Table of Contents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 

**x****      Quarterly report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For the quarterly period ended June 30,2009**

 

**Or**

 

**o****         Transition report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For the transition periodfrom                  to**

 

**Commission file number 0-17171**

 

**URANIUM RESOURCES, INC.**

(Exact Name of Issuer as Specified in Its Charter)

 

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

 

**405 State 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 checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   Yes x   No o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post suchfiles).   Yes o   No o

 

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

 

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

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12-b2of the Exchange Act).   Yes o   No x

 

Indicate thenumber of shares outstanding of each of the issuer’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                                       |       | 56,331,337 as of  August 7, 2009           |

 

 

 

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**URANIUM RESOURCES, INC.**

 

**2009 SECOND QUARTERLY REPORT ON FORM 10-Q**

 

**TABLE OFCONTENTS**

 
| **PART I—FINANCIAL  INFORMATION** |                                                                                                            |
|---------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                            |   |
| Item  1.                                    | Financial Statements                                                                                            |   |
|                                        |                                                                                                            |   |
|                                        | Consolidated  Balance Sheets- June 30, 2009 (Unaudited) and December 31, 2008                         | 3 |
|                                        |                                                                                                            |   |
|                                        | Consolidated  Statements of Operations—three and six months ended June 30, 2009 and  2008 (Unaudited) | 5 |
|                                        |                                                                                                            |   |
|                                        | Consolidated  Statements of Cash Flows—three and six months ended June 30, 2009 and  2008 (Unaudited) | 6 |
|                                        |                                                                                                            |   |
|                                        | Notes to Condensed Consolidated Financial  Statements—June 30, 2009 (Unaudited)                       | 7 |
|                                        |                                                                                                            |   |
| Item 2.                                     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                     | 15 |
|                                        |                                                                                                            |   |
| Item 3.                                     | Quantitative and Qualitative  Disclosures About Market Risk                                                     | 21 |
|                                        |                                                                                                            |   |
| Item 4.                                     | Controls and Procedures                                                                                         | 21 |
|                                        |                                                                                                            |   |
| **PART II—OTHER  INFORMATION**    | 22                                                                                                              |
| ** **                                  | ** **                                                                                                      | ** ** |
| Item 1.                                     | Legal Proceedings                                                                                               | 22 |
|                                        |                                                                                                            |   |
| Item 1A.                                    | Risk Factors                                                                                                    | 22 |
|                                        |                                                                                                            |   |
| Item 2.                                     | Unregistered  Sales of Equity Securities and Use of Proceeds                                                    | 22 |
|                                        |                                                                                                            |   |
| Item 3.                                     | Defaults Upon  Senior Securities                                                                                | 22 |
|                                        |                                                                                                            |   |
| Item 4.                                     | Submission of  Matters to a Vote of Security Holders                                                            | 22 |
|                                        |                                                                                                            |   |
| Item 5.                                     | Other Information                                                                                               | 23 |
|                                        |                                                                                                            |   |
| Item 6.                                     | Exhibits and Reports on  Form 8–K                                                                     | 23 |
|                                        |                                                                                                            |
| **SIGNATURES**                              | 24                                                                                                              |
| ** **                                  | ** **                                                                                                      |
| **Index to  Exhibits**                      | E-1                                                                                                             |

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED BALANCE SHEETS**

**ASSETS**

 
| ** **                                               | ** ** | **June 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|----------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                               | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| Current  assets:                                         |       |                    |       |                        |       |
| Cash  and cash equivalents                               |       | $                       | 9,311,484  |                        | $          | 12,041,592 |   |
| Receivables,  net                                        |       | 10,831                  |       | 40,360                      |       |
| Uranium  inventory                                       |       | 711,459                 |       | 1,213,927                   |       |
| Prepaid  and other current assets                        |       | 263,268                 |       | 513,489                     |       |
| Total  current assets                                    |       | 10,297,042              |       | 13,809,368                  |       |
|                                                     |       |                    |       |                        |       |
| Property,  plant and equipment, at cost:                 |       |                    |       |                        |       |
| Uranium  properties                                      |       | 84,416,011              |       | 85,095,067                  |       |
| Other  property, plant and equipment                     |       | 899,560                 |       | 898,933                     |       |
| Less-accumulated  depreciation, depletion and impairment |       | (63,762,975             | )          | (63,215,677                 | )          |
| Net  property, plant and equipment                       |       | 21,552,596              |       | 22,778,323                  |       |
|                                                     |       |                    |       |                        |       |
| Long-term  investment:                                   |       |                    |       |                        |       |
| Certificates  of deposit, restricted                     |       | 6,720,640               |       | 6,636,715                   |       |
|                                                     |       | $                       | 38,570,278 |                        | $          | 43,224,406 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED BALANCE SHEETS**

 

**LIABILITIES AND SHAREHOLDERS’ EQUITY**

 
| ** **                                                                                                                                                          | ** ** | **June 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| Current  liabilities:                                                                                                                                               |       |                    |       |                        |       |
| Accounts  and short term notes payable                                                                                                                              |       | $                       | 744,395    |                        | $          | 1,169,293 |   |
| Current  portion of restoration reserve                                                                                                                             |       | 1,432,380               |       | 1,660,422                   |       |
| Royalties  and commissions payable                                                                                                                                  |       | 781,957                 |       | 719,542                     |       |
| Accrued  interest and other accrued liabilities                                                                                                                     |       | 350,130                 |       | 607,975                     |       |
| Current  portion of capital leases                                                                                                                                  |       | 138,034                 |       | 158,068                     |       |
| Total  current liabilities                                                                                                                                          |       | 3,446,896               |       | 4,315,300                   |       |
|                                                                                                                                                                |       |                    |       |                        |       |
| Other  long-term liabilities and deferred credits                                                                                                                   |       | 6,246,787               |       | 6,531,378                   |       |
|                                                                                                                                                                |       |                    |       |                        |       |
| Long  term capital leases, less current portion                                                                                                                     |       | 256,606                 |       | 320,108                     |       |
| Long-term  debt, less current portion                                                                                                                               |       | 450,000                 |       | 450,000                     |       |
| Commitments  and contingencies (Notes 2, 5 and 14)                                                                                                                  |       |                    |       |                        |       |
| Shareholders’  equity:                                                                                                                                         |       |                    |       |                        |       |
| Common  stock, $.001 par value, shares authorized: 200,000,000; shares issued and  outstanding (net of treasury shares): 2009—56,262,245; 2008—55,955,549 |       | 56,300                  |       | 55,994                      |       |
| Paid-in  capital                                                                                                                                                    |       | 146,900,388             |       | 146,518,753                 |       |
| Accumulated  deficit                                                                                                                                                |       | (118,777,281            | )          | (114,957,709                | )          |
| Less:  Treasury stock (38,125 shares), at cost                                                                                                                      |       | (9,418                  | )          | (9,418                      | )          |
| Total  shareholders’ equity                                                                                                                                    |       | 28,169,989              |       | 31,607,620                  |       |
|                                                                                                                                                                |       | $                       | 38,570,278 |                        | $          | 43,224,406 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                   | ** ** | **2009**                                        | ** ** | **2008**                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| Revenues:                                                                    |       |                                            |       |                                          |       |   |   |   |   |
| Uranium  sales                                                               |       | $                                               | 1,786,973  |                                          | $          | 6,598,401 |   | $ | 3,209,363 |   | $ | 12,329,939 |   |
| Total  revenue                                                               |       | 1,786,973                                       |       | 6,598,401                                     |       | 3,209,363 |   | 12,329,939 |   |
| Costs  and expenses:                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Cost  of uranium sales                                                       |       |                                            |       |                                          |       |   |   |   |   |
| Royalties  and commissions                                                   |       | 166,937                                         |       | 576,355                                       |       | 305,652 |   | 1,136,757 |   |
| Operating  expenses                                                          |       | 762,753                                         |       | 1,810,893                                     |       | 1,632,702 |   | 3,938,032 |   |
| Accretion/amortization  of restoration reserve                               |       | 114,206                                         |       | 177,640                                       |       | 258,208 |   | 384,628 |   |
| Depreciation  and depletion                                                  |       | 181,969                                         |       | 2,314,244                                     |       | 413,263 |   | 4,244,825 |   |
| Impairment  of uranium properties                                            |       | 1,232,615                                       |       | 160,275                                       |       | 1,414,989 |   | 296,117 |   |
| Exploration  expenses                                                        |       | 4,050                                           |       | 249,792                                       |       | 4,823 |   | 258,339 |   |
| Total  cost of uranium sales                                                 |       | 2,462,530                                       |       | 5,289,199                                     |       | 4,029,637 |   | 10,258,698 |   |
| Earnings  (loss) from operations before corporate expenses                   |       | (675,557                                        | )          | 1,309,202                                     |       | (820,274 | ) | 2,071,241 |   |
|                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Corporate  expenses—                                                    |       |                                            |       |                                          |       |   |   |   |   |
| General  and administrative                                                  |       | 1,578,967                                       |       | 3,088,011                                     |       | 3,020,262 |   | 5,789,818 |   |
| Write-off  of target acquisition costs (Note 12)                             |       | —                                          |       | 1,437,410                                     |       | — |   | 1,437,410 |   |
| Depreciation                                                                 |       | 36,751                                          |       | 36,834                                        |       | 71,888 |   | 71,047 |   |
| Total  corporate expenses                                                    |       | 1,615,718                                       |       | 4,562,255                                     |       | 3,092,150 |   | 7,298,275 |   |
| Loss  from operations                                                        |       | (2,291,275                                      | )          | (3,253,053                                    | )          | (3,912,424 | ) | (5,227,034 | ) |
|                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Other  income (expense):                                                     |       |                                            |       |                                          |       |   |   |   |   |
| Interest  expense                                                            |       | (10,375                                         | )          | (6,388                                        | )          | (21,603 | ) | (17,817 | ) |
| Interest  and other income, net                                              |       | 55,743                                          |       | 150,070                                       |       | 114,455 |   | 298,056 |   |
|                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Net loss                                                                     |       | $                                               | (2,245,907 | )                                             | $          | (3,109,371 | ) | $ | (3,819,572 | ) | $ | (4,946,795 | ) |
|                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Net loss  per common share:                                                  |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                                        |       | $                                               | (0.04      | )                                             | $          | (0.06 | ) | $ | (0.07 | ) | $ | (0.09 | ) |
| Diluted                                                                      |       | $                                               | (0.04      | )                                             | $          | (0.06 | ) | $ | (0.07 | ) | $ | (0.09 | ) |
|                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Weighted  average common shares and common equivalent shares per share data: |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                                        |       | 56,249,628                                      |       | 54,007,417                                    |       | 56,173,559 |   | 53,156,273 |   |
| Diluted                                                                      |       | 56,249,628                                      |       | 54,007,417                                    |       | 56,173,559 |   | 53,156,273 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                     | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                     | ** ** | **2009**                                      | ** ** | **2008** | ** ** |
| Net  loss                                                                      |       | $                                             | (3,819,572 | ) | $ | (4,946,795 | ) |
| Reconciliation  of net earnings to cash provided (used in) by operations— |       |                                          |       |   |   |
| Accretion/amortization  of restoration reserve                                 |       | 258,208                                       |       | 384,628 |   |
| Depreciation  and depletion                                                    |       | 485,151                                       |       | 4,315,872 |   |
| Impairment  of uranium properties                                              |       | 1,414,989                                     |       | 296,117 |   |
| Decrease  in restoration and reclamation accrual                               |       | (1,076,575                                    | )          | (342,214 | ) |
| Stock  compensation expense                                                    |       | 381,941                                       |       | 1,550,304 |   |
| Write-off  of target acquisition costs                                         |       | —                                        |       | 1,437,410 |   |
| Other  non-cash items, net                                                     |       | —                                        |       | (9,733 | ) |
|                                                                           |       |                                          |       |   |   |
| Effect  of changes in operating working capital items—                    |       |                                          |       |   |   |
| Decrease  in receivables                                                       |       | 29,529                                        |       | 515,790 |   |
| Decrease  in inventories                                                       |       | 408,695                                       |       | 88,270 |   |
| (Increase)  decrease in prepaid and other current assets                       |       | 250,221                                       |       | (46,910 | ) |
| Decrease  in payables, accrued liabilities and deferred credits                |       | (620,328                                      | )          | (295,745 | ) |
| Net  cash provided by (used in) operations                                     |       | (2,287,741                                    | )          | 2,946,994 |   |
|                                                                           |       |                                          |       |   |   |
| Investing  activities:                                                         |       |                                          |       |   |   |
| Increase  in certificates of deposit, restricted                               |       | (83,925                                       | )          | (413,694 | ) |
| Additions  to property, plant and equipment—                              |       |                                          |       |   |   |
| Kingsville  Dome                                                               |       | (80,534                                       | )          | (3,196,693 | ) |
| Vasquez                                                                        |       | (90,577                                       | )          | (167,090 | ) |
| Rosita                                                                         |       | (31,062                                       | )          | (3,782,475 | ) |
| Rosita  South                                                                  |       | 3,038                                         |       | (156,330 | ) |
| Churchrock                                                                     |       | (59,676                                       | )          | (285,807 | ) |
| Crownpoint                                                                     |       | —                                        |       | (64,353 | ) |
| Other  property                                                                |       | (16,095                                       | )          | (849,290 | ) |
| Net  cash used in investing activities                                         |       | (358,831                                      | )          | (8,915,732 | ) |
|                                                                           |       |                                          |       |   |   |
| Financing  activities:                                                         |       |                                          |       |   |   |
| Issuance  of common stock, net                                                 |       | —                                        |       | 12,859,845 |   |
| Payments  on borrowings                                                        |       | (83,536                                       | )          | (146,859 | ) |
| Net  cash provided by (used in) financing activities                           |       | (83,536                                       | )          | 12,712,986 |   |
| Net  increase (decrease) in cash and cash equivalents                          |       | (2,730,108                                    | )          | 6,744,248 |   |
| Cash  and cash equivalents, beginning of period                                |       | 12,041,592                                    |       | 9,284,270 |   |
| Cash  and cash equivalents, end of period                                      |       | $                                             | 9,311,484  |   | $ | 16,028,518 |   |

 

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

 

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**Uranium Resources, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements June 30, 2009 (Unaudited)**

 

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

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information and with the instructions to Form 10-Qand Item 310(b) of Regulation S-K.  Accordingly, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted 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 2008 AnnualReport on Form 10-K.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included.  Operating results for the six monthsended June 30, 2009 are not necessarily indicative of the results that maybe expected for the full calendar year ending December 31, 2009.

 

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

 

Uranium Resources, Inc.(“URI”) was formed in 1977 and domesticated in Delaware in 1987. The Company isprimarily engaged in the business of acquiring, exploring, developing andmining uranium properties, using the *in situ*recovery (“ISR”) or solution mining process. Historically, the primarycustomers of the Company have been major utilities and commodities brokers thatsell uranium to utilities who utilize nuclear power to generate electricity. Atpresent the Company owns both developed and undeveloped uranium properties inSouth Texas and undeveloped uranium properties in New Mexico.

 

TheCompany resumed uranium production in 2004 at its Vasquez project, in 2006 atits Kingsville Dome project and in the 3rd quarter of 2008 at its Rosita project. Each ofsuch projects is located in South Texas. As a result of declining uraniummarket prices and high production costs, the Company announced its decision tocease further development of additional wellfields and to curtail productionfrom its South Texas projects as existing production wellfields from eachproject were depleted. Production at our Vasquez and Rosita projects were shutdown in the 4th quarter of 2008 and production at the Kingsville Dome project wasshut-in in mid June 2009. The Vasquez project was mined out in 2008 and isnow being restored. At the Kingsville Dome and Rosita projects, the decision toshut-in production was made to conserve the in-place reserve base until higherprices can be realized.

 

Prior to resumingVasquez production, the Company had been in production stand-by since the firstquarter of 1999 at its Kingsville Dome and Rosita projects. Groundwaterrestoration and reclamation activities have been conducted at these two sitesand are currently ongoing at each of the Kingsville Dome, Vasquez and Rositaprojects.

 

The financialstatements of the Company have been prepared on the basis of accountingprinciples applicable to a going concern, which contemplates the realization ofassets and the satisfaction of liabilities in the normal course ofbusiness.  The Company believes that the cash balance of $9.3 million at June 30,2009 and the cash expected to be provided through our remaining uranium saleswill be sufficient to maintain its liquidity beyond the next twelve months.

 

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

 

During the firsthalf of 2009, the Company’s executive officers cash compensation was reduced by30% to 40% and in lieu of such cash compensation the officers were issuedrestricted shares of common stock of the Company.  A total of 142,680shares of restricted common stock were issued in January 2009 and 164,016shares of restricted common stock were issued in April 2009 with respectto a reduction of $87,750 of cash compensation for each of the first twoquarters of 2009.

 

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

 

**KingsvilleDome Project**

 

Productionfrom Kingsville Dome for the first half of 2009 and 2008 was 49,200 and 172,900pounds, respectively.  Total capital expenditures for Kingsville Dome forthe first half of 2009 was $80,500 and was primarily related to land andmineral lease payments.  Total capital expenditures for Kingsville Domefor the first half of 2008 were $3.2 million for wellfield development, theconstruction of additional satellite plants and for wellfield evaluation anddelineation of future wellfields.

 

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DuringJune 2009, the two remaining producing wellfields at Kingsville Dome wereshut-down as a result of their resource being fully depleted.  We areconducting ongoing restoration activities at this project and incurred $521,000in costs for the six months ended June 30, 2009.

 

**Rosita**

 

We beganproduction at one new wellfield at Rosita in August 2008.  Due topoor economics driven by technical challenges and lower uranium prices,production from this wellfield was shut-in in October 2008.  We havebeen conducting ongoing restoration activities at this project on our depletedwellfields and incurred $320,000 in costs for the six months ended June 30,2009.  Capital expenditures for the first half of 2009 were minimal withapproximately $31,000 being spent primarily for land and mineral leasepayments.  Capital expenditures for our Rosita project totaled $3.8million in the first six months of 2008.  These expenditures were made forwellfield delineation and development, upgrading the Rosita plant and elutioncircuit, the addition of another satellite plant and the construction of adrying facility at Rosita in anticipation of start-up of production later in2008.

 

**VasquezProject**

 

Production at theVasquez project was shutdown during October 2008.  The economically recoverable reserves fromthis project have been mined out.  During the first half of 2009 weincurred $91,000 of capital expenditures primarily for land and mineral leasepayments.  We are conducting ongoingrestoration activities at this project and incurred $391,000 in costs for thesix months ended June 30, 2009.  In the first half of 2008 weproduced 24,000 pounds and we incurred wellfield development expenditures of$167,000, primarily for development of new wellfields to bring on newproduction at Vasquez, which commenced in March 2008.

 

**Impairmentof Uranium Properties**

 

At June 30,2009, we determined the carrying value of our project assets at each of ourSouth Texas production locations exceeded their fair value as provided inSFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. A decline in the market price of uranium and an increase in the estimatedproduction costs for each of our South Texas projects resulted in a decrease inthe estimated future cash flow to be generated from each site.  Suchdetermination resulted in an impairment provision of approximately $1.4 millionfor the first six months of 2009, $910,000 for Kingsville Dome, $308,000 forVasquez and $196,000 for Rosita.  The net carrying value of the KingsvilleDome, Rosita and Vasquez projects are approximately $7.2 million, $5.4 millionand $842,000, respectively, at June 30, 2009.

 

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

 

**Amendmentto Uranium Sales Contracts**

 

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

 

Under the amendedItochu contract there was potential for reinstatement of the original contractterms if our joint venture with Itochu to develop our Church Rock property inNew Mexico was terminated by us. On March 6, 2009, Itochu terminated theJoint Venture.  The only consequence of the termination is that for salesprices in excess of $43, we will not receive 30% of the amount of the spotprice that exceeds the ceiling price for future uranium sales from $43 to $50per pound.

 

Under the UGcontract all production from our Texas properties will be sold at a price equalto the month-end long-term contract price for the second month prior to themonth of delivery less $6 per pound until (i) 600,000 pounds have beensold in a particular delivery year and (ii) an aggregate of 3 millionpounds of Uranium has been sold. After the 600,000 pounds in any year and3 million pounds total have been sold, UG will have a right of firstrefusal to purchase other Texas production at a price equal to the average spotprice for a period prior to the date of delivery less 4%.  We paid UG$12 million in cash to restructure its previously existing contract.

 

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**6.****                                     ****STOCK BASED COMPENSATION**

 

Our stock basedcompensation programs consist of stock options granted to employees anddirectors and restricted stock grants made to employees.

 

***Stock Compensation Expense - SFAS 123(R)***

 

Stock compensationexpense for the six months ended June 30, 2009 and 2008 was $382,000 and$1.6 million, respectively. 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-Scholesoption pricing model was used to estimate the stock option fair values. Theoption pricing model requires a number of assumptions, of which the mostsignificant are, expected stock price volatility, the expected pre-vestingforfeiture rate and the expected option term (the amount of time from the grantdate until the option or restricted shares are exercised, vest or expire).Expected volatility was calculated based upon actual historical stock pricemovements through the measurement date of the stock option grant. Expectedpre-vesting forfeitures were estimated based on actual historical pre-vestingforfeitures over the most recent periods ending June 30, 2009 for the expectedterm. The expected term was estimated based on historical averages over themost recent periods ending June 30, 2009.

 

At the June 2009annual meeting of the stockholders, each of the non-employee directors of theCompany was granted an option under the 2004 Directors’ Plan to purchase 50,000shares of the Company’s common stock at an exercise price of $1.49 pershare.  The non-employee directors heldoptions covering 731,250 shares under the 2004 Directors’ Plan at June 30,2009. At June 30, 2009, 381,250 shares were available for future grantsunder the 2004 Directors’ Plan.

 

A total of 142,680and 164,016 shares of restricted stock were granted in the first and secondquarters of 2009, respectively to five executive officers on January 2 andApril 1, 2009 in connection with a cash conservation plan for 2009. All of these shares vest one year from the date of grant.  Restrictedstock grants are valued using the fair market value of the stock on the date ofgrant. The Company recognized stock compensation expense for the restrictedshare grants of approximately $82,100 during the first half of 2009.

 

At the June 2008annual meeting of the stockholders, each of the non-employee directors of theCompany was granted an option under the 2004 Directors’ Plan to purchase 50,000shares of the Company’s common stock at an exercise price of $4.10 pershare.  The non-employee directors heldoptions covering 806,250 shares under the 2004 Directors’ Plan at June 30,2008. At June 30, 2008, 400,000 shares were available for future grantsunder the 2004 Directors’ Plan.

 

A total of 70,000shares of restricted stock were granted in the first quarter of 2008.  Restricted share grants for 60,000 shareswere made to a total of three non-executive employees on March 6, 2008.30,000 of these shares vest ratably over five years and 30,000 shares vestratably over four years.  Anotherrestricted share grant for 10,000 shares of common stock was made to anexecutive of the Company on March 24, 2008.  These shares vest ratably over 5 years.  Restricted stock grants are valued using thefair market value of the stock on the date of grant. The Company recognizedstock compensation cost for the restricted share grants of approximately $30,000and $38,000 during the three and six months ended June 30, 2008,respectively.  The total estimatedunrecognized compensation cost from the unvested restricted shares wasapproximately $538,000 at June 30, 2008.

 

The totalestimated unrecognized compensation cost from the unvested restricted grants atJune 30, 2009 was approximately $145,000, which is expected to berecognized over the weighted average vesting period of the individual grantswhich range from 1-4 years.

 

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***Stock Options for the Six Months Ended June 30, 2009***

 

The followingtable summarizes stock options outstanding and changes during the six monthperiod ended June 30, 2009:

 
| ** **                                   | ** ** | **Outstanding Options** | ** ** |
|----------------------------------------------|------------|------------------------------|------------|
| ** **                                   | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term –in years** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|                                         |       |                         |       |   |   |   |   |   |   |
| Options  outstanding at January 1, 2009 |       | 4,278,574                    |       | $ | 2.81 |   |   |   |   |   |
| Granted                                      |       | 150,000                      |       | 1.49 |   |   |   |   |   |
| Exercised                                    |       | —                       |       | — |   |   |   |   |   |
| Canceled  or forfeited                       |       | (22,500                      | )          | 5.19 |   |   |   |   |   |
| Options  outstanding at June 30, 2009   |       | 4,406,074                    |       | $ | 2.75 |   | 6.1 |   | $ | 378,118 |   |
|                                         |       |                         |       |   |   |   |   |   |   |
| Options  exercisable at June 30, 2009   |       | 3,937,324                    |       | $ | 2.47 |   | 5.7 |   | $ | 290,143 |   |

 

Shares available forgrant under the Stock Option Plans as of June 30, 2009 were 478,395;97,145 under the 2004 Employee Incentive Plan and 381,250 under the 2004Directors’ Plan.

 

Stock optionsoutstanding and currently exercisable at June 30, 2009 are as follows:

 
| ** **                         | ** ** | **Options Outstanding**             | ** ** | **Options Exercisable**                                | ** ** |
|------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Stock Option Plan**    | ** ** | **Number of  Options  Outstanding** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** | **Weighted Average  Exercise price** | ** ** | **Number of  Options  Exercisable** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| ** **                         | ** ** | ** **                               | ** ** | **(in years)**                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 1995  Stock Incentive Plan         |       | 2,156,447                                |       | 4.9                                                         |       | $ | 1.38 |   | 2,156,447 |   | $ | 1.38 |   |
| 2004  Stock Incentive Plan         |       | 1,518,314                                |       | 6.7                                                         |       | 3.35 |   | 1,468,314 |   | 3.28 |   |
| Directors’  Stock Option Plan |       | 63                                       |       | 4.0                                                         |       | 0.16 |   | 63 |   | 0.16 |   |
| 2004  Directors’ Plan         |       | 731,250                                  |       | 8.3                                                         |       | 5.57 |   | 312,500 |   | 6.22 |   |
|                               |       | 4,406,074                                |       | 6.1                                                         |       | $ | 2.75 |   | 3,937,324 |   | $ | 2.47 |   |

 

Total estimatedunrecognized compensation cost from unvested stock options at June 30,2009 was approximately $1.5 million, which is expected to be recognized overthe weighted average vesting period of the individual grants which range fromapproximately 2-4 years.

 

**7.****                                     ****ASSET RETIREMENTOBLIGATIONS**

 

The followingtable shows the change in the balance of the restoration and reclamationliability during the six months ended June 30, 2009:

 
| Reserve  for future restoration and reclamation costs beginning of period |   | $          | 6,994,772 |   |
|---------------------------------------------------------------------------|--------|------------|-----------|--------|
| Additions  and changes in cash flow estimates                             |   | 581,463    |      |
| Costs  incurred                                                           |   | (1,232,495 | )         |
| Accretion  expense                                                        |   | 138,399    |      |
| Reserve  for future restoration and reclamation costs at end of period    |   | $          | 6,482,139 |   |

 

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

 

***Restricted Stock Grant***

 

Atotal of 142,680 shares of restricted stock were granted to five executiveofficers on January 2, 2009 at a price of $0.615 per share in connectionwith a cash conservation plan for 2009.  The issuance price is determinedby the average closing price of the last ten trading days of the previousquarter.  All of these shares vest one year from the date of grant.

 

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On April 1,2009 a total of 164,016 shares of restricted stock were granted to fiveexecutive officers at a price of $0.535 per share in connection with the cashconservation plan for 2009.  The issuance price is determined by theaverage closing price of the last ten trading days of the previous quarter andthese shares vest one year from their date of grant.

 

On July 1,2009 a total of 69,092 shares of restricted stock were granted to fiveexecutive officers at a price of $1.27 per share in connection with the cashconservation plan for 2009.  The issuance price is determined by theaverage closing price of the last ten trading days of the previous quarter andthese shares vest one year from their date of grant.

 

***Equity Infusion — Private Placement***

 

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

 

The followingtable details the changes in shareholders equity for the six months ended June 30,2009:

 
| ** **                        | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|-----------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------|------------|
| ** **                        | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Treasury Stock** | ** ** |
| Balances,  December 31, 2008 |       | 55,955,549            |       | $           | 55,994     |            | $          | 146,518,753 |       | $ | (114,957,709 | ) | $ | (9,418 | ) |
| Net  loss                         |       | —                |       | —      |       | —          |       | (3,819,572  | )          | — |   |
| Stock  compensation expense       |       | —                |       | —      |       | 381,941         |       | —      |       | — |   |
| Restricted  stock issuance        |       | 306,696               |       | 306         |       | (306            | )          |        |       |   |   |
| Balances,  June 30, 2009     |       | 56,262,245            |       | $           | 56,300     |            | $          | 146,900,388 |       | $ | (118,777,281 | ) | $ | (9,418 | ) |

 

**10.**                               **IMPACT OF RECENTACCOUNTING PRONOUNCEMENTS**

 

**Impactof Recent Accounting Pronouncements**

 

***Business Combinations.***   InDecember 2007, the FASB issued SFAS No. 141R, “Business Combinations,”which changes how business acquisitions are accounted for. SFAS No. 141Rrequires the acquiring entity in a business combination to recognize all (andonly) the assets acquired and liabilities assumed in the transaction andestablishes the acquisition-date fair value as the measurement objective for allassets acquired and liabilities assumed in a business combination. Certainprovisions of this standard will, among other things, impact the determinationof acquisition-date fair value of consideration paid in a business combination(including contingent consideration); exclude transaction costs fromacquisition accounting; and change accounting practices for acquiredcontingencies, acquisition-related restructuring costs, in-process research anddevelopment, indemnification assets, and tax benefits. SFAS No. 141R iseffective for business combinations and adjustments to an acquired entity’sdeferred tax asset and liability balances occurring after December 31,2008.  The Company adopted this standard on January 1, 2009 which didnot have an impact on its financial position, results of operations or cashflows as there have been no acquisitions that have been consummated after January 1,2009.

 

***Noncontrolling Interests in ConsolidatedFinancial Statements.***   In December 2007, theFASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements, an amendment of ARB No. 51,” which establishes newstandards governing the accounting for and reporting of noncontrollinginterests (NCIs) in partially owned consolidated subsidiaries and the loss ofcontrol of subsidiaries. Certain provisions of this standard indicate, amongother things, that NCIs (previously referred to as minority interests) betreated as a separate component of equity, not as a liability; that increasesand decrease in the parent’s ownership interest that leave control intact betreated as equity transactions, rather than as step acquisitions or dilutiongains or losses; and that losses of a partially owned consolidated subsidiarybe allocated to the NCI even when such allocation might result in a deficitbalance. This standard also requires changes to certain presentation anddisclosure requirements. SFAS No. 160 is effective beginning January 1,2009. The provisions of the standard are to be applied to all NCIs prospectively,except for the presentation and disclosure requirements, which are to beapplied retrospectively to all periods presented.  The Company adoptedthis standard on January 1, 2009 which did not have an impact on itsfinancial position, results of operations or cash flows as the Company owns100% of its subsidiaries.

 

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***Derivative Instruments and HedgingActivities.***   In March 2008, the FASB issued SFAS No. 161“Disclosures about Derivative Instruments and Hedging Activities an amendmentof FASB Statement No. 133”. The new standard requires additionaldisclosures regarding a company’s derivative instruments and hedging activitiesby requiring disclosure of the fair values of derivative instruments and theirgains and losses in a tabular format. The standard is effective for our fiscalyear and interim periods within such year, beginning January 1,2009.  The Company adopted this standard on January 1, 2009 which didnot have an impact on its financial position, results of operations or cashflows as there were no derivative instruments or hedging activities after January 1,2009.

 

***Determining Whether an Instrument (or EmbeddedFeature) is Indexed to an Entity’s Own Stock.****  *In June 2008, the FASB issued EITF Issue 07-5(EITF 07-5),*Determining Whether anInstrument (or Embedded Feature) is Indexed to an Entity’s Own Stock*.  EITFNo. 07-5 is effective for financial statements issued for fiscal yearsbeginning after December 15, 2008, and interim periods within those fiscalyears.  Early application is not permitted. Paragraph 11(a) ofSFAS No. 133*  Accounting forDerivatives and Hedging Activities,*  specifies that a contractthat would otherwise meet the definition of a derivative but is both (a) indexedto the Company’s own stock and (b) classified in stockholders’ equity inthe statement of financial position would not be considered a derivativefinancial instrument. EITF 07-5 provides a new two-step model to be applied indetermining whether a financial instrument or an embedded feature is indexed toan issuer’s own stock and thus able to qualify for the SFAS No. 133paragraph 11(a) scope exception.  The application of thisguidance at January 1, 2009 did not have a significant impact on theCompany’s financial statements.

 

***Fair Value Measurements.***   InFebruary 2008, the FASB issued FASB Staff Position 157-2 (“FSP 175-2”),* Effective Date of FASB Statement 157*,which delays the effective date of Statement of Financial Accounting No. 157,“Fair Value Measurements” (“SFAS 157”) for all non-financial assets andnon-financial liabilities, except for items that are recognized or disclosed asfair value in the financial statements on a recurring basis (at leastannually).  Beginning January 1, 2009, we applied SFAS 157 tononrecurring, nonfinancial assets and liabilities. This adoption did not have amaterial impact on our consolidated condensed statement of operations orfinancial condition.  Our asset retirement obligation is classified as aLevel 3 liability within the valuation hierarchy. The significant unobservableinputs to this fair value measurement include estimates of plugging,abandonment and restoration costs, inflation rate and the expected remaininglife of wellfields. The inputs are calculated based on historical data as wellas current estimated costs.  See Note 7 — Asset Retirement Obligation foradditional information regarding our asset retirement obligation as of June 30,2009.

 

***Fair Value Measurements and Impairments ofSecurities.****  *In April 2009,the Financial Accounting Standards Board issued three final staff positionsintended to provide additional application guidance and enhance disclosuresregarding fair value measurements and impairments of securities. FSP FAS 157-4,“Determining Fair Value When the Volume and Level of Activity for the Asset orLiability Have Significantly Decreased and Identifying Transactions That AreNot Orderly,” provides guidelines for making fair value measurements moreconsistent with the principles presented in FASB Statement No. 157, “FairValue Measurements.” FSP FAS 107-1 and APB 28-1, “Interim Disclosures aboutFair Value of Financial Instruments,” enhances consistency in financialreporting by increasing the frequency of fair value disclosures. FSP FAS 115-2and FAS 124-2, “Recognition and Presentation of Other-Than-TemporaryImpairments,” provides additional guidance designed to create greater clarityand consistency in accounting for and presenting impairment losses onsecurities. We do not expect this guidance to have a significant impact on ourfinancial statements.

 

***SubsequentEvents.   ***In May 2009, the FASB issued SFAS No. 165, *Subsequent Events* (“SFAS No. 165”).SFAS No. 165 introduces the concept of financial statements beingavailable to be issued. SFAS No. 165 will require the disclosure of thedate through which an entity has evaluated subsequent events and the basis forthat date (that is, whether that date represents the date the financialstatements were issued or were available to be issued). For SEC registrants,this date will continue to be the date on which financial statements are filedwith the SEC. SFAS No. 165 is effective for fiscal years and interim periodsending after June 15, 2009. We adopted SFAS No. 165 on June 30, 2009 andhave included the required disclosures in this Form 10-Q. The Company hasevaluated subsequent events through August 10, 2009, which is the date thesefinancial statements are issued.

 

***VariableInterest Entities.***   In May 2009, the FASB issued SFAS No. 167,*Amendments to FASB Interpretation No. 46(R)*(“SFAS No. 167”). SFAS No. 167 amends Interpretation 46(R) toreplace the quantitative-based risks and rewards calculation for determiningwhich enterprise, if any, has a controlling financial interest in a variableinterest entity with an approach that focuses on identifying which enterprisehas the power to direct the activities of a variable interest entity, has themost significant impact on the entity’s economic performance, and theobligation to absorb the losses of the entity or the right to receive benefitsfrom the entity. SFAS No. 167 also requires an additional reconsiderationevent to determine whether an entity is a variable interest entity when anychanges in facts and circumstances occur such that the holders of the equityinvestment at risk, as a group, lose voting rights or similar rights to directthose activities of the entity that most significantly impact the entity’s economicperformance. It also requires ongoing assessments of whether an enterprise isthe primary beneficiary of a variable interest entity. SFAS No. 167 iseffective for fiscal years and interim periods beginning after November 15,2009. The Company does not believe that the adoption of SFAS No. 167 willhave a material impact on the consolidated financial statements of the Company.

 

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***TheAccounting Standards Codification.   ***In June 2009, the FASB issued SFAS No. 168,*The FASB Accounting Standards CodificationTM and theHierarchy of Generally Accepted Accounting Principles* (“SFAS No. 168”).SFAS No. 168 will become the source for authoritative U.S. GenerallyAccepted Accounting Principles recognized by the FASB to be applied bynon-governmental entities. Rules and interpretive releases of theSecurities and Exchange Commission under the authority of the federalsecurities laws are also sources of authoritative GAAP for SEC registrants. Onthe effective date of SFAS No. 168, the Codification will supersede allthen-existing non-SEC accounting and reporting standards. All othernon-grandfathered non-SEC accounting literature not included in theCodification will become non-authoritative. SFAS No. 168 is effective forfinancial statements issued for interim and annual periods ending after September 15,2009. The Company does not believe the adoption of SFAS No. 168 will havea material impact on the consolidated financial statements of the Company.

 

**11.****                              ****EARNINGS PER SHARE**

 

Basic earnings pershare includes no dilution and is computed by dividing income or lossattributed 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 stock options were exercised orconverted into common stock.  6,153,070 potentially dilutive shares wereexcluded from the calculation of earning per share because they wereanti-dilutive due to our net loss position for the six months ended June 30,2009.

 

**12.****                              ****TERMINATION OF AGREEMENTTO PURCHASE RIO ALGOM MINING LLC**

 

In June 2008, wedecided along with Billiton Investment 15 B.V. to terminate our agreement topurchase Rio Algom Mining, LLC, which was entered into on October 12,2007.  In connection with the targetedacquisition, we incurred costs of $1.437 million which were originally recordedas a pre-acquisition cost asset.  Uponthe termination of the agreement these pre-acquisition costs were expensed inthe second quarter of 2008.

 

**13.****                              ****TENTH CIRCUIT COURT OFAPPEALS DECISION**

 

On April 17,2009, a three-judge panel of the United States Court of Appeals for the TenthCircuit affirmed the February 2007 decision of the United StatesEnvironmental Protection Agency (the “USEPA”) and held that Section 8 ofURI’s Churchrock property in New Mexico (owned in fee by the Company’ssubsidiary Hydro Resources, Inc.) is Indian country.  One of themembers of the panel dissented.  Indiancountry falls under the jurisdiction of the USEPA, and not the State of NewMexico, to administer the Underground Injection Control (UIC) program permit,which the Company requires for ISR mining of that property. The jurisdictionaldispute originated among the State of New Mexico, the USEPA and the NavajoNation.  The Company has petitioned theTenth Circuit for en banc review of the panel’s decision.  The Company does not believe that animpairment provision is necessary for this property at June 30, 2009.

 

**14.****                              ****COMMITMENTS ANDCONTINGENCIES**

 

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

 

The Company isfrom time to time involved in various legal proceedings of a character normallyincident to its business. Management does not believe that adverse decisions inany pending or threatened proceedings will have a material adverse effect onthe Company’s financial condition or results of operations.

 

The Company fileda registration statement under the Securities Act of 1933, as amended, toregister the resale of the shares of its common stock issued in the May 2008private placement. The registration rights agreement executed in connectionwith the private placement and pursuant to which the shares were registered,provides for penalties in the event the registration statement fails to remaineffective. At June 30, 2009, the Company’s registration statement was andremains effective.

 

The Company hasentered into Compensation Agreements with Executive Officers of the Companythat provide that, in the event of a change in control, such officers will havecertain rights and benefits for a period of thirty-six months for the ExecutiveChairman of the Company and twenty-four months for the other officers,following such change in control. The Compensation Agreements provide that theexecutive’s base salary payments shall be made on a monthly basis for the durationof the term and any incentive payments shall be paid annually until theobligation to make such payments expires.

 

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

 

In June 2008,a suit for declaratory judgment titled, ***Saenz v. URI Inc.,*** was filed in the 105th Judicial District Court, KlebergCounty, Texas by the owners of the mineral estate of property in KlebergCounty, Texas leased to the Company, seeking a declaratory judgment that acertain lease is limited to one specific lot only and does not encompass otheradjacent lands. The Company has a lease on the adjacent lands from the samemineral owners and has produced over 340,000 pounds of uranium from those landsin 2007 and 2008. The Company entered a general denial of the claims. On September 24,2008 the mineral owners amended their suit to include a declaration that bothof the leases held by the Company are not valid. The Company has entered ageneral denial and other specific defenses to the amended complaint. TheCompany has produced uranium from both leases. On November 5, 2008, theCompany engaged in mediation with the plaintiffs but was unable to resolve thematter. The Plaintiffs filed a Motion for Summary Judgment alleging that theleases terminated prior to any production occurring. The Court denied themotion. A trial date was originally set for June 1, 2009 but has beenrescheduled for December 7, 2009. The Company will defend the casevigorously. While the Company believes that each of the leases is valid,counsel to the Company is unable to predict the outcome of the litigation. Adetermination of the invalidity of the leases could have a material adverseaffect on the Company’s financial condition.

 

**15.****                              ****SUBSEQUENT EVENT**

 

In July 2009,the Company entered into a definitive agreement to purchase from NZ Uranium, LLC(NZU) 113,000 acres of mineral rights in the Crownpoint area of New Mexico.Closing of the transaction is subject to receipt of a title report andsatisfaction of standard closing conditions and is expected to occur in September 2009.

 

The properties include Section 24 at Crownpoint, in which URIalready owns a 40% fee interest. The acquisition of the remaining interest in Section 24is expected to add 6 million pounds of uranium mineralized material to ourcurrent holdings. The properties also include Sections 19 and 29 at Crownpointthat had been leased previously by URI from NZU. We estimate these propertiescontain approximately 14 million pounds of uranium mineralized material. Thesecombined estimated 20 million pounds of uranium mineralized material areincluded under the Company’s Nuclear Regulatory Commission (NRC) Crownpointlicense.

 

The transaction also includes the acquisition of Hosta Butte, locatedsoutheast of Crownpoint, which we had evaluated as an in situ recovery (ISR)project for NZU in the past. Publicly available reports of other parties assignapproximately 15 million pounds of uranium mineralized material to thatproperty. URI has commissioned a third-party engineering study to update theestimates.

 

The Company will pay $1 million in cash and issue four million sharesof the Company’s common stock together with a 7.5% royalty on future productionfrom these properties to NZU in consideration of the purchase. For three yearsfollowing closing, NZU will be restricted from selling more than 333,333 of theshares it will receive during any calendar quarter. With this acquisition, URIwill increase its current New Mexico holdings to approximately 300,000 acres ofmineral rights and more than 136 million pounds of in-place mineralized uraniummaterial.

 

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**ITEM2.  MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**ForwardLooking Statements**

 

The followingsummary is qualified in its entirety by, and should be read in conjunctionwith, the more detailed information and any financial data incorporated hereinby reference to the Company’s reports filed with the Securities and ExchangeCommission under the Securities Exchange Act of 1934. Except for historicalinformation contained in this report, the matters discussed herein containforward-looking statements, made pursuant to the “safe harbor” provisions ofthe Private Securities Litigation Reform Act of 1995, including management’s expectationsregarding the Company’s reserves and mineralized uranium materials, timing ofreceipt of mining permits, production capacity of mining operations planned forproperties in South Texas and New Mexico and planned dates for commencement ofproduction at such properties. Such forward-looking statements are inherentlyuncertain, and investors must recognize that actual results may differ frommanagement’s expectations. Key factors impacting current and future operationsof the Company include the price of uranium, weather conditions, operatingconditions at the Company’s mining projects, government regulation of themining industry and the nuclear power industry, the world-wide supply anddemand of uranium, availability of capital, timely receipt of mining and otherpermits from regulatory agencies and other matters indicated in “CautionaryStatement,” found in the Company’s 2008 Annual Report on Form 10K.

 

**Overview**

 

URI also has anestimated 101.4 million pounds of in place mineralized uranium material on183,000 acres in New Mexico and a Nuclear Regulatory Commission (NRC) licenseto produce up to 3 million pounds per year at our New Mexico licensedproperties, including our Churchrock property. URI has also produced uranium inSouth Texas where it has three projects that are now in restoration: KingsvilleDome, Vasquez and Rosita. Our operations are heavily influenced by the price ofuranium both on the spot and long-term markets. The spot price of uranium,which has fluctuated from a high of $136/lb in June 2007 to its recentprice level of $48.50/lb, has been the primary driver of the strategicdecisions of the Company.  At August 3, 2009 the current spot price was $48.50,compared to a recent high of $54.00-$55.00 in mid-June 2009.  The long-term price for uranium has remainedlevel for several months and stands at $65.00 per pound at July 31, 2009.

 

We have among thelargest uranium asset bases in the United States.  Our strategy is to grow the value of theCompany by accomplishing the following:

 

·                  Build our in place mineralized uraniummaterial to 200 to 300 million pounds. In July 2009, the Company entered into a definitive agreement topurchase from NZ Uranium, LLC (NZU) 113,000 acres of mineral rights in theCrownpoint area of New Mexico. After closing the transaction, which is expectedin September 2009, URI will increase its current New Mexico holdingsto approximately 300,000 acres of mineral rights and more than 136 millionpounds of in-place mineralized uranium material.The Company will pay $1 million in cash andissue four million shares of the Company’s common stock together with a 7.5%royalty on future production from these properties to NZU in consideration ofthe purchase.

 

·                  Resolve the issue in New Mexico with theNavajo Nation regarding their concerns about uranium mining on their lands.

 

·                  Develop strategic partnerships with majorindustry players including electric utilities that have nuclear poweroperations.

 

·                  Become a 10 million pound per yearproducer.

 

In 2008, wechanged our approach to our Texas operations in response to changes in theuranium market. Operating margins from our production are impacted by uraniumprices and costs. Although uranium prices escalated rapidly from 2004 to 2007,so did costs. In 2008, while prices declined, costs did not, leading to asignificant decrease in margins. As a result, in October 2008 we decidedto suspend new wellfield development at Kingsville and Rosita until sufficientmargins can be made to justify the new investment required to bring onadditional production.

 

*NewMexico Progress:* There has been progress in our efforts to advance our properties towardproduction in New Mexico.  We have hadseveral meetings with various Navajo groups as well as with New MexicoLegislators.  We have taken community andpolitical leaders on site tours at our Texas properties to demonstrate the lowprofile of an ISR mining operation compared with an underground mine.  And, we have shown the restoration processand progress at these properties.

 

In May, URI and theNavajo Nation EPA began a weeklong assessment of the Section 17 Churchrockproperty to determine the radiation levels that may exist from previous miningoperations and potential impact on the air, soil and water in the area. As part of the field work, background levels will be established under thepurview of Navajo EPA.  While URI never mined at this site, the assessmentis a step toward addressing legacy issues.

 

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We also have movedforward with our drilling plans at Section 13 in the Ambrosia Lakedistrict to assess the feasibility of ISR mining at that location.  We expect to complete drilling to recovercore samples in September and have results of the testing by the end ofthe year.

 

*SouthTexas Production:* During June 2009, we completed production at our two remaining operatingwellfields at Kingsville Dome.  We produced 49,200 pounds of uranium fromKingsville Dome during the first half of 2009.  Current activity atKingsville Dome is focused on the restoration of depleted wellfields. We arealso studying the potential of uranium recovery from the by-product materialthat was generated from prior uranium processing at our Kingsville Dome plant.Such activities may reduce our restoration costs and may result in the recoveryof uranium that could be processed into a saleable product.  The lastwellfield at Vasquez was fully depleted in October 2008 and the project isnow undergoing restoration. Production from Rosita was started in June 2008,but was suspended in October 2008 due to poor economics driven byincreased operating costs as a result of technical operating challenges and thedecreased price of uranium.  We arecurrently conducting restoration and reclamation activities at each of ourthree South Texas projects.  Theprojected cash cost for these activities for the next twelve months isapproximately $1.4 million.

 

The Companybelieves it has sufficient in-place mineralized uranium material to produce atotal of 300,000 to 500,000 pounds U3O8 over a one to two year period should realizeduranium prices recover to the level of $70 per pound U3O8. A new wellfield typically requires 4 to5 months to install and 9 to 12 months to mine out. The Company hasdeferred all activities for delineating or developing wellfields until astronger pricing environment is realized. The Company continues to look for opportunities to acquire additionalreserves.

 

*Reservedevelopment:*   A significant portion of the cash on hand atDecember 31, 2008 was generated from the $12.8 million in netproceeds received from the sale of common stock and warrants in a privateplacement in May 2008. The equity was raised to fund the acquisition,exploration, permitting and development of new and existing properties in SouthTexas to increase our resource base in an effort to extend production at ourTexas operations beyond 2009 as well as for general corporate purposes.

 

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**FinancialCondition and Results of Operations**

 

***Comparison of Three and Six Months Ended June 30, 2009and 2008***

 

*Productionand production costs. *In the first half of 2009, we produced 49,200 poundsand received positive inventory adjustments of 2,700 pounds.  Productionin the first half of 2008 was 196,900 pounds; 24,000 pounds from Vasquez and172,900 from Kingsville Dome.  We ceased production at Vasquez anddeferred additional development of new wellfields at Kingsville Dome in thefourth quarter of 2008.  This resulted in the reduction in production inthe first half of 2009 compared to 2008.  We ceased production at thefinal two wellfields at Kingsville Dome in mid-June 2009.

 

The followingtable details our production and production cost breakdown for the three andsix months ended June 30, 2009 and 2008.

 
| ** **                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2009**                                        | ** ** | **2008**                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Kingsville Dome production**     |       | 19,400                                          |       | 93,700                                        |       | 49,200 |   | 172,900 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| **Vasquez production**             |       | 450                                             |       | 19,800                                        |       | 2,200 |   | 24,000 |   |
| ** **                         |       |                                            |       |                                          |       |   |   |   |   |
| **Rosita production**              |       | 450                                             |       | —                                        |       | 450 |   | — |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| **Total production**               |       | 20,300                                          |       | 113,500                                       |       | 51,850 |   | 196,900 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Total  operating costs             |       | $                                               | 589,000    |                                          | $          | 1,938,000 |   | $ | 1,224,000 |   | $ | 3,850,000 |   |
| Per  pound operating costs         |       | $                                               | 28.95      |                                          | $          | 17.07 |   | $ | 23.57 |   | $ | 19.56 |   |
| Total  deprec. and depletion costs |       | $                                               | 158,000    |                                          | $          | 2,606,000 |   | $ | 319,000 |   | $ | 4,843,000 |   |
| Per  pound DD&A cost           |       | $                                               | 7.76       |                                          | $          | 22.96 |   | $ | 6.15 |   | $ | 24.60 |   |
| Total  production cost             |       | $                                               | 747,000    |                                          | $          | 4,544,000 |   | $ | 1,543,000 |   | $ | 8,693,000 |   |
| Production  cost per pound         |       | $                                               | 36.71      |                                          | $          | 40.03 |   | $ | 29.73 |   | $ | 44.16 |   |

 

Total operatingcosts, total depreciation and depletion costs and total production costsincurred for the periods presented above differ from the cost of uranium salesrecorded in consolidated statements of operations because of changes in theamounts recorded to inventory for the same periods.  The cost of uraniumsales includes the sales of uranium inventory on hand at the beginning of theperiod and does not include certain uranium produced during the period that wasnot sold at period end.

 

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Reconciliation ofproduction costs to cost of uranium sales:

 
| ** **                                              | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                              | ** ** | **2009**                                        | ** ** | **2008**                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| Operating  costs                                        |       | $                                               | 589,000    |                                          | $          | 1,938,000 |   | $ | 1,224,000 |   | $ | 3,850,000 |   |
| Change  in uranium inventory                            |       | 174,000                                         |       | (127,000                                      | )          | 409,000 |   | 88,000 |   |
| Operating  expense for uranium production sold          |       | $                                               | 763,000    |                                          | $          | 1,811,000 |   | $ | 1,633,000 |   | $ | 3,938,000 |   |
| Depreciation  and depletion costs                       |       | $                                               | 158,000    |                                          | $          | 2,606,000 |   | $ | 319,000 |   | $ | 4,843,000 |   |
| Change  in uranium inventory                            |       | 24,000                                          |       | (292,000                                      | )          | 94,000 |   | (598,000 | ) |
| Depreciation  and depletion for uranium production sold |       | $                                               | 182,000    |                                          | $          | 2,314,000 |   | $ | 413,000 |   | $ | 4,245,000 |   |
| Total  production costs                                 |       | $                                               | 747,000    |                                          | $          | 4,544,000 |   | $ | 1,543,000 |   | $ | 8,693,000 |   |
| Change  in uranium inventory                            |       | 198,000                                         |       | (419,000                                      | )          | 503,000 |   | (510,000 | ) |
| Direct  cost of uranium production sold                 |       | $                                               | 945,000    |                                          | $          | 4,125,000 |   | $ | 2,046,000 |   | $ | 8,183,000 |   |

 

*UraniumSales. *Inthe first half of 2009, we sold 64,200 pounds, generating revenue of $3.2million ($49.99 per pound), compared with sales of 180,500 pounds in the sameperiod of 2008, for revenue of $12.3 million ($68.32 per pound).  Thedecrease in sales revenue was the result of the reduction in pounds sold, aswell as from lower prices we received as a result of lower uranium marketprices in the first half of 2009 compared to the prior year’s period.

 

*Cost of Uranium Sales. *Our cost of uranium sales from the sale of produceduranium in the first half of 2009 was $4.0 million compared with $10.3 millionin the same period of 2008.  Total cost of uranium sales includesroyalties and commissions related to our uranium sales, production costs,including operating expenses, depreciation and depletion expenses, amortizationof our restoration and reclamation cost estimates, exploration costs andimpairment costs for the write-down of uranium assets.  The followingtable details the direct cost of uranium sales and royalties and commissionsbreakdown for the three and six months ended June 30, 2009 and 2008.

 
| ** **                              | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                              | ** ** | **2009**                                        | ** ** | **2008**                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Total pounds sold**                   |       | 36,600                                          |       | 99,400                                        |       | 64,200 |   | 180,500 |   |
| Total  operating expenses               |       | $                                               | 763,000    |                                          | $          | 1,811,000 |   | $ | 1,633,000 |   | $ | 3,938,000 |   |
| Per  pound operating expense            |       | $                                               | 20.85      |                                          | $          | 18.23 |   | $ | 25.43 |   | $ | 21.82 |   |
| Depreciation  and depletion             |       | $                                               | 182,,000   |                                          | $          | 2,314,000 |   | $ | 413,000 |   | $ | 4,245,000 |   |
| Per  pound DD&A expense             |       | $                                               | 4.97       |                                          | $          | 23.29 |   | $ | 6.44 |   | $ | 23.52 |   |
| Direct  cost of uranium production sold |       | $                                               | 945,000    |                                          | $          | 4,125,000 |   | $ | 2,046,000 |   | $ | 8,183,000 |   |
| Direct  cost of sales per pound         |       | $                                               | 25.83      |                                          | $          | 41.52 |   | $ | 31.87 |   | $ | 45.34 |   |
|                                    |       |                                            |       |                                          |       |   |   |   |   |
| **Royalties and commissions**           |       | $                                               | 167,000    |                                          | $          | 576,000 |   | $ | 306,000 |   | $ | 1,137,000 |   |
| Royalties  and commissions per pound    |       | $                                               | 4.56       |                                          | $          | 5.80 |   | $ | 4.76 |   | $ | 6.30 |   |

 

We saw a decreasein our overall production costs in the first half of 2009 compared to 2008. Our2009 production was sourced from the remaining two wellfields at KingsvilleDome and was supplemented by nominal amounts derived from finalized assaying ofprior Vasquez and Rosita shipments.  The cost decreases seen in the firstsix months of 2009 resulted from significant operating cost reductions madebeginning in the fourth quarter of 2008 along with the impact of the impairmentof our uranium assets in 2008 and 2009.  The impairment provisions reducedthe amount of capital costs attributable to our uranium properties and resultedin the lower cost per pound attributable to depreciation and depletion in thecurrent period.

 

The 2008production from Kingsville Dome was sourced from wellfields in their latterstages of production as well as from new less prolific wellfields compared toprior production. These changes resulted in an increase in our costs. Alsocontributing to higher costs in 2008 was initial production from a newwellfield at Vasquez, which began production in March 2008. HistoricallyVasquez has had lower recovery factors than Kingsville Dome and this factor hascontributed to increased operating and capital costs. Our average cost ofpounds sold in the first half of 2008 was $45.34 per pound with Kingsville Domeproduction contributing approximately 90% and Vasquez pounds totalingapproximately 10% of total pounds sold during the first half of the year.

 

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*Royalties and Commissions.*   During thefirst half of 2009, royalties and commissions for Vasquez and Kingsville Domeproduction sold totaled $306,000, representing 9.5% of sales. During the firsthalf of 2008, royalties and commissions for Vasquez and Kingsville Domeproduction sold totaled $1.1 million, representing 9.2% of sales.

 

*Operating Expenses.*   During thefirst half of 2009, operating expenses for Kingsville Dome, Vasquez and Rositaoperations and production sold was $1.6 million. Included in this amount was$90,000 of stand-by costs related to our Vasquez and Rosita projects During thefirst half of 2008, operating expenses for Vasquez and Kingsville Domeproduction sold was $3.9 million. This total included approximately$536,000 of stand-by costs related to our Vasquez and Rosita projects.

 

*Depreciation and Depletion.*   During thefirst half of 2009, we incurred depreciation and depletion expense attributableto our Vasquez and Kingsville Dome production of $413,000. During the sameperiod in 2008, we incurred depreciation and depletion expense attributable toour Vasquez and Kingsville Dome production of $4.2 million.

 

*Impairmentof Uranium Properties.*   During the first half of 2009and 2008, we determined the carrying value of our uranium assets exceeded theirfair value as provided in SFAS 144 “Accounting for the Impairment orDisposal of Long-Lived Assets”. Such determination resulted in an impairmentprovision of approximately $1.4 million and $296,000 in 2009 and 2008,respectively.

 

*Accretion and Amortization of Future Restoration Costs.*   Accretionand amortization of future restoration costs in the first half of 2009 and 2008was $258,000 and $384,000, respectively.

 

*General and Administrative Charges.*   Weincurred general and administrative charges and corporate depreciation of $3.1million and $7.3 million, respectively in the six months ended June 30,2009 and 2008.

 

Significantexpenditures for general and administrative expenses for the three and sixmonths ended June 30, 2009 and 2008 were:

 
| ** **                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                        | ** ** | **2008**                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| Stock  compensation expense                 |       | $                                               | 222,000    |                                          | $          | 896,000 |   | $ | 382,000 |   | $ | 1,550,000 |   |
| Salaries  and payroll burden                |       | 512,000                                         |       | 821,000                                       |       | 1,107,000 |   | 1,661,000 |   |
| Legal,  accounting, public company expenses |       | 297,000                                         |       | 484,000                                       |       | 585,000 |   | 767,000 |   |
| Insurance  and bank fees                    |       | 109,000                                         |       | 145,000                                       |       | 241,000 |   | 288,000 |   |
| Consulting  and professional services       |       | 274,000                                         |       | 439,000                                       |       | 431,000 |   | 940,000 |   |
| Office,  travel and other expenses          |       | 165,000                                         |       | 303,000                                       |       | 274,000 |   | 584,000 |   |
|                                        |       |                                            |       |                                          |       |   |   |   |   |
| Total                                       |       | $                                               | 1,579,000  |                                          | $          | 3,088,000 |   | $ | 3,020,000 |   | $ | 5,790,000 |   |

 

The non-cashcompensation expense recorded for the six months ended June 30, 2009 and2008 resulted from the adoption of SFAS 123(R) in January 2006,requiring the recognition of expense related to the Company’s stock option andrestricted stock grants.

 

Salary and payrollcosts decreases for the six months presented resulted primarily from areduction in salaried positions primarily in South Texas and New Mexico inconjunction with cost cutting moves which began in the fourth quarter of 2008.

 

The costs forconsulting and professional services decreased in the first half of 2009compared with 2008 and resulted from the cost cutting moves which began in thefourth quarter of 2008.  The activities incurred in the first half of 2008included work performed in the review and assessment of our New Mexico propertydata bases to evaluate their potential as conventional mining projects andother costs related to community outreach and information campaigns designed toenhance public awareness of our planned New Mexico operations.  In the2008 period, we also incurred increased costs for environmental, health andsafety training, investor relations and media relations activities and forhuman resources and computer networking consultants.

 

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Decreased officecosts incurred in the first six months of 2009 compared to 2008 resultedprimarily from the closure of our corporate offices in Corpus Christi, Texasand Albuquerque, New Mexico in the third and fourth quarters of 2008,respectively.

 

*Write-offof Target Acquisition Costs. * InJune 2008, we decided along with Billiton Investment 15 B.V. to terminateour agreement to purchase Rio Algom Mining, LLC, which was entered into on October 12,2007.  In connection with the targetedacquisition, we incurred costs of $1.437 million dollars which were originallyrecorded as a pre-acquisition cost asset. Upon the termination of the agreement these pre-acquisition costs wereexpensed in the second quarter of 2008.

 

*Net Losses.*For the six months ended June 30, 2009 and 2008,we had net losses of $3.8 million and of $4.9 million, respectively.

 

*CashFlow. *At ofJune 30, 2009 we had a cash balance of approximately $9.3 million comparedwith $16.0 million at the same date in 2008.

 

In the first halfof 2009, we had cash used in operations of $2.3 million. We used $359,000 ininvesting activities during the first half of 2009.  We increased thecollateral supporting our South Texas financial surety requirements by $84,000and made additions to our South Texas and New Mexico property, plant andequipment of $274,000 during the quarter.  These expenditures wereprimarily for land and mineral lease payments during the quarter.

 

In the first halfof 2008, we had net cash flow provided by operations of $2.9 million. We used$8.9 million in investing activities during the first six months of 2008. We increased the collateral supporting our South Texas financial surety requirementsby $414,000 and also made significant additions to our South Texas and NewMexico property, plant and equipment of $8.5 million during the period. These expenditures were primarily for wellfield development, evaluationdrilling and plant and dryer upgrades at Kingsville Dome of $3.2 million andwellfield development, evaluation drilling and plant and dryer upgrades atRosita of $3.8 million, additional wellfield development at Vasquez of$167,000, New Mexico property additions of $350,000 and other Texas propertyand other assets of $849,000.

 

**Liquidity—CashSources and Uses for 2009**

 

As of June 30,2009 we had $9.3 million in cash compared to $12.0 million at December 31,2008.  The cash at June 30, 2009 was generated from operations aswell as the $12.8 million in net proceeds received from the sale of commonstock and warrants in a private placement in May 2008.

 

The Company used$2.3 million in cash from operations during the first half of 2009. Withfalling sales prices and higher production costs, the Company decided tosuspend the development of new wellfields at Kingsville Dome and Rosita as of October 2008.The primary source of our remaining sales revenue will be generated by uraniumsales scheduled for early August 2009. Such sales will be generated from uranium production from the KingsvilleDome project which ceased in mid-June 2009, plus inventory adjustmentsrelated to prior period uranium shipments. The sales total volume available for sale will be approximately 22,600pounds and is expected to generate revenue of approximately $1.0 million.

 

In the second halfof 2008, we took significant steps to decrease our cost structure byimplementing tighter spending controls, closing two offices, reducingemployment, limiting exploration activities, and reducing public and governmentrelations activities in New Mexico and Texas. With the termination of ourproduction activities in June 2009, we have implemented additional costreductions to further slow down our cash outflows and we continue to assess allareas of the Company to determine where further cost reductions may bemade.  Our objective is to reduce ourcash requirements to a level that allows us to sustain our reclamationactivities and continue the requisite activities in New Mexico to advance ourprojects toward production without needing outside sources of capital through2010.  The Company is also evaluating certain assets to determine if theycan be better utilized and/or monetized.

 

**ContingentLiabilities—Off Balance Sheet Arrangements**

 

The Company hasobtained financial surety relating to certain of its future restoration andreclamation obligations as required by the State of Texas regulatory agencies.The Company has bank Letters of Credit (the “L/C’s) and performance bonds issuedfor the benefit of the Company to satisfy such regulatory requirements. The L/C’swere issued by Bank of America and the performance bonds have been issued byUnited States Fidelity and Guaranty Company (“USF&G”). L/C’s for $5.7million and $5.6 million were issued at June 30, 2009 and December 31,2008, respectively.  Such L/C’s arecollateralized in their entirety by certificates of deposit.

 

Performance bondstotaling $2.8 million were issued for the benefit of the Company at June 30,2009 and December 31, 2008. USF&G has required that the Companydeposit funds collateralizing a portion of the bonds. The amount of bondingissued by USF&G exceeded the amount of collateral by $2.5 million at June 30,2009 and December 31, 2008, respectively. In the event that USF&G isrequired to perform under its bonds or the bonds are called by the stateagencies, the Company would be obligated to pay any expenditure in excess ofthe collateral.

 

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**CriticalAccounting Policies**

 

Our significantaccounting policies are described in Note 2 to the consolidated financialstatements included in the Company’s 2008 Annual Report on Form 10-K. We believe our most critical accounting policies involve those requiring theuse of significant estimates and assumptions in determining values orprojecting future costs.

 

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

 

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

 

Such estimates andassumptions affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of expenses during the reporting period.

 

**ITEM 3.****                            ****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

**UraniumPrice Volatility**

 

The Company issubject to market risk related to the market price of uranium. The Company’scash flow has historically been dependent on the price of uranium, which isdetermined primarily by global supply and demand, relative to the Company’scosts of production. Historically, uranium prices have been subject tofluctuation, and the price of uranium has been and will continue to be affectedby numerous factors beyond the Company’s control, including the demand fornuclear power, political and economic conditions, and governmental legislationin uranium producing and consuming countries and production levels and costs ofproduction of other producing companies.

 

The spot marketprice for uranium has demonstrated a large range since January 2001. Priceshave risen from $7.10 per pound at January 2001 to a high of $136.00 perpound in June 2007 and were $48.50 per pound as of August 3, 2009.

 

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

 

Duringthe year ended December 31, 2008 and the six months ended June 30,2009, the Company’s management, with the participation of the Chief ExecutiveOfficer and Chief Financial Officer of the Company, carried out an evaluationof the effectiveness of the design and operation of the Company’s disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) ofthe Securities Exchange Act of 1934, as amended.

 

Basedon that evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures as of December 31,2008 and June 30, 2009 were effective.

 

Duringthe first six months of 2009 no material changes have been made in our internalcontrol over financial reporting that may have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II - OTHER INFORMATION**

 

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

 

On April 17,2009, a three-judge panel of the United States Court of Appeals for the TenthCircuit affirmed the February 2007 decision of the United StatesEnvironmental Protection Agency (the “USEPA”) and held that Section 8 ofURI’s Churchrock property in New Mexico (owned in fee by the Company’ssubsidiary Hydro Resources, Inc.) is Indian country.  One of themembers of the panel dissented.  Indiancountry falls under the jurisdiction of the USEPA, and not the State of NewMexico, to administer the Underground Injection Control (UIC) program permit,which the Company requires for ISR mining of that property. The jurisdictionaldispute originated among the State of New Mexico, the USEPA and the NavajoNation.  The Company has petitioned theTenth Circuit for en banc review of the panel’s decision.

 

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

 

None

 

**ITEM 2.****                            ****UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS**

 

None

 

**ITEM 3.****                            ****DEFAULTS UPON SENIORSECURITIES.**

 

None

 

**ITEM 4.****                            ****SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS.**

 

At the Company’sAnnual Meeting of shareholders, held June 3, 2009, The Company’sshareholders re-elected its directors, voted to approve the recommendedproposal for ratification of the Company’s independent auditors and votedagainst the recommended proposal to ratify the Company’s amended and restatedDirectors’ Stock option Plan.

 

Following are thevotes cast for and against each director.

 
| **Directors**     | ** ** | **For**    | ** ** | **Against** | ** ** |
|-------------------|------------|------------|------------|-------------|------------|
| Paul  K Willmott  |       | 38,442,788 |       | 1,262,818   |       |
| Leland  O. Erdahl |       | 38,259,120 |       | 1,446,486   |       |
| David  N. Clark   |       | 38,349,078 |       | 1,356,528   |       |
| Terence  J. Cryan |       | 38,304,383 |       | 1,401,223   |       |
| Marvin  K. Kaiser |       | 38,434,417 |       | 1,271,189   |       |

 

Votes on theproposal for ratification of the Company’s independent auditors are as follows:

 
| ** **                                                            | ** ** | **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** |
|-----------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------|------------|
| Proposal  for ratification of the Company’s independent auditors |       | 39,010,084 |       | 340,808     |       | 354,714         |       |

 

Votes on theproposal for ratification of the Company’s amended and restated Directors’Stock Option Plan are as follows:

 
| ** **                                                                                               | ** ** | **For**   | ** ** | **Against** | ** ** | **Abstentions** | ** ** | **Broker Non-Votes** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-----------|------------|-------------|------------|-----------------|------------|----------------------|------------|
| Proposal  for ratification of the Company’s amended and restated Directors’ Stock  Option Plan |       | 7,654,167 |       | 8,593,597   |       | 2,316,223       |       | 21,141,619           |       |

 

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

 

None

 

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

 

See the Index toExhibits on Page E-1 for a listing of the exhibits that are filed as partof this Quarterly Report.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
| ** **                   | **URANIUM  RESOURCES, INC.** |
|------------------------------|------------------------------|
|                         |                         |   |
| Dated: August 10,  2009 | By:                          | /s/ David N. Clark |
|                         |                         | David N. Clark |
|                         |                         | Director and Chief  Executive Officer |
|                         |                         |   |
| Dated: August 10,  2009 | By:                          | /s/ Thomas H. Ehrlich |
|                         |                         | Thomas H. Ehrlich |
|                         |                         | Vice President -  Finance and Chief Financial Officer |
|                         |                         | (Principal Financial  and Accounting Officer) |

 

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

 

E-1

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Table of Contents

 
| 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). |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.27.1* |   | 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).                                  |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.33*   |   | 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                                                                                                                                                                                              |

 

E-2

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Table of Contents

 
|   |   | 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).                                                                                                   |
|   |   |                                                                                                                                                                                                                                                             |
| 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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