Table of Contents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 
| **x**                                                       | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**  |
|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                        |
| **For  the quarterly period ended September 30, 2009** |
|                                                        |
| **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**

 

**URANIUM RESOURCES, INC.**

(Exact Name of Issuer as Specified in Its Charter)

 

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

 

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

(Address of Principal Executive Offices)

 

**(972) 219-3330**

(Issuer’s Telephone Number, Including Area Code)

 

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

 

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

 

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

 

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

 

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

 

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

 

| **Title of Each Class of Common Stock** | ** ** | **Number of Shares Outstanding** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------|
| Common Stock,  $0.001 par value                                       |       | 56,781,792 as of  November  6, 2009        |

 

 

 

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**URANIUM RESOURCES, INC.**

 

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

 

**TABLE OFCONTENTS**

 
| **PART I—FINANCIAL  INFORMATION** |                                                                                                                            |
|---------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                                            |
| Item  1.                                    | Financial Statements                                                                                                            |   |
|                                        |                                                                                                                            |   |
|                                        | Consolidated  Balance Sheets- September 30, 2009 (Unaudited) and December 31,  2008                                   | 3 |
|                                        |                                                                                                                            |   |
|                                        | Condensed  Consolidated Statements of Operations—three and nine months ended  September 30, 2009 and 2008 (Unaudited) | 5 |
|                                        |                                                                                                                            |   |
|                                        | Consolidated  Statements of Cash Flows—nine months ended September 30, 2009 and 2008  (Unaudited)                     | 6 |
|                                        |                                                                                                                            |   |
|                                        | Notes to Condensed Consolidated Financial  Statements—September 30, 2009 (Unaudited)                                  | 7 |
|                                        |                                                                                                                            |   |
| Item 2.                                     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                     | 15 |
|                                        |                                                                                                                            |   |
| Item 3.                                     | Quantitative  and Qualitative Disclosures About Market Risk                                                                     | 20 |
|                                        |                                                                                                                            |   |
| Item 4.                                     | Controls and  Procedures                                                                                                        | 20 |
|                                        |                                                                                                                            |
| **PART II—OTHER  INFORMATION**    | 21                                                                                                                              |
| ** **                                  | ** **                                                                                                                      |
| Item 1.                                     | Legal Proceedings                                                                                                               | 21 |
|                                        |                                                                                                                            |   |
| Item 1A.                                    | Risk Factors                                                                                                                    | 21 |
|                                        |                                                                                                                            |   |
| Item 2.                                     | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                    | 21 |
|                                        |                                                                                                                            |   |
| Item 3.                                     | Defaults Upon  Senior Securities                                                                                                | 21 |
|                                        |                                                                                                                            |   |
| Item 4.                                     | Submission of  Matters to a Vote of Security Holders                                                                            | 21 |
|                                        |                                                                                                                            |   |
| Item 5.                                     | Other Information                                                                                                               | 21 |
|                                        |                                                                                                                            |   |
| Item 6.                                     | Exhibits and Reports on  Form 8—K                                                                                     | 21 |
|                                        |                                                                                                                            |   |
| **SIGNATURES**                              | 22                                                                                                                              |
| ** **                                  | ** **                                                                                                                      |
| **Index to  Exhibits**                      | E-1                                                                                                                             |

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED BALANCE SHEETS**

**ASSETS**

 
|                                                     |   | **September 30,  2009** |       | **December 31,  2008** |   |
|----------------------------------------------------------|--------|------------------------------|------------|-----------------------------|--------|
|                                                     |   | **(Unaudited)**              |       |                        |   |
| Current assets:                                          |   |                         |       |                        |   |
| Cash and cash equivalents                                |   | $                            | 8,154,230  |                        | $      | 12,041,592 |   |
| Receivables, net                                         |   | 364,238                      |       | 40,360                      |   |
| Uranium inventory                                        |   | 770                          |       | 1,213,927                   |   |
| Prepaid and other  current assets                        |   | 214,134                      |       | 513,489                     |   |
| Total current assets                                     |   | 8,733,372                    |       | 13,809,368                  |   |
|                                                     |   |                         |       |                        |   |
| Property, plant and  equipment, at cost:                 |   |                         |       |                        |   |
| Uranium properties                                       |   | 83,578,718                   |       | 85,095,067                  |   |
| Other property, plant  and equipment                     |   | 894,235                      |       | 898,933                     |   |
| Less-accumulated  depreciation, depletion and impairment |   | (63,994,322                  | )          | (63,215,677                 | )      |
| Net property, plant and  equipment                       |   | 20,478,631                   |       | 22,778,323                  |   |
|                                                     |   |                         |       |                        |   |
| Long-term investment:                                    |   |                         |       |                        |   |
| Certificates of  deposit, restricted                     |   | 6,757,541                    |       | 6,636,715                   |   |
|                                                     |   | $                            | 35,969,544 |                        | $      | 43,224,406 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED BALANCE SHEETS**

** **

**LIABILITIES AND SHAREHOLDERS’ EQUITY**

 
|                                                                                                                                                                |   | **September 30,  2009** |       | **December 31,  2008** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|-----------------------------|--------|
|                                                                                                                                                                |   | **(Unaudited)**              |       |                        |   |
| Current liabilities:                                                                                                                                                |   |                         |       |                        |   |
| Accounts and short term  notes payable                                                                                                                              |   | $                            | 869,464    |                        | $      | 1,169,293 |   |
| Current portion of  restoration reserve                                                                                                                             |   | 1,249,008                    |       | 1,660,422                   |   |
| Royalties and  commissions payable                                                                                                                                  |   | 786,117                      |       | 719,542                     |   |
| Accrued interest and  other accrued liabilities                                                                                                                     |   | 401,816                      |       | 607,975                     |   |
| Current portion of  capital leases                                                                                                                                  |   | 124,035                      |       | 158,068                     |   |
| Total current  liabilities                                                                                                                                          |   | 3,430,440                    |       | 4,315,300                   |   |
|                                                                                                                                                                |   |                         |       |                        |   |
| Other long-term  liabilities and deferred credits                                                                                                                   |   | 5,633,170                    |       | 6,531,378                   |   |
|                                                                                                                                                                |   |                         |       |                        |   |
| Long term capital  leases, less current portion                                                                                                                     |   | 231,663                      |       | 320,108                     |   |
| Long-term debt, less  current portion                                                                                                                               |   | 450,000                      |       | 450,000                     |   |
| Commitments and  contingencies (Notes 2, 5 and 14)                                                                                                                  |   |                         |       |                        |   |
| Shareholders’ equity:                                                                                                                                          |   |                         |       |                        |   |
| Common stock, $.001 par  value, shares authorized: 200,000,000; shares issued and outstanding (net of  treasury shares): 2009—56,731,337; 2008—55,955,549 |   | 56,769                       |       | 55,994                      |   |
| Paid-in capital                                                                                                                                                     |   | 147,478,789                  |       | 146,518,753                 |   |
| Accumulated deficit                                                                                                                                                 |   | (121,301,869                 | )          | (114,957,709                | )      |
| Less: Treasury stock  (38,125 shares), at cost                                                                                                                      |   | (9,418                       | )          | (9,418                      | )      |
| Total shareholders’  equity                                                                                                                                    |   | 26,224,271                   |       | 31,607,620                  |   |
|                                                                                                                                                                |   | $                            | 35,969,544 |                        | $      | 43,224,406 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

** **

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 

**(Unaudited)**

 
|                                                                         |   | **Three Months Ended  September 30,** |       | **Nine Months Ended  September 30,** |   |
|------------------------------------------------------------------------------|--------|------------------------------------------------------|------------|-----------------------------------------------------|--------|
|                                                                         |   | **2009**                                             |       | **2008**                                            |   | **2009** |   | **2008** |   |
| Revenues:                                                                    |   |                                                 |       |                                                |   |   |   |   |   |
| Uranium sales                                                                |   | $                                                    | 1,406,782  |                                                | $      | 4,024,558 |   | $ | 4,616,145 |   | $ | 16,354,497 |   |
| Total revenue                                                                |   | 1,406,782                                            |       | 4,024,558                                           |   | 4,616,145 |   | 16,354,497 |   |
| Costs and expenses:                                                          |   |                                                 |       |                                                |   |   |   |   |   |
| Cost of uranium sales—                                                  |   |                                                 |       |                                                |   |   |   |   |   |
| Royalties and commissions                                                    |   | 143,319                                              |       | 368,880                                             |   | 448,971 |   | 1,505,637 |   |
| Operating expenses                                                           |   | 886,313                                              |       | 1,751,642                                           |   | 2,519,015 |   | 5,689,674 |   |
| Accretion/amortization of restoration reserve                                |   | (3,818                                               | )          | 203,876                                             |   | 254,390 |   | 588,504 |   |
| Depreciation and depletion                                                   |   | 474,207                                              |       | 1,874,281                                           |   | 887,470 |   | 6,119,106 |   |
| Impairment of uranium properties                                             |   | 400,231                                              |       | 10,935,498                                          |   | 1,815,220 |   | 11,231,615 |   |
| Exploration expenses                                                         |   | 34,929                                               |       | 961,717                                             |   | 39,752 |   | 1,220,056 |   |
| Total cost of uranium sales                                                  |   | 1,935,181                                            |       | 16,095,894                                          |   | 5,964,818 |   | 26,354,592 |   |
| Loss from operations  before corporate expenses                              |   | (528,399                                             | )          | (12,071,336                                         | )      | (1,348,673 | ) | (10,000,095 | ) |
|                                                                         |   |                                                 |       |                                                |   |   |   |   |   |
| Corporate expenses—                                                     |   |                                                 |       |                                                |   |   |   |   |   |
| General and administrative                                                   |   | 1,989,331                                            |       | 2,041,836                                           |   | 5,009,593 |   | 7,831,654 |   |
| Write-off of target acquisition costs (Note 12)                              |   | —                                               |       | —                                              |   | — |   | 1,437,410 |   |
| Depreciation                                                                 |   | 35,792                                               |       | 39,204                                              |   | 107,680 |   | 110,251 |   |
| Total corporate expenses                                                     |   | 2,025,123                                            |       | 2,081,040                                           |   | 5,117,273 |   | 9,379,315 |   |
| Loss from operations                                                         |   | (2,553,522                                           | )          | (14,152,376                                         | )      | (6,465,946 | ) | (19,379,410 | ) |
|                                                                         |   |                                                 |       |                                                |   |   |   |   |   |
| Other income (expense):                                                      |   |                                                 |       |                                                |   |   |   |   |   |
| Interest expense                                                             |   | (10,119                                              | )          | (13,663                                             | )      | (31,722 | ) | (31,480 | ) |
| Interest and other income, net                                               |   | 39,053                                               |       | 149,685                                             |   | 153,508 |   | 447,741 |   |
|                                                                         |   |                                                 |       |                                                |   |   |   |   |   |
| Net loss                                                                     |   | $                                                    | (2,524,588 | )                                                   | $      | (14,016,354 | ) | $ | (6,344,160 | ) | $ | (18,963,149 | ) |
|                                                                         |   |                                                 |       |                                                |   |   |   |   |   |
| Net loss per common  share:                                                  |   |                                                 |       |                                                |   |   |   |   |   |
| Basic                                                                        |   | $                                                    | (0.04      | )                                                   | $      | (0.25 | ) | $ | (0.11 | ) | $ | (0.35 | ) |
| Diluted                                                                      |   | $                                                    | (0.04      | )                                                   | $      | (0.25 | ) | $ | (0.11 | ) | $ | (0.35 | ) |
|                                                                         |   |                                                 |       |                                                |   |   |   |   |   |
| Weighted average common  shares and common equivalent shares per share data: |   |                                                 |       |                                                |   |   |   |   |   |
| Basic                                                                        |   | 56,453,076                                           |       | 55,818,343                                          |   | 56,267,755 |   | 54,050,106 |   |
| Diluted                                                                      |   | 56,453,076                                           |       | 55,818,343                                          |   | 56,267,755 |   | 54,050,106 |   |

 

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

 

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**URANIUM RESOURCES, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                       |   | **Nine Months Ended  September 30,** |       |
|----------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|
|                                                                       |   | **2009**                                            |       | **2008** |   |
| Net loss                                                                   |   | $                                                   | (6,344,160 | ) | $ | (18,963,149 | ) |
| Reconciliation of net loss  to cash provided by (used in) operations— |   |                                                |       |   |   |
| Accretion/amortization of restoration reserve                              |   | 254,390                                             |       | 588,504 |   |
| Depreciation and depletion                                                 |   | 995,150                                             |       | 6,229,357 |   |
| Impairment of uranium properties                                           |   | 1,815,220                                           |       | 11,231,615 |   |
| Decrease in restoration and reclamation accrual                            |   | (1,487,541                                          | )          | (497,554 | ) |
| Stock compensation expense                                                 |   | 960,811                                             |       | 1,846,990 |   |
| Write-off of target acquisition costs                                      |   | —                                              |       | 1,437,410 |   |
| Other non-cash items, net                                                  |   | 2,132                                               |       | 19,258 |   |
|                                                                       |   |                                                |       |   |   |
| Effect of changes in operating working capital  items—                |   |                                                |       |   |   |
| (Increase) decrease in receivables                                         |   | (323,878                                            | )          | 675,595 |   |
| (Increase) decrease in inventories                                         |   | 1,010,845                                           |       | (340,572 | ) |
| Decrease in prepaid and other current assets                               |   | 299,355                                             |       | 168,373 |   |
| Decrease in payables, accrued liabilities and  deferred credits            |   | (439,413                                            | )          | (1,130,440 | ) |
| Net cash provided by (used in) operations                                  |   | (3,257,089                                          | )          | 1,265,387 |   |
|                                                                       |   |                                                |       |   |   |
| Investing activities:                                                      |   |                                                |       |   |   |
| Increase in certificates of deposit, restricted                            |   | (120,826                                            | )          | (508,247 | ) |
| Additions to property, plant and equipment—                           |   |                                                |       |   |   |
| Kingsville Dome                                                            |   | (109,524                                            | )          | (3,362,839 | ) |
| Rosita                                                                     |   | (34,762                                             | )          | (4,384,647 | ) |
| Vasquez                                                                    |   | (99,578                                             | )          | (225,696 | ) |
| Rosita South                                                               |   | 3,003                                               |       | (424,521 | ) |
| Churchrock                                                                 |   | (107,626                                            | )          | (377,952 | ) |
| Crownpoint                                                                 |   | (2,991                                              | )          | (102,473 | ) |
| Other property                                                             |   | (35,491                                             | )          | (1,035,908 | ) |
| Net cash used in investing activities                                      |   | (507,795                                            | )          | (10,422,283 | ) |
|                                                                       |   |                                                |       |   |   |
| Financing activities:                                                      |   |                                                |       |   |   |
| Issuance of common  stock, net                                             |   | —                                              |       | 13,086,612 |   |
| Payments on borrowings                                                     |   | (122,478                                            | )          | (211,960 | ) |
| Net cash provided by  (used in) financing activities                       |   | (122,478                                            | )          | 12,874,652 |   |
| Net increase (decrease) in cash and cash  equivalents                      |   | (3,887,362                                          | )          | 3,717,756 |   |
| Cash and cash equivalents, beginning of period                             |   | 12,041,592                                          |       | 9,284,270 |   |
| Cash and cash  equivalents, end of period                                  |   | $                                                   | 8,154,230  |   | $ | 13,002,026 |   |

 

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

 

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**Uranium Resources, Inc.**

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

 

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

 

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

 

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

 

Uranium Resources, Inc.(“URI”) was formed in 1977 and domesticated in Delaware in 1987. The Company isprimarily engaged in the business of acquiring, exploring, developing andmining uranium properties, principally using the *in situ* recovery (“ISR”) or solution mining process.Historically, the primary customers of the Company have been major utilitiesand commodities brokers that sell uranium to utilities who utilize nuclearpower to generate electricity. At present the Company owns both developed andundeveloped uranium properties in South Texas and undeveloped uraniumproperties in New Mexico.

 

TheCompany resumed uranium production in 2004 at its Vasquez project, in 2006 atits Kingsville Dome project and in the 3rd quarter of 2008 at its Rositaproject. Each of such projects is located in South Texas. As a result ofdeclining uranium market prices and high production costs, the Companyannounced its decision to cease further development of additional wellfieldsand to curtail production from its South Texas projects as existing productionwellfields from each project were depleted. Production at our Vasquez projectwas shut down and production at our Rosita project was shut-in in the4th quarter of 2008.  Production atthe Kingsville Dome project was shut-in in mid June 2009. The Vasquezproject was mined out in 2008 and is now in the process of restoration. At theKingsville Dome and Rosita projects, the decision to shut-in production wasmade to conserve the in-place reserve base until higher prices can be realized.

 

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

 

The financialstatements of the Company have been prepared on the basis of accountingprinciples applicable to a going concern, which contemplates the realization ofassets and the satisfaction of liabilities in the normal course ofbusiness.  The Company believes that the cash balance of $8.2 million at September 30,2009 will be sufficient to maintain its liquidity beyond the next twelvemonths.

 

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

 

During the firstthree quarters of 2009, the Company’s executive officers cash compensation wasreduced by 30% to 40% and in lieu of such cash compensation the officers wereissued restricted shares of common stock of the Company.  A total of142,680 shares of restricted common stock were issued in January 2009;164,016 shares of restricted common stock were issued in April 2009 and69,092 shares of restricted common stock were issued in July 2009 withrespect to a reduction of $87,750 of cash compensation for each of the firstthree quarters of 2009.

 

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

 

**KingsvilleDome Project**

 

Productionfrom Kingsville Dome for the first three quarters of 2009 and 2008 was 55,600and 218,100 pounds, respectively.  Total capital expenditures forKingsville Dome for the first three quarters of 2009 was $110,000 and wereprimarily related to land and mineral lease payments.  Total capitalexpenditures for Kingsville Dome for the first three quarters of 2008 were $3.4million for wellfield development, the construction of additional satelliteplants and for wellfield evaluation and delineation of future wellfields.

 

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DuringJune 2009, the two remaining producing wellfields at Kingsville Dome wereshut-down as a result of these wellfields being depleted.  We are conducting ongoing restoration activitiesat this project and incurred $778,000 in costs for the nine months ended September 30,2009.

 

**Rosita**

 

We beganproduction at one new wellfield at Rosita in August 2008.  Due topoor economics driven by technical challenges and lower uranium prices,production from this wellfield was shut-in in October 2008.  We havebeen conducting ongoing restoration activities at this project on our depletedwellfields and incurred $245,000 in costs for the nine months ended September 30,2009.  Capital expenditures for the first three quarters of 2009 wereminimal with approximately $35,000 being spent primarily for land and minerallease payments.  Capital expenditures for our Rosita project totaled $4.4million in the first nine months of 2008.  These expenditures were madefor wellfield delineation and development, upgrading the Rosita plant and elutioncircuit, the addition of another satellite plant and the construction of adrying facility at Rosita in preparation for the start-up of production in August 2008.

 

**VasquezProject**

 

Production at theVasquez project was shutdown during October 2008.  The economicallyrecoverable reserves from this project have been mined out.  During thefirst nine months of 2009 we incurred $100,000 of capital expendituresprimarily for land and mineral lease payments.  We are conducting ongoingrestoration activities at this project and incurred $465,000 in costs for thenine months ended September 30, 2009.  In the first nine months of2008 we produced 33,800 pounds and we incurred wellfield developmentexpenditures of $227,000.

 

**Impairmentof Uranium Properties**

 

At September 30,2009, we determined the carrying value of our project assets at each of ourSouth Texas production locations exceeded their fair value as provided inAccounting Standards Codification 360, “Property, Plant and Equipment”. The cessation of production at each of our South Texas projects along with thedecline in the market price of uranium has resulted in a decrease in theestimated future cash flow to be generated from each site.  Suchdetermination resulted in an impairment provision of approximately $1.8 millionfor the first nine months of 2009, which was primarily related to the assetvalues at our Kingsville Dome project.  The net carrying value of theKingsville Dome, Rosita and Vasquez projects are approximately $6.2 million,$5.4 million and $787,000, respectively, at September 30, 2009.

 

At September 30,2008, we incurred an impairment provision of approximately $11.2 million forthe first nine months of 2008, $10.9 million of which was recorded in the thirdquarter.  The impairment provisionrecorded in the third quarter was approximately $4.6 million for the KingsvilleDome project and $6.3 million for the Rosita project.  The impairment provision recorded for theVasquez project was approximately $298,000 for the nine months ended September 30,2008.  The net carrying value of theKingsville Dome, Rosita and Vasquez projects are approximately $6.6 million,$5.5 million and $891,000, respectively, at September 30, 2008.

 

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

 

**Amendmentto Uranium Sales Contracts**

 

In March 2006we entered into new sales contracts with Itochu Corporation (“Itochu”) and UGU.S.A., Inc. (“UG”) that superseded the previously existing contracts.Each contract provides for delivery of one-half of our actual production fromour properties in Texas currently owned or hereafter acquired by theCompany (excluding certain large potential exploration plays).  The Itochucontract contains separate pricing terms for the Vasquez property that are nolonger applicable since Vasquez has reached the end of its useful life. Our Texas production will be sold to Itochu at a price equal to the averagespot price for the eight weeks prior to the date of delivery less $7.50 perpound, with a floor for the spot price of $37 and a ceiling of $43 per pound. Ifthe spot price is over $50 per pound the price will be increased by 50% of suchexcess. The floor and ceiling and sharing arrangement over the ceiling appliesto 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.  Uranium deliveries from theinception of the contracts through September 30, 2009 have totaledapproximately 510,000 pounds to Itochu and 480,000 pounds to UG.

 

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

 

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Under the UGcontract all production from our Texas properties will be sold at a price equalto the month-end long-term contract price for the second month prior to themonth of delivery less $6 per pound until (i) 600,000 pounds have beensold in a particular delivery year and (ii) an aggregate of 3 millionpounds of Uranium has been sold. After the 600,000 pounds in any year and3 million pounds total have been sold, UG will have a right of firstrefusal to purchase other Texas production at a price equal to the average spotprice for a period prior to the date of delivery less 4%.  In 2006, wepaid UG $12 million in cash to restructure its previously existingcontract.

 

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

 

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

 

***Stock Compensation Expense***

 

Stock compensationexpense for the three months ended September 30, 2009 and 2008 was $579,000and $297,000, respectively. Stock compensation expense for the nine monthsended September 30, 2009 and 2008 was $961,000 and $1.8 million,respectively. Stock compensation expense is recorded as a component of generaland administrative expenses for each period. The Company did not recognize atax benefit from the stock compensation expense because the Company considersit is more likely than not that the related deferred tax assets, which havebeen reduced by a full valuation allowance, will not be realized.

 

The Black-Scholesoption pricing model was used to estimate the stock option fair values. Theoption pricing model requires a number of assumptions, of which the mostsignificant are, expected stock price volatility, the expected pre-vestingforfeiture rate and the expected option term (the amount of time from the grantdate until the options are exercised, vest or expire). Expected volatility wascalculated based upon actual historical stock price movements through the measurementdate of the stock option grant. Expected pre-vesting forfeitures and expectedterm were estimated based on actual historical pre-vesting forfeitures over themost recent periods ending September 30, 2009.

 

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

 

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

 

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

 

A total of142,680, 164,016 and 69,092 shares of restricted stock were granted in thefirst, second and third quarters of 2009, respectively to five executiveofficers on January 2, April 1 and July 1, 2009 in connection witha cash conservation plan for 2009.  All of these shares were scheduled tovest one year from the date of grant. On September 3, 2009 the vestingschedule with respect to the former CEO’s 115,628 restricted shares wasmodified to provide for immediate vesting. The Company has recognized $110,000 of compensation cost for theserestricted shares.  Restricted stock grants are valued using the fairmarket value of the stock on the date of grant.

 

A total of 70,000shares of restricted stock were granted in the first quarter of 2008.  Thevesting with respect to 60,000 of  theserestricted shares was modified in the first quarter of 2009 to provide forimmediate vesting. The remaining 10,000 restricted shares vest ratably over 5years.

 

The Companyrecognized stock compensation expense for its restricted share grants ofapproximately $159,000 and $207,000 during the three and nine months ended September 30,2009.  The Company recognized stockcompensation cost for the restricted share grants of approximately $31,000 and$69,000 during the three and nine months ended September 30, 2008,respectively.  The total estimated unrecognized compensation cost from theunvested restricted grants at September 30, 2009 was approximately $465,000,which is expected to be recognized over the weighted average vesting period ofthe individual grants which range from 1-4 years.

 

At the June 2008annual meeting of the stockholders, each of the non-employee directors of theCompany was granted an option under the 2004 Directors’ Plan to purchase 50,000shares of the Company’s common stock at an exercise price of $4.10 pershare.  The non-employee directors heldoptions covering 581,250 shares under the 2004 Directors’ Plan at September 30,2008. At September 30, 2008, 531,250 shares were available for futuregrants under the 2004 Directors’ Plan.

 

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***Stock Options for the Nine Months Ended September 30,2009***

 

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

 
|                                            |   | **Outstanding Options** |   |
|-------------------------------------------------|--------|------------------------------|--------|
|                                            |   | **Number of  Shares**   |   | **Weighted  Average  Exercise  Price** |   | **Weighted  Average  Remaining  Contractual  Term –in years** |   | **Aggregate  Intrinsic  Value** |   |
|                                            |   |                         |   |   |   |   |   |   |   |
| Options outstanding at  January 1, 2009    |   | 4,278,574                    |   | $ | 2.81 |   |   |   |   |   |
| Granted                                         |   | 150,000                      |   | 1.49 |   |   |   |   |   |
| Exercised                                       |   | —                       |   | — |   |   |   |   |   |
| Canceled or forfeited                           |   | (22,500                      | )      | 5.19 |   |   |   |   |   |
| Options outstanding at  September 30, 2009 |   | 4,406,074                    |   | $ | 2.75 |   | 5.8 |   | $ | 152,000 |   |
|                                            |   |                         |   |   |   |   |   |   |   |
| Options exercisable at  September 30, 2009 |   | 3,974,824                    |   | $ | 2.56 |   | 5.5 |   | $ | 61,000 |   |

 

There were 478,395shares available for grant under the Stock Option Plans as of September 30,2009; 97,145 shares under the 2004 Employee Incentive Plan and 381,250 sharesunder the 2004 Directors’ Plan.

 

Stock optionsoutstanding and currently exercisable at September 30, 2009 are asfollows:

 
| ** **                         |   | **Options Outstanding**                  |   | **Options Exercisable**                                     |   |
|------------------------------------|--------|------------------------------------------|--------|-------------------------------------------------------------|--------|
| **Stock Option Plan**    |   | **Number of  Options  Outstanding** |   | **Weighted Average  Remaining  Contractual Life** |   | **Weighted Average  Exercise price** |   | **Number of  Options  Exercisable** |   | **Weighted Average  Exercise Price** |   |
|                               |   |                                     |   | **(in years)**                                         |   |   |   |   |   |   |   |
| 1995 Stock Incentive  Plan         |   | 2,156,447                                |   | 4.6                                                         |   | $ | 1.38 |   | 2,156,447 |   | $ | 1.38 |   |
| 2004 Stock Incentive  Plan         |   | 1,518,314                                |   | 6.4                                                         |   | 3.35 |   | 1,468,314 |   | 3.28 |   |
| Directors’ Stock Option  Plan |   | 63                                       |   | 3.8                                                         |   | 0.16 |   | 63 |   | 0.16 |   |
| 2004 Directors’ Plan          |   | 731,250                                  |   | 8.0                                                         |   | 5.57 |   | 350,000 |   | 6.77 |   |
|                               |   | 4,406,074                                |   | 5.8                                                         |   | $ | 2.75 |   | 3,974,824 |   | $ | 2.56 |   |

 

Total estimatedunrecognized compensation cost from unvested stock options at September 30,2009 was approximately $1.3 million, which is expected to be recognized overthe weighted average vesting period of the individual grants which range fromapproximately 2-4 years.

 

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

 

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

 
| Reserve for future  restoration and reclamation costs beginning of period |   | $          | 6,994,772 |   |
|---------------------------------------------------------------------------|--------|------------|-----------|--------|
| Additions and changes  in cash flow estimates                             |   | (15,176    | )         |
| Costs incurred                                                            |   | (1,487,541 | )         |
| Accretion expense                                                         |   | 193,095    |      |
| Reserve for future  restoration and reclamation costs at end of period    |   | $          | 5,685,150 |   |

 

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

 

***Restricted Stock Grants***

 

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

 

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

 

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

 

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

 

On September 3,2009, the Company granted a total of 400,000 restricted shares of the Company’scommon stock in connection with the hire of its President/CEO/COO.  100,000 of these shares vest on March 3,2010; the remaining 300,000 shares vest 1/3 on September 2010; 2011 and2012.  The vesting of the remaining300,000 restricted shares is also subject to certain annual performanceobjectives as specified in Mr. Ewigleben’s employment agreement.  Restricted stock grants are valued using thefair market value of the stock on the date of grant.

 

***Equity Infusion — Private Placement***

 

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

 

The followingtable details the changes in shareholders equity for the nine months ended September 30,2009:

 
|                               |   | **Common Stock** |   | **Paid-In** |   | **Accumulated** |   |        |   |
|------------------------------------|--------|-----------------------|--------|-------------|--------|-----------------|--------|-------------|--------|
|                               |   | **Shares**            |   | **Amount**  |   | **Capital**     |   | **Deficit** |   | **Treasury Stock** |   |
| Balances,  December 31, 2008  |   | 55,955,549            |   | $           | 55,994 |            | $      | 146,518,753 |   | $ | (114,957,709 | ) | $ | (9,418 | ) |
| Net loss                           |   | —                |   | —      |   | —          |   | (6,344,160  | )      | — |   |
| Stock compensation  expense        |   | —                |   | —      |   | 960,811         |   | —      |   | — |   |
| Restricted stock  issuance         |   | 775,788               |   | 775         |   | (775            | )      |        |   |   |   |
| Balances,  September 30, 2009 |   | 56,731,337            |   | $           | 56,769 |            | $      | 147,478,789 |   | $ | (121,301,869 | ) | $ | (9,418 | ) |

 

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

 

**Impactof Recent Accounting Pronouncements**

 

***TheAccounting Standards Codification.***   In June 2009, the FinancialAccounting Standards Board (FASB) issued Statement of Financial AccountingStandards No. 168,*The FASB AccountingStandards Codification and the Hierarchy of Generally Accepted AccountingPrinciples — a replacement of FASB Statement No. 162*  (the “Codification” or “ASC”).  TheCodification reorganized existing U.S. accounting and reporting standardsissued by the FASB and other related private sector standard setters into asingle source of authoritative accounting principles arranged by topic. The Codification supersedes all existing U.S. accounting standards; all otheraccounting literature not included in the Codification (other than Securitiesand Exchange Commission guidance for publicly-traded companies) is considerednon-authoritative.  The Codification was effective on a prospective basisfor interim and annual reporting periods ending after September 15,2009.  The adoption of the Codification changed the Company’s referencesto U.S. GAAP accounting standards but did not impact the Company’s results ofoperations, financial position or liquidity.

 

***Business Combinations.***  In December 2007, theFASB issued revised guidance for the accounting for businesscombinations.  The revised guidance, which is now part of ASC 805,*  BusinessCombinations*  (ASC 805),requires the fair value measurement of assets acquired, liabilities assumed andany noncontrolling interest in the acquiree, at the acquisition date withlimited exceptions.  Previously, a cost allocation approach was used toallocate the cost of the acquisition based on the estimated fair value of theindividual assets acquired and liabilities assumed.  The cost allocationapproach treated acquisition-related costs and restructuring costs that theacquirer expected to incur as a liability on the acquisition date, as part ofthe cost of the acquisition.  Under the revised guidance, those costs arerecognized in the consolidated statement of income separately from the businesscombination.  In addition, the revised guidance includes recognition,classification and measurement guidance for assets and liabilities related toinsurance and reinsurance contracts acquired in a business combination. The revised guidance applies to business combinations for acquisitions 

 

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occurring on or after January 1,2009.  The Company adopted this standard on January 1, 2009 which didnot have an impact on its financial position, results of operations or cashflows as there have been no acquisitions that have been consummated after January 1,2009.

 

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

 

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

 

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

 

***Determining Whether an Instrument (orEmbedded Feature) is Indexed to an Entity’s Own Stock.****  *In June 2008, the FASB issued newguidance on a financial instrument that is indexed to an entities ownstock.  The new guidance, which is now apart of ASC 815, *Determining Whether anInstrument (or Embedded Feature) is Indexed to an Entity’s Own Stock*is effective for financial statements issued for fiscal years beginning after December 15,2008, and interim periods within those fiscal years.  Earlyapplication is not permitted.  ASC815-15-74 specifies that a contract that would otherwise meet the definition ofa derivative but is both (a) indexed to the Company’s own stock and (b) classifiedin stockholders’ equity in the statement of financial position would not beconsidered a derivative financial instrument. ASC 815 provides a new two-stepmodel to be applied in determining whether a financial instrument or anembedded feature is indexed to an issuer’s own stock and thus able to qualifyfor the scope exception.  The application of this guidance at January 1,2009 did not have a significant impact on the Company’s financial statements.

 

***Fair Value Measurements.***   In February 2008, the FASB issuednew guidance for the accounting for non-financial assets and non-financialliabilities.  The new guidance, which is now a part of ASC 820, *Fair Value Measurements and Disclosures*  (ASC 820), permitted a one-year deferral ofthe application of fair value accounting for all non-financial assets andnon-financial liabilities, except those that are recognized or disclosed atfair value in the financial statements on a recurring basis (at leastannually).  Beginning January 1,2009, we applied ASC 820 to nonrecurring, nonfinancial assets and liabilities.This adoption did not have a material impact on our consolidated condensedstatement of operations or financial condition.  Our asset retirementobligation is classified as a Level 3 liability within the valuation hierarchy.The significant unobservable inputs to this fair value measurement includeestimates of plugging, abandonment and restoration costs, inflation rate andthe expected remaining life of wellfields. The inputs are calculated based onhistorical data as well as current estimated costs.  See Note 7 — AssetRetirement Obligation for additional information regarding our asset retirementobligation as of September 30, 2009.

 

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***Subsequent Events.   ***In May 2009, the FASB issued newguidance for accounting for subsequent events.  The new guidance, which isnow part of ASC 855,*  Subsequent Events* , is consistentwith existing auditing standards in defining subsequent events as events ortransactions that occur after the balance sheet date but before the financialstatements are issued or are available to be issued, but it also requires thedisclosure of the date through which an entity has evaluated subsequent eventsand the basis for that date.  The new guidance defines two types ofsubsequent events: “recognized subsequent events” and “non-recognizedsubsequent events.”  Recognized subsequent events provide additionalevidence about conditions that existed at the balance sheet date and must bereflected in the company’s financial statements.  Non-recognizedsubsequent events provide evidence about conditions that arose after thebalance sheet date and are not reflected in the financial statements of acompany.  Certain non-recognized subsequent events may require disclosureto prevent the financial statements from being misleading.  The newguidance was effective on a prospective basis for interim or annual periodsending after June 15, 2009.  We adopted ASC855 on June 30, 2009and have included the required disclosures in this Form 10-Q. The Companyhas evaluated subsequent events through November 9, 2009, which is thedate these financial statements are issued.

 

***Variable Interest Entities.***   In June 2009, the FASBissued revised guidance on the accounting for variable interest entities. The revised guidance, which was issued as Statement of Financial AccountingStandards No. 167,*  Amendments to FASB Interpretation No. 46(R*), has not yet been adopted into Codification.  The revised guidancereflects the elimination of the concept of a qualifying special-purpose entityand replaces the quantitative-based risks and rewards calculation of theprevious guidance for determining which company, if any, has a controllingfinancial interest in a variable interest entity.  The revised guidancerequires an analysis of whether a company has: (1) the power to direct theactivities of a variable interest entity that most significantly impact theentity’s economic performance and (2) the obligation to absorb the lossesthat could potentially be significant to the entity or the right to receivebenefits from the entity that could potentially be significant to theentity.  An entity is required to be re-evaluated as a variable interestentity when the holders of the equity investment at risk, as a group, lose thepower from voting rights or similar rights to direct the activities that mostsignificantly impact the entity’s economic performance.  Additionaldisclosures are required about a company’s involvement in variable interestentities and an ongoing assessment of whether a company is the primarybeneficiary.

 

The revised guidance iseffective for all variable interest entities owned on or formed after January 1,2010.  The Company does not expect that the provisions of the revisedguidance will have a material effect on its results of operations, financial positionor liquidity.

 

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

 

Basic earnings pershare includes no dilution and is computed by dividing income or lossattributed to common stockholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflects thepotential dilution that could occur if stock options were exercised orconverted into common stock.  6,195,800 potentially dilutive shares wereexcluded from the calculation of earnings per share because they were anti-dilutivedue to our net loss position for the nine months ended September 30, 2009.

 

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

 

In June 2008,we decided along with Billiton Investment 15 B.V. to terminate our agreement topurchase Rio Algom Mining, LLC, which was entered into on October 12,2007.  In connection with the targeted acquisition, we incurred costs of$1.437 million which were originally recorded as a pre-acquisition costasset.  Upon the termination of the agreement these pre-acquisition costswere expensed in the second quarter of 2008.

 

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

 

On April 17,2009, a three-judge panel of the United States Court of Appeals for the TenthCircuit affirmed the February 2007 decision of the United StatesEnvironmental Protection Agency (the “USEPA”) and held that Section 8 ofURI’s Churchrock property in New Mexico (owned in fee by the Company’ssubsidiary Hydro Resources, Inc.) is Indian country.  One of themembers of the panel dissented.  Indian country falls under thejurisdiction of the USEPA, and not the State of New Mexico, to administer theUnderground Injection Control (UIC) program permit, which the Company requiresfor ISR mining of that property. The jurisdictional dispute originated among theState of New Mexico, the USEPA and the Navajo Nation.  The Companypetitioned the Tenth Circuit for and was granted an en banc review of the panel’sdecision.  URI filed a supplemental brief regarding the jurisdictionalissues to which the USEPA and the Navajo Nation may respond by November 19,2009. If they do respond, URI has the option to file a reply brief by December 11,2009. The court anticipates oral arguments will be held during the week of January 11,2010**.** The Company does not believe that an impairment provision is necessaryfor this property at September 30, 2009.

 

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

 

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

 

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

 

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

 

The Company hasentered into Compensation Agreements with Executive Officers of the Company,with the exception of the CEO/President/COO, that provide that, in the event ofa change in control, such officers will have certain rights and benefits for aperiod of thirty-six months for the Executive Chairman of the Company andtwenty-four months for the other officers, following such change in control.The Compensation Agreements provide that the executive’s base salary paymentsshall be made on a monthly basis for the duration of the term and any incentivepayments shall be paid annually until the obligation to make such paymentsexpires.  In September, 2009 the Companyentered into a Compensation Agreement with the CEO/President /COO of theCompany that provides that, in the event he terminates employment following achange in control he would be entitled to two years salary and bonus plusmedical and dental benefits for up to 12 months.  A change in control would also result in theimmediate vesting of all unvested restricted shares of stock granted to him.

 

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

 

In June 2008,a suit for declaratory judgment titled, ***Saenz v. URI Inc.,*** was filed in the105th Judicial District Court, Kleberg County, Texas by the owners of themineral estate of property in Kleberg County, Texas leased to the Company,seeking a declaratory judgment that a certain lease is limited to one specificlot only and does not encompass other adjacent lands. The Company has a leaseon the adjacent lands from the same mineral owners and has produced over340,000 pounds of uranium from those lands in 2007 and 2008. The Companyentered a general denial of the claims. On September 24, 2008 the mineralowners amended their suit to include a declaration that both of the leases heldby the Company are not valid. The Company has entered a general denial andother specific defenses to the amended complaint. The Company has produceduranium from both leases. On November 5, 2008, the Company engaged inmediation with the plaintiffs but was unable to resolve the matter. ThePlaintiffs filed a Motion for Summary Judgment alleging that the leasesterminated prior to any production occurring. The Court denied the motion. Atrial date was originally set for June 1, 2009 but is currentlyrescheduled for December 7, 2009. This trial date is subject to a motion filed by the Company toreschedule the date into March or April, 2010. The Company will defend thecase vigorously. While the Company believes that each of the leases is valid,counsel to the Company is unable to predict the outcome of the litigation. Adetermination of the invalidity of the leases could have a material adverseeffect on the Company’s financial condition.

 

In connection withthe resignation of David N. Clark as President and CEO of the Company on September 3,2009, the Company and Mr. Clark entered into an agreement which providesfor his salary continuation through December 2, 2009, continuation ofemployee benefits through March 31, 2010, extension to September 3,2011 of the termination date for the stock options granted to Mr. Clark andimmediate vesting of the restricted shares and stock options granted to Mr. Clark.  As part of the agreement, Mr. Clark hasalso agreed to provide consulting services to the Company, as requested by theCompany’s CEO for a six month period ending March 3, 2010.

 

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**ITEM 2.****      ****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS**

 

**Forward Looking Statements**

 

Thefollowing summary is qualified in its entirety by, and should be read inconjunction 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.  Forward-looking statements are subject torisks, uncertainties and assumptions and are identified by words such as“expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” andother similar words.  All statementsaddressing operating performance, events, or developments that the Companyexpects or anticipates will occur in the future, including but not limited tostatements relating to the Company’s mineralized uranium materials, timing ofreceipt of mining permits, production capacity of mining operations planned forproperties in South Texas and New Mexico, planned dates for commencement ofproduction at such properties, revenue, cash generation, consumption of cashand profits are forward-looking statements. Because they are forward-looking, they should be evaluated in light ofimportant risk factors and uncertainties. These risk factors and uncertainties include, but are not limited to,the spot price and long-term contract price of uranium, weather conditions,operating conditions at the Company’s mining projects, government regulation ofthe mining industry and the nuclear power industry, world-wide uranium supplyand demand, availability of capital, timely receipt of mining and other permitsfrom regulatory agents and other factors which are more fully described in theCompany’s documents filed with the Securities and Exchange Commission.  Should one or more of these risks oruncertainties materialize, or should any of the Company’s underlyingassumptions prove incorrect, actual results may vary materially from thosecurrently anticipated.  In addition,undue reliance should not be placed on the Company’s forward-lookingstatements.  Except as required by law,the Company disclaims any obligation to update or publicly announce anyrevisions to any of the forward-looking statements contained in this Form 10-Q.

 

**Overview**

 

URIhas an estimated 101.4 million pounds of in place mineralized uraniummaterial on 183,000 acres in New Mexico and a Nuclear Regulatory Commission(NRC) license to produce up to 3 million pounds per year at our New Mexicolicensed properties, including our Churchrock property. URI has also produceduranium in South Texas where it has three projects that are now in restoration:Kingsville Dome, Vasquez and Rosita. Our operations are heavily influenced bythe price of uranium both on the spot and long-term markets. The spot price ofuranium, which has fluctuated from a high of $136.00 per pound in June 2007to a low of $40.00 per pound in April 2009 to its recent price level of$46.50/lb., has been the primary driver of the strategic decisions of theCompany.  At November 2, 2009 the current spot price was $46.50/lb.,compared to a recent high of $54.00-$55.00 per pound in mid-June 2009. The long-term price for uranium has remained level for several months andstands at $64.00-65.00 per pound at October 31, 2009.

 

Wehold one of the largest uranium asset bases in the United States.  Ourstrategy is to grow the value of the Company by accomplishing the following:

 

·        Resolvethe issue in New Mexico with the Navajo Nation.

 

·        Developstrategic relationships with major industry players including electricutilities that have nuclear power operations.

 

·        Expandupon our present capabilities of exploration, development, operation andclosure beyond ISR mining to include conventional mining.

 

·        Determinethe appropriateness of consolidation of properties held by others and maximizethe value of our existing resource base.

 

·        Becomea 10 million pound per year producer.

 

In2008, we changed our approach to our Texas operations in response to changes inthe uranium market. Operating margins from our production are impacted byuranium prices and costs. Although uranium prices escalated rapidly from 2004to 2007, so did costs. In 2008, while prices declined, costs did not followaccordingly, leading to a significant decrease in margins. As a result, in October 2008we decided to suspend new wellfield development at Kingsville and Rosita untilsufficient margins can be made to justify the new investment required to bringon additional production. We believe the value can still be received from ourTexas resource base.

 

*New Mexico Progress:*  There has been progress in our efforts toadvance our properties toward production in New Mexico.  We have hadseveral meetings with various Navajo groups as well as with New Mexicolegislators.  We have taken community and political leaders on site toursat our Texas properties to demonstrate the low profile of an ISR miningoperation compared with an underground mine and have demonstrated therestoration process and progress achieved at these properties.

 

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In May 2009,URI and the Navajo Nation EPA began an assessment of the Section 17Churchrock property to determine the radiation levels that may exist fromhistoric mining operations and potential impact on the air, soil and water inthe area.  As part of the field work, background levels will beestablished.

 

*South Texas Production:*  During June 2009, we ceased production atour two remaining operating wellfields at Kingsville Dome.  We produced55,600 pounds of uranium from Kingsville Dome during the first nine months of2009.  Current activity at Kingsville Dome is focused on the restorationof depleted wellfields. We are also studying the potential of uranium recoveryfrom the by-product material that was generated from prior uranium processingat our Kingsville Dome plant. Such activities may reduce our restoration costsand may result in the recovery of uranium that could be processed into asaleable product.  The last wellfield at Vasquez was fully depleted in October 2008and the project is now undergoing restoration. Production from Rosita wasstarted in June 2008, but was suspended in October 2008 due to pooreconomics driven by increased operating costs as a result of technicaloperating challenges and the decreased price of uranium.  We are currentlyconducting active restoration and reclamation activities at the Kingsville Domeand Vasquez projects, we are currently in stabilization for the depletedwellfields at Rosita.  The projected cash cost for these activities forthe next twelve months is approximately $1.3 million.

 

TheCompany believes it has sufficient in-place mineralized uranium material toproduce a total of more than 500,000 pounds U3O8 should realized uranium prices recover to thelevel of $70 per pound U3O8.A new wellfield typically requires 4 to 5 months to install and 9 to12 months to mine out. The Company has deferred all activities fordelineating or developing wellfields until uranium prices increase.  TheCompany continues to look for opportunities to acquire additional reserves.

 

**FinancialCondition and Results of Operations**

 

***Comparison of Three and Nine Months Ended September 30,2009 and 2008***

 

*Production and production costs. *In the first nine months of 2009, weproduced 58,500 pounds including positive assaying adjustments.  We ceasedproduction at Vasquez and deferred additional development of new wellfields atKingsville Dome in the fourth quarter of 2008.  This resulted in thereduction in production in the first half of 2009 compared to 2008.  Weceased production at the final two wellfields at Kingsville Dome in mid-June 2009.  Production in the first nine months of 2008was 259,600 pounds; Kingsville Dome produced 218,100 pounds, Vasquez produced33,800 pounds and Rosita produced 7,700 pounds.

 

Thefollowing table details our production and production cost breakdown for thethree and nine months ended September 30, 2009 and 2008.

 
|                              |   | **Three Months Ended  September 30,** |      | **Nine Months Ended  September 30,** |   |
|-----------------------------------|--------|------------------------------------------------------|-----------|-----------------------------------------------------|--------|
|                              |   | **2009**                                             |      | **2008**                                            |   | **2009** |   | **2008** |   |
| **Kingsville Dome production**    |   | 6,400                                                |      | 45,200                                              |   | 55,600 |   | 218,100 |   |
|                              |   |                                                 |      |                                                |   |   |   |   |   |
| **Vasquez production**            |   | —                                               |      | 9,800                                               |   | 2,200 |   | 33,800 |   |
|                              |   |                                                 |      |                                                |   |   |   |   |   |
| **Rosita production**             |   | 200                                                  |      | 7,700                                               |   | 700 |   | 7,700 |   |
|                              |   |                                                 |      |                                                |   |   |   |   |   |
| **Total production**              |   | 6,600                                                |      | 62,700                                              |   | 58,500 |   | 259,600 |   |
|                              |   |                                                 |      |                                                |   |   |   |   |   |
| Total operating costs             |   | $                                                    | 284,000   |                                                | $      | 2,181,000 |   | $ | 1,508,000 |   | $ | 6,030,000 |   |
| Per pound operating costs         |   | N/A                                                  | (1)  | $                                                   | 34.78  |   | $ | 25.77 |   | $ | 23.23 |   |
| Total deprec. and depletion costs |   | $                                                    | 366,000   |                                                | $      | 2,115,000 |   | $ | 685,000 |   | $ | 6,959,000 |   |
| Per pound DD&A cost           |   | N/A                                                  | (1)       | $                                                   | 33.74  |   | $ | 11.71 |   | $ | 26.81 |   |
| Total production cost             |   | $                                                    | 650,000   |                                                | $      | 4,296,000 |   | $ | 2,193,000 |   | $ | 12,989,000 |   |
| Production cost per pound         |   | N/A                                                  | (1)       | $                                                   | 68.52  |   | $ | 37.48 |   | $ | 50.04 |   |

 

----

(1)Costs incurred during the quarter for ourSouth Texas projects related to stand-by or care and maintenance costs and arenot applicable to uranium production on a per pound basis.  The production reflected for the quarterresulted from positive assaying adjustments from previous uranium shipments.

 

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

 

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Reconciliation of production costs to cost of uraniumsales:

 
|                                                    |   | **Three Months Ended  September 30,** |      | **Nine Months Ended  September 30,** |   |
|---------------------------------------------------------|--------|------------------------------------------------------|-----------|-----------------------------------------------------|--------|
|                                                    |   | **2009**                                             |      | **2008**                                            |   | **2009** |   | **2008** |   |
| Operating  costs                                        |   | $                                                    | 284,000   |                                                | $      | 2,181,000 |   | $ | 1,508,000 |   | $ | 6,030,000 |   |
| Change  in uranium inventory                            |   | 603,000                                              |      | (429,000                                            | )      | 1,011,000 |   | (340,000 | ) |
| Operating  expense for uranium production sold          |   | $                                                    | 887,000   |                                                | $      | 1,752,000 |   | $ | 2,519,000 |   | $ | 5,690,000 |   |
| Depreciation  and depletion costs                       |   | $                                                    | 366,000   |                                                | $      | 2,115,000 |   | $ | 685,000 |   | $ | 6,959,000 |   |
| Change  in uranium inventory                            |   | 108,000                                              |      | (241,000                                            | )      | 202,000 |   | (840,000 | ) |
| Depreciation  and depletion for uranium production sold |   | $                                                    | 474,000   |                                                | $      | 1,874,000 |   | $ | 887,000 |   | $ | 6,119,000 |   |
| Total  production costs                                 |   | $                                                    | 650,000   |                                                | $      | 4,296,000 |   | $ | 2,193,000 |   | $ | 12,989,000 |   |
| Change  in uranium inventory                            |   | 711,000                                              |      | (670,000                                            | )      | 1,213,000 |   | (1,180,000 | ) |
| Direct  cost of uranium production sold                 |   | $                                                    | 1,361,000 |                                                | $      | 3,626,000 |   | $ | 3,406,000 |   | $ | 11,809,000 |   |

 

*Uranium Sales. *In the first nine months of 2009, we sold 94,000pounds, generating revenue of $4.6 million ($49.11 per pound), compared withsales of 246,800 pounds in the same period in 2008 generating revenue of$16.354 million ($66.28 per pound).  The decrease in sales revenue was theresult of the reduction in pounds sold, as well as from lower prices we receivedbecause of lower uranium market prices in 2009 compared to the prior year’speriod.

 

*Cost of Uranium Sales. *Our cost of uranium sales from the sale of produceduranium in the first nine months of 2009 was $6.0 million compared with $26.4million in the same period of 2008.  Total cost of uranium sales includesroyalties and commissions related to our uranium sales, production costs,including operating expenses, depreciation and depletion expenses, amortizationof our restoration and reclamation cost estimates, exploration costs andimpairment costs for the write-down of uranium assets.  The followingtable details the direct cost of uranium sales and royalties and commissionsbreakdown for the three and nine months ended September 30, 2009 and 2008.

 
|                                    |   | **Three Months Ended  September 30,** |      | **Nine Months Ended  September 30,** |   |
|-----------------------------------------|--------|------------------------------------------------------|-----------|-----------------------------------------------------|--------|
|                                    |   | **2009**                                             |      | **2008**                                            |   | **2009** |   | **2008** |   |
| **Total  pounds sold**                  |   | 29,800                                               |      | 66,300                                              |   | 94,000 |   | 246,800 |   |
| Total operating  expenses               |   | $                                                    | 887,000   |                                                | $      | 1,752,000 |   | $ | 2,519,000 |   | $ | 5,690,000 |   |
| Per pound operating  expense            |   | $                                                    | N/A       | (1)                                       | $      | 26.42 |   | $ | 26.80 |   | $ | 23.06 |   |
| Depreciation and  depletion             |   | $                                                    | 474,000   |                                                | $      | 1,874,000 |   | $ | 887,000 |   | $ | 6,119,000 |   |
| Per pound DD&A  expense             |   | $                                                    | N/A       | (1)                                                 | $      | 28.27 |   | $ | 9.44 |   | $ | 24.80 |   |
| Direct cost of uranium  production sold |   | $                                                    | 1,361,000 |                                                | $      | 3,626,000 |   | $ | 3,406,000 |   | $ | 11,809,000 |   |
| Direct cost of sales  per pound         |   | $                                                    | N/A       | (1)                                                 | $      | 54.69 |   | $ | 36.24 |   | $ | 47.86 |   |
|                                    |   |                                                 |      |                                                |   |   |   |   |   |
| **Royalties  and commissions**          |   | $                                                    | 143,000   |                                                | $      | 369,000 |   | $ | 449,000 |   | $ | 1,506,000 |   |
| Royalties and  commissions per pound    |   | $                                                    | 4.81      |                                                | $      | 5.56 |   | $ | 4.78 |   | $ | 6.10 |   |

 

----

(1)Costs incurred during the quarter for ourSouth Texas projects related to stand-by or care and maintenance costs and arenot applicable to uranium production on a per pound basis.  The production reflected for the quarterresulted from positive assaying adjustments from previous uranium shipments.

 

We sawa significant decrease in our overall production costs in the first nine monthsof 2009 compared to 2008. Our 2009 production ceased in mid-June and wassourced from the remaining two wellfields at Kingsville Dome and was supplementedby nominal amounts derived from finalized assaying of prior Vasquez and Rositashipments.  The production cost decreases seen in the first nine months of2009 resulted from the shut down of production in the 2nd quarter of theyear along with significant operating cost reductions that were made beginningin the fourth quarter of 2008.  Theimpact of the impairment of our uranium assets in 2008 and 2009 also resultedin lower production costs in 2009.  These impairment provisions reducedthe amount of capital costs attributable to our uranium properties and resultedin the lower costs attributable to depreciation and depletion in 2009.

 

The2008 production from Kingsville Dome was sourced from wellfields in theirlatter stages of production as well as from new less prolific wellfieldscompared to prior production. These changes resulted in an increase in ourcosts. Also contributing to higher costs in 2008 was initial production from anew wellfield at Vasquez, which began production in March 2008.Historically Vasquez has had lower recovery factors than Kingsville Dome andthis factor has contributed to increased operating and capital costs.

 

Ouraverage cost of pounds sold in the quarter ended September 30, 2008 was$54.69 per pound with Kingsville Dome production contributing approximately 76%of total pounds sold during the quarter and Vasquez and Rosita pounds totaling

 

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approximately 19% and 5%,respectively.  Included in the cost ofgoods sold for the quarter was a lower of cost or market (“LCM”) adjustment touranium inventories of $283,000 ($4.27 per pound).

 

Averagecost of pounds sold in the first nine months of 2008 was $47.86 per pound withKingsville Dome production contributing approximately 85% of total pounds soldduring the period and Vasquez and Rosita pounds totaling approximately 13% and2%, respectively.

 

*Royalties and Commissions.*   During the first nine months of 2009,royalties and commissions for Vasquez and Kingsville Dome production soldtotaled $449,000, representing 9.7% of sales. During the first nine months of2008, royalties and commissions for Vasquez and Kingsville Dome production soldtotaled $1.5 million, representing 9.2% of sales.

 

*Operating Expenses.*   During the first nine months of 2009,operating expenses for Kingsville Dome, Vasquez and Rosita operations andproduction sold was $2.5 million. Included in this amount was $374,000 ofstand-by related costs.  During the firstnine months of 2008, operating expenses for production from these threeprojects sold was $5.7 million. This includes approximately $536,000 ofpre-production costs related to our Vasquez and Rosita projects.

 

*Depreciation and Depletion.*   During the first nine months of 2009, weincurred depreciation and depletion expense attributable to our Kingsville Domeand Vasquez production and stand-by costs of $887,000. During the same periodin 2008, we incurred depreciation and depletion expense attributable to theseprojects of $6.1 million.

 

*Impairment of Uranium Properties.*   During the first nine monthsof 2009 and 2008, we determined the carrying value of our uranium assetsexceeded their fair value. Such determination resulted in an impairmentprovision of approximately $1.8 million and $11.2 million in 2009 and 2008,respectively.

 

*Accretion and Amortization of Future Restoration Costs.*   Accretion and amortizationof future restoration costs in the first nine months half of 2009 and 2008 was$254,000 and $589,000, respectively.

 

*General and Administrative Charges.*   We incurred general andadministrative charges and corporate depreciation of $4.7 million and $7.8million, respectively in the nine months ended September 30, 2009 and2008.

 

Significantexpenditures for general and administrative expenses for the three and ninemonths ended September 30, 2009 and 2008 were:

 
|                                        |   | **Three Months Ended  September 30,** |      | **Nine Months Ended  September 30,** |   |
|---------------------------------------------|--------|------------------------------------------------------|-----------|-----------------------------------------------------|--------|
|                                        |   | **2009**                                             |      | **2008**                                            |   | **2009** |   | **2008** |   |
| Stock compensation  expense                 |   | $                                                    | 579,000   |                                                | $      | 297,000 |   | $ | 961,000 |   | $ | 1,847,000 |   |
| Salaries and payroll  burden                |   | 493,000                                              |      | 751,000                                             |   | 1,600,000 |   | 2,420,000 |   |
| Legal, accounting,  public company expenses |   | 423,000                                              |      | 280,000                                             |   | 1,008,000 |   | 1,115,000 |   |
| Insurance and bank fees                     |   | 167,000                                              |      | 256,000                                             |   | 408,000 |   | 544,000 |   |
| Consulting and  professional services       |   | 184,000                                              |      | 225,000                                             |   | 615,000 |   | 1,027,000 |   |
| Office, travel and  other expenses          |   | 143,000                                              |      | 233,000                                             |   | 417,000 |   | 879,000 |   |
|                                        |   |                                                 |      |                                                |   |   |   |   |   |
| Total                                       |   | $                                                    | 1,989,000 |                                                | $      | 2,042,000 |   | $ | 5,009,000 |   | $ | 7,832,000 |   |

 

Thenon-cash compensation expense recorded for the three and nine months ended September 30,2009 and 2008 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.

 

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

 

Legalfees year to date 2009 and 3rd quarter 2009 increased from the prior yearcorresponding periods because of unsuccessful New Mexico property acquisitionof certain assets of NZ Uranium, pending lawsuit preparation and employmentcontract activities incurred in 2009. These year-to-date costs were offset by lower audit and SOX 404compliance fees realized in the first half of the year.

 

Thecosts for consulting and professional services decreased in the first ninemonths of 2009 compared with 2008 and resulted from the cost cutting moveswhich began in the fourth quarter of 2008.  The activities incurred in thefirst nine months of 2008 included work performed in the review and assessmentof our New Mexico property databases to evaluate these properties’

 

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potentialas conventional mining projects and other costs related to communityoutreach and information campaigns designed to enhance public awareness of ourplanned New Mexico operations.  In the 2008 period, we also incurredincreased costs for environmental, health and safety training, investorrelations and media relations activities and for human resources and computernetworking consultants.

 

Decreasedoffice costs incurred in the first nine months of 2009 compared to 2008resulted primarily from the closure of our corporate offices in Corpus Christi,Texas and Albuquerque, New Mexico in the third and fourth quarters of 2008,respectively.

 

*Write-off of Target Acquisition Costs. * In June 2008, we decided alongwith Billiton Investment 15 B.V. to terminate our agreement to purchase RioAlgom Mining, LLC, which was entered into on October 12, 2007.  Inconnection with the targeted acquisition, we incurred costs of $1.437 milliondollars which were originally recorded as a pre-acquisition cost asset. Upon the termination of the agreement these pre-acquisition costs were expensedin the second quarter of 2008.

 

*Net Losses.*For the nine months ended September 30, 2009 and2008, we had net losses of $6.0 million and of $19.0 million, respectively.

 

*Cash Flow. *At September 30, 2009 we had a cash balance ofapproximately $8.2 million compared with $9.3 million at June 30, 2009 and$12.0 million at December 31, 2008.

 

In thefirst nine months of 2009, we had cash used in operations of $3.3 million. Weused $508,000 in investing activities during the first nine months of2009.  We increased the collateral supporting our South Texas financialsurety requirements by $121,000 and made additions to our South Texas and NewMexico property, plant and equipment of $387,000 during the quarter. These expenditures were primarily for land and mineral lease payments duringthe quarter.

 

In thefirst nine months of 2008, we had net cash flow provided by operations of $1.3million.  We used $10.4 million ininvesting activities during the first nine months of 2008.  We increasedthe collateral supporting our South Texas financial surety requirements by$508,000 and also made significant additions to our South Texas and New Mexicoproperty, plant and equipment of $9.9 million during the period.  Theseexpenditures were primarily for wellfield development, evaluation drilling andplant and dryer upgrades at Kingsville Dome of $3.4 million and wellfielddevelopment, evaluation drilling and plant and dryer upgrades at Rosita of $4.4million, additional wellfield development at Vasquez of $226,000, New Mexicoproperty additions of $480,000 and other Texas property and other assets of$1,036,000.

 

**Liquidity—CashSources and Uses for 2009**

 

As of September 30,2009 we had $8.2 million in cash compared to $12.0 million at December 31,2008.  The cash at September 30, 2009 was generated from operationsas well as the $13.1 million in net proceeds received from the sale ofcommon stock and warrants in a private placement in May 2008.

 

TheCompany used $3.3 million in cash from operations during the first ninemonths of 2009. With falling sales prices and higher production costs, theCompany decided to suspend the development of new wellfields at Kingsville Domeand Rosita as of October 2008.  The Company has sold substantiallyits entire uranium inventory as of September 30, 2009 and has received theproceeds from such sales as of October 30, 2009.  For the balance of 2009 and 2010, the Companyis currently projecting an average use of approximately $500,000 of cash permonth and the Company believes that the cash balance of $8.2 million at September 30,2009 will be sufficient to maintain its liquidity beyond the next twelvemonths.

 

In thesecond half of 2008, we took significant steps to decrease our cost structureby implementing tighter spending controls, closing two offices, reducing employment,limiting exploration activities, and reducing public and government relationsactivities in New Mexico and Texas. With the termination of our productionactivities in June 2009, we have implemented additional cost reductions tofurther slow down our cash outflows and we continue to assess all areas of theCompany to determine where further cost reductions may be made.  Ourobjective is to reduce our cash requirements to a level that allows us tosustain our reclamation activities and continue the requisite activities in NewMexico to advance our projects toward production.  The Company is alsoevaluating certain assets to determine if they can be better utilized and/ormonetized.

 

**ContingentLiabilities—Off Balance Sheet Arrangements**

 

TheCompany has obtained financial surety relating to certain of its futurerestoration and reclamation obligations as required by the State of Texasregulatory agencies. The Company has bank Letters of Credit (the “L/C’s) andperformance bonds issued for the benefit of the Company to satisfy suchregulatory requirements. The L/C’s were issued by Bank of America and theperformance bonds have been issued by United States Fidelity and GuarantyCompany (“USF&G”). L/C’s for $5.7 million and $5.6 million were issued at September 30,2009 and December 31, 2008, respectively.  Such L/C’s arecollateralized in their entirety by certificates of deposit.

 

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

 

**CriticalAccounting Policies**

 

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

 

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

 

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

 

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

 

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

 

**UraniumPrice Volatility**

 

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

 

Thespot market price for uranium has demonstrated a large range since January 2001.Prices have risen from $7.10 per pound at January 2001 to a high of$136.00 per pound in June 2007 and were $46.50 per pound as of November 2,2009.

 

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

 

Duringthe nine months ended September 30, 2009, the Company’s management, withthe participation of the Chief Executive Officer and Chief Financial Officer ofthe Company, carried out an evaluation of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended.

 

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

 

Duringthe first nine months of 2009 no material changes have been made in ourinternal control over financial reporting that may have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II - OTHER INFORMATION**

 

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

 

On April 17,2009, a three-judge panel of the United States Court of Appeals for the TenthCircuit affirmed the February 2007 decision of the United StatesEnvironmental Protection Agency (the “USEPA”) and held that Section 8 ofURI’s Churchrock property in New Mexico (owned in fee by the Company’ssubsidiary Hydro Resources, Inc.) is Indian country.  One of themembers of the panel dissented.  Indian country falls under thejurisdiction of the USEPA, and not the State of New Mexico, to administer theUnderground Injection Control (UIC) program permit, which the Company requiresfor ISR mining of that property. The jurisdictional dispute originated amongthe State of New Mexico, the USEPA and the Navajo Nation.  The Companypetitioned the Tenth Circuit for and was granted an en banc review of the panel’sdecision.  URI filed a supplemental brief regarding the jurisdictionalissues to which the USEPA and the Navajo Nation may respond by November 19,2009. If they do respond, URI has the option to file a reply brief by December 11,2009. The court anticipates oral arguments will be held during the week of January 11,2010**.**

 

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

 

***Our business is dependent on the market price of uranium.***

 

The price of alternative energy sources affects thedemand for and price of uranium.   The attractiveness of uranium as analternative fuel to generate electricity is to some degree dependent on therelative prices of oil, gas, coal and hydro-electricity and the possibility ofdeveloping other low cost sources for energy. In the event alternative energy sources become less expensive or newenergy sources become available, the price of uranium could be negativelyimpacted.  Any significant decrease inthe price of uranium would negatively impact our business and results ofoperations.  In addition, the marketprice of uranium is influenced by sales of its uranium stockpile by the UnitedStates Department of Energy (“DOE”). Decisions by the DOE to sell significant amounts of its stockpile have anegative impact on the market price of uranium.

 

**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**

 

Seethe Index to Exhibits on Page E-1 for a listing of the exhibits that arefiled as part of this Quarterly Report.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| ** **                    | **URANIUM  RESOURCES, INC.** |
|-------------------------------|------------------------------|
|                          |                         |
| Dated: November 9,  2009 | By:                | /s/ Donald C. Ewigleben |
|                          |                         | Donald C. Ewigleben |
|                          |                         | Director and Chief  Executive Officer |
|                          |                         | (Principal Executive  Officer) |
|                          |                         |   |
| Dated: November 9,  2009 | By:                          | /s/ Thomas H. Ehrlich |
|                          |                         | Thomas H. Ehrlich |
|                          |                         | Vice President -  Finance and Chief Financial Officer |
|                          |                         | (Principal Financial  and Accounting Officer) |

 

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**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                  |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1*                |       | Restated Certificate of  Incorporation of the Company, dated February 15, 2004 (filed with the  Company’s Registration Statement on Form SB-2 dated July 26, 2004,  SEC File Number 333-117653).                                             |
|                |       |                                                                                                                                                                                                                                                             |
| 3.1.1*              |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company (filed with  the Company’s Form 8-K dated April 11, 2006, SEC File Number  000-17171).                                                                          |
|                |       |                                                                                                                                                                                                                                                             |
| 3.2*                |       | Restated Bylaws of the  Company (filed with the Company’s Form 8-K on April 14, 2005).                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                             |
| 4.1*                |       | Common Stock Purchase  Agreement dated February 28, 2001 between the Company and Purchasers of  the Common Stock of the Company (filed with the Company’s Annual Report on  Form 10-KA dated July 26, 2001, SEC File Number 000-17171). |
|                |       |                                                                                                                                                                                                                                                             |
| 4.2*                |       | Form of Warrant to  Purchase Common Stock (filed with the Company’s Form 8-K on May 19,  2008).                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                             |
| 10.1*               |       | Amended and Restated  Directors’ Stock Option Plan (filed with the Company’s Form S-8  Registration No. 333- 00349 on January 22, 1996).                                                                                                |
|                |       |                                                                                                                                                                                                                                                             |
| 10.2*               |       | Amended and Restated  Employee’s Stock Option Plan (filed with the Company’s Form S-8  Registration No. 333-00403 on January 24, 1996).                                                                                                 |
|                |       |                                                                                                                                                                                                                                                             |
| 10.3*               |       | Amended and restated  1995 Stock Incentive Plan (filed with the Company’s Form SB-2  Registration No. 333-117653 on July 26, 2005).                                                                                                          |
|                |       |                                                                                                                                                                                                                                                             |
| 10.4*               |       | Non-Qualified Stock  Option Agreement dated June 19, 2001 between the Company and  Leland O. Erdahl (filed with the Company’s 10-QSB dated August 13,  2001, SEC File Number 000-17171).                                                |
|                |       |                                                                                                                                                                                                                                                             |
| 10.5*               |       | Non-Qualified Stock  Option Agreement dated June 19, 2001 between the Company and George R.  Ireland (filed with the Company’s 10-QSB dated August 13, 2001, SEC File  Number 000-17171).                                                         |
|                |       |                                                                                                                                                                                                                                                             |
| 10.7*               |       | Summary of Supplemental  Health Care Plan (filed with Amendment No. 1 to the Company’s  Form S-1 Registration Statement (File No. 33-32754) as filed with  the Securities and Exchange Commission on February 20, 1990).                |
|                |       |                                                                                                                                                                                                                                                             |
| 10.12*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Paul K. Willmott (filed with  the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC  File Number 000-17171).                                                  |
|                |       |                                                                                                                                                                                                                                                             |
| 10.13*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Richard A. Van Horn (filed  with the Company’s Annual Report on Form 10-K dated June 30, 1998,  SEC File Number 000-17171).                                               |
|                |       |                                                                                                                                                                                                                                                             |
| 10.14*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Thomas H. Ehrlich (filed with  the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC  File Number 000-17171).                                                 |
|                |       |                                                                                                                                                                                                                                                             |
| 10.15*              |       | Compensation Agreement  dated June 2, 1997 between the Company and Mark S. Pelizza (filed with  the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File  Number 000-17171).                                                   |
|                |       |                                                                                                                                                                                                                                                             |
| 10.16*              |       | Uranium  Resources, Inc. 1999 Deferred Compensation Plan (filed with the  Company’s Annual Report on Form 10-K dated June 30, 1999, SEC File  Number 000-17171).                                                                             |
|                |       |                                                                                                                                                                                                                                                             |
| 10.16.1*            |       | Amendment No. 1 to  the Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with  the Company’s Annual Report on Form 10KSB dated March 31, 2006, SEC  File Number 000-17171).                                               |
|                |       |                                                                                                                                                                                                                                                             |
| 10.17*              |       | 2000-2001 Deferred  Compensation Plan (filed with the Company’s Annual Report on Form 10-K  dated December 31, 2004, SEC File Number 000-17171).                                                                                                  |

 

E-1

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Table of Contents

 
| 10.17.1* |   | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2000-2001  (filed with the Company’s Annual Report on Form 10KSB dated March 31,  2006, SEC File Number 000-17171).                                                                            |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.22*   |   | Uranium Resources, Inc.  Deferred Compensation Plan for 2002 (filed with the Company’s Quarterly  Report on Form 10-QSB dated November 13, 2002, SEC File Number  000-17171).                                                                                                      |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.23*   |   | Uranium Resources, Inc.  Deferred Compensation Plan for 2003 (filed with the Company’s Quarterly  Report on Form 10-QSB dated November 13, 2002, SEC File Number  000-17171).                                                                                                      |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.24*   |   | Uranium Resources, Inc.  Deferred Compensation Plan for 2004 (filed with the Company’s Quarterly  Report on Form 10-QSB dated May 14, 2004, SEC File Number  000-17171).                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.24.1* |   | Amendment No. 2 to  the Uranium Resources, Inc. Deferred Compensation Plan for 2002,  Deferred Compensation Plan for 2003, and Deferred Compensation Plan for 2004  (filed with the Company’s Annual Report on Form 10-KSB dated March 31,  2006, SEC File Number 000-17171). |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.27.1* |   | Amendment No. 1  with UG U.S.A., Inc. dated August 30, 2004 to Exhibit 10.27  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                     |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.27.2* |   | Amendment No. 2  with UG U.S.A., Inc. dated April 29, 2005 to Exhibit 10.27  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File  Number 333-125106).                      |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.28*   |   | Amended and Restated  Uranium Supply Contract with Itochu Corporation dated June 7, 2005  (filed with the Company’s Pre-Effective Amendment No. 2 to Registration  Statement on form SB-2 dated September 20, 2005, SEC File Number  333-125106).                                  |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.33*   |   | Uranium Supply Contract  with Itochu Corporation dated June 15, 2005 (filed with the Company’s  Pre-Effective Amendment No. 2 to Registration Statement on Form SB-2  dated September 20, 2005, SEC File Number 333-125106).                                                  |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.34*   |   | Stock Purchase  Agreement by and between Uranium Resources, Inc. and accredited  investors (filed with the Company’s Form 8-K dated August 12, 2005,  SEC File No. 000-17171).                                                                                                |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.35*   |   | Uranium Resources, Inc.  2004 Stock Incentive Plan (filed with the Company’s Quarterly Report on Form 10QSB/A  dated November 18, 2005, SEC File No. 000-17171).                                                                                                              |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.36*   |   | Feasibility Study  Funding Agreement between Itochu Corporation, Uranium Resources, Inc.  and Hydro Resources, Inc. effective March 29, 2006. (filed with the  Company’s Form 10KSB dated March 31, 2006, SEC file Number  000-17171).                                   |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.37*   |   | Amended and Restated  Uranium Supply Contract between Itochu Corporation and Uranium Resources, Inc.  effective March 1, 2006. (filed with the Company’s Form 10KSB dated  March 31, 2006, SEC file Number 000-17171).                                                        |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.38*   |   | Agreement for the Sale  of Uranium Concentrates between UG U.S.A., Inc. and Uranium Resources, Inc.  dated March 31, 2006. (filed with the Company’s Form 10KSB dated March 31,  2006, SEC file Number 000-17171).                                                       |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.39*   |   | Stock Purchase  Agreement dated as of April 19, 2006, by and between Uranium Resources, Inc.  and accredited investors (filed with the Company’s Current Report on Form 8-K  dated April 19, 2006, SEC File No. 000-17171).                                              |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.40*   |   | Limited Liability  Company Agreement of Churchrock Venture LLC (filed with the Company’s Current  Report on Form 8-K dated December 5, 2006, SEC File No. 000-17171).                                                                                                              |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.41*   |   | Compensation Agreement  dated March 12, 2007 between the Company and Craig S. Bartels (filed  with the Company’s Form 8-K dated March 13, 2007, SEC File No. 000-17171).                                                                                                      |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.42*   |   | Compensation Agreement  dated March 12, 2007 between the Company and David N. Clark (filed with  the                                                                                                                                                                                              |

 

E-2

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Table ofContents

 
|   |   | Company’s Form 8-K  dated March 13, 2007, SEC File No. 000-17171).                                                                                                                                                                           |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                             |
| 10.43* |   | Amended and Restated  2004 Directors’ Stock Option Plan dated April 10, 2007 (filed with the  Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3  dated April 11, 2007, SEC File No. 333-133960). |
|   |   |                                                                                                                                                                                                                                                             |
| 10.44* |   | Uranium Resources, Inc.  2007 Restricted Stock Plan (filed with the Company’s Form 10-Q dated May 10,  2007, SEC File No. 000-17171).                                                                                                   |
|   |   |                                                                                                                                                                                                                                                             |
| 10.45* |   | Agreement dated September 3,  2009 between the Company and David N. Clark (Filed with the Company’s Form 8-K  dated September 4, 2009, SEC File No. 001-33404).                                                                         |
|   |   |                                                                                                                                                                                                                                                             |
| 10.46* |   | Letter Agreement dated September 3,  2009 between the Company and Donald C. Ewigleben (Filed with the Company’s Form 8-K  dated September 4, 2009, SEC File No. 001-33404).                                                             |
|   |   |                                                                                                                                                                                                                                                             |
| 10.47  |   | Agreement dated September 3,  2009 between the Company and Donald C. Ewigleben.                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                             |
| 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 pursuantto Rule 12b-32 under the Securities Exchange Act of 1934.

 

E-3

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