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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                    to


Commission file number 001-33404

URANIUM RESOURCES, INC.(Exact name of Registrant as specified in its charter)

DELAWARE(State of Incorporation)

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

75067(Zip code)


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

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

Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value per share
(Title of class)

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

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

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

Smaller reporting company o


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

The aggregate market value of the Common Stock held by non-affiliates of the Registrant at June 30, 2008, was approximately $125,880,730.
Number of shares of Common Stock, $0.001 par value, outstanding as of March 9, 2009: 56,098,229 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10,
11, 12, 13 and 14 of Part III of this Form 10-K report are incorporated by reference to the Registrant's Definitive Proxy Statement for the
Registrant's 2009 Annual Meeting of Stockholders.



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URANIUM RESOURCES, INC.        ANNUAL REPORT ON FORM 10-K        FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008        TABLE OF CONTENTS



PART I

1Item 1. Business

1The Company

1New Mexico Assets

1Texas Production History and Current Status

22008 Events

2Review of 2008 Production and 2009 Operational Plans

3Strategy

4Uranium Reserves/Mineralized Material

4Long-Term Delivery Contracts

5Joint Venture for Church Rock Property

6Overview of the Uranium Industry

6The ISR Mining Process

7Environmental Considerations and Permitting

8Reclamation and Restoration Costs and Bonding Requirements

9Water Rights

10Competition

10Item 1A. Risk Factors

11General Risks and Uncertainties

11Item 1B. Unresolved Staff Comments

16Item 2. Properties

17South Texas

17New Mexico Properties

23Insurance

33Reclaimed Properties

33Item 3. Legal Proceedings

33New Mexico Radioactive Material License

33New Mexico UIC Permit

34Bonding for Texas Groundwater Restoration Obligations

34Dispute over Kleberg County Settlement Agreement

34Kingsville Dome Production Disposal Well Permit Renewals and Area Authorization
3

35Navajo EPA Letter and UNC Demand for Indemnity

35Kingsville Dome Lessor Legal Action

36Other

36Item 4. Submission of Matters to a Vote of Security Holders

36GLOSSARY OF CERTAIN URANIUM INDUSTRY TERMS

37PART II

40Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

40Dividends

40Securities Authorized for Issuance Under Equity Compensation
Plans

40Performance Graph

41Recent Sales of Unregistered Securities

41Item 6. Selected Financial Data

42


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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation

43Forward Looking Statements

43Overview

43Financial Condition and Results of Operations

44LiquidityCash Sources and Uses for 2009

50Derivative Financial Instruments

51Contingent Liabilities

51Off Balance Sheet Arrangements

51Critical Accounting Policies

52Impact of Recent Accounting Pronouncements

52Item 7A. Quantitative and Qualitative Disclosures About Market
Risk

53Uranium Price Volatility

53Derivative Financial Instruments

54Item 8. Financial Statements and Supplementary
Data

54Financial Statements

54Supplemental Financial Data Tables

54Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

54Item 9A. Controls and Procedures

54Evaluation of Disclosure Controls and Procedures

54Management's Report on Internal Control Over Financial Reporting

55Report of Independent Registered Public Accounting Firm

56Item 9B. Other Information

57PART III

57Item 10. Directors, Executive Officers and Corporate
Governance

57Item 11. Executive Compensation

57Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters

57Item 13. Certain Relationship and Related Transactions and Director
Independence

57Item 14. Principal Accountant Fees and Services

57PART IV

57Item 15. Exhibits and Financial Statement
Schedules

57SIGNATURES

58Index to Consolidated Financial Statements

F-1Exhibit Index

E-1


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PART I

The "Company" or "Registrant" or "URI" is used in this report to refer to Uranium Resources, Inc. and
its consolidated subsidiaries. This 10-K contains "forward-looking statements." These statements include, without limitation, statements relating to management's expectations regarding the
Company's ability to remain solvent, capital requirements, mineralized materials, timing of receipt of mining permits, production capacity of mining operations planned for properties in South Texas
and New Mexico and planned dates for commencement of production at such properties, business strategies and other plans and objectives of the Company's management for future operations and activities
and other such matters. The words "believes," "plans," "intends," "strategy," "projects," "targets," or "anticipates" and similar expressions identify forward-looking statements. The Company does not
undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures
under the heading: "Risk Factors" beginning on page11.

Certain terms used in this Form 10-K and other industry terms are defined in the "Glossary of Certain Terms" appearing at the end of
Part I hereto.

Item 1.    Business.

The Company

Uranium Resources, Inc. (URI) is a uranium exploration, mine development and production company. We were organized in 1977 to
acquire and develop uranium mines in South Texas using the in-situ recovery mining process (ISR). Since its founding, URI has produced over 8 million pounds
U3O8 from five Texas projects, two of which have been fully restored and returned to the land owners. The Company currently has two fully licensed ISR processing facilities in
Texas: Kingsville Dome and Rosita. Since 1986, the Company has built a significant asset base in New Mexico that includes 101.4 million pounds U3O8 of
in-place mineralized uranium material on 183,000 acres of uranium mineral holdings. We have also been issued a Nuclear Regulatory Commission (NRC) license to build a 3 million pound
U3O8 per year ISR processing facility at Crownpoint, New Mexico.

New Mexico Assets

URI holds a NRC source materials license to build and operate an ISR uranium processing facility on company-owned property at
Crownpoint, New Mexico. The license allows for ISR mining at the Church Rock and Crownpoint projects that together hold nearly 34 million pounds U3O8 of
in-place mineralized uranium material. The license allows for the production of up to 1 million pounds per year from Church Rock until a successful commercial demonstration of
restoration is made; after which the quantity of production can be increased and mining on other properties can begin. Total production under the license is limited to 3 million pounds
U3O8 per year. This project is currently being delayed due to depressed uranium prices and by a lawsuit to determine whether the U.S. Environmental Protection Agency ("USEPA")
or the State of New Mexico has the jurisdiction to issue the Underground Injection Control (UIC) program permits. The Company believes production could begin within 18 -
24 months after obtaining this permit assuming uranium market improvements.

Overall
in New Mexico, the Company owns 183,000 acres of mineral holdings that contain approximately 101.4 million pounds U3O8 of in-place
mineralized uranium material that has been verified by an independent engineering firm. A substantial amount of our total acreage remains unexplored or currently has insufficient data to estimate
in-place mineralized materials. These properties were acquired during the 1980s and 1990s along with a vast database of exploration logs and drill results that were developed by Conoco,
Homestake Mining, Mobil Oil, Kerr-McGee, Phillips Petroleum, United Nuclear and Westinghouse Electric Corporation. Three of our properties were in various stages of being developed as
conventional underground mines in the early 1980s with a total designed capacity to produce approximately 4.5 million pounds U3O8 per year. We also possess a 16.5%

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royalty
interest on a partial section of the Mount Taylor Mine owned by Rio Grande Resources, a division of General Atomics.

Since
2007, we have digitized approximately 18,800 drill logs in order to secure the data and allow for easier analysis of drill hole information. These logs total nearly
23 million feet of hole drilled in the 1970s and 1980s with an estimated drilling and logging replacement cost of $700 million.

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

Texas Production History and Current Status

The Company developed and produced over 560,000 pounds U3O8 from the Longoria and Benavides projects in the
early 1980s. These properties were fully restored between 1986 and 1991. From 1988 through 1999, we produced approximately 6.1 million pounds U3O8 from two South Texas
projects: 3.5 million pounds from the Kingsville Dome project and 2.6 million pounds U3O8 from the Rosita project. In 1999, we shut-down production at
both projects due to depressed uranium prices. We had no revenue from uranium sales between 2000 and the fourth quarter of 2004, and therefore had to rely on equity infusions to fund operations and
maintain our critical employees and assets.

After
uranium prices rose significantly in 2004, we placed our South Texas Vasquez property 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 2008, these three projects produced a total of 1.4 million pounds of U3O8.

The
Vasquez project was mined out in 2008 and is now being restored. Rosita production was shut-in in October 2008 due to depressed pricing and technical challenges in the
first new wellfield that made it uneconomical. The decline in uranium prices throughout 2008 also led to a decision in October 2008 to defer new wellfield development at Rosita and Kingsville Dome.
Production continued in two existing wellfields at Kingsville Dome and is expected to be completed by the end of March 2009. By the end of March 2009, the Company does not expect to have any operating
mines in Texas.

The
Company believes it has sufficient in-place mineralized uranium material to produce a total of 300,000 to 500,000 pounds U3O8 over a one to two
year period should realized uranium prices recover to the level of $70 per pound U3O8, which is the current long-term uranium price. Production could
begin within 6 - 12 months after a decision to restart is made. Longer-term, additional production could come from new production area authorizations at
Kingsville Dome, however, this may take a considerable period of time given local opposition.

2008 Events

On May 12, 2008, oral arguments were heard in the United States Court of Appeals for the Tenth Circuit in the jurisdictional
dispute between the Company aligned with the State of New Mexico, and the USEPA over who has authority to issue the Underground Injection Control (UIC) program permits. This is the final permit needed
before mining can commence at the Church Rock Project. As of March 11, 2009, the court has not yet issued its ruling.

On
May 16, 2008, we closed a negotiated private placement with institutional investors for shares of our common stock and warrants. The sale raised $12.8 million, net of
costs and fees. The net proceeds of the offering were or will be used for the acquisition, permitting, exploration and development of additional properties in Texas as well as for general corporate
purposes.

In
June 2008, the Company and Billiton Investment 15 B.V. agreed to terminate an agreement dated October 12, 2007 under which URI agreed to purchase Rio Algom
Mining LLC. Changing capital and uranium market conditions prevented the Company from securing the $180 million that would have been required to finance the acquisition. URI incurred a
total of $1.42 million in costs

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associated
with the transaction and these costs were expensed in 2008 upon termination of the agreement.

By
October 2008, the Company had closed its Corpus Christi, TX and Albuquerque, NM offices, curtailed production and exploration activities in Texas, and completed its data evaluation
activities in New Mexico as part of a cost reduction effort.

In
November 2008, we announced that the Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department granted URI a permit to conduct exploratory
drilling in the Ambrosia Lake area, where the Company has approximately 2.4 million pounds of mineralized uranium material combined on several sections.

In
December 2008, we eliminated three executive officer positions, adopted a salary reduction program for all executives and continue to make further cost reductions.

Review of 2008 Production and 2009 Operational Plans

The Company produced 300,800 pounds U3O8 in 2008 from our Kingsville Dome, Rosita and Vasquez projects. During
2008, we placed five new wellfields into production at Kingsville Dome and one new wellfield at Vasquez. Production from a new wellfield at Rosita was begun in June 2008. However, technical
difficulties that raised the cost of production coupled with a sharp drop in uranium prices led to the decision to shut-in this wellfield in the fourth quarter of 2008 after 10,200 pounds
were produced.

Because
of the downturn in the uranium market during 2008, the Company decided in October to limit near-term production to existing wellfields. In the fourth quarter,
production was reduced to the two remaining operating wellfields at Kingsville Dome. Production from these wellfields is expected to be completed by the end of March 2009. The Company also ceased the
majority of its exploration and development activities in Texas in the fourth quarter of 2008.

During
2008, the Company invested $1.6 million in exploratory drilling in South Texas primarily on the Mosser and Marshall properties we acquired in 2007. We found significant
mineralization on the Marshall property; however, further evaluations need to be completed to determine if this property can be mined by ISR methods.

The
Company has signed an agreement with the Kenedy Memorial Foundation, to test 165 water wells on a portion of the Kenedy Ranch, located in South Texas for uranium, radium and radon to
determine if there is a potential for uranium mineralization. These tests are scheduled to take place during the first half of 2009.

By
the end of March 2009 we expect our South Texas operations to be fully devoted to restoration activities at Vasquez, Kingsville Dome and Rosita. Full scale restoration of the
groundwater at the Vasquez project commenced in the fourth quarter of 2008. At Kingsville Dome, the Company has been restoring Production Areas 1 & 2 while producing from Production Area 3,
with such production expected to cease by the end of March 2009.

The
Company is working with Texas A&M-Kingsville to evaluate the use of dissolved hydrogen to enhance bioremediation of mined zones at Kingsville Dome. A test will be
conducted on a small portion of a previously mined wellfield at Kingsville Dome. The test is expected to begin in March 2009 and be completed within 9 to 12 months. We are also working with
other active ISR mining companies as well as several government labs and agencies to evaluate and develop new technologies in an effort to enhance groundwater restoration methods for ISR mines.

During
2008, the Company applied for and was issued a permit to drill up to 10 exploration holes on Section 13 T13N R9W, six miles west of San Mateo, New Mexico. The objective of
this project is to obtain core samples in order to test the amenability for ISR mining on this property. We also

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completed
the digitizing of 23 million feet of drill hole logs during the year which will allow us to further evaluate company-owned properties and data.

During
2009, our focus in New Mexico will be to continue the requisite government and public relations activities needed to advance toward production at all of our projects beginning
with the Church Rock mine of the Crownpoint Project. The Company is also partnering with the Navajo Nation EPA on a study to perform a comprehensive environmental characterization of the Church Rock
mine site at Section 17 and lands adjacent to the site area. To that end, the Company and the Navajo Nation have reached agreement on a characterization work plan. The work plan is projected to
be executed during the spring of 2009.

Strategy

The Company adopted a strategic plan in March 2007 that established a goal to produce 10 million pounds of uranium annually by
2014 using both ISR and conventional mining and milling methods. As part of our strategy, we intend to build our uranium reserves to between 200 and 300 million pounds through exploration of
our own properties and by acquisition of additional properties. However, the change in the uranium market and the lack of support in the capital markets for the uranium industry has made the
achievement of our strategic goals more challenging. As a result, we have modified our plan by not limiting the timeframe in which to achieve our production goal and to identify how we can capitalize
on our assets in the near term.

In
Texas, we believe we are well positioned to take advantage of a consolidation of the uranium industry. URI owns two fully-licensed ISR processing facilities that are both capable of
receiving and processing resin from remote ion exchange satellite mines. This could allow us to either acquire new projects or potentially monetize valuable assets should we decide to focus company
resources in New Mexico. We also have the capability, although limited, to generate cash from renewed production once uranium prices recover. Until then, the Company will focus on completing
groundwater restoration activities at our three mining projects, which we believe will help demonstrate the environmental soundness and safety of ISR mining.

In
New Mexico, the Company's strategy is to develop our considerable assets beginning with the startup of the Crownpoint Uranium Project. This ISR production facility could produce up to
3 million pounds per year under our NRC license, the only such license in the state. The Company believes there are more than 200 million pounds of mineralized uranium material owned by
URI and other parties that could be developed using ISR production methods and processed at our Crownpoint plant using remote ion exchange technology. We will continue our work to educate the public
and government officials on the safety of ISR and conventional mining in an effort to begin uranium mining in New Mexico.

Uranium Reserves/Mineralized Material

In accordance with the SEC's Guideline on Non-Reserve Mineralized Material, and as shown in the following table, we
estimate 101.4 million pounds of in-place mineralized uranium material on our New Mexico properties as of December 31, 2008. This estimate reflects our ongoing reevaluation
of our New Mexico properties, including our decision to consider development of certain properties by conventional mining and milling methods in addition to ISR methods. The estimate for each New
Mexico property is based on studies and geologic
reports prepared by prior owners, along with studies and reports prepared by geologists engaged by the Company. The estimates presented below were reviewed and affirmed by Behre Dolbear &
Company (USA) an independent private engineering firm in their report dated February 26, 2008.

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SUMMARY OF IN-PLACE NON-RESERVE MINERALIZED  MATERIAL IN NEW MEXICO

Property

Tonnage
Millions

Grade
Percent

Non-Reserve
Mineralized
Material
Millions of Lbs U3O8Mancos


5.2


0.11
%

11.3Church Rock


7.8


0.12
%

18.6Nose Rock


7.6


0.15
%

21.9West Largo


2.8


0.30
%

17.2Roca Honda


3.9


0.19
%

14.7Crownpoint


4.8


0.16
%

15.3Ambrosia Lake


0.71


0.17
%

2.4Total


101.4


The
following table summarizes our estimates of Proven Reserves for our Kingsville Dome and Rosita properties in South Texas.

SUMMARY OF IN-PLACE RESERVES IN SOUTH TEXAS

Property

Tonnage
Millions

Grade
Percent

Proven Uranium Reserves
Millions of Lbs U3O8
at 12/31/08Kingsville Dome


0.065


0.076
%

0.100Rosita


0.138


0.081
%

0.224Total


0.324


Additionally,
we have completed wide spaced drilling on extensions of the Kingsville Dome properties that we intend to mine after the identified reserves have been mined. When we finish
the delineation drilling for the wellfields on those extensions we will then assign reserve numbers thereto.

Long-Term Delivery Contracts

Prior to March 2006 we had two contracts with Itochu Corporation and two with UG USA, Inc. Under those contracts we were
obligated to deliver an aggregate of 600,000 pounds in each of the years 2005 through 2008, and the buyer had the right to increase or decrease those deliveries by 15%. The average price for such
deliveries was $17.95 in 2005 and was anticipated to have been $14.58 per pound in 2006. These contracts were entered into at a time when the spot price for uranium was less than $15 per pound,
substantially below the $40 per pound in effect as of March 25, 2006. Two other contracts with these buyers 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 $3.80 per pound.

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

The Itochu Contract.Under the Itochu contract all production from the Vasquez property will be sold at a price equal to the average
spot price for
the eight weeks prior to the date of delivery less $6.50 per pound, with a floor for the spot price of $37 and a ceiling of $46.50. Other Texas production will be sold at a price equal to the average
spot price for the eight weeks prior to the date of delivery less $7.50 per pound, with a floor for the spot price of $37 and a ceiling of $43. On non-Vasquez production the price paid
will be increased by 30% of the difference between the actual spot price and

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the
$43 ceiling up to and including $50 per pound. If the spot price is over $50 per pound the price on all Texas production will be increased by 50% of such excess. The floor and ceiling and sharing
arrangement over the ceiling applies to 3.65 million pounds of deliveries, after which there is no floor or ceiling. Itochu has the right to cancel any deliveries on six-month's
notice.

On
December 5, 2006, HRI-Church Rock, Inc., a wholly-owned subsidiary of the Company, entered into an agreement with a wholly-owned subsidiary of Itochu to
develop jointly our Church Rock property in New Mexico (the "Joint Venture"). Such agreement was terminated on March 6, 2009. (See "BusinessJoint Venture
for Church Rock Property", below).

The UG Contract.Under the UG contract all production from the Vasquez property and other Texas production will be sold at a price
equal to the
month-end long-term contract price for the second month prior to the month of delivery less $6 per pound until (i) 600,000 pounds have been sold in a particular delivery
year and (ii) an aggregate of 3 million pounds of uranium has been sold. After the 600,000 pounds in any year and 3 million pounds total have been sold, UG will have a right of
first refusal to purchase other Texas production at a price equal to the average spot price for a period prior to the date of delivery less 4%. In consideration of UG's agreement to restructure its
previously existing contract, we paid UG $12 million in cash with funds raised in our equity offering completed in April 2006.

Joint Venture for Church Rock 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 to develop jointly our Church Rock property in New Mexico. The Joint Venture provided Itochu an opportunity to participate in New Mexico uranium
production in exchange for renegotiating their
sales contract with the Company. The new contract included a provision to allow the Company to receive up to an additional $2.10 per pound for certain South Texas uranium production sold to Itochu.

A
feasibility 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, both parties had until
April 2, 2007 to make a Preliminary Investment Decision whether to move forward with the Joint Venture. Over the past two year the parties had executed multiple extension agreements which
extended that date until March 2, 2009. As a result of the extensions, the Company realized approximately $590,000 additional revenue on its South Texas production sold to Itochu since
April 2007.

On
March 6, 2009 we received notification that Itochu had made a negative Preliminary Investment Decision for the Joint Venture which resulted in the termination of the Joint
Venture. Such action eliminates the potential for reinstatement of the original delivery contracts with Itochu for South Texas production. However, depending on spot market prices, our sales price may
be reduced by up to $2.10 per pound on some of our South Texas production for future deliveries under the contract. With the termination, the Company now retains 100% ownership of the approximately
18.6 millions pounds of in place mineralized uranium material at Church Rock.

Overview of the Uranium Industry

The only significant commercial use for uranium is as a fuel for nuclear power plants for the generation of electricity. According to
the World Nuclear Association, as of January 2009 there are now 436 nuclear power plants operating in the world with an annual consumption of about 170 million pounds of uranium. In addition,
the WNA lists 43 reactors under construction, 108 being planned, and 266 being proposed.

Based
on reports by Ux Consulting Company, LLC, or Ux, the preliminary estimate for worldwide production of uranium in 2008 is 115 million pounds. Ux reported the gap
between production and demand was filled by secondary supplies, such as inventories held by governments, utilities and others in the fuel cycle, including the highly enriched uranium, or HEU,
inventories which are a result of the agreement between the US and Russia to blend down nuclear warheads. These secondary supplies are currently meeting nearly a third of worldwide demand, but are
depleting.

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Spot market prices rose from $21/lb in January 2005 to a high of $136/lb in June 2007 in anticipation of sharply higher projected demand as a result of a
resurgence in nuclear power, and by the fact that secondary supplies are either becoming depleted or will not be available. The sharp price increase was driven in part by high levels of utility
buying, which resulted in most utilities covering their requirements through 2009. A decrease in near-term utility demand coupled with rising levels of supplies from producers and traders
led to downward pressure being placed on uranium prices since the third quarter of 2007. During 2008, the spot market price for uranium ranged between a high of $90/lb. in January to a low of $44/lb.
in October. As of March 2, 2009, the spot price was $43.75/lb and the long-term contract price was $70/lb. We believe the higher long-term price reflects the continued
strong future fundamentals for the uranium market.

The
following graph shows annual average spot prices per pound from 1982 to 2008 and the average price for the period January 1, 2009 to March 2, 2009, as reported by Trade
Tech and Ux.

Ux Average Annual U3O8 Spot Price

GRAPHIC

The ISR Mining Process

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

The
ISR process was first tested for the production of uranium in the mid-1960s and was first applied to a commercial-scale project in 1975 in South Texas. It was well
established in South Texas by the late 1970's, where it was employed in about twenty commercial projects, including two operated by us.

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In
the ISR process, 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 concentrates.

We
have historically used a central plant for the ion exchange. In order to increase operating efficiency and reduce future capital expenditures, we are now using a wellfield-specific
remote ion exchange methodology. Instead of piping the solutions over large distances through large diameter pipelines and mixing the waters of several wellfields together, each wellfield is being
mined using a dedicated satellite ion exchange facility. This allows ion exchange to take place at the wellfield instead of at the central
plant. A wellfield consists of a series of injection wells, production (extraction) wells and monitoring wells drilled in specified patterns. Wellfield pattern is crucial to minimizing costs and
maximizing efficiencies of production. The satellite facilities allow mining of each wellfield using its own native groundwater.

Environmental Considerations and Permitting

Uranium mining is regulated by the federal government, states and, where conducted in Indian Country, by Indian tribes. Compliance with
such regulation has a material effect on the economics of our operations and the timing of project development. Our primary regulatory costs have been related to obtaining licenses and permits from
federal and state agencies before the commencement of mining activities.

Radioactive Material License.Before commencing operations in both Texas and New Mexico, we must obtain a radioactive material
license. Under the
federal Atomic Energy Act, the United States Nuclear Regulatory Commission has primary jurisdiction over the issuance of a radioactive material license. However, the Atomic Energy Act also allows for
states with regulatory programs deemed satisfactory by the Commission to take primary responsibility for issuing the radioactive material license. The Commission has ceded jurisdiction for such
licenses to Texas, but not to New Mexico. Such ceding of jurisdiction by the Commission is hereinafter referred to as the "granting of primacy."

The
Texas Commission of Environmental Quality (TCEQ) is the permitting agency for the radioactive material license. For operations in New Mexico, radioactive material licensing is
handled directly by the United States Nuclear Regulatory Commission.

See
"Properties" and "Legal Proceedings" for the status of our radioactive material
license for New Mexico and our Texas properties.

Underground Injection Control Permits ("UIC").The federal Safe Drinking Water Act creates a nationwide regulatory program
protecting groundwater.
This act is administered by the United States Environmental Protection Agency (the "USEPA"). However, to avoid the burden of dual federal and state (or Indian tribal) regulation, the Safe Drinking
Water Act allows for the UIC permits issued by states (and Indian tribes determined eligible for treatment as states) to satisfy the UIC permit required under the Safe Drinking Water Act under two
conditions. First the state's program must have been granted primacy. Second, the USEPA must have granted, upon request by the state, an aquifer
exemption. The USEPA may delay or decline to process the state's application if the USEPA questions the state's jurisdiction over the mine site.

Texas
has been granted primacy for its UIC programs, and the Texas Commission on Environmental Quality administers UIC permits. In addition to the radioactive Materials License as

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described
above, the TCEQ also regulates air quality and surface deposition or discharge of treated wastewater associated with the ISR mining process.

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

Properties
located in Indian Country remain subject to the jurisdiction of the USEPA. Some of our properties are located in areas that are in Indian Country or in areas that are in
dispute.

See
"Properties" and "Legal Proceedings" for a description of the status of our UIC
permits in Texas and New Mexico.

Other.In addition to radioactive material licenses and underground injection control permit, we are also required to obtain
from governmental
authorities a number of other permits or exemptions, such as for wastewater discharge, for land application of treated wastewater, and for air emissions.

In
order for a licensee to receive final release from further radioactive material license obligations after all of its mining and post-mining clean up have been completed in
Texas, approval must be issued by the TCEQ along with concurrence from the United States Nuclear Regulatory Commission and in New Mexico by the United States Nuclear Regulatory Commission.

In
addition to the costs and responsibilities associated with obtaining and maintaining permits and the regulation of production activities, we are subject to environmental laws and
regulations applicable to
the ownership and operation of real property in general, including, but not limited to, the potential responsibility for the activities of prior owners and operators.

The
current environmental regulatory program for the ISR industry is well established. Many ISR mines have gone full cycle without any significant environmental impact. However, the
public anti-nuclear lobby can make environmental permitting difficult and timing unpredictable.

Reclamation and Restoration Costs and Bonding Requirements

At the conclusion of mining, a mine site is decommissioned and decontaminated, and each wellfield is restored and reclaimed.
Restoration involves returning the aquifer to its pre-mining use and removing evidence of surface disturbance. Restoration can be accomplished by flushing the ore zone with native ground
water or using reverse osmosis to remove ions, minerals and salts to provide clean water for reinjection to flush the ore zone. Decommissioning and decontamination entails dismantling and removing the
structures, equipment and materials used at the site during the mining and restoration activities.

The
Company is required by the State of Texas regulatory agencies to obtain financial surety relating to certain of its future restoration and reclamation obligations. 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 such regulatory requirements. The L/C's were issued by Bank of America and the
performance bonds 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 Vasquez projects and amounted to
$5,629,000 and $5,360,000, at December 31, 2008 and 2007, respectively. The L/C's are collateralized in their entirety by certificates of deposit.

The
performance bonds were $2,835,000 on December 31, 2008 and 2007, respectively, and related primarily to our operations at Kingsville Dome and Rosita. USF&G has required that
the Company deposit funds collateralizing a portion of the bonds, and we have deposited approximately $385,000 and

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$378,000
at December 31, 2008 and 2007, respectively, as cash collateral for such bonds. We are obligated by agreement with the bonding company to increase the cash collateral to an amount
equal to 50% of the amount of the bonds, plus an additional $0.50 for each pound of uranium produced until the account accumulates an additional $1.0 million.

We
estimate that our actual reclamation liabilities for prior operations at Kingsville Dome, Vasquez and Rosita at December 31, 2008, are about $9.8 million of which the
present value of $7.0 million is recorded as a liability as of December 31, 2008. Under an agreement reached on March 1, 2004 with the Texas regulatory agencies and our bonding
company, we agreed to fund ongoing groundwater restoration at the Kingsville Dome and Rosita mine sites at specified treatment rates, utilizing a portion of our cash flow from sales of uranium from
the Vasquez site as a substitute for additional bonding. This agreement expired on August 31, 2007. As a result, the Company is now required to post adequate financial surety, and as of
December 31, 2008 has posted letters of credit in the amount of $5.6 million, which are cash collateralized in full.

These
financial surety obligations are reviewed and revised periodically by the Texas regulators.

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

Water Rights

Water is essential to the ISR process. It is readily available in South Texas. In Texas, water is subject to capture, and we do not
have to acquire water rights through a state administrative process. In New Mexico, water rights are administered through the New Mexico State Engineer and can be subject to Indian tribal
jurisdictional claims. New water rights or changes in purpose or place of use or points of diversion of existing water rights, such as those in the San Juan and Gallup Basins where our properties are
located, must be obtained by permit from the State Engineer. Applications may be approved subject to conditions that govern exercise of the water rights.

Jurisdiction
over water rights becomes an issue in New Mexico when an Indian nation, such as the Navajo Nation, objects to the State Engineer's authority and claims tribal jurisdiction
over Indian Country. This issue may result in litigation between the Indian nation and the state, which may delay action on water right applications, and can require applications to the appropriate
Indian nation and continuing jurisdiction by the Indian nation over use of the water. The foregoing issues arise in connection with certain of our New Mexico properties.

In
New Mexico, we hold approved water rights to provide sufficient water to conduct mining at the Church Rock project and Section 24 for the Crownpoint project for the projected
life of these mines. We also hold two unprotested senior water rights applications that, when approved, would provide sufficient water for future extensions of the Crownpoint project.

Competition

A primary area of competition is in the identification and acquisition of properties with high prospects of potential producible
reserves that are suitable for our size operation. We believe that we compete with 10 to 20 junior exploration companies for both properties as well as skilled personnel.

The
Company competes for markets for our uranium primarily based on price. We market uranium to utilities and commodity brokers and are in direct competition with supplies available from
various sources worldwide. We believe we compete with approximately 10 to 20 operating companies in the mining and sale of uranium.

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Item 1A.    Risk Factors.

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

General Risks and Uncertainties

We expect to cease our uranium production by the end of March 2009. If we cannot add additional reserves to replace production in the future, monetize certain existing
Company assets and/or have the ability to access additional sources of private or public capital we may not be able to remain in business.

Our Vasquez project has been depleted of its economically recoverable reserves and our Rosita and Kingsville Dome projects have minimal
identified economically recoverable reserves. Our future uranium production, cash flow and income are dependent upon our ability to bring on new, as yet unidentified wellfields and to acquire and
develop additional reserves. We cannot assure investors that our properties will be placed into production or that we will be able to continue to find, develop, acquire and finance additional
reserves.

Our ability to function as an operating mining company will be dependent on our ability to mine our properties at a profit sufficient to finance further mining activities
and for the acquisition and development of additional properties. The volatility of uranium prices makes long-range planning uncertain and raising capital difficult.

We have made the decision to defer all activities for delineation and development of new wellfields at our South Texas projects and
expect production from our remaining operating wellfields at Kingsville Dome to be depleted in the first quarter of 2009. This decision will limit our ability to generate additional cash from
operations. Our ability to operate on a positive cash flow basis will be dependent on mining sufficient quantities of uranium at a profit sufficient to finance our operations and for the acquisition
and development of additional mining properties. Any profit will necessarily be dependent upon, and affected by, the long and short term market prices of uranium, which are subject to significant
fluctuation. Uranium prices have been and will continue to be affected by numerous factors beyond our control. These factors include the demand for nuclear power, political and economic conditions in
uranium producing and consuming countries, uranium supply from secondary sources and uranium production levels and costs of production. A significant, sustained drop in uranium prices may make it
impossible to operate our business at a level that will permit us to cover our fixed costs or to remain in operation.

We face risks related to exploration and development, if warranted, on our properties.

Our level of profitability, if any, in future years will depend to a great degree on uranium prices and whether any of our exploration
stage properties can be brought into production. The exploration for and development of uranium deposits involves significant risks. It is impossible to ensure that the

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current
and future exploration programs and/or feasibility studies on our existing properties will establish reserves. Whether a uranium ore body will be commercially viable depends on a number of
factors, including, but not limited to: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; uranium prices, which cannot be predicted and which have been
highly volatile in the past; mining, processing and transportation costs; perceived levels of political risk and the willingness of lenders and investors to provide project financing; labor costs and
possible labor strikes; and governmental regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting materials, foreign
exchange, environmental protection, employment, worker safety, transportation, and reclamation and closure obligations. Most exploration projects do not result in the discovery of commercially
mineable deposits of uranium.

The only market for uranium is nuclear power plants world wide, and there are a limited number of customers.

We are dependent on a limited number of electric utilities that buy uranium for nuclear power plants. Because of the limited market for
uranium, a reduction in purchases of newly produced uranium by electric utilities for any reason (such as plant closings) would adversely affect the viability of our business.

The price of alternative energy sources affects the demand for and price of uranium.

The attractiveness of uranium as an alternative fuel to generate electricity is to some degree dependent on the relative prices of oil,
gas, coal and hydro-electricity and the possibility of developing other low cost sources for energy.

Public acceptance of nuclear energy is uncertain.

Maintaining the demand for uranium at current levels and future growth in demand will depend upon acceptance of nuclear technology as a
means of generating electricity. Lack of public acceptance of nuclear technology would adversely affect the demand for nuclear power and potentially increase the regulation of the nuclear power
industry.

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

In April 2005, the Navajo Nation Council passed the Diné Natural Resources Protection Act of 2005 prohibiting uranium
mining and processing on any sites within Indian Country. We believe that the ban is beyond the jurisdiction of the Navajo Nation. However, the ban may prevent us from developing and operating the
properties until the jurisdictional issue is resolved.

In
February 2007, the United States Environmental Protection Agency, or USEPA, determined that Section 8 of our Church Rock property was Indian Country and that the USEPA and not
the state of New Mexico has the authority to issue the Underground Injection Control, or UIC, permits for Section 8 that are a precondition to mining. We have appealed that decision to the
United States Court of Appeals for the Tenth Circuit. The case has been briefed, and oral argument occurred on May 12, 2008. The expansive definition of Indian Country adopted by the USEPA may
encompass properties owned by non-Indians within Navajo chapters in New Mexico. If that expansive definition prevails, as much as 84% of our in-place mineralized uranium
materials in New Mexico could be in Indian Country.

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

A substantial portion of our uranium in New Mexico may not be able to be mined unless a mill is built in New Mexico.

Itochu has made a negative Preliminary Investment Decision resulting in the termination of our Joint Venture with them for the development of the Church Rock Property and we
do not have a committed source of financing for the development of our Church Rock Property.

On December 5, 2006, HRI-Church Rock, Inc., a wholly owned subsidiary of the Company, entered into a joint
venture with a wholly owned subsidiary of Itochu Corporation to develop jointly our Church Rock property in New Mexico. Under the terms of the joint venture, both parties had until April 2,
2007 to make a preliminary investment decision whether to move forward with the joint venture. The parties then agreed to extend that date to March 2, 2009. On March 6, 2009 we received
notification that Itochu had made a negative Preliminary Investment Decision for the Joint Venture which resulted in the termination of the Joint Venture. With the negative investment decision, the
joint venture terminated and we do not have a committed source of financing for the development of our Church Rock property, but we will retain all of the rights to the asset.

Our operations are subject to environmental risks.

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

We
are required to comply with the Atomic Energy Act, as amended by UMTRCA, by applying for and maintaining an operating license from the NRC and the state of Texas. Uranium operations
must conform to the terms of such licenses, which include provisions for protection of human health and the environment from endangerment due to radioactive materials. The licenses encompass
protective measures consistent with the Clean Air Act and the Clean Water Act. We intend to utilize specific employees and consultants in order to comply with and maintain our compliance with the
above laws and regulations. Mining operations may be subject to other laws administered by the federal Environmental Protection Agency and other agencies.

The
uranium industry is subject not only to the worker health and safety and environmental risks associated with all mining businesses, but also to additional risks uniquely associated
with uranium mining and milling. The possibility of more stringent regulations exists in the areas of worker health and safety, storage of hazardous materials, standards for heavy equipment used in
mining or milling, the disposition of wastes, the decommissioning and reclamation of exploration, mining and
in-situ sites, climate change and other environmental matters, each of which could have a material adverse effect on the costs or the viability of a particular project.

We
cannot predict what environmental legislation, regulation or policy will be enacted or adopted in the future or how future laws and regulations will be administered or interpreted.
The recent trend in environmental legislation and regulation, generally, is toward stricter standards, and this trend is likely to continue in the future. This recent trend includes, without
limitation, laws and regulations relating to air and water quality, mine reclamation, waste handling and disposal, the protection of

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certain
species and the preservation of certain lands. These regulations may require the acquisition of permits or other authorizations for certain activities. These laws and regulations may also
limit or prohibit activities on certain lands. Compliance with more stringent laws and regulations, as well as potentially more vigorous enforcement policies or stricter interpretation of existing
laws, may necessitate significant capital outlays, may materially affect our results of operations and business, or may cause material changes or delays in our intended activities.

Our
operations may require additional analysis in the future including environmental, cultural and social impact and other related studies. Certain activities require the submission and
approval of environmental impact assessments. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers, and employees. We cannot
assure investors that we will be able to obtain or maintain all necessary permits that may be required to continue our operation or our exploration of our properties or, if feasible, to commence
development, construction or operation of mining facilities at such properties on terms which enable operations to be conducted at economically justifiable costs. If we are unable to obtain or
maintain permits or water rights for development of our properties or otherwise fail to manage adequately future environmental issues, our operations could be materially and adversely affected.

Because mineral exploration and development activities are inherently risky, we may be exposed to environmental liabilities and other dangers. If we are unable to maintain
adequate insurance, or liabilities exceed the limits of our insurance policies, we may be unable to continue operations, which may result in a loss of an investors' investment.

The business 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 inability to
obtain suitable or adequate machinery, equipment or labor are other risks involved in extraction operations and the conduct of exploration programs. Previous mining operations may have caused
environmental damage at certain of our properties. It may be difficult or impossible to assess the extent to which such damage was caused by us or by the activities of previous operators, in which
case, any indemnities and exemptions from
liability may be ineffective. If any of our properties are found to have commercial quantities of uranium, we would be subject to additional risks respecting any development and production activities.

Although
we carry liability insurance with respect to our mineral exploration operations, we may become subject to liability for damage to life and property, environmental damage,
cave-ins or hazards against which we cannot insure or against which we may elect not to insure. In addition, the insurance industry is undergoing change and premiums are being increased.
If premiums should increase to a level we cannot afford, we could not continue in business.

Our inability to obtain financial surety would threaten our ability to continue in business.

Future bonding requirements to comply with federal and state environmental and remediation requirements and to secure necessary
licenses and approvals will increase significantly when future development and production occurs at our sites in Texas and New Mexico. The amount of the bonding for each producing property is subject
to annual review and revision by regulators. We expect that the issuer of the bonds will require us to provide cash collateral equal to the face amount of the bond to secure the obligation. In the
event we are not able to raise, secure or generate sufficient funds necessary to satisfy these bonding requirements, we will be unable to develop our sites and bring them into production, which
inability will have a material adverse impact on our business and may negatively affect our ability to continue to operate.

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Competition from better-capitalized companies affects prices and our ability to acquire properties and personnel.

There is global competition for uranium properties, capital, customers and the employment and retention of qualified personnel. In the
production and marketing of uranium, there are approximately 15 major producing entities, some of which are government controlled and all of which are significantly larger and better capitalized than
we are. Many of these organizations also have substantially greater financial, technical, manufacturing and distribution resources than we have.

We
also compete with uranium recovered from the de-enrichment of highly enriched uranium obtained from the dismantlement of United States and Russian nuclear weapons and
imports to the United States of uranium from the former Soviet Union. In addition, there are numerous
entities in the market that compete with us for properties and are attempting to become licensed to operate ISR facilities.

Because we have limited capital, inherent mining risks pose a significant threat to us compared with our larger competitors.

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

We may need to obtain additional financing in order to implement our business plan, and the inability to obtain it could cause our business plan to fail.

As of December 31, 2008, we had approximately $12.0 million in cash. We could require additional financing in order to
complete our plan of operations. We may not be able to obtain all of the financing we require. Our ability to obtain additional financing is subject to a number of factors, including the market price
of uranium, market conditions, investor acceptance of our business plan, and investor sentiment. These factors may make the timing, amount, terms and conditions of additional financing unattractive or
unavailable to us. In recognition of current economic conditions and the planned shut-down of production we have significantly reduced our spending, delayed or cancelled planned activities
and substantially changed our current corporate structure. However, these actions could have material adverse effects on our business, revenues, operating results, and prospects, resulting in a
possible failure of our business.

Our business could be harmed if we lose the services of our key personnel.

Our business and mineral exploration programs depend upon our ability to employ the services of geologists, accountants and other
experts. In operating our business and in order to continue our programs, we compete for the services of professionals with other mineral exploration companies and businesses. In addition, several
entities have expressed an interest in hiring certain of our employees. Our ability to maintain and expand our business and continue our exploration programs may be impaired if we are unable to
continue to employ or engage those parties currently providing services and expertise to us or identify and engage other qualified personnel to do so in their place. To retain key employees, we may
face increased compensation costs, including potential new stock incentive grants.

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Over 29.8% of our Common Stock is controlled by 2 record owners and management.

Over 21.1% of our Common Stock is controlled by two significant stockholders. In addition, our directors and officers are the
beneficial owners of approximately 8.7% of our Common Stock. This includes, with respect to both groups, shares that may be purchased upon the exercise of outstanding options. Such ownership by the
Company's principal shareholders, executive officers and directors may have the effect of delaying, deferring, preventing or facilitating a sale of the Company or a business combination with a third
party.

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

As of December 31, 2008, 55,955,549 shares of our Common Stock were currently outstanding, all of which are registered or
otherwise transferable. The availability for sale of a large amount of shares or conversion of the Company's outstanding warrants by any one or several shareholders may depress the market price of our
Common Stock and impair our ability to raise additional capital through the public sale of our Common Stock. We have no arrangement with any of the holders of the foregoing shares to address the
possible effect on the price of our Common Stock of the sale by them of their shares.

Terms of subsequent financings may adversely impact an investor's investment.

In order to finance our cash needs, we may have to raise equity or debt in the future. We currently have no authorized preferred stock.
An investor's rights and the value of an investor's investment in our Common Stock could be reduced. For example, if we have to issue secured debt securities, the holders of the debt would have a
claim to our assets that would be prior to the rights of stockholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results.

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

Shareholders may be diluted in their ownership if we raise capital. Direct dilution would occur if we sell Common Stock or debt
convertible into Common Stock, with conversion and other terms which large institutions can negotiate for substantial capital financings which result in more favorable terms than buying stock in the
market. Indirect dilution would occur if institutional financing is raised for a subsidiary company. In this scenario, the percentage of the subsidiary held by us would be diluted.

Additionally,
should the Company complete an equity offering which triggers the provisions of certain ratchet warrants issued in May 2008, such transaction could have a significant
dilutive effect on the Company's shareholders.

Item 1B.    Unresolved Staff Comments.

None.

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Item 2.    Properties.

South Texas

We currently control 3 major properties in the state of Texas. The Kingsville Dome, Rosita and Vasquez properties are shown in Figure
No. 2.1 and are described below.

Figure No 2.1. Texas Properties Location Map

GRAPHIC



The Property.The Kingsville Dome property consists of mineral leases from private landowners on about 2,354 gross and net acres
located in central
Kleberg County, Texas. The leases provide for royalties based upon a percentage of uranium sales of 6.25%. The leases have expiration dates ranging from 2000 to 2007, however we hold most of these
leases by production; and with a few minor exceptions, all the leases contain clauses that permit us to extend the leases not held by production by payment of a per acre royalty ranging from $10 to
$30. We have paid such royalties on all material acreage. Mineralization is found in the Goliad formation at depths of 600 to 750 feet.

Production History.Initial production commenced in May 1988. From then until July 1999, we produced a total of 3.5 million
pounds. Production
was stopped in July 1999, because of depressed uranium prices. We resumed production at Kingsville Dome in April 2006 produced 94,100 pounds in

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2006;
338,100 pounds of uranium in 2007 and 254,000 in 2008. We spent about $10.4 million in capital expenditures in 2006; $8.0 million in capital expenditures in 2007 and
$3.6 million in 2008.

Permitting Status.A radioactive material license and underground injection control permit have been issued. As new areas are proposed
for
production, additional authorizations under the area permit are required. Approval of our Production Area Authorization #3 was received in February 2006 which allowed for the start-up of
production at Kingsville Dome in April 2006. See "Legal Proceedings."

Restoration and Reclamation.During 2008, we conducted restoration activities as required by the permits and licenses on this project,
spending
approximately $349,000 on such activities. In 2007 and 2006, we spent about $595,000 and $321,000 in restoration costs.

Figure No. 2.2. Kingsville Dome Property

GRAPHIC



The Property:The Rosita and Rosita South property consists of mineral leases from private landowners on about 2075 gross and net acres
(775 acres in
Rosita and 1300 acres in Rosita South) located in north-central Duval County, Texas. The leases provide for sliding scale royalties based on a percentage 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 have expiration dates ranging from 2012 to 2015.

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We
are holding these leases by payment of rentals ranging from $10 to $30 per acre. Mineralization is found in the Goliad Formation at depths of 125 to 350 feet.

Production History:Initial production commenced in 1990. From then until July 1999, URI produced a total of 2.64 million pounds.
Production
was stopped in July of 1990 because of depressed uranium prices. Production from a new wellfield at Rosita wellfield was begun in June 2008. However, technical difficulties that raised the cost of
production coupled with a sharp drop in uranium prices led to the decision to shut-in this wellfield after 10,200 pounds were produced.

In
order to restart the plant facility, we spent about $4.5 million, 5.0 million and $2.8 million in 2008, 2007 and 2006, respectively for plant refurbishment and
wellfield development. We are conducting restoration and reclamation, of which $465,000 was spent in 2008. In 2007 and 2006, we spent about $820,000 and $676,000 for restoration and reclamation
activities.

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

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Figure No. 2.3. Rosita Property Mineral Ownership

GRAPHIC



The Property.We have a mineral lease on 872 gross and net acres located in southwestern Duval County, in South Texas. The primary term
expired in
February 2008; however, we hold the lease by production. The lease provides for royalties based upon 6.25% of uranium sales below $25.00 per pound and royalty rate increases on a sliding scale up to
10.25% for uranium sales occurring at or above $40.00 per pound. Mineralization is found in the Oakville formation at depths of 200 to 250 feet.

Production History.We commenced production from this property in October 2004. We spent about $355,000 in capital expenditures at
Vasquez and
produced 36,600 pounds of uranium in 2008. We spent about $1.3 million in capital expenditures at Vasquez and produced 78,600 pounds of uranium in

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2007.
We spent about $3.4 million in capital expenditures at Vasquez and produced 165,000 pounds of uranium in 2006. We are conducting restoration and reclamation, of which $224,000 and $33,000
was spent in 2008 and 2007, respectively.

Permitting Status.All of the required permits for this property have been received.

Figure No. 2.4. Vasquez Property

GRAPHIC

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

Figure No. 2.6. Marshall Exploration Property

GRAPHIC

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New Mexico Properties

General.We have various interests in properties located in New Mexico (Figure 2.7). We have fee lands, patented and
unpatented mining claims,
mineral leases and some surface leases. We have spent $12.9 million to date on permitting for New Mexico. Additional expenditures will be required and could be material. We are unable to
estimate the amount. We expect that whatever is spent will occur over multiple years. See "LegalProceedings" for a discussion
of the current status of our license for New Mexico

Figure No. 2.7. Location of New Mexico Properties

GRAPHIC

The Property.The Church Rock project encompasses about 2,200 gross and net acres. The properties are located in McKinley County, New
Mexico and
consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation. Access to the
Church Rock property is via State Highway 566 and access to Mancos is via 4-wheel drive ranch roads west of State Highway 566.

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We own the mineral estate in fee for the NE 1/4 and the SW 1/4 of the NW 1/4 of
Section 17, T16N, R16W. In Section 8, T16N, R16W, we own the SE 1/4 in fee and hold the minerals in the rest of the section with 26 unpatented federal mining claims (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 121617-32A thru 121617-35A). The federal unpatented mining claims are all held through the payment of a $125.00
assessment fee each year on each claim.

Mineralization
occurs in the Westwater Member of the Morrison Formation at depths of 800 to 1700 feet.

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

Development Plan.We anticipate that Church Rock will be the first of our New Mexico properties we will develop. We spent about
$421,000, $504,000
and $305,000 in 2008, 2007 and 2006, respectively, for permitting activities and land holding costs. In December 2006, we entered into a joint venture with Itochu to jointly develop this property and
in March 2009 the joint venture was terminated (see "BusinessJoint Venture for Church Rock Property").

Water Rights.The State Engineer approved our water rights application in October 1999 and granted us sufficient water rights for the
life of Church
Rock.

Permitting Status.We have the radioactive material license for Section 8. This license is subject to the continuing proceedings
described
under "LegalProceedings." With respect to the UIC permits, see "Legal Proceedings." We do not plan to
pursue permits for Mancos at this time.

24

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Table of Contents

Figure No. 2.8. Church Rock / Mancos Property Mineral Ownership

GRAPHIC



The Property.The Crownpoint properties are located in the San Juan Basin, 22 miles northeast of our Church Rock deposits and 35 miles
northeast of
Gallup, New Mexico, adjacent to the town of Crownpoint, New Mexico. The Properties consist of 619 gross and 521.8 net acres. 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 the minerals in the SW 1/4 of Section 24, T17N, R13W with 10 unpatented federal mining claims
(CP-10 thru CP-19). In the SE 1/4 of Section 24, T17N, R13W we hold a 40% interest in the minerals through a lease (the "Walker" lease) on approximately
139 acres and hold 100% of the minerals on the remaining 21 acres with two unpatented federal mining claims (Consol I and

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Table of Contents

Consol II).
In the NE 1/4 of Section 25, T17N, R13W we hold the minerals with eight unpatented federal mining claims (Hydro-1 thru Hydro-8). The
federal unpatented mining claims are held through the payment of a $125.00 assessment fee each year on each claim. Access is via paved road from State Highway 371, through the town of Crownpoint to
Church Road to the main gate of the property.

Mineralization
is found in the Westwater Member of the Morrison Formation at a depth of from 2,100 to 2,300 feet. Three pilot shafts were completed on the property in the early 1980's
but were never completed. Surface facilities dating from those activities including buildings and their associated electrical/water infrastructure are still in-place and are currently used
as offices and storage facilities.

Development Plan.We spent about $127,000, $164,000 and $91,000 in 2008, 2007 and 2006, respectively, for permitting activities and land
holding
costs.

Water Rights.We have three pending applications for appropriations of water, which give us the first three "positions in line" on the
hearings list
for the San Juan Basin. Certain of the water rights may involve a claim of jurisdiction by the Navajo Nation.

Permitting Status.See "Legal Proceedings" for a discussion of the radioactive material
license for
Crownpoint. The surface estate on Section 19 and 29 is owned by the United States Government and held in trust for the Navajo Nation and may be subject to the same jurisdictional dispute with
respect to the UIC permit as for Section 8 and 17 in Church Rock.

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Table of Contents

Figure No. 2.9. Crownpoint Property Mineral Ownership

GRAPHIC

27

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Table of Contents



The Nose Rock property consists of approximately 6,400 acres and is located about 12 miles northeast of Crownpoint, New Mexico. The
minerals is held in fee on Sections 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 private paved road north of Tribal Road
9. The property was developed by Philips Uranium Corporation in the early 1980's and includes two circular concrete-lined shafts that have been completed to a depth of 3,300 feet. Both shafts have
been plugged at surface and just above the Westwater. There is no usable surface infrastructure on site. Mineralization occurs in the Westwater Member of the Morrison Formation.

Figure No. 2.10. Nose Rock Property Mineral Ownership

GRAPHIC

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Table of Contents



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

Mineralization
occurs in the Westwater Member of the Morrison Formation at depths ranging from 2,000 to 2,750 feet depending on surface topography. Over 1,000 drill holes were 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 this property.

Figure 2.11. West Largo Property Mineral Ownership

GRAPHIC

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Table of Contents



The Roca Honda property is comprised of four sections of land totaling approximately 2,560 acres located about 4 miles northwest of the
town of San Mateo in McKinley County, New Mexico. Sections 13, 15 and 17, T13N, R8W are held in fee and Section 8, T13N, R8W is held by 36 unpatented federal mining claims (Roca Honda 55
thru Roca Honda 63, Roca Honda 82 thru Roca Honda 90, Roca Honda 109 thru 117 and Roca Honda 136 thru Roca Honda 144). The federal unpatented mining claims are held through the payment of a $125.00
assessment for each year on each claim. The property is accessed over various 4-wheel drive ranch roads north of State Highway 605.

Mineralization
occurs in the Westwater Member of the Morrison Formation at depths ranging from 1,700 on Section 17 to over 3,300 feet in Section 13. In the late 1970's and
early 1980's, various operators drilled 620 exploration holes on the property. In the late 1980's, Kerr-McGee sank a shaft to a depth of 1,475 feet on Section 17 to develop the
property, then known as the Lee Mine. The shaft was stopped short of the ore zone and the mine closed down when uranium prices fell in 1983. There is no useable infrastructure on surface.

Figure No. 2.12. Roca Honda Property Mineral Ownership

GRAPHIC

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Table of Contents

Potential ISR and OSL areas (Figures 2.13 & 2.14).Several areas in T13N R 9 W and
T14 N R 10W are being considered for early application of ISR methods (Sections 13 and 17 of T13N R9W and Sections 5 and 27 of
T14 N R 10W). In November of 2008, we received a permit to drill up to 10 holes for the purpose of extracting core to evaluate the suitability of the property for ISR extraction.
All land described is owned in fee.

Two
other sections in T14N R10W (Sections 23 and 25) have been the site of extensive development and mining in the past and could provide excellent targets for the
application of Old Stope Leaching operations. Mineral on these two sections is owned in fee.

Figure No. 2.13. West Ambrosia area

GRAPHIC

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Table of Contents

Figure 2.14. T13N R9W Area

GRAPHIC

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Table of Contents

Insurance

Our property is covered by various types of insurance including property and casualty, liability and umbrella coverage. We have not
experienced any material uninsured or under insured losses related to our properties in the past and believe that sufficient insurance coverage is in place.

Reclaimed Properties

We have completed production and groundwater restoration on our Benavides and Longoria projects in South Texas. We completed the final
stages of surface reclamation on these projects and received full and final release for these sites in 1999.

We
acquired the Section 17 leases in the New Mexico Church Rock district from United Nuclear Corporation who had conducted underground mining for uranium on Section 17 and
had reclaimed these properties. In the acquisition, we assumed any liability of United Nuclear Corporation for any remaining remediation work that might be required. The New Mexico Energy Minerals and
Natural Resources Department has not determined what, if any, additional remediation would be required under the New Mexico Mining Act. If more remediation work is required, we believe it would not
involve material expenditures as required by the New Mexico Energy Minerals and Natural Resources Department regulation.

In
January 2008 the Navajo Nation Environmental Protection Agency (NNEPA) notified the Company of their analysis that indicated potentially uranium contaminated materials present on the
Church Rock Section 17 Mine Site. In response, the Company has agreed with the NNEPA to perform a comprehensive characterization of the Church Rock Site at Section 17 and lands adjacent
to the site area during the spring of 2009. The jurisdiction of the Navajo 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 the status of the Navajo EPA letter and UNC Demand for Indemnity in New Mexico.

Item 3.    Legal Proceedings.

New Mexico Radioactive Material License

In the State of New Mexico, uranium recovery by ISR technology requires a radioactive material (uranium recovery) license issued by the
United States Nuclear Regulatory Commission (the "NRC" or the "Commission"). We applied for one license covering the properties located in both the Church Rock and Crownpoint districts collectively
known as the Crownpoint Uranium Project (CUP). The Commission issued a radioactive material (uranium recovery) license for the CUP in January 1998 that allowed licensed ISR operations to begin in the
Church Rock district. In mid-1998, the Commission determined that certain interested stakeholders who requested an NRC administrative hearing had standing to raise certain objections to
the license. A panel of Administrative Law Judges (NRC's Atomic Safety and Licensing Board (hereinafter "Licensing Board")) conducted a hearing during 1999. The Licensing Board upheld the Church Rock
Section 8
portion of the NRC license and granted our request to defer any dispute on the remaining CUP properties until we make a decision whether to mine these other properties.

The
Licensing 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 also determined that we were required to submit restoration action plans for each CUP project site and that we must proceed with the hearing process
for the other New Mexico properties beyond Church Rock Section 8. Subsequently, the administrative hearing was held in abeyance until 2004, pursuant to NRC-supervised settlement
negotiations between the parties.

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Table of Contents

In
February 2004, the Licensing Board issued an order, which concluded that we must make three specific changes to our submitted restoration action plan for Church Rock Section 8
in order to commence mining operations at Church Rock Section 8. The Commission accepted our petition for review on two of the three issues and subsequently overruled the Licensing Board on
these issues. Then, the parties agreed to truncate the number and scope of the issues remaining for consideration at the remaining three CUP project sites. Since then, the Licensing Board and the full
Commission has endorsed our license and its requirements for the CUP.

In
summary, all contested issues regarding the CUP were decided by the Licensing Board in our favor, with a few minor amendments, and affirmed on appeal by the full Commission.
Intervenors have appealed the Commission's final approved action to the United States Court of Appeals for the Tenth Circuit. We have intervened on behalf of NRC to defend the license. All required
legal briefs have been filed in this proceeding and oral argument was held before the court on May 12, 2008. We are waiting for the Court to render a decision.

New Mexico UIC Permit

The State of New Mexico, the USEPA, and the Navajo Nation are engaged in a jurisdictional dispute as to which regulatory entity
(i.e., USEPA or the State of New Mexico) has the authority to issue Underground Injection Control ("UIC") program permits, which are required to mine the Church Rock Section 8 property.
The dispute was taken to the United States Court of Appeals for the Tenth Circuit, which, in January 2000, remanded to the USEPA the issue whether the Section 8 Church Rock property was Indian
Country. In February 2007, the USEPA issued
a decision finding that the Church Rock Section 8 property is Indian country and that the USEPA is the proper authority to issue the UIC permit. We have appealed that decision to the United
States Court of Appeals for the Tenth Circuit. The decision can be accessed at the USEPA Region 9 website at http://www.epa.gov/region09/water/groundwater/permit-determination.html. All required legal
briefs have been filed in this proceeding and oral argument
was held before the court on May 12, 2008. We are waiting for the Court 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 Texas Department of State Health Services ("DSHS"), the Texas Commission on Environmental Quality (TCEQ) and United States Fidelity and Guaranty Insurance Company as a means
of funding the Company's ongoing groundwater restoration at the Kingsville Dome and Rosita mine sites at specified treatment rates, utilizing a portion of the Company's cash flow from sales of uranium
from the Vasquez site as a substitute for additional bonding. Although Kleberg County and an ad hoc citizen group brought suit in April 2004 to challenge the GRPA, Kleberg County settled with the
Company and withdrew its support and funding of the suit in December 2004. In June 2007, DSHS' regulatory authority over uranium recovery operations, including its oversight of groundwater restoration
bonds posted for uranium mining operations was transferred to TCEQ; and, on August 31, 2007, the GRPA expired according to 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 advised the Company that the County had retained counsel to investigate its remedies, including
injunctive relief against new uranium mining at the Company's Kingsville Dome mine site. The dispute relates to differing interpretations of the Company's December 2004 settlement agreement with
Kleberg County as to the level of groundwater restoration the Company agreed to achieve in Kingsville Dome production areas 1 and 2. Seeking to resolve these issues amicably, the Company elected to
defer briefly the startup of production at the new wellfield.

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When
the negotiations failed, the Company notified the County of its intent to begin new production. The Company believes it is in full compliance and engaged in a mediation of this dispute. On
September 28, 2007, after negotiations had stalled, the Company filed suit against the County for declaratory relief interpreting the Settlement Agreement. The County answered the suit with a
general
denial but has not asserted a counterclaim for relief against the Company. Neither party has pressed the matter further.

Kingsville Dome Production Disposal Well Permit renewals and Production Area Authorization 3

After an August 2005 hearing, the Texas Commission on Environmental Quality ("TCEQ") voted unanimously February 22, 2006 to
renew the Company's disposal well permits, WDW-247 and WDW-248, and to issue Kingsville Dome Production Area Authorization 3 ("PAA 3"). A citizens group and a Ms. Garcia
filed for judicial review of the TCEQ action. The Texas Attorney General answered in defense of TCEQ and the Company has intervened to defend the TCEQ. The two cases have been consolidated; a judge
has been assigned; and, in June 2007, the TCEQ submitted its administrative record for review.

In
June 2007 an attorney claiming to have been newly engaged by a plaintiff, Ms. Garcia, notified all parties that Garcia wished to withdraw from the litigation and requested that
no further action be taken and her action was dismissed. On June 27, 2007, Garcia's original counsel moved to appoint a guardian or representative for Ms. Garcia. The Company challenged
the sufficiency of the request for appointment of a guardian or representative for Ms. Garcia; and Ms. Garcia's original counsel set his motion for hearing in August 2007. Before the
hearing date, original counsel for Ms. Garcia, tentatively rescheduled the hearing for October 24, 2007 and then canceled that hearing date. No further action on the matter has been
scheduled.

The
permits and production area authorization issued by TCEQ remain effective until and unless overturned by a reviewing Court; and, the Company believes the TCEQ action issuing the
permits and production area authorization is well-founded and will be affirmed when considered on the merits.

Navajo EPA letter and UNC/GE Demand for Indemnity

By letter dated January 23, 2008, the Navajo Nation Environmental Protection Agency (NNEPA) sent a document dated September 2007
titled "Radiological Scoping Survey Summary Report for the Old Church Rock Mine Site" (Survey Report) to Hydro Resources Inc (HRI) and United Nuclear Corporation and General Electric (UNC/GE). The
Survey Report was reportedly prepared in response to a claim by NNEPA against HRI and UNC/GE for potential liability for uranium contaminated materials present on HRI's Church Rock Mine Site. NNEPA
requested HRI
and UNC/GE to undertake a "comprehensive and detailed characterization" of HRI's Church Rock Mine Site and adjacent lease areas, as recommended in the Survey Report.

By
letter dated January 29, 2008, UNC and GE, pursuant to a certain Supplemental Purchase Agreement and Guarantee, demanded that HRI and Uranium Resources Inc (URI) defend and
indemnify it for all loss, cost, expense, liabilities and obligations that have been or will be incurred or sustained by GE and UNC with respect to the request asserted by NNEPA.

In
response HRI/URI has committed with UNC and GE to perform a site assessment at its expense of the Old Church Rock Site for potential contamination from historic mining. In the event
that a governmental authority issues a formal Administrative Order or files a lawsuit, the company and UNC will be considered to have reserved their respective rights and defenses to the
indemnity claims, and will immediately seek and attempt to resolve, in good faith, any areas of dispute which may exist at that time.

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Table of Contents

Moreover,
the Company has agreed with the Navajo Nation to perform a timely, detailed and comprehensive characterization of the Old Church Rock Site and lands adjacent to the site area.
To that end, the Company and the Navajo have reached agreement on a characterization work plan. The work plan is planned during the spring of 2009 at a projected cost of $130,000.

Kingsville Dome Lessor Legal Action

In June 2008 a suit for declaratory judgment titled,Saenz v. URI Inc.,was
filed in the 105th Judicial District Court, Kleberg County, Texas by the owners of the mineral estate of property in Kleberg County, Texas leased to the Company, seeking a
declaratory judgment that a certain lease is limited to one specific lot only and does not encompass other adjacent lands. The Company has a lease on the adjacent lands from the same mineral owners
and has produced over 340,000 pounds of uranium from those lands in 2007 and 2008. The Company entered a general denial of the claims. On September 24, 2008 the mineral owners amended their
suit to include a declaration that both of the leases held by the Company are not valid. The Company has entered a general denial and other specific defenses to the amended complaint. The Company has
produced uranium from both leases. On November 5, 2008, the Company engaged in mediation with the plaintiffs but was unable to resolve the matter. The Plaintiffs filed a Motion for Summary
Judgment alleging that the leases terminated prior to any production occurring. The Court denied the motion. A trial date has been set
for June 1, 2009. The Company will defend the case 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. A determination of the invalidity of the lease on the adjacent lands on which the Company has previously produced uranium could have a material adverse affect on the Company's financial
condition.

Other

On July 13, 2007, an employee of a drilling contractor engaged by the Company was killed when the drill rig on which he was
making repairs backed over him on lands owned by the Company. At the time of the incident the Contractor and the Decedent were not engaged in drilling activities rather they were performing
maintenance to the drilling rig. Decedent's heirs have filed claims against the drilling contractor and the Company in the 105th Judicial District Court, Kleberg County, Texas
asserting claims of negligence. We have filed a Denial of Plaintiff's claims. We have also filed a Motion for Summary Judgment seeking dismissal of the claims based on protections afforded landowners
under the Texas Civil Practice and Remedies Code. The Court has yet to rule on the pending Motion. Our insurance carrier is defending the matter on our behalf. We believe we have meritorious defenses
to the claims and that, in any event, we have adequate insurance to cover the matter.

The
Company is subject to periodic inspection by certain regulatory agencies for the purpose of determining compliance by the Company with the conditions of its licenses. In the ordinary
course of business, minor violations may occur; however, these are not expected to cause material expenditures.

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

None.

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Table of Contents

GLOSSARY OF CERTAIN URANIUM INDUSTRY TERMS

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.ore

Naturally occurring material from which a mineral or minerals of economic value can be extracted at a reasonable profit.


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Table of Contents

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 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.


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Table of Contents

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.


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Table of Contents

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Since April 12, 2007, our Common Stock has been listed on the NASDAQ Global Market under the symbol "URRE." Between
April 11, 2007 and October 15, 2004, our shares were quoted on the Over the Counter Bulletin Board and we were dually quoted on both the OTCBB and the Pink Sheets during those dates.

The
following table sets forth the high and low bid prices for our Common Stock as reported on the applicable markets for the periods indicated:

Common StockFiscal Quarter Ending

High

LowDecember 31, 2008

$
1.59

$
0.39September 30, 2008


3.44


1.57June 30, 2008


7.42


2.22March 31, 2008


12.64


5.71December 31, 2007


14.02


8.92September 30, 2007


11.32


7.06June 30, 2007


11.81


8.00March 31, 2007


8.75


4.40


As
of December 31, 2008, 55,955,549 shares of our Common Stock were outstanding. On that date, there were 139 holders of record.

On
March 29, 2006 the Board of Directors declared a 1 for 4 reverse stock split for stockholders of record on April 10, 2006. All of the common stock share information,
share price information and share ownership information in this Annual Report on Form 10-K has been revised to give effect to the reverse stock split. The split was approved by the
Company's Stockholders at the 2005 Annual Meeting of Stockholders.

Dividends

We have never paid any cash or other dividends on our Common Stock, and we do not anticipate paying dividends for the foreseeable
future.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2008 regarding equity compensation to the Company's employees,
officers and directors under equity compensation plans.

Plan category

Number of shares
issuable under
outstanding options
and rights

Weighted average
exercise price

Number of shares
available for
future issuanceEquity compensation plans approved by security holders


4,427,611

$
2.74


605,895Equity compensation plans not approved by security holders


735,984

$
0.80


Total


5,163,595

$
2.46


605,895


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Table of Contents

Performance Graph

The following chart compares the yearly changes in total stockholder return on the Company's common stock against two other measures of
performance. The comparison is on a cumulative basis for the Company's last five fiscal years. The two other performance measures are the Russell 2000 index and a peer group consisting of
CamecoCCJ, DenisonDNN, UranerzURZ, and Uranium EnergyUEC. In each case, we assumed an initial investment of $100 on December 31, 2003 and
reinvestment of all dividends. Dates on the following chart represent the last trading day of the indicated fiscal year.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

GRAPHIC

Recent Sales of Unregistered Securities.



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Table of Contents

Item 6.    Selected Financial Data.

The following tables provide selected financial and operating data for each of the fiscal years in the five-year period
ended December 31, 2008. The selected financial and operating data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of Operation" and the Company's financial statements and related notes included
elsewhere in this annual report. Historical results are not necessarily indicative of results to be expected in any future period.

For the Year Ended December 31,2008

2007

2006

2005

2004(In thousands except per share and per pound amounts)Uranium sales

$
18,551

$
31,143

$
8,581

$
4,865

$
1,009Cost of salesoperations


16,372


18,051


12,687


6,299


1,768(Gain) loss on derivatives








(34,821
)

30,975


13,112Writedown of uranium properties and exploration expenses


17,623


999


3,495





46Total cost of uranium sales


33,995


19,050


(18,639
)

37,274


14,926Earnings (loss) from operations before corporate expenses


(15,444
)

12,093


27,220


(32,409
)

(13,917
)Corporate expenses


11,553


11,768


6,791


3,209


2,006Earnings (loss) from operations


(26,996
)

325


20,429


(35,618
)

(15,923
)Interest and other, net


487


753


1,081


531


58Net income (loss)

$
(26,509
)
$
1,078

$
21,510

$
(35,087
)
$
(15,865
)Earnings (loss) per common share:Basic

$
(0.49
)
$
0.02

$
0.44

$
(0.96
)
$
(0.55
)Diluted

$
(0.49
)
$
0.02

$
0.42

$
(0.96
)
$
(0.55
)Net earnings (loss) per common share:Basic

$
(0.49
)
$
0.02

$
0.44

$
(0.96
)
$
(0.55
)Diluted

$
(0.49
)
$
0.02

$
0.42

$
(0.96
)
$
(0.55
)Weighted average common stock and equivalents outstanding:Basic


54,569


52,119


48,338


36,644


28,725Diluted


54,569


56,081


51,560


36,644


28,725CONSOLIDATED OPERATING AND OTHER DATACash provided by (used in) operations

$
1,042

$
11,294

$
(2,215
)
$
(1,722
)
$
(2,541
)Capital expenditures and investing activities


(11,016
)

(22,908
)

(31,906
)

(6,364
)

(4,777
)Financing activities


12,731


722


48,445


13,670


7,277Net increase (decrease) in cash and equivalents

$
2,757

$
(10,893
)
$
14,324

$
5,584

$
(41
)Pounds of uranium produced


301


417


259


310


76Pounds of uranium delivered


286


435


263


271


72Average sales price per pound

$
64.99

$
71.61

$
32.63

$
17.95

$
13.95Average cost of produced pounds sold

$
48.60

$
33.21

$
43.36

$
20.32

$
11.76Royalties/commissions per pound sold

$
5.99

$
6.98

$
2.92

$
1.31

$
0.94


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CONSOLIDATED BALANCE SHEET DATA

At December 31,2008

2007

2006

2005

2004(In thousands)Cash and cash equivalents

$
12,042

$
9,284

$
20,177

$
5,853

$
269Working capital


9,494


8,072


18,371


(16,370
)

(5,650Net property, plant and equipment


22,778


30,611


18,196


8,689


4,308Total assets


43,224


52,937


45,936


17,913


6,592Unrealized loss on derivatives











46,821


15,846Total debt


928


839


838


626


585Total liabilities


11,616


10,060


9,167


53,903


21,884Total shareholders' equity (deficit)

$
31,608

$
42,877

$
36,769

$
(35,990
)
$
(15,293
)


Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation.

Forward Looking Statements

This Item 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 identify
forward-looking statements. We do not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in
conjunction with our disclosures under the heading: "Risk Factors" beginning on page 9.

Overview

URI explores for and produces uranium in South Texas where it has three production operations: Kingsville Dome, Vasquez and Rosita. URI
also has an estimated 101.4 million pounds of in place mineralized uranium material on 183,000 acres in New Mexico. Our operations are heavily influenced by the price of uranium both on the
spot and long-tem markets. The spot price of uranium, which has fluctuated from a high of $136/lb in June 2007 to its recent price level of $43.75/lb, has been the primary driver of the
strategic decisions of the Company.

Our
strategy has been focused on two fronts: 1) advancing our New Mexico assets towards production, and 2) expanding our reserve base in Texas so we can continue to
generate cash from operations to sustain our efforts in New Mexico.

Throughout
2008, we have had to adjust our plans in response to changes in the uranium market. Operating margins from our production are impacted by uranium prices and costs. Although
uranium prices escalated rapidly from 2004 to 2007, so did costs. In 2008, while prices declined, costs did not, leading to a significant decrease in margins. As a result, in October 2008 we decided
to suspend new wellfield development at Kingsville and Rosita until sufficient margins can be made to justify the new investment required to bring on additional production.

South Texas Production:We produced 300,800 pounds of uranium from our South Texas operations in 2008. At December 31, 2008, we
had only two
operating wellfields remaining at Kingsville Dome that are expected to complete their production by the end of March 2009. Current activity at Kingsville Dome is primarily focused on the
restoration of depleted wellfields. The last wellfield at Vasquez was fully depleted in October 2008 and the project is now undergoing restoration. Production from Rosita was started in June 2008, but
was suspended in October 2008 due to poor economics driven by increased operating costs as a result of technical operating challenges and the decreased price of uranium.

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The Company believes it has sufficient in-place mineralized uranium material to produce a total of 300,000 to 500,000 pounds
U3O8 over a one to two year period should realized uranium prices recover to the level of $70 per pound U3O8, the current long-term uranium
price. A new wellfield typically requires 4 to 5 months to install and 9 to 12 months to mine out. The Company has deferred all activities for delineating or developing wellfields until
a stronger pricing environment is realized.

Reserve development:A significant portion of the cash on hand at December 31, 2008 was generated from the $12.9 million in
net
proceeds received from the sale of common stock and warrants in a private placement in May 2008. The equity was raised to fund the acquisition, exploration, permitting and development of new and
existing properties in South Texas to increase our resource base in an effort to extend production at our Texas operations beyond 2009 and for general corporate purposes.

During
2008, we conducted drilling activities on several of our exploration targets including 280 holes on the Marshall property, 100 holes at the South Rosita property and 13
holes on the Cooke property. We found significant mineralization on the Marshall property, however, further evaluations need to be completed to determine if this property can be mined by ISR methods.
We also have completed some initial drilling on the Mosser property. At Kingsville, we conducted exploration drilling on our potential extension to Production Area Authorization 2 (known as
PAA2 extension), but suspended drilling in the
fourth quarter due to poor results. A preliminary program to identify additional reserves within Production Area 3 have had mixed results to-date and have been put on hold.

Due
to higher costs, combined with geologic and technical risk and unknown market risk, we have chosen to suspend our exploration activities until the economics justify further activity.
We are seeking opportunities for the rights to potential uranium properties in South Texas in geographic areas that have historically held significant uranium resources. There is no assurance that we
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, 2008, 2007 and 2006

Production and production costs.Our uranium production was 300,800 pounds in 2008, 416,700 pounds in 2007 and 259,100 pounds in 2006.
Production
began at our Vasquez project in the fourth quarter of 2004 and reached peak production output in 2005. In 2006 and 2007 we saw a decline in Vasquez production and the start-up of
production from our Kingsville Dome project. This trend continued in 2007 and 2008. The start-up of production from Kingsville Dome wellfield 13 in January 2007, the first new production
from our Production Area 3 at Kingsville Dome resulted in the production increases in 2007 over our 2006 production output. In 2008, we placed five new wellfields into production at Kingsville Dome
and one new wellfield at Vasquez. These wellfields were less prolific than the wellfields produced in 2007. Three of the Kingsville Dome wellfields and the Vasquez wellfields were produced out in
2008. The remaining two wellfields at Kingsville Dome are expected to complete production by the end of March 2009.

Production
at our Rosita project began with oxygen injection in June 2008 and resulted in low levels of production using our standard in-situ recovery mining techniques. In
late July, we employed a series of alternative operational strategies including the use of various oxidants in an attempt to improve recovery levels. While these tests did improve production over
previous levels, the
higher cost of production combined with lower uranium prices did not allow the operation to continue on a positive cash basis and production was suspended in the 4th quarter of
2008. Although technically challenging, we believe the reserves from Rosita can be produced economically with higher uranium prices.

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We
completed production at the Vasquez project and shut-in production at the Rosita project in the 4th quarter of 2008 and we expect to
shut-in production at the Kingsville Dome project by the end of March 2009. The Vasquez project was mined out in 2008 and is now being restored. At the Kingsville Dome and Rosita projects,
we shut-in production to conserve the in-place reserve base in response to a drop in uranium market prices. We do not intend to resume production at these sites until there is
a significant recovery of uranium prices.

The
following table details our production and production cost breakdown for the year ended December 31, 2008, 2007 and 2006:

2008

2007

2006Kingsville Dome production


254,000


338,100


94,100Vasquez production


36,600


78,600


165,000Rosita production


10,200





Total production


300,800


416,700


259,100Total operating costs

$
7,173,000

$
7,510,000

$
6,280,000Per pound operating costs

$
23.84

$
18.02

$
24.23Total depreciation and depletion costs

$
7,165,000

$
6,078,000

$
6,018,000Per pound DD&A cost

$
23.82

$
14.59

$
23.23Total production cost

$
14,338,000

$
13,588,000

$
12,298,000Production cost per pound

$
47.66

$
32.61

$
47.46


Total
operating costs, total depreciation and depletion costs and total production costs incurred for the periods presented above differ from the cost of uranium sales recorded in
consolidated statements of operations because of changes in the amounts recorded to inventory for the same periods. The cost of
uranium sales amounts include the sales of uranium inventory on hand at the beginning of the period and does not include uranium produced during the period but not sold at period end.

The
following table provides a reconciliation of production costs to cost of uranium sales for the year ended December 31, 2008, 2007 and 2006:

2008

2007

2006Operating costs

$
7,173,000

$
7,510,000

$
6,280,000Change in uranium inventory


(508,000
)

682,000


(705,000
)Operating expense for uranium production sold

$
6,665,000

$
8,192,000

$
5,575,000Depreciation and depletion costs

$
7,165,000

$
6,078,000

$
6,018,000Change in uranium inventory


43,000


173,000


(191,000
)Depreciation and depletion for uranium production sold

$
7,208,000

$
6,251,000

$
5,827,000Total production costs

$
14,338,000

$
13,588,000

$
12,298,000Change in uranium inventory


(466,000
)

855,000


(896,000
)Direct cost of uranium production sold

$
13,872,000

$
14,443,000

$
11,402,000


Our
direct production costs in 2008 increased compared with 2007 costs. These total cost increases resulted from production being sourced from higher cost Kingsville Dome and Vasquez
wellfields in 2008 and from the unfavorable results we saw from our Rosita production in the current year.

Uranium Sales.In 2008, we sold a total of 285,500 pounds of uranium produced from our Kingsville Dome, Vasquez and Rosita projects,
resulting in
revenue of $18.5 million. In 2007, we sold a total of 434,900 pounds of uranium produced from our Kingsville Dome and Vasquez projects, resulting

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in
revenue of $31.1 million. In 2006, we sold a total of 263,000 pounds of uranium produced from our Kingsville Dome and Vasquez projects, resulting in revenue of $8.5 million.

Cost of Uranium Sales.Our direct production costs for uranium sales made in 2008, 2007 and 2006 was $13.9 million,
$14.4 million and
$11.4 million, respectively. The 2006 amounts were exclusive of a gain on derivatives of $34.8 million recorded in connection with our amended uranium sales contracts. Our total cost of
uranium sales is comprised of such production costs, including operating expenses, depreciation and depletion expenses, and also includes royalties and commissions related to our uranium sales,
amortization of our restoration and reclamation cost estimates, exploration costs incurred during the year and impairment provisions for uranium properties. The following table details our production
and royalties/commissions cost of uranium sales breakdown for the years ended December 31, 2008, 2007 and 2006:

2008

2007

2006Total pounds sold


285,500


434,900


263,000Total operating expenses

$
6,664,000

$
8,192,000

$
5,575,000Per pound operating expense

$
23.35

$
18.84

$
21.20Depreciation and depletion

$
7,208,000

$
6,251,000

$
5,827,000Per pound DD&A expense

$
25.25

$
14.37

$
22.16Direct cost of uranium production sold

$
13,872,000

$
14,443,000

$
11,402,000Direct cost of sales per pound

$
48.60

$
33.21

$
43.36Royalties and commissions

$
1,710,000

$
3,034,000

$
768,000Royalties and commissions per pound

$
5.99

$
6.98

$
2.92


Our
Kingsville Dome, Vasquez and Rosita projects all experienced higher production costs in 2008 than our production from Kingsville Dome and Vasquez in 2007. The higher costs at
Kingsville Dome and Vasquez were the result of production being sourced from lesser quality ore reserves and the wind-down of production at each of these projects during the year. As the
production life of a wellfield extends, the costs to produce those pounds is higher than when a wellfield is first placed into production. Since no new capital expenditures were made in the latter
part of the year to bring on new wellfields, there was no new lower cost production to offset the higher latter stage production we experienced at these two projects. The production difficulties we
experienced at Rosita forced us to try a number of non-standard methodologies in an attempt to increase our
production efficiencies. The costs incurred and the lack of significant progress in resolving our production inefficiencies at Rosita without committing to a capital expenditure program to increase
the number of production wells resulted in our high production costs at Rosita during the year. Our average cost of pounds sold in 2008 was $48.60 per pound with Kingsville Dome production
contributing approximately 85%, Vasquez pounds totaling approximately 12% and Rosita contributing approximately 3% of total pounds sold during the year.

We
saw an improvement in our overall production costs in 2007 compared with 2006. With the majority of our production in 2007 coming from new wellfields at our Kingsville Dome project,
we saw benefits of this historically lower cost production contributing significantly to reducing both our operating and capital costs of production in 2007. Our average cost of pounds sold in 2007
was $33.21 per pound with Kingsville Dome production contributing approximately 77% and Vasquez pounds totaling approximately 23% of the total pounds sold during the year.

Our
average cost of pounds sold was $43.36 for 2006. These costs resulted from our incurring both higher operating and capital costs in 2006 and were primarily caused by inefficiencies
at our Vasquez project. We encountered chemical and permeability obstacles in the Vasquez project's formation which caused us to attempt a variety of new operating techniques including the use of
different oxidizing components and more concentrated drilling patterns for our wellfields. These and other attempted solutions did not have the desired effect of increasing the production rates and
reducing our operating

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and
capital costs at Vasquez. The cost of pounds sold includes operating expenses and depreciation and depletion. These costs for 2006 include a cumulative $1.5 million related to lower of cost
or market inventory adjustments made quarterly. The adjustments resulted from the book carrying value of our uranium inventory exceeding the expected market value of the inventory. These adjustments
had the effect of reducing the carrying value of the uranium inventory and accelerating the timing of recording operating expenses and depreciation and depletion recorded in the statement of
operations for each quarter. The cost of goods sold for 2006 exclude $761,000 ($17.77 per pound) from a lower of cost or market adjustment made in December 2005 for 42,900 pounds of Vasquez inventory
at that date that were sold in the first quarter of 2006.

Royalties and Commissions.During 2008, royalties and commissions 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. During
2006, royalties and commissions for Vasquez and Kingsville Dome production sold was $768,000, or 9.0% of sales. The changes in royalty percentages from 2008 to 2007 and 2006 resulted primarily from
the changes in uranium sales prices year to year and the source for our production in each year. Our Vasquez leases contain a sliding scale royalty with percentages that range from 6.25% up to 10.25%
dependent on our sales prices. The increase in royalties from 2006 to 2007 resulted from production activities in 2007 at our Kingsville Dome project from leases which have a 6.25% royalty and carry
an additional 3.125% royalty payment to certain land owners of the property
which have ratified lease agreements with the Company. Our Rosita leases contain 11.25% royalty rates.

Operating Expenses.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 Rosita project, which were charged to operations. During 2007, operating expenses for Vasquez and Kingsville Dome production sold was
$7.9 million. In 2007 we incurred $336,000 of stand-by costs at the Rosita project, such costs were charged to operations. During 2006, operating expenses for Vasquez and Kingsville
Dome production sold was $5.5 million. In 2006 we incurred $64,000 of stand-by costs at the Rosita project, such costs were charged to operations.

Depreciation and Depletion.During 2008, we incurred depreciation and depletion expense attributable to our Kingsville Dome, Vasquez
and Rosita
production of $7.2 million. During 2007, we incurred depreciation and depletion expense attributable to our Vasquez and Kingsville Dome production of $6.2 million. During 2006, we
incurred depreciation and depletion expense attributable to our Vasquez and Kingsville Dome production of $5.8 million.

Impairment of Uranium Properties.During 2008, 2007 and 2006, we determined the carrying value of our uranium project assets exceeded
their fair
value as provided in SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". Such determination in 2008 resulted in an impairment provision of
$16.0 million. The impairment provision reduced the carrying 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 and 2006 resulted primarily from our reducing the estimated recoverable reserves projected to be produced from Vasquez in the future and
resulted in an impairment provision related to the Vasquez project assets of approximately $651,000 and $3.2 million in 2007 and 2006, respectively.

Accretion and Amortization of Future Restoration Costs.During 2008, 2007 and 2006, the accretion and amortization of future
restoration costs was
$790,000, $574,000 and $517,000, respectively.

General and Administrative Charges.We incurred general and administrative charges and corporate depreciation of $11.6 million,
$11.8 million and $6.8 million in 2008, 2007 and 2006, respectively.

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Significant expenditures for general and administrative expenses for year ended December 31, 2008, 2007 and 2006 were:

Year Ended2008

2007

2006(Amounts in 000's)Stock compensation expense

$
2,154

$
4,047

$
2,422Salaries and payroll burden


3,165


2,847


1,570Legal, accounting, public company expenses


1,428


1,622


1,317Writeoff of target acquisition costs

$
1,422





Insurance and bank fees


703


646


406Consulting and professional services


1,481


1,582


563Office expenses


660


535


292Travel and other expenses


392


391


185Total

$
11,405

$
11,670

$
6,755


The
non-cash compensation expense recorded for the years ended December 31, 2008, 2007 and 2006 resulted from the adoption of SFAS 123(R) in January 2006,
requiring the recognition of expense related to the Company's stock option grants. The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted was
derived from historical data on our employee exercise and post-vesting employment termination experience. The expected volatility was based on the historical volatility of our stock.

Salary
and payroll costs were up slightly in 2008 compared with 2007. The $318,000, or 11% increase resulted primarily from increased personnel and benefits and a reduction in personnel
costs allocated to operations and projects during the current year. Salary and payroll cost increases of $1.3 million in 2007 compared with resulted primarily from the addition of 21 salaried
positions primarily in South Texas and New Mexico during the year and the cash bonus' awarded to non-executive employees at year end 2007.

The
Company's legal, accounting and public company expenses had a net decrease of $194,000 in 2008 compared with 2007. The decrease related to lower Sarbanes-Oxley Section 404
("SOX 404") audit related costs in 2008 and NASDAQ listing fees, decreased directors' fees and costs related to the preparation for a planned listing on the Toronto Stock Exchange incurred in
2007. The Company's legal, accounting and public company expenses had a net increase of $306,000 in 2007 compared with 2006. The primary increases in these costs were from SOX 404 audit related costs,
NASDAQ listing fees, higher directors fees related to the addition of two independent directors during 2007 and an increased directors participation in strategic planning activities and costs related
to the preparation for a planned listing on the Toronto Stock Exchange. These increased costs were somewhat offset by a reduction of legal costs charged to general and administrative costs during the
year. The primary reduction related to a significant amount of legal activity in 2006 related to the negotiation and preparation of the joint venture in New Mexico with Itochu Corporation. The
Company's legal, accounting and public company expenses increased for the year from the increase in transactions and activities occurring in 2006 compared to 2005. Such activities included the
renegotiation of the Company's long-term sales contracts, the negotiation of a joint venture in New Mexico with Itochu Corporation, increased costs to conduct the annual shareholder
meeting, an increase in the number of Board of Directors meetings and preparation of the Company's NASDAQ application listing.

Insurance
costs increased in 2008 compared to 2007 primarily as a result of an increase in our directors and officers liability premiums which rose during the year primarily as a result
of increased

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coverage
limits in 2008 compared with the prior year. Insurance costs increased in 2007 compared to 2006 primarily as a result of an increase in our general liability premiums, these premiums rose
during the year as a result of increases in production activities seen in 2007 compared with the prior year. We also had increases in our property and casualty premiums resulting from increased
vehicle coverage because additional vehicles acquired in 2007. Bank fees also increased in 2007 as a result of additions made to our financial surety requirements for our South Texas uranium projects.

The
2008 costs for consulting and professional services decreased by $101,000 compared with 2007 and was related primarily to a reduction in costs for financial advisory services
provided by a non-employee director of the Company in 2007 ($80,000). The 2007 costs for consulting and professional services increased by $1.0 million compared with 2006. The
increased costs were a result of heightened activities involving work performed to review and assess our New Mexico property data bases for their evaluation as potential conventional mining projects
($160,000), the expansion of a
broad community relations and community information education effort in both South Texas and New Mexico ($521,000), investor relations costs ($104,000), costs for financial advisory services provided
by a non-employee director of the Company ($80,000) and other advisory fees in Texas ($150,000).

Increased
office costs in 2008 compared with 2007 resulted primarily from the full year costs of the Lewisville, Texas and Albuquerque, New Mexico offices offset by cost reductions
realized by the closure of the Corpus Christi office mid-year 2008. Increased office costs in 2007 compared with 2006 resulted primarily from the opening of a new corporate office location
in Albuquerque, New Mexico, in October, 2007, the move of the corporate headquarters to larger office space in September 2007, the costs for the Corpus Christi office for the entire year and increases
in the South Texas Kingsville operations office resulting from 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 our agreement
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-acquisition cost asset. Upon the termination of the agreement these pre-acquisition costs were expensed in 2008.

Net Income (Loss).For the year ended December 31, 2008 we had a net loss of $26.5 million compared to a net income of
$1.1 million in 2007 and net income of $21.5 million in 2006. On a diluted per share basis, losses were ($0.49) in 2008 compared with earnings of $0.02 and $0.42 in 2007 and 2006,
respectively. The 2008 results include an impairment provision for the Kingsville Dome, Vasquez and Rosita projects of $16.0 million and exploration charges of $1.6 million. The 2007
results include an impairment provision for the Vasquez project of $651,000 and exploration charges of $347,000. Included in 2006 results was a non-cash gain on derivatives of
$34.8 million somewhat offset by a non-cash impairment provision for the Vasquez project of $3.3 million and exploration charges of $235,000.

Cash Flow.As of December 31, 2008 we had a cash balance of approximately $12.0 million compared with approximately
$9.3 million
and $20.2 million at December 31, 2007 and 2006, respectively.

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

In
2008, we generated $1.0 million of cash flow from operations, resulting from our uranium production activities during the year.

We
also 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,

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delineation
and development 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 million at the Rosita project during 2008. Costs at the Vasquez project were $355,000 in 2008 and were primarily for wellfield development and land holding
costs and we spent approximately $478,000 for evaluation and delineation activities at the Company's Rosita South project during 2008.

In
2007, we generated $11.3 million of cash flow from operations, resulting primarily from our increased production and reduced production costs realized incurred during the year.

We
also 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 and development costs of $6.5 million and plant and equipment additions of $1.3 million at Kingsville Dome. Wellfield evaluation and development
costs were $2.6 million and plant and equipment additions totaled $1.8 million at the Rosita project during 2007. Costs for wellfield development and plant and equipment totaled
$1.2 million at the Vasquez project in 2007 and we spent approximately $1.3 million for evaluation and delineation activities at the Company's Rosita South project.

In
2007, we generated $1.0 million from the issuance of 514,000 shares from the exercise of employee stock options.

In
2006, we had a negative cash flow from operations of $2.2 million, resulting primarily from our low production volumes coupled with high production costs incurred during the
year. We also used $31.9 million in investing activities, the largest component of which was the payment of $12.0 million to one of our customers in connection with the restructuring of
our uranium sales contract. Other significant investing activities were for production start-up capital at Kingsville Dome of $10.4 million, additional wellfield development at
Vasquez of $3.4 million, Rosita project expenditures of $2.8 million, other Texas property and other assets of $1.7 million and other property additions in New Mexico of $396,000.

In
2006, we raised net proceeds of approximately $48.2 million through the sale of 10,200,307 shares at $4.90 per share in April 2006 and $458,000 from the issuance of
229,000 shares from the exercise of employee stock options.

LiquidityCash Sources and Uses for 2009

As of December 31, 2008, the Company had $12.0 million in cash. A significant portion of the cash on hand at
December 31, 2008 was generated from the $12.8 million in net proceeds received from the sale of common stock and warrants in a private placement in May 2008.

The
Company generated $1.0 million in cash from operations during 2008. Given falling sales prices coupled with higher production costs, the company decided to suspend the
development of new wellfields at Kingsville Dome and Rosita as of October 2008. As such, sales revenue for the Company will be limited to the remaining production that is expected to be completed by
the end of March 2009.

In
the second half of 2008, we took significant steps to decrease our cost structure by implementing tighter spending controls, closing two offices, reducing employment, limiting
exploration activities, and reducing public and government relations activities in New Mexico and Texas. Our objective is to reduce our cash requirements to a level that allows us to sustain our
reclamation activities and continue the requisite activities in New Mexico to advance our projects toward production without needing outside sources of capital over the next eighteen to
twenty-four months.

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During
2008, we invested $10.5 million primarily for exploration and development on our South Texas Properties and $296,000 on activities associated with evaluation, analysis and
preservation of the New Mexico data we own related to our New Mexico uranium properties.

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial
instruments for financial statement reporting purposes and are recorded on the balance sheet at fair value at December 31, 2005.

The
Company amended these contracts in March 2006 and determined that the terms of the amended contracts substantially eliminated their qualification as derivatives.

We
recorded a gain on derivatives in 2006 of $34.8 million compared to a loss of $30.9 million in 2005. The gain in 2006 resulted from March 2006 amended sales contracts.
The terms of such contracts are summarized in "BusinessLong Term Delivery Contracts".

Contingent Liabilities

In May 2008, the Company completed the sale of 3,295,920 shares of common stock to accredited investors at a price of $4.34 per share
and warrants to purchase 988,771 additional shares of common stock, at a price of $5.78. These warrants expire 60 months after issuance and are exercisable immediately. In addition, ratchet
warrants to purchase shares of common stock at $0.01 per share were issued as part of the private placement. The ratchet warrants are triggered and become immediately exercisable in the event that the
Company should issue shares of Common Stock at a price below $4.34 per share. The number of shares that may be purchased upon the exercise of the ratchet warrants is determined by a formula that
results in the effective price paid by the investors in this offering being equal to the price paid in a subsequent below $4.34 per share offering. The ratchet warrants expire on the earlier of
12 months following issuance, or ten days after the consummation of the sale of shares of the Company's common stock which raises in one or more transactions at least $80 million in
gross proceeds.

The
Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares. Such shares are subject to certain resale registration
rights that would include penalties in the event the registration statement fails to remain effective. At December 31, 2008, the Company's registration statement was and remains effective.

Off Balance Sheet Arrangements

The Company has obtained financial surety relating to certain of its future restoration and reclamation obligations as required by the
State of Texas regulatory agencies. The Company has bank Letters of Credit (the "L/C's) and performance bonds issued for the benefit of the Company to satisfy such regulatory requirements. The L/C's
were issued by Bank of America and the performance bonds have been issued by United States Fidelity and Guaranty Company ("USF&G"). L/C's for $5,629,000, $5,360,000 and $2,072,000 at
December 31, 2008, 2007 and 2006, respectively such L/C's are collateralized in their entirety by certificates of deposit.

Performance
bonds totaling $2,835,000 were issued for the benefit of the Company at December 31, 2008, 2007 and 2006. USF&G has required that the Company deposit funds
collateralizing a portion of the bonds. The amount of bonding issued by USF&G exceeded the amount of collateral by $2.5 million at December 31, 2008, 2007 and 2006, respectively. In the
event that USF&G is required to perform under its bonds or the bonds are called by the state agencies, the Company would be obligated to pay any expenditure in excess of the collateral.

51

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Table of Contents

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated financial statements on
page F-8 of this Form 10-K. We believe our most critical accounting policies involve those requiring the use of significant estimates and assumptions in
determining values or projecting future costs.

Specifically
regarding our uranium properties, significant estimates were utilized in determining the carrying value of these assets. These assets have been recorded at their estimated
net realizable value for impairment purposes on a liquidation basis, which is less than our cost. The actual value realized from these assets may vary significantly from these estimates based upon
market conditions, financing availability and other factors.

Regarding
our reserve for future restoration and reclamation costs, significant estimates were utilized in determining the future costs to complete the groundwater restoration and
surface reclamation at our mine sites. The actual cost to conduct these activities may vary significantly from these estimates.

Such
estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period.

The
accounts of the Company are maintained in United States dollars. All dollar amounts in the financial statements are stated in United States dollars except where indicated.

Impact of Recent Accounting Pronouncements

Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock.In June 2008, the FASB issued EITF
Issue
No. 07-5, EITF 07-Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock("EITF 07-5") which is effective for financial statements for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Issue
addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. EITF 07-05 does not permit early adoption for an existing instrument.
The Company has not completed its analysis of these instruments nor determined the effects of pending adoption, if any, on its financial statements.

Derivative Instruments and Hedging Activities.In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative
Instruments and
Hedging Activities an amendment of FASB Statement No. 133". The new standard requires additional disclosures regarding a company's derivative instruments and hedging activities by requiring
disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. The standard is effective for our fiscal year and interim periods within such year, beginning
January 1, 2009, with early application encouraged. The impact from this standard is not expected to have a material impact on our current disclosures.

Noncontrolling Interests in Consolidated Financial Statements.In December 2007, the FASB issued SFAS No. 160,
"Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51," which establishes new standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned
consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated
as a separate component of equity, not as a liability; that increases and decrease in the parent's ownership interest that leave control intact be treated as equity transactions, rather than as step
acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This
standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 is effective beginning January 1, 2009. The provisions of the standard are to be applied
to all

52

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Table of Contents

NCIs
prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively to all periods presented. The Company does not expect the future impacts and
disclosures of this standard to have a material effect on its financial statements or disclosures.

Business Combinations.In December 2007, the FASB issued SFAS No. 141R, "Business Combinations," which changes how business
acquisitions are
accounted for. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes
the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among
other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from
acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, in-process research and development, indemnification assets,
and tax benefits. SFAS No. 141R is effective for business combinations and adjustments to an acquired entity's deferred tax asset and liability balances occurring after December 31,
2008. The Company does not expect a material impact upon adoption, and will apply SFAS No. 141R to any future acquisitions as they occur.

Fair Value Option for Financial Assets and Liabilities.In February 2007, the FASB issued SFAS No. 159, "The Fair Value
Option for Financial
Assets and Financial Liabilities," which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We have adopted SFAS 159 and we do not plan to implement the fair value option provided in SFAS No. 159.

Fair Value Measurements.In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which provides a
common definition for
the measurement of fair value for use in applying generally accepted accounting principles in the United States of America and in preparing financial statement disclosures. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. We adopted SFAS No. 157, on January 1, 2008, and did not have a material impact on our financial condition, results
of operations or cash flows. On February 8, 2008, the FASB issued Staff Position 157-2, "Effective Date of FASB 157" (FSP 157-2) which partially deferred the
provisions of FAS 157 to annual periods beginning after November 15, 2008 for non-financial assets and liabilities. Non-financial assets include fair value
measurements associated with business acquisitions and impairment testing of tangible and intangible assets. We do not believe the adoption of SFAS 157 will have a material effect on our
non-financial assets and liabilities in our consolidated financial statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

Uranium Price Volatility

The Company is subject to market risk related to the market price of uranium. The Company's cash flow has historically been dependent
on the price of uranium, which is determined primarily by global supply and demand, relative to the Company's costs of production. Historically, uranium prices have been subject to fluctuation, and
the price of uranium has been and will continue to be affected by numerous factors beyond the Company's control, including the demand for nuclear power, political and economic conditions, and
governmental legislation in uranium producing and consuming countries and production levels and costs of production of other producing companies.

The
spot 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
and are $43.75 as of March 2, 2009.

53

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Table of Contents

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial
instruments for financial statement reporting purposes and are recorded on the balance sheet at fair value at December 31, 2005.

The
Company amended these contracts in March 2006 and determined that the terms of the amended contracts substantially eliminated their qualification as derivatives.

We
recorded a gain on derivatives in 2006 of $34.8 million compared to a loss of $30.9 million in 2005. The gain in 2006 resulted from March 2006 amended sales contracts.
The terms of such contracts are summarized in "BusinessLong Term Delivery Contracts".

Item 8.    Financial Statements and Supplementary Data.

Financial Statements

The financial statement information called for by this item appears on pages F-1 through F-32.

Supplementary Financial Data Tables

SUPPLEMENTARY FINANCIAL DATA        (UNAUDITED)

For the Quarter Ended(1)12/31/2008

9/30/2008

6/30/2008

3/31/2008

12/31/2007

9/30/2007

6/30/2007

3/31/2007(Amounts in Thousands)Uranium sales

$
2,196

$
4,025

$
6,598

$
5,732

$
8,219

$
10,387

$
7,963

$
4,574Earnings (loss) from operations


(7,617
)

(14,152
)

(3,253
)

(1,974
)

(1,044
)

1,939


973


(1,542
)Net earnings (loss)


(7,547
)

(14,016
)

(3,109
)

(1,837
)

(840
)

2,155


1,183


(1,420
)Net earnings (loss) per common share:(2)Basic

$
(0.15
)
$
(0.25
)
$
(0.06
)
$
(0.03
)
$
(0.02
)
$
0.04

$
0.02

$
(0.03
)Diluted

$
(0.15
)
$
(0.25
)
$
(0.06
)
$
(0.03
)
$
(0.02
)
$
0.04

$
0.02

$
(0.03
)


---

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its
filings with the Securities and Exchange Commission (SEC) are recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms, and that such information is
accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the
definition of "disclosure controls and procedures" as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In designing
and evaluating the disclosure controls and procedures, management has recognized that any controls and procedures, no matter how well designed and operated, can provide only

54

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reasonable
assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating its controls and procedures.

During
the fiscal period covered by this report, the Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out
an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have certified that our disclosure controls and
procedures were effective as of December 31, 2008.

Management's Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed, under the supervision of the Company's
Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company's internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

The
Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2008. This evaluation was based on the framework in
"Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). All internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP.

Based
on the Company's evaluation under the framework inInternal ControlIntegrated Framework, our Chief Executive Officer
and Chief Financial Officer concluded that internal control over financial reporting was effective as of December 31, 2008.

The
Company's independent auditors, Hein & Associates, LLP, with direct access to the Company's Board of Directors through its Audit Committee, have audited the
consolidated financial statements prepared by the Company. Their report 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 financial reporting appears on the following page.

55

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors
Uranium Resources, Inc.
Lewisville, TX 75067

We
have audited Uranium Resources, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Uranium Resources, Inc.'s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Uranium Resources, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Uranium Resources, Inc.
as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years ending December 31, 2008 and our
report dated March 10, 2009 expressed an unqualified opinion.

HEIN & ASSOCIATES LLP

Dallas,
Texas
March 10, 2009

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Table of Contents

Item 9B.    Other Information.

None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference in our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2008.

Item 11.    Executive Compensation.

The information required by this item is incorporated by reference in our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2008.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference in our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2008.

Item 13.    Certain Relationships and Related Transactions and Director Independence.

The information required by this item is incorporated by reference in our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2008.

Item 14.    Principal Accountant Fees and Services.

The information required by this item is incorporated by reference in our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2008.

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

See Index to Exhibits on page E-1 for a listing of the exhibits filed as part of this Annual Report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:
March 11, 2009

URANIUM RESOURCES, INC.By:

/s/ DAVID N. CLARK David N. Clark,President and
Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Signature

Date/s/ PAUL K. WILLMOTT Paul K. Willmott, Director and Chairman

March 11, 2009/s/ DAVID N. CLARK David N. Clark Director, President and Chief Executive Officer

March 11, 2009/s/ THOMAS H. EHRLICH Thomas H. Ehrlich, Vice PresidentFinance and Chief Financial Officer
(Principal Financial and Accounting Officer)

March 11, 2009/s/ LELAND O. ERDAHL Leland O. Erdahl,Director

March 11, 2009/s/ TERENCE J. CRYAN Terence J. Cryan,Director

March 11, 2009/s/ MARVIN K. KAISER Marvin K. Kaiser,Director

March 11, 2009


58

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Table of Contents

URANIUM RESOURCES, INC. AND CONSOLIDATED SUBSIDIARIES    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements For The Years Ended December 31, 2008, 2007 and 2006



Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets

F-3Consolidated Statements of Operations

F-5Consolidated Statements of Common Shareholders'
Equity

F-6Consolidated Statements of Cash Flows

F-7Notes to Consolidated Financial Statements

F-8


The
following consolidated financial statements are presented reflecting the effects of the 1 for 4 reverse split effective April 10, 2006.

F-1

---





Table of Contents

Report of Independent Registered Public Accounting Firm

To
the Board of Directors
Uranium Resources, Inc.
Lewisville, TX 75067

We
have audited the consolidated balance sheets of Uranium Resources, Inc. as of December 31, 2008 and 2007 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Uranium Resources, Inc. as of
December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally
accepted accounting principles.

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

Hein &
Associates, LLP
Dallas, TX
March 10, 2009

F-2

---





Table of Contents

URANIUM RESOURCES, INC.        CONSOLIDATED BALANCE SHEETS        ASSETS

December 31,2008

2007Current assets:Cash and cash equivalents

$
12,041,592

$
9,284,270Receivables, net


40,360


2,652,574Uranium inventory


1,213,927


748,452Prepaid and other current assets


513,489


720,357Total current assets


13,809,368


13,405,653Property, plant and equipment, at cost:Uranium properties


85,095,067


88,289,570Other property, plant and equipment


898,933


821,811Lessaccumulated depreciation, depletion and impairment


(63,215,677
)

(55,736,530
)Net property, plant and equipment


22,778,323


33,374,851Other assets





73,302Long-term investment:Certificate of deposit, restricted


6,636,715


6,083,076$
43,224,406

$
52,936,882


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

F-3

---





Table of Contents

URANIUM RESOURCES, INC.        CONSOLIDATED BALANCE SHEETS        LIABILITIES AND SHAREHOLDERS' EQUITY

December 31,2008

2007Current liabilities:Accounts and short term notes payable

$
1,169,293

$
2,157,475Current portion of restoration reserve


1,660,422


1,124,504Royalties and commissions payable


719,542


1,131,636Accrued interest and other accrued liabilities


607,975


709,400Current portion of capital leases


158,068


210,616Total current liabilities


4,315,300


5,333,631Other long-term liabilities and deferred credits


6,531,378


4,097,327Long-term capital leases, less current portion


320,108


178,665Other long-term debt


450,000


450,000Commitments and contingencies (Notes 2, 3, 5, 8, 11 and 13)Shareholders' equity:Common stock, $0.001 par value, shares authorized: 200,000,000; shares issued and outstanding (net of treasury shares): 200855,955,549;
200752,305,129;


55,994


52,343Paid-in capital


146,518,753


131,282,687Accumulated deficit


(114,957,709
)

(88,448,353
)Less: Treasury stock (38,125 shares), at cost


(9,418
)

(9,418
)Total shareholders' equity


31,607,620


42,877,259$
43,224,406

$
52,936,882


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

F-4

---





Table of Contents

URANIUM RESOURCES, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,2008

2007

2006Revenues:Uranium sales

$
18,551,065

$
31,142,689

$
8,580,799Total revenue


18,551,065


31,142,689


8,580,799Costs and expenses:Cost of uranium sales:Royalties and commissions


1,709,748


3,033,811


767,788Operating expenses


6,664,341


8,192,378


5,574,926Accretion/amortization of restoration reserve


790,204


573,581


516,956Depreciation and depletion


7,207,719


6,251,359


5,827,464Gain on derivatives








(34,820,947
)Writedown of uranium properties


15,992,623


651,407


3,260,201Exploration expenses


1,630,043


347,221


234,646Total (gain on) cost of uranium sales


33,994,678


19,049,757


(18,638,966
)Earnings (loss) from operations before corporate expenses


(15,443,613
)

12,092,932


27,219,765Corporate expenses:General and administrative (includes stock compensation expense of $2,154,000, $4,047,000 and $2,422,000 in 2008, 2007 and 2006,
respectively)


11,405,169


11,670,138


6,755,532Depreciation


147,561


97,920


35,542Total corporate expenses


11,552,730


11,768,058


6,791,074Earnings (loss) from operations


(26,996,343
)

324,874


20,428,691Other income (expense):Interest expense


(43,549
)

(24,914
)

(16,204
)Interest and other income, net


530,536


777,574


1,097,236Net income (loss)

$
(26,509,356
)
$
1,077,534

$
21,509,723Net income (loss) per common share:Basic

$
(0.49
)
$
0.02

$
0.44Diluted

$
(0.49
)
$
0.02

$
0.42


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

F-5

---





Table of Contents

URANIUM RESOURCES, INC.        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common StockTreasury StockShares

Amount

Paid-In Capital

Accumulated DeficitBalances, December 31, 2005


40,952,127

$
40,990

$
75,013,668

$
(111,035,610
)
$
(9,418
)Net income











21,509,723


Common stock issuance


10,200,307


10,200


49,675,960





Common stock issued for services


306,009


306


(1,499,751
)




Common stock issued for debt conversion


103,896


104


182,752





Stock compensation expense








2,422,281





Common stock issued for stock option exercise


229,000


229


457,961





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
)


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

F-6

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Table of Contents

URANIUM RESOURCES, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,2008

2007

2006Cash flows from operations:Net income (loss)

$
(26,509,356
)
$
1,077,534

$
21,509,723
)Reconciliation of net income (loss) to cash used in operationsGain on derivatives








(34,820,947
)Accretion/amortization of restoration reserve


790,204


573,581


516,956Depreciation and depletion


7,355,280


6,349,278


5,863,006Writedown of uranium properties and exploration expenses


15,992,623


998,628


3,260,201Decrease in restoration and reclamation accrual


(840,416
)

(1,296,047
)

(886,987
)Stock compensation expense


2,154,281


4,047,326


2,422,281Write-off of target acquisition costs


1,422,410





Other non-cash items, net


78,521


1,097


16,130Effect of changes in operating working capital items(Increase) decrease in receivables


2,612,214


(1,939,045
)

(680,589
)(Increase) decrease in inventories


(508,342
)

682,635


(705,132
)(Increase) decrease in prepaid and other current assets


(43,585
)

(349,276
)

51,008(Increase) decrease in payables and accrued liabilities


(1,462,326
)

1,148,075


1,239,373Net cash provided by (used in) operations


1,041,508


11,293,786


(2,214,977
)Investing activities:Increase in certificate of deposit, restricted


(553,639
)

(3,615,585
)

(1,179,080
)Derivative settlement








(12,000,000
)Additions to property, plant and equipmentKingsville Dome


(3,577,994
)

(8,042,794
)

(10,414,835
)Rosita


(4,471,110
)

(4,994,532
)

(2,767,801
)Vasquez


(354,600
)

(1,254,561
)

(3,405,581
)Rosita South


(477,912
)

(1,392,918
)

(502,646
)Church Rock


(421,484
)

(503,826
)

(304,632
)Crownpoint


(127,479
)

(164,300
)

(91,392
)Other property


(1,060,110
)

(2,951,622
)

(819,901
)Other assets/notes receivable


28,773


11,706


(420,034
)Net cash used in investing activities


(11,015,555
)

(22,908,432
)

(31,905,902
)Financing activities:Payments of borrowings


(261,867
)

(260,859
)

(199,971
)Issuance of common stock, net


12,993,236


983,004


48,644,905Net cash provided by financing activities


12,731,369


722,145


48,444,934Net increase (decrease) in cash and cash equivalents


2,757,322


(10,892,501
)

14,324,055Cash and cash equivalents, beginning of year


9,284,270


20,176,771


5,852,716Cash and cash equivalents, end of year

$
12,041,592

$
9,284,270

$
20,176,771


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

F-7

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Table of Contents

URANIUM RESOURCES, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2008 AND 2007

1. DESCRIPTION OF THE COMPANY

Uranium Resources, Inc. ("URI") was formed in 1977 and domesticated in Delaware in 1987. The Company is primarily engaged in the business of acquiring, exploring, developing and
mining uranium properties, using thein siturecovery ("ISR") or solution mining process. Historically, the primary customers of the Company have been
major utilities who utilize nuclear power to generate electricity. At present the Company owns both producing and undeveloped uranium properties in South Texas and undeveloped uranium properties in
New Mexico.

The
Company resumed uranium production in 2004 at its Vasquez project, in 2006 at its Kingsville Dome project and in the 3rd quarter of 2008 at its Rosita project,
each of such projects are located in South Texas. As a result of declining uranium market prices and high production costs, the Company announced its decision to cease further development of
additional wellfields and to curtail production from its South Texas projects as existing production wellfields from each project were depleted. Production at our Vasquez and Rosita projects were shut
down in the 4th quarter of 2008 and production was shut-in at the Kingsville Dome project in the February 2009. The Vasquez project was mined out in 2008 and is now
being restored. At the Kingsville Dome and Rosita projects, our production shut-in was done to conserve the in-place reserve base until higher prices can be realized.

Prior
to resuming Vasquez production, the Company had been in production stand-by since the first quarter of 1999 at its Kingsville Dome and Rosita projects. Groundwater
restoration and reclamation activities have been conducted at these two sites and are currently ongoing at each of the Kingsville Dome, Vasquez and Rosita projects.

Reverse Stock Split

On March 29, 2006 the Company's Board of Directors declared a 1 for 4 reverse stock split for shareholders of record on
April 10, 2006, effective April 11, 2006. The split was approved by shareholders at the 2005 Annual Meeting of Shareholders. All common stock share amounts, earnings per share data and
references to the common stock of the Company in these financial statements are stated on a post-split basis.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America and include the accounts of URI and its wholly owned subsidiaries (collectively "the Company"). All significant intercompany transactions have been eliminated in consolidation.

Inventories

Uranium and materials and supplies inventory for each of the Company's projects are valued at the lower of average cost or market.

F-8

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Uranium Properties

All acquisition and development costs (including financing, salary and related overhead costs) incurred in connection with the various
uranium properties are capitalized. Exploration and evaluation costs associated with uranium properties are expensed as incurred until such time that the existence of a commercially minable uranium
deposit is confirmed. All properties with significant acquisition or incurred costs are evaluated for their realizability on a property-by-property basis. Any impairment of such costs is
recognized through a reduction in the net carrying value of the asset. (See Note 4"Uranium PropertiesProperty Realizability") Depreciation and Depletion. Depletion of
uranium mineral interests, permits, licenses and related development costs are computed on a property-by-property basis using the units-of-production
method based on each project's pounds of recoverable uranium. The determination of the depletable base for each uranium mineral interest is calculated by the Company's professional geologists to
determine the estimated recoverable uranium to be produced over the projected life for each uranium mineral interest. Depreciation and depletion are provided on the investment costs, net of salvage
value, of the various uranium properties' production plants and related equipment using the estimated production life of the uranium reserves. During the periods that our facilities are not in
production, depletion on our mineral interests, permits, licenses and development properties are suspended. Depreciation and depletion of our plant facilities, machinery and equipment continues, at
significantly reduced amounts, in accordance with the level of stand-by activity being conducted at each site. Other ancillary plant equipment and vehicles are depreciated using a straight
line method based upon the estimated useful lives of the assets.

Other Property, Plant and Equipment

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

Capitalization of Interest

The Company capitalizes interest cost with respect to properties undergoing exploration or development activities that are not subject
to depreciation or depletion. The average interest rate on outstanding borrowings during the period is used in calculating the amount of interest to be capitalized. No interest was capitalized in the
twelve months ended December 31, 2008, 2007 and 2006. Total interest costs in these periods were $43,500 $24,900 and $16,000, respectively.

Restoration and Remediation Costs (Asset Retirement Obligations)

Various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water
quality for its mine projects to the pre-existing mine area average quality after the completion of mining. In August 2001, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 143, "Accounting for Asset Retirement Obligations," which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was
adopted January 1, 2003, when the Company recorded the estimated present value of reclamation liabilities and increased the carrying amount of the related asset, which resulted in a net

F-9

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

expense
for the cumulative effect of a change in accounting principle of $1,447,000. Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to
reflect
changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and remediation costs.

Future
reclamation and remediation costs are accrued based on management's best estimate at the end of each period of the costs expected to be incurred at each project. Such estimates
are determined by the Company's engineering studies calculating the cost of future of surface and groundwater activities.

During
the years ended December 31, 2008, 2007 and 2006 the Company increased its cash flow estimate for restoration and reclamation costs by $ 3,933,000, $967,900 and $543,700,
respectively.

Contingent LiabilitiesOff Balance Sheet Arrangements

The Company has obtained financial surety relating to certain of its future restoration and reclamation obligations as required by the
State of Texas regulatory agencies. The Company has bank Letters of Credit (the "L/C's) and performance bonds issued for the benefit of the Company to satisfy such regulatory requirements. The L/C's
were issued by Bank of America and the performance bonds have been issued by United States Fidelity and Guaranty Company ("USF&G"). L/C's for $5,629,000, $5,360,000 and $2,072,000 at
December 31, 2008, 2007 and 2006, respectively such L/C's are collateralized in their entirety by certificates of deposit.

Performance
bonds totaling $2,835,000 were issued for the benefit of the Company at December 31, 2008, 2007 and 2006. USF&G has required that the Company deposit funds
collateralizing a portion of the bonds. The amount of bonding issued by USF&G exceeded the amount of collateral by $2.5 million at December 31, 2008, 2007 and 2006, respectively. In the
event that USF&G is required to perform under its bonds or the bonds are called by the state agencies, the Company would be obligated to pay any expenditure in excess of the collateral.

Revenue Recognition for Uranium Sales

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

Earnings Per Share

Net earnings (loss) per common sharebasic has been calculated based on the weighted average shares outstanding during the
year and net earnings (loss) per common sharediluted has been calculated assuming the exercise or conversion of all dilutive securities. Due to net losses incurred for 2008 there were no
dilutive securities included in this year.

F-10

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
weighted average number of shares used to calculate basic and diluted earnings (loss) per share was 54,568,550 in 2008, 52,118,851 and 56,081,302 respectively in 2007 and 48,338,172
and 51,559,867 respectively in 2006. The difference in the number of weighted average shares used to calculate basic and diluted earnings per share in 2007 and 2006 resulted from potential common
stock issuances of shares related to the Company's stock option and deferred compensation plans. The potential Common Stock that was excluded from the calculation of diluted earnings per share was
5,961,583 in 2008.

Consolidated Statements of Cash Flows

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Additional
disclosures of cash flow information follow:

Year Ended December 31,2008

2007

2006Cash paid during the period for:Interest

$
43,600

$
24,900

$
13,600The following non-cash transactions occurred in 2008, 2007 and 2006 and such transactions are summarized as follows:The Company issued 115,250 shares of Common Stock in 2008 in satisfaction of the conversion of deferred compensation

$
92,200

$


$



In
connection with a private placement in April 2006, the Company paid a fee of $1,449,445 in cash and 306,009 shares of Common Stock to a placement agent.

In
March 2006, the Company issued 103,896 shares of Common Stock in connection with the conversion of the Convertible Notes described in Footnote 6.

During
2008, 2007 and 2006, the Company entered into capital leases and financings to acquire certain property plant and equipment totaling $301,000, $233,000 and $225,000. The balance
of the capital leases at December 31, 2008 was $478,000.

Cash Balances in Excess of Federally Insured Limits

The Company's cash balance at December 31, 2008 was $12.0 million and it maintains its cash accounts primarily with Bank
of America, N.A. The total cash balances 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 $11.6 million at December 31, 2008.

F-11

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restricted Cash

At December 31, 2008 and 2007, the Company had pledged certificates of deposit and money market accounts of $ 6,637,000 and
$6,083,000, respectively, in order to collateralize letters of credit required for future restoration and reclamation obligations related to the Company's South Texas production and development
properties. These funds are not readily available to the Company and are not included in cash equivalents.

Stock-Based Compensation

On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R),
"Share-Based Payment" ("FAS 123(R)"). The Company adopted FAS 123(R) using the modified prospective transition method. Under this method,
compensation cost recognized in 2006 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the
grant-date fair value estimated in accordance with the original provisions of FAS 123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R).

As
a result of adopting FAS 123(R), the Company'sEarnings from operationsandNet
earningsfor 2006 was $2.4 million ($0.05 per share) lower, than if we had continued to account for share-based compensation under APB 25 as we did in the
comparable prior year periods.

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial
instruments for financial statement reporting purposes and were recorded on the balance sheet at fair value at December 31, 2005 and 2004. Changes in the fair value of such derivatives recorded
on the balance sheet are recorded in the consolidated statements of operations in current earnings as they occur. Such changes in the Company's derivatives represent non-cash charges to
earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to
satisfy the deliveries under both of its long-term uranium sales contracts. See Footnote 5 "Contract CommitmentsSales Contracts" for discussion of renegotiated sales
contracts.

In
March 2006 we entered into a new contract with Itochu Corporation ("Itochu") and a new contract with UG U.S.A., Inc. ("UG") that supersede the prior contracts. Each of the new
contracts calls for delivery of one-half of our actual production from our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding
certain large potential exploration plays). The terms of such contracts are discussed in Footnote 5. "Contract CommitmentsSales Contracts". The Company has determined that the terms of
the amended contracts substantially eliminate their qualification as derivatives.

We
recorded a gain on derivatives in 2006 of $34.8 million, the gain resulted from changes in the contract terms of long-term uranium sales contracts that were
finalized in March 2006.

F-12

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions. Such estimates and assumptions may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Specifically regarding the Company's uranium properties,
significant estimates were utilized in determining the carrying value of these assets and in the case of producing and development properties the pounds of uranium to be recovered. The actual values
received from the disposition of these assets and the amount of uranium recovered from these projects may vary significantly from these estimates based upon market conditions, financing availability
and other factors.

Regarding
the Company's reserve for future restoration and reclamation costs, significant estimates were utilized in determining the future costs and timing to complete the groundwater
restoration and surface reclamation at the Company's mine sites. The actual cost to conduct these activities may vary significantly from these estimates.

Risks and Uncertainties

Historically, the market for uranium has experienced significant price fluctuations. Prices are significantly impacted by global supply
and demand, which is affected by the demand for nuclear power, political, and economic conditions, governmental legislation in uranium producing and consuming countries, and production levels and
costs of production of other producing companies. Increases or decreases in prices received could have a significant impact on the Company's future results of operations.

The
Company has outstanding surety bonds issued on its behalf by USF&G at December 31, 2008 and 2007. The Company has deposited funds collateralizing a portion of these bonds. In
the event that USF&G is required to perform under the bonds or the bonds are called by the state agencies, the Company would be obligated to pay USF&G for its expenditures in excess of the collateral.
See Footnote 2 "Summary of Significant Accounting PoliciesRestoration and Reclamation Costs" for further discussion.

Reclassifications

Certain reclassifications have been made to the prior years' financial statements to conform to the current year presentation. These
reclassifications had no effect on previously reported results of operations or retained earnings.

Impact of Recent Accounting Pronouncements

Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock.In June 2008, the FASB issued EITF
Issue
No. 07-5, EITF 07-Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock("EITF Issue No. 07-5") which is effective for financial statements for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The
Issue addresses the determination of whether an instrument (or an embedded

F-13

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

feature)
is indexed to an entity's own stock, which would qualify as a scope exception under SFAS 133,Accounting for Derivative Instruments and Hedging
Activities. EITF 07-05 does not permit early adoption for an existing instrument. The Company has not completed its analysis of these instruments nor
determined the effects of pending adoption, if any, on its financial statements.

Derivative Instruments and Hedging Activities.In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative
Instruments and
Hedging Activities an amendment of FASB Statement No. 133". The new standard requires additional disclosures regarding a company's derivative instruments and hedging activities by requiring
disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. The standard is effective for our fiscal year and interim periods within such year, beginning
January 1, 2009, with early application encouraged. The impact from this standard is not expected to have a material impact on our current disclosures.

Noncontrolling Interests in Consolidated Financial Statements.In December 2007, the FASB issued SFAS No. 160,
"Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51," which establishes new standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned
consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated
as a separate component of equity, not as a liability; that increases and decrease in the parent's ownership interest that leave control intact be treated as equity transactions, rather than as step
acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This
standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 is effective beginning January 1, 2009. The provisions of the standard are to be applied
to all NCIs prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively to all periods presented. The Company does not expect the future impacts and
disclosures of this standard to have a material effect on its financial statements or disclosures.

Business Combinations.In December 2007, the FASB issued SFAS No. 141R, "Business Combinations," which changes how business
acquisitions are
accounted for. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes
the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among
other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from
acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, in-process research and development, indemnification assets,
and tax benefits. SFAS No. 141R is effective for business combinations and adjustments to an acquired entity's deferred tax asset and liability balances occurring after December 31,
2008.

Fair Value Option for Financial Assets and Liabilities.In February 2007, the FASB issued SFAS No. 159, "The Fair Value
Option for Financial
Assets and Financial Liabilities," which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We have adopted SFAS 159 and we do not plan to implement the fair value option provided in SFAS No. 159.

F-14

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurements.In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which provides a common
definition for
the measurement of fair value for use in applying generally accepted accounting principles in the United States of America and in preparing financial statement disclosures. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. We adopted SFAS No. 157, on January 1, 2008, and did not have a material impact on our financial condition, results
of operations or cash flows. On February 8, 2008, the FASB issued Staff Position 157-2, "Effective Date of FASB 157" (FSP 157-2) which partially deferred the
provisions of FAS 157 to annual periods beginning after November 15, 2008 for non-financial assets and liabilities. Non-financial assets include fair value
measurements associated with business acquisitions and impairment testing of tangible and intangible assets. We do not believe the adoption of SFAS 157 will have a material effect on our
non-financial assets and liabilities in our consolidated financial statements.

3. LIQUIDITY

The Company's generated cash from operations for the year ended December 31, 2008 and 2007 of $1.0 million and $11.3 million, respectively. The Company's net cash
used in operations for the years ended December 31, 2006 was $2.2 million.

As
of December 31, 2008, the Company had $12.0 million in cash. With our current production in South Texas expected to be shut-in within the
1st quarter of 2009 we will have a limited amount of cash available from uranium sales in 2009. During 2009, we will be continuing to conduct groundwater restoration and
reclamation activities at each of the Kingsville Dome, Vasquez and Rosita projects, maintain those mineral rights we consider key to our future plans in South Texas and New Mexico and continue to
evaluate those non-core assets held by the Company for potential disposition. We project that with the cash on hand at December 31, 2008 plus the cash expected to be generated from
operations in 2009 that we will be able to maintain our liquidity through 2010.

4. URANIUM PROPERTIES

Property, Plant and Equipment

Property, Plant and
Equipment Balances (net)
At December 31,2008

2007Uranium plant

$
10,385,000

$
8,396,000Uranium wellfield development


0


9,675,000Permits and licenses


2,313,000


2,291,000Mineral rights


2,098,000


3,001,000Evaluation and delineation


2,463,000


2,743,000Vehicles/depreciable equipment


2,519,000


2,721,000Asset retirement obligations


1,732,000


2,764,000Other


819,000


1,307,000Total

$
22,329,000

$
32,898,000


F-15

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

4. URANIUM PROPERTIES (Continued)

Uranium Properties

Impairment of Uranium Properties

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate
that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of
the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected uranium
prices, production levels and operating costs of production and capital, based upon the projected remaining future uranium production from each project. The Company's estimates of future cash flows
are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, uranium
prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

At
December 31, 2008, we determined the carrying value of our project assets at each of our South Texas production locations exceeded their fair value as provided in
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A decline in the current and projected market price of uranium and an increase in the estimated production
costs for each of our South Texas projects resulted in a decrease in the estimated future cash flow to be generated from each site. Such determination resulted in an impairment provision of
approximately $16.0 million for the year. The impairment provision for 2008 was approximately $6.0 million for the Kingsville Dome project, $8.1 million for the Rosita project and
$1.8 million for the Vasquez project.

Kingsville Dome Property

The Kingsville Dome property consists of mineral leases from private landowners on about 2,354 gross and net acres located in central
Kleberg County, Texas. The leases provide for royalties based upon a percentage of uranium sales of 6.25% 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 minor exceptions, all the leases contain clauses that permit us to extend the leases not 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.

In
2006, the Company began production from new production areas and extended offers to pay a 6.25% royalty if certain landowners would ratify mineral leases covering these properties. At
December 31, 2008 approximately 50% of the ownership interest of the minerals had ratified the leases.

The
net carrying value of the property was approximately $7,934,000 at December 31, 2008. Such assets consisted plant buildings/uranium processing/drying facilities ($5,124,000),
asset retirement obligations ($1,445,000) and restoration and other equipment ($1,365,000). The net carrying value of the property was approximately $14,457,000 at December 31, 2007. Such
assets consisted of mineral rights ($658,000), permits/licenses ($344,000), plant buildings/uranium processing/drying facilities ($4,921,000), wellfield development ($6,283,000), asset retirement
obligations ($704,000) and restoration and other equipment ($1,547,000).

F-16

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

4. URANIUM PROPERTIES (Continued)

Vasquez Property

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

The
net carrying value of the property was approximately $1,024,000 at December 31, 2008. Such assets consisted of plant buildings/uranium processing/drying facilities ($305,000),
restoration and other equipment ($551,000) and asset retirement obligations ($168,000). The net carrying value of the property was approximately $2,081,000 at December 31, 2007. Such assets
consisted of mineral rights ($32,000), permits/licenses ($3,000), wellfield development ($255,000), plant buildings/uranium processing/drying facilities ($355,000), restoration and other equipment
($673,000) and asset retirement obligations ($763,000).

Rosita Property

The Rosita and Rosita South property consists of mineral leases from private landowners on about 2,075 gross and net acres (775 acres
in Rosita and 1,300 acres in Rosita South) located in north-central Duval County, Texas. The leases provide for sliding scale royalties based on a percentage 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 have expiration dates ranging from 2012 to 2015. We are holding these leases by payment of rentals ranging from $10 to $30 per acre.

The
net carrying value of the Rosita property at December 31, 2008 was approximately $5,562,000. Such assets consisted of plant buildings/uranium processing/drying facilities
($4,957,000), restoration and other equipment of ($487,000) and asset retirement obligations ($118,000). The net carrying value of the property at December 31, 2007 was approximately
$8,798,000. Such assets consisted of mineral rights ($774,000), permits/licenses ($82,000), plant buildings/uranium processing/drying facilities ($3,120,000), wellfield development ($3,138,000), asset
retirement obligations ($1,297,000) and other equipment of ($387,000).

South Rosita

In the fourth quarter of 2005, the Company entered into leases on approximately 1,300 acres in Duval County near its Rosita property.
Evaluation of the uranium mineralization of this property began in 2006 and continued in 2007.

The
net carrying value of the property at December 31, 2008 was approximately $2,645,000. Such assets consisted of mineral rights ($445,000), evaluation costs ($2,026,000) and
permits/licenses ($174,000). The net carrying value of the property at December 31, 2007 was approximately $2,167,000. Such assets consisted of mineral rights ($345,000), permits/licenses
($151,000) and evaluation costs ($1,671,000).

F-17

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

4. URANIUM PROPERTIES (Continued)

Church Rock Properties

The Church Rock project encompasses about 2,200 gross and net acres. The properties are located in McKinley County, New Mexico and
consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation. We own the
mineral estate in fee for both Section 17 and the Mancos properties. We own patented mining claims on Section 8.

The
surface estate on Section 17 is owned by the United States Government and held in trust for the Navajo Nation. We have royalty obligations ranging from 5% to
61/4% and a 2% overriding royalty obligation to the Navajo Nation for surface use agreements.

Permitting
activities are currently ongoing on both of these properties. The net carrying value of these properties was $1,736,000 and $1,315,000 at December 31, 2008 and 2007,
respectively and the assets consisted of mineral rights and permitting/licensing costs.

Crownpoint Property

The Crownpoint properties are located in the San Juan Basin, 22 miles northeast of our Church Rock deposits and 35 miles northeast of
Gallup, New Mexico, adjacent to the town of Crownpoint. The Properties consist of 619 gross and 521.8 net acres.

The
net carrying value of these properties was $902,000 and $775,000 at December 31, 2008 and 2007, respectively, and consisted primarily of mineral rights, permits/licenses and
plant buildings and equipment.

West Largo 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 within this acreage, including a uranium mineralized property called the West Largo and a uranium mineralized property called the Roca Honda.

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

The
Roca Honda property lies about 4 miles northwest of the town of San Mateo in McKinley County, New Mexico. We also own 36 unpatented mining claims encompassing approximately 640 acres
that are adjacent to the fee land. The net carrying value of the properties was $364,000 and $230,000 at December 31, 2008 and 2007, respectively.

5. CONTRACT COMMITMENTS

Sales Contracts

In March 2006 we entered into a new contract with Itochu and a new contract with UG that supersede the previously existing contracts
and provide for delivery of one-half of our actual production

F-18

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

5. CONTRACT COMMITMENTS (Continued)

from
our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding certain large potential exploration plays). The terms of such contracts are
summarized below.

The Itochu Contract.Under the Itochu contract all production from the Vasquez property will be sold at a price equal to the average
spot price for
the eight weeks prior to the date of delivery less $6.50 per pound, with a floor for the spot price of $37 and a ceiling of $46.50. Other Texas production will be sold at a price equal to the average
spot price for the eight weeks prior to the date of delivery less
$7.50 per pound, with a floor for the spot price of $37 and a ceiling of $43. On non-Vasquez production the price paid will be increased by 30% of the difference between actual spot price
and the $43 ceiling up to and including $50 per pound. If the spot price is over $50 per pound the price on all Texas production will be increased by 50% of such excess. The floor and ceiling and
sharing arrangement over the ceiling applies to 3.65 million pounds of deliveries, after which there is no floor or ceiling. Itochu has the right to cancel any deliveries on
six-month's notice.

In
December 2005 we entered into a joint venture with Itochu to develop our Church Rock property in New Mexico. See "Joint Venture for Church Rock
Property." Under the terms of the joint venture, both parties must make an investment decision after the completion of a feasibility study, which was completed at the end of
2006. The parties had extended the timing for making the preliminary investment decision to March 2, 2009. On March 6, 2009 we received notification that Itochu had made a negative
Preliminary Investment Decision for the Joint Venture which resulted in the termination of the Joint Venture. Such action eliminates the potential for reinstatement of the original delivery contracts
with Itochu for South Texas production. However, depending on spot market prices, our sales price may be reduced by up to $2.10 per pound on some of our South Texas production for future deliveries
under the contract.

The UG Contract.Under the UG contract all production from the Vasquez property and other Texas production will be sold at a price equal
to the
month-end long-term contract price for the second month prior to the month of delivery less $6 per pound until (i) 600,000 pounds have been sold in a particular delivery
year and (ii) an aggregate of 3 million pounds of Uranium has been sold. After the 600,000 pounds in any year and 3 million pounds total have been sold, UG will have a right of
first refusal to purchase other Texas production at a price equal to the average spot price for a period prior to the date of delivery less 4%. In consideration of UG's agreement to restructure its
previously existing contract, we paid UG $12 million in cash with funds raised in our equity offering completed in April 2006.

Derivative Financial Instruments

The Company determined that its long-term uranium sales contracts in effect prior to March 2006 met the definition of
derivative financial instruments for financial statement reporting purposes. Each of these contracts were amended in March 2006.

Both
of the amended contracts obligate the Company to deliver 50% of its uranium production to each customer, and is does not obligate the Company to deliver any uranium in excess of its
production. The Company has determined that at March 31, 2006 the terms of the amended contracts eliminated their qualification as derivatives and therefore, as of May 2006, are not required to
be

F-19

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

5. CONTRACT COMMITMENTS (Continued)

valued
at fair value. The amendment to these contracts resulted in a gain on derivatives recorded to the consolidated statements of operations of $34.3 million and $527,000 in the first and
second quarters of 2006, respectively. At December 31, 2008, no derivative positions are outstanding.

Changes
in the Company's derivatives represented a non-cash charge to earnings for the present value of the loss the Company would have incurred in the event it was required
to purchase uranium in the spot market to satisfy the delivery obligations under the uranium sales contracts. The Company has not entered into any hedge transactions with respect to its uranium sales
contracts.

6. LONG-TERM DEBT

Convertible Notes

In 2000, the Company issued a $135,000 Convertible Note due July 17, 2005 in settlement of certain outstanding claims. Interest
of 6% per annum was due at maturity. The Company could prepay the Note at any time and the holder of the Note had the right to convert all principal and accrued interest into shares of the Company's
Common Stock at a conversion price of $3.00 per share. In the third quarter of 2005, the maturity was extended to July 17, 2006, and the
accrued and unpaid interest of $40,833 was added to the principal of the Convertible Note. The conversion price was reduced to $1.76 per share. In connection with these amended terms, the Company
recorded interest expense of approximately $56,000 in 2005 related to the beneficial conversion terms of the modified Note. In March 2006, all of the principal and accrued interest ($182,900) under
the note were converted into 103,896 shares of the Company's Common Stock.

Summary of Long-Term Debt

At December 31,2008

2007Long-term debt of the Company consists of:Crownpoint property

$
450,000

$
450,000Capital leases


478,176


389,281928,176


839,281LessCurrent portion


(158,068
)

(210,616
)Total long-term debt

$
770,108

$
628,665


F-20

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

6. LONG-TERM DEBT (Continued)

Maturities of long-term debt and capital leases are as follows:

For the Twelve Months Ended:

Long-Term Debt

Capital LeasesDecember 31, 2009

$


$
158,068December 31, 2010





112,606December 31, 2011





83,219December 31, 2012





63,403December 31, 2013 and beyond


450,000


60,880Totals

$
450,000

$
478,176Less amounts representing imputed interest





(77,500
)Present value of future payments




$
400,676


7. RELATED-PARTY TRANSACTIONS

In August 2008, the Company issued a total of 50,000 shares of Common Stock at $0.80 per share to
an executive officer of the Company upon his election to exercise stock options 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 share to a non-employee director of the Company upon his election to convert deferred
compensation into 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 ranging from $0.16 per share to
$1.80 per share, the weighted average exercise price was $1.20 per share) to the same non-employee director of the Company upon his election to exercise stock options under the terms of
the 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 the Chief
Executive Officer, consisting of (i) an option to Mr. Erdahl to purchase 12,000 shares (the "Option") under the 2004 Directors Stock Option Plan 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 created the circumstance that Mr. Erdahl no longer met the qualifications of an
independent director under NASDAQ rules. Mr. Erdahl, the Compensation Committee of the Board of Directors and the Board of Directors agreed to rescind the stock option grant. On
December 20, 2007, the Compensation Committee of the Board of Directors and the Board of Directors acted and rescinded 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 option grant. The Compensation
Committee and the Board of Directors also adopted a resolution that no stock option grants would be made to Mr. Erdahl until the next compensation year of the Company, that is, the twelve
months ending December 31, 2008 resulting in Mr. Erdahl maintaining his qualification as an independent director.

In
April 2007, the Company issued a total of 69,187 shares of Common Stock (at prices ranging from $0.16 per share to $1.80 per share, the weighted average exercise price was $1.11 per
share) to a

F-21

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

7. RELATED-PARTY TRANSACTIONS (Continued)

non-employee
director of the Company upon his election to exercise stock options under the terms of the Company's Directors' stock option plans.

In
April/May 2007, the Company issued a total of 287,499 shares of Common Stock (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 stock options under the terms of the Company's stock option plans.

In
the second quarter of 2006, the Company issued a total of 162,500 shares of Common Stock (100,000 shares at $0.80 per share and 62,500 shares at $2.80 per share) to executive officers
of the
Company upon their election to exercise stock options under the terms of the Company's stock option plans.

In
April 2006, the Company issued shares of its common stock in private placement transactions. Two private investment partnerships managed by George R. Ireland, a then director of the
Company, purchased 300,000 out of 10,200,307 shares in the offering. The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares
issued in these private placements.

8. SHAREHOLDERS' EQUITY

Reverse Stock Split

On March 29, 2006 the Company's Board of Directors declared a 1 for 4 reverse stock split for shareholders of record on
April 10, 2006. The split was approved by shareholders at the 2005 Annual Meeting of Shareholders.

Equity Infusions

In 2008 and 2006 the Company sold shares of common stock in the following private placements:

Date

Price per
Share

Amount, net

Shares IssuedMay 2008

$
4.34

$
12,810,195


3,295,920April 2006

$
4.90

$
49,686,160


10,200,307


In
May 2008, the Company completed the sale of 3,295,920 shares of common stock to accredited investors at a price of $4.34 per share, which represented a 10 percent discount to
the last sale price on May 13, 2008; and warrants to purchase 988,771 additional shares of common stock, at a price of $5.78, which represented a 20 percent premium to the last sale
price of the Company's common stock on May 13, 2008. These warrants expire 60 months after issuance and are exercisable immediately. In addition, ratchet warrants to purchase shares of
common stock at $0.01 per share were issued as part of the private placement. The ratchet warrants are triggered and become immediately exercisable in the event that the Company should issue shares of
Common Stock at a price below $4.34 per share. The number of shares that may be purchased upon the exercise of the ratchet warrants is determined by a formula that results in the effective price paid
by the investors in this offering being equal to the price paid in a subsequent below $4.34 per share offering. The ratchet warrants expire on the earlier of 12 months following issuance, or
ten days after the consummation of the sale of shares of the

F-22

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

8. SHAREHOLDERS' EQUITY (Continued)

Company's
common stock which raises in one or more transactions at least $80 million in gross proceeds.

The
sale raised proceeds of approximately $12.8 million net of expenses of the offering. The Company has filed a registration statement under the Securities Act of 1933, as
amended, to register the resale of the shares. Such shares are subject to certain resale registration rights that include penalties (1% per month) in the event the registration statement failed to
become effective in a timely manner or if the registration statement fails to remain effective. On July 18, 2008, such registration statement was made effective and as a result the Company met
its initial obligation with regard to this registration requirement. The placement agent in connection with the offering received a cash fee equal to 5.5% of the gross proceeds.

In
connection with the April 2006 placement the Company paid a fee of $1,449,445 in cash and issued 306,009 shares of Common Stock to a placement agent.. Two private investment
partnerships managed by George R. Ireland, a then director of the Company, purchased 300,000 out of 10,200,307 shares in the April 2006 offering. The Company has filed a registration statement under
the Securities Act of 1933, as amended, to register the resale of the shares issued in these private placements.

Common Stock 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 share to an executive officer of the Company
upon his election to exercise stock options 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 share to a director of the Company upon his election to convert deferred compensation into 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 ranging from $0.16 per share to $1.80 per share, the
weighted average exercise price was $1.20 per share) to a non-employee director of the Company upon his election to exercise stock options under the terms of the Company's Directors' stock
option plans.

In
2007, the Company raised $983,000 of equity through the issuance of 513,790 shares of Common Stock of the Company upon the exercise of outstanding stock options.

In
2006, the Company raised $458,000 of equity through the issuance of 229,000 shares of Common Stock of the Company upon the exercise of outstanding stock options.



Employee Stock Options

The Company has two stock Incentive Plans for Employees, both of which were approved by the Company's shareholders.

At
December 31, 2008 there were outstanding under the 1995 Stock Incentive Plan (the "1995 Plan") options for the purchase of 2,156,447 shares of Common Stock with exercise prices
ranging from $0.76 to $3.12 per share. No new options may be granted under the 1995 Plan.

F-23

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

8. SHAREHOLDERS' EQUITY (Continued)

Under
the Company's 2004 Stock Incentive Plan (the "2004 Plan") a total of 1,750,000 shares may be issued upon exercise of options granted under the 2004 Plan. At December 31,
2008 there were outstanding under the 2004 Plan options for the purchase of 1,540,814 shares of Common Stock at exercise prices ranging from $2.96 to $5.19 per share. At December 31, 2008,
74,645 shares were available for future grants under the 2004 Plan.

Employee
stock options generally vest ratably over a 3 or 4 year time frame and have a contractual term of 10 years.

Directors Stock Options

On June 19, 2001, the Company granted to certain outside directors options to purchase 75,000 shares of the Company's Common
Stock at an exercise price of $0.88 per share. 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, 2008.

On
June 2, 2004 the Company adopted the 2004 Directors' Stock Option Plan (the "2004 Directors' Plan"). Under the 2004 Directors' Plan, each non-employee director on
the date the Plan was adopted was granted an option to purchase 75,000 shares of Common Stock. Each non-employee Director elected or appointed to the Board of Directors for the first time
will be granted an option to purchase 25,000 shares of Common Stock and, each Non-Employee Director shall be granted an option to purchase 25,000 shares either, (a) upon his or her
reelection at an annual meeting of the Company's stockholders or (b) in any calendar year in which an annual meeting of shareholders is not held, on June 1 of such year.

In
June 2006, the Directors' Stock Option Plan was amended to increase the initial grants and the annual reelection grants to non-employee Directors to 50,000 shares of
Common Stock. The 2004 Directors' Plan replaces an earlier plan that expired in 2004. At December 31, 2008, there were outstanding options for the exercise of 63 shares under the old plan.

At
the June 2008 annual meeting of the shareholders, each of the non-employee directors of the Company (Leland O. Erdahl, George R. Ireland, Terence J. Cryan and Marvin K.
Kaiser) was granted an option under the 2004 Directors Plan to purchase 50,000 shares of the Company's common stock at an exercise price of $4.10 per share. The non-employee directors hold
options covering 581,250 shares under the 2004 Directors' Plan at December 31, 2008. At December 31, 2008, 531,250 shares were available for future grants under the 2004 Directors' Plan.

At
the July 2007 annual meeting of the shareholders, each of the non-employee directors of the Company (Leland O. Erdahl, George R. Ireland and Terence J. Cryan) was granted
an option under the 2004 Directors Plan to purchase 50,000 shares 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's Common Stock was granted to Marvin K. Kaiser, a new non-employee director of the 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 granted to Terence J. Cryan, a non-employee director of the Company at an exercise price
of $9.25 per share.

F-24

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

8. SHAREHOLDERS' EQUITY (Continued)

Such
grant was subject to shareholder approval of an amendment to the 2004 Directors' Plan which was received at the July 2007 annual shareholders meeting.

At
the June 2006 annual meeting of the shareholders, each of the non-employee directors of the Company (Leland O. Erdahl and George R. Ireland) was granted an option under
the 2004 Directors Plan to purchase 25,000 shares of the Company's common stock at an exercise price of $5.15 per share. In June and October 2006 options to purchase 50,000 shares of the Company's
Common Stock were granted to two new non-employee directors of the Company (David N. Clark in June and Terence J. Cryan in October) at exercise prices of $5.13 and $2.97, respectively.

Options Issuable for Deferred Compensation

The Company has a 1999 Deferred Compensation Plan (the "1999 Plan") and Deferred Compensation Plans for 2000-2001, 2002,
2003 and 2004 (the "2000-2004 Plans") whereby executive officers and directors were permitted to defer up to 100% of their compensation for the years 1999-2004.

Under
the 1999 Deferred Compensation Plan (the "1999 Plan"), executive officers and directors 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, a participant could elect to receive payment of up to 100% of the deferred amount of salary in shares of our Common Stock. A total
of approximately $242,000 was deferred under the 1999 Plan of which $133,450 was paid by issuing 88,965 shares of Common Stock at $1.50 per share. As of December 31, 2008, approximately
$108,200 remains outstanding as deferred compensation under the 1999 Plan.

Under
the 2000-2004 Plans, the executive officers and directors were permitted to defer up to 100% of their 2000, 2001, 2002, 2003 and 2004 salary with payment thereof to be
made on January 11, 2006. On or before that date, the participant may elect to receive the deferred amount in shares of our Common Stock valued at $0.80 per share. A total of $829,000 was
deferred under the 2000-2004 Plans of which $95,300 was paid in 2004 by issuing 119,125 shares of Common Stock at $0.80 per share. As of December 31, 2008, approximately $588,800
remains 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 of the participants under the plans to receive their deferred compensation until
January 11, 2011. All of the participants with accrued deferred compensation at December 2005 elected to defer their election to such date.

Restricted Stock Plan

In 2007, the Board of Directors adopted and the shareholders approved the 2007 Restricted Stock Plan (the "2007 Plan"). The 2007 Plan
permits the Company to make Restricted Stock grants of shares of Common Stock to management personnel and other key employees of the Company. Unless otherwise specified by the Committee, the term of
the restricted period for any Restricted Stock grant under 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 the rights of a stockholder, including the right to vote the shares of Restricted Stock that are the subject of the grant and the right to receive any regular cash

F-25

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

8. SHAREHOLDERS' EQUITY (Continued)

dividends
paid out of current earnings. The Company may issue an aggregate maximum of 1,500,000 shares of Common Stock under the 2007 Plan.

In
March 2008 the Company granted 70,000 shares of restricted common stock to four employees under the 2007 Plan. The estimated fair value totaling approximately $550,000 was calculated
based upon quoted market prices on the date of grant. The shares vest ratably over periods ranging from four to five years. All of such shares were issued but were none had vested at
December 31, 2008.

9. STOCK-BASED COMPENSATION PLANS



Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting
Standard 123(R) "Share-Based Payment"("SFAS 123(R)") using the modified prospective transition method. In addition, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 107 "Share-Based Payment" ("SAB 107") in March, 2005, which provides supplemental
SFAS 123(R) application guidance based on the views of the SEC. Under the modified prospective transition method, compensation cost recognized in the quarter ended March 31, 2006 and
beyond includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance
with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted beginning January 1, 2006, based on the grant date fair value
estimated in accordance with the provisions of SFAS 123(R). In accordance with the modified prospective transition method, results for prior periods have not been restated.

The
adoption of SFAS 123(R) resulted in stock compensation expense for the year ended December 31, 2008, 2007 and 2006 of $2,154,000, $4,047,000 and $2,422,000,
respectively, to general and administrative expenses. The Company has not recognized a tax benefit from the stock compensation expense because the Company considers it is more likely than not that the
related deferred tax assets, which have been reduced by a full valuation allowance, will not be realized.

The
Black-Scholes option-pricing model was used to estimate the option fair values. The option-pricing model requires a number of assumptions, of which the most significant are, expected
stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire). Expected
volatility was calculated based upon actual historical stock price movements through the measurement date of the stock option grant. Expected pre-vesting forfeitures were estimated based
on actual historical pre-vesting forfeitures over the most recent periods ending December 31, 2008 for the expected option term. The expected option term was estimated based on
historical averages over the most recent periods ending December 31, 2008.

A
total of 200,000 new option grants were made to the non-employee directors of the Company in June 2008 at a grant price of $4.10 per share, respectively.

A
total of 300,000 new option grants were made to the non-employee directors of the Company in April 2007 (100,000 shares) and July 2007 (200,000 shares) at grant prices of
$9.25 and $11.32 per share, respectively.

F-26

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

9. STOCK-BASED COMPENSATION PLANS (Continued)

A
total of 100,000 new option grants were made to the non-employee directors of the Company in June 2006 at grant prices of $5.15 and $5.13 per share. In October 2006 a total
of 800,000 new options were made to an executive officer of the Company and 50,000 new option grants were made to a non-employee director of the Company at a grant price of $2.97 per
share. In November 2006, a total of 295,000 new option grants were made to employees of the Company at a grant price of $5.19 per share.



The Company has four stock option plans as summarized under Footnote 8 "Shareholders Equity-Stock Options." The following table
summarizes stock options outstanding and changes during the year ended December 31, 2008:

Outstanding OptionsNumber of
Shares

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
ValueOptions outstanding at January 1, 2008


4,452,844

$
2.88Granted


200,000

$
4.10Exercised


(169,250
)
$
1.08Canceled or forfeited


(205,020
)
$
6.95Options outstanding at December 31, 2008


4,278,574

$
2.81


6.43

$
1,319,549Options exercisable at December 31, 2008


3,889,824

$
2.46


6.21

$
420


The
total intrinsic value of options exercised during the years ended December 31, 2008, 2007and 2006 was $153, $5,429,000 and $793,000, respectively.

Shares
available for grant under the Plans as of December 31, 2008 were 605,895.

Stock
options outstanding and currently exercisable at December 31, 2008 are as follows:

Options Outstanding

Options ExercisableStock Option Plan

Number of
Options
Outstanding

Weighted Average
Remaining
Contractual Life
(in years)

Weighted Average
Exercise price

Number of
Options
Exercisable

Weighted Average
Exercise Price1995 Stock Incentive Plan


2,156,447


5.39

$
1.38


2,156,447

$
1.382004 Employee Incentive Plan


1,540,814


7.19


3.37


1,483,314


3.30Directors Stock Option Plan


63


4.50


0.16


63


0.162004 Directors Plan


581,250


8.31


6.62


250,000


6.734,278,574


6.43

$
2.81


3,889,824

$
2.46


F-27

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

9. STOCK-BASED COMPENSATION PLANS (Continued)

Total
estimated unrecognized compensation cost from unvested stock options as of December 31, 2008 was approximately $2.1 million, which is expected to be recognized over a
weighted average period of approximately 2 to 3 years.

The
fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model.

Using
the Black-Scholes option pricing model, the weighted average assumptions for grants in 2008: fair market value: $4.10, expected volatility of 143% and risk-free
interest rate of 4.25%. An expected life of 9.42 years was used for the options granted. The weighted average fair value of the options granted in 2008 was $4.10.

Using
the Black-Scholes option pricing model, the weighted average assumptions for grants in 2007: fair market value: $11.32, expected volatility of 148% and risk-free
interest rate of 4.625%. An expected life of 9.62 years was used for the options granted. The weighted average fair value of the options granted in 2007 was $11.32.

Using
the Black-Scholes option pricing model, the weighted average assumptions for grants in 2006: fair market value: $5.05, $5.03, $2.91, $2.92 and $5.09 expected volatility of 155%,
155%, 154%, 148% and 155% and risk-free interest rates of 5.18%, 5.08%, 4.13%, 5.13% and 4.66%. An expected life of 8.58, 8.58, 8.58, 9.53 and 8.58 years was used for the options
granted. The weighted average fair value of the options granted in 2006 was $3.60.

Additional
details about the options granted under the stock option plans are as follows:

Date of Grant

Exercise
Price

Options
Granted

Options
Available for
Exercise

Options
Exercised

Options
Canceled

Options
OutstandingBalances at Dec. 31, 2005





4,395,118


2,717,324


1,038,838


595,206


2,761,074June 1, 2006

$
5.15


50,000


12,500





25,000


25,000June 6, 2006

$
5.13


50,000


25,000








50,000October 3, 2006

$
2.97


850,000


825,000








850,000November 8, 2006

$
5.19


295,000


135,000


35,000


67,500


192,500Balances at Dec. 31, 2006





5,640,118


3,714,824


1,073,838


687,706


3,878,574April 10, 2007

$
9.25


100,000


100,000








100,000July 12, 2007

$
11.32


200,000


37,500





50,000


150,000Balances at Dec. 31, 2007





5,940,118


3,852,324


1,073,838


737,706


4,128,574June 4, 2008

$
4.10


200,000


37,500





50,000


150,000Balances at Dec. 31, 2008





6,140,118


3,889,824


1,073,838


787,706


4,278,574


The
exercise price for the options granted under the plans is the fair market value of the Common Stock on the date granted. The terms of the options are determined by
the Board of Directors upon grant; however, no options may be exercised after a period of ten years. The weighted average fair value of options granted in 2008, 2007 and 2006 was $4.10, $10.63 and
$3.67, respectively.

F-28

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

10. FEDERAL INCOME TAXES

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

December 31,2008

2007

2006Property development costsnet of amortization

$
13,688,000

$
8,407,000

$
8,883,000Accelerated depreciation


(195,000
)

(90,000
)

28,000Restoration reserves


(480,000
)

(194,000
)

1,106,000Net operating loss and percentage depletion carryforwards


26,235,000


21,661,000


20,302,000Valuation allowance and othernet


(39,248,000
)

(29,784,000
)

(30,319,000
)Total deferred income tax asset (liability)

$
0

$
0

$
0


Major
items causing the Company's tax provision to differ from the federal statutory rate of 34% were:

For the Twelve Months Ended December 31,2008

2007

2006Amount

% of Pretax
Income

Amount

% of Pretax
Income

Amount

% of Pretax
IncomePretax income (loss)

$
(26,509,356
)



$
1,077,534




$
21,509,723


Pretax income (loss) times statutory tax rate


(9,013,000
)

34
%

366,000


(34
)%

7,313,000


(34
)%Increases (decreases) in taxes resulting from:Change in valuation allowance


9,013,000


(34
)%

(366,000
)

34
%

(7,313,000
)

34
%Income tax benefit

$
0


0
%
$
0


0
%
$
0


0
%


The Company's net operating loss carryforwards generated in 2008 and in prior years have generally been valued, net of valuation allowance, at
Alternative Minimum Tax ("AMT") rates imposed by the Tax Reform Act of 1986. It is assumed that these deferred tax assets will be realized at such rates.

At
December 31, 2008, approximately $79,439,000 of percentage depletion (available for regular tax purposes) had not been utilized to offset book income and is available to carry
forward to future accounting periods.

The
Company also has available for regular federal income tax purposes at December 31, 2008 estimated net operating loss ("NOL") carryforwards of approximately
$77,163,000 which expire primarily in 2009 through 2028, if not previously utilized. Following the issuance of the Company's Common Stock in 2001, use of the Company's NOL will be severely limited on
an annual and aggregate basis. For this reason, the NOL is not included as a deferred tax asset in the table above.

F-29

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

11. OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS

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

December 31,2008

2007Reserve for future restoration and reclamation costs (Asset Retirement Obligations), net of current portion of $1,660,000 and $1,125,000 in
2008 and 2007. (Note 2)

$
5,334,350

$
2,808,099Royalties payable


500,000


500,000Deferred compensation


697,028


789,228$
6,531,378

$
4,097,327


The
following table shows the change in the balance of the restoration and reclamation liability (Asset Retirement Obligation) during the years ended December 31, 2008 and 2007:

December 312008

2007Reserve for future restoration and reclamation costs at January 1,

$
3,932,603

$
4,229,193Additions





116,572Changes in cash flow estimates


3,932,828


967,865Costs incurred


(1,039,164
)

(1,447,815
)Accretion expense


168,505


66,788Reserve for future restoration and reclamation costs at December 31,

$
6,994,772

$
3,932,603


12. EARNINGS (LOSS) PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income or loss attributed to common stockholders by the weighted-average number of common shares outstanding for
the period.
Diluted earnings per share reflects the potential dilution that could occur if security interests were exercised or converted into common stock.

The
following table sets forth the computation of basic and diluted earnings (loss) per share for the years ended December 31, 2008, 2007 and 2006.

2008

2007

2006Net Income
Attributed
to Common
Stock

Weighted-
Average
Shares

Per-
Share
Income

Net Income
Attributed
to Common
Stock

Weighted-
Average
Shares

Per-
Share
Income

Net Loss
Attributed
to Common
Stock

Weighted-
Average
Shares

Per-
Share
LossBasic income (loss) per share

$
(26,509,356
)

54,568,550

$
(0.49
)
$
1,077,534


52,118,851

$
0.02

$
21,509,723


48,338,172

$
0.44Effect of dilutive securities:Stock options/ warrants














3,962,451

$



2,081


3,221,695


(0.02
)Diluted income (loss) earnings per share

$
(26,509,356
)

54,568,550

$
(0.49
)
$
1,077,534


56,081,302

$
0.02

$
21,511,804


51,559,867


0.42


F-30

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

13. COMMITMENTS AND CONTINGENCIES

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

The
Company is from time to time involved in various legal proceedings of a character normally incident to its business. Management does not believe that adverse decisions in any pending
or threatened proceedings will have a material adverse effect on the Company's financial condition or results of operations.

In
May 2008, the Company completed the sale of 3,295,920 shares of common stock to accredited investors at a price of $4.34 per share and warrants to purchase 988,771 additional shares
of common
stock, at a price of $5.78. These warrants expire 60 months after issuance and are exercisable immediately. In addition, ratchet warrants to purchase shares of common stock at $0.01 per share
were issued as part of the private placement. The ratchet warrants are triggered and become immediately exercisable in the event that the Company should issue shares of Common Stock at a price below
$4.34 per share. The number of shares that may be purchased upon the exercise of the ratchet warrants is determined by a formula that results in the effective price paid by the investors in this
offering being equal to the price paid in a subsequent below $4.34 per share offering. The ratchet warrants expire on the earlier of 12 months following issuance, or ten days after the
consummation of the sale of shares of the Company's common stock which raises in one or more transactions at least $80 million in gross proceeds.

The
Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares. Such shares are subject to certain resale registration
rights that would include penalties in the event the registration statement fails to remain effective. At December 31, 2008, the Company's registration statement was and remains effective.

Kingsville
Dome Contingent Royalty

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

Compensation
Agreements

The
Company has entered into Compensation Agreements with Executive Officers of the Company that provide that, in the event of a change in control, such
officers will have certain rights and benefits for a period of thirty-six months for the Chairman and CEO of the Company and

F-31

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Table of Contents

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2008 AND 2007

13. COMMITMENTS AND CONTINGENCIES (Continued)

twenty-four
months for the other officers, following such change in control. The Compensation Agreements provide that the executive's base salary payments shall be made on a monthly basis
for the duration of the term and any incentive payments shall be paid annually until the obligation to make such payments expires.

Legal
Contingencies

On
July 13, 2007, an employee of a drilling contractor engaged by the Company was killed when the drill rig on which he was making repairs backed over
him. His heirs have filed claims against the drilling company and us. Our insurance carrier is defending the matter on our behalf. We believe we have meritorious defenses to the claims and that, in
any event, we have adequate insurance to cover the matter.

In
June 2008 a suit for declaratory judgment titled,Saenz v. URI Inc.,was filed in the 105th Judicial
District Court, Kleberg County, Texas by the owners of the mineral estate of property in Kleberg County, Texas leased to the Company, seeking a declaratory judgment that a certain lease is limited to
one specific lot only and does not encompass other adjacent lands. The Company has a lease on the adjacent lands from the same mineral owners and has produced over 340,000 pounds of uranium from those
lands in 2007 and 2008. The Company entered a general denial of the claims. On September 24, 2008 the mineral owners amended their suit to include a declaration that both of the leases held by
the Company are not valid. The Company has entered a general denial and other specific defenses to the amended complaint. The Company has produced uranium from both leases. On November 5, 2008,
the Company engaged in mediation with the plaintiffs but was unable to resolve the matter. The Plaintiffs filed a Motion for Summary Judgment alleging that the leases terminated prior to any
production occurring. The Court denied the motion. A trial date has been set for June 1, 2009. The Company will defend the case 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. A determination of the invalidity of the lease on the adjacent lands on which the Company has previously produced
uranium could have a material adverse affect on the Company's financial condition.

14. JOINT VENTURE FOR CHURCH ROCK 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 to
develop jointly our Church Rock property in New Mexico.

A
feasibility study was completed and delivered at the end of 2006. Under the terms of the Joint Venture, both parties had until April 2, 2007 to make a Preliminary Investment
Decision whether to move forward with the Joint Venture. The parties had extended that date until March 2, 2009. On March 6, 2009 we received notification that Itochu had made a negative
Preliminary Investment Decision for the Joint Venture which resulted in the termination of the Joint Venture. Such action eliminates the potential for reinstatement of the original delivery contracts
with Itochu for South Texas production. However, depending on spot market prices, our sales price may be reduced by up to $2.10 per pound on some of our South Texas production for future deliveries
under the contract.

F-32

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Table of Contents

EXHIBIT INDEX

Exhibit
Number

Description3.1*

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 (filed with the Company's Form 8-K on April 14, 2005).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).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).


E-1

---



Table of Contents

Exhibit
Number

Description10.16.1*

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).


E-2

---



Table of Contents

Exhibit
Number

Description10.36*

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 Church Rock 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)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).23.1

Consent of Independent Registered Public Accounting Firm23.2

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.


---

E-3

---