging from 5% to 61/4% and a 2% overriding royalty obligationto the Navajo Nation for surface use agreements. The total royalties on Section 8depend on the sales’ price of uranium. Aggregate royalties are potentially asmuch as 39.25% at the current price of uranium.

 

*Development Plan.*    We anticipate that Churchrockwill be the first of our New Mexico properties we will develop. We spent about$219,000, $421,000 and $504,000 in 2009, 2008 and 2007, respectively, forpermitting activities and land holding costs. In December 2006, we enteredinto a joint venture with Itochu to jointly develop this property and in March 2009the joint venture was terminated (see “Business**—Joint Venture for Churchrock Property**”).

 

*Water Rights.*    The State Engineer approvedour water rights application in October 1999 and granted us sufficientwater rights for the life of Churchrock.

 

*Permitting Status.*    We have the radioactivematerial license for Section 8. This license is subject to the continuingproceedings described under “**Legal Proceedings**.” With respect to theUIC permits, see “**Legal Proceedings.**”We do not plan to pursue permits for Mancos at this time.

 

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**Figure No. 2.8. Churchrock /Mancos Property Mineral Ownership**

 

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*** ***

***Crownpoint (Figure 2.9)***

 

*The Property.*    The Crownpoint properties arelocated in the San Juan Basin, 22 miles northeast of our Churchrock depositsand 35 miles northeast of Gallup, New Mexico, adjacent to the town ofCrownpoint, New Mexico. The properties consist of 619 gross and 521.8 netacres. We hold the minerals in the NW 1/4 of Section 9,T17N, R13W with 9 unpatented federal mining claims (CP-1 thru CP9) and theminerals in the SW 1/4 of Section 24, T17N, R13W with 10unpatented federal mining claims (CP-10 thru CP-19). In the SE 1/4 ofSection 24, T17N, R13W we own in fee a 40% interest in the minerals onapproximately 139 acres and hold 100% of the minerals on 20 additional acreswith two unpatented federal mining claims (Consol I and Consol II).In the NE 1/4 of Section 25, T17N, R13W we hold theminerals with eight unpatented federal mining claims (Hydro-1 thru Hydro-8).The federal unpatented mining claims are held through the payment of a $140.00assessment fee each year on each claim. Access is via paved road from StateHighway 371, through the town of Crownpoint to Church Road to the main gate ofthe property.

 

Mineralizationis found in the Westwater Member of the Morrison Formation at a depth of from2,100 to 2,300 feet. Three pilot shafts were commenced on the property in theearly 1980’s but were never completed. Surface facilities dating from thoseactivities including buildings and their associated electrical/waterinfrastructure are still in-place and are currently used as offices and storagefacilities.

 

*Development Plan.*    We spent about $3,000,$127,000 and $164,000 in 2009, 2008 and 2007, respectively, for permittingactivities and land holding costs.

 

*Water Rights.*    We have three pendingapplications for appropriations of water, which give us the first three “positionsin line” on the hearings list for the San Juan Basin. Certain of the waterrights may involve a claim of jurisdiction by the Navajo Nation.

 

*Permitting Status.*    See “**Legal Proceedings**” for a discussion of theradioactive material license for Crownpoint. The surface estate on Section 19and 29 is owned by the United States Government and held in trust for theNavajo Nation and may be subject to the same jurisdictional dispute withrespect to the UIC permit as for Section 8 and 17 in Churchrock.

 

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**Figure No. 2.9. CrownpointProperty Mineral Ownership**

 

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***Nose Rock (Figure 2.10)***

 

TheNose Rock property consists of approximately 6,400 acres and is located about12 miles northeast of Crownpoint, New Mexico. The minerals are held in fee onSections 10, 11, 15, 17, 18, 19, 20, 29, 30 and 31 all in T19N, R11W.Access to the property is via a 41/2 mile privatepaved road north of Tribal Road 9. The property was developed by PhilipsUranium Corporation in the early 1980’s and includes two circularconcrete-lined shafts that have been completed to a depth of 3,300 feet. Bothshafts have been plugged at surface and just above the Westwater. There is nousable surface infrastructure on site. Mineralization occurs in the WestwaterMember of the Morrison Formation.

 

**Figure No. 2.10. Nose RockProperty Mineral Ownership**

 

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***West Largo (Figure 2.11)***

 

TheWest Largo property is comprised of six contiguous sections of land located inMcKinley County, New Mexico about 21 miles north of the town of Milan, NewMexico and about three miles west of State Highway 509. Access is via anine-mile 4-wheel drive road from State Highway 509. The minerals onsections 17, 19, 21 and 29 T15N, R10W are held in fee and the minerals onsections 20 and 28 T15N, R10W are held by 75 unpatented federal miningclaims (ID21 thru ID91 and ID95 thru ID98). The federal unpatented miningclaims are held through the payment of a $125.00 assessment fee each year oneach claim.

 

Mineralizationoccurs in the Westwater Member of the Morrison Formation at depths ranging from2,000 to 2,750 feet depending on surface topography. Over 1,000 drill holeswere used to define the mineralization in the late 1970’s and early 1980’s.Other than this exploration drilling, there has been no development on thisproperty.

 

**Figure 2.11. West Largo PropertyMineral Ownership**

 

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***Roca Honda (Figure 2.12)***

 

TheRoca Honda property is comprised of four sections of land totalingapproximately 2,560 acres located about 4 miles northwest of the town of SanMateo in McKinley County, New Mexico. Sections 13, 15 and 17, T13N, R8Ware held in fee and Section 8, T13N, R8W is held by 36 unpatented federalmining claims (Roca Honda 55 thru Roca Honda 63, Roca Honda 82 thru Roca Honda90, Roca Honda 109 thru 117 and Roca Honda 136 thru Roca Honda 144). Thefederal unpatented mining claims are held through the payment of a $125.00assessment for each year on each claim. The property is accessed over various4-wheel drive ranch roads north of State Highway 605.

 

Mineralizationoccurs in the Westwater Member of the Morrison Formation at depths ranging from1,700 on Section 17 to over 3,300 feet in Section 13. In the late1970’s and early 1980’s, various operators drilled 620 exploration holes on theproperty. In the late 1980’s, Kerr-McGee sank a shaft to a depth of 1,475 feeton Section 17 to develop the property, then known as the Lee Mine. Theshaft was stopped short of the ore zone and the mine closed down when uraniumprices fell in 1983. There is no useable infrastructure on surface.

 

**Figure No. 2.12. Roca HondaProperty Mineral Ownership**

 

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**Potential ISR and OSL areas (Figures 2.13 &2.14).**    Severalareas in T13N R 9 W and T14 N R 10W are beingconsidered for early application of ISR methods (Sections 13 and 17 ofT13N R9W and Sections 5 and 27 of T14 N R 10W). In November of2008, we received a permit to drill up to 10 holes for the purpose ofextracting core to evaluate the suitability of the property for ISR extraction.All land described is owned in fee.

 

Twoother sections in T14N R10W (Sections 23 and 25) have been the siteof extensive development and mining in the past and could provide excellenttargets for the application of Old Stope Leaching operations. Mineral on thesetwo sections is owned in fee.

 

**Figure No. 2.13. West Ambrosiaarea**

 

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**Figure 2.14. T13N R9W Area**

 

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**Insurance**

 

Ourproperty is covered by various types of insurance including property andcasualty, liability and umbrella coverage. We have not experienced any materialuninsured or under insured losses related to our properties in the past andbelieve that sufficient insurance coverage is in place.

 

**Reclaimed Properties**

 

Wehave completed production and groundwater restoration on our Benavides andLongoria projects in South Texas. We completed the final stages of surfacereclamation on these projects and received full and final release for thesesites in 1999.

 

Weacquired the Section 17 leases in the New Mexico Churchrock district fromUnited Nuclear Corporation who had conducted underground mining for uranium on Section 17and had reclaimed these properties. In the acquisition, we assumed anyliability of United Nuclear Corporation for any remaining remediation work thatmight be required. The New Mexico Energy Minerals and Natural ResourcesDepartment has not determined what, if any, additional remediation would berequired under the New Mexico 

 

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Mining Act. If moreremediation work is required, we believe it would not involve materialexpenditures as required by the New Mexico Energy Minerals and NaturalResources Department regulation.

 

In January 2008the Navajo Nation Environmental Protection Agency (NNEPA) notified the Companyof their analysis that indicated potentially uranium contaminated materialspresent on the Churchrock Section 17 mine site. In response, the Companyhas performed a comprehensive characterization of the Churchrock Site at Section 17and lands adjacent to the site area and completed the field work during thespring/summer of 2009. This study was completed in September 2009 and webelieve that any off-site mine-related impacts at Section 17 and adjacentlands are minor.  The jurisdiction of theNavajo Nation to require additional remediation at the Section 17 site,and their criteria for further remediation, are unknown.

 

See “**Legal Proceedings**” for a description of thestatus of the Navajo EPA letter and UNC Demand for Indemnity in New Mexico.

 

**Item 3.    Legal Proceedings.**

 

**New Mexico Radioactive Material License**

 

In theState of New Mexico, uranium recovery by ISR technology requires a combinedsource and 11e.(2) byproduct material (uranium recovery) license issued bythe United States Nuclear Regulatory Commission (the “NRC” or the “Commission”).We applied for one license covering the properties located in both theChurchrock and Crownpoint districts collectively known as the CrownpointUranium Project (CUP). The Commission issued a uranium recovery license for theCUP in January 1998 that allowed licensed ISR operations to begin in theChurchrock district. In mid-1998, the Commission determined that certaininterested stakeholders who requested an NRC administrative hearing hadstanding to raise certain objections to the NRC license. A panel ofadministrative law judges (NRC’s Atomic Safety and Licensing Board (hereinafter“Licensing Board”)) conducted an administrative hearing during 1999. TheLicensing Board upheld the Churchrock Section 8 portion of the NRC licenseand granted our request to defer any dispute on the remaining CUP propertiesuntil we make a decision whether to mine these other properties.

 

TheLicensing Board’s ruling was then appealed to the full Commission. On January 31,2000, the Commission issued an order concurring with the technical,substantive, and legal findings of the Licensing Board, but the Commission alsodetermined that we were required to submit restoration action plans (RAP) foreach CUP project site and that we must proceed with the hearing process for theother New Mexico properties beyond the Churchrock Section 8 project site(i.e. Churchrock Section 17, Unit 1 and Crownpoint). Subsequently, the NRCadministrative hearing was held in abeyance until 2004, pursuant toNRC-supervised settlement negotiations between the parties.

 

In February 2004,the Licensing Board issued an order, which concluded that we must make threespecific changes to our submitted RAP for Churchrock Section 8 in order tocommence uranium recovery operations at Churchrock Section 8. TheCommission accepted our petition for review on two of the three issues andsubsequently issued an order overruling the Licensing Board on these issues.Then, the parties agreed to truncate the number and scope of the issuesremaining for consideration for the remaining three CUP project sites. Sincethen, the Licensing Board and the full Commission has endorsed our NRC licenseand its requirements for the entire CUP.

 

Intervenorsappealed the Commission’s final approved action to the United States Court ofAppeals for the Tenth Circuit. On March 8, 2010 the Tenth Circuit rejected thepetition and affirmed the action of the Commission in all respects. With thisdecision, the petitioners are permitted to request that the Tenth Circuit rehearthe case *en banc* or to petition the United StatesSupreme Court for a writ of certiorari to hear the case.

 

**New Mexico UIC Permit**

 

In April 2005,the Navajo Nation Council passed the Diné Natural Resources Protection Act of2005 prohibiting uranium mining and processing on any sites within IndianCountry as defined under 18 U.S.C. § 1151. The State of NewMexico, the USEPA, and the Navajo Nation are engaged in a jurisdictionaldispute as to which regulatory entity (i.e., USEPA or the State of NewMexico) has the authority to issue Underground Injection Control (“UIC”)program permits, which are required to mine the Churchrock Section 8property.  If the land is deemed to beIndian Country, the USEPA has jurisdictional authority to issue the UICpermit.  If the land is not IndianCountry, UIC permitting matters fall within the jurisdiction of the State ofNew Mexico.  The dispute was taken to theUnited States Court of Appeals for the Tenth Circuit, which, in January 2000,remanded to the USEPA the issue whether the Section 8 Churchrock propertywas Indian Country. In February 2007, the USEPA issued a decision findingthat the Churchrock Section 8 property is Indian Country and that theUSEPA is the proper authority to issue the UIC permit. The expansive definitionof Indian 

 

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Country adopted by theUSEPA may encompass properties owned by non-Indians within Navajo chapters inNew Mexico. If that expansive definition prevails, as much as 84% of ourin-place mineralized uranium materials in New Mexico could be deemed to be inIndian Country, which could subject these properties to the Navajo Nation banon uranium mining.  We appealed thatdecision to the United States Court of Appeals for the Tenth Circuit.  On April 17, 2009, a three-judge panelof the Tenth Circuit affirmed the USEPA decision and held that Section 8of URI’s Churchrock property (owned in fee by the Company’s subsidiary HydroResources, Inc.) is Indian Country.  One of the members of the paneldissented.  The Company petitioned for and was granted an en bancreview of the Tenth Circuit panel’s decision.  Oral arguments werepresented to the Court on January 12, 2010 and we are waiting for theCourt to render a decision.

 

**Bonding for Texas Groundwater Restoration Obligations**

 

In March 2004,the Company entered into the Groundwater Restoration Performance Agreement(GRPA), with the Texas Department of Health (“TDH”), later renamed the TexasDepartment of State Health Services (“DSHS”), the Texas Commission onEnvironmental Quality (TCEQ) and United States Fidelity and Guaranty InsuranceCompany as a means of funding the Company’s ongoing groundwater restoration atthe Kingsville Dome and Rosita mine sites at specified treatment rates,utilizing a portion of the Company’s cash flow from sales of uranium from theVasquez site as a substitute for additional bonding. Although Kleberg Countyand an ad hoc citizen group brought suit in April 2004 to challenge theGRPA, Kleberg County settled with the Company and withdrew its support andfunding of the suit in December 2004. In June 2007, DSHS’ regulatoryauthority over uranium recovery operations, including its oversight ofgroundwater restoration bonds posted for uranium mining operations wastransferred to TCEQ; and, on August 31, 2007, the GRPA expired accordingto its terms. The citizen group has taken no further action to pursue the suit.

 

**Dispute over Kleberg County Settlement Agreement**

 

In February 2007,Kleberg County, Texas adopted a resolution alleging violations of its December 2004Settlement Agreement with the Company and authorizing outside counsel to bringsuit against the Company to force it to cease mineral production unless theCompany promptly resolved the matter to the County’s satisfaction.  The County disputes the Company’sinterpretation of the December 2004 Settlement Agreement as to the levelof groundwater restoration the Company agreed to achieve in Kingsville DomeProduction Areas 1 and 2. Seeking to resolve these issues amicably, the Companyelected to defer briefly the startup of production in Production Area 3,however, when the negotiations failed, the Company notified the County of its intentto resume production in Production Area 3. The Company believes it is in fullcompliance and engaged in a mediation of this dispute. On September 28,2007, after negotiations had stalled but production continued, the Companyfiled suit against the County in the 105th JudicialDistrict Court, Kleberg County, Texas for declaratory relief interpreting theSettlement Agreement and for recovery of the Company’s legal fees and costs ofthe suit.

 

TheCounty answered the suit with a general denial but did not assert anycounterclaim against the Company until May 28, 2009, when the County filedits First Amended Answer and Counterclaims. Although production had been completed at the mine by that time, theCounty’s amended pleading presents seven counterclaims based on the Company’salleged violations of the December, 2004 Settlement Agreement.  By way of relief, the County’s Amended Answerand Counterclaims seeks declarations that the Company violated variousSettlement Agreement provisions, asks for injunctive relief ordering theCompany to cure various alleged violations of various Settlement Agreementprovisions, and asks that the County be awarded its legal fees and costs ofsuit.  The Company responded to theCounty’s assertion of counterclaims by commencing discovery in the case in July, 2009; and, the Countyresponded by making discovery requests against the Company in December, 2009.

 

TheCompany believes its own claims are well supported in fact and the law and thateach of the County’s various claims is either factually or legally deficient orboth.  The Company believes that if thecase should go to trial, it has a reasonable prospect of prevailing in itsclaims for declaratory relief and its claims for recovery of its attorney’sfees and costs of suit.  The Company willdefend itself vigorously.

 

**Kingsville Dome Production Disposal Well Permit Renewals andProduction Area Authorization 3**

 

Afteran August 2005 hearing, the Texas Commission on Environmental Quality (“TCEQ”)voted unanimously February 22, 2006 to renew the Company’s disposal wellpermits, WDW-247 and WDW-248, and to issue Kingsville Dome Production AreaAuthorization 3 (“PA 3”). A citizens group and a Ms. Garcia filed in the201st Judicial District Court, Travis County, Texasfor judicial review of the TCEQ action in June 2006. The Texas AttorneyGeneral answered in defense of TCEQ and the Company intervened to defend theTCEQ’s action granting the permit renewals and production area authorization.The two cases have been consolidated; a judge has been assigned; and, in June 2007,the TCEQ submitted the administrative record to the court for review.

 

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In June 2007an attorney claiming to have been newly engaged by a plaintiff, Ms. Garcia,notified all parties that Garcia wished to withdraw from the litigation andrequested that no further action be taken and that her action be dismissed. On June 27,2007, Garcia’s original counsel moved to appoint a guardian or representativefor Ms. Garcia. The Company challenged the sufficiency of the request forappointment of a guardian or representative for Ms. Garcia; and Ms. Garcia’soriginal counsel set his motion for hearing in August 2007. Before thehearing date, original counsel for Ms. Garcia, tentatively rescheduled thehearing for October 24, 2007 and then canceled that hearing date. Nofurther action on the matter has been scheduled; and mining in Production Area3 and the rest of the Company’s Kingsville Dome mines has ceased, leaving theentire mine site in the process of groundwater restoration..

 

Thepermits and production area authorization issued by TCEQ remain effective untiland unless overturned by a reviewing Court; and, the Company believes the TCEQaction issuing the permits and production area authorization is well-foundedand will be affirmed if the suit for judicial review is considered on itsmerits rather than being dismissed for want of prosecution.

 

**Navajo EPA letter and UNC/GE Demand for Indemnity**

 

Byletter dated January 23, 2008, the Navajo Nation Environmental ProtectionAgency (NNEPA) sent a document dated September 2007 titled “RadiologicalScoping Survey Summary Report for the Old Churchrock Mine Site” (Survey Report)to Hydro Resources Inc (HRI) and United Nuclear Corporation and GeneralElectric (UNC/GE). The Survey Report was reportedly prepared in response to aclaim by NNEPA against HRI and UNC/GE for potential liability for uraniumcontaminated materials present on HRI’s Churchrock Mine Site. NNEPA requestedHRI and UNC/GE to undertake a “comprehensive and detailed characterization” ofHRI’s Churchrock Mine Site and adjacent lease areas, as recommended in theSurvey Report.

 

Byletter dated January 29, 2008, UNC and GE, pursuant to a certainSupplemental Purchase Agreement and Guarantee, demanded that HRI and theCompany defend and indemnify it for all loss, cost, expense, liabilities andobligations that have been or will be incurred or sustained by GE and UNC withrespect to the request asserted by NNEPA.

 

Inresponse HRI/URI has committed with UNC and GE to perform a site assessment atits expense of the Old Churchrock Site for potential contamination fromhistoric mining. In the event that a governmental authority issues a formalAdministrative Order or files a lawsuit, the Company and UNC will beconsidered to have reserved their respective rights and defenses to theindemnity claims, and will immediately seek and attempt to resolve, in goodfaith, any areas of dispute which may exist at that time.

 

**Kingsville Dome Lessor Legal Action**

 

In June 2008a suit for declaratory judgment titled, ***Saenz v. URI Inc.,*** was filed in the 105th Judicial District Court, Kleberg County, Texas bythe owners of the mineral estate of property in Kleberg County, Texas leased tothe Company, seeking a declaratory judgment that a certain lease is limited toone specific lot only and does not encompass other adjacent lands. The Companyhas a lease on the adjacent lands from the same mineral owners and has producedover 340,000 pounds of uranium from those lands in 2007 and 2008. The Companyentered a general denial of the claims. On September 24, 2008 the mineralowners amended their suit to include a declaration that both of the leases heldby the Company are not valid. The Company has entered a general denial andother specific defenses to the amended complaint. The Company has produceduranium from both leases. On November 5, 2008, the Company engaged inmediation with the plaintiffs but was unable to resolve the matter. ThePlaintiffs filed a Motion for Summary Judgment alleging that the leasesterminated prior to any production occurring. The Court denied the motion. Atrial date has been set for August 2, 2010. The Company will defend thecase vigorously. While the Company believes that each of the leases is valid,counsel to the Company is unable to predict the outcome of the litigation. Adetermination of the invalidity of the lease on the adjacent lands on which theCompany has previously produced uranium could have a material adverse effect onthe Company’s financial condition.

 

**Other**

 

On July 13,2007, an employee of a drilling contractor engaged by the Company was killedwhen the drill rig on which he was making repairs backed over him on landsowned by the Company. At the time of the incident, the contractor and thedecedent were not engaged in drilling activities, rather they were performingmaintenance to the drilling rig. Decedent’s heirs filed claims against thedrilling contractor and the Company in the 105th JudicialDistrict Court, Kleberg County, Texas asserting claims of negligence. Ourinsurance carrier defended and resolved the matter on our behalf with noadditional settlement costs incurred by the Company.

 

TheCompany is subject to periodic inspection by certain regulatory agencies forthe purpose of determining compliance by the Company with the conditions of itslicenses. In the ordinary course of business, minor violations may occur;however, these are not expected to result in material expenditures or have anyother material adverse effect on the Company.

 

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** **

**Item 4.    Submission of Matters toa Vote of Security Holders.**

 

None.

 

**GLOSSARY OF CERTAIN URANIUM INDUSTRYTERMS**

 
| claim                  |   | A claim is a 20 acre  tract of land, the right to mine of which is held under the federal General  Mining Law of 1872 and applicable local laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| concentrates           |   | A product from a  uranium mining and milling facility, which is commonly referred to as uranium  concentrate or U3O8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| conversion             |   | A process whereby  uranium concentrates are converted into forms suitable for use as fuel in  commercial nuclear reactors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| cut-off grade          |   | Cut-off grade is  determined by the following formula parameters: estimates over the relevant  period of mining costs, ore treatment costs, general and administrative  costs, refining costs, royalty expenses, process and refining recovery rates  and uranium prices.                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| gross acres            |   | Total acres under which  we have mineral rights and can mine for uranium.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Indian Country         |   | A term derived from  jurisdictional determinations in criminal law enforcement proceedings under  18 U.S.C. § 1151 and understood to encompass territory  situated within Indian reservations, land owned by Indian allottees and land  within a dependent Indian community.                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| in-situ recovery (ISR) |   | Groundwater fortified  with oxygen and other solubilizing agents is pumped into a permeable ore body  causing the uranium contained in the ore to dissolve. The resulting solution  is pumped to the surface. The fluid-bearing uranium is then circulated to an  ion exchange column on the surface where uranium is extracted from the fluid  onto resin beads. The fluid is then reinjected into the ore body. When the  ion exchange column’s resin beads are loaded with uranium, they are removed  and flushed with a salt-water solution, which strips the uranium from the  beads. This leaves the uranium in slurry, which is then dried and packaged  for shipment as uranium powder, or yellowcake. |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| mineralized material   |   | A mineralized body which  has been delineated by appropriately spaced drilling and/or underground  sampling to support a sufficient tonnage and average grade. Such a deposit  does not qualify as a reserve, until a comprehensive evaluation based upon  unit cost, grade, recoveries, and other material factors conclude legal and  economic feasibility.                                                                                                                                                                                                                                                                                                                                                       |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| net acres              |   | Actual acres under  lease which may differ from gross acres when fractional mineral interests are  not leased.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| old stope leaching     |   | Old stope leaching involves the pumping of ground water, through stopes, drifts, and  other flooded underground mine workings of previously conventionally mined  areas to remove the residual and soluble post mining uranium values.   The resulting uranium-bearing ground water is pumped to the surface for  uranium removal and then is re-circulated directly into the mine workings or  into injection wells that are completed in or near to the workings. This  re-circulation of the same ground water is repeated, until the residual  uranium in the old underground mine is depleted.                                                                                                            |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ore                    |   | Naturally occurring  material from which a mineral or minerals of economic value can be extracted  at a reasonable profit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| probable reserves      |   | Reserves for which  quantity and grade and/or quality are computed from information similar to  that used for proven (measured) reserves, but the sites for inspection,  sampling and measurement are farther apart or are otherwise less adequately  spaced. The degree of assurance, although lower than that for proven  (measured) reserves, is high enough to assume continuity between points of                                                                                                                                                                                                                                                                                                              |

 

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|                             |   | observation.                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| proven reserves                  |   | Reserves for which  (a) quantity is computed from dimensions revealed in outcrops, trenches,  workings or drill holes; grade and/or quality are computed from the results  of detailed sampling and (b) the sites for inspection, sampling and  measurement are spaced so closely and the geologic character is so well  defined that size, shape, depth and mineral content of reserves are  well-established. |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| reclamation                      |   | Reclamation involves  the returning of the surface area of the mining and wellfield operating areas  to a condition similar to pre-mining.                                                                                                                                                                                                                                                                                |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| recoverable reserves             |   | Reserves that are  either proven or probable, are physically minable and can be profitably  recovered under conditions specified at the time of the appraisal, based on a  positive feasibility study. The calculation of minable reserves is adjusted  for potential mining recovery and dilution.                                                                                                                       |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| reserve                          |   | That part of a mineral  deposit which could be economically and legally extracted or produced at the  time of the reserve determination.                                                                                                                                                                                                                                                                                  |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| restoration                      |   | Restoration involves  returning an aquifer to a condition consistent with our pre-mining use. The  restoration of wellfield can be accomplished by flushing the ore zone with  native ground water and/or using reverse osmosis to remove ions to provide  clean water for reinjection to flush the ore zone.                                                                                                             |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| roll front                       |   | The configuration of  sedimentary uranium ore bodies as they appear within the host sand. A term  that depicts an elongate uranium ore mass that is “C” shaped.                                                                                                                                                                                                                                                 |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| shut in                          |   | A term that refers to  ceasing production or the absence of production.                                                                                                                                                                                                                                                                                                                                                   |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| shut-in royalty                  |   | A lease clause  permitting the extension of a lease not held by production by payment of a  per acre royalty.                                                                                                                                                                                                                                                                                                             |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| spot price                       |   | The price at which  uranium may be purchased for delivery within one year.                                                                                                                                                                                                                                                                                                                                                |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| surety obligations               |   | A bond, letter of  credit, or financial guarantee posted by a party in favor of a beneficiary to  ensure the performance of its or another party’s obligations,  e.g., reclamation bonds, workers’ compensation bond, or guarantees of debt  instruments.                                                                                                                                                  |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| tailings                         |   | Waste material from a  mineral processing mill after the metals and minerals of a commercial nature  have been extracted; or that portion of the ore which remains after the  valuable minerals have been extracted.                                                                                                                                                                                                      |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| uranium or uranium  concentrates |   | U3O8 or triuranium octoxide.                                                                                                                                                                                                                                                                                                                                                                                         |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| U3O8                             |   | Triuranium octoxide  equivalent contained in uranium concentrates, referred to as uranium  concentrate.                                                                                                                                                                                                                                                                                                                   |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| waste                            |   | Barren rock in a mine,  or uranium in a rock formation that is too low in grade to be mined and  milled at a profit.                                                                                                                                                                                                                                                                                                      |
|                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| yellowcake                       |   | Uranium in powder form,  the end-result of the ISR process.                                                                                                                                                                                                                                                                                                                                                               |

 

**PART II**

 

**Item 5.    Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.**

 

Since April 12,2007, our common stock has been listed on the NASDAQ Global Market under thesymbol “URRE.” Between April 11, 2007 and October 15, 2004, ourshares were quoted on the Over the Counter Bulletin Board (“OTCBB”) and we weredually quoted on both the OTCBB and the Pink Sheets during those dates.

 

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On January 10,2010, the Company received notification from The NASDAQ Stock Market (“NASDAQ”)that for 30 consecutive business days the bid price for the Company’s commonstock has closed below the minimum $1.00 per share as required by Marketplace Rule 5550(a)(1) forcontinued listing on the NASDAQ Global Market. In accordance with Marketplace Rule 5810(c)(3)(A), the Company willregain compliance with the minimum bid requirement if at any time before July 7,2010 (180 calendar days), the bid price of the Company’s common stock closes at$1.00 per share or above for a minimum of 10 consecutive business days.

 

In theevent the Company does not regain compliance with the minimum bid price rule byJuly 7, 2010, NASDAQ will provide the Company with written notificationthat its common stock is subject to delisting from the NASDAQ Global Market. Atthat time, pursuant to Marketplace Rule 5810(c)(3)(A), the Company may beeligible for an additional grace period of 180 calendar days if it meets allinitial listing requirements, with the exception of the bid price, for theNASDAQ Capital Market and submits an application to the NASDAQ Capital Market.Alternatively, the Company may appeal NASDAQ’s determination to delist itscommon stock at that time.

 

The Company intends toactively monitor the closing bid price of its common stock prior to July 7,2010 and will evaluate available options to resolve the deficiency and regaincompliance with the Minimum Bid Price Requirement under the NASDAQ ListingRules.

 

Thefollowing table sets forth the high and low bid prices for our common stock asreported on the applicable markets for the periods indicated:

 
| ** **                | ** ** | **Common Stock** | ** ** |
|---------------------------|------------|------------------|------------|
| **Fiscal Quarter Ending** | ** ** | **High**         | ** ** | **Low** | ** ** |
| December 31,  2009   |       | $                | 1.33       |   | $ | 0.76 |   |
| September 30,  2009  |       | 1.32             |       | 0.89 |   |
| June 30,  2009       |       | 1.73             |       | 0.50 |   |
| March 31,  2009      |       | 0.92             |       | 0.40 |   |
| December 31,  2008   |       | 1.59             |       | 0.39 |   |
| September 30,  2008  |       | 3.44             |       | 1.57 |   |
| June 30,  2008       |       | 7.42             |       | 2.22 |   |
| March 31,  2008      |       | 12.64            |       | 5.71 |   |
|                           |            |                  |            |  |  |  |  |

 

As of December 31,2009, 56,781,792 shares of our common stock were outstanding. On that date,there were 126 holders of record.

 

**Dividends**

 

Wehave never paid any cash or other dividends on our common stock, and we do notanticipate paying dividends for the foreseeable future.

 

**Securities Authorized for Issuance Under Equity CompensationPlans**

 

Thefollowing table sets forth information as of December 31, 2009 regardingequity compensation to the Company’s employees, officers and directors underequity compensation plans.

 
| **Plan category**                                           | ** ** | **Number of shares  issuable under  outstanding options  and rights** | ** ** | **Weighted average  exercise price** | ** ** | **Number of shares  available for  future issuance** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------------------|------------|
| Equity  compensation plans approved by security holders     |       | 4,555,111                                                             |       | $                                    | 2.69       |                                                 | 575,540    |   |
| Equity  compensation plans not approved by security holders |       | 735,982                                                               |       | $                                    | 0.80       |                                                 | —     |   |
| Total                                                       |       | 5,291,093                                                             |       | $                                    | 2.42       |                                                 | 575,540    |   |

 

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**Performance Graph**

 

Thefollowing chart compares the yearly changes in total stockholder return on theCompany’s common stock against two other measures of performance. Thecomparison is on a cumulative basis for the Company’s last five fiscal years.The three other performance measures are the Russell 2000 index, a new peergroup consisting of Denison—DNN, Uranerz—URZ, Uranium Energy—UEC and StrathmoreMinerals —STHJF and an old peer group consisting of Cameco—CCJ, Denison—DNN,Uranerz—URZ, and Uranium Energy—UEC.  Ineach case, we assumed an initial investment of $100 on December 31, 2004and reinvestment of all dividends. Dates on the following chart represent thelast trading day of the indicated fiscal year.

 

**COMPARISON OF 5 YEAR CUMULATIVETOTAL RETURN**

 

 

**Item 6.    Selected Financial Data.**

 

Thefollowing tables provide selected financial and operating data for each of thefiscal years in the five-year period ended December 31, 2009. The selectedfinancial and operating data set forth below should be read in conjunctionwith, and are qualified in their entirety by reference to, the section entitled“**Management’s Discussion and Analysis ofFinancial Condition and Results of Operation**” and the Company’sfinancial statements and related notes included elsewhere in this annualreport. Historical results are not necessarily indicative of results to beexpected in any future period.

 

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| ** **                                                  | ** ** | **For the Year Ended December 31,**                  | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2009**                                                  | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                  | ** ** | **(In thousands except per share and per pound amounts)** | ** ** |
| Uranium  sales                                              |       | $                                                         | 4,673      |   | $ | 18,551 |   | $ | 31,143 |   | $ | 8,581 |   | $ | 4,865 |   |
| Cost  of sales—operations                              |       | 4,504                                                     |       | 16,372 |   | 18,051 |   | 12,687 |   | 6,299 |   |
| (Gain)  loss on derivatives                                 |       | —                                                    |       | — |   | — |   | (34,821 | ) | 30,975 |   |
| Writedown  of uranium properties and exploration expenses   |       | 3,580                                                     |       | 17,623 |   | 999 |   | 3,495 |   | — |   |
| Total  cost of uranium sales                                |       | 8,084                                                     |       | 33,995 |   | 19,050 |   | (18,639 | ) | 37,274 |   |
| Earnings  (loss) from operations before corporate expenses  |       | (3,411                                                    | )          | (15,444 | ) | 12,093 |   | 27,220 |   | (32,409 | ) |
| Corporate  expenses                                         |       | 6,766                                                     |       | 11,553 |   | 11,768 |   | 6,791 |   | 3,209 |   |
| Earnings  (loss) from operations                            |       | (10,177                                                   | )          | (26,996 | ) | 325 |   | 20,429 |   | (35,618 | ) |
| Interest  and other, net                                    |       | 111                                                       |       | 487 |   | 753 |   | 1,081 |   | 531 |   |
| Net  income (loss)                                          |       | $                                                         | (10,066    | ) | $ | (26,509 | ) | $ | 1,078 |   | $ | 21,510 |   | $ | (35,087 | ) |
| Earnings  (loss) per common share:                          |       |                                                      |       |   |   |   |   |   |   |   |   |
| Basic                                                       |       | $                                                         | (0.18      | ) | $ | (0.49 | ) | $ | 0.02 |   | $ | 0.44 |   | $ | (0.96 | ) |
| Diluted                                                     |       | $                                                         | (0.18      | ) | $ | (0.49 | ) | $ | 0.02 |   | $ | 0.42 |   | $ | (0.96 | ) |
| Net  earnings (loss) per common share:                      |       |                                                      |       |   |   |   |   |   |   |   |   |
| Basic                                                       |       | $                                                         | (0.18      | ) | $ | (0.49 | ) | $ | 0.02 |   | $ | 0.44 |   | $ | (0.96 | ) |
| Diluted                                                     |       | $                                                         | (0.18      | ) | $ | (0.49 | ) | $ | 0.02 |   | $ | 0.42 |   | $ | (0.96 | ) |
| Weighted  average common stock and equivalents outstanding: |       |                                                      |       |   |   |   |   |   |   |   |   |
| Basic                                                       |       | 56,400                                                    |       | 54,569 |   | 52,119 |   | 48,338 |   | 36,644 |   |
| Diluted                                                     |       | 56,400                                                    |       | 54,569 |   | 56,081 |   | 51,560 |   | 36,644 |   |
|                                                        |       |                                                      |       |   |   |   |   |   |   |   |   |
| CONSOLIDATED  OPERATING AND OTHER DATA                      |       |                                                      |       |   |   |   |   |   |   |   |   |
| Cash  provided by (used in) operations                      |       | $                                                         | (5,033     | ) | $ | 1,042 |   | $ | 11,294 |   | $ | (2,215 | ) | $ | (1,722 | ) |
| Capital  expenditures and investing activities              |       | (820                                                      | )          | (11,016 | ) | (22,908 | ) | (31,906 | ) | (6,364 | ) |
| Financing  activities                                       |       | (97                                                       | )          | 12,731 |   | 722 |   | 48,445 |   | 13,670 |   |
| Net  increase (decrease) in cash and equivalents            |       | $                                                         | (5,950     | ) | $ | 2,757 |   | $ | (10,893 | ) | $ | 14,324 |   | $ | 5,584 |   |
| Pounds  of uranium produced                                 |       | 59                                                        |       | 301 |   | 417 |   | 259 |   | 310 |   |
| Pounds  of uranium delivered                                |       | 95                                                        |       | 286 |   | 435 |   | 263 |   | 271 |   |
| Average  sales price per pound                              |       | $                                                         | 49.08      |   | $ | 64.99 |   | $ | 71.61 |   | $ | 32.63 |   | $ | 17.95 |   |
| Average  cost of produced pounds sold                       |       | $                                                         | 39.73      |   | $ | 48.60 |   | $ | 33.21 |   | $ | 43.36 |   | $ | 20.32 |   |
| Royalties/commissions  per pound sold                       |       | $                                                         | 4.87       |   | $ | 5.99 |   | $ | 6.98 |   | $ | 2.92 |   | $ | 1.31 |   |

 

**CONSOLIDATED BALANCE SHEET DATA**

 
| ** **                                 | ** ** | **At December 31,** | ** ** |
|--------------------------------------------|------------|-------------------------------|------------|
| ** **                                 | ** ** | **2009**                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                 | ** ** | **(In thousands)**       | ** ** |
| Cash  and cash equivalents                 |       | $                             | 6,092      |   | $ | 12,042 |   | $ | 9,284 |   | $ | 20,177 |   | $ | 5,853 |   |
| Working  capital                           |       | 3,276                         |       | 9,494 |   | 8,072 |   | 18,371 |   | (16,370 | ) |
| Net  property, plant and equipment         |       | 18,944                        |       | 22,778 |   | 30,611 |   | 18,196 |   | 8,689 |   |
| Total  assets                              |       | 32,012                        |       | 43,224 |   | 52,937 |   | 45,936 |   | 17,913 |   |
| Unrealized  loss on derivatives            |       | —                        |       | — |   | — |   | — |   | 46,821 |   |
| Total  debt                                |       | 658                           |       | 928 |   | 839 |   | 838 |   | 626 |   |
| Total  liabilities                         |       | 9,151                         |       | 11,616 |   | 10,060 |   | 9,167 |   | 53,903 |   |
| Total  shareholders’ equity (deficit) |       | $                             | 22,861     |   | $ | 31,608 |   | $ | 42,877 |   | $ | 36,769 |   | $ | (35,990 | ) |

 

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

 

**Forward Looking Statements**

 

ThisItem 7 contains “forward looking statements.” These statements include,without limitation, statements relating to liquidity, financing of operations,continued volatility of uranium prices and other matters. The words “believes,”“expects,” “projects,” “targets,” “estimates” or similar expressions identifyforward-looking statements. We do not undertake to update, revise or correctany of the forward-looking information. Readers are cautioned that suchforward-looking statements should be read in conjunction with our disclosuresunder the heading: “Risk Factors” beginning on page 9.

 

**Overview**

 

URIexplores for and produces uranium in South Texas where it has two remainingproduction operations that are currently on stand-by: Kingsville Dome andRosita. URI also has an estimated 101.4 million pounds of in placemineralized uranium material on 183,000 acres in New Mexico. Our operations areheavily influenced by the price of uranium both on the spot and long-termmarkets. The spot price of uranium, which has fluctuated from a high of $136.00per pound in June 2007 to its recent price level of $40.75 per pound, hasbeen the primary driver of the strategic decisions of the Company.

 

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Ourstrategy has been focused on two fronts: 1) advancing our New Mexicoassets towards production, and 2) expanding our reserve base in Texas sowe can continue to generate cash from operations to sustain our efforts in NewMexico.

 

During2009, with a continuing weakening of the uranium market prices that began inearly 2008, we focused on reducing costs, restoration activities in Texas,public and government relations efforts in New Mexico and preserving cash.  After we concluded production from our two remainingwellfields in Texas in July 2009, we no longer had a source of revenue.

 

*South Texas Production:*    We produced 59,000 pounds ofuranium from our South Texas operations in 2009 and currently have noproduction operations.  Current activityat Kingsville Dome is primarily focused on the restoration of depletedwellfields. The last wellfield at Vasquez was fully depleted in October 2008and the project is now undergoing restoration. Production from Rosita wasstarted in June 2008, but was suspended in October 2008 due to pooreconomics driven by increased operating costs as a result of technicaloperating challenges and the decreased price of uranium.  We are currently in the stabilization phaseof groundwater restoration at the Rosita project.

 

*Reserve development:*    A significant portion of thecash on hand at December 31, 2009 was generated from the$12.9 million in net proceeds received from the sale of common stock andwarrants in a private placement in May 2008. The equity was raised to fundthe acquisition, exploration, permitting and development of new and existingproperties in South Texas to increase our resource base in an effort to extendproduction at our Texas operations beyond 2009 and for general corporatepurposes.  These activities were haltedwhen uranium prices declined in 2008 and 2009.

 

Due tohigher costs, combined with geologic and technical risk and unknown marketrisk, we have chosen to suspend our exploration activities until the economicsjustify further activity. We are seeking opportunities for the rights to potentialuranium properties in South Texas and New Mexico in geographic areas that havehistorically held significant uranium resources. There can be no assurance thatwe will be successful in the acquisition of such properties, or if acquired,that such properties will contain commercially viable uranium deposits.

 

**Financial Condition and Results of Operations**

 

***Comparison of Twelve Months Ended December 31, 2009,2008 and 2007***

 

*Production and production costs.*    Our uraniumproduction was 59,000 in 2009, 300,800 pounds in 2008 and 416,700 pounds in2007. Production began at our Vasquez project in the fourth quarter of 2004 andreached peak production output in 2005. In 2006 and 2007 we saw a decline inVasquez production and the start-up of production from our Kingsville Domeproject. This trend continued in 2007 and 2008. The start-up of production fromthe first new production from our Production Area 3 at Kingsville Dome in January 2007resulted in the production increases in 2007 over 2006. In 2008, we placed fivenew wellfields into production at Kingsville Dome and one new wellfield atVasquez. These wellfields were less prolific than the wellfields produced in2007. Three of the Kingsville Dome wellfields and the Vasquez wellfields wereproduced out in 2008. The remaining two wellfields at Kingsville Dome completedproduction in the second quarter of 2009.

 

Productionat our Rosita project began with oxygen injection in June 2008 andresulted in low levels of production using our standard in-situ recovery miningtechniques. In late July, we employed a series of alternative operationalstrategies including the use of various oxidants in an attempt to improverecovery levels. While these tests did improve production over previous levels,the higher cost of production combined with lower uranium prices did not allowthe operation to continue on a positive cash basis and production was suspendedin the fourth quarter of 2008. Although technically challenging, webelieve the reserves from Rosita can be produced economically with higheruranium prices.

 

Wecompleted production at the Vasquez project and shut-in production at theRosita project in the fourth quarter of 2008 and we shut-in production atthe Kingsville Dome project in the second quarter of 2009. The Vasquez projectwas mined out in 2008 and is now being restored. At the Kingsville Dome andRosita projects, we shut-in production to conserve the in-place reserve base inresponse to a drop in uranium market prices. We do not intend to resumeproduction at these sites until there is a significant recovery of uraniumprices.

 

Thefollowing table details our production and production cost breakdown for theyear ended December 31, 2009, 2008 and 2007:

 

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| ** **                              | ** ** | **2009** | ** ** | **2008** | ** ** | **2007**   | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| **Kingsville Dome production**          |       | 56,100   |       | 254,000  |       | 338,100    |       |
| **Vasquez production**                  |       | 2,200    |       | 36,600   |       | 78,600     |       |
| **Rosita production**                   |       | 700      |       | 10,200   |       | —     |       |
| **Total production**                    |       | 59,000   |       | 300,800  |       | 416,700    |       |
| Total  operating costs                  |       | $        | 1,682,000  |     | $          | 7,173,000  |       | $ | 7,510,000 |   |
| Per  pound operating costs              |       | $        | 28.50      |     | $          | 23.84      |       | $ | 18.02 |   |
| Total  depreciation and depletion costs |       | $        | 887,000    |     | $          | 7,165,000  |       | $ | 6,078,000 |   |
| Per  pound DD&A cost                |       | $        | 15.02      |     | $          | 23.82      |       | $ | 14.59 |   |
| Total  production cost                  |       | $        | 2,569,000  |     | $          | 14,338,000 |       | $ | 13,588,000 |   |
| Production  cost per pound              |       | $        | 43.53      |     | $          | 47.66      |       | $ | 32.61 |   |

 

Totaloperating costs, total depreciation and depletion costs and total productioncosts incurred for the periods presented above differ from the cost of uraniumsales recorded in consolidated statements of operations because of changes inthe amounts recorded to inventory for the same periods. The cost of uraniumsales amounts include the sales of uranium inventory on hand at the beginningof the period and do not include uranium produced during the period but notsold at period end.

 

Thefollowing table provides a reconciliation of production costs to cost ofuranium sales for the year ended December 31, 2009, 2008 and 2007:

 
| ** **                                              | ** ** | **2009**  | ** ** | **2008** | ** ** | **2007**   | ** ** |
|---------------------------------------------------------|------------|-----------|------------|----------|------------|------------|------------|
| Operating  costs                                        |       | $         | 1,682,000  |     | $          | 7,173,000  |       | $ | 7,510,000 |   |
| Change  in uranium inventory                            |       | 1,011,000 |       | (508,000 | )          | 682,000    |       |
| Operating  expense for uranium production sold          |       | $         | 2,693,000  |     | $          | 6,665,000  |       | $ | 8,192,000 |   |
| Depreciation  and depletion costs                       |       | $         | 887,000    |     | $          | 7,165,000  |       | $ | 6,078,000 |   |
| Change  in uranium inventory                            |       | 203,000   |       | 43,000   |       | 173,000    |       |
| Depreciation  and depletion for uranium production sold |       | $         | 1,090,000  |     | $          | 7,208,000  |       | $ | 6,251,000 |   |
| Total  production costs                                 |       | $         | 2,569,000  |     | $          | 14,338,000 |       | $ | 13,588,000 |   |
| Change  in uranium inventory                            |       | 1,214,000 |       | (466,000 | )          | 855,000    |       |
| Direct  cost of uranium production sold                 |       | $         | 3,783,000  |     | $          | 13,872,000 |       | $ | 14,443,000 |   |

 

Totaldollars expended for direct production costs in 2009 were significantly lowerthan 2008 as a result of the scale back of production during the year whencompared to 2008.  The reduced productionvolumes in 2009 resulted from the decline in uranium prices throughout 2008which led to the Company’s decision in October 2008 to defer new wellfielddevelopment. Production at Kingsville Dome was completed in July 2009 atwhich time the Company ceased having any operating wellfields in Texas.

 

Ourdirect production costs in 2008 increased compared with 2007 costs. These totalcost increases resulted from production being sourced from higher costKingsville Dome and Vasquez wellfields in 2008 and from the unfavorable resultswe saw from our Rosita production during 2008.

 

*Uranium Sales.*    In 2009, we sold a total of95,200 pounds of uranium produced from our Kingsville Dome, Vasquez and Rositaprojects, resulting in revenue of $4.7 million.  In 2008, we sold a total of 285,500 pounds ofuranium produced from our Kingsville Dome, Vasquez and Rosita projects, resultingin revenue of $18.5 million. In 2007, we sold a total of 434,900 pounds ofuranium produced from our Kingsville Dome and Vasquez projects, resulting inrevenue of $31.1 million.

 

*Cost of Uranium Sales.*    Our direct production costsfor uranium sales made in 2009, 2008 and 2007 was $3.8 million,$13.9 million and $14.4 million, respectively. Our total cost ofuranium sales is comprised of such production costs, including operatingexpenses, depreciation and depletion expenses, and also includes royalties andcommissions related to our uranium sales, amortization of our restoration andreclamation cost estimates, exploration costs incurred during the year andimpairment provisions for uranium properties. The following table details ourproduction and royalties/commissions cost of uranium sales breakdown for theyears ended December 31, 2009, 2008 and 2007:

 

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| ** **                              | ** ** | **2009** | ** ** | **2008** | ** ** | **2007**   | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| **Total pounds sold**                   |       | 95,200   |       | 285,500  |       | 434,900    |       |
| Total  operating expenses               |       | $        | 2,693,000  |     | $          | 6,664,000  |       | $ | 8,192,000 |   |
| Per  pound operating expense            |       | $        | 28.29      |     | $          | 23.35      |       | $ | 18.84 |   |
| Depreciation  and depletion             |       | $        | 1,090,000  |     | $          | 7,208,000  |       | $ | 6,251,000 |   |
| Per  pound DD&A expense             |       | $        | 11.44      |     | $          | 25.25      |       | $ | 14.37 |   |
| Direct  cost of uranium production sold |       | $        | 3,783,000  |     | $          | 13,872,000 |       | $ | 14,443,000 |   |
| Direct  cost of sales per pound         |       | $        | 39.74      |     | $          | 48.60      |       | $ | 33.21 |   |
| **Royalties and commissions**           |       | $        | 464,000    |     | $          | 1,710,000  |       | $ | 3,034,000 |   |
| Royalties  and commissions per pound    |       | $        | 4.87       |     | $          | 5.99       |       | $ | 6.98 |   |

 

Overallproduction costs in 2009 were significantly lower than 2008 as a result of thescale back of production volumes during the year when compared to 2008.  These lower volumes, which caused lower salesvolumes, also resulted in lower total royalties and commissions in 2009.  Our Kingsville Dome, Vasquez and Rositaprojects all experienced higher production costs in 2008 than our productionfrom Kingsville Dome and Vasquez in 2007. The higher costs at Kingsville Domeand Vasquez were the result of production being sourced from lesser quality orereserves and the wind-down of production at each of these projects during theyear. As the production life of a wellfield extends, the costs to produce thosepounds is higher than when a wellfield is first placed into production.  We experienced production difficulties atRosita which forced us to try a number of methodologies in an attempt toincrease our production efficiencies. The operating costs incurred, the lack ofsignificant progress in resolving our production inefficiencies at Rosita andthe decision to not make the capital expenditures to increase the number ofproduction wells resulted in our high production costs at Rosita during theyear. Our average cost of pounds sold in 2008 was $48.60 per pound withKingsville Dome production contributing approximately 85% of total pounds sold,Vasquez contributing approximately 12% of total pounds sold and Rositacontributing approximately 3% of total pounds sold during the year.

 

We sawan improvement in our overall production costs in 2007,  With the majority of our production in 2007coming from new wellfields at our Kingsville Dome project, we saw benefits ofthis historically lower cost production contributing significantly to reducingboth our operating and capital costs of production in 2007. Our average cost ofpounds sold in 2007 was $33.21 per pound with Kingsville Dome productioncontributing approximately 77% and Vasquez contributing approximately 23% ofthe total pounds sold during the year.

 

*Royalties and Commissions.*    During 2009, royalties andcommissions for Kingsville Dome, Vasquez and Rosita production sold was$464,000, representing a charge of 9.9% of sales. During 2008, royalties andcommissions for Kingsville Dome, Vasquez and Rosita production sold was$1.710 million, representing a charge of 9.2% of sales. During 2007,royalties and commissions for Vasquez and Kingsville Dome production sold was$3.034 million, representing a charge of 9.7% of sales. The changes inroyalty percentages from 2009 to 2008 and 2007 resulted primarily from thechanges in uranium sales prices year to year and the source of our productionin each year. Our Vasquez leases contain a sliding scale royalty withpercentages that range from 6.25% up to 10.25% dependent on our sales prices.Our Kingsville Dome leases have a 6.25% royalty and carry an additional 3.125%royalty payment to certain land owners of the property. Our Rosita leasescontain 11.25% royalty rates.

 

*Operating Expenses.*    During 2009, operatingexpenses for Kingsville Dome, Vasquez and Rosita production sold was$2.7 million which included $548,000 of stand-by and other operating costsat our South Texas projects which were charged to operations. During 2008,operating expenses for Kingsville Dome, Vasquez and Rosita production sold was$6.2 million. In 2008 we incurred $456,000 of stand-by costs at the Rositaproject, which were charged to operations. During 2007, operating expenses forVasquez and Kingsville Dome production sold was $7.9 million. In 2007 weincurred $336,000 of stand-by costs at the Rosita project, which costs werecharged to operations.

 

*Depreciation and Depletion.*    During 2009, we incurreddepreciation and depletion expense attributable to our Kingsville Dome, Vasquezand Rosita production of $1.1 million. During 2008, we incurred depreciation and depletion expense attributableto our Kingsville Dome, Vasquez and Rosita production of $7.2 million.During 2007, we incurred depreciation and depletion expense attributable to ourVasquez and Kingsville Dome production of $6.2 million.

 

*Impairment of Uranium Properties.*    During 2009, 2008and 2007, we determined the carrying value of our uranium project assetsexceeded their fair value. Such determination in 2009 resulted in an impairmentprovision of $3.5 million. The impairment provision reduced the carryingvalue of Kingsville Dome by $2.6 million, Rosita by $214,000, Vasquez by$263,000 and other South Texas projects by $567,000 at December 31, 2009.In 2008 our impairment provision totaled $16.0 million reducing thecarrying value of Kingsville Dome by $6.0 million, Rosita by$8.1 million and Vasquez by $1.8 million at December 31, 2008.The impairment provision in 2007 resulted primarily from our reducing the estimatedrecoverable reserves projected to be produced from Vasquez in the future andresulted in an impairment provision related to the Vasquez project assets ofapproximately $651,000.

 

*Accretion and Amortization of Future Restoration Costs.*    During 2009, 2008and 2007, the accretion and amortization of future restoration costs was$257,000, $790,000 and $574,000, respectively.

 

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*General and Administrative Charges.*    We incurredgeneral and administrative charges and corporate depreciation of $6.8 million,$11.6 million and $11.8 million in 2009, 2008 and 2007, respectively.

 

Significantexpenditures for general and administrative expenses for the years ended December 31,2009, 2008 and 2007 were:

 
| ** **                                  | ** ** | **Year Ended**              | ** ** |
|---------------------------------------------|------------|-----------------------------|------------|
| ** **                                  | ** ** | **2009**                    | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                  | ** ** | **(Amounts in 000’s)** | ** ** |
| Stock  compensation expense                 |       | $                           | 1,258      |   | $ | 2,154 |   | $ | 4,047 |   |
| Salaries  and payroll burden                |       | 2,186                       |       | 3,180 |   | 2,847 |   |
| Legal,  accounting, public company expenses |       | 1,348                       |       | 1,584 |   | 1,622 |   |
| Write-off  of target acquisition costs      |       | —                      |       | 1,422 |   | — |   |
| Insurance  and bank fees                    |       | 539                         |       | 703 |   | 646 |   |
| Consulting  and professional services       |       | 748                         |       | 1,247 |   | 1,582 |   |
| Office  expenses                            |       | 313                         |       | 724 |   | 535 |   |
| Travel  and other expenses                  |       | 232                         |       | 391 |   | 391 |   |
| Total                                       |       | $                           | 6,624      |   | $ | 11,405 |   | $ | 11,670 |   |

 

Thenon-cash compensation expense recorded for the years ended December 31,2009, 2008 and 2007 resulted from the adoption of a new accounting standard in January 2006,requiring the recognition of expense related to the fair value of the Company’sstock option grants. The value of each option award is estimated on the date ofgrant using the Black-Scholes option-pricing model. The Black-Scholesoption-pricing model requires the input of subjective assumptions, includingthe expected term of the option award and stock price volatility. The expectedterm of options granted was derived from historical data on our employeeexercise and post-vesting employment termination experience. The expectedvolatility was based on the historical volatility of our stock.

 

Wemade significant reductions in salary and payroll costs in 2009 compared with2008. The $994,000, or 31% decrease resulted primarily from a reduction inpersonnel headcount that resulted from lower activities created by the shutdown of the Company’s production during the current year. Salary and payrollcosts were up slightly in 2008 compared with 2007. The $333,000 or 12% increaseresulted primarily from increased personnel and benefits and a reduction inpersonnel costs allocated to operations and projects during the current year.Salary and payroll cost increases of $1.3 million in 2007 resultedprimarily from the addition of 21 salaried positions primarily in South Texasand New Mexico during the year and the cash bonuses awarded to non-executiveemployees at year end 2007.

 

TheCompany’s legal, accounting and public company expenses had a net decrease of$236,000 in 2009 compared with 2008. The decrease resulted from reduced auditand Sarbanes-Oxley Section 404 (“SOX 404”) related costs during theyear offset by increases in legal fees. The Company’s legal, accounting and public company expenses had a netdecrease of $38,000 in 2008 compared with 2007. The decrease related to lowerSOX 404 audit related costs in 2008 and NASDAQ listing fees, decreaseddirectors’ fees and costs related to the preparation for a planned listing onthe Toronto Stock Exchange incurred in 2007. The Company’s legal, accountingand public company expenses had a net increase of $306,000 in 2007. The primaryincreases in these costs were from SOX 404 audit related costs, NASDAQ listingfees, higher directors fees related to the addition of two independentdirectors during 2007 and increased director participation in strategicplanning activities and costs related to the preparation for a planned listingon the Toronto Stock Exchange. These increased costs were somewhat offset by areduction of legal costs charged to general and administrative costs during theyear. The primary reduction related to a significant amount of legal activityin 2006 related to the negotiation and preparation of the joint venture in NewMexico with Itochu Corporation.

 

Insurancecosts decreased in 2009 compared to 2008 as a result of lower general liabilityand umbrella coverage premiums which saw reductions because of overallreductions in payroll during the year. Insurance costs increased in 2008 compared to 2007 primarily as a resultof an increase in our directors and officers liability premiums which roseduring the year primarily as a result of increased coverage limits in 2008compared with the prior year. Insurance costs increased in 2007 primarily as aresult of an increase in our general liability premiums.  These premiums rose during the year as aresult of increases in production activities seen in 2007 compared with theprior year. We also had increases in our property and casualty premiumsresulting from increased vehicle coverage because of additional vehiclesacquired in 2007. Bank fees also increased in 2007 as a result of additionsmade to our financial surety requirements for our South Texas uranium projects.

 

Consultingand professional service expenses were reduced significantly in 2009 comparedto the prior year as a result of lower public relations costs associated withNew Mexico community relations and community information education activitiesduring the current year.  This reducedspending resulted in savings of approximately $499,000 year over year.  The 2008 costs for consulting and 

 

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professional servicesdecreased by $101,000 compared with 2007 and was related primarily to areduction in costs for financial advisory services provided by a non-employeedirector of the Company in 2007 ($80,000). The 2007 costs for consulting andprofessional services increased by $1.0 million compared with 2006. Theincreased costs were a result of heightened activities involving work performedto review and assess our New Mexico property databases for their evaluation aspotential conventional mining projects ($160,000), the expansion of a broadcommunity relations and community information education effort in both SouthTexas and New Mexico ($521,000), investor relations costs ($104,000), costs forfinancial advisory services provided by a non-employee director of the Company($80,000) and other advisory fees in Texas ($150,000).

 

Reducedoffice related costs in 2009 resulted from closures of the Company’s New Mexicoand Corpus Christi office locations along with peripheral office related costsreductions resulting from the reductions in work force seen in 2009. Increasedoffice costs in 2008 compared with 2007 resulted primarily from the full yearcosts of the Lewisville, Texas and Albuquerque, New Mexico offices offset bycost reductions realized by the closure of the Corpus Christi office mid-year2008. Increased office costs in 2007 compared with 2006 resulted primarily fromthe opening of a new corporate office location in Albuquerque, New Mexico, inOctober, 2007, the move of the corporate headquarters to larger office space inSeptember 2007, the costs for the Corpus Christi office for the entireyear and increases in the South Texas Kingsville operations office resultingfrom the personnel added during the year.

 

*Write-off of Target Acquisition Costs.*    In June 2008,the Company and Billiton Investment 15 B.V. agreed to terminate ouragreement to purchase Rio Algom Mining, LLC, which was entered into on October 12,2007. In connection with the targeted acquisition, we incurred costs of$1.4 million dollars which were originally recorded as a pre-acquisitioncost asset. Upon the termination of the agreement these pre-acquisition costswere expensed in 2008.

 

*Net Income (Loss).*    For the year ended December 31,2009 we had a net loss of $10.1 million compared to a net loss of$26.5 million in 2008 and net income of $1.1 million in 2007. On adiluted per share basis, losses were ($0.18) in 2009 compared with losses of($0.49) in 2008 and net income of $0.02 in 2007, respectively. The 2009 and2008 results include an impairment provision for the Kingsville Dome, Vasquezand Rosita projects of $3.5 million and $16.0 million, respectively andexploration charges of $62,000 and $1.6 million, respectively. The 2007results include an impairment provision for the Vasquez project of $651,000 andexploration charges of $347,000.

 

*Cash Flow.*    As of December 31, 2009we had a cash balance of approximately $6.1 million compared withapproximately $12.0 million and $9.3 million at December 31,2008 and 2007, respectively.

 

In2009, we had a negative cash flow from operations of $5.0 million, resultingprimarily from our low uranium production and related sales volumes seen duringthe year. As a result of the deferral of wellfield development activities, ourcapital expenditures used in investing activities were reduced by approximately$10.2 million compared to 2008.

 

In2008, we generated $1.0 million of cash flow from operations, resultingfrom our uranium production activities during the year.

 

In2008, we raised net proceeds of approximately $12.8 million through thesale of 3,295,920 shares at $4.34 per share in May 2008 and $183,000 fromthe issuance of 169,250 shares from the exercise of employee stock options.

 

Wealso used $11.0 million in investing activities, including$8.4 million of capital additions for our South Texas production projects.These expenditures primarily consisted of wellfield evaluation, delineation anddevelopment costs of $2.8 million and plant and equipment additions of$634,000 at Kingsville Dome. Wellfield evaluation and development costs were$2.4 million and plant and equipment additions totaled $1.9 millionat the Rosita project during 2008. Costs at the Vasquez project were $355,000in 2008 and were primarily for wellfield development and land holding costs andwe spent approximately $478,000 for evaluation and delineation activities atthe Company’s Rosita South project during 2008.

 

In2007, we generated $11.3 million of cash flow from operations, resultingprimarily from our increased production and reduced production costs incurredduring the year.

 

Wealso used $22.9 million in investing activities, including$15.7 million of capital additions for our main South Texas projects.These expenditures primarily consisted of wellfield evaluation, delineation anddevelopment costs of $6.5 million and plant and equipment additions of$1.3 million at Kingsville Dome. Wellfield evaluation and developmentcosts were $2.6 million and plant and equipment additions totaled$1.8 million at the Rosita project during 2007. Costs for wellfielddevelopment and plant and equipment totaled $1.2 million at the Vasquezproject in 2007 and we spent approximately $1.3 million for evaluation anddelineation activities at the Company’s Rosita South project.

 

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In2007, we generated $1.0 million from the issuance of 514,000 shares fromthe exercise of employee stock options.

 

**Liquidity—Cash Sources and Uses for 2010**

 

As of December 31,2009, the Company had $6.1 million in cash.  The Company deferred the development of newwellfields at Kingsville Dome and Rosita beginning in late 2008.  This action resulted in the wind down of oururanium production activities by mid-2009 and a corresponding reduction inuranium sales which was the primary reason for our $5.0 million of cash used inoperations in 2009.  As of December 31,2009 the Company had sold its entire uranium inventory and as such, salesrevenue and related cash inflows for the Company are expected to be nominal in2010.

 

During2009 we continued the actions begun in the second half of 2008, significantlydecreasing our cost structure by implementing tighter spending controls,reducing employment, limiting exploration activities, and reducing public andgovernment relations activities in New Mexico and Texas.  The Company expects to raise additionalcapital in 2010 through a financing transaction, the monetization of non-core assetsor other means.  Absent the ability tocomplete one or more of these actions the Company would need to implementsignificant cost cutting measures designed to maintain the Company’s liquidityfor a period of 12 to fifteen months. While the Company believes it will be successful in its capital raisingefforts, there can be no assurance that such activities will result in theraising of sufficient funds to allow the Company to continue operations beyond2010.  However, we do project that withthe cash on hand at December 31, 2009 and with the ability to sufficientlyreduce our controllable costs we will be able to maintain our liquidity through2010.

 

**Off Balance Sheet Arrangements**

 

TheCompany has obtained financial surety relating to certain of its futurerestoration and reclamation obligations as required by the State of Texasregulatory agencies. The Company has bank Letters of Credit (the “L/C’s) andperformance bonds issued for the benefit of the Company to satisfy suchregulatory requirements. The L/C’s were issued by Bank of America and theperformance bonds have been issued by United States Fidelity and GuarantyCompany (“USF&G”). L/C’s for $5,761,000, $5,629,000 and $5,360,000 at December 31,2009, 2008 and 2007, respectively such L/C’s are collateralized in theirentirety by certificates of deposit.

 

Performancebonds totaling $2,835,000 were issued for the benefit of the Company at December 31,2009, 2008 and 2007. USF&G has required that the Company deposit fundscollateralizing a portion of the bonds. The amount of bonding issued byUSF&G exceeded the amount of collateral by $2.5 million at December 31,2009, 2008 and 2007, respectively. In the event that USF&G is required toperform under its bonds or the bonds are called by the state agencies, theCompany would be obligated to pay any expenditure in excess of the collateral.

 

**Contractual Obligations**

 

Thetable below sets forth our best estimates as to the amounts and timing offuture payments relating to our most significant contractual obligations as of December 31,2009, except as otherwise noted.

 
| ** **                  | ** ** | ** ** | ** ** | **Payment  Due by Period** | ** ** |
|-----------------------------|------------|------------|------------|----------------------------|------------|
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **Less than 1 year**       | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than 5 years** | ** ** |
| Capital leases              |       | $          | 367,500    |                       | $          | 141,947 |   | $ | 208,942 |   | $ | 16,611 |   | $ | — |   |
| Corporate office lease      |       | 161,618    |       | 60,607                     |       | 101,011 |   | — |   | — |   |
| Crownpoint                  |       | 450,000    |       | —                     |       | — |   | — |   | 450,000 |   |
|                        |       |       |       |                       |       |   |   |   |   |   |   |
| Total                       |       | $          | 979,118    |                       | $          | 202,554 |   | $ | 309,953 |   | $ | 16,611 |   | $ | 450,000 |   |

 

**Critical Accounting Policies**

 

Oursignificant accounting policies are described in Note 2 to theconsolidated financial statements on page F-8 of this Form 10-K. Webelieve our most critical accounting policies involve those requiring the useof significant estimates and assumptions in determining values or projectingfuture costs.

 

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Specificallyregarding our uranium properties, significant estimates were utilized indetermining the carrying value of these assets. These assets have been recordedat their estimated net realizable value for impairment purposes on aliquidation basis, which is less than our cost. The actual value realized fromthese assets may vary significantly from these estimates based upon marketconditions, financing availability and other factors.

 

Regardingour reserve for future restoration and reclamation costs, significant estimateswere utilized in determining the future costs to complete the groundwaterrestoration and surface reclamation at our mine sites. The actual cost toconduct these activities may vary significantly from these estimates.

 

Suchestimates and assumptions affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of expenses during the reportingperiod.

 

Theaccounts of the Company are maintained in United States dollars. All dollaramounts in the financial statements are stated in United States dollars exceptwhere indicated.

 

**Impact of Recent Accounting Pronouncements**

 

***The Accounting Standards Codification.***   In June 2009, theFinancial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards No. 168,*The FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles — a replacement of FASB Statement No. 162* (the “Codification” or “ASC”).  The Codification reorganized existing U.S.accounting and reporting standards issued by the FASB and other related privatesector standard setters into a single source of authoritative accountingprinciples arranged by topic.  The Codification supersedes all existingU.S. accounting standards; all other accounting literature not included in theCodification (other than Securities and Exchange Commission guidance forpublicly-traded companies) is considered non-authoritative.  TheCodification was effective on a prospective basis for interim and annualreporting periods ending after September 15, 2009.  The adoption ofthe Codification changed the Company’s references to U.S. GAAP accountingstandards but did not impact the Company’s results of operations, financialposition or liquidity.

 

***Business Combinations.***  In December 2007, theFASB issued revised guidance for the accounting for businesscombinations.  The revised guidance, which is now part of ASC 805,*  Business Combinations*  (ASC805), requires the fair value measurement of assets acquired, liabilitiesassumed and any noncontrolling interest in the acquiree, at the acquisitiondate with limited exceptions.  Previously, a cost allocation approach wasused to allocate the cost of the acquisition based on the estimated fair valueof the individual assets acquired and liabilities assumed.  The costallocation approach treated acquisition-related costs and restructuring coststhat the acquirer expected to incur as a liability on the acquisition date, aspart of the cost of the acquisition.  Under the revised guidance, thosecosts are recognized in the consolidated statement of income separately fromthe business combination.  In addition, the revised guidance includesrecognition, classification and measurement guidance for assets and liabilitiesrelated to insurance and reinsurance contracts acquired in a businesscombination.  The revised guidance applies to business combinations foracquisitions occurring on or after January 1, 2009.  The Companyadopted this standard on January 1, 2009 which did not have an impact onits financial position, results of operations or cash flows as there have beenno acquisitions that have been consummated after January 1, 2009.

 

***Noncontrolling Interests in ConsolidatedFinancial Statements.***   In December 2007, the FASB issued new guidance forthe accounting for noncontrolling interests.  The new guidance, which isnow a part of ASC 810,*  Consolidation*,establishes accounting and reporting standards for noncontrolling interests ina subsidiary and for the deconsolidation of a subsidiary.  In addition, itclarifies that a noncontrolling interest in a subsidiary is an ownershipinterest in the consolidated entity that should be reported as a component ofequity in the consolidated financial statements.

 

Theprovisions of the new guidance were effective on a prospective basis beginning January 1,2009, except for the presentation and disclosure requirements which are appliedon a retrospective basis for all periods presented.  The adoption of thenew guidance on January 1, 2009 did not have a material effect on theCompany’s results of operations, financial position or cash flows as theCompany owns 100% of its subsidiaries.

 

***Derivative Instruments and HedgingActivities.***  In March 2008, the FASB issued new guidance on the disclosure ofderivative instruments and hedging activities.  The new guidance, which isnow a part of ASC 815,*Derivatives andHedging Activities,* requires qualitative disclosures aboutobjectives and strategies for using derivatives, quantitative disclosures aboutfair value amounts of, and gains and losses on, derivative instruments, anddisclosures about credit-risk-related contingent features in derivativeagreements.  The provisions of the new guidance were effective forfinancial statements issued for fiscal years beginning after November 15,2008.  The adoption of the new guidance on January 1, 2009 did notresult in a change in the Company’s disclosure since there were no derivativeinstruments or hedging activities after January 1, 2009.

 

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***Determining Whether an Instrument (orEmbedded Feature) is Indexed to an Entity’s Own Stock.****  *In June 2008, the FASB issued newguidance on a financial instrument that is indexed to an entity’s ownstock.  The new guidance, which is now a part of ASC 815, *Determining Whether an Instrument (or EmbeddedFeature) is Indexed to an Entity’s Own Stock* is effective forfinancial statements issued for fiscal years beginning after December 15,2008, and interim periods within those fiscal years.  Earlyapplication is not permitted.  ASC 815-15-74 specifies that a contractthat would otherwise meet the definition of a derivative but is both (a) indexedto the Company’s own stock and (b) classified in stockholders’ equity inthe statement of financial position would not be considered a derivativefinancial instrument. ASC 815 provides a new two-step model to be applied indetermining whether a financial instrument or an embedded feature is indexed toan issuer’s own stock and thus able to qualify for the scopeexception.  The application of this guidance at January 1, 2009did not have a significant impact on the Company’s financial statements.

 

***Fair Value Measurements.***   In February 2008, theFASB issued new guidance for the accounting for non-financial assets andnon-financial liabilities.  The new guidance, which is now a part of ASC820, *Fair Value Measurements and Disclosures* (ASC 820), permitted a one-year deferral of the application of fair valueaccounting for all non-financial assets and non-financial liabilities, exceptthose that are recognized or disclosed at fair value in the financialstatements on a recurring basis (at least annually).  Beginning January 1,2009, we applied ASC 820 to nonrecurring, nonfinancial assets and liabilities.This adoption did not have a material impact on our consolidated statement ofoperations or financial condition.  Our asset retirement obligation isclassified as a Level 3 liability within the valuation hierarchy. Thesignificant unobservable inputs to this fair value measurement includeestimates of plugging, abandonment and restoration costs, inflation rate andthe expected remaining life of wellfields. The inputs are calculated based onhistorical data as well as current estimated costs.  See Note 11 — OtherLiabilities and Deferred Credits for additional information regarding our assetretirement obligation as of December 31, 2009.

 

***Subsequent Events.   ***In May 2009, the FASB issued newguidance for accounting for subsequent events.  The new guidance, which isnow part of ASC 855,*  Subsequent Events*, is consistent with existing auditing standards in defining subsequent eventsas events or transactions that occur after the balance sheet date but beforethe financial statements are issued or are available to be issued, but it alsorequires the disclosure of the date through which an entity has evaluatedsubsequent events and the basis for that date.  The new guidance definestwo types of subsequent events: “recognized subsequent events” and “non-recognizedsubsequent events.”  Recognized subsequent events provide additionalevidence about conditions that existed at the balance sheet date and must bereflected in the company’s financial statements.  Non-recognizedsubsequent events provide evidence about conditions that arose after thebalance sheet date and are not reflected in the financial statements of acompany.  Certain non-recognized subsequent events may require disclosureto prevent the financial statements from being misleading.  The newguidance was effective on a prospective basis for interim or annual periodsending after June 15, 2009.  We adopted ASC 855 on June 30, 2009and have included the required disclosures in this Form 10-K.

 

**Item 7A.    Quantitative andQualitative Disclosures About Market Risk.**

 

**Uranium Price Volatility**

 

TheCompany is subject to market risk related to the market price of uranium. TheCompany’s cash flow has historically been dependent on the price of uranium,which is determined primarily by global supply and demand, relative to theCompany’s costs of production. Historically, uranium prices have been subjectto fluctuation, and the price of uranium has been and will continue to beaffected by numerous factors beyond the Company’s control, including the demandfor nuclear power, political and economic conditions, and governmentallegislation in uranium producing and consuming countries and production levelsand costs of production of other producing companies.

 

Thespot market price for uranium has demonstrated a large range since January 2001.Prices have risen from $7.10 per pound at January 2001 to a high of$136.00 per pound as of June 2007. The spot market price was $40.75 per pound as of March 8, 2010.

 

**Item 8.    Financial Statements andSupplementary Data.**

 

**Financial Statements**

 

Thefinancial statement information called for by this item appears on pages F-1through F-24.

 

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**Supplementary Financial Data Tables**

 

**SUPPLEMENTARY FINANCIAL DATA**

 

**(UNAUDITED)**

 
| ** **                             | ** ** | **For  the Quarter Ended**  | ** ** |
|----------------------------------------|------------|-----------------------------|------------|
| ** **                             | ** ** | **12/31/2009**              | ** ** | **9/30/2009** | ** ** | **6/30/2009** | ** ** | **3/31/2009** | ** ** | **12/31/2008** | ** ** | **9/30/2008** | ** ** | **6/30/2008** | ** ** | **3/31/2008** | ** ** |
| ** **                             | ** ** | **(Amounts  in Thousands)** | ** ** |
| Uranium  sales                         |       | $                           | 57         |   | $ | 1,407 |   | $ | 1,787 |   | $ | 1,422 |   | $ | 2,196 |   | $ | 4,025 |   | $ | 6,598 |   | $ | 5,732 |   |
| Earnings  (loss) from operations       |       | (3,711                      | )          | (2,554 | ) | (2,291 | ) | (1,621 | ) | (7,617 | ) | (14,152 | ) | (3,253 | ) | (1,974 | ) |
| Net  earnings (loss)                   |       | (3,721                      | )          | (2,525 | ) | (2,246 | ) | (1,574 | ) | (7,547 | ) | (14,016 | ) | (3,109 | ) | (1,837 | ) |
| Net  earnings (loss) per common share: |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                  |       | $                           | (0.07      | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.15 | ) | $ | (0.25 | ) | $ | (0.06 | ) | $ | (0.03 | ) |
| Diluted                                |       | $                           | (0.07      | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.15 | ) | $ | (0.25 | ) | $ | (0.06 | ) | $ | (0.03 | ) |

 

**Item 9.   Changes in and Disagreementswith Accountants on Accounting and Financial Disclosure.**

 

None.

 

**Item 9A.    Controls and Procedures.**

 

***Evaluation of Disclosure Controls andProcedures***

 

TheCompany maintains disclosure controls and procedures that are designed toensure that information required to be disclosed in its filings with theSecurities and Exchange Commission (SEC) are recorded, processed, summarizedand reported within the time period specified in the SEC’s rules andforms, and that such information is accumulated and communicated to management,including its Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure based onthe definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgatedunder the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Indesigning and evaluating the disclosure controls and procedures, management hasrecognized that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, and management is required to apply judgment in evaluatingits controls and procedures.

 

Duringthe fiscal period covered by this report, the Company’s management, with theparticipation of the Chief Executive Officer and Chief Financial Officer of theCompany, carried out an evaluation of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)). Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer have certified that our disclosure controls and procedures wereeffective as of December 31, 2009.

 

***Management’s Report on Internal ControlOver Financial Reporting***

 

Managementof the Company is responsible for establishing and maintaining adequateinternal control over financial reporting as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. The Company’s internal control overfinancial reporting is designed, under the supervision of the Company’s ChiefExecutive Officer and Chief Financial Officer, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with accountingprinciples generally accepted in the United States of America (GAAP). TheCompany’s internal control over financial reporting includes those policies andprocedures that: (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP, and that receipts andexpenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

 

TheCompany conducted an evaluation of the effectiveness of its internal controlover financial reporting as of December 31, 2009. This evaluation wasbased on the framework in “Internal Control—Integrated Framework” issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). Allinternal control systems, no matter how well designed, have 

 

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inherent limitations.Therefore, even those systems determined to be effective can provide onlyreasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withGAAP.

 

Basedon the Company’s evaluation under the framework in *Internal Control—Integrated Framework*, our Chief ExecutiveOfficer and Chief Financial Officer concluded that internal control overfinancial reporting was effective as of December 31, 2009.

 

Therewere no changes in our internal controls over financial reporting that occurredduring the fourth quarter of 2009 that materially affected, or are reasonablylikely to materially affect, our internal controls over financial reporting.

 

TheCompany’s independent auditors, Hein & Associates, LLP, with directaccess to the Company’s Board of Directors through its Audit Committee, haveaudited the consolidated financial statements prepared by the Company. Theirreport on the consolidated financial statements is included in Part II,Item 8. Financial Statements and Supplementary Data. Hein &Associates, LLP’s report on the Company’s internal control over financialreporting appears on the following page.

 

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

To the Board of DirectorsUranium Resources, Inc.Lewisville, TX 75067

 

Wehave audited Uranium Resources, Inc.’s internal control over financialreporting as of December 31, 2009, based on criteria established inInternal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Uranium Resources, Inc.’smanagement is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’sReport on Internal Control Over Financial Reporting. Our responsibility is toexpress an opinion on the company’s internal control over financial reportingbased on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. Our audit also included performingsuch other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.

 

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

In ouropinion, Uranium Resources, Inc. maintained, in all material respects,effective internal control over financial reporting as of December 31,2009, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Wehave also audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheets ofUranium Resources, Inc. as of December 31, 2009 and 2008, and therelated consolidated statements of operations, shareholders’ equity, and cashflows for each of the three years ending December 31, 2009 and our reportdated March 16, 2010 expressed an unqualified opinion.

 

*HEIN &ASSOCIATES LLP*

 

Dallas, TexasMarch 16, 2010

 

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**Item 9B.    Other Information.**

 

None.

 

**PART III**

 

**Item 10.    Directors, ExecutiveOfficers and Corporate Governance.**

 

Theinformation required by this item is incorporated by reference from ourdefinitive proxy statement for the 2010 Annual Meeting of Stockholders to befiled with the SEC within 120 days after the end of the fiscal year ended December 31,2009.

 

**Item 11.    Executive Compensation.**

 

Theinformation required by this item is incorporated by reference from ourdefinitive proxy statement for the 2010 Annual Meeting of Stockholders to befiled with the SEC within 120 days after the end of the fiscal year ended December 31,2009.

 

**Item 12.    Security Ownership ofCertain Beneficial Owners and Management and Related Stockholder Matters.**

 

Theinformation required by this item is incorporated by reference from ourdefinitive proxy statement for the 2010 Annual Meeting of Stockholders to befiled with the SEC within 120 days after the end of the fiscal year ended December 31,2009.

 

**Item 13.    Certain Relationshipsand Related Transactions and Director Independence.**

 

Theinformation required by this item is incorporated by reference from ourdefinitive proxy statement for the 2010 Annual Meeting of Stockholders to befiled with the SEC within 120 days after the end of the fiscal year ended December 31,2009.

 

**Item 14.    Principal AccountantFees and Services.**

 

Theinformation required by this item is incorporated by reference in ourdefinitive proxy statement for the 2010 Annual Meeting of Stockholders to befiled with the SEC within 120 days after the end of the fiscal year ended December 31,2009.

 

**PART IV**

 

**Item 15.    Exhibits and FinancialStatement Schedules.**

 

SeeIndex to Exhibits on page E-1 for a listing of the exhibits filed as partof this Annual Report.

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 

Date: March 16, 2010

 

 
|   | URANIUM  RESOURCES, INC. |
|--------|--------------------------|
|   |                     |   |
|   | By:                      | /s/ DONALD C. EWIGLEBEN |
|   |                     | Donald C. Ewigleben, *President,* |
|   |                     | *Chief Executive Officer and Chief Operating  Officer* |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.

 
| **Signature**                                              | ** ** | **Date**       |
|------------------------------------------------------------|------------|----------------|
|                                                       |       |           |
| /s/ PAUL K. WILLMOTT                                       |       | March 16, 2010 |
| Paul K. Willmott,                                          |       |           |
| *Director and Executive Chairman*                          |       |           |
|                                                       |       |           |
| /s/ DONALD C. EWIGLEBEN                                    |       | March 16, 2010 |
| Donald C. Ewigleben                                        |       |           |
| *Director, President, CEO and COO*                         |       |           |
|                                                       |       |           |
| /s/ THOMAS H. EHRLICH                                      |       | March 16, 2010 |
| Thomas H. Ehrlich,                                         |       |           |
| *Vice President—Finance and Chief Financial  Officer* |       |           |
| *(Principal Financial and Accounting Officer)*             |       |           |
|                                                       |       |           |
| /s/ LELAND O. ERDAHL                                       |       | March 16, 2010 |
| Leland O. Erdahl, *Director*                               |       |           |
|                                                       |       |           |
| /s/ TERENCE J. CRYAN                                       |       | March 16, 2010 |
| Terence J. Cryan, *Director*                               |       |           |
|                                                       |       |           |
| /s/ MARVIN K. KAISER                                       |       | March 16, 2010 |
| Marvin K. Kaiser, *Director*                               |       |           |
|                                                       |       |           |
| /s/ ROBERT M. GALLAGHER                                    |       | March 16, 2010 |
| Robert M. Gallagher, Director                              |       |           |

 

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**URANIUM RESOURCES, INC. ANDCONSOLIDATED SUBSIDIARIES**

 

**INDEX TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**ConsolidatedFinancial Statements For The Years Ended December 31, 2009, 2008 and 2007**

 
| Report  of Independent Registered Public Accounting Firm |   | F-2    |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| Consolidated  Balance Sheets                             |   | F-3    |
|                                                     |   |   |
| Consolidated Statements of Operations                    |   | F-5    |
|                                                     |   |   |
| Consolidated Statements of Shareholders’ Equity     |   | F-6    |
|                                                     |   |   |
| Consolidated Statements of Cash Flows                    |   | F-7    |
|                                                     |   |   |
| Notes to Consolidated Financial Statements               |   | F-8    |

 

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Report of IndependentRegistered Public Accounting Firm

 

To the Board of DirectorsUranium Resources, Inc.Lewisville, TX 75067

 

Wehave audited the consolidated balance sheets of Uranium Resources, Inc. asof December 31, 2009 and 2008 and the related consolidated statements ofoperations, shareholders’ equity and cash flows for each of the three years inthe period ended December 31, 2009. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provided a reasonable basis for our opinion.

 

In ouropinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Uranium Resources, Inc.as of December 31, 2009 and 2008, and the results of its operations andcash flows for each of the three years in the period ended December 31,2009, in conformity with accounting principles generally accepted in the UnitedStates.

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness of UraniumResources, Inc.’s internal control over financial reporting as of December 31,2009, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated March 16, 2010 expressed an unqualified opinion onthe effectiveness of Uranium Resources, Inc.’s internal control over financialreporting.

 

Hein &Associates, LLPDallas, TXMarch 16, 2010

 

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**URANIUM RESOURCES, INC.**

 

**CONSOLIDATED BALANCE SHEETS**

 

**ASSETS**

 
| ** **                                                    | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                    | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Current  assets:                                              |       |                  |       |   |   |
| Cash  and cash equivalents                                    |       | $                     | 6,092,068  |   | $ | 12,041,592 |   |
| Receivables,  net                                             |       | 63,890                |       | 40,360 |   |
| Uranium  inventory                                            |       | —                |       | 1,213,927 |   |
| Prepaid  and other current assets                             |       | 125,400               |       | 513,489 |   |
| Total  current assets                                         |       | 6,281,358             |       | 13,809,368 |   |
| Property,  plant and equipment, at cost:                      |       |                  |       |   |   |
| Uranium  properties                                           |       | 82,212,719            |       | 85,095,067 |   |
| Other  property, plant and equipment                          |       | 886,992               |       | 898,933 |   |
| Less—accumulated  depreciation, depletion and impairment |       | (64,155,311           | )          | (63,215,677 | ) |
| Net  property, plant and equipment                            |       | 18,944,400            |       | 22,778,323 |   |
| Long-term  investment:                                        |       |                  |       |   |   |
| Certificate  of deposit, restricted                           |       | 6,786,000             |       | 6,636,715 |   |
|                                                          |       | $                     | 32,011,758 |   | $ | 43,224,406 |   |

 

The accompanying notes to financial statements are an integral part ofthese consolidated statements.

 

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**URANIUM RESOURCES, INC.**

 

**CONSOLIDATED BALANCE SHEETS**

 

**LIABILITIES AND SHAREHOLDERS’ EQUITY**

 
| ** **                                                                                                                                                            | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Current  liabilities:                                                                                                                                                 |       |                  |       |   |   |
| Accounts  and short term notes payable                                                                                                                                |       | $                     | 641,727    |   | $ | 1,169,293 |   |
| Current  portion of restoration reserve                                                                                                                               |       | 1,236,588             |       | 1,660,422 |   |
| Royalties  and commissions payable                                                                                                                                    |       | 693,303               |       | 719,542 |   |
| Accrued  interest and other accrued liabilities                                                                                                                       |       | 321,235               |       | 607,975 |   |
| Current  portion of capital leases                                                                                                                                    |       | 112,559               |       | 158,068 |   |
| Total  current liabilities                                                                                                                                            |       | 3,005,412             |       | 4,315,300 |   |
| Other  long-term liabilities and deferred credits                                                                                                                     |       | 5,487,389             |       | 6,531,378 |   |
| Long-term  capital leases, less current portion                                                                                                                       |       | 207,922               |       | 320,108 |   |
| Other  long-term debt                                                                                                                                                 |       | 450,000               |       | 450,000 |   |
| Commitments  and contingencies (Notes 2, 3, 5, 8 and 13)                                                                                                         |       |                  |       |   |   |
| Shareholders’  equity:                                                                                                                                           |       |                  |       |   |   |
| Common  stock, $0.001 par value, shares authorized: 200,000,000; shares issued and  outstanding (net of treasury shares): 2009—56,781,792; 2008—55,955,549; |       | 56,820                |       | 55,994 |   |
| Paid-in  capital                                                                                                                                                      |       | 147,837,204           |       | 146,518,753 |   |
| Accumulated  deficit                                                                                                                                                  |       | (125,023,571          | )          | (114,957,709 | ) |
| Less:  Treasury stock (38,125 shares), at cost                                                                                                                        |       | (9,418                | )          | (9,418 | ) |
| Total  shareholders’ equity                                                                                                                                      |       | 22,861,035            |       | 31,607,620 |   |
|                                                                                                                                                                  |       | $                     | 32,011,758 |   | $ | 43,224,406 |   |

 

The accompanying notes to financial statements are an integral part ofthese consolidated statements.

 

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**URANIUM RESOURCES, INC.**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS**

 
| ** **                                                                                                                                       | ** ** | **Year Ended December 31,** | ** **  |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|-------------|
| ** **                                                                                                                                       | ** ** | **2009**                         | ** **  | **2008** | ** ** | **2007** | ** ** |
| Revenues:                                                                                                                                        |       |                             |        |   |   |   |   |
| Uranium  sales                                                                                                                                   |       | $                                | 4,673,169   |   | $ | 18,551,065 |   | $ | 31,142,689 |   |
| Total  revenue                                                                                                                                   |       | 4,673,169                        |        | 18,551,065 |   | 31,142,689 |   |
| Costs  and expenses:                                                                                                                             |       |                             |        |   |   |   |   |
| Cost  of uranium sales:                                                                                                                          |       |                             |        |   |   |   |   |
| Royalties  and commissions                                                                                                                       |       | 464,028                          |        | 1,709,748 |   | 3,033,811 |   |
| Operating  expenses                                                                                                                              |       | 2,692,960                        |        | 6,664,341 |   | 8,192,378 |   |
| Accretion/amortization  of restoration reserve                                                                                                   |       | 257,791                          |        | 790,204 |   | 573,581 |   |
| Depreciation  and depletion                                                                                                                      |       | 1,089,612                        |        | 7,207,719 |   | 6,251,359 |   |
| Writedown  of uranium properties                                                                                                                 |       | 3,517,970                        |        | 15,992,623 |   | 651,407 |   |
| Exploration  expenses                                                                                                                            |       | 61,677                           |        | 1,630,043 |   | 347,221 |   |
| Total  cost of uranium sales                                                                                                                     |       | 8,084,038                        |        | 33,994,678 |   | 19,049,757 |   |
| Earnings  (loss) from operations before corporate expenses                                                                                       |       | (3,410,869                       | )           | (15,443,613 | ) | 12,092,932 |   |
| Corporate  expenses:                                                                                                                             |       |                             |        |   |   |   |   |
| General  and administrative (includes stock compensation expense of $1,258,000,  $2,154,000 and $4,047,000 in 2009, 2008 and 2007, respectively) |       | 6,624,023                        |        | 11,405,169 |   | 11,670,138 |   |
| Depreciation                                                                                                                                     |       | 142,531                          |        | 147,561 |   | 97,920 |   |
| Total  corporate expenses                                                                                                                        |       | 6,766,554                        |        | 11,552,730 |   | 11,768,058 |   |
| Earnings  (loss) from operations                                                                                                                 |       | (10,177,423                      | )           | (26,996,343 | ) | 324,874 |   |
| Other  income (expense):                                                                                                                         |       |                             |        |   |   |   |   |
| Interest  expense                                                                                                                                |       | (40,637                          | )           | (43,549 | ) | (24,914 | ) |
| Interest  and other income, net                                                                                                                  |       | 152,198                          |        | 530,536 |   | 777,574 |   |
| Net  income (loss)                                                                                                                               |       | $                                | (10,065,862 | ) | $ | (26,509,356 | ) | $ | 1,077,534 |   |
| Net  income (loss) per common share:                                                                                                             |       |                             |        |   |   |   |   |
| Basic                                                                                                                                            |       | $                                | (0.18       | ) | $ | (0.49 | ) | $ | 0.02 |   |
| Diluted                                                                                                                                          |       | $                                | (0.18       | ) | $ | (0.49 | ) | $ | 0.02 |   |

 

The accompanying notes to financial statements are an integral part ofthese consolidated statements.

 

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**URANIUM RESOURCES, INC.**

 

**CONSOLIDATED STATEMENTS OFSHAREHOLDERS’ EQUITY**

 
| ** **                                     | ** ** | **Common Stock** | ** ** | ** ** | ** ** | ** **               | ** ** | ** **                   | ** ** |
|------------------------------------------------|------------|-----------------------|------------|------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **Shares**            | ** ** | **Amount** | ** ** | **Paid-In Capital** | ** ** | **Accumulated Deficit** | ** ** | **Treasury Stock** | ** ** |
| Balances,  December 31, 2006              |       | 51,791,339            |       | $          | 51,829     |                     | $          | 126,252,871                  |       | $ | (89,525,887 | ) | $ | (9,418 | ) |
| Net  income                                    |       | —                |       | —     |       | —                   |       | 1,077,534                    |       | — |   |
| Stock  compensation expense                    |       | —                |       | —     |       | 4,047,326                |       | —                       |       | — |   |
| Common  stock issued for stock option exercise |       | 513,790               |       | 514        |       | 982,490                  |       | —                       |       | — |   |
| Balances,  December 31, 2007              |       | 52,305,129            |       | $          | 52,343     |                     | $          | 131,282,687                  |       | $ | (88,448,353 | ) | $ | (9,418 | ) |
| Net  loss                                      |       | —                |       | —     |       | —                   |       | (26,509,356                  | )          | — |   |
| Common  stock issuance                         |       | 3,295,920             |       | 3,296      |       | 12,806,899               |       | —                       |       | — |   |
| Common  stock issued for services              |       | 115,250               |       | 115        |       | 92,085                   |       | —                       |       | — |   |
| Restricted  common stock issued for services   |       | 70,000                |       | 70         |       | (70                      | )          | —                       |       | — |   |
| Stock  compensation expense                    |       | —                |       | —     |       | 2,154,281                |       | —                       |       | — |   |
| Common  stock issued for stock option exercise |       | 169,250               |       | 170        |       | 182,871                  |       | —                       |       | — |   |
| Balances,  December 31, 2008              |       | 55,955,549            |       | $          | 55,994     |                     | $          | 146,518,753                  |       | $ | (114,957,709 | ) | $ | (9,418 | ) |
| Net  loss                                      |       | —                |       | —     |       | —                   |       | (10,065,862                  | )          | — |   |
| Restricted  common stock issued for services   |       | 826,243               |       | 826        |       | (826                     | )          | —                       |       | — |   |
| Stock  compensation expense                    |       | —                |       | —     |       | 1,257,909                |       | —                       |       | — |   |
| Common  stock issuance                         |       | —                |       | —     |       | 61,368                   |       | —                       |       | — |   |
| Balances,  December 31, 2009              |       | 56,781,792            |       | 56,820     |       | 147,837,204              |       | (125,023,571                 | )          | (9,418 | ) |

 

The accompanying notes to financial statements are an integral part ofthese consolidated statements.

 

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**URANIUM RESOURCES, INC.**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

 
| ** **                                                            | ** ** | **Year Ended December 31,** | ** **  |
|-----------------------------------------------------------------------|------------|--------------------------------------------|-------------|
| ** **                                                            | ** ** | **2009**                                   | ** **  | **2008** | ** ** | **2007** | ** ** |
| Cash  flows from operations:                                          |       |                                       |        |   |   |   |   |
| Net  income (loss)                                                    |       | $                                          | (10,065,862 | ) | $ | (26,509,356 | ) | $ | 1,077,534 |   |
| Reconciliation  of net income (loss) to cash used in operations— |       |                                       |        |   |   |   |   |
|                                                                  |       |                                       |        |   |   |   |   |
| Accretion/amortization  of restoration reserve                        |       | 257,791                                    |        | 790,204 |   | 573,581 |   |
| Depreciation  and depletion                                           |       | 1,232,143                                  |        | 7,355,280 |   | 6,349,278 |   |
| Writedown  of uranium properties and exploration expenses             |       | 3,517,970                                  |        | 15,992,623 |   | 998,628 |   |
| Decrease  in restoration and reclamation accrual                      |       | (1,802,370                                 | )           | (840,416 | ) | (1,296,047 | ) |
| Stock  compensation expense                                           |       | 1,257,909                                  |        | 2,154,281 |   | 4,047,326 |   |
| Write-off  of target acquisition costs                                |       | —                                     |        | 1,422,410 |   | — |   |
| Other  non-cash items, net                                            |       | 34,584                                     |        | 78,521 |   | 1,097 |   |
| Effect  of changes in operating working capital items—           |       |                                       |        |   |   |   |   |
| (Increase)  decrease in receivables                                   |       | (23,530                                    | )           | 2,612,214 |   | (1,939,045 | ) |
| (Increase)  decrease in inventories                                   |       | 1,010,845                                  |        | (508,342 | ) | 682,635 |   |
| (Increase)  decrease in prepaid and other current assets              |       | 388,089                                    |        | (43,585 | ) | (349,276 | ) |
| Increase  (decrease) in payables and accrued liabilities              |       | (840,545                                   | )           | (1,462,326 | ) | 1,148,075 |   |
| Net  cash provided by (used in) operations                            |       | (5,032,976                                 | )           | 1,041,508 |   | 11,293,786 |   |
| Investing  activities:                                                |       |                                       |        |   |   |   |   |
| Increase  in certificate of deposit, restricted                       |       | (149,285                                   | )           | (553,639 | ) | (3,615,585 | ) |
|                                                                  |       |                                       |        |   |   |   |   |
| Additions  to property, plant and equipment—                     |       |                                       |        |   |   |   |   |
| Kingsville  Dome                                                      |       | (158,911                                   | )           | (3,577,994 | ) | (8,042,794 | ) |
| Rosita                                                                |       | (40,274                                    | )           | (4,471,110 | ) | (4,994,532 | ) |
| Vasquez                                                               |       | (193,528                                   | )           | (354,600 | ) | (1,254,561 | ) |
| Rosita  South                                                         |       | (19,926                                    | )           | (477,912 | ) | (1,392,918 | ) |
| Churchrock                                                            |       | (218,966                                   | )           | (421,484 | ) | (503,826 | ) |
| Crownpoint                                                            |       | (2,991                                     | )           | (127,479 | ) | (164,300 | ) |
| Other  property                                                       |       | (36,340                                    | )           | (1,060,110 | ) | (2,951,622 | ) |
| Other  assets/notes receivable                                        |       | —                                     |        | 28,773 |   | 11,706 |   |
| Net  cash used in investing activities                                |       | (820,221                                   | )           | (11,015,555 | ) | (22,908,432 | ) |
| Financing  activities:                                                |       |                                       |        |   |   |   |   |
| Payments  of borrowings                                               |       | (157,695                                   | )           | (261,867 | ) | (260,859 | ) |
| Issuance  of common stock, net                                        |       | 61,368                                     |        | 12,993,236 |   | 983,004 |   |
| Net  cash (used in) provided by financing activities                  |       | (96,327                                    | )           | 12,731,369 |   | 722,145 |   |
| Net  increase (decrease) in cash and cash equivalents                 |       | (5,949,524                                 | )           | 2,757,322 |   | (10,892,501 | ) |
| Cash  and cash equivalents, beginning of year                         |       | 12,041,592                                 |        | 9,284,270 |   | 20,176,771 |   |
| Cash  and cash equivalents, end of year                               |       | $                                          | 6,092,068   |   | $ | 12,041,592 |   | $ | 9,284,270 |   |

 

The accompanying notes to financial statements are an integral part ofthese consolidated statements.

 

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**URANIUM RESOURCES, INC.**

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**DECEMBER 31, 2009 AND 2008**

 

**1.DESCRIPTION OF THE COMPANY**

 

UraniumResources, Inc. (“URI”) was formed in 1977 and domesticated in Delaware in1987. The Company is primarily engaged in the business of acquiring, exploring,developing and mining uranium properties, using the *in situ* recovery (“ISR”) or solution mining process.Historically, the primary customers of the Company have been major utilitieswho utilize nuclear power to generate electricity. At present the Company ownsboth developed and undeveloped uranium properties in South Texas andundeveloped uranium properties in New Mexico.

 

TheCompany resumed uranium production in 2004 at its Vasquez project, in 2006 atits Kingsville Dome project and in the 3rd quarterof 2008 at its Rosita project, each of such projects are located in SouthTexas. As a result of declining uranium market prices and high productioncosts, the Company ceased development of additional wellfields and curtailedproduction from its South Texas projects as existing production wellfields fromeach project were depleted. Production at our Vasquez and Rosita projects wereshut down in the 4th quarter of 2008 and production wasshut-in at the Kingsville Dome project in June 2009. The Vasquez projectwas mined out in 2008 and is now being restored. At the Kingsville Dome andRosita projects, our production shut-in was done to conserve the in-placereserve base until higher prices can be realized.

 

Priorto resuming Vasquez production, the Company had been in production stand-bysince the first quarter of 1999 at its Kingsville Dome and Rosita projects.Groundwater restoration and reclamation activities have been conducted at thesetwo sites and are currently ongoing at each of the Kingsville Dome, Vasquez andRosita projects.

 

**2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Principlesof Consolidation**

 

Theconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States of America andinclude the accounts of URI and its wholly owned subsidiaries (collectively “theCompany”). All significant intercompany transactions have been eliminated inconsolidation.

 

**Inventories**

 

Uraniumand materials and supplies inventory for each of the Company’s projects arevalued at the lower of average cost or market.

 

**UraniumProperties**

 

Allacquisition and development costs (including financing, salary and relatedoverhead costs) incurred in connection with the various uranium properties arecapitalized. Exploration and evaluation costs associated with uraniumproperties are expensed as incurred until such time that the existence of acommercially minable uranium deposit is confirmed. All properties with significantacquisition or incurred costs are evaluated for their realizability on aproperty-by-property basis. Any impairment of such costs is recognized througha reduction in the net carrying value of the asset. (See Note 4—“UraniumProperties”) Depreciation and Depletion. Depletion of uranium mineralinterests, permits, licenses and related development costs are computed on aproperty-by-property basis using the units-of-production method based on eachproject’s pounds of recoverable uranium. The determination of the depletablebase for each uranium mineral interest is calculated by the Company’sprofessional geologists to determine the estimated recoverable uranium to beproduced over the projected life for each uranium mineral interest.Depreciation and depletion are provided on the investment costs, net of salvagevalue, of the various uranium properties’ production plants and relatedequipment using the estimated production life of the uranium reserves. Duringthe periods that our facilities are not in production, depletion on our mineralinterests, permits, licenses and development properties are suspended.Depreciation and depletion of our plant facilities, machinery and equipmentcontinues, at significantly reduced amounts, in accordance with the level ofstand-by activity being conducted at each site.

 

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Other ancillary plantequipment and vehicles are depreciated using a straight line method based uponthe estimated useful lives of the assets.

 

**OtherProperty, Plant and Equipment**

 

Otherproperty, plant and equipment consists of corporate office equipment, furnitureand fixtures and transportation equipment. Depreciation on other property iscomputed based upon the estimated useful lives of the assets. Repairs andmaintenance costs are expensed as incurred. Gain or loss on disposal of suchassets is recorded as other income or expense as such assets are disposed.

 

**Capitalizationof Interest**

 

TheCompany capitalizes interest cost with respect to properties undergoingexploration or development activities that are not subject to depreciation ordepletion. The average interest rate on outstanding borrowings during theperiod is used in calculating the amount of interest to be capitalized. Nointerest was capitalized in the twelve months ended December 31, 2009,2008 and 2007. Total interest costs in these periods were $40,600, $43,500 and$24,900, respectively.

 

**Restorationand Remediation Costs (Asset Retirement Obligations)**

 

Variousfederal and state mining laws and regulations require the Company to reclaimthe surface areas and restore underground water quality for its mine projectsto the pre-existing mine area average quality after the completion ofmining.  In accordance with generallyaccepted accounting principles, the Company records the estimated present valueof reclamation liabilities and increases the carrying amount of the relatedasset.  Reclamation costs are allocatedto expense over the life of the related assets and are periodically adjusted toreflect changes in the estimated present value resulting from the passage oftime and revisions to the estimates of either the timing or amount of the reclamationand remediation costs.

 

Futurereclamation and remediation costs are accrued based on management’s bestestimate at the end of each period of the costs expected to be incurred at eachproject. Such estimates are determined by the Company’s engineering studiescalculating the cost of future of surface and groundwater activities.

 

Duringthe years ended December 31, 2009, 2008 and 2007 the Company increased itscash flow estimate for restoration and reclamation costs by $80,000, $3,933,000and $967,900, respectively.

 

**ContingentLiabilities—Off Balance Sheet Arrangements**

 

TheCompany has obtained financial surety relating to certain of its futurerestoration and reclamation obligations as required by the State of Texasregulatory agencies. The Company has bank Letters of Credit (the “L/C’s) andperformance bonds issued for the benefit of the Company to satisfy suchregulatory requirements. The L/C’s were issued by Bank of America and theperformance bonds have been issued by United States Fidelity and GuarantyCompany (“USF&G”). L/C’s for $5,761,000, $5,629,000 and $5,360,000 at December 31,2009, 2008 and 2007, respectively such L/C’s are collateralized in theirentirety by certificates of deposit.

 

Performancebonds totaling $2,835,000 were issued for the benefit of the Company at December 31,2009, 2008 and 2007. USF&G has required that the Company deposit fundscollateralizing a portion of the bonds. The amount of bonding issued byUSF&G exceeded the amount of collateral by $2.5 million at December 31,2009, 2008 and 2007, respectively. In the event that USF&G is required toperform under its bonds or the bonds are called by the state agencies, theCompany would be obligated to pay any expenditure in excess of the collateral.

 

**RevenueRecognition for Uranium Sales**

 

TheCompany delivers uranium to its customers at third-party conversion facilities.The third-party converters warehouse our uranium and transfer title to ourcustomers via book transfer upon instructions supplied by the Company. TheCompany recognizes revenue from the sale of uranium when title to the uraniumtransfers and delivery is completed through such book transfer. The Companybears the risk of loss while its uranium is held at the converter prior to itssale to our customers, except in the case of negligence by the converter,whereby the converter would bear such risk. Upon completion of the booktransfer, which is a record keeping entry, not a physical transfer of goods tothe customer, the risk of loss passes to our customer.

 

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**EarningsPer Share**

 

Netearnings (loss) per common share—basic has been calculated based on theweighted average shares outstanding during the year and net earnings (loss) percommon share—diluted has been calculated assuming the exercise or conversion ofall dilutive securities. Due to net losses incurred for 2009 there were nodilutive securities included in this year.

 

Theweighted average number of shares used to calculate basic and diluted earnings(loss) per share was 56,400,466 in 2009, 54,568,550 in 2008 and 52,118,851 and56,081,302 respectively in 2007. The difference in the number of weightedaverage shares used to calculate basic and diluted earnings per share in 2007resulted from potential common stock issuances of shares related to the Company’sstock option and deferred compensation plans. The potential Common Stock thatwas excluded from the calculation of diluted earnings per share was 6,216,989in 2009 and 5,961,583 in 2008.

 

**ConsolidatedStatements of Cash Flows**

 

TheCompany considers all highly liquid investments with a maturity of three monthsor less when purchased to be cash equivalents.

 

Additionaldisclosures of cash flow information follow:

 
| ** **                                                                                                                                                    | ** ** | **Year Ended December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                                                    | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
| Cash  paid during the period for:                                                                                                                             |       |                                       |       |   |   |   |   |
|                                                                                                                                                          |       |                                       |       |   |   |   |   |
| Interest                                                                                                                                                      |       | $                                          | 40,600     |   | $ | 43,600 |   | $ | 24,900 |   |
|                                                                                                                                                          |       |                                       |       |   |   |   |   |
| The  following non-cash transactions occurred in 2009, 2008 and 2007 and such  transactions are summarized as follows:                                        |       |                                       |       |   |   |   |   |
|                                                                                                                                                          |       |                                       |       |   |   |   |   |
| The  Company issued 426,423 restricted shares of Common Stock to five Executive  Officers of the Company in connection with a cash conservation plan for 2009 |       | $                                          | 324,000    |   | $ | — |   | $ | — |   |
|                                                                                                                                                          |       |                                       |       |   |   |   |   |
| The  Company issued 115,250 shares of Common Stock in 2008 in satisfaction of the  conversion of deferred compensation                                        |       | $                                          | —     |   | $ | 92,200 |   | $ | — |   |

 

During2008 and 2007, the Company entered into capital leases and financings toacquire certain property plant and equipment totaling $301,000 and $233,000. Nonew capital leases or financings were entered into in 2009.  The balance of the capital leases at December 31,2009 was $320,000.

 

**CashBalances in Excess of Federally Insured Limits**

 

TheCompany’s cash balance at December 31, 2009 was $6.1 million and itmaintains its cash accounts primarily with Bank of America, N.A. The total cashbalances are insured by the Federal Deposit Insurance Corporation up to$250,000 per account. The Company has cash balances with Bank of America, N.A.that exceeded the balance insured by the FDIC that totaled approximately$5.6 million at December 31, 2009.

 

**RestrictedCash**

 

At December 31,2009 and 2008, the Company had pledged certificates of deposit and money marketaccounts of $ 6,786,000 and $6,637,000, respectively, in order to collateralizeletters of credit required for future restoration and reclamation obligationsrelated to the Company’s South Texas production and development properties.These funds are not readily available to the Company and are not included incash equivalents.

 

**Use ofEstimates**

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make certain estimates andassumptions. Such estimates and assumptions may affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from thoseestimates. Specifically regarding the Company’s uranium properties,

 

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significant estimateswere utilized in determining the carrying value of these assets and in the caseof producing and development properties the pounds of uranium to be recovered.The actual values received from the disposition of these assets and the amountof uranium recovered from these projects may vary significantly from theseestimates based upon market conditions, financing availability and otherfactors.

 

Regardingthe Company’s reserve for future restoration and reclamation costs, significantestimates were utilized in determining the future costs and timing to completethe groundwater restoration and surface reclamation at the Company’s minesites. The actual cost to conduct these activities may vary significantly fromthese estimates.

 

**Risksand Uncertainties**

 

Historically,the market for uranium has experienced significant price fluctuations. Pricesare significantly impacted by global supply and demand, which is affected bythe demand for nuclear power, political, and economic conditions, governmentallegislation in uranium producing and consuming countries, and production levelsand costs of production of other producing companies. Increases or decreases inprices received could have a significant impact on the Company’s future resultsof operations.

 

**Reclassifications**

 

Certainreclassifications have been made to the prior years’ financial statements toconform to the current year presentation. These reclassifications had no effecton previously reported results of operations or retained earnings.

 

**Impact ofRecent Accounting Pronouncements**

 

***The Accounting Standards Codification.***   In June 2009, theFinancial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards No. 168,*The FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles — a replacement of FASB Statement No. 162* (the “Codification” or “ASC”).  The Codification reorganized existing U.S.accounting and reporting standards issued by the FASB and other related privatesector standard setters into a single source of authoritative accountingprinciples arranged by topic.  The Codification supersedes all existingU.S. accounting standards; all other accounting literature not included in theCodification (other than Securities and Exchange Commission guidance forpublicly-traded companies) is considered non-authoritative.  TheCodification was effective on a prospective basis for interim and annualreporting periods ending after September 15, 2009.  The adoption ofthe Codification changed the Company’s references to U.S. GAAP accountingstandards but did not impact the Company’s results of operations, financialposition or liquidity.

 

***Business Combinations.***  In December 2007, theFASB issued revised guidance for the accounting for businesscombinations.  The revised guidance, which is now part of ASC 805,*  Business Combinations*  ,requires the fair value measurement of assets acquired, liabilities assumed andany noncontrolling interest in the acquiree, at the acquisition date with limitedexceptions.  Previously, a cost allocation approach was used to allocatethe cost of the acquisition based on the estimated fair value of the individualassets acquired and liabilities assumed.  The cost allocation approachtreated acquisition-related costs and restructuring costs that the acquirerexpected to incur as a liability on the acquisition date, as part of the costof the acquisition.  Under the revised guidance, those costs arerecognized in the consolidated statement of income separately from the businesscombination.  In addition, the revised guidance includes recognition,classification and measurement guidance for assets and liabilities related toinsurance and reinsurance contracts acquired in a business combination. The revised guidance applies to business combinations for acquisitionsoccurring on or after January 1, 2009.  The Company adopted thisstandard on January 1, 2009 which did not have an impact on its financialposition, results of operations or cash flows as there have been noacquisitions that have been consummated after January 1, 2009.

 

***Noncontrolling Interests in ConsolidatedFinancial Statements.***   In December 2007, the FASB issued new guidance forthe accounting for noncontrolling interests.  The new guidance, which isnow a part of ASC 810,*  Consolidation*, establishes accounting and reporting standards for noncontrolling interestsin a subsidiary and for the deconsolidation of a subsidiary.  In addition,it clarifies that a noncontrolling interest in a subsidiary is an ownershipinterest in the consolidated entity that should be reported as a component ofequity in the consolidated financial statements.

 

Theprovisions of the new guidance were effective on a prospective basis beginning January 1,2009, except for the presentation and disclosure requirements which are appliedon a retrospective basis for all periods presented.  The adoption of thenew guidance on January 1, 2009 did not have a material effect on theCompany’s results of operations, financial position or cash flows as theCompany owns 100% of its subsidiaries.

 

***Derivative Instruments and HedgingActivities.***  In March 2008, the FASB issued new guidance on the disclosure ofderivative instruments and hedging activities.  The new guidance, which isnow a part of ASC 815,*Derivatives andHedging Activities,* requires

 

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qualitative disclosuresabout objectives and strategies for using derivatives, quantitative disclosuresabout fair value amounts of, and gains and losses on, derivative instruments,and disclosures about credit-risk-related contingent features in derivativeagreements.  The provisions of the new guidance were effective forfinancial statements issued for fiscal years beginning after November 15,2008.  The adoption of the new guidance on January 1, 2009 did notresult in a change in the Company’s disclosure since there were no derivativeinstruments or hedging activities after January 1, 2009.

 

***Determining Whether an Instrument (orEmbedded Feature) is Indexed to an Entity’s Own Stock.****  *In June 2008, the FASB issued newguidance on a financial instrument that is indexed to an entities ownstock.  The new guidance, which is now a part of ASC 815, *Determining Whether an Instrument (or EmbeddedFeature) is Indexed to an Entity’s Own Stock* is effective forfinancial statements issued for fiscal years beginning after December 15,2008, and interim periods within those fiscal years.  Earlyapplication is not permitted.  The guidance specifies that a contract thatwould otherwise meet the definition of a derivative but is both (a) indexedto the Company’s own stock and (b) classified in stockholders’ equity inthe statement of financial position would not be considered a derivativefinancial instrument. ASC 815 provides a new two-step model to be applied indetermining whether a financial instrument or an embedded feature is indexed toan issuer’s own stock and thus able to qualify for the scopeexception.  The application of this guidance at January 1, 2009did not have a significant impact on the Company’s financial statements.

 

***Fair Value Measurements.***   In February 2008, theFASB issued new guidance for the accounting for non-financial assets andnon-financial liabilities.  The new guidance, which is now a part of ASC820, *Fair Value Measurements and Disclosures* , permitted a one-year deferral of the application of fair value accounting forall non-financial assets and non-financial liabilities, except those that arerecognized or disclosed at fair value in the financial statements on arecurring basis (at least annually).  Beginning January 1, 2009, weapplied ASC 820 to nonrecurring, nonfinancial assets and liabilities. Thisadoption did not have a material impact on our consolidated condensed statementof operations or financial condition.  Our asset retirement obligation isclassified as a Level 3 liability within the valuation hierarchy. Thesignificant unobservable inputs to this fair value measurement includeestimates of plugging, abandonment and restoration costs, inflation rate andthe expected remaining life of wellfields. The inputs are calculated based onhistorical data as well as current estimated costs.  See Note 11 — OtherLong-term Liabilities and Deferred Credits Obligation for additionalinformation regarding our asset retirement obligation as of December 31,2009.

 

***Subsequent Events.   ***In May 2009, the FASB issued newguidance for accounting for subsequent events.  The new guidance, which isnow part of ASC 855,*  Subsequent Events*, is consistent with existing auditing standards in defining subsequent eventsas events or transactions that occur after the balance sheet date but beforethe financial statements are issued or are available to be issued, but it alsorequires the disclosure of the date through which an entity has evaluatedsubsequent events and the basis for that date.  The new guidance definestwo types of subsequent events: “recognized subsequent events” and “non-recognizedsubsequent events.”  Recognized subsequent events provide additionalevidence about conditions that existed at the balance sheet date and must bereflected in the company’s financial statements.  Non-recognized subsequentevents provide evidence about conditions that arose after the balance sheetdate and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent thefinancial statements from being misleading.  The new guidance waseffective on a prospective basis for interim or annual periods ending after June 15,2009.  We adopted ASC 855 on June 30, 2009 and have included therequired disclosures in this Form 10-K.

 

**3.LIQUIDITY**

 

TheCompany used cash flows from operations of $5.0 million for the year ended December 312009 and generated cash from operations for the year ended December 31,2008 and 2007 of $1.0 million and $11.3 million, respectively.

 

As of December 31,2009, the Company had $6.1 million in cash. Our uranium production inSouth Texas ceased in 2009 and as a result we had a limited amount of cashavailable from uranium sales in 2009 and a nominal amount 2010. During 2010, wewill be continuing to conduct groundwater restoration and reclamationactivities at each of the Kingsville Dome and Vasquez projects, continuegroundwater stability requirements at our Rosita project, maintain thosemineral rights we consider key to our future plans in South Texas and NewMexico and continue to evaluate those non-core assets held by the Company forpotential disposition. We project that with the cash on hand at December 31,2009 we will be able to maintain our liquidity through 2010.

 

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**4. Property, Plant and Equipment**

 
| ** **                           | ** ** | **Property, Plant and  Equipment Balances (net)  At December 31,** | ** ** |
|--------------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **2009**                                                                | ** ** | **2008** | ** ** |
| Uranium  plant                       |       | $                                                                       | 10,249,000 |   | $ | 10,385,000 |   |
| Permits  and licenses                |       | 2,529,000                                                               |       | 2,313,000 |   |
| Mineral  rights                      |       | 1,598,000                                                               |       | 2,098,000 |   |
| Evaluation  and delineation          |       | 2,460,000                                                               |       | 2,463,000 |   |
| Vehicles/depreciable  equipment      |       | 2,113,000                                                               |       | 2,519,000 |   |
| Asset  retirement obligations        |       | —                                                                  |       | 1,732,000 |   |
| Other  uranium properties            |       | 580,000                                                                 |       | 819,000 |   |
| Other  property, plant and equipment |       | 315,000                                                                 |       | 449,000 |   |
| Total                                |       | $                                                                       | 19,844,000 |   | $ | 22,778,000 |   |

 

***Uranium Properties***

 

**Impairmentof Uranium Properties**

 

TheCompany reviews and evaluates its long-lived assets for impairment when eventsor changes in circumstances indicate that the related carrying amounts may notbe recoverable. An impairment is considered to exist if the total estimatedfuture cash flows on an undiscounted basis are less than the carrying amount ofthe assets. An impairment loss is measured and recorded based on discountedestimated future cash flows. Future cash flows are estimated based onquantities of recoverable minerals, expected uranium prices, production levelsand operating costs of production and capital, based upon the projectedremaining future uranium production from each project. The Company’s estimatesof future cash flows are based on numerous assumptions and it is possible thatactual future cash flows will be significantly different than the estimates, asactual future quantities of recoverable minerals, uranium prices, productionlevels and operating costs of production and capital are each subject tosignificant risks and uncertainties.

 

At December 31,2009, we determined the carrying value of our project assets at each of ourSouth Texas production locations exceeded their fair value. A decline in thecurrent and projected market price of uranium and an increase in the estimatedproduction costs for each of our South Texas projects resulted in a decrease inthe estimated future cash flow to be generated from each site. Suchdetermination resulted in an impairment provision of approximately$3.5 million for the year. The impairment provision for 2009 wasapproximately $2.6 million for the Kingsville Dome project, $214,000 forthe Rosita project, $263,000 for the Vasquez project and $567,000 for otherSouth Texas projects. The impairment provision recorded in 2008 wasapproximately $16.0 million and included approximately $6.0 millionfor the Kingsville Dome project, $8.1 million for the Rosita project and$1.8 million for the Vasquez project.

 

**KingsvilleDome Property**

 

TheKingsville Dome property consists of mineral leases from private landowners onabout 2,424 gross and 2,227 net acres located in central Kleberg County, Texas.The leases provide for royalties based upon a percentage of uranium sales of6.25% to 9.375%. The leases have expiration dates ranging from 2000 to 2007,however we hold most of these leases by production; and with a few minorexceptions, all the leases contain clauses that permit us to extend the leasesnot held by production by payment of an annual per acre royalty ranging from$10 to $30. We have paid such royalties on all material acreage.

 

Thenet carrying value of the property was approximately $5,583,000 at December 31,2009. Such assets consisted of plant buildings/uranium processing/dryingfacilities ($4,393,000), and restoration and other equipment ($1,190,000).Thenet carrying value of the property was approximately $7,934,000 at December 31,2008. Such assets consisted of plant buildings/uranium processing/dryingfacilities ($5,124,000), asset retirement obligations ($1,445,000) andrestoration and other equipment ($1,365,000).

 

**VasquezProperty**

 

TheCompany has a mineral lease on 872 gross and net acres located in southwesternDuval County, in South Texas. The primary term expired in February 2008;however we hold the lease by production. The lease provides for royalties basedupon 6.25% of uranium sales below $25.00 per pound and royalty rate increaseson a sliding scale up to 10.25% for uranium sales occurring at or above $40.00per pound.

 

Thenet carrying value of the property was approximately $590,000 at December 31,2009. Such assets consisted of plant buildings/uranium processing/dryingfacilities ($305,000) and restoration and other equipment ($435,000). The netcarrying value of

 

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the property wasapproximately $1,024,000 at December 31, 2008. Such assets consisted ofplant buildings/uranium processing/drying facilities ($305,000), restorationand other equipment ($551,000) and asset retirement obligations ($168,000).

 

**RositaProperty**

 

TheRosita property consists of mineral leases from private landowners on about3,377 gross and net acres located in north-central Duval County, Texas.  The leases provide for sliding scaleroyalties based on a percentage of uranium sales. Royalty percentages onaverage increase from 6.25% up to 18.25% when uranium prices reach $80.00 perpound. The leases have expiration dates ranging from 2012 to 2015. We areholding these leases by payment of rentals ranging from $10 to $30 per acre.

 

Thenet carrying value of the Rosita property at December 31, 2009 wasapproximately $5,186,000. Such assets consisted of plant buildings/uraniumprocessing/drying facilities ($4,802,000) and restoration and other equipmentof ($384,000). The net carrying value of the Rosita property at December 31,2008 was approximately $5,562,000. Such assets consisted of plantbuildings/uranium processing/drying facilities ($4,957,000), restoration andother equipment of ($487,000) and asset retirement obligations ($118,000).

 

**SouthRosita**

 

TheRosita South property consists of mineral leases from private land owners onabout 2,130 gross acres and 1,984 net acres located in Duval County near itsRosita property. Evaluation of the uranium mineralization of this propertybegan in 2006 and continued in 2007.

 

Thenet carrying value of the property at December 31, 2009 was approximately$2,665,000. Such assets consisted of mineral rights ($469,000), evaluationcosts ($2,022,000) and permits/licenses ($174,000). The net carrying value ofthe property at December 31, 2008 was approximately $2,645,000. Suchassets consisted of mineral rights ($445,000), evaluation costs ($2,026,000)and permits/licenses ($174,000).

 

**ChurchrockProperties**

 

TheChurchrock project encompasses about 2,200 gross and net acres. The propertiesare located in McKinley County, New Mexico and consist of three parcels, knownas Section 8, Section 17 and Mancos. None of these parcels lieswithin the area generally recognized as constituting the Navajo Reservation. Weown the mineral estate in fee for both Section 17 and the Mancosproperties. We own patented mining claims on Section 8.

 

Thesurface estate on Section 17 is owned by the United States Government andheld in trust for the Navajo Nation. We have royalty obligations ranging from5% to 61/4% and a 2% overriding royalty obligation to the NavajoNation for surface use agreements.

 

Permittingactivities are currently ongoing on both of these properties. The net carryingvalue of these properties was $1,955,000 and $1,736,000 at December 31,2009 and 2008, respectively and the assets consisted of mineral rights andpermitting/licensing costs.

 

**CrownpointProperty**

 

TheCrownpoint properties are located in the San Juan Basin, 22 miles northeast ofour Churchrock deposits and 35 miles northeast of Gallup, New Mexico, adjacentto the town of Crownpoint. The Properties consist of 619 gross and 522 netacres.

 

Thenet carrying value of these properties was $906,000 and $902,000 at December 31,2009 and 2008, respectively, and consisted primarily of mineral rights,permits/licenses and plant buildings and equipment.

 

**WestLargo and Roca Honda**

 

In March 1997,we acquired the fee interest in 177,000 acres in northwestern New Mexico.Several significant occurrences of uranium mineralization are know to be withinthis acreage, including a uranium mineralized property called the West Largoand a uranium mineralized property called the Roca Honda.

 

TheWest Largo property is about 21 miles north of the town of Milan and about 1.5miles west of State Highway 509 in McKinley County, New Mexico. The propertylies about 3 miles to the northwest of the Ambrosia Lake District, a majorproducer of uranium by means of underground operations from the late 1950s tothe early 1980s.

 

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TheRoca Honda property lies about 4 miles northwest of the town of San Mateo inMcKinley County, New Mexico. We also own 36 unpatented mining claimsencompassing approximately 640 acres that are adjacent to the fee land. The netcarrying value of the properties was $381,000 and $364,000 at December 31,2009 and 2008, respectively.

 

**5.CONTRACT COMMITMENTS**

 

**SalesContracts**

 

In March 2006we entered into new sales contracts with Itochu Corporation (“Itochu”) and UGU.S.A., Inc. (“UG”) that superseded the previously existing contracts.Each contract provides for delivery of one-half of our actual production fromour properties in Texas currently owned or hereafter acquired by theCompany (excluding certain large potential exploration plays).  The Itochucontract contains separate pricing terms for the Vasquez property that are nolonger applicable since Vasquez has reached the end of its useful life. Our Texas production will be sold to Itochu at a price equal to the averagespot price for the eight weeks prior to the date of delivery less $7.50 perpound, with a floor for the spot price of $37 per pound and a ceiling of $43per pound. If the spot price is over $50 per pound the price will be increasedby 50% of such excess. The floor and ceiling and sharing arrangement over theceiling applies to 3.65 million pounds of deliveries, after which there isno floor or ceiling. Itochu has the right to cancel any deliveries on six-month’snotice.  Uranium deliveries from the inception of the contracts through December 31,2009 have totaled approximately 510,000 pounds to Itochu and 480,000 pounds toUG.

 

Underthe amended Itochu contract there was potential for reinstatement of theoriginal contract terms if our joint venture with Itochu to develop ourChurchrock property in New Mexico was terminated by us. On March 6, 2009,Itochu terminated the Joint Venture.  The only consequence of thetermination is that for sales prices in excess of $43 per pound, we will notreceive 30% of the amount of the spot price that exceeds the ceiling price forfuture uranium sales from $43 per pound to $50 per pound.

 

Underthe UG contract all production from our Texas properties will be sold at aprice equal to the month-end long-term contract price for the second monthprior to the month of delivery less $6 per pound until (i) 600,000 poundshave been sold in a particular delivery year and (ii) an aggregate of3 million pounds of uranium has been sold. After the 600,000 pounds in anyyear and 3 million pounds total have been sold, UG will have a right offirst refusal to purchase other Texas production at a price equal to theaverage spot price for a period prior to the date of delivery less 4%.  In2006, we paid UG $12 million in cash to restructure its previouslyexisting contract.

 

**6.LONG-TERM DEBT**

 

**Summaryof Long-Term Debt**

 
| ** **                                  | ** ** | **At December 31,** | ** ** |
|---------------------------------------------|------------|--------------------------|------------|
| ** **                                  | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| Long-term  debt of the Company consists of: |       |                     |       |   |   |
| Crownpoint  property                        |       | $                        | 450,000    |   | $ | 450,000 |   |
| Capital  leases                             |       | 320,481                  |       | 478,176 |   |
|                                        |       |                     |       |   |   |
|                                        |       | 770,481                  |       | 928,176 |   |
| Less—Current  portion                  |       | (112,559                 | )          | (158,068 | ) |
|                                        |       |                     |       |   |   |
| Total  long-term debt                       |       | $                        | 657,922    |   | $ | 770,108 |   |

 

Maturitiesof long-term debt and capital leases are as follows:

 
| **For the Twelve Months Ended:**            | ** ** | **Long-Term Debt** | ** ** | **Capital Leases** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| December  31, 2010                          |       | $                       | —     |                    | $          | 141,947 |   |
| December 31,  2011                     |       | —                  |       | 100,678                 |       |
| December 31,  2012                     |       | —                  |       | 75,738                  |       |
| December 31,  2013                     |       | —                  |       | 32,526                  |       |
| December 31,  2014 and beyond          |       | 450,000                 |       | 16,611                  |       |
| Totals                                      |       | $                       | 450,000    |                    | $          | 367,500 |   |
| Less  amounts representing imputed interest |       |                    |       | (47,019                 | )          |
| Present  value of future payments           |       |                    |       | $                       | 320,481    |   |

 

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**7.RELATED-PARTY TRANSACTIONS**

 

On January 2,April 1, July 1, and October 1, 2009, 142,680, 164,016, 69,092and 50,455 shares of restricted stock were granted, respectively to executiveofficers of the Company in connection with a cash conservation plan for2009.  All of these shares were scheduled to vest one year from the dateof grant. On September 3, 2009 the vesting schedule with respect to theformer CEO’s 115,628 restricted shares was modified to provide for immediatevesting.  Restricted stock grants arevalued using the fair market value of the stock on the date of grant.

 

In August 2008,the Company issued a total of 50,000 shares of Common Stock at $0.80 per shareto an executive officer of the Company upon his election to exercise stockoptions under the terms of the Company’s stock option plans.

 

In July 2008,the Company issued a total of 115,250 shares of Common Stock at $0.80 per shareto a non-employee director of the Company upon his election to convert deferredcompensation into shares under the terms of the deferred compensation plans.Also in July 2008, the Company issued a total of 119,250 shares of CommonStock (at prices ranging from $0.16 per share to $1.80 per share, the weightedaverage exercise price was $1.20 per share) to the same non-employee directorof the Company upon his election to exercise stock options under the terms ofthe Company’s Directors’ stock option plans.

 

On November 1,2007, the Company’s Compensation Committee authorized compensation to Leland O.Erdahl, a director of the Company, for his role as financial advisor to theChief Executive Officer, consisting of (i) an option to Mr. Erdahl topurchase 12,000 shares (the “Option”) under the 2004 Directors Stock OptionPlan and (ii) a stipend of $10,000 per month effective May 1, 2007(the “Stipend”). It was determined that the grant of this stock option createdthe circumstance that Mr. Erdahl no longer met the qualifications of anindependent director under NASDAQ rules. Mr. Erdahl, the CompensationCommittee of the Board of Directors and the Board of Directors agreed torescind the stock option grant. On December 20, 2007, the CompensationCommittee of the Board of Directors and the Board of Directors acted andrescinded the stock option grant made to Mr. Erdahl on November 1,2007 and also terminated the Stipend effective immediately for periods after December 20,2007. No shares of common stock were issued in connection with the stock optiongrant. The Compensation Committee and the Board of Directors also adopted aresolution that no stock option grants would be made to Mr. Erdahl untilthe next compensation year of the Company, that is, the twelve months ending December 31,2008 resulting in Mr. Erdahl maintaining his qualification as anindependent director.

 

In April 2007,the Company issued a total of 69,187 shares of Common Stock (at prices rangingfrom $0.16 per share to $1.80 per share, the weighted average exercise pricewas $1.11 per share) to a non-employee director of the Company upon hiselection to exercise stock options under the terms of the Company’s Directors’stock option plans.

 

InApril/May 2007, the Company issued a total of 287,499 shares of CommonStock (225,000 shares at $0.80 per share and 62,499 shares at $2.80 per share)to executive officers of the Company upon their election to exercise stockoptions under the terms of the Company’s stock option plans.

 

**8.****                                    ****SHAREHOLDERS’ EQUITY**

 

**RestrictedStock Plan**

 

In2007, the Board of Directors adopted and the shareholders approved the 2007Restricted Stock Plan (the “2007 Plan”). The 2007 Plan permits the Company tomake Restricted Stock grants of shares of Common Stock to management personneland other key employees of the Company. Unless otherwise specified by theCommittee, the term of the restricted period for any Restricted Stock grantunder the 2007 Plan shall not be less than five years from the date of grant.Employee participants who receive Restricted Stock grants will have all of therights of a stockholder, including the right to vote the shares of RestrictedStock that are the subject of the grant and the right to receive any regularcash dividends paid out of current earnings. The Company may issue an aggregatemaximum of 1,500,000 shares of Common Stock under the 2007 Plan.

 

Atotal of 70,000 shares of restricted stock were granted in the first quarter of2008.  Total restricted share grants of 60,000 shares were made to threenon-executive employees on March 6, 2008. 30,000 of these shares vestedratably over five years and 30,000 shares vest ratably over four years. Another 10,000 restricted share grant was made to an executive of the Companyon March 24, 2008, these shares vest ratably over 5 years.  In November 2008,the terms of the restricted stock grants were modified to permit theacceleration of their vesting upon certain conditions.  In the firstquarter of 2009, the vesting for 60,000 of the Restricted Shares was

 

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accelerated to be fullyvested.  Restricted stock grants are valued using the fair market value ofthe stock on the later of the date of grant or modification. The Companyrecognized a reduction of stock compensation expense for the restricted sharegrants of approximately $36,000 during the first quarter of 2009 as a result ofthe vesting modification.

 

Atotal of 142,680 shares of restricted stock were granted to five executiveofficers on January 2, 2009 at a price of $0.615 per share in connectionwith a cash conservation plan for 2009.  The issuance price is determinedby the average closing price of the last ten trading days of the previousquarter.  The shares were to vest one year from date of grant. On September 3,2009 the vesting schedule with respect to 43,902 of these restricted shares wasmodified to provide for immediate vesting.

 

On April 1,2009 a total of 164,016 shares of restricted stock were granted to fiveexecutive officers at a price of $0.535 per share in connection with the cashconservation plan for 2009.  The issuance price is determined by theaverage closing price of the last ten trading days of the previousquarter.  The shares were to vest one year from the date of grant. On September 3,2009 the vesting schedule with respect to 50,467 of these restricted shares wasmodified to provide for immediate vesting.

 

On July 1,2009 a total of 69,092 shares of restricted stock were granted to fiveexecutive officers at a price of $1.27 per share in connection with the cashconservation plan for 2009.  The issuance price is determined by theaverage closing price of the last ten trading days of the previous quarter. Theshares were to vest one year from the date of grant. On September 3, 2009the vesting schedule with respect to 21,259 of these restricted shares wasmodified to provide for immediate vesting.

 

On October 1,2009 a total of 50,455 shares of restricted stock were granted to fourexecutive officers at a price of $1.20 per share in connection with the cashconservation plan for 2009.  The issuance price is determined by theaverage closing price of the last ten trading days of the previous quarter andthese shares vest one year from their date of grant.

 

On September 3,2009, the Company granted a total of 400,000 restricted shares of the Company’scommon stock in connection with the hire of Donald C. Ewigleben as itsPresident/CEO/COO.  100,000 of theseshares vest on March 3, 2010; the remaining 300,000 shares vest 1/3 oneach of September 2010, 2011 and 2012.  The vesting of the remaining300,000 restricted shares is also subject to certain annual performanceobjectives as specified in Mr. Ewigleben’s employment agreement. Restricted stock grants are valued using the fair market value of the stock onthe date of grant.

 

Asummary of the status of non-vested shares for the years ended December 31,2009 and 2008, is presented below:

 
| ** **                          | ** ** | **Number of  Shares** | ** ** | **Weighted Average  Grant Date Fair Value** | ** ** |
|-------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|
| Nonvested at January 1, 2008   |       | —                |       | $                                           | —     |   |
| Granted                             |       | 70,000                |       | $                                           | 8.21       |   |
| Vested                              |       | —                |       | $                                           | —     |   |
| Nonvested at December 31, 2008 |       | 70,000                |       | $                                           | 8.21       |   |
| Granted                             |       | 826,243               |       | $                                           | 0.79       |   |
| Vested                              |       | (177,628              | )          | $                                           | 3.31       |   |
| Nonvested at December 31, 2009 |       | 718,615               |       | $                                           | 0.87       |   |

 

Theunrecognized compensation of $376,000 related to the nonvested shares will berecognized over a remaining service period of 1.3 years.

 

***Equity Infusion — Private Placement***

 

In May 2008,the Company completed the sale of 3,295,920 shares of common stock toaccredited investors at a price of $4.34 per share and warrants to purchase988,771 additional shares of common stock, at a price of $5.78 per share. Thesewarrants expire 60 months after issuance and are exercisable immediately.In addition, ratchet warrants to purchase shares of common stock at $0.01 pershare were issued as part of the private placement. The ratchet warrantsexpired unexercised on May 13, 2009.

 

Thesale raised proceeds of approximately $12.8 million net of expenses of theoffering. The Company filed a registration statement under the Securities Actof 1933, as amended, to register the resale of the shares. Such shares aresubject to certain resale registration rights that include penalties (1% permonth) in the event the registration statement failed to become effective in atimely manner or if the registration statement fails to remain effective. On July 18,2008, such registration statement was declared effective and as a result theCompany met its initial obligation with regard to this registrationrequirement. The placement agent in connection with the offering received acash fee equal to 5.5% of the gross proceeds.

 

**CommonStock Issued Upon Conversion of Options and Deferred Compensation**

 

In August 2008,the Company issued a total of 50,000 shares of Common Stock at $0.80 per shareto an executive officer of the Company upon his election to exercise stockoptions under the terms of the Company’s stock option plans.

 

In July 2008,the Company issued a total of 115,250 shares of Common Stock at $0.80 per shareto a director of the Company upon his election to convert deferred compensationinto shares under the terms of the deferred compensation plans. Also in July 2008,the Company issued a total of 119,250 shares of Common Stock (at prices rangingfrom $0.16 per share to $1.80 per share, the weighted average exercise pricewas $1.20 per share) to a non-employee director of the Company upon hiselection to exercise stock options under the terms of the Company’s Directors’stock option plans.

 

In2007, the Company raised $983,000 of equity through the issuance of 513,790shares of Common Stock of the Company upon the exercise of outstanding stockoptions.

 

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**Stock Options**

 

*EmployeeStock Options*

 

TheCompany has two stock Incentive Plans for Employees, both of which wereapproved by the Company’s shareholders.

 

At December 31,2009 there were outstanding under the 1995 Stock Incentive Plan (the “1995 Plan”)options to purchase 2,156,447 shares of Common Stock with exercise pricesranging from $0.76 to $3.12 per share. No new options may be granted under the1995 Plan.

 

Underthe Company’s 2004 Stock Incentive Plan (the “2004 Plan”) a total of 1,750,000shares may be issued upon exercise of options granted under the 2004 Plan. At December 31,2009 there were outstanding under the 2004 Plan options to purchase 1,518,314shares of Common Stock at exercise prices ranging from $2.96 to $5.19 pershare. At December 31, 2009, 97,145 shares were available for futuregrants under the 2004 Plan.

 

Employeestock options generally vest ratably over a 3 or 4 year time frame andhave a contractual term of 10 years.

 

*DirectorsStock Options*

 

On June 19,2001, the Company granted to certain outside directors options to purchase75,000 shares of the Company’s Common Stock at an exercise price of $0.88 pershare. 25,000 options were exercised in both July 2008 and April 2007,and 25,000 were cancelled in 2006. None of such options remains outstanding at December 31,2009.

 

On June 2,2004 the Company adopted the 2004 Directors’ Stock Option Plan (the “2004Directors’ Plan”). Under the 2004 Directors’ Plan, each non-employee directoron the date the Plan was adopted was granted an option to purchase 75,000shares of Common Stock. Each non-employee Director elected or appointed to theBoard of Directors for the first time will be granted an option to purchase25,000 shares of Common Stock and, each Non-Employee Director shall be grantedan option to purchase 25,000 shares either, (a) upon his or her reelectionat an annual meeting of the Company’s stockholders or (b) in any calendaryear in which an annual meeting of shareholders is not held, on June 1 ofsuch year.

 

In June 2006,the Directors’ Stock Option Plan was amended to increase the initial grants andthe annual re-election grants to non-employee Directors to 50,000 shares ofCommon Stock. The 2004 Directors’ Plan replaces an earlier plan that expired in2004. At December 31, 2009, there were outstanding options for theexercise of 63 shares under the old plan.

 

At theJune 2009 annual meeting of the stockholders, each of the non-employeedirectors of the Company (Leland O. Erdahl, Terence J. Cryan and Marvin K.Kaiser) was granted an option under the 2004 Directors’ Plan to purchase 50,000shares of the Company’s common stock at an exercise price of $1.49 pershare.  The non-employee directors held options covering 731,250 sharesunder the 2004 Directors’ Plan at December 31, 2009. At December 31,2009, 381,250 shares were available for future grants under the 2004 Directors’Plan.

 

At theJune 2008 annual meeting of the shareholders, each of the non-employeedirectors of the Company (Leland O. Erdahl, George R. Ireland, Terence J. Cryanand Marvin K. Kaiser) was granted an option under the 2004 Directors Plan topurchase 50,000 shares of the Company’s common stock at an exercise price of$4.10 per share.

 

At theJuly 2007 annual meeting of the shareholders, each of the non-employeedirectors of the Company (Leland O. Erdahl, George R. Ireland and Terence J.Cryan) was granted an option under the 2004 Directors Plan to purchase 50,000shares of the Company’s common stock at an exercise price of $11.32 per share.Also in July 2007 an option to purchase 50,000 shares of the Company’sCommon Stock was granted to Marvin K. Kaiser, a new non-employee director ofthe Company at an exercise price of $11.32.

 

In April 2007,an option to purchase 100,000 shares of the Company’s Common Stock was grantedto Terence J. Cryan, a non-employee director of the Company at an exerciseprice of $9.25 per share. Such grant was subject to shareholder approval of anamendment to the 2004 Directors’ Plan which was received at the July 2007annual shareholders meeting.

 

**OptionsIssuable for Deferred Compensation**

 

TheCompany has a 1999 Deferred Compensation Plan (the “1999 Plan”) and DeferredCompensation Plans for 2000-2001, 2002, 2003 and 2004 (the “2000-2004 Plans”)whereby executive officers and directors were permitted to defer up to 100% oftheir compensation for the years 1999-2004.

 

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Underthe 1999 Deferred Compensation Plan (the “1999 Plan”), executive officers anddirectors of the Company and its subsidiaries were permitted to defer until January 11,2006 up to 100% of their 1999 salary. At the time of the deferral election, aparticipant could elect to receive payment of up to 100% of the deferred amountof salary in shares of our Common Stock. A total of approximately $242,000 wasdeferred under the 1999 Plan of which $133,450 was paid by issuing 88,965shares of Common Stock at $1.50 per share. As of December 31, 2009,approximately $108,200 remains outstanding as deferred compensation under the1999 Plan.

 

Underthe 2000-2004 Plans, the executive officers and directors were permitted todefer up to 100% of their 2000, 2001, 2002, 2003 and 2004 salary with paymentthereof to be made on January 11, 2006. On or before that date, theparticipant may elect to receive the deferred amount in shares of our CommonStock valued at $0.80 per share. A total of $829,000 was deferred under the 2000-2004Plans of which $95,300 was paid in 2004 by issuing 119,125 shares of CommonStock at $0.80 per share. As of December 31, 2009, approximately $588,800remains outstanding as deferred compensation under the 2000-2004 Plans.

 

In December 2005,the 1999 Plan and the 2000-2004 Plans were amended, extending the election ofthe participants under the plans to receive their deferred compensation until January 11,2011. All of the participants with accrued deferred compensation at December 2005elected to defer their election to such date.

 

**9.STOCK-BASED COMPENSATION PLANS**

 

Ourstock based compensation programs consist of stock options granted to employeesand directors and restricted stock grants made to employees.

 

Stock CompensationExpense

 

Stockcompensation expense for the year ended December 31, 2009, 2008 and 2007of $1,258,000, $2,154,000 and $4,047,000, respectively, was recorded to generaland administrative expenses. The Company has not recognized a tax benefit fromthe stock compensation expense because the Company considers it is more likelythan not that the related deferred tax assets, which have been reduced by afull valuation allowance, will not be realized.

 

TheBlack-Scholes option-pricing model was used to estimate the option fair values.The option-pricing model requires a number of assumptions, of which the mostsignificant are, expected stock price volatility, the expected pre-vestingforfeiture rate and the expected option term (the amount of time from the grantdate until the options are exercised or expire). Expected volatility wascalculated based upon actual historical stock price movements through themeasurement date of the stock option grant. Expected pre-vesting forfeitureswere estimated based on actual historical pre-vesting forfeitures over the mostrecent periods ending December 31, 2009 for the expected option term. Theexpected option term was estimated based on historical averages over the mostrecent periods ending December 31, 2009.

 

In September 2009,the Company hired Donald C. Ewigleben as the Company’s President, CEO andCOO.  In connection with the hire, the Company granted Mr. Ewiglebena total of 400,000 restricted shares of the Company’s common stock. 100,000 of these shares vest on March 3, 2010; the remaining 300,000shares vest 1/3 on each of September 3, 2010, 2011 and 2012.  Thevesting of the remaining 300,000 restricted shares is also subject to certainannual performance objectives as specified in Mr. Ewigleben’s employmentagreement.  Restricted stock grants are valued using the fair market valueof the stock on the date of grant.

 

On September 3,2009, in connection with the resignation of David N. Clark as President andCEO, the Company and Mr. Clark entered into an agreement which extended toSeptember 3, 2011 the termination date for the stock options previouslygranted to Mr. Clark and the immediate vesting of 12,500 previouslygranted stock options scheduled to vest in June 2010.  The Companyrecognized $260,000 of stock compensation expense in the third quarter of 2009in connection with the modification of these stock options.

 

At theJune 2009 annual meeting of the stockholders, each of the fournon-employee directors of the Company was granted an option under the 2004Directors’ Plan to purchase 50,000 shares of the Company’s common stock at anexercise price of $1.49 per share.  The non-employee directors heldoptions covering 731,250 shares under the 2004 Directors’ Plan at December 31,2009. At December 31, 2009, 381,250 shares were available for futuregrants under the 2004 Directors’ Plan.

 

At theJune 2008 annual meeting of the stockholders, each of the threenon-employee directors of the Company was granted an option under the 2004Directors’ Plan to purchase 50,000 shares of the Company’s common stock at anexercise price of $4.10 per share.

 

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At theJuly 2007 annual meeting of the stockholders, each of the fournon-employee directors of the Company was granted an option under the 2004Directors’ Plan to purchase 50,000 shares of the Company’s common stock at anexercise price of $11.32 per share.  In April 2007 one non-employeedirector of the Company was granted an option under the 2004 Directors’ Plan topurchase 100,000 shares of the Company’s common stock at an exercise price of$9.25 per share.

 

Atotal of 142,680, 164,016, 69,092 and 50,455 shares of restricted stock weregranted in the first, second, third and fourth quarters of 2009, respectivelyto five executive officers on January 2, April 1 and July 1,2009 and four executive officers on October 1, 2009 in connection with acash conservation plan for 2009.  All of these shares were scheduled tovest one year from the date of grant. On September 3, 2009 the vestingschedule with respect to the former CEO’s 115,628 restricted shares wasmodified to provide for immediate vesting.  The Company has recognized$110,000 of compensation cost for modification of the vesting schedule forthese restricted shares.  Restricted stock grants are valued using thefair market value of the stock on the date of grant.

 

Atotal of 70,000 shares of restricted stock were granted in the first quarter of2008.  The vesting with respect to 60,000 of  these restricted shareswas modified in the first quarter of 2009 to provide for immediate vesting. Theremaining 10,000 restricted shares vest ratably over 5 years.

 

TheCompany recognized stock compensation expense for its restricted share grantsof approximately $339,000 for the year ended December 31, 2009.  TheCompany recognized stock compensation cost for the restricted share grants ofapproximately $100,000 for the year ended December 31, 2008.  Thetotal estimated unrecognized compensation cost from the unvested restrictedgrants at December 31, 2009 was approximately $376,000, which is expectedto be recognized over the weighted average vesting period of the individualgrants which range from 1-3 years.

 

***Stock Options as of December 31, 2009***

 

TheCompany has four stock option plans as summarized under Footnote 8 “ShareholdersEquity-Stock Options.” The following table summarizes stock options outstandingand changes during the year ended December 31, 2009:

 
| ** **                                     | ** ** | **Outstanding Options** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **Number of  Shares**   | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted Average  Remaining  Contractual  Term  (in years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| Options  outstanding at January 1, 2009   |       | 4,278,574                    |       | $ | 2.81 |   |   |   |   |   |
| Granted                                        |       | 150,000                      |       | $ | 1.49 |   |   |   |   |   |
| Exercised                                      |       | —                       |       | $ | — |   |   |   |   |   |
| Canceled  or forfeited                         |       | (22,500                      | )          | $ | 5.19 |   |   |   |   |   |
| Options  outstanding at December 31, 2009 |       | 4,406,074                    |       | $ | 2.75 |   | 5.56 |   | $ | 99,870 |   |
| Options  exercisable at December 31, 2009 |       | 4,037,324                    |       | $ | 2.59 |   | 5.29 |   | $ | 420 |   |

 

Thetotal intrinsic value of options exercised during the years ended December 31,2009, 2008 and 2007 was $0, $153 and $5,429,000, respectively.

 

Sharesavailable for grant under the Plans as of December 31, 2009 were 478,395.

 

Stockoptions outstanding and currently exercisable at December 31, 2009 are asfollows:

 
| ** **                      | ** ** | **Options Outstanding**             | ** ** | **Options Exercisable**                                                 | ** ** |
|---------------------------------|------------|------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| **Stock Option Plan** | ** ** | **Number of  Options  Outstanding** | ** ** | **Weighted Average  Remaining  Contractual Life  (in years)** | ** ** | **Weighted Average  Exercise price** | ** ** | **Number of  Options  Exercisable** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| 1995  Stock Incentive Plan      |       | 2,156,447                                |       | 4.39                                                                         |       | $ | 1.38 |   | 2,156,447 |   | $ | 1.38 |   |
| 2004  Employee Incentive Plan   |       | 1,518,314                                |       | 6.18                                                                         |       | 3.35 |   | 1,518,314 |   | 3.35 |   |
| Directors  Stock Option Plan    |       | 63                                       |       | 3.50                                                                         |       | 0.16 |   | 63 |   | 0.16 |   |
| 2004  Directors Plan            |       | 731,250                                  |       | 7.76                                                                         |       | 5.57 |   | 362,500 |   | 6.64 |   |
|                            |       | 4,406,074                                |       | 5.56                                                                         |       | $ | 2.75 |   | 4,037,324 |   | $ | 2.59 |   |

 

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Totalestimated unrecognized compensation cost from unvested stock options as of December 31,2009 was approximately $1.1 million, which is expected to be recognizedover a weighted average period of approximately 2 to 3 years.

 

Thefair value of each option is estimated on the date of grant using theBlack-Scholes option-pricing model.

 

Usingthe Black-Scholes option pricing model, the weighted average assumptions forgrants in 2009: fair market value: $1.44, expected volatility of 143% andrisk-free interest rate of 4.5%. An expected life of 8.01 years was usedfor the options granted. The weighted average fair value of the options grantedin 2009 was $1.44.

 

Usingthe Black-Scholes option pricing model, the weighted average assumptions forgrants in 2008: fair market value: $4.10, expected volatility of 143% andrisk-free interest rate of 4.25%. An expected life of 9.42 years was usedfor the options granted. The weighted average fair value of the options grantedin 2008 was $4.10.

 

Usingthe Black-Scholes option pricing model, the weighted average assumptions forgrants in 2007: fair market value: $11.32 and $9.25, expected volatility of148% and risk-free interest rate of 4.625%. An expected life of 9.62 yearswas used for the options granted. The weighted average fair value of theoptions granted in 2007 was $10.63.

 

Theexercise price for the options granted under the plans is the fair market valueof the Common Stock on the date granted. The terms of the options aredetermined by the Board of Directors upon grant; however, no options may beexercised after a period of ten years. The weighted average fair value ofoptions granted in 2009, 2008 and 2007 was $1.44, $4.10 and $10.63,respectively.

 

**10.FEDERAL INCOME TAXES**

 

Thedeferred federal income tax asset (liability) consists of the following:

 
| ** **                                                 | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                 | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Property  development costs—net of amortization       |       | $                     | 13,018,000 |   | $ | 13,688,000 |   | $ | 8,407,000 |   |
| Accelerated  depreciation                                  |       | (193,000              | )          | (195,000 | ) | (90,000 | ) |
| Restoration  reserves                                      |       | (1,093,000            | )          | (480,000 | ) | (194,000 | ) |
| Net  operating loss and percentage depletion carryforwards |       | 29,621,000            |       | 26,235,000 |   | 21,661,000 |   |
| Valuation  allowance and other—net                    |       | (41,353,000           | )          | (39,248,000 | ) | (29,784,000 | ) |
| Total  deferred income tax asset (liability)               |       | $                     | —     |   | $ | — |   | $ | — |   |

 

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Majoritems causing the Company’s tax provision to differ from the federal statutoryrate of 34% were:

 
| ** **                                      | ** ** | **For  the Twelve Months Ended December 31,** | ** **  |
|-------------------------------------------------|------------|----------------------------------------------------|-------------|
| ** **                                      | ** ** | **2009**                                           | ** **  | **2008** | ** ** | **2007** | ** ** |
| ** **                                      | ** ** | **Amount**                                         | ** **  | **%  of Pretax  Income** | ** ** | **Amount** | ** ** | **%  of Pretax  Income** | ** ** | **Amount** | ** ** | **%  of Pretax  Income** | ** ** |
| Pretax  income (loss)                           |       | $                                                  | (10,065,862 | ) | — |   | $ | (26,509,356 | ) | — |   | $ | 1,077,534 |   | — |   |
| Pretax  income (loss) times statutory tax rate  |       | (3,422,000                                         | )           | 34 | % | (9,013,000 | ) | 34 | % | 366,000 |   | (34 | )% |
| Increases  (decreases) in taxes resulting from: |       |                                               |        |   |   |   |   |   |   |   |   |   |   |
| Change  in valuation allowance                  |       | 2,105,000                                          |        | (34 | )% | (9,013,000 | ) | (34 | )% | (366,000 | ) | 34 | % |
| Correction  to deferred tax                     |       | 1,317,000                                          |        | — |   | — |   | — |   | — |   | — |   |
| Income  tax benefit                             |       | $                                                  | 0           |   | 0 | % | $ | 0 |   | 0 | % | $ | 0 |   | 0 | % |

 

TheCompany also has available for regular federal income tax purposes at December 31,2009 estimated net operating loss (“NOL”) carryforwards of approximately$87,120,000, before limitations which expire primarily in 2010 through 2030, ifnot previously utilized. Following the issuance of the Company’s Common Stockin 2001, use of the Company’s NOL will be severely limited on an annual andaggregate basis. For this reason, the NOL is not included as a deferred taxasset in the table above.

 

**11.OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS**

 

Otherlong-term liabilities and deferred credits on the balance sheet consisted of:

 
| ** **                                                                                                                                                                  | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                  | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Reserve  for future restoration and reclamation costs (Asset Retirement Obligations),  net of current portion of $1,237,000 and $1,660,000 in 2009 and 2008.  (Note 2) |       | $                     | 4,290,361  |   | $ | 5,334,350 |   |
| Royalties  payable                                                                                                                                                          |       | 500,000               |       | 500,000 |   |
| Deferred  compensation                                                                                                                                                      |       | 697,028               |       | 697,028 |   |
|                                                                                                                                                                        |       | $                     | 5,487,389  |   | $ | 6,531,378 |   |

 

Thefollowing table shows the change in the balance of the restoration andreclamation liability (Asset Retirement Obligation) during the years ended December 31,2009 and 2008:

 
| ** **                                                                 | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                 | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Reserve  for future restoration and reclamation costs at January 1,   |       | $                     | 6,994,772  |   | $ | 3,932,603 |   |
| Additions                                                                  |       |                  |       |   |   |
| Changes  in cash flow estimates                                            |       | 79,604                |       | 3,932,828 |   |
| Costs  incurred                                                            |       | (1,802,369            | )          | (1,039,164 | ) |
| Accretion  expense                                                         |       | 254,942               |       | 168,505 |   |
| Reserve  for future restoration and reclamation costs at December 31, |       | $                     | 5,526,949  |   | $ | 6,994,772 |   |

 

**12.EARNINGS (LOSS) PER SHARE**

 

Basicearnings per share includes no dilution and is computed by dividing income orloss attributed to common stockholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflects thepotential dilution that could occur if security interests were exercised orconverted into common stock.

 

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Thefollowing table sets forth the computation of basic and diluted earnings (loss)per share for the years ended December 31, 2009, 2008 and 2007.

 
| ** **                                | ** ** | **2009**                                    | ** **  | **2008**                       | ** ** | **2007**              | ** ** |
|-------------------------------------------|------------|---------------------------------------------|-------------|--------------------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **Net  Loss  Attributed  to Common  Stock** | ** **  | **Weighted-  Average  Shares** | ** ** | **Per-  Share  Loss** | ** ** | **Net  Loss  Attributed  to Common  Stock** | ** ** | **Weighted-  Average  Shares** | ** ** | **Per-  Share  Loss** | ** ** | **Net  Income  Attributed  to Common  Stock** | ** ** | **Weighted-  Average  Shares** | ** ** | **Per-  Share  Income** | ** ** |
| Basic  income (loss) per share            |       | $                                           | (10,065,862 | )                              | 56,400,466 |                  | $          | (0.18 | ) | $ | (26,509,356 | ) | 54,568,550 |   | $ | (0.49 | ) | $ | 1,077,534 |   | 52,118,851 |   | $ | 0.02 |   |
| Effect  of dilutive securities:           |       |                                        |        |                           |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock  options/ warrants                  |       | —                                      |        | —                         |       | —                |       | — |   | — |   | — |   | — |   | 3,962,451 |   | — |   |
| Diluted  income (loss) earnings per share |       | $                                           | (10,065,862 | )                              | 56,400,466 |                  | $          | (0.18 | ) | $ | (26,509,356 | ) | 54,568,550 |   | $ | (0.49 | ) | $ | 1,077,534 |   | 56,081,302 |   | 0.02 |   |
|                                           |            |                                             |             |                                |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**13.COMMITMENTS AND CONTINGENCIES**

 

TheCompany’s mining operations are subject to federal and state regulations forthe protection of the environment, including water quality. These laws areconstantly changing and generally becoming more restrictive. The ongoing costsof complying with such regulations have not been significant to the Company’sannual operating costs. Future mine closure and reclamation costs are providedfor as each pound of uranium is produced on a unit-of-production basis. TheCompany reviews its reclamation obligations each year and determines theappropriate unit charge. The Company also evaluates the status of currentenvironmental laws and their potential impact on their accrual for costs. TheCompany believes its operations are in compliance with current environmentalregulations.

 

Registration Statement

 

In May 2008,the Company completed the sale of 3,295,920 shares of common stock toaccredited investors at a price of $4.34 per share and warrants to purchase988,771 additional shares of common stock, at a price of $5.78. These warrantsexpire 60 months after issuance and are exercisable immediately.  The Company filed a registration statementunder the Securities Act of 1933, as amended, to register the resale of theshares of its common stock issued in the May 2008 private placement. Theregistration rights agreement executed in connection with the private placementand pursuant to which the shares were registered, provides for penalties in theevent the registration statement fails to remain effective. At December 31,2009, the Company’s registration statement was and remains effective.

 

Compensation Agreements

 

TheCompany has entered into Compensation Agreements with Executive Officers of theCompany, with the exception of the CEO/President/COO, that provide that, in theevent of a change in control, such officers will have certain rights andbenefits for a period of thirty-six months for the Executive Chairman of theCompany and twenty-four months for the other officers, following such change incontrol. The Compensation Agreements provide that the executive’s base salarypayments shall be made on a monthly basis for the duration of the term and anyincentive payments shall be paid annually until the obligation to make suchpayments expires.  In September, 2009 the Company entered into aCompensation Agreement with the CEO/President /COO of the Company that providesthat, in the event he terminates employment following a change in control hewould be entitled to two years salary and bonus plus medical and dentalbenefits for up to 12 months.  A change in control would also result inthe immediate vesting of all unvested restricted shares of stock granted tohim.

 

Kingsville DomeContingent Royalty

 

TheCompany accrued a royalty obligation from its production activities at theKingsville Dome Project in 2007 from leases which have a 6.25% royalty andcarry and additional 3.125% royalty payment to certain land owners of theproperty that have ratified lease agreements with the Company. At December 31,2007, none of these additional leases had been ratified and the contingentliability and related royalty expense recorded for the first nine months of2007 of approximately $453,000 was reversed.

 

Legal Contingencies

 

In June 2008,a suit for declaratory judgment titled, ***Saenz v. URI Inc.,*** was filed in the105th Judicial District Court, Kleberg County, Texas by the owners of themineral estate of property in Kleberg County, Texas leased to the Company,seeking a declaratory judgment that a certain lease is limited to one specificlot only and does not encompass other adjacent lands. The Company has a leaseon the adjacent lands from the same mineral owners and has produced over340,000 pounds of uranium from those lands in 2007 and 2008. The Companyentered a general denial of the claims. On September 24, 2008 the mineralowners amended their suit to include a

 

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declaration that both ofthe leases held by the Company are not valid. The Company has entered a generaldenial and other specific defenses to the amended complaint. The Company hasproduced uranium from both leases. On November 5, 2008, the Companyengaged in mediation with the plaintiffs but was unable to resolve the matter.The Plaintiffs filed a Motion for Summary Judgment alleging that the leasesterminated prior to any production occurring. The Court denied the motion. Atrial date was originally set for June 1, 2009 but is currentlyrescheduled for March 1, 2010.  This trial date has been rescheduledto August 12, 2010. The Company will defend the case vigorously. While theCompany believes that each of the leases is valid, counsel to the Company isunable to predict the outcome of the litigation. A determination of theinvalidity of the leases could have a material adverse effect on the Company’sfinancial condition.

 

Inconnection with the resignation of David N. Clark as President and CEO of theCompany on September 3, 2009, the Company and Mr. Clark entered intoan agreement which provided for his salary continuation through December 2,2009, continuation of employee benefits through March 31, 2010, extensionto September 3, 2011 of the termination date for the stock options grantedto Mr. Clark and immediate vesting of the restricted shares and stockoptions granted to Mr. Clark.  As part of the agreement, Mr. Clarkhas also agreed to provide consulting services to the Company, as requested bythe Company’s CEO for a six month period ending March 3, 2010.

 

**14.JOINT VENTURE FOR CHURCHROCK PROPERTY**

 

On December 5,2006, HRI-Churchrock, Inc., a wholly-owned subsidiary of the Company,entered into a Joint Venture with a wholly-owned subsidiary of Itochu todevelop jointly our Churchrock property in New Mexico.

 

Afeasibility study was completed and delivered at the end of 2006. Under theterms of the Joint Venture, both parties had until April 2, 2007 to decidewhether to terminate the Joint Venture. The parties extended that date until March 2,2009. On March 6, 2009 we received notification that Itochu had decided toterminate the Joint Venture which resulted in the termination of the JointVenture. Such action eliminates the potential for reinstatement of the originaldelivery contracts with Itochu for South Texas production. However, dependingon spot market prices, our sales price may be reduced by up to $2.10 per poundon some of our South Texas production for future deliveries under the contract.

 

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**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1*                |       | Restated Certificate of  Incorporation of the Company, dated February 15, 2004 (filed with the  Company’s Registration Statement on Form SB-2 dated July 26, 2004,  SEC File Number 333-117653).                                                      |
|                |       |                                                                                                                                                                                                                                                                           |
| 3.1.1*              |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company (filed with  the Company’s Form 8-K dated April 11, 2006, SEC File  Number 000-17171 and as corrected in the Company’s Form 8-K dated  December 7, 2007). |
|                |       |                                                                                                                                                                                                                                                                           |
| 3.2                 |       | Restated Bylaws of the  Company.                                                                                                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                           |
| 4.1*                |       | Common Stock Purchase  Agreement dated February 28, 2001 between the Company and Purchasers of  the Common Stock of the Company (filed with the Company’s Annual Report on  Form 10-KA dated July 26, 2001, SEC File Number 000-17171).               |
|                |       |                                                                                                                                                                                                                                                                           |
| 4.2*                |       | Form of Warrant to  Purchase Common Stock (filed with the Company’s Form 8-K on May 19,  2008).                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.1*               |       | Amended and Restated  Directors Stock Option Plan (filed with the Company’s Form S-8 Registration  No. 333-00349 on January 22, 1996).                                                                                                                     |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.2*               |       | Amended and Restated  Employee’s Stock Option Plan (filed with the Company’s Form S-8  Registration No. 333-00403 on January 24, 1996).                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.3*               |       | Amended and restated  1995 Stock Incentive Plan (filed with the Company’s Form SB-2  Registration No. 333-117653 on July 26, 2005).                                                                                                                        |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.4*               |       | Non-Qualified Stock  Option Agreement dated June 19, 2001 between the Company and  Leland O. Erdahl (filed with the Company’s 10-QSB dated August 13,  2001, SEC File Number 000-17171).                                                              |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.5*               |       | Non-Qualified Stock  Option Agreement dated June 19, 2001 between the Company and  George R. Ireland (filed with the Company’s 10-QSB dated August 13,  2001, SEC File Number 000-17171).                                                             |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.7*               |       | Summary of Supplemental  Health Care Plan (filed with Amendment No. 1 to the Company’s  Form S-1 Registration Statement (File No. 33-32754) as filed with  the Securities and Exchange Commission on February 20, 1990).                              |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.12*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Paul K. Willmott (filed  with the Company’s Annual Report on Form 10-K dated June 30, 1998,  SEC File Number 000-17171).                                                      |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.13*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Richard A. Van Horn  (filed with the Company’s Annual Report on Form 10-K dated June 30,  1998, SEC File Number 000-17171).                                              |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.14*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Thomas H. Ehrlich (filed  with the Company’s Annual Report on Form 10-K dated June 30, 1998,  SEC File Number 000-17171).                                                     |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.15*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Mark S. Pelizza (filed  with the Company’s Annual Report on Form 10-K dated June 30, 1998,  SEC File Number 000-17171).                                                       |
|                |       |                                                                                                                                                                                                                                                                           |
| 10.16*              |       | Uranium  Resources, Inc. 1999 Deferred Compensation Plan (filed with the  Company’s Annual Report on Form 10-K dated June 30, 1999, SEC File  Number 000-17171).                                                                                      |

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                             |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.16.1*            |       | Amendment No. 1 to  the Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with  the Company’s Annual Report on Form 10-KSB dated March 31, 2006,  SEC File Number 000-17171).                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.17*              |       | 2000-2001 Deferred  Compensation Plan (filed with the Company’s Annual Report on Form 10-K  dated December 31, 2004, SEC File Number 000-17171).                                                                                                                                        |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.17.1*            |       | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2000-2001  (filed with the Company’s Annual Report on Form 10-KSB dated  March 31, 2006, SEC File Number 000-17171).                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.22*              |       | Uranium  Resources, Inc. Deferred Compensation Plan for 2002 (filed with the  Company’s Quarterly Report on Form 10-QSB dated November 13, 2002,  SEC File Number 000-17171).                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.23*              |       | Uranium  Resources, Inc. Deferred Compensation Plan for 2003 (filed with the  Company’s Quarterly Report on Form 10-QSB dated November 13, 2002,  SEC File Number 000-17171).                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.24*              |       | Uranium  Resources, Inc. Deferred Compensation Plan for 2004 (filed with the  Company’s Quarterly Report on Form 10-QSB dated May 14, 2004, SEC  File Number 000-17171).                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.24.1*            |       | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2002,  Deferred Compensation Plan for 2003, and Deferred Compensation Plan for 2004  (filed with the Company’s Annual Report on Form 10-KSB dated  March 31, 2006, SEC File Number 000-17171). |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.27.1*            |       | Amendment No. 1  with UG U.S.A., Inc. dated August 30, 2004 to Exhibit 10.27  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                          |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.27.2*            |       | Amendment No. 2  with UG U.S.A., Inc. dated April 29, 2005 to Exhibit 10.27  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                           |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.28*              |       | Amended and Restated  Uranium Supply Contract with Itochu Corporation dated June 7, 2005  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                             |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.31*              |       | Note Purchase Agreement  dated March 24, 2005 and promissory notes issued thereunder (filed with  the Company’s Annual Report on Form 10-K for the year ended  December 31, 2004, SEC File Number 000-17171).                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.32*              |       | Uranium Supply Contract  with UG U.S.A., Inc. dated April 29, 2005 (filed with the Company’s  Pre-Effective Amendment No. 2 to Registration Statement on  Form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                                              |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.33*              |       | Uranium Supply Contract  with Itochu Corporation dated June 15, 2005 (filed with the Company’s  Pre-Effective Amendment No. 2 to Registration Statement on  Form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                                                 |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.34*              |       | Stock Purchase  Agreement by and between Uranium Resources, Inc. and accredited  investors (filed with the Company’s Form 8-K dated August 12, 2005,  SEC File No. 000-17171).                                                                                                     |
|                |       |                                                                                                                                                                                                                                                                                                        |
| 10.35*              |       | Uranium  Resources, Inc. 2004 Stock Incentive Plan (filed with the Company’s  Quarterly Report on Form 10-QSB/A dated November 18, 2005, SEC File  No. 000-17171).                                                                                                                 |

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                           |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                |
| 10.36*              |       | Feasibility Study  Funding Agreement between Itochu Corporation, Uranium Resources, Inc.  and Hydro Resources, Inc. effective March 29, 2006 (filed with the  Company’s Form 10-KSB dated March 31, 2006, SEC file  Number 000-17171). |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.37*              |       | Amended and Restated  Uranium Supply Contract between Itochu Corporation and Uranium  Resources, Inc. effective March 1, 2006 (filed with the Company’s  Form 10-KSB dated March 31, 2006, SEC file Number 000-17171).                      |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.38*              |       | Agreement for the Sale  of Uranium Concentrates between UG U.S.A., Inc. and Uranium  Resources, Inc. dated March 31, 2006 (filed with the Company’s  Form 10-KSB dated March 31, 2006, SEC file Number 000-17171).                     |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.39*              |       | Stock Purchase Agreement  dated as of April 19, 2006, by and between Uranium Resources, Inc.  and accredited investors (filed with the Company’s Current Report on  Form 8-K dated April 19, 2006, SEC File No. 000-17171).                 |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.40*              |       | Limited Liability  Company Agreement of Churchrock Venture LLC (filed with the Company’s  Current Report on Form 8-K dated December 5, 2006, SEC File  No. 000-17171).                                                                           |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.41*              |       | Compensation Agreement  dated March 12, 2007 between the Company and Craig S. Bartels  (filed with the Company’s Form 8-K dated March 13, 2007, SEC File  No. 000-17171).                                                                   |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.42*              |       | Compensation Agreement  dated March 12, 2007 between the Company and David N. Clark (filed  with the Company’s Form 8-K dated March 13, 2007, SEC File  No. 000-17171).                                                                     |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.43*              |       | Amended and Restated 2004  Directors’ Stock Option Plan dated April 10, 2007 (filed with the  Company’s Post-Effective Amendment No. 1 to Registration Statement on  Form S-3 dated April 11, 2007, SEC File No. 333-133960)           |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.44*              |       | Uranium  Resources, Inc. 2007 Restricted Stock Plan (filed with the Company’s  Form 10-Q dated May 10,2007, SEC File No. 000-17171)                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.45*              |       | Agreement dated  September 3, 2009 between the Company and David N. Clark (Filed with the  Company’s Form 8-K dated September 4, 2009, SEC File  No. 001-33404).                                                                                 |
|                |       |                                                                                                                                                                                                                                                                      |
| 10.46*              |       | Letter Agreement dated  September 3, 2009 between the Company and Donald C. Ewigleben (Filed  with the Company’s Form 8-K dated September 4, 2009, SEC File  No. 001-33404).                                                                     |
|                |       |                                                                                                                                                                                                                                                                      |
| 14*                 |       | Uranium  Resources, Inc. Amended Code of Ethics for Senior Executives. (filed  with the Company’s Form 10-KSB dated March 30, 2004, SEC File  No. 000-17171).                                                                                    |
|                |       |                                                                                                                                                                                                                                                                      |
| 21*                 |       | Subsidiaries of the  Registrant                                                                                                                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                      |
| 23.1                |       | Consent of Independent  Registered Public Accounting Firm                                                                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                      |
| 23.2                |       | Consent of Behre  Dolbear & Company (USA)                                                                                                                                                                                                                        |
|                |       |                                                                                                                                                                                                                                                                      |
| 31.1                |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                |
|                |       |                                                                                                                                                                                                                                                                      |
| 31.2                |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                |
|                |       |                                                                                                                                                                                                                                                                      |
| 32.1                |       | Certification of Chief  Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                |
|                |       |                                                                                                                                                                                                                                                                      |
| 32.2                |       | Certification of Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                |

 

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*                                         Not filed herewith. Incorporated byreference pursuant to Rule 12b-32 under the Securities Exchange Act of1934.

 

E-3

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