** **

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

**FORM 10-Q**

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

** **

**For thequarterly period ended September 30, 2007**

** **

**Or**

 

| **o** | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For the transition periodfrom                  to**

**Commission file number 0-17171**

**URANIUMRESOURCES, INC.**

(Exact Name of Issuer as Specified in Its Charter)

| **DELAWARE**             | ** ** | **75-2212772**                       |
|--------------------------|------------|--------------------------------------|
| (State of Incorporation) |       | (I.R.S. Employer Identification No.) |

 

**405State Highway 121 Bypass, Building A, Suite 110, Lewisville, Texas 75067**

(Address of Principal Executive Offices)

**(972)219-3330**

(Issuer’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer” and “large accelerated filer” in Rule 12-b2of the Exchange Act.

| (Check one): |   | Large accelerated filer  o |   | Accelerated filer  x |   | Non-accelerated filer  o |
|--------------|--------|--------------------------------------|--------|--------------------------------|--------|------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12-b2 of the Exchange Act).

o  Yes    x  No

Indicate the number of shares outstanding of each of theissuer’s classes of common stock, as of the latest practicable date.

| **Title of Each Class of Common Stock** | ** ** | **Number of Shares Outstanding** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------|
| Common Stock, $0.001 par value                                        |       | 52,300,929 as of November 6, 2007               |

 

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**URANIUM RESOURCES, INC.**

**2007 THIRD QUARTERLY REPORT ON FORM10-Q**

**TABLE OF CONTENTS**
| **PART  I—FINANCIAL INFORMATION** |       |
|----------------------------------------|------------|
|                                   |       |   |   |
|                                   | Item 1.    | Financial Statements |   |
|                                   |       |   |   |
|                                   |       | Consolidated  Balance Sheets- September 30, 2007 (Unaudited) and December 31, 2006 |   |
|                                   |       |   |   |
|                                   |       | Consolidated Statements of Operations–three and nine  months ended September 30, 2007 and 2006 (Unaudited) |   |
|                                   |       |   |   |
|                                   |       | Consolidated Statements of Cash Flows–three and nine  months ended September 30, 2007 and 2006 (Unaudited) |   |
|                                   |       |   |   |
|                                   |       | Notes to Consolidated Financial Statements—September  30, 2007 (Unaudited) |   |
|                                   |       |   |   |
|                                   | Item 2.    | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |   |
|                                   |       |   |   |
|                                   | Item 3.    | Quantitative and Qualitative Disclosures About Market  Risk |   |
|                                   |       |   |   |
|                                   | Item 4.    | Controls and Procedures |   |
|                                   |       |   |   |
| **PART  II—OTHER INFORMATION**    |       |
| ** **                             | ** ** | ** ** | ** ** |
|                                   | Item  1.   | Legal  Proceedings |   |
|                                   |       |   |   |
|                                   | Item  1A.  | Risk  Factors |   |
|                                   |       |   |   |
|                                   | Item 2.    | Unregistered Sales of Equity Securities and Use of  Proceeds |   |
|                                   |       |   |   |
|                                   | Item 3.    | Defaults Upon Senior Securities |   |
|                                   |       |   |   |
|                                   | Item 4.    | Submission of Matters to a Vote of Security Holders |   |
|                                   |       |   |   |
|                                   | Item  5.   | Other  Information |   |
|                                   |       |   |   |
|                                   | Item 6.    | Exhibits  and Reports on Form 8–K |   |
|                                   |       |   |   |
| **SIGNATURES**                         |       |
| ** **                             | ** ** | ** ** | ** ** |
| **Index to  Exhibits**                 |       |

 

2

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDBALANCE SHEETS**

**ASSETS**

| ** **                                              | ** ** | **September 30,**

**2007** | ** ** | **December 31,**

**2006** | ** ** |
|---------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                              | ** ** | **(Unaudited)**                  | ** ** | ** **                      | ** ** |
| Current assets:                                         |       |                             |       |                            |       |
| Cash and cash equivalents                               |       | $                                | 13,915,606 |                            | $          | 20,176,771 |   |
|                                                    |       |                             |       |                            |       |
| Receivables, net                                        |       | 2,414,986                        |       | 713,529                         |       |
| Uranium and materials/supplies inventory                |       | 2,012,617                        |       | 1,603,585                       |       |
| Prepaid and other current assets                        |       | 463,708                          |       | 410,000                         |       |
| Total current assets                                    |       | 18,806,917                       |       | 22,903,885                      |       |
|                                                    |       |                             |       |                            |       |
| Property, plant and equipment, at cost:                 |       |                             |       |                            |       |
| Uranium properties                                      |       | 81,548,733                       |       | 67,153,797                      |       |
| Other property, plant and equipment                     |       | 735,746                          |       | 465,613                         |       |
| Less-accumulated depreciation, depletion and impairment |       | (54,899,785                      | )          | (49,423,848                     | )          |
| Net property, plant and equipment                       |       | 27,384,694                       |       | 18,195,562                      |       |
|                                                    |       |                             |       |                            |       |
| Other assets                                            |       | 2,652,474                        |       | 2,369,434                       |       |
| Long-term investment:                                   |       |                             |       |                            |       |
| Certificates of deposit, restricted                     |       | 5,389,452                        |       | 2,467,491                       |       |
|                                                    |       | $                                | 54,233,537 |                            | $          | 45,936,372 |   |
|                                                         |            |                                  |            |                                 |            |  |  |  |

 

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

 

 

 

3

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**LIABILITIES ANDSHAREHOLDERS’ EQUITY**
| ** **                                                                                                                                                          | ** ** | **September 30,**

**2007** | ** ** | **December 31,**

**2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** |
| Current liabilities:                                                                                                                                                |       |                        |       |                            |       |
| Accounts payable                                                                                                                                                    |       | $                           | 3,064,514  |                            | $          | 1,994,184 |   |
| Current portion of restoration reserve                                                                                                                              |       | 1,146,201                   |       | 1,520,192                       |       |
| Accrued interest and other accrued liabilities                                                                                                                      |       | 2,237,978                   |       | 816,877                         |       |
| Current portion of long-term debt                                                                                                                                   |       | 235,913                     |       | 201,804                         |       |
| Total current liabilities                                                                                                                                           |       | 6,684,606                   |       | 4,533,057                       |       |
|                                                                                                                                                                |       |                        |       |                            |       |
| Other long-term liabilities and deferred credits                                                                                                                    |       | 4,134,432                   |       | 3,998,229                       |       |
|                                                                                                                                                                |       |                        |       |                            |       |
| Long-term debt, less current portion                                                                                                                                |       | 646,527                     |       | 635,691                         |       |
| Commitments and contingencies (Notes 1, 2 and 5)                                                                                                                    |       |                        |       |                            |       |
| Shareholders’ equity:                                                                                                                                          |       |                        |       |                            |       |
| Common stock, $.001 par value, shares authorized: 200,000,000; shares  issued and outstanding (net of treasury shares): 2007—52,275,929;  2006—51,791,339 |       | 52,314                      |       | 51,829                          |       |
| Paid-in capital                                                                                                                                                     |       | 130,333,481                 |       | 126,252,871                     |       |
| Accumulated deficit                                                                                                                                                 |       | (87,608,405                 | )          | (89,525,887                     | )          |
| Less: Treasury stock (38,125 shares), at cost                                                                                                                       |       | (9,418                      | )          | (9,418                          | )          |
| Total shareholders’ equity                                                                                                                                     |       | 42,767,972                  |       | 36,769,395                      |       |
|                                                                                                                                                                |       | $                           | 54,233,537 |                            | $          | 45,936,372 |   |

 

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

 

4

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
| ** **                                                                    | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues:                                                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Uranium sales—                                                           |       | $                                                    | 10,387,408 |                                                | $          | 2,765,606 |   | $ | 22,924,284 |   | $ | 5,678,965 |   |
| Total revenue                                                                 |       | 10,387,408                                           |       | 2,765,606                                           |       | 22,924,284 |   | 5,678,965 |   |
| Costs and expenses:                                                           |       |                                                 |       |                                                |       |   |   |   |   |
| Cost of uranium sales—                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Royalties and commissions                                                     |       | 1,296,644                                            |       | 241,523                                             |       | 2,717,586 |   | 490,849 |   |
| Operating expenses                                                            |       | 1,998,220                                            |       | 1,556,587                                           |       | 5,341,294 |   | 4,674,015 |   |
| Accretion/amortization of restoration reserve                                 |       | 126,119                                              |       | 86,171                                              |       | 433,320 |   | 360,479 |   |
| Depreciation and depletion                                                    |       | 1,428,387                                            |       | 2,425,327                                           |       | 4,726,400 |   | 3,814,416 |   |
| Exploration expenses                                                          |       | —                                               |       | —                                              |       | — |   | 234,646 |   |
| Impairment of uranium properties                                              |       | —                                               |       | 3,260,201                                           |       | — |   | 3,260,201 |   |
| Gain on derivatives                                                           |       | —                                               |       | —                                              |       | — |   | (34,820,947 | ) |
| Total (gain on) cost of uranium sales                                         |       | 4,849,370                                            |       | 7,569,809                                           |       | 13,218,600 |   | (21,986,341 | ) |
| Earnings (loss) from operations before corporate expenses                     |       | 5,538,038                                            |       | (4,804,203                                          | )          | 9,705,684 |   | 27,665,306 |   |
|                                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Corporate expenses—                                                      |       |                                                 |       |                                                |       |   |   |   |   |
| General and administrative                                                    |       | 3,575,420                                            |       | 1,557,083                                           |       | 8,266,664 |   | 4,214,096 |   |
| Depreciation                                                                  |       | 23,506                                               |       | 9,949                                               |       | 69,690 |   | 23,008 |   |
| Total corporate expenses                                                      |       | 3,598,926                                            |       | 1,567,032                                           |       | 8,336,354 |   | 4,237,104 |   |
| Earnings (loss) from operations                                               |       | 1,939,112                                            |       | (6,371,235                                          | )          | 1,369,330 |   | 23,428,202 |   |
|                                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Other income (expense):                                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Interest expense                                                              |       | (6,372                                               | )          | (1,370                                              | )          | (18,738 | ) | (5,703 | ) |
| Interest and other income, net                                                |       | 221,949                                              |       | 383,549                                             |       | 566,890 |   | 630,494 |   |
|                                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Net earnings (loss)                                                           |       | $                                                    | 2,154,689  |                                                | $          | (5,989,056 | ) | $ | 1,917,482 |   | $ | 24,052,993 |   |
|                                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Net earnings (loss) per common share:*                                        |       |                                                 |       |                                                |       |   |   |   |   |
| Basic                                                                         |       | $                                                    | 0.04       |                                                | $          | (0.12 | ) | $ | 0.04 |   | $ | 0.51 |   |
| Diluted                                                                       |       | $                                                    | 0.04       |                                                | $          | (0.12 | ) | $ | 0.03 |   | $ | 0.48 |   |
|                                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted average common shares and common equivalent shares per share  data:* |       |                                                 |       |                                                |       |   |   |   |   |
| Basic                                                                         |       | 52,266,199                                           |       | 51,735,089                                          |       | 52,059,849 |   | 47,184,096 |   |
| Diluted                                                                       |       | 56,020,832                                           |       | 51,735,089                                          |       | 55,867,860 |   | 49,804,986 |   |
|                                                                               |            |                                                      |            |                                                     |            |  |  |  |  |  |  |  |  |  |

----

*                         Net earnings (loss) per share andweighted average common shares information reflects the effect of a reverse 1for 4 stock split made effective April 11, 2006.

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

 

5

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**
| ** **                                                                     | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| Net earnings                                                                   |       | $1,917,482                                          |       | $24,052,993 |   |
| Reconciliation of net earnings to cash provided by (used in)  operations— |       |                                                |       |   |   |
| Gain on derivatives                                                            |       | —                                              |       | (34,820,947 | ) |
| Accretion/amortization of restoration reserve                                  |       | 433,320                                             |       | 360,479 |   |
| Depreciation and depletion                                                     |       | 4,796,090                                           |       | 3,837,424 |   |
| Decrease in restoration and reclamation accrual                                |       | (982,220                                            | )          | (684,979 | ) |
| Stock compensation expense                                                     |       | 3,191,867                                           |       | 1,228,619 |   |
| Impairment of uranium properties                                               |       | —                                              |       | 3,260,201 |   |
| Other non-cash items, net                                                      |       | 637,050                                             |       | 318,342 |   |
|                                                                           |       |                                                |       |   |   |
| Effect of changes in operating working capital items—                     |       |                                                |       |   |   |
| Increase in receivables                                                        |       | (1,701,457                                          | )          | (577,557 | ) |
| Decrease in inventories                                                        |       | 177,357                                             |       | 42,999 |   |
| Increase in prepaid and other current assets                                   |       | (681,566                                            | )          | (295,483 | ) |
| Increase in payables, accrued liabilities and deferred credits                 |       | 2,491,431                                           |       | 1,427,497 |   |
| Net cash provided by (used in) operations                                      |       | 10,279,354                                          |       | (1,850,412 | ) |
|                                                                           |       |                                                |       |   |   |
| Investing activities:                                                          |       |                                                |       |   |   |
| Increase in certificates of deposit, restricted                                |       | (2,921,961                                          | )          | (665,966 | ) |
| Settlement of derivative instrument                                            |       | —                                              |       | (12,000,000 | ) |
| Additions to property, plant and equipment—                               |       |                                                |       |   |   |
| Kingsville Dome                                                                |       | (5,658,840                                          | )          | (8,499,106 | ) |
| Vasquez                                                                        |       | (541,432                                            | )          | (3,078,092 | ) |
| Rosita                                                                         |       | (3,943,074                                          | )          | (1,047,125 | ) |
| Rosita South                                                                   |       | (1,330,794                                          | )          | (83,837 | ) |
| Churchrock                                                                     |       | (463,953                                            | )          | (268,866 | ) |
| Crownpoint                                                                     |       | (127,726                                            | )          | (66,621 | ) |
| Other property                                                                 |       | (2,246,267                                          | )          | (330,386 | ) |
| Net cash used in investing activities                                          |       | (17,234,047                                         | )          | (26,039,999 | ) |
|                                                                           |       |                                                |       |   |   |
| Financing activities:                                                          |       |                                                |       |   |   |
| Payments on borrowings                                                         |       | (195,700                                            | )          | (11,473 | ) |
| Issuance of common stock, net                                                  |       | 889,228                                             |       | 48,515,846 |   |
| Net cash provided by financing activities                                      |       | 693,528                                             |       | 48,504,373 |   |
| Net increase (decrease) in cash and cash equivalents                           |       | (6,261,165                                          | )          | 20,613,962 |   |
| Cash and cash equivalents, beginning of period                                 |       | 20,176,771                                          |       | 5,852,716 |   |
| Cash and cash equivalents, end of period                                       |       | $13,915,606                                         |       | $26,466,678 |   |

 

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

 

6

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** **

** **

**UraniumResources, Inc.**

**Notes to Consolidated FinancialStatements September 30, 2007 (Unaudited)**

 

**1.****                                     ****BASIS OF PRESENTATION**

 

The accompanyingunaudited consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of Americafor interim financial information and with the instructions to Form 10-Q andItem 310(b) of Regulation S-K.  Accordingly, they do not include all ofthe information and footnotes required by accounting principles generallyaccepted in the United States of America for complete financialstatements.  The accompanying statements should be read in conjunctionwith the audited financial statements included in the Company’s 2006 AnnualReport on Form 10-K/A.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included.  Operating results for the three and ninemonths ended September 30, 2007 are not necessarily indicative of the resultsthat may be expected for the full calendar year ending December 31, 2007.

 

**ReverseStock Split**

 

On March 29, 2006 theCompany’s Board of Directors declared a 1 for 4 reverse stock split forstockholders of record on April 10, 2006, effective April 11, 2006.  Thesplit was approved by stockholders at the 2005 Annual Meeting ofStockholders.  All common stock share amounts, earnings per share data andreferences to the common stock of the Company in this report are stated on apost-split basis.

 

**2.****                                     ****DESCRIPTION OF BUSINESS**

 

URI was organized in 1977to mine uranium in the United States using the in situ recovery (“ISR”) miningprocess. From 1988 through 1999 we produced about 6.1 million pounds ofuranium from two South Texas properties, 3.5 million pounds fromKingsville Dome and 2.6 million pounds from Rosita.

 

In 1999 we shut-in ourproduction because of depressed uranium prices.  When uranium pricesreached a level where it was prudent to commence operations the company beganproducing at its Vasquez property in South Texas in the fourth quarter of2004.  Production at Kingsville Dome began in the second quarter of 2006.

 

The financial statementsof the Company have been prepared on the basis of accounting principlesapplicable to a going concern, which contemplates the realization of assets andthe satisfaction of liabilities in the normal course of business.

 

**3.****                                     ****DISCLOSURE OF NON-CASHTRANSACTIONS**

 

The following non-cashtransaction occurred in the first nine months of 2007 and 2006:

 

During the first ninemonths of 2007 and 2006, the Company entered into capital leases to acquireproperty, plant and equipment items including logging trucks and officecomputers and equipment totaling $211,000 and $256,000, respectively.  Theoutstanding balance of the capital leases was $432,000 at September 30, 2007.

 

In March 2006, 103,896shares of the Company’s Common Stock were issued in connection with theconversion of the Convertible Notes described in Footnote 8.

 

**4.****                                     ****URANIUM PROPERTIES**

 

**Vasquez Project**

The Vasquez projectcommenced production in the fourth quarter of 2004.  Since its start-upand through September 30, 2007, the project has produced 621,600 pounds ofuranium. In the first nine months of 2007 we produced 70,300 pounds.  In the third quarter of 2007 we incurredwellfield development expenditures of $100,000 in preparation of a newwellfield and additional production at Vasquez.  As production fromdepleted wellfields at Vasquez declines we are beginning preparations forrestoration activities in those wellfields at this project.

 

 

 

7

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**Kingsville Dome Project**

We began production fromProduction Area Authorization (“PAA”) #3 at Kingsville Dome at the end ofJanuary 2007, which was the first new production from this PAA. Production from PAA #3 was 260,300 pounds in the first nine months of 2007 andKingsville Dome produced a total of 278,300 pounds for the first nine months of2007.

 

During the first ninemonths of 2007 wellfield delineation and development work has been ongoing onadditional wellfields in PAA #3 at Kingsville Dome, where $3.0 million ofwellfield capital expenditures have been made related to future wellfields notyet on-line.

 

**Rosita/RositaSouth**

 

Capital expenditures forour Rosita and Rosita South projects totaled $5.3 million in the first ninemonths of 2007.  These costs were made to upgrade the Rosita plant andelution circuit and construction of a drying facility at Rosita and forwellfield development at Rosita and wellfield evaluation at Rosita South. The timing of production from Rosita and Rosita South will be dependent on theresults of our drilling program.

 

**5.****                                     ****CONTRACT COMMITMENTS**

 

**Amendmentto Uranium Sales Contracts**

 

In March 2006 we enteredinto a new contract with Itochu Corporation (“Itochu”) and a new contract withUG U.S.A., Inc. (“UG”) that supersede the previously existing contracts.  Each of the new contracts provides fordelivery of one-half of our actual production from our Vasquez property andother properties in Texas currently owned or hereafter acquired by the Company(excluding certain large potential exploration plays). The terms of suchcontracts are summarized below.

 

*TheItochu Contract*.Under the Itochu contract all production from the Vasquez property will be soldat a price equal to the average spot price for the eight weeks prior to thedate of delivery less $6.50 per pound, with a floor for the spot price of $37and a ceiling of $46.50. Other Texas production will be sold at a price equalto the average spot price for the eight weeks prior to the date of deliveryless $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 thedifference 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 Texasproduction will be increased by 50% of such excess. The floor and ceiling andsharing arrangement over the ceiling applies to 3.65 million pounds ofdeliveries, after which there is no floor or ceiling. Itochu has the right tocancel any deliveries on six-month’s notice.

 

In December 2005 weentered into a joint venture with Itochu to develop our Churchrock property inNew Mexico.  Under the terms of the joint venture, both parties must makean investment decision after the completion of a feasibility study, which wascompleted at the end of 2006. If Itochu should terminate the venture at thattime, we would no longer receive the additional price of 30% of the excessbetween $43 and $50 per pound outlined above. If we should terminate theventure at that time, the original contract terms will be reinstated from thattime forward.  The parties have extended the preliminary investment decisionuntil February 1, 2008.

 

*TheUG Contract*.Under the UG contract all production from the Vasquez property and other Texasproduction will be sold at a price equal to the month-end long-term contractprice for the second month prior to the month of delivery less $6 per pounduntil (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 600,000pounds in any year and 3 million pounds total have been sold, UG will have aright of first refusal to purchase other Texas production at a price equal tothe average spot price for a period prior to the date of delivery less 4%. Inconsideration of UG’s agreement to restructure its previously existingcontract, we paid UG $12 million incash with funds raised in our equity offering completed in April 2006.

 

 

 

8

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**Derivative Financial Instruments**

The Company determined that its long-term uraniumsales contracts in effect prior to March 2006 met the definition of derivativefinancial instruments for financial statement reporting purposes.  Changesin the Company’s derivatives represent non-cash charges to earnings for thepresent value of the loss the Company would incur in the event it would berequired to purchase uranium in the spot market to satisfy the deliveryobligations under the uranium sales contracts.  The Company has notentered into hedge transactions with respect to its uranium sales contracts.

**6.             STOCKBASED COMPENSATION**

***Adoption of SFAS 123(R)***

 

Effective January 1,2006, the Company adopted the fair value recognition provisions of Statement ofFinancial Accounting Standard 123(R) “*Share-BasedPayment”* (“SFAS 123(R)”) using the modified prospective transitionmethod. In addition, the Securities and Exchange Commission issued StaffAccounting Bulletin No. 107 “*Share-BasedPayment*” (“SAB 107”) in March, 2005, which provides supplementalSFAS 123(R) application guidance based on the views of the SEC. Under themodified prospective transition method, compensation cost recognized in thequarter ended March 31, 2006 and beyond includes: (a) compensation costfor all share-based payments granted prior to, but not yet vested as of January1, 2006, based on the grant date fair value estimated in accordance with theoriginal provisions of SFAS No. 123, and (b) compensation cost forall share-based payments granted beginning January 1, 2006, based on the grantdate fair value estimated in accordance with the provisions of SFAS 123(R). Inaccordance with the modified prospective transition method, results for priorperiods have not been restated.

 

The adoption of SFAS123(R) resulted in stock compensation expense for the three months endedSeptember 30, 2007 and 2006 of $1.636 million and $432,000, respectively, and$3.192 million and $1.229 million, respectively for the nine months endedSeptember 30, 2007 and 2006. Stock compensation expense is recorded as acomponent of general and administrative expenses for each period. The Companydid not recognize a tax benefit from the stock compensation expense because theCompany considers it is more likely than not that the related deferred taxassets, which have been reduced by a full valuation allowance, will not berealized.

 

The Black-Scholes option-pricingmodel was used to estimate the option fair values. The option-pricing modelrequires a number of assumptions, of which the most significant are, expectedstock price volatility, the expected pre-vesting forfeiture rate and theexpected option term (the amount of time from the grant date until the optionsare exercised or expire). Expected volatility was calculated based upon actualhistorical stock price movements through the measurement date of the stockoption grant. Expected pre-vesting forfeitures were estimated based on actualhistorical pre-vesting forfeitures over the most recent periods endingSeptember 30, 2007 for the expected option term. The expected option term wasestimated based on historical averages over the most recent periods endingSeptember 30, 2007.

 

A total of 100,000 newoption grants were made to a non-employee director of the Company in April 2007at a grant price of $9.25 per share.  This grant was subject to approvalof and amendment to the 2004 Director’s Stock Option Plan that was approved atthe Annual Meeting of Stockholders on July 12, 2007.  As such grant wassubject to stockholder approval, the stock compensation expense related tothese options was recognized upon the approval date of July 12, 2007.  A total of 200,000 new option grants weremade in July 2007, under the 2004 Director’s Stock Option Plan at grant pricesof $11.32 per share to the non-employee directors of the Company in connectionwith the reappointment of the previous directors at the Annual ShareholdersMeeting and the appointment of an additional director.

 

Using the Black-Scholesoption pricing model, the weighted average assumptions for grants in April andJuly 2007: fair market value: $11.14 and $11.12, expected volatility of 148.1%and 148.1% and risk-free interest rates of 4.6% and 4.6%.  An expectedlife of 9.62 years was used for the options granted.  The weighted averagefair value of the options granted was $11.32.

 

A total of 100,000 newoption grants were made to the non-employee directors of the Company in June2006 at grant prices of $5.15 and $5.13 per share.  Using theBlack-Scholes option pricing model, the weighted average assumptions for grantsin 2006: fair market value: $5.13 and $5.11, expected volatility of 184.7% and184.7% and

 

 

 

9

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risk-free interest rates of 5.20% and 5.09%.  Anexpected life of 9.31 years was used for the options granted.  Theweighted average fair value of the options granted in 2006 was $5.12.

 

***Stock Options as of the Nine Months Ended September 30, 2007and 2006***

 

*EmployeeStock Options*

 

The Company has two stockIncentive Plans for Employees, both of which were approved by the Company’sstockholders.  Under the 1995 Stock Incentive Plan (the “1995 Plan”) 2,260,572shares may be purchased upon the exercise of outstanding options at September30, 2007, with exercise prices ranging from $0.76 to $11.75 per share.  Nonew options may be granted under the 1995 Plan.

 

Under the Company’s 2004Stock Incentive Plan (the “2004 Plan”) a total of 1,750,000 shares may beissued upon exercise of options granted under the 2004 Plan. At September 30,2007 there were outstanding under the 2004 Plan options for the purchase of1,589,159 shares of Common Stock at exercise prices ranging from $2.96 to $5.19per share. At September 30, 2007, 30,500 shares were available for futuregrants under the 2004 Plan.

 

Employee stock optionsgenerally vest ratably over a 3 or 4 year time frame and have a contractualterm of 10 years.

 

*DirectorsStock Options*

 

On June 19, 2001,the Company granted to certain outside directors options to purchase 75,000shares of the Company’s Common Stock at an exercise price of $0.88 pershare.  All such options were immediately exercisable and will expire June 19,2011 or 30 days after the holder ceases to be a director of the Company orone year after such holder’s death, whichever occurs first.  25,000 ofthese options have been exercised and 25,000 of these options have expiredunexercised and 25,000 remain outstanding as of September 30, 2007.

 

On June 2, 2004 theCompany adopted the 2004 Directors’ Stock Option Plan (the “2004 Directors’Plan”). Under the 2004 Directors’ Plan, each non-employee director on the datethe Plan was adopted was granted an option to purchase 75,000 shares of CommonStock. Each non-employee Director elected or appointed to the Board ofDirectors for the first time will be granted an option to purchase 25,000shares of Common Stock and, each Non-Employee Director shall be granted anoption to purchase 25,000 shares either, (a) upon his or her reelection atan annual meeting of the Company’s stockholders or (b) in any calendaryear in which an annual meeting of stockholders is not held, on June 1 ofsuch year. In June 2006, the Directors’ Stock Option Plan was amended toincrease the initial grants to non-employee Directors to 50,000 shares ofCommon Stock.  The 2004 Directors’ Plan replaces an earlier plan thatexpired in 2004. Stock options under the 2004 Directors’ Plan vest ratably overa 4 year time frame or such other vesting schedule as designated by theCompensation Committee of the Board of Directors.  All option grants havea contractual term of 10 years.  The Compensation Committee may also makediscretionary option awards under this plan.

 

At the June 2006 annualmeeting of the stockholders, each of the non-employee directors of the Companywas granted an option under the 2004 Directors Plan to purchase 25,000 sharesof the Company’s common stock at an exercise price of $5.15 per share. In Juneand October 2006 options to purchase 50,000 shares of the Company’s CommonStock were granted to two new non-employee directors of the Company at exerciseprices of $5.13 and $2.97, respectively.  The non-employee directors holdoptions covering 606,250 shares under the 2004 Directors’ Plan at September 30,2007. At September 30, 2007, 600,000 shares were available for future grantsunder the 2004 Directors’ Plan.

 

A total of 100,000 newoption grants were made to a non-employee director of the Company in April 2007at a grant price of $9.25 per share subject to the approval of amendments tothe 2004 Directors’ Stock Option Plan that was voted on at the Annual Meetingof Stockholders held on July 12, 2007.  Such approval was granted at theJuly 12, 2007 Annual Meeting.  A total of200,000 new option grants were made at grant prices of $11.32 per share to thenon-employee directors of the Company in July 2007 in connection with thereappointment of the previous directors at the Annual Shareholders Meeting andthe appointment of an additional director.

 

 

 

10

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The following tablesummarizes stock options outstanding and changes during the nine months periodended September 30, 2007:

 
| ** **                                | ** ** | **Outstanding Options** | ** ** |
|-------------------------------------------|------------|------------------------------|------------|
| ** **                                | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term  (in years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| Options outstanding at January 1, 2007    |       | 4,725,209                    |       | $ | 1.47 |   |   |   |   |   |
| Granted                                   |       | 300,000                      |       | 10.63 |   |   |   |   |   |
| Exercised                                 |       | (484,590                     | )          | $ | 1.84 |   |   |   |   |   |
| Canceled or forfeited                     |       | (58,575                      | )          | $ | 14.96 |   |   |   |   |   |
| Options outstanding at September 30, 2007 |       | 4,482,044                    |       | $ | 2.88 |   | 7.50 |   | $ | 29,189,558 |   |
|                                      |       |                         |       |   |   |   |   |   |   |
| Options exercisable at September 30, 2007 |       | 2,665,291                    |       | $ | 2.07 |   | 6.85 |   | $ | 19,500,765 |   |

 

Sharesavailable for grant under the Plans as of September 30, 2007 were 630,500.

Stock options outstandingand currently exercisable at September 30, 2007 are as follows:

 
| ** **                      | ** ** | **Options Outstanding**             | ** ** | **Options Exercisable**                                                 | ** ** |
|---------------------------------|------------|------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| **Stock Option Plan** | ** ** | **Number of  Options  Outstanding** | ** ** | **Weighted Average  Remaining  Contractual Life  (in years)** | ** ** | **Weighted Average  Exercise price** | ** ** | **Number of  Options  Exercisable** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| 1995 Stock Incentive Plan       |       | 2,260,572                                |       | 6.51                                                                         |       | $ | 1.50 |   | 1,777,033 |   | $ | 1.41 |   |
| 2004 Employee Incentive Plan    |       | 1,589,159                                |       | 8.45                                                                         |       | 3.42 |   | 693,445 |   | 3.29 |   |
| Directors Stock Option Plan     |       | 1,063                                    |       | 2.46                                                                         |       | 4.99 |   | 1,063 |   | 4.99 |   |
| 2004 Directors Plan             |       | 606,250                                  |       | 8.83                                                                         |       | 6.70 |   | 168,750 |   | 4.22 |   |
| Other                           |       | 25,000                                   |       | 3.75                                                                         |       | 0.88 |   | 25,000 |   | 0.88 |   |
|                            |       | 4,482,044                                |       | 7.50                                                                         |       | $ | 2.88 |   | 2,665,291 |   | $ | 2.07 |   |

 

Total estimatedunrecognized compensation cost from unvested stock options as of September 30,2007 was approximately $4.6 million, which is expected to be recognized over aweighted average period of approximately 2 years.

 

**7.****            ****ASSET RETIREMENT OBLIGATIONS**

The following table shows the change in the balance ofthe restoration and reclamation liability during the three months endedSeptember 30, 2007:

| Reserve for future restoration and reclamation costs beginning of  period |   | $          | 4,229,193 |   |
|---------------------------------------------------------------------------|--------|------------|-----------|--------|
| Additions and changes in cash flow estimates                              |   | 786,233    |      |
| Costs incurred                                                            |   | (1,090,809 | )         |
| Accretion expense                                                         |   | 66,788     |      |
| Reserve for future restoration and reclamation costs at end of period     |   | $          | 3,991,405 |   |
|                                                                           |        |            |           |        |  |

 

 

 

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

**Convertible Notes**

In March 2006, 103,896 shares of the Company’s CommonStock were issued in connection with the conversion of $182,900 of principaland accrued interest of the Convertible Notes issued in 2000.

**Common Stock Issued Upon Exercise of Options**

During the first nine months of 2007, the Companyraised $889,000 of equity through the issuance of 484,590 shares of CommonStock of the Company upon the exercise of outstanding stock options.

The following table details the changes inshareholders equity for the nine months ended September 30, 2007:
| ** **                       | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|----------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------|------------|
| ** **                       | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Treasury Stock** | ** ** |
| Balances, December 31, 2006 |       | 51,791,339            |       | $           | 51,829     |            | $          | 126,252,871 |       | $ | (89,525,887 | ) | $ | (9,418 | ) |
| Net earnings                     |       | —                |       | —      |       | —          |       | 1,917,482   |       | — |   |
| Stock option exercise            |       | 484,590               |       | 485         |       | 888,744         |       | —      |       | — |   |
| Stock compensation expense       |       | —                |       | —      |       | 3,191,866       |       | —      |       | — |   |
| Balances, September 30, 2007     |       | 52,275,929            |       | $           | 52,314     |            | $          | 130,333,481 |       | $ | (87,608,405 | ) | $ | (9,418 | ) |
|                                  |            |                       |            |             |            |                 |            |             |            |  |  |  |  |  |  |  |  |

 

**9.****                                     ****ACCOUNTING FORUNCERTAINTY IN INCOME TAXES**

On January 1, 2007, we adopted FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes, aninterpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies theaccounting for uncertainty in income taxes by prescribing a two-step method offirst evaluating whether a tax position has met a more likely than notrecognition threshold and second, measuring that tax position to determine theamount of benefit to be recognized in the financial statements. FIN 48 providesguidance on the presentation of such positions within a classified statement offinancial position as well as on derecognition, interest and penalties,accounting in interim periods, disclosure, and transition.

As a result of the implementation of FIN 48, werecognized no change in our recorded assets or liabilities for unrecognizedincome tax benefits. Based on our analysis of all material tax positions taken,management believes the technical merits of these positions are justified andexpects that the full amount of the deductions taken and associated taxbenefits will be allowed.

FIN 48 requires the evaluation of a tax position as atwo-step process. We must determine whether it is more likely than not that atax position will be sustained upon examination, including the resolution ofany related appeals or litigation processes, based on the technical merits ofthe position. If the tax position meets the “more likely than not” recognitionthreshold, then the tax benefit is measured and recorded at the largest amountthat is greater than 50 percent likely of being realized upon ultimatesettlement. The re-assessment of our tax positions in accordance with FIN 48did not result in any material change to our financial condition, results ofoperations or cash flows.

We have also assessed the classification of interestand penalties, if any, related to income tax matters. Pursuant to theapplication of FIN 48, we have made an accounting election to treat interestand penalties related to income tax matters, if any, as a component of incometax expense rather than other operating expenses.

 

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**10.**          **IMPACTOF RECENT ACCOUNTING PRONOUNCEMENTS**

***Fair ValueMeasurements.***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 inapplying generally accepted accounting principles in the United States ofAmerica and in preparing financial statement disclosures. SFAS No. 157 iseffective for fiscal years beginning after November 15, 2007. We areevaluating the effect of the adoption and implementation of SFAS No. 157,which is not expected to have a material impact on our financial condition,results of operations or cash flows.

***Fair Value Optionfor Financial Assets and Liabilities.*** In February 2007, the FASB issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities,” whichpermits entities to choose to measure many financial instruments and certainother items at fair value. SFAS No. 159 is effective for fiscal yearsbeginning after November 15, 2007. We are evaluating the effect of theadoption and implementation of SFAS No. 159, which is not expected to havea material impact on our financial condition, results of operations or cashflows.

**11.          EARNINGS PER SHARE**

Basicearnings per share includes no dilution and is computed by dividing income orloss attributed to common stockholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflects thepotential dilution that could occur if security interests were exercised orconverted into common stock. The following table setsforth the computation of basic and diluted loss per share for the three andnine months ended September 30, 2007 and 2006:

 
| ** **                      | ** ** | **For the three months ended  September 30, 2007** | ** ** | **For the three months ended  September 30, 2006** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **Net income attributed to common stock (Numerator)**   | ** ** | **Weighted-Average Shares (Denominator)**               | ** ** | **Per Share Amount** | ** ** | **Net income attributed to common stock (Numerator)** | ** ** | **Weighted-Average Shares (Denominator)** | ** ** | **Per Share Amounts** | ** ** |
| *Basic EPS:*                    | * *   | * *                                                | * *   | * *                                                | * *   | * * | * * | * * | * * | * * | * * | * * | * * |
| Net earnings (loss)             |       | $                                                       | 2,154,689  |                                                    | 52,266,199 |   | $ | 0.04 |   | $ | (5,989,056 | ) | 51,735,089 |   | $ | (0.12 | ) |
| *Effect of dilutive securities* | * *   | * *                                                | * *   | * *                                                | * *   | * * | * * | * * | * * | * * | * * | * * | * * |
| Employee Stock Options (A)      |       | $                                                       | —     |                                                    | 3,754,633  |   | $ | — |   | $ | — |   | — |   | $ | — |   |
| Diluted earnings per share      |       | $                                                       | 2,154,689  |                                                    | 56,020,832 |   | $ | 0.04 |   | $ | (5,989,056 | ) | 51,735,089 |   | $ | (0.12 | ) |

 
| ** **                      | ** ** | **For the  nine months ended  September 30, 2007**     | ** ** | **For the  nine months ended   September 30, 2006** | ** ** |
|---------------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                      | ** ** | **Net  income attributed to common stock (Numerator)** | ** ** | **Weighted-Average  Shares (Denominator)**          | ** ** | **Per  Share Amount** | ** ** | **Net loss  attributed to common stock (Numerator)** | ** ** | **Weighted-Average  Shares (Denominator)** | ** ** | **Per  Share Amounts** | ** ** |
| *Basic EPS:*                    | * *   | * *                                               | * *   | * *                                            | * *   | * * | * * | * * | * * | * * | * * | * * | * * |
| Net earnings (loss)             |       | $                                                      | 1,917,482  |                                                | 52,059,849 |   | $ | 0.04 |   | $ | 24,052,993 |   | 47,184,096 |   | $ | 0.51 |   |
| *Effect of dilutive securities* | * *   | * *                                               | * *   | * *                                            | * *   | * * | * * | * * | * * | * * | * * | * * | * * |
| Employee Stock Options (A)      |       | $                                                      | —     |                                                | 3,808,011  |   | (0.01 | ) | $ | — |   | 2,587,400 |   | $ | (0.03 | ) |
| Convertible Notes (B)           |       | $                                                      | —     |                                                | —     |   | — |   | $ | 2,081 |   | 33,490 |   | $ | — |   |
| Diluted earnings per share      |       | $                                                      | 1,917,482  |                                                | 55,867,860 |   | $ | 0.03 |   | $ | 24,055,074 |   | 49,804,986 |   | $ | 0.48 |   |
|                                 |            |                                                        |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(A)      Represents the dilutiveeffect of our employee stock options as the average price of our stock for thequarter ended September 30, 2007, exceeded their strike price.

 

(B)        Represents the dilutiveeffect of our Convertible Notes from year-end through conversion in March 2006.

**12.          SUBSEQUENT EVENTS**

On October 12, 2007, the Company finalized a definitive agreement with BHP Billiton to acquire 100% of the ownership of Rio Algom Mining LLC (“Rio Algom”). Under the agreement, URI will pay BHP Billiton $110 million in cash and assume certain retirement benefits and reclamation liabilities of which up to $35 million will be pre-funded at closing. URI will also pay BHP Billiton $16.5 million contingent upon the receipt of a license from the Nuclear Regulatory Commission (NRC) to construct and operate a conventional uranium mill. The transaction is expected to close on or before June 1, 2008 and is subject to customary closing conditions, financing and regulatory approvals.

 

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**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

**Forward Looking Statements**

The following summary is qualified in its entirety by,and should be read in conjunction with, the more detailed information and anyfinancial data incorporated herein by reference to the Company’s reports filedwith the Securities and Exchange Commission under the Securities Exchange Actof 1934. Except for historical information contained in this report, the mattersdiscussed herein contain forward-looking statements, made pursuant to the “safeharbor” provisions of the Private Securities Litigation Reform Act of 1995,including management’s expectations regarding the Company’s reserves andmineralized uranium materials, timing of receipt of mining permits, productioncapacity of mining operations planned for properties in South Texas and NewMexico and planned dates for commencement of production at such properties.Such forward-looking statements are inherently uncertain, and investors mustrecognize that actual results may differ from management’s expectations. Keyfactors impacting current and future operations of the Company include theprice of uranium, weather conditions, operating conditions at the Company’s miningprojects, government regulation of the mining industry and the nuclear powerindustry, the world-wide supply and demand of uranium, availability of capital,timely receipt of mining and other permits from regulatory agencies and othermatters indicated in “Cautionary Statement,” found in the Company’s AnnualReport.

**Financial Condition and Results of Operations**

**Comparison of Three and Nine Months Ended September 30, 2007and 2006**

*Production and productioncosts. *Inthe first nine months of 2007, we produced 348,600 pounds.  The Vasquezproject produced 70,300 pounds and Kingsville Dome produced 278,300pounds.  Production in the first nine months of 2006 was 187,400, 117,400from Vasquez and 70,000 from Kingsville Dome.  The following table detailsour production and production cost breakdown for the three and nine monthsended September 30, 2007 and 2006.

| ** **                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Vasquez production**            |       | 5,800                                                |       | 26,100                                              |       | 70,300 |   | 117,400 |   |
|                              |       |                                                 |       |                                                |       |   |   |   |   |
| **Kingsville Dome production**    |       | 98,000                                               |       | 46,500                                              |       | 278,300 |   | 70,000 |   |
|                              |       |                                                 |       |                                                |       |   |   |   |   |
| **Total production**              |       | 103,800                                              |       | 72,600                                              |       | 348,600 |   | 187,400 |   |
| ** **                        | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total operating costs             |       | $1,867,000                                           |       | $1,499,000                                          |       | $5,165,000 |   | $4,631,000 |   |
| Per pound operating costs         |       | $18.00                                               |       | $20.64                                              |       | $14.81 |   | $24.71 |   |
| Total deprec. and depletion costs |       | $1,081,000                                           |       | $2,796,000                                          |       | $5,312,000 |   | $4,363,000 |   |
| Per pound DD&A cost           |       | $10.42                                               |       | $38.50                                              |       | $15.24 |   | $23.28 |   |
| Total production cost             |       | $2,948,000                                           |       | $4,295,000                                          |       | $10,477,000 |   | $8,994,000 |   |
| Production cost per pound         |       | $28.41                                               |       | $59.14                                              |       | $30.05 |   | $47.99 |   |

 

Total operating costs,total depreciation costs and total production costs incurred for the periodspresented above differ from the cost of uranium sales recorded in consolidatedstatements of operations because of changes in the amounts recorded toinventory for the same periods.  The costof uranium sales amounts include the sales of uranium inventory on hand at thebeginning of the period and does not include certain uranium produced duringthe period but was not sold at period end.

Reconciliation of production costs to cost of uranium sales:

 

 

| ** **                             | ** ** | Three  Months Ended September 30, | ** ** | Nine  Months Ended September 30, | ** ** |
|----------------------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| ** **                             | ** ** | **2007**                          | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| Production costs                       |       | $                                 | 2,948,000  |                             | $          | 4,295,000 |   | $ | 10,477,000 |   | $ | 8,994,000 |   |
| Change in uranium inventory            |       | $                                 | 479,000    |                             | ($313,000  | ) | ($409,000 | ) | ($506,000 | ) |
| Direct cost of uranium production sold |       | $                                 | 3,427,000  |                             | $          | 3,982,000 |   | $ | 10,068,000 |   | $ | 8,488,000 |   |

 

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*Uranium Sales. *In the first nine months of 2007, we sold321,900 pounds generating revenue of $22.924 million ($71.22 per pound),compared with sales of 199,900 pounds in the same period of 2006 for revenue of$5.679 million ($28.41 per pound).  In the quarter ended September 30,2007, we sold 127,800 pounds and had revenue of $10.387 million ($81.25 perpound) compared with third quarter 2006 sales of 70,000 pounds which generatedrevenue of $2.766 million ($39.54 per pound).  Improved sales resultedfrom our increased production in 2007 achieved by the commencement ofoperations in PAA#3 at Kingsville Dome.  The increase in sales revenue wasthe result of both the increase in pounds sold, but more significantly fromhigher prices we received under new contracts entered into with each of our twocustomers in March 2006, which superseded the previous contracts.

*Cost of Uranium Sales. *Our cost of uranium sales from the saleof produced uranium in the first nine months of 2007 was $10.1 million comparedwith $8.5 million in the same period of 2006, excluding the gain on derivativesof $34.8 million recorded in connection with the revised uranium salescontracts in the first nine months of 2006.  Cost of uranium sales iscomprised primarily of royalties and commissions related to our uranium sales,production costs, including operating expenses, depreciation and depletionexpenses and amortization of our restoration and reclamation costestimates.  The following table details the cost of uranium salesbreakdown for the three and nine months ended September 30, 2007 and 2006.

 

| ** **                             | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Total pounds sold**                  |       | 127,800                                              |       | 70,000                                              |       | 321,900 |   | 199,900 |   |
| Total operating expenses               |       | $                                                    | 1,998,000  |                                                | $          | 1,557,000 |   | $ | 5,341,000 |   | $ | 4,674,000 |   |
| Per pound operating expense            |       | $                                                    | 15.63      |                                                | $          | 22.25 |   | $ | 16.60 |   | $ | 23.38 |   |
| Depreciation and depletion             |       | $                                                    | 1,428,000  |                                                | $          | 2,425,000 |   | $ | 4,727,000 |   | $ | 3,814,000 |   |
| Per pound DD&A expense             |       | $                                                    | 11.17      |                                                | $          | 34.67 |   | $ | 14.68 |   | $ | 19.08 |   |
| Direct cost of uranium production sold |       | $                                                    | 3,427,000  |                                                | $          | 3,982,000 |   | $ | 10,068,000 |   | $ | 8,488,000 |   |
| Direct cost of sales per pound         |       | $                                                    | 26.80      |                                                | $          | 56.92 |   | $ | 31.28 |   | $ | 42.46 |   |
|                                   |       |                                                 |       |                                                |       |   |   |   |   |
| **Royalties and commissions**          |       | $                                                    | 1,297,000  |                                                | $          | 242,000 |   | $ | 2,718,000 |   | $ | 491,000 |   |
| Royalties and commissions per pound    |       | $                                                    | 10.14      |                                                | $          | 3.45 |   | $ | 8.44 |   | $ | 2.46 |   |

 

The third quarter and nine months ended September 30,2007, reflected a higher percentage of sales of Kingsville Dome productioncompared with Vasquez production sold and resulted from the continued increasein production from PAA #3 wellfields along with a decrease of production fromthe Vasquez project.  Kingsville Dome PAA#3 wellfields have shown bothlower operating and capital cost compared with the previous Kingsville Domewellfields placed in production in the second quarter of 2006 because of thehigher quality of the ore trend being put under the new wellfield.  ThePAA#3 wellfields have also demonstrated lower operating costs than our Vasquezproduction because of the better ore quality at Kingsville Dome and because theKingsville Dome ore body does not contain the re-reduced ore characteristicsfound at Vasquez.

Accretion and amortization of future restoration costsin the third quarter of 2007 and 2006 was $126,000 and $86,000, respectivelyand $433,000 and $360,000, respectively for the first nine months of 2007 and2006.

*General and Administrative Charges.*  We incurred general andadministrative charges and corporate depreciation of $3.6 million and $1.6million, respectively in the three months ended September 30, 2007 and2006.   General and administrative charges and corporate depreciationwas $8.3 million and $4.2 million, respectively in the nine months ended September30, 2007 and 2006.

 

16

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Significant expenditures for general andadministrative expenses for the three and nine months ended September 30, 2007and 2006 were:

|                                       | ** ** | **Three Months Ended**

**September  30,** | ** ** | **Nine Months Ended**

**September  30,** | ** ** |
|--------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| Stock compensation expense                 |       | $                                                    | 1,636,000  |                                                | $          | 432,000 |   | $ | 3,192,000 |   | $ | 1,229,000 |   |
| Salaries and payroll burden                |       | 587,000                                              |       | 420,000                                             |       | 1,709,000 |   | 1,075,000 |   |
| Legal, accounting, public company expenses |       | 380,000                                              |       | 240,000                                             |       | 1,217,000 |   | 940,000 |   |
| Insurance and bank fees                    |       | 317,000                                              |       | 116,000                                             |       | 588,000 |   | 305,000 |   |
| Consulting and professional services       |       | 391,000                                              |       | 211,000                                             |       | 917,000 |   | 355,000 |   |
| Office, travel and other expenses          |       | 264,000                                              |       | 138,000                                             |       | 644,000 |   | 310,000 |   |
|                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Total                                      |       | $                                                    | 3,575,000  |                                                | $          | 1,557,000 |   | $ | 8,267,000 |   | $ | 4,214,000 |   |

 

The non-cash compensation expense recorded for thethree and nine months ended September 30, 2007 and 2006 resulted from theadoption of SFAS 123(R) in January 2006, requiring the recognition of expenserelated to the Company’s stock option grants.

Salary and payroll costs increases for the three andnine months presented resulted primarily from the additions to the engineering,professional and executive levels in South Texas and New Mexico made in 2007and 2006 and compensation increases for the Company’s key personnel in thesecond half of 2006.

Increases in the Company’s legal, accounting andpublic company expenses in the three and nine months of 2007 compared with 2006resulted from audit and consulting fees related to Sarbanes-Oxley compliance,listing fees related to our April 2007 NASDAQ listing and the increase in theCompany’s Board of Directors membership in late 2006.  These increaseswere offset by a reduction in legal fees, as the 2006 period includedsignificant legal costs related to the Itochu joint venture agreement.

Our insurance costs increased in the three and ninemonths ended September 30, 2007 compared with 2006 from higher directors andofficer’s insurance premiums, higher cost of property and casualty coverage,increased vehicle coverage premiums resulting from additional vehicles in 2007and higher general liability coverage resulting from increased employee headcount at our uranium projects.

The costs for consulting and professional servicesincreased in the three and nine months ended September 30, 2007 compared with2006 resulted from increases in project related activities in 2007.  Theseactivities include work performed in the review and assessment of our NewMexico property data bases to evaluate their potential as conventionalmining projects, New Mexico costs related to the preparation of ISR projectstowards their final licensing and permitting phase, increases in environmental,health and safety training, the engagement of an investor relations and mediarelations firm in late 2006, consulting and computer networking and web sitedesign work.

Increased office costs incurred in the three and ninemonths ended September 30, 2007 compared with 2006 resulted primarily from theopening of a corporate office location in Corpus Christi, Texas in June 2006,increases in the South Texas Kingsville operations office resulting from thepersonnel added in 2006 and additions made to the Crownpoint office in NewMexico to support the additional activities beginning in the first quarter of2007.

*Net Earnings and Losses.*For the three months ended September 30,2007 and 2006, we had net earnings of $2.2 million and a net loss of $6.0million, respectively.  The nine months ended September 30, 2007 and 2006,had net earnings of $1.9 million and $24.1 million, respectively.  Theearnings in 2006 included a non-cash gain on derivatives of $34.8 million.

*Cash Flow. *As of September 30, 2007 we have a cashbalance of approximately $13.9 million compared with $26.5 million at the samedate in 2006.

In the first nine months of 2007, we had positive cashflow provided by operations of $10.3 million, resulting primarily from thehigher volume of uranium sold and the increase in sales prices received underour uranium sales contracts that were amended in March 2006.  We used$17.2 million in investing activities during the first nine months of2007.  We increased the collateral supporting our South Texas financialsurety requirements by $2.9 million dollars in the nine months ended September30, 2007 and made significant additions to our South Texas and New Mexicoproperty, plant and equipment for 2007. These expenditures were primarily for wellfield development, evaluationdrilling capital and plant and dryer upgrades at Kingsville Dome of $5.7million, plant and equipment expenditures for restoration start-up at Vasquezof $541,000, Rosita and Rosita South project expenditures for wellfielddevelopment,

 

17

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evaluationdrilling capital and plant and dryer upgrades of $5.3 million, other Texasproperty and other assets of $2.3 million and property additions in New Mexicoof $592,000 primarily for licensing and permitting activities.

In the nine months of 2006, we had a negative cashflow used in operations of ($1.9 million), resulting primarily from our lowproduction volumes coupled with high production costs for the first nine monthsof the year.  We also used $26.0 million in investing activities, thelargest component of which was the payment of $12.0 million to UG, U.S.A., Inc.in connection with the restructuring of our uranium sales contract.  Othersignificant investing activities were for production start-up capital at KingsvilleDome of $8.5 million, additional wellfield development at Vasquez and Rosita of$3.1 and $1.0 million, respectively, and other plant and equipment additions of$0.8 million.

**Liquidity—Cash Sources and Uses for 2007**

Our cash balance at September 30, 2007 was $13.9million, a reduction of $2.6 million from the previous quarter.  Duringthe quarter we increased the collateral supporting our South Texas financialsurety requirements by $2.5 million dollars. During the third quarter of 2006, we averaged a net cash outflow of $1.7million per month.  Based upon ourcurrent plan of operations, we anticipate that our operating and capitalrequirements for 2007 will be met through existing cash and through cash to begenerated from operations.

**Contingent Liabilities—Off Balance Sheet Arrangements**

In April 2006, the Company completed the sale of10,200,307 shares of its Common Stock at $4.90 per share to accreditedinvestors resulting in gross proceeds of approximately $50 million beforeexpenses of the offering.  The Company has filed a registration statementunder the Securities Act of 1933, as amended, to register the resale of theshares.  Such shares are subject to certain resale registration rightsthat include penalties (1% per month) in the event registration statement doesnot become effective in a timely manner or if the registration statement failsto remain effective.  On August 4, 2006, such registration statement wasmade effective and the Company met its initial obligation.  We have periodicallyupdated the registration statement as necessary to ensure that the registrationstatement has continued to remain effective.

The Company has obtained financial surety relating tocertain of its future restoration and reclamation obligations as required bythe 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 tosatisfy such regulatory requirements. The L/C’s were issued by Bank of Americaand the performance bonds have been issued by United States Fidelity andGuaranty Company (“USF&G”). L/C’s for $5.4 million and $2.0 million wereissued at September 30, 2007 and December 31, 2006, respectively, such L/C’sare collateralized in their entirety by certificates of deposit.

Performance bonds totaling $2.8 million were issuedfor the benefit of the Company at September 30, 2007 and December 31,2006. USF&G has required that the Company deposit funds collateralizing aportion of the bonds. The amount of bonding issued by USF&G exceeded theamount of collateral by $2.5 million at September 30, 2007 andDecember 31, 2006, respectively. In the event that USF&G is requiredto perform under its bonds or the bonds are called by the state agencies, theCompany would be obligated to pay any expenditure in excess of the collateral.

**Critical Accounting Policies**

Our significant accounting policies are described inNote 2 to the consolidated financial statements included in the Company’s 2006Annual Report on Form 10-K/A.  We believe our most criticalaccounting policies involve those requiring the use of significant estimatesand assumptions in determining values or projecting future costs.

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

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

 

18

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Such estimates and assumptions affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of expensesduring the reporting period.

 

19

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**ITEM 3.****                                                    ****QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**Uranium Price Volatility**

The Company is subject to market risk related to themarket price of uranium.  The Company’s cash flow has historically beendependent on the price of uranium, which is determined primarily by globalsupply and demand, relative to the Company’s cost of production. Historically, uranium prices have been subject to fluctuation, and the price ofuranium has been and will continue to be affected by numerous factors beyondthe Company’s control, including the demand for nuclear power, politicaland economic conditions, governmental legislation in uranium producing andconsuming countries and production levels and costs of production of otheruranium producing companies.

**Derivative Financial Instruments**

The Company determined that its long-term uraniumsales contracts in effect prior to March 2006 met the definition of derivativefinancial instruments for financial statement reporting purposes.  Changesin the Company’s derivatives represent non-cash charges to earnings for thepresent value of the loss the Company would incur in the event it would berequired to purchase uranium in the spot market to satisfy the deliveryobligations under the uranium sales contracts.  The Company has notentered into hedge transactions with respect to its uranium sales contracts.

The Company amended these contracts inMarch 2006.  The amended contracts obligate the Company to deliver50% of its uranium production to each customer, and do not obligate the Companyto deliver any uranium in excess of its production.  The Company hasdetermined that the terms of the amended contracts eliminates theirqualification as derivatives and therefore are not required to be valued atfair value.

**ITEM 4.****                                                    ****CONTROLS AND PROCEDURES**

During the year ended December 31, 2006 and thequarter ended September 30, 2007, the Company’s management, with theparticipation of the Chief Executive Officer and Chief Financial Officer of theCompany, carried out an evaluation of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, asamended (the “Exchange Act”)).

Based on that evaluation, our Chief Executive Officerand Chief Financial Officer concluded that our disclosure controls andprocedures as of December 31, 2006 and September 30, 2007 were noteffective as a result of the material weakness in our internal controls overfinancial reporting discussed below.

**Management’s Report on Internal Control over FinancialReporting**

The Company’s management assessed the effectiveness ofthe Company’s internal control over financial reporting as of December 31,2006. In making this assessment, the Company’s management used the criteria setforth by the Committee of Sponsoring Organizations of the Treadway Commission(COSO) in *Internal Control-IntegratedFramework*.

Under the supervision and with the participation ofour management, including our Chief Executive Officer and Chief FinancialOfficer, we conducted an evaluation of the effectiveness of our internalcontrol over financial reporting in connection with preparation of the annualreport on Form 10-K for the year ended December 31, 2006. As a resultof these assessments, a material weakness was identified in March 2007, inconnection with our year ended December 31, 2006 audit procedures, leadingmanagement to conclude that our internal controls over financial reporting werenot effective as of December 31, 2006. A material weakness is a controldeficiency, or combination of control deficiencies, that results in more than aremote likelihood that a material misstatement of the annual or interimfinancial statements will not be prevented or detected.

 

20

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The following material weakness forms the basis forour conclusion at December 31, 2006:

•               *Controls over theReview of Financial Statements.* Our financial and accounting organization consists ofthe Vice President—Finance and the Corporate Controller. Due to a lack offinancial and accounting resources, the financial records preparation andreview procedures performed by our personnel with respect to our application ofthe fair value recognition provisions of Statement of Financial AccountingStandard 123(R)” *Share-Based Payment”*(“SFAS 123(R)”) for the fourth quarter of 2006 did not correctly record certainterms of stock option grants made in the fourth quarter of 2006. This matterwas identified by our auditors in March 2007 during the course of theiraudit procedures and resulted in an audit adjustment increasing stockcompensation expense by $629,000 in our year end 2006 financial statements.Because of this lack of resources, review procedures were not consistentlyperformed on a timely basis to ensure that financial reporting and fraud riskcontrols were operating in the manner designed.

**Changes in Internal Controls**

During the second and third quarters of 2007 we havemade certain changes in our internal control over financial reporting that mayhave materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.  Management is currentlyevaluating the implementation of these procedures and such additionalprocedures that may be necessary to fully remediate the material weaknessdescribed above. Management is in the process of making the following changesto its system of internal controls:

•               We relocated and expanded our corporateoffice effective September 2007.  This allowed the hiring of additionalpersonnel, including both experienced accounting and support staff to allow forimproved segregation of duties and allow for a more thorough review, by seniorfinancial personnel, of the financial statements and underlying supportingdocumentation. We added to our accounting staff in June and in the thirdquarter of 2007 and have designed their responsibilities to improve thesegregation of duties functions previously identified as internal controlweaknesses.

•               The addition of accounting and supportstaff has allowed us to conduct a more detailed review of our purchasing andprocurement procedures.  We are currently evaluating the results of thisreview and expect to determine an evaluation on the compliance with our existingpurchasing policies and permit the implementation of additional reviewprocedures at each uranium project location and in the financial reportingarea.

We believe the changes that were made in the secondand third quarter of 2007 have addressed certain of those weaknesses ininternal controls identified as of December 31, 2006.  While we believecertain of these deficiencies have been remediated and/or mitigated we have notconducted a complete review and assessment of our overall internal control environmentto be able to conclude that the material weakness identified in connection withour December 31, 2006 financial statements is no longer applicable.

 

21

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** **

** **

**PART II - OTHER INFORMATION**

 

**ITEM 1.****                            ****LEGAL PROCEEDINGS**

 

No change from the priorannual filing on our Form 10-K/A.

 

**ITEM 1A.****                   ****RISK FACTORS**

 

**Over53.7% of our shares of Common Stock are controlled by Principal Stockholdersand Management.**

 

Approximately 44.0% ofour Common Stock is controlled by five stockholders of record. In addition, ourdirectors and officers are the beneficial owners of about 9.7% of our CommonStock. This includes with respect to both groups shares that may be purchasedupon the exercise of outstanding options. Such ownership by the Company’sprincipal shareholders, executive officers and directors may have the effect ofdelaying, deferring, preventing or facilitating a sale of the Company or abusiness combination with a third party.

 

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

 

**As ofDecember 31, 2006 and September 30, 2007, we identified a materialweakness in internal control over financial reporting and concluded that ourdisclosure controls were not effective. If we fail to maintain an effectivesystem of internal and disclosure controls, we may not be able to accuratelyreport our financial results or prevent fraud. As a result, investors may bemisled and lose confidence in our financial reporting and disclosures and theprice of our common stock may be negatively affected.**

 

The Sarbanes-Oxley Act of2002 requires that we report annually on the effectiveness of our internalcontrol over financial reporting. Among other things, we must perform systemsand process evaluation and testing. We must also conduct an assessment of ourinternal controls to allow management to report on, and our independentregistered public accounting firm to attest to, our assessment of our internalcontrol over financial reporting as required by Section 404 of theSarbanes-Oxley Act.

 

In connection with theassessment of our internal control over financial reporting for our AnnualReport on Form 10-K/A, as further described in Item 9A of such Form 10K/A,management and our registered public accounting firm determined that as ofDecember 31, 2006 and September 30, 2007 our disclosure controls andprocedures were ineffective because of the material weakness in our internalcontrol over financial reporting.

 

Although we have made andare continuing to make improvements in our internal controls, if we areunsuccessful in remediating the material weakness impacting our internalcontrol over financial reporting and disclosure controls, or if we discover otherdeficiencies, it may adversely impact our ability to report accurately and in atimely manner our financial condition and results of operations in the future,which may cause investors to lose confidence in our financial reporting and maynegatively affect the price of our Common Stock. Moreover, effective internaland disclosure controls are necessary to produce accurate, reliable financialreports and to prevent fraud. If we continue to have deficiencies in ourinternal control over financial reporting and disclosure controls, they maynegatively impact our business and operations.

 

 

 

22

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**ITEM 2.****                            ****UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

None

 

**ITEM 3.****                            ****DEFAULTS UPON SENIOR SECURITIES.**

 

None

 

**ITEM 4.****                            ****SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS.**

 

At the Company’s AnnualMeeting of shareholders, held July 12, 2007, The Company’s shareholdersre-elected its directors and also voted to approve the recommended proposal forratification of the Company’s independent auditors.

 

Following are the votescast for and against each director. 

 

| **Directors**     | ** ** | **For**    | ** ** | **Against** | ** ** |
|-------------------|------------|------------|------------|-------------|------------|
| Paul K Willmott   |       | 20,892,273 |       | 236,206     |       |
| Leland O. Erdahl  |       | 20,497,024 |       | 631,455     |       |
| George R. Ireland |       | 20,513,934 |       | 614,545     |       |
| David N. Clark    |       | 20,583,860 |       | 544,619     |       |
| Terence J. Cryan  |       | 20,976,430 |       | 152,049     |       |

 

Votes for the approval of the adoption of the Company’s2007 Restricted Stock Plan as follows:

| ** **                                                                              | ** ** | **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------|------------|
| Proposal the approval of the adoption of the Company’s 2007  Restricted Stock Plan |       | 12,693,114 |       | 8,318,907   |       | 116,458         |       |

 

Votes for the approval of the amendments to Section 5of the Company’s 2007 Amended and Restated Directors’ Stock Option Plan asfollows:

| ** **                                                                                                                              | ** ** | **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------|------------|
| Proposal the approval of the amendments to Section 5 of the Company’s  2007 Amended and Restated Directors’ Stock Option Plan |       | 12,589,433 |       | 8,219,923   |       | 247,123         |       |

 

Votes for the approval of the amendments to Section6.4.2 of the Company’s 2007 Amended and Restated Directors’ Stock Option Planas follows:

| ** **                                                                                                                                   | ** ** | **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------|------------|
| Proposal the  approval of the amendments to Section 6.4.2 of the Company’s 2007 Amended and  Restated Directors’ Stock Option Plan |       | 19,449,816 |       | 1,432,939   |       | 245,724         |       |

 

Votes on the proposal for ratification of the Company’sindependent auditors as follows:

| ** **                                                           | ** ** | **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** |
|----------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------|------------|
| Proposal for ratification of the Company’s independent auditors |       | 12,383,300 |       | 8,692,451   |       | 52,728          |       |

 

**ITEM 5.****                            ****OTHER INFORMATION.**

 

None

 

**ITEM 6.****                            ****EXHIBITS**

 

See the Index to Exhibitson Page E-1 for a listing of the exhibits that are filed as part of thisQuarterly Report.

 

 

 

23

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
| ** **              | **URANIUM  RESOURCES, INC.** |                                          |     |
|-------------------------|------------------------------|-----------------------------------------------|----------|
|                    |                         |                                          |     |   |
| Dated: November 9, 2007 | By:                          | /*s*/ David N. Clark                          | * * |   |
|                    |                         | David N. Clark                                |     |   |
|                    |                         | Director and                                  |     |   |
|                    |                         | Chief Executive Officer                       |     |   |
|                    |                         |                                          |     |   |
| Dated: November 9, 2007 | By:                          | /*s*/ Thomas H. Ehrlich                       | * * |   |
|                    |                         | Thomas H. Ehrlich                             |     |   |
|                    |                         | Vice President -  Finance and                 |     |   |
|                    |                         | Chief Financial Officer                       |     |   |
|                    |                         | (Principal Financial  and Accounting Officer) |     |   |

 

 

 

 

24

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** **

** **

**EXHIBIT INDEX**

 

| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                             |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1*                |       | Restated Certificate of  Incorporation of the Company, dated February 15, 2004 (filed with the  Company’s Registration Statement on Form SB-2 dated July 26, 2004, SEC  File Number 333-117653).                                             |
|                |       |                                                                                                                                                                                                                                                        |
| 3.1.1*              |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company (filed with  the Company’s Form 8-K dated April 11, 2006, SEC File Number  000-17171).                                                                     |
|                |       |                                                                                                                                                                                                                                                        |
| 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).           |
|                |       |                                                                                                                                                                                                                                                        |
| 10.9*               |       | License to Explore and  Option to Purchase dated March 25, 1997 between Santa Fe Pacific Gold  Corporation and Uranco, Inc. (filed with the Company’s Annual Report on  Form 10-K dated June 30, 1997, SEC File Number 000-17171). |
|                |       |                                                                                                                                                                                                                                                        |
| 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).                                              |

 

 

 

E-1

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| 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).                                                                                                              |
|----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                         |
| 10.16.1* |   | Amendment No. 1 to the  Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with the  Company’s Annual Report on Form 10KSB 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 10KSB 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*   |   | Contract with UG  U.S.A., Inc for the Purchase of Natural Uranium Concentrates (U3O8) dated  August 12, 2003 (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).               |
|     |   |                                                                                                                                                                                                                                                                                         |
| 10.27.1* |   | 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).                                                              |

 

 

 

E-2

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| 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  10QSB/A dated November 18, 2005, SEC File No. 000-17171).                                                                                            |
|   |   |                                                                                                                                                                                                                                                             |
| 10.36* |   | Feasibility Study  Funding Agreement between Itochu Corporation, Uranium Resources, Inc. and  Hydro Resources, Inc. effective March 29, 2006. (filed with the Company’s  Form 10KSB 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 10KSB 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 10KSB dated March 31,  2006, SEC file Number 000-17171).                                          |
|   |   |                                                                                                                                                                                                                                                             |
| 10.39* |   | Stock Purchase  Agreement dated as of April 19, 2006, by and between Uranium Resources, Inc.  and accredited investors (filed with the Company’s Current Report on Form 8-K  dated April 19, 2006, SEC File No. 000-17171).                                 |
|   |   |                                                                                                                                                                                                                                                             |
| 10.40* |   | Limited Liability  Company Agreement of Churchrock Venture LLC (filed with the Company’s Current  Report on Form 8-K dated December 5, 2006, SEC File No. 000-17171).                                                                                       |
|   |   |                                                                                                                                                                                                                                                             |
| 10.41* |   | Compensation Agreement  dated March 12, 2007 between the Company and Craig S. Bartels (filed with the  Company’s Form 8-K dated March 13, 2007, SEC File No. 000-17171).                                                                                    |
|   |   |                                                                                                                                                                                                                                                             |
| 10.42* |   | Compensation Agreement  dated March 12, 2007 between the Company and David N. Clark (filed with the  Company’s Form 8-K dated March 13, 2007, SEC File No. 000-17171).                                                                                      |
|   |   |                                                                                                                                                                                                                                                             |
| 10.43* |   | Amended and Restated  2004 Directors’ Stock Option Plan dated April 10, 2007 (filed with the  Company’s Post-Effective Amendment No. 1 to Registration Statement on  Form S-3 dated April 11, 2007, SEC File No. 333-133960). |
|   |   |                                                                                                                                                                                                                                                             |
| 10.44* |   | Uranium Resources, Inc.  2007 Restricted Stock Plan (filed with the Company’s Form 10-Q dated  May 10, 2007, SEC File No. 000-17171).                                                                                                        |
|   |   |                                                                                                                                                                                                                                                             |
| 14*    |   | Uranium Resources, Inc.  Code of Ethics for Senior Executives. Filed with the Company’s Annual Report  on Form 10-KSB dated March 30, 2004, SEC File Number 000-17171).                                                                                |
|   |   |                                                                                                                                                                                                                                                             |
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                             |
| 31.2   |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                             |
| 32.1   |   | Certification of Chief  Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                             |
| 32.2   |   | Certification of Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                       |

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| * | Not filed herewith.  Incorporated by reference pursuant to Rule 12b-32 under the Securities  Exchange Act of 1934. |
|---|-------------------------------------------------------------------------------------------------------------------------|

 

 

 

E-3

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