**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 

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

 

**For the quarterly period ended March 31, 2008**

 

**Or**

 

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

 

**For the transition periodfrom                  to**

 

**Commission file number 0-17171**

 

**URANIUMRESOURCES, INC.**

(ExactName 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**

(Addressof Principal Executive Offices)

 

**(972) 219-3330**

(Issuer’sTelephone Number, Including Area Code)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. x  Yes    o  No

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. 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 check markwhether the registrant is a shell company (as defined in Rule 12-b2 of theExchange Act).

o  Yes    x  No

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.

 

| **Title of Each Class of Common Stock** | ** ** | **Number of Shares Outstanding** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------|
| Common  Stock, $0.001 par value                                       |       | 52,305,129  as of May 9, 2008              |

 

 

----

 

**URANIUM RESOURCES, INC.**

 

**2008 FIRST QUARTERLY REPORT ON FORM 10-Q**

 

**TABLE OF CONTENTS**

 
| **PART I—FINANCIAL  INFORMATION** |                                                                                                     |
|---------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                     |   |
| Item  1.                                    | Financial Statements                                                                                     |   |
|                                        |                                                                                                     |   |
|                                        | Consolidated Balance Sheets-  March 31, 2008 (Unaudited) and December 31, 2007                 |   |
|                                        |                                                                                                     |   |
|                                        | Consolidated  Statements of Operations–three months ended March 31, 2008 and 2007  (Unaudited) |   |
|                                        |                                                                                                     |   |
|                                        | Consolidated  Statements of Cash Flows–three months ended March 31, 2008 and 2007  (Unaudited) |   |
|                                        |                                                                                                     |   |
|                                        | Notes to  Consolidated Financial Statements—March 31, 2008 (Unaudited)                         |   |
|                                        |                                                                                                     |   |
| Item  2.                                    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations              |   |
|                                        |                                                                                                     |   |
| Item  3.                                    | Quantitative  and Qualitative Disclosures About Market Risk                                              |   |
|                                        |                                                                                                     |   |
| Item  4.                                    | Controls and  Procedures                                                                                 |   |
|                                        |                                                                                                     |
| **PART II—OTHER  INFORMATION**    |                                                                                                     |
| ** **                                  | ** **                                                                                               |
| Item 1.                                     | Legal Proceedings                                                                                        |   |
|                                        |                                                                                                     |   |
| Item 1A.                                    | Risk Factors                                                                                             |   |
|                                        |                                                                                                     |   |
| Item  2.                                    | Unregistered  Sales of Equity Securities and Use of Proceeds                                             |   |
|                                        |                                                                                                     |   |
| Item  3.                                    | Defaults Upon  Senior Securities                                                                         |   |
|                                        |                                                                                                     |   |
| Item  4.                                    | Submission  of Matters to a Vote of Security Holders                                                     |   |
|                                        |                                                                                                     |   |
| Item 5.                                     | Other Information                                                                                        |   |
|                                        |                                                                                                     |   |
| Item 6.                                     | Exhibits and Reports on  Form 8–K                                                              |   |
|                                        |                                                                                                     |   |
| **SIGNATURES**                              |                                                                                                     |
| ** **                                  | ** **                                                                                               | ** ** |
| **Index to  Exhibits**                      |                                                                                                     |
|                                             |                                                                                                          |  |  |  |  |

 

2

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDBALANCE SHEETS**

**ASSETS**

 
| ** **                                               | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|----------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                               | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| Current assets:                                          |       |                     |       |                        |       |
| Cash and cash equivalents                                |       | $                        | 5,238,557  |                        | $          | 9,284,270 |   |
| Receivables, net                                         |       | 2,314,123                |       | 2,652,574                   |       |
| Uranium inventory                                        |       | 840,197                  |       | 748,452                     |       |
| Prepaid and other current assets                         |       | 807,507                  |       | 720,357                     |       |
| Total current assets                                     |       | 9,200,384                |       | 13,405,653                  |       |
|                                                     |       |                     |       |                        |       |
| Property, plant and equipment, at cost:                  |       |                     |       |                        |       |
| Uranium properties                                       |       | 89,842,384               |       | 85,525,808                  |       |
| Other property, plant and equipment                      |       | 924,917                  |       | 821,811                     |       |
| Less-accumulated depreciation, depletion  and impairment |       | (58,077,224              | )          | (55,736,530                 | )          |
| Net property, plant and equipment                        |       | 32,690,077               |       | 30,611,089                  |       |
|                                                     |       |                     |       |                        |       |
| Other assets                                             |       | 2,961,707                |       | 2,837,064                   |       |
| Long-term investment:                                    |       |                     |       |                        |       |
| Certificates of deposit, restricted                      |       | 6,408,130                |       | 6,083,076                   |       |
|                                                     |       | $                        | 51,260,298 |                        | $          | 52,936,882 |   |

 

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

 

3

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**LIABILITIES AND SHAREHOLDERS’ EQUITY**

 
| ** **                                                                                                                                                          | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                                                                |       |                     |       |                        |       |
| Accounts and short term notes payable                                                                                                                               |       | $                        | 1,903,613  |                        | $          | 2,157,475 |   |
| Current portion of restoration reserve                                                                                                                              |       | 1,267,176                |       | 1,124,504                   |       |
| Royalties and commissions payable                                                                                                                                   |       | 940,639                  |       | 1,131,636                   |       |
| Accrued interest and other accrued  liabilities                                                                                                                     |       | 636,632                  |       | 709,400                     |       |
| Current portion of long-term debt                                                                                                                                   |       | 188,924                  |       | 210,616                     |       |
| Total current liabilities                                                                                                                                           |       | 4,936,984                |       | 5,333,631                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Other long-term liabilities and deferred  credits                                                                                                                   |       | 4,011,661                |       | 4,097,327                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Long term capital leases, less current  portion                                                                                                                     |       | 167,391                  |       | 178,665                     |       |
| Long-term debt, less current portion                                                                                                                                |       | 450,000                  |       | 450,000                     |       |
| Commitments and contingencies (Notes 1, 2  and 5)                                                                                                                   |       |                     |       |                        |       |
| Shareholders’ equity:                                                                                                                                          |       |                     |       |                        |       |
| Common stock, $.001 par value, shares  authorized: 200,000,000; shares issued and outstanding (net of treasury  shares): 2008—52,305,129; 2007—52,305,129 |       | 52,343                   |       | 52,343                      |       |
| Paid-in capital                                                                                                                                                     |       | 131,937,114              |       | 131,282,687                 |       |
| Accumulated deficit                                                                                                                                                 |       | (90,285,777              | )          | (88,448,353                 | )          |
| Less: Treasury stock (38,125 shares), at  cost                                                                                                                      |       | (9,418                   | )          | (9,418                      | )          |
| Total shareholders’ equity                                                                                                                                     |       | 41,694,262               |       | 42,877,259                  |       |
|                                                                                                                                                                |       | $                        | 51,260,298 |                        | $          | 52,936,882 |   |

 

Theaccompanying notes to financial statements are an integral part of theseconsolidated statements.

 

4

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
| ** **                                                                   | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| Revenues:                                                                    |       |                                             |       |   |   |
| Uranium sales—                                                          |       | $                                                | 5,731,538  |   | $ | 4,574,167 |   |
| Total revenue                                                                |       | 5,731,538                                        |       | 4,574,167 |   |
| Costs and expenses:                                                          |       |                                             |       |   |   |
| Cost of uranium sales—                                                  |       |                                             |       |   |   |
| Royalties and commissions                                                    |       | 560,402                                          |       | 438,976 |   |
| Operating expenses                                                           |       | 2,127,139                                        |       | 1,787,063 |   |
| Accretion/amortization of restoration  reserve                               |       | 206,988                                          |       | 170,180 |   |
| Depreciation and depletion                                                   |       | 1,930,581                                        |       | 1,487,049 |   |
| Impairment of uranium properties                                             |       | 135,842                                          |       | — |   |
| Exploration expenses                                                         |       | 8,547                                            |       | — |   |
| Total cost of uranium sales                                                  |       | 4,969,499                                        |       | 3,883,268 |   |
| Earnings from operations before corporate  expenses                          |       | 762,039                                          |       | 690,899 |   |
|                                                                         |       |                                             |       |   |   |
| Corporate expenses—                                                     |       |                                             |       |   |   |
| General and administrative                                                   |       | 2,701,807                                        |       | 2,212,092 |   |
| Depreciation                                                                 |       | 34,213                                           |       | 21,162 |   |
| Total corporate expenses                                                     |       | 2,736,020                                        |       | 2,233,254 |   |
| Loss from operations                                                         |       | (1,973,981                                       | )          | (1,542,355 | ) |
|                                                                         |       |                                             |       |   |   |
| Other income (expense):                                                      |       |                                             |       |   |   |
| Interest expense                                                             |       | (11,429                                          | )          | (7,866 | ) |
| Interest and other income, net                                               |       | 147,986                                          |       | 129,762 |   |
|                                                                         |       |                                             |       |   |   |
| Net loss                                                                     |       | $                                                | (1,837,424 | ) | $ | (1,420,459 | ) |
|                                                                         |       |                                             |       |   |   |
| Net loss per common share:                                                   |       |                                             |       |   |   |
| Basic                                                                        |       | $                                                | (0.04      | ) | $ | (0.03 | ) |
| Diluted                                                                      |       | $                                                | (0.04      | ) | $ | (0.03 | ) |
|                                                                         |       |                                             |       |   |   |
| Weighted average common shares and common  equivalent shares per share data: |       |                                             |       |   |   |
| Basic                                                                        |       | 52,305,129                                       |       | 51,795,006 |   |
| Diluted                                                                      |       | 52,305,129                                       |       | 51,795,006 |   |

 

Theaccompanying notes to financial statements are an integral part of theseconsolidated statements.

 

5

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**URANIUM RESOURCES, INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| Net loss                                                                   |       | $                                                | (1,837,424 | ) | $ | (1,420,459 | ) |
| Reconciliation of net earnings to cash  provided by operations—       |       |                                             |       |   |   |
| Accretion/amortization of restoration  reserve                             |       | 206,988                                          |       | 170,180 |   |
| Depreciation and depletion                                                 |       | 1,964,794                                        |       | 1,508,211 |   |
| Impairment of uranium properties                                           |       | 135,842                                          |       | — |   |
| Decrease in restoration and reclamation  accrual                           |       | (250,986                                         | )          | (330,720 | ) |
| Stock compensation expense                                                 |       | 654,427                                          |       | 773,672 |   |
| Other non-cash items, net                                                  |       | 23,212                                           |       | 152,738 |   |
|                                                                       |       |                                             |       |   |   |
| Effect of changes in operating working  capital items—                |       |                                             |       |   |   |
| (Increase) decrease in receivables                                         |       | 338,451                                          |       | (405,808 | ) |
| Decrease in inventories                                                    |       | 277,400                                          |       | 198,886 |   |
| Increase in prepaid and other current  assets                              |       | (187,152                                         | )          | (132,793 | ) |
| Increase (decrease) in payables, accrued  liabilities and deferred credits |       | (517,627                                         | )          | 216,451 |   |
| Net cash provided by operations                                            |       | 807,925                                          |       | 730,358 |   |
|                                                                       |       |                                             |       |   |   |
| Investing activities:                                                      |       |                                             |       |   |   |
| Increase in certificates of deposit,  restricted                           |       | (325,054                                         | )          | (51,515 | ) |
| Additions to property, plant and equipment—                           |       |                                             |       |   |   |
| Kingsville Dome                                                            |       | (2,159,188                                       | )          | (1,763,946 | ) |
| Vasquez                                                                    |       | (152,520                                         | )          | (248,952 | ) |
| Rosita                                                                     |       | (1,786,411                                       | )          | (1,093,373 | ) |
| Rosita South                                                               |       | (15,302                                          | )          | (539,537 |   |
| Churchrock                                                                 |       | (75,064                                          | )          | (211,389 | ) |
| Crownpoint                                                                 |       | (30,523                                          | )          | (29,871 | ) |
| Other property                                                             |       | (226,858                                         | )          | (357,681 | ) |
| Net cash used in investing activities                                      |       | (4,770,920                                       | )          | (4,296,264 | ) |
|                                                                       |       |                                             |       |   |   |
| Financing activities:                                                      |       |                                             |       |   |   |
| Payments on borrowings                                                     |       | (82,718                                          | )          | (68,158 | ) |
| Issuance of common stock, net                                              |       | —                                           |       | 17,760 |   |
| Net cash used in financing activities                                      |       | (82,718                                          | )          | (50,398 | ) |
| Net decrease in cash and cash equivalents                                  |       | (4,045,713                                       | )          | (3,616,304 | ) |
| Cash and cash equivalents, beginning of  period                            |       | 9,284,270                                        |       | 20,176,771 |   |
| Cash and cash equivalents, end of period                                   |       | $                                                | 5,238,557  |   | $ | 16,560,467 |   |

 

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

 

6

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**UraniumResources, Inc.**

**Notes toConsolidated Financial Statements March 31, 2008 (Unaudited)**

 

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

 

The accompanying unaudited consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with theinstructions to Form 10-Q and Item 310(b) of Regulation S-K. Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements.  The accompanying statements should be readin conjunction with the audited financial statements included in the Company’s2007 Annual Report on Form 10-K/A.  In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary fora fair presentation have been included.  Operating results for the threemonths ended March 31, 2008 are not necessarily indicative of the resultsthat may be expected for the full calendar year ending December 31, 2008.

 

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

 

URI was organized in 1977 to mine uranium in the United States usingthe in situ recovery (“ISR”) mining process. From 1988 through 1999 we producedabout 6.1 million pounds of uranium from two South Texas properties,3.5 million pounds from Kingsville Dome and 2.6 million pounds fromRosita.  In 1999 we shut-in ourproduction because of depressed uranium prices.  When uranium pricesreached a level where it was prudent to commence operations, the company beganproducing at its Vasquez property in South Texas in the fourth quarter of2004.  Production at Kingsville Dome began in the second quarter of2006.  Our production since the fourthquarter of 2004 has been 1,145,400 pounds, 634,100 pounds from Vasquez and511,300 from Kingsville Dome.

 

The financial statements of the Company have been prepared on the basisof accounting principles applicable to a going concern, which contemplates therealization of assets and the satisfaction of liabilities in the normal courseof business.  The Company’s activitiesfor the next twelve months include certain discretionary expenditures that willrequire additional funding. Management believes that the cash balance of $5.2million at March 31, 2008 and the cash expected to be provided throughoperations over the next year will be sufficient to maintain its liquidity forthe next year.

 

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

 

During the first quarter of 2007, the Company entered into capitalleases to acquire property, plant and equipment items including logging trucksand office computers and equipment totaling $96,000.  No additions to capital leases were made inthe first quarter of 2008.  The outstanding balance of the capital leaseswas $356,000 at March 31, 2008.

 

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

 

**Vasquez Project**

 

TheVasquez project commenced production in the fourth quarter of 2004.  Sinceits start-up and through March 31, 2008, the project has produced 634,100pounds of uranium. In the first quarter of 2008 we produced 4,300 poundscompared to 44,100 pounds produced from Vasquez in the first quarter of2007.  In the first quarter of 2008 we incurred wellfield developmentexpenditures of $153,000, primarily for development of new wellfields to bringon new production at Vasquez.  Such new production commenced in March 2008.  As production from depleted wellfields atVasquez declines, restoration activities in those wellfields are beingconducted.  During the first quarter of2008, we determined the carrying value of the Vasquez project assets exceededtheir fair value as provided in SFAS 144 “Accounting for the Impairment orDisposal of Long-Lived Assets”. Such determination resulted in an impairmentprovision of approximately $136,000.

 

**Kingsville Dome Project**

 

Production from Kingsville Dome for the firstquarter of 2008 and 2007 was 79,100 and 64,900 pounds, respectively.  During the first quarter of 2008, wellfielddelineation and development work was ongoing on additional wellfields at KingsvilleDome, where $1.5 million of wellfield capital expenditures were made forwellfields that began production during the quarter and for future wellfieldsnot yet on-line.  Total capitalexpenditures for Kingsville Dome for the first quarter of 2008 were $2.2million for wellfield development, the construction of additional satelliteplants and for wellfield evaluation and delineation of future wellfields.

 

7

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**Rosita**

 

Capital expenditures for our Rosita project totaled $1.7 million in thefirst quarter of 2008.  These expenditures were made to upgrade the Rositaplant and elution circuit, the addition of another satellite plant,construction of a drying facility at Rosita and for wellfield development. Production from Rosita is scheduled to commence mid-May 2008.

 

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

 

**Amendment to Uranium Sales Contracts**

 

In March 2006, we entered into a new contract with ItochuCorporation (“Itochu”) and a new contract with UG U.S.A., Inc. (“UG”) thatsuperseded the previously existing contracts.  Each of the new contractsprovides for delivery of one-half of our actual production from our Vasquezproperty and other properties in Texas currently owned or hereafter acquired bythe Company (excluding certain large potential exploration plays). The terms ofsuch contracts are summarized below.

 

*The Itochu Contract*. Under the Itochu contract, all productionfrom the Vasquez property will be sold at a price equal to the average spotprice for the eight weeks prior to the date of delivery less $6.50 per pound,with a floor for the spot price of $37 and a ceiling of $46.50. Other Texasproduction will be sold at a price equal to the average spot price for theeight weeks prior to the date of delivery less $7.50 per pound, with a floorfor the spot price of $37 and a ceiling of $43. On non-Vasquez production theprice paid will be increased by 30% of the difference between actual spot priceand the $43 ceiling up to and including $50 per pound. If the spot price isover $50 per pound the price on all Texas production will be increased by 50%of such excess. The floor and ceiling and sharing arrangement over the ceilingapplies to 3.65 million pounds of deliveries, after which there is no floor orceiling. Itochu has the right to cancel any deliveries on six-month’snotice.  To date, we have delivered360,000 pounds to Itochu since the effective date of this contract.

 

In December 2005 we entered into a joint venture with Itochu todevelop our Churchrock property in New Mexico.  Under the terms of thejoint venture, both parties must make an investment decision after thecompletion of a feasibility study, which was completed at the end of 2006. Theparties have extended the preliminary investment decision until August 1,2008.  If Itochu should terminate theventure at that time, we would no longer receive the additional price of 30% ofthe excess between $43 and $50 per pound outlined above. If we should terminatethe venture at that time, the original contract terms will be reinstated fromthat time forward.

 

*The UG Contract*. Under the UG contract all production fromthe Vasquez property and other Texas production 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 and 3million pounds total have been sold, UG will have a right of first refusal topurchase other Texas production at a price equal to the average spot price fora period prior to the date of delivery less 4%. In consideration of UG’sagreement to restructure its previously existing contract, we paid UG $12 million in cash with fundsraised in our equity offering completed in April 2006.  To date, we have delivered 332,000pounds to UG since the effective date of this contract.

 

**6.             STOCKBASED COMPENSATION**

 

                Our stock based compensation programs consist ofstock options granted to employees and directors and restricted stock grantsmade employees.

 

***Stock Compensation Expense - SFAS123(R)***

 

Stock compensation expense for the three months March 31, 2008 and2007 was $654,000 and $774,000, respectively. Stock compensation expense isrecorded as a component of general and administrative expenses for each period.The Company did not recognize a tax benefit from the stock compensation expensebecause the Company considers it is more likely than not that the relateddeferred tax assets, which have been reduced by a full valuation allowance,will not be realized.

 

The Black-Scholes option pricing model was used to estimate the stockoption fair values. The option pricing model requires a number of assumptions,of which the most significant are, expected stock price volatility, theexpected pre-vesting forfeiture rate and the expected option term (the amountof time from the grant date until the option or restricted shares areexercised, vest or expire). Expected volatility was calculated based uponactual historical stock price movements through the measurement date of thestock option grant. Expected pre-vesting forfeitures were estimated based onactual historical pre-vesting forfeitures over the most recent periods ending March 31,2008 for the expected term. The expected term was estimated based on historicalaverages over the most recent periods ending March 31, 2008.

 

No stock option grants were made in the first quarter of 2008.

 

8

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A total of 70,000 shares of restricted stock were granted in the firstquarter of 2008.  Restricted share grantsfor 60,000 shares were 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 sharesvest ratably over four years.  Another10,000 restricted share grant was made to an executive of the Company on March 24,2008, these shares vest ratably over 5 years. Restricted stock grants are valued using the fair market value of thestock on the date of grant. The Company recognized stock compensation cost forthe restricted share grants of approximately $8,000 during the first quarter of2008.  The total estimated unrecognizedcompensation cost form the unvested restricted shares was approximately$538,000 at March 31, 2008.

 

***Stock Options as of the Three MonthsEnded March 31, 2008 and 2007***

 

The following table summarizes stock options outstanding and changesduring the three month period ended March 31, 2008:

 
| ** **                                  | ** ** | **Outstanding Options** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|
| ** **                                  | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| ** **                                  | ** ** | ** **                   | ** ** | ** ** | ** ** | **(in years)** | ** ** | ** ** | ** ** |
| Options outstanding at January 1, 2008 |       | 4,452,844                    |       | $ | 2.88 |   |   |   |   |   |
| Granted                                     |       | —                       |       | — |   |   |   |   |   |
| Exercised                                   |       | —                       |       | — |   |   |   |   |   |
| Canceled or forfeited                       |       | (46,000                      | )          | $ | 8.54 |   |   |   |   |   |
| Options outstanding at March 31, 2008  |       | 4,406,844                    |       | $ | 2.82 |   | 7.02 |   | $ | 15,534,203 |   |
|                                        |       |                         |       |   |   |   |   |   |   |
| Options exercisable at March 31, 2008  |       | 3,167,262                    |       | $ | 2.21 |   | 6.67 |   | $ | 12,146,358 |   |

 

Shares available for grantunder the Stock Option Plans as of March 31, 2008 were 653,000.

 

Stock options outstanding and currently exercisable at March 31,2008 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      |       | 2,212,072                                |       | 6.06                                                        |       | $ | 1.37 |   | 1,781,657 |   | $ | 1.30 |   |
| 2004 Stock Incentive  Plan      |       | 1,562,459                                |       | 7.94                                                        |       | 3.39 |   | 1,178,292 |   | 3.30 |   |
| Directors  Stock Option Plan    |       | 1,063                                    |       | 1.96                                                        |       | 4.99 |   | 1,063 |   | 4.99 |   |
| 2004  Directors Plan            |       | 606,250                                  |       | 8.33                                                        |       | 6.70 |   | 181,250 |   | 4.13 |   |
| Other                           |       | 25,000                                   |       | 3.25                                                        |       | 0.88 |   | 25,000 |   | 0.88 |   |
|                            |       | 4,406,844                                |       | 7.02                                                        |       | $ | 2.82 |   | 3,167,262 |   | $ | 2.21 |   |

 

Total estimated unrecognized compensation cost from unvested stockoptions at March 31, 2008 was approximately $3.029 million, which isexpected to be recognized over a weighted average period of approximately 2-4years.

 

Total estimated unrecognized compensation cost from unvested restrictedstock grants at March 31, 2008 was approximately $538,000, which isexpected to be recognized over a weighted average period of approximately 4-5years.

 

**7.             ASSETRETIREMENT OBLIGATIONS**

 

The following table shows the change in the balance of the restorationand reclamation liability during the three months ended March 31, 2008:

 
| Reserve for future restoration and  reclamation costs beginning of period |   | $        | 3,932,603 |   |
|---------------------------------------------------------------------------|--------|----------|-----------|--------|
| Additions and changes in cash flow estimates                              |   | 311,810  |      |
| Costs incurred                                                            |   | (296,613 | )         |
| Accretion expense                                                         |   | 41,809   |      |
| Reserve for future restoration and  reclamation costs at end of period    |   | $        | 3,989,609 |   |

 

9

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

 

The following table details the changes in shareholders equity for thequarter ended March 31, 2008:

 
| ** **                        | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|-----------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------|------------|
| ** **                        | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Treasury Stock** | ** ** |
| Balances,  December 31, 2007 |       | 52,305,129            |       | $           | 52,343     |            | $          | 131,282,687 |       | $ | (88,448,353 | ) | $ | (9,418 | ) |
| Net loss                          |       | —                |       | —      |       | —          |       | (1,837,424  | )          | — |   |
| Stock  compensation expense       |       | —                |       | —      |       | 654,427         |       | —      |       | — |   |
| Balances,  March 31, 2008    |       | 52,305,129            |       | $           | 52,343     |            | $          | 131,937,114 |       | $ | (90,285,777 | ) | $ | (9,418 | ) |

 

**10.**          **IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS**

 

**Impact of Recent Accounting Pronouncements**

 

***Fair ValueMeasurements.***    InSeptember 2006, the FASB issued SFAS No. 157, “Fair ValueMeasurements,” which provides a common definition for the measurement of fairvalue for use in applying generally accepted accounting principles in theUnited States of America and in preparing financial statement disclosures. SFASNo. 157 is effective for fiscal years beginning after November 15,2007. We adopted SFAS No. 157, on January 1, 2008, and did not have amaterial impact on our financial condition, results of operations or cashflows. On February 8, 2008, the FASB issued Staff Position 157-2, “EffectiveDate of FASB 157” (FSP 157-2) which partially deferred the provisions of FAS157 to annual periods beginning after November 15, 2008 for non-financialassets and liabilities.  Non-financialassets include fair value measurements associated with business acquisitionsand impairment testing of tangible and intangible assets.  We are currently evaluating the impact thatthe adoption of SFAS 157 will have on our non-financial assets and liabilitiesin our consolidated financial statements.

 

***Fair Value Optionfor Financial Assets and Liabilities.***    In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Financial Liabilities,” which permits entities to choose to measure manyfinancial instruments and certain other items at fair value. SFAS No. 159is effective for fiscal years beginning after November 15, 2007. We haveadopted SFAS 159 and we do not plan to implement the fair value option providedin SFAS No. 159.

 

***BusinessCombinations.***    In December 2007,the FASB issued SFAS No. 141R, “Business Combinations,” which changes howbusiness acquisitions are accounted. SFAS No. 141R requires the acquiring entityin a business combination to recognize all (and only) the assets acquired andliabilities assumed in the transaction and establishes the acquisition-datefair value as the measurement objective for all assets acquired and liabilitiesassumed in a business combination. Certain provisions of this standard will,among other things, impact the determination of acquisition-date fair value ofconsideration paid in a business combination (including contingentconsideration); exclude transaction costs from acquisition accounting; andchange accounting practices for acquired contingencies, acquisition-relatedrestructuring costs, in-process research and development, indemnificationassets, and tax benefits. SFAS No. 141R is effective for businesscombinations and adjustments to an acquired entity’s deferred tax asset andliability balances occurring after December 31, 2008. The Company iscurrently evaluating the future impacts and disclosures of this standard.

 

***NoncontrollingInterests in Consolidated Financial Statements.***    In December 2007,the FASB 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 noncontrolling interests(NCIs) in partially owned consolidated subsidiaries and the loss of control ofsubsidiaries. Certain provisions of this standard indicate, among other things,that NCIs (previously referred to as minority interests) be treated as aseparate component of equity, not as a liability; that increases and decreasein the parent’s ownership interest that leave control intact be treated asequity transactions, rather than as step acquisitions or dilution gains orlosses; and that losses of a partially owned consolidated subsidiary beallocated 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 NCIsprospectively, except for the presentation and disclosure requirements, whichare to be applied retrospectively to all periods presented. The Company iscurrently evaluating the future impacts and disclosures of this standard.

 

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

 

10

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**11.          EARNINGSPER SHARE**

 

Basic earnings per share includes no dilution and is computed bydividing income or loss attributed to common stockholders by theweighted-average number of common shares outstanding for the period. Dilutedearnings per share reflects the potential dilution that could occur if stockoptions were exercised or converted into common stock.  Potentially dilutive shares of 3,804,578 wereexcluded from the calculation of earning per share because they wereanti-dilutive due to our net loss position for the quarter ended March 31,2008.

 

11

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**ITEM 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Forward Looking Statements**

 

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

 

**Financial Condition and Results of Operations**

 

**Comparison of Three Months Ended March 31, 2008 and 2007**

 

*Production and production costs. *In the first quarter of 2008, we produced83,400 pounds.  The Vasquez project produced 4,300 pounds and KingsvilleDome produced 79,100 pounds.  Production in the first quarter of 2007 was109,000; 44,100 from Vasquez and 64,900 from Kingsville Dome.  Thefollowing table details our production and production cost breakdown for thethree months ended March 31, 2008 and 2007.

 
| ** **                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| **Vasquez  production**            |       | 4,300                                            |       | 44,100 |   |
|                               |       |                                             |       |   |   |
| **Kingsville  Dome production**    |       | 79,100                                           |       | 64,900 |   |
|                               |       |                                             |       |   |   |
| **Total  production**              |       | 83,400                                           |       | 109,000 |   |
| ** **                         | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Total  operating costs             |       | $                                                | 1,912,000  |   | $ | 1,589,000 |   |
| Per pound  operating costs         |       | $                                                | 22.94      |   | $ | 14.57 |   |
| Total  deprec. and depletion costs |       | $                                                | 2,238,000  |   | $ | 2,167,000 |   |
| Per pound  DD&A cost           |       | $                                                | 26.85      |   | $ | 19.87 |   |
| Total  production cost             |       | $                                                | 4,150,000  |   | $ | 3,756,000 |   |
| Production  cost per pound         |       | $                                                | 49.78      |   | $ | 34.44 |   |

 

Total operating costs, total depreciation and depletion costs and totalproduction costs incurred for the periods presented above differ from the costof uranium sales recorded in consolidated statements of operations because ofchanges in the amounts recorded to inventory for the same periods.  Thecost of uranium sales includes the sales of uranium inventory on hand at thebeginning of the period and does not include certain uranium produced duringthe period that was not sold at period end.

 

12

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Reconciliationof production costs to cost of uranium sales:

 
| ** **                                              | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                              | ** ** | **2008**                               | ** ** | **2007** | ** ** |
| Operating costs                                         |       | $                                      | 1,912,000  |   | $ | 1,589,000 |   |
| Change in uranium inventory                             |       | 216,000                                |       | 198,000 |   |
| Operating expense for uranium production  sold          |       | $                                      | 2,127,000  |   | $ | 1,787,000 |   |
| Depreciation and depletion costs                        |       | $                                      | 2,238,000  |   | $ | 2,167,000 |   |
| Change in uranium inventory                             |       | (307,000                               | )          | (680,000 | ) |
| Depreciation and depletion for uranium  production sold |       | $                                      | 1,931,000  |   | $ | 1,487,000 |   |
| Total production costs                                  |       | $                                      | 4,150,000  |   | $ | 3,756,000 |   |
| Change in uranium inventory                             |       | (92,000                                | )          | (482,000 | ) |
| Direct cost of uranium production sold                  |       | $                                      | 4,058,000  |   | $ | 3,274,000 |   |

 

*Uranium Sales. *In the first quarter of 2008, we sold 81,100pounds generating revenue of $5.732 million ($70.66 per pound), compared withsales of 79,700 pounds in the same period of 2007 for revenue of $4.574 million($57.41 per pound).  The increase in sales revenue was the result of boththe modest increase in pounds sold, but more significantly from higher priceswe received under new contracts as a result of higher uranium prices in thefirst quarter 2008 compared to the prior year’s quarter.

 

*Cost of Uranium Sales. *Our cost of uranium sales from the sale ofproduced uranium in the first quarter of 2008 was $5.0 million compared with$3.9 million in the same period of 2007.  Total cost of uranium salesincludes royalties and commissions related to our uranium sales, productioncosts, including operating expenses, depreciation and depletion expenses andamortization of our restoration and reclamation cost estimates.  Thefollowing table details the direct cost of uranium sales and royalties andcommissions breakdown for the three months ended March 31, 2008 and 2007.

 
| ** **                              | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|--------------------------------------------------|------------|
| ** **                              | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| **Total  pounds sold**                  |       | 81,100                                           |       | 79,700 |   |
| Total  operating expenses               |       | $                                                | 2,127,000  |   | $ | 1,787,000 |   |
| Per pound  operating expense            |       | $                                                | 26.22      |   | $ | 22.42 |   |
| Depreciation  and depletion             |       | $                                                | 1,931,000  |   | $ | 1,487,000 |   |
| Per pound  DD&A expense             |       | $                                                | 23.80      |   | $ | 18.66 |   |
| Direct cost  of uranium production sold |       | $                                                | 4,058,000  |   | $ | 3,274,000 |   |
| Direct cost  of sales per pound         |       | $                                                | 50.02      |   | $ | 41.08 |   |
|                                    |       |                                             |       |   |   |
| **Royalties  and commissions**          |       | $                                                | 560,000    |   | $ | 439,000 |   |
| Royalties  and commissions per pound    |       | $                                                | 6.91       |   | $ | 5.51 |   |

 

We saw an increase in our overall production costs in the first quarterof 2008 compared to 2007. The 2008 production from Kingsville Dome was sourcedfrom wellfields in their latter stages of production as well as from new lessprolific wellfields compared to our production from Kingsville Dome in 2007.These changes resulted in an increase in our costs. Also contributing to highercosts in 2008 was initial production from a new wellfield at Vasquez, whichbegan production in March 2008. Historically Vasquez has had lowerrecovery factors than Kingsville Dome and this factor has contributed toincreased operating and capital costs. Our average cost of pounds sold in thefirst quarter of 2008 was $50.02 per pound with Kingsville Dome productioncontributing approximately 95% and Vasquez pounds totaling approximately 5% oftotal pounds sold during the quarter. Our cost of sales for the current quarter also included stand-by costsat Vasquez and Rosita of approximately $425,000 ($5.24 per pound) associatedwith pre-operating activities and depreciation at these projects in advance ofthe start-up of new wellfields at each location.

 

Weexpect overall production costs to increase in 2008 compared to 2007. Our 2008production from Kingsville Dome will be sourced from less prolific wellfieldscompared to the production in 2007. This is expected to result in an increasein both operating and capital costs as a result of each production wellprojecting fewer pounds per well. Also contributing to higher costs in 2008will be the projected production increase from our Vasquez project.Historically this project has had lower recovery factors than Kingsville Domeand this factor is expected to contribute to increased production costs whencompared to our 2007 costs.

 

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*Royalties and Commissions.*    During the firstquarter of 2008, royalties and commissions for Vasquez and Kingsville Domeproduction sold totaled $560,000, representing 9.8% of sales. During the firstquarter of 2007, royalties and commissions for Vasquez and Kingsville Domeproduction sold were $439,000, or 9.6% of sales.

 

*Operating Expenses.*    During the first quarterof 2008, operating expenses for Vasquez and Kingsville Dome production sold was$2.201 million. During this period we incurred approximately $425,000 ofstand-by costs related to our Vasquez and Rosita projects with such costscharged to operations. During the first quarter of 2007, operating expenses forVasquez and Kingsville Dome production sold was $1.787 million. In thefirst quarter of 2007 we incurred $14,000 of stand-by costs at the Rositaproject; such costs were charged to operations.

 

*Depreciation and Depletion.*    During the firstquarter of 2008, we incurred depreciation and depletion expense attributable toour Vasquez and Kingsville Dome production of $1.931 million. During thesame period in 2007, we incurred depreciation and depletion expenseattributable to our Vasquez and Kingsville Dome production of$1.487 million.

 

*Impairment of Uranium Properties.*    During the firstquarter of 2008, we determined the carrying value of the Vasquez project assetsexceeded their fair value as provided in SFAS 144 “Accounting for theImpairment or Disposal of Long-Lived Assets”. Such determination resulted in animpairment provision related to the Vasquez project assets of approximately$136,000.

 

*Accretion and Amortization ofFuture Restoration Costs.*    Accretion and amortization of futurerestoration costs in the first quarter of 2008 and 2007 was $207,000 and$170,000, respectively.

 

*General and Administrative Charges.*  We incurred general and administrativecharges and corporate depreciation of $2.7 million and $2.2 million,respectively in the three months ended March 31, 2008 and 2007.

 

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Significantexpenditures for general and administrative expenses for the three months endedMarch 31, 2008 and 2007 were:

 
| ** **                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                  | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| Stock compensation expense                  |       | $                                                | 654,000    |   | $ | 774,000 |   |
| Salaries and payroll  burden                |       | 840,000                                          |       | 551,000 |   |
| Legal, accounting, public  company expenses |       | 283,000                                          |       | 416,000 |   |
| Insurance and bank fees                     |       | 143,000                                          |       | 110,000 |   |
| Consulting and  professional services       |       | 501,000                                          |       | 190,000 |   |
| Office expenses                             |       | 175,000                                          |       | 89,000 |   |
|   Travel and other expenses       |       | 106,000                                          |       | 82,000 |   |
| Total                                       |       | $                                                | 2,702,000  |   | $ | 2,212,000 |   |

 

The non-cashcompensation expense recorded for the quarter ended March 31, 2008 and2007 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 increases for the three months presented resulted primarily from 18additional salaried positions primarily in South Texas and New Mexico in thefirst quarter of 2008 compared to the same period in 2007.

 

The reduction inthe Company’s legal, accounting and public company expenses in the firstquarter of 2008 compared with 2007 resulted primarily from lower audit andconsulting fees related to Sarbanes-Oxley compliance.

 

Insurance costsincreased in the first quarter of 2008 compared to 2007 from higher premiumsand increased coverage under our insurance policies. Certain policies, such asour vehicle insurance coverage had increased premiums resulting from additionalvehicles in the current year.  Ourgeneral liability coverage premiums increased as a result of increases inpersonnel at our uranium project sites.

 

The costs forconsulting and professional services increased in the quarter ended March 31,2008 compared with 2007 and resulted from continuing activities for projectrelated activities in 2008.  These activities include work performed inthe review and assessment of our New Mexico property data bases to evaluatetheir potential as conventional mining projects and other costs related tocommunity outreach and information campaigns designed to enhance publicawareness of our planned New Mexico operations. We also incurred increased costs for environmental, health and safetytraining, investor relations and media relations activities and for humanresources and computer networking consultants.

 

Increased officecosts incurred in the quarter ended March 31, 2008 compared to 2007resulted primarily from the opening of a corporate office location inAlbuquerque, New Mexico in October 2007, the move of the corporateheadquarters to larger office space in September 2007 and increases in theSouth Texas Kingsville Dome operations office resulting from personneladditions made in 2007.

 

*NetLosses.*For thethree months ended March 31, 2008 and 2007, we had net losses of $1.8million and of $1.4 million, respectively.

 

*CashFlow. *At ofMarch 31, 2008 we had a cash balance of approximately $5.2 millioncompared with $16.6 million at the same date in 2007.

 

In the firstquarter of 2008, we had positive cash flow provided by operations of $808,000.We used $4.8 million in investing activities during the first quarter of2008.  We increased the collateral supporting our South Texas financialsurety requirements by $325,000 and also made significant additions to ourSouth Texas and New Mexico property, plant and equipment of $4.5 million duringthe quarter.  These expenditures were primarily for wellfield development,evaluation drilling and plant and dryer upgrades at Kingsville Dome of $2.2million and wellfield development, evaluation drilling and plant and dryerupgrades at Rosita of $1.7 million, additional wellfield development at Vasquezof $153,000, other Texas property and other assets and other property additionsin New Mexico of $347,000.

 

In the firstquarter of 2007, we had positive cash flow from operations of $730,000,resulting primarily from the increased price received under our uranium salescontracts that were amended in March 2006.  We also used $4.3 millionin investing activities for wellfield development and evaluation drillingcapital at Kingsville Dome of $1.8 million, additional wellfield development at

 

15

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Vasquez of $249,000, Rosita and Rosita South projectexpenditures of $1.1 million and $540,000, other Texas property and otherassets of $358,000 and other property additions in New Mexico of $244,000.

 

**Liquidity—Cash Sources and Uses for 2008**

 

As of March 31,2008, the Company had $5.2 million in cash. We will require additionalfinancing beyond cash on hand and cash generated from operations in 2008 inorder to implement our plans to acquire Rio Algom Mining LLC, as discussedbelow, to evaluate and develop our New Mexico properties and extend Texasproduction at a rate of 400,000 to 450,000 pounds per year beyond 2008. We arecurrently engaged in active negotiations to acquire properties in South Texaswith known quantities of uranium as a part of our plan to continue productionthrough 2011. These acquisitions will require additional funding.

 

Thecash generated from operations in 2008 will depend on meeting our productiontargets by bringing on and efficiently producing new wellfields at theKingsville Dome, Vasquez and Rosita projects as well as the sales price foruranium delivered under our long-term contracts.  The decline in our cash position in 2008 wascaused by reduced production which resulted in less cash receipts for theperiod while our wellfield and plant capital costs, being primarily fixedcontinued at consistent levels. While our production in the first quarter of2008 was 83,300 pounds we expect production to increase in the second quarterand total production for 2008 to be in the 400,000 to 450,000 pound range.

 

On October 12,2007, we entered into a Membership Interest Purchase Agreement, with BillitonInvestment 15 B.V. to acquire a 100% ownership of Rio AlgomMining LLC (“RAML”). The RAML acquisition is an essential element of ourstrategy. The successful completion of the RAML acquisition will be dependent uponsecuring the financing for the transaction. Such financing is anticipated topotentially take the form of the issuance of the Company’s common stock and/orpartnerships and/or joint ventures and/or milling agreements with othersengaged in the uranium fuel cycle. If we are unable to secure the financing wewill be unable to complete the transaction. Furthermore, once acquired, theproject will require operating cash to continue RAML’s restoration andreclamation obligations. Sufficient cash for these activities would also berequired as part of the financing of the transaction.

 

Our raising ofcapital for any acquisition and development opportunity could be affected bythe market value of our common stock. If the price of our common stockdeclines, our ability to utilize our stock for raising capital could benegatively affected. Further, raising additional funds by issuing common stockor other types of equity securities could dilute our existing shareholders,which dilution could be substantial if the price of our common stock decreases.

 

**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 bondsissued for the benefit of the Company to satisfy such regulatory requirements.The L/C’s were issued by Bank of America and the performance bonds have beenissued by United States Fidelity and Guaranty Company (“USF&G”). L/C’s for$6.1 million and $5.4 million were issued at March 31, 2008 and December 31,2007, respectively, such L/C’s are collateralized in their entirety bycertificates of deposit.

 

Performance bondstotaling $2.8 million were issued for the benefit of the Company at March 31,2008 and December 31, 2007. 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 March 31,2008 and December 31, 2007, 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.

 

**CriticalAccounting Policies**

 

Our significantaccounting policies are described in Note 2 to the consolidated financialstatements included in the Company’s 2007 Annual Report on Form 10-K/A. 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 aliquidation basis, which is less than our cost. The actual value realized fromthese assets may vary significantly from these estimates based upon marketconditions, financing availability and other factors.

 

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.

 

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Such estimates andassumptions affect the reported amounts of assets and liabilities and disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of expenses during the reporting period.

 

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

 

**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.Prices have risen from $7.10 per pound at January 2001 to a high of$138.00 per pound in June 2007 and are $63.00 per pound as of May 5,2008.

 

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

 

Duringthe year ended December 31, 2007 and the quarter ended March 31,2008, 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 (the “Exchange Act”)).

 

Basedon that evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures as of December 31,2007 and March 31, 2008 were effective.

 

**Management’sReport on Internal Control over Financial Reporting**

 

TheCompany’s management assessed the effectiveness of the Company’s internalcontrol over financial reporting as of December 31, 2007.  In making this assessment, the Company’smanagement used the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) in *Internal Control-Integrated Framework*.

 

Underthe supervision and with the participation of our management, including ourChief Executive Officer and Chief Financial Officer, we conducted an evaluationof the effectiveness of our internal control over financial reporting inconnection with preparation of the annual report on Form 10-K/A for theyear ended December 31, 2007. As a result of these assessments managementconcluded that our internal controls over financial reporting were effective asof December 31, 2007.

 

**Changesin Internal Controls**

 

Duringthe first quarter of 2008 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.

 

17

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**PART II - OTHER INFORMATION**

 

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

 

No change from theprior annual filing on our Form 10-K/A.

 

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

 

**Over54.5% of our shares of Common Stock are controlled by Principal Stockholdersand Management.**

 

Approximately43.5% of our Common Stock is controlled by four stockholders of record. Inaddition, our directors and officers are the beneficial owners of about 11.0%of our Common Stock. This includes with respect to both groups shares that maybe purchased upon the exercise of outstanding options. Such ownership by theCompany’s principal shareholders, executive officers and directors may have theeffect of delaying, deferring, preventing or facilitating a sale of the Companyor a business combination with a third party.

 

The availabilityfor sale of a large amount of shares may depress the market price for ourCommon Stock.

 

**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.**

 

None.

 

**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.

 

18

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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: May 12,  2008 | By:                          | /*s*/ David N. Clark |
|                      |                         | David N. Clark |
|                      |                         | Director and |
|                      |                         | Chief Executive Officer |
|                      |                         |   |
| Dated: May 12,  2008 | By:                          | /*s*/ Thomas H. Ehrlich |
|                      |                         | Thomas H. Ehrlich |
|                      |                         | Vice President -  Finance and |
|                      |                         | Chief Financial Officer |
|                      |                         | (Principal Financial  and Accounting Officer) |

 

19

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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).                                                                                                                                             |
|                |       |                                                                                                                                                                                                                                              |
| 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).                                                                                       |
|                |       |                                                                                                                                                                                                                                              |
| 10.3*               |       | Amended and restated  1995 Stock Incentive Plan (filed with the Company’s Form SB-2  Registration No. 333-117653 on July 26, 2005).                                                                                           |
|                |       |                                                                                                                                                                                                                                              |
| 10.5*               |       | 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).                                    |

 

E-1

----

 
| 10.16*   |   | Uranium  Resources, Inc. 1999 Deferred Compensation Plan (filed with the  Company’s Annual Report on Form 10-K dated June 30, 1999, SEC File  Number 000-17171).                                                                                                                   |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.16.1* |   | Amendment No. 1 to  the Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with  the Company’s Annual Report on Form 10KSB dated March 31, 2006, SEC  File Number 000-17171).                                                                                     |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.17*   |   | 2000-2001 Deferred  Compensation Plan (filed with the Company’s Annual Report on Form 10-K  dated December 31, 2004, SEC File Number 000-17171).                                                                                                                                        |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.17.1* |   | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2000-2001  (filed with the Company’s Annual Report on Form 10KSB dated  March 31, 2006, SEC File Number 000-17171).                                                                            |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.22*   |   | Uranium  Resources, Inc. Deferred Compensation Plan for 2002 (filed with the  Company’s Quarterly Report on  Form 10-QSB dated November 13, 2002, SEC File Number 000-17171).                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.23*   |   | Uranium  Resources, Inc. Deferred Compensation Plan for 2003 (filed with the  Company’s Quarterly Report on  Form 10-QSB dated November 13, 2002, SEC File Number 000-17171).                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.24*   |   | Uranium  Resources, Inc. Deferred Compensation Plan for 2004 (filed with the  Company’s Quarterly Report on  Form 10-QSB dated May 14, 2004, SEC File Number 000-17171).                                                                                                                |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.24.1* |   | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2002,  Deferred Compensation Plan for 2003, and Deferred Compensation Plan for 2004  (filed with the Company’s Annual Report on Form 10-KSB dated  March 31, 2006, SEC File Number 000-17171). |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.28*   |   | 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).                                  |

 

E-2

----

 
| 10.33* |   | Uranium Supply Contract  with Itochu Corporation dated June 15, 2005 (filed with the Company’s  Pre-Effective Amendment No. 2 to Registration Statement on  Form SB-2 dated September 20, 2005, SEC File Number 333-125106).                |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                 |
| 10.34* |   | Stock Purchase  Agreement by and between Uranium Resources, Inc. and accredited  investors (filed with the Company’s Form 8-K dated August 12, 2005,  SEC File No. 000-17171).                                                              |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.35* |   | Uranium  Resources, Inc. 2004 Stock Incentive Plan (filed with the Company’s  Quarterly Report on Form 10QSB/A dated November 18, 2005, SEC File  No. 000-17171).                                                                           |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.36* |   | Feasibility Study  Funding Agreement between Itochu Corporation, Uranium Resources, Inc.  and Hydro Resources, Inc. effective March 29, 2006. (filed with the  Company’s Form 10KSB dated March 31, 2006, SEC file Number  000-17171). |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.37* |   | Amended and Restated  Uranium Supply Contract between Itochu Corporation and Uranium  Resources, Inc. effective March 1, 2006. (filed with the Company’s  Form 10KSB dated March 31, 2006, SEC file Number 000-17171).                      |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.38* |   | Agreement for the Sale  of Uranium Concentrates between UG U.S.A., Inc. and Uranium Resources, Inc.  dated March 31, 2006. (filed with the Company’s Form 10KSB dated  March 31, 2006, SEC file Number 000-17171).                     |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.39* |   | Stock Purchase  Agreement dated as of April 19, 2006, by and between Uranium  Resources, Inc. and accredited investors (filed with the Company’s  Current Report on Form 8-K dated April 19, 2006, SEC File  No. 000-17171).           |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.40* |   | Limited Liability  Company Agreement of Churchrock Venture LLC (filed with the Company’s Current  Report on Form 8-K dated December 5, 2006, SEC File No. 000-17171).                                                                            |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.41* |   | Compensation Agreement  dated March 12, 2007 between the Company and Craig S. Bartels (filed  with the Company’s Form 8-K dated March 13, 2007, SEC File  No. 000-17171).                                                                   |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.42* |   | Compensation Agreement  dated March 12, 2007 between the Company and David N. Clark (filed with  the Company’s Form 8-K dated March 13, 2007, SEC File  No. 000-17171).                                                                     |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.43* |   | Amended and Restated  2004 Directors’ Stock Option Plan dated April 10, 2007 (filed with the  Company’s Post-Effective Amendment No. 1 to Registration Statement on  Form S-3 dated April 11, 2007, SEC File No. 333-133960).     |
|   |   |                                                                                                                                                                                                                                                                 |
| 10.44* |   | Uranium  Resources, Inc. 2007 Restricted Stock Plan (filed with the Company’s  Form 10-Q dated May 10, 2007, SEC File No. 000-17171).                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                 |
| 14*    |   | Uranium Resources, Inc.  Code of Ethics for Senior Executives. Filed with the Company’s Annual Report  on  Form 10-KSB dated March 30, 2004, SEC File Number 000-17171).                                                                              |
|   |   |                                                                                                                                                                                                                                                                 |
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                 |
| 31.2   |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                 |
| 32.1   |   | Certification of Chief  Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                 |
| 32.2   |   | Certification of Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                           |

 

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

 

E-3

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