Tableof Contents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 

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

 

**For the quarterly period ended September 30, 2010**

 

**Or**

 

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

 

**For the transition periodfrom                to                **

 

**Commission file number 0-17171**

 

**URANIUM RESOURCES, INC.**

(Exact Name of Issuer as Specified in Its Charter)

 

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

 

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

(Address of Principal Executive Offices)

 

**(972) 219-3330**

(Issuer’s Telephone Number, Including Area Code)

 

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

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate 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 such files).   Yes o No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting 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) |   |                             |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12-b2of the Exchange Act).   Yes o No x

 

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

 

| **Title of Each Class of Common Stock** | ** ** | **Number of Shares Outstanding** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------|
| Common Stock, $0.001 par value                                        |       | 92,486,756 as of November 5, 2010          |

 

 

 

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**URANIUM RESOURCES, INC.**

 

**2010 THIRD QUARTERLY REPORT ON FORM 10-Q**

 

**TABLE OF CONTENTS**

 
| **PART I—FINANCIAL INFORMATION** |                                                                                                                            |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                       |                                                                                                                            |   |
| Item 1.                                    | Financial  Statements                                                                                                           |   |
|                                       |                                                                                                                            |   |
|                                       | Condensed  Consolidated Balance Sheets- September 30, 2010 (Unaudited) and December 31,  2009 (Unaudited)             | 3 |
|                                       |                                                                                                                            |   |
|                                       | Condensed  Consolidated Statements of Operations—three and nine months ended  September 30, 2010 and 2009 (Unaudited) | 5 |
|                                       |                                                                                                                            |   |
|                                       | Condensed  Consolidated Statements of Cash Flows—three and nine months ended  September 30, 2010 and 2009 (Unaudited) | 6 |
|                                       |                                                                                                                            |   |
|                                       | Notes to Condensed Consolidated Financial  Statements—September 30, 2010 (Unaudited)                                  | 7 |
|                                       |                                                                                                                            |   |
| Item 2.                                    | Management’s Discussion and Analysis  of Financial Condition and Results of Operations                                     | 13 |
|                                       |                                                                                                                            |   |
| Item 3.                                    | Quantitative  and Qualitative Disclosures About Market Risk                                                                     | 18 |
|                                       |                                                                                                                            |   |
| Item 4.                                    | Controls and  Procedures                                                                                                        | 18 |
|                                       |                                                                                                                            |   |
| **PART II—OTHER  INFORMATION**   | 19                                                                                                                              |
|                                       |                                                                                                                            |   |
| Item 1.                                    | Legal Proceedings                                                                                                               | 19 |
|                                       |                                                                                                                            |   |
| Item 1A.                                   | Risk Factors                                                                                                                    | 20 |
|                                       |                                                                                                                            |   |
| Item 2.                                    | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                    | 20 |
|                                       |                                                                                                                            |   |
| Item 3.                                    | Defaults  Upon Senior Securities                                                                                                | 20 |
|                                       |                                                                                                                            |   |
| Item 4.                                    | Submission  of Matters to a Vote of Security Holders                                                                            | 20 |
|                                       |                                                                                                                            |   |
| Item 5.                                    | Other Information                                                                                                               | 20 |
|                                       |                                                                                                                            |   |
| Item  6.                                   | Exhibits and Reports on  Form 8—K                                                                                     | 20 |
|                                       |                                                                                                                            |   |
| **SIGNATURES**                             | 21                                                                                                                              |
|                                       |                                                                                                                            |   |
| **Index to  Exhibits**                     | E-1                                                                                                                             |

 

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**URANIUM RESOURCES, INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**ASSETS**

**(Unaudited)**

 
| ** **                                               | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Current assets:                                          |       |                         |       |                        |       |
| Cash and cash equivalents                                |       | $                            | 10,505,189 |                        | $          | 6,092,068 |   |
| Receivables, net                                         |       | 4,602                        |       | 63,890                      |       |
| Prepaid and other current assets                         |       | 283,277                      |       | 125,400                     |       |
| Total current assets                                     |       | 10,793,068                   |       | 6,281,358                   |       |
|                                                     |       |                         |       |                        |       |
| Property, plant and equipment, at cost:                  |       |                         |       |                        |       |
| Uranium properties                                       |       | 81,722,252                   |       | 82,212,719                  |       |
| Other property, plant and equipment                      |       | 948,687                      |       | 886,992                     |       |
| Less-accumulated depreciation, depletion and  impairment |       | (64,106,430                  | )          | (64,155,311                 | )          |
| Net property, plant and equipment                        |       | 18,564,509                   |       | 18,944,400                  |       |
|                                                     |       |                         |       |                        |       |
| Long-term investment:                                    |       |                         |       |                        |       |
| Certificates of deposit, restricted                      |       | 6,827,795                    |       | 6,786,000                   |       |
|                                                     |       | $                            | 36,185,372 |                        | $          | 32,011,758 |   |

 

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

 

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**LIABILITIES AND SHAREHOLDERS’ EQUITY**

**(Unaudited)**

 
| ** **                                                                                                                                                                                             | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Current liabilities:                                                                                                                                                                                   |       |                         |       |                        |       |
| Accounts and short term notes payable                                                                                                                                                                  |       | $                            | 566,226    |                        | $          | 641,727 |   |
| Current portion of restoration reserve                                                                                                                                                                 |       | 1,251,984                    |       | 1,236,588                   |       |
| Royalties and commissions payable                                                                                                                                                                      |       | 665,745                      |       | 693,303                     |       |
| Deferred compensation                                                                                                                                                                                  |       | 697,028                      |       | —                      |       |
| Accrued legal settlement                                                                                                                                                                               |       | 1,375,000                    |       | —                      |       |
| Accrued interest and other accrued liabilities                                                                                                                                                         |       | 398,485                      |       | 321,235                     |       |
| Current portion of capital leases                                                                                                                                                                      |       | 90,740                       |       | 112,559                     |       |
| Total current liabilities                                                                                                                                                                              |       | 5,045,208                    |       | 3,005,412                   |       |
|                                                                                                                                                                                                   |       |                         |       |                        |       |
| Other long-term liabilities and deferred credits                                                                                                                                                       |       | 4,423,625                    |       | 5,487,389                   |       |
|                                                                                                                                                                                                   |       |                         |       |                        |       |
| Long term capital leases, less current portion                                                                                                                                                         |       | 139,322                      |       | 207,922                     |       |
| Long-term debt, less current portion                                                                                                                                                                   |       | 450,000                      |       | 450,000                     |       |
| Commitments and contingencies (Notes 5 and 12)                                                                                                                                                         |       |                         |       |                        |       |
| Shareholders’ equity:                                                                                                                                                                             |       |                         |       |                        |       |
| Common stock, $.001 par value, shares  authorized: 200,000,000; shares issued and outstanding  (net of treasury shares): 2010—84,264,256; 2009—56,781,792 |       | 84,265                       |       | 56,820                      |       |
| Paid-in capital                                                                                                                                                                                        |       | 158,809,128                  |       | 147,837,204                 |       |
| Accumulated deficit                                                                                                                                                                                    |       | (132,756,758                 | )          | (125,023,571                | )          |
| Less: Treasury stock (38,125 shares), at cost                                                                                                                                                          |       | (9,418                       | )          | (9,418                      | )          |
| Total shareholders’ equity                                                                                                                                                                        |       | 26,127,217                   |       | 22,861,035                  |       |
|                                                                                                                                                                                                   |       | $                            | 36,185,372 |                        | $          | 32,011,758 |   |

 

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

 

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** **

**URANIUM RESOURCES, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                    | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine months Ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Revenues:                                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Uranium sales                                                 |       | $                                                    | —     |                                                | $          | 1,406,782 |   | $ | — |   | $ | 4,616,145 |   |
| Total revenue                                                 |       | —                                               |       | 1,406,782                                           |       | — |   | 4,616,145 |   |
| Costs and expenses:                                           |       |                                                 |       |                                                |       |   |   |   |   |
| Cost of uranium sales                                         |       |                                                 |       |                                                |       |   |   |   |   |
| Royalties and commissions                                     |       | —                                               |       | 143,319                                             |       | — |   | 448,971 |   |
| Operating expenses                                            |       | 67,260                                               |       | 886,313                                             |       | 297,570 |   | 2,519,015 |   |
| Accretion/amortization of restoration reserve                 |       | 39,143                                               |       | (3,818                                              | )          | 116,431 |   | 254,390 |   |
| Depreciation and depletion                                    |       | 186,603                                              |       | 474,207                                             |       | 576,449 |   | 887,470 |   |
| Impairment of uranium properties                              |       | 352,631                                              |       | 400,231                                             |       | 742,278 |   | 1,815,220 |   |
| Exploration expenses                                          |       | —                                               |       | 34,929                                              |       | 725 |   | 39,752 |   |
| Total cost of uranium sales                                   |       | 645,637                                              |       | 1,935,181                                           |       | 1,733,453 |   | 5,964,818 |   |
| Loss from operations before corporate expenses                |       | (645,637                                             | )          | (528,399                                            | )          | (1,733,453 | ) | (1,348,673 | ) |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Corporate expenses                                            |       |                                                 |       |                                                |       |   |   |   |   |
| General and administrative                                    |       | 1,674,030                                            |       | 1,989,331                                           |       | 4,852,642 |   | 5,009,593 |   |
| Provision for legal settlement                                |       | 1,375,000                                            |       | —                                              |       | 1,375,000 |   | — |   |
| Depreciation                                                  |       | 36,331                                               |       | 35,792                                              |       | 107,581 |   | 107,680 |   |
| Total corporate expenses                                      |       | 3,085,361                                            |       | 2,025,123                                           |       | 6,335,223 |   | 5,117,273 |   |
| Loss from operations                                          |       | (3,730,998                                           | )          | (2,553,522                                          | )          | (8,068,676 | ) | (6,465,946 | ) |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Other income (expense):                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Interest expense                                              |       | (7,597                                               | )          | (10,119                                             | )          | (18,430 | ) | (31,722 | ) |
| Interest and other income, net                                |       | 74,114                                               |       | 39,053                                              |       | 353,919 |   | 153,508 |   |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Net loss                                                      |       | $                                                    | (3,664,481 | )                                                   | $          | (2,524,588 | ) | $ | (7,733,187 | ) | $ | (6,344,160 | ) |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Net loss per common share:                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Basic                                                         |       | $                                                    | (0.04      | )                                                   | $          | (0.04 | ) | $ | (0.12 | ) | $ | (0.11 | ) |
| Diluted                                                       |       | $                                                    | (0.04      | )                                                   | $          | (0.04 | ) | $ | (0.12 | ) | $ | (0.11 | ) |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted average common shares and common  equivalent shares: |       |                                                 |       |                                                |       |   |   |   |   |
| Basic                                                         |       | 83,720,754                                           |       | 56,453,076                                          |       | 66,558,635 |   | 56,267,755 |   |
| Diluted                                                       |       | 83,720,754                                           |       | 56,453,076                                          |       | 66,558,635 |   | 56,267,755 |   |

 

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

 

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** **

**URANIUM RESOURCES, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                 | ** ** | **Nine months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                                            | ** ** | **2009** | ** ** |
| Net loss                                                                   |       | $                                                   | (7,733,187 | ) | $ | (6,344,160 | ) |
| Reconciliation of net loss to cash used in  operations—               |       |                                                |       |   |   |
| Accretion/amortization of restoration reserve                              |       | 116,431                                             |       | 254,390 |   |
| Depreciation and depletion                                                 |       | 684,030                                             |       | 995,150 |   |
| Impairment of uranium properties                                           |       | 742,278                                             |       | 1,815,220 |   |
| Decrease in restoration and reclamation accrual                            |       | (1,072,148                                          | )          | (1,487,541 | ) |
| Stock compensation expense                                                 |       | 795,743                                             |       | 960,811 |   |
| Other non-cash items, net                                                  |       | 14,858                                              |       | 2,132 |   |
|                                                                       |       |                                                |       |   |   |
| Effect of changes in operating working capital  items—                |       |                                                |       |   |   |
| Increase (decrease) in receivables                                         |       | 59,288                                              |       | (323,878 | ) |
| Decrease in inventories                                                    |       | —                                              |       | 1,010,845 |   |
| (Increase) decrease in prepaid and other current  assets                   |       | (157,877                                            | )          | 299,355 |   |
| Increase (decrease) in payables, accrued  liabilities and deferred credits |       | 1,349,191                                           |       | (439,413 | ) |
| Net cash used in operating activities                                      |       | (5,201,393                                          | )          | (3,257,089 | ) |
|                                                                       |       |                                                |       |   |   |
| Investing activities:                                                      |       |                                                |       |   |   |
| Increase in certificates of deposit, restricted                            |       | (41,795                                             | )          | (120,826 | ) |
| Additions to property, plant and equipment—                           |       |                                                |       |   |   |
| Kingsville Dome                                                            |       | (143,324                                            | )          | (109,524 | ) |
| Vasquez                                                                    |       | (7,500                                              | )          | (99,578 | ) |
| Rosita                                                                     |       | (63,852                                             | )          | (31,759 | ) |
| Churchrock                                                                 |       | (125,543                                            | )          | (107,626 | ) |
| Section 13 Drilling                                                   |       | (89,882                                             | )          | — |   |
| Other property                                                             |       | (26,797                                             | )          | (38,482 | ) |
| Net cash used in investing activities                                      |       | (498,693                                            | )          | (507,795 | ) |
|                                                                       |       |                                                |       |   |   |
| Financing activities:                                                      |       |                                                |       |   |   |
| Issuance of common stock, net                                              |       | 10,203,626                                          |       | — |   |
| Payments on borrowings                                                     |       | (90,419                                             | )          | (122,478 | ) |
| Net cash provided by (used in) financing  activities                       |       | 10,113,207                                          |       | (122,478 | ) |
| Net increase (decrease) in cash and cash  equivalents                      |       | 4,413,121                                           |       | (3,887,362 | ) |
| Cash and cash equivalents, beginning of period                             |       | 6,092,068                                           |       | 12,041,592 |   |
| Cash and cash equivalents, end of period                                   |       | $                                                   | 10,505,189 |   | $ | 8,154,230 |   |

 

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

 

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**Uranium Resources, Inc.**

**Notes toCondensed Consolidated Financial Statements September 30, 2010 (Unaudited)**

 

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

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with theinstructions to Form 10-Q and Item 310(b) of Regulation S-K. Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements.  The accompanying statements should be readin conjunction with the audited financial statements included in the Company’s2009 Annual Report on Form 10-K.  In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary fora fair presentation have been included.  Operating results for the ninemonths ended September 30, 2010 are not necessarily indicative of theresults that may be expected for the full year ending December 31, 2010.

 

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

 

UraniumResources, Inc. (“URI”) was formed in 1977 and domesticated in Delaware in1987. The Company is primarily engaged in the business of acquiring, exploring,developing and mining uranium properties, using the *in situ* recovery (“ISR”) or solution mining process.Historically, the primary customers of the Company have been major utilitieswho utilize nuclear power to generate electricity. At present the Company ownsboth developed and undeveloped uranium properties in South Texas andundeveloped uranium properties in New Mexico.

 

TheCompany resumed uranium production in 2004 at its Vasquez project, in 2006 atits Kingsville Dome project and in 2008 at its Rosita project, each of suchprojects are located in South Texas. As a result of declining uranium marketprices and high production costs, the Company ceased development of additionalwellfields and curtailed production from its South Texas projects as existingproduction wellfields from each project were depleted. Production at ourVasquez project was shut down in the 4th quarter of 2008. Production wasshut-in at the Rosita project in the 4th quarter of 2008 and at theKingsville Dome project in June 2009. The Vasquez project was mined out in2008 and is now being restored. At the Kingsville Dome and Rosita projects, ourproduction shut-in was done to conserve the in-place reserve base until higherprices can be realized.

 

Priorto resuming Vasquez production, the Company had been in production stand-bysince the first quarter of 1999 at its Kingsville Dome and Rosita projects.Groundwater restoration and reclamation activities have been conducted at thesetwo sites and are currently ongoing at the Kingsville Dome and Vasquez projectsand we are in the stabilization phase of restoration in the first twoProduction Areas at our Rosita project.

 

Thefinancial statements of the Company have been prepared on the basis ofaccounting principles applicable to a going concern, which contemplates therealization of assets and the satisfaction of liabilities in the normal courseof business.  During 2009, we continued to significantly decrease our coststructure by implementing tighter spending controls, reducing employment,limiting exploration activities, and reducing public and government relationsactivities in New Mexico and Texas.  The Company raised a total of approximately$10.2 million, net of expenses in additional capital in June andJuly 2010 through the sale of 27,142,830 shares of the Company’s commonstock.  Approximately $9.0 million, net, was raised on June 25, 2010with the issuance of 23,809,500 shares at a price of $0.42 per share andapproximately $1.2 million, net, was raised on July 16, 2010 with theissuance of 3,333,330 shares at $0.42 per share in connection with the exerciseof an over-allotment option by the underwriter. In November 2010, the Company raised a total of approximately $9.0million, net of expenses, in additional capital through the sale of 8,222,500shares of the Company’s common stock at a price of $1.16 per share.

 

**3.****                                     ****DISCLOSURE OF NON-CASH TRANSACTIONS**

 

InJanuary 2010, a total of 65,820 shares of restricted stock were granted tofour executive officers at a price of $0.809 per share and in April 2010 atotal of 73,751 shares of restricted stock were granted to four executiveofficers at a price of $0.722 per share in connection with a cash conservationplan initiated in 2009.  Under the plan, cash compensation was reduced by$53,250 for each quarter.  The issuance price was determined by theaverage closing price of the last ten trading days of the quarter prior to thegrant date. The shares vest one year from the date of grant.

 

Duringthe first three quarters of 2009, a total of 142,680, 164,016 and 69,092 sharesof restricted stock were granted to five executive officers at a price of$0.615, $0.535 and $1.27 per share, respectively in connection with a cashconservation plan for 2009.  Under the plan, cash compensation was reducedby $87,750 for each quarter.  The issuance price was determined by theaverage closing price of the last ten trading days of the quarter prior to thegrant date. The shares vested one year from the date of grant. At September 30,2010 all of these shares have vested.

 

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

 

**Kingsville Dome Project**

 

Productionfrom Kingsville Dome for the nine months of 2010 and 2009 was 0 and 55,600pounds, respectively.  Total capital expenditures for Kingsville Dome forthe first nine months of 2010 and 2009 was $143,000 and $110,000, respectively,and was related to land and mineral lease payments.

 

DuringJune 2009, the two remaining producing wellfields at Kingsville Dome wereshut-down as a result of these wellfields being depleted. We are conducting ongoingrestoration activities at this project and incurred $693,000 and $778,000 incosts for the nine months ended September 30, 2010 and 2009, respectively.

 

**Rosita Project**

 

Webegan production at one new wellfield at Rosita in August 2008.  Dueto poor economics driven by technical challenges and lower uranium prices,production from this wellfield was shut-in in October 2008.  Capitalexpenditures for the first nine months of 2010 and 2009 were minimal withapproximately $64,000 and $32,000, respectively, being spent for land andmineral lease payments. We conducted ongoing restoration activities at thisproject in 2009 incurring $245,000 in costs. We are currently in the stabilization phase of our groundwater restorationprocess for two of the three production areas at Rosita where the economicallyrecoverable reserves have been mined out.

 

**Vasquez Project**

 

Productionat the Vasquez project was shut-down during October 2008. The economicallyrecoverable reserves from this project have been mined out.  We areconducting ongoing restoration activities at this project and incurred $379,000and $465,000 in costs for the nine months ended September 30, 2010 and2009, respectively.  In the first nine months of 2010 and 2009, weincurred $7,500 and $100,000, respectively, of capital expenditures primarilyfor land and mineral lease payments.

 

**Impairment of Uranium Properties**

 

AtSeptember 30, 2010, we determined the carrying value of our project assetsat each of our South Texas production locations exceeded their fairvalue.  An increase in the estimated costs for each of our South Texasprojects resulted in an increase in the estimated future cash flow to beexpended on each site.  Such determination resulted in an impairmentprovision of approximately $742,000 and $1.8 million for the first nine monthsof 2010 and 2009, respectively.  The 2010 impairment consisted of $481,000related to Kingsville Dome, $216,000 related to Vasquez and $45,000 forRosita. The 2009 impairment consisted of $1.8 million related to KingsvilleDome, $10,000 related to Vasquez and $54,000 for Rosita. The net carrying valueof the Kingsville Dome, Rosita and Vasquez projects are approximately $5.4million, $5.0 million and $505,000, respectively, at September 30, 2010.

 

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

 

**Uranium Sales Contracts**

 

InMarch 2006 we entered into new sales contracts with Itochu Corporation (“Itochu”)and UG U.S.A., Inc. (“UG”) that superseded the previously existingcontracts. Each new contract calls for delivery of one-half of our actualproduction from our Vasquez property and other properties in Texas currentlyowned or hereafter acquired by the Company (excluding certain large potentialexploration plays). The Itochu contract contains separate pricing terms for theVasquez property that are no longer applicable since Vasquez has reached theend of its useful life.  Our Texas production will be sold to Itochu at aprice equal to the average spot price for the eight weeks prior to the date ofdelivery less $7.50 per pound, with a floor for the spot price of $37 and aceiling of $50 per pound. If the spot price is over $50 per pound the pricewill be increased by 50% of such excess. The floor and ceiling and sharingarrangement over the ceiling applies to 3.65 million pounds of deliveries,after which there is no floor or ceiling. Itochu has the right to cancel anydeliveries on six-month’s notice.

 

Underthe amended Itochu contract there was potential for reinstatement of theoriginal contract terms if our joint venture with Itochu to develop ourChurchrock property in New Mexico was terminated by us. On March 6,2009, Itochu terminated the Joint Venture.  The only consequence ofthe termination was the increase of the ceiling price for future uranium salesfrom $43 to $50 per pound.

 

Underthe UG contract all production from our Texas properties will be sold at aprice equal to the month-end long-term contract price for the second monthprior to the month of delivery less $6 per pound until (i) 600,000 poundshave been sold in a particular delivery year and (ii) an aggregate of3 million pounds of Uranium has been sold. After the 600,000 pounds in anyyear and 3 million pounds total have been sold, UG will have a right of firstrefusal to purchase other Texas production at a price equal to the 

 

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averagespot price for a period prior to the date of delivery less 4%.  We paid UG$12 million in cash in 2006 to restructure its previously existingcontract.

 

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

 

Ourstock based compensation programs consist of stock options granted to employeesand directors and restricted stock grants made to employees and directors.

 

***Stock Compensation Expense***

 

Stockcompensation expense for the nine months ended September 30, 2010 and 2009was $796,000 and $961,000, respectively. Stock compensation expense is recordedas a component of general and administrative expenses for each period. The Companydid not recognize a tax benefit from the stock compensation expense because theCompany considers it is more likely than not that the related deferred taxassets, which have been reduced by a full valuation allowance, will not berealized.

 

TheBlack-Scholes option pricing model was used to estimate the stock option fairvalues. The option pricing model requires a number of assumptions, of which themost significant are, expected stock price volatility, the expected pre-vestingforfeiture rate and the expected option term (the amount of time from the grantdate until the option or restricted shares are exercised, vest or expire).Expected volatility was calculated based upon actual historical stock pricemovements through the measurement date of the stock option grant. Expectedpre-vesting forfeitures were estimated based on actual historical pre-vestingforfeitures over the most recent periods ending September 30, 2010 for theexpected term. The expected term was estimated based on historical averages overthe most recent periods ending September 30, 2010.

 

Atthe June 2010 annual meeting of the stockholders, each of the non-employeedirectors of the Company was granted 50,000 shares of restricted common stockof the Company under the Amended and Restated 2004 Directors Stock Option andRestricted Stock Plan (the “Amended 2004 Directors’ Plan”) in lieu of theannual stock option grants made in connection with the annual meeting. Such shares vest 25% per year on the anniversary date of their grantdate.  In the first quarter of 2010, 50,000 stock options were granted toa newly appointed director at an exercise price of $0.76 per share and fairvalue of $0.73 per option under the 2004 Directors’ Stock Option Plan. The non-employee directors held options covering 781,250 shares and 200,000shares for restricted stock under the Amended 2004 Directors’ Plan at September 30,2010. At September 30, 2010, 131,250 shares were available for futurestock option and restricted share grants under the Amended 2004 Directors’Plan.

 

Atotal of 85,000 stock options were granted to employees of the Company at anexercise price of $0.73 per share and fair value of $0.70 per option in April 2010under the Company’s 2004 Stock Incentive Plan.  These options vest ratablyover four years.  There were options covering 2,982,138 shares under theCompany’s stock option plans at September 30, 2010.  At September 30,2010, 515,583 shares were available for future grants under these plans.

 

InSeptember 2009, the Company hired Donald C. Ewigleben as the Company’sPresident, CEO and COO.  In connection with the hire, the Company grantedMr. Ewigleben a total of 400,000 restricted shares of the Company’s commonstock.  100,000 of these shares vested on March 3, 2010; theremaining 300,000 shares vest 1/3 on September 3, 2010, 2011 and2012.  The vesting of the remaining 300,000 restricted shares is alsosubject to certain annual performance objectives as specified inMr. Ewigleben’s employment agreement.  Restricted stock grants arevalued using the fair market value of the stock on the date of grant.

 

Atotal of 65,820 and 73,751 shares of restricted stock were granted in the firstand second quarters of 2010, respectively, to four executive officers onJanuary 4 and April 1, 2010 in connection with a cash conservationplan initiated in 2009.  All of these shares vest one year from the dateof grant.  Restricted stock grants are valued using the fair market valueof the stock on the date of grant. The Company recognized stock compensation expensefor the restricted share grants of approximately $66,400 during the first ninemonths of 2010.

 

EffectiveSeptember 30, 2010, Robert M. Gallagher resigned as a member of the Boardof Directors and, as of October 1, 2010 was engaged as a consultant toassist the Company in its efforts to advance toward production in New Mexico. Mr. Gallagheris engaged through the entity RMG Consulting, LLC, a government and communityrelations firm in which he is a principal.

 

Inconnection with this change, the terms of the equity awards granted to Mr. Gallagherwere modified whereby the vesting attributable to 25% of the 50,000 share stockoption grant made on January 20, 2010 was accelerated to the date of hisresignation and the exercise period was extended to September 30,2012.  In addition, the vestingattributable to 25% of the 50,000 share restricted stock grant made on June 3,2010 was accelerated to the date of his resignation.  The Company recognized stock compensationexpense for the modifications of approximately $12,000 during the first ninemonths of 2010.  All remaining unvestedequity awards were forfeited upon his resignation.

 

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Thetotal estimated unrecognized compensation cost from the unvested restrictedgrants at September 30, 2010 was approximately $319,000, which is expectedto be recognized over the weighted average vesting period of the individualgrants which range from 1-4 years.

 

***Stock Options for the Nine months Ended September 30,2010***

 

Thefollowing table summarizes stock options outstanding and changes during the ninemonth period ended September 30, 2010:

 
| ** **                                     | ** ** | **Outstanding Options** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term —in   years** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|                                           |       |                         |       |   |   |   |   |   |   |
| Options outstanding at January 1, 2010    |       | 4,406,074                    |       | $ | 2.75 |   |   |   |   |   |
| Granted                                        |       | 135,000                      |       | 0.74 |   |   |   |   |   |
| Exercised                                      |       | (63                          | )          | 0.16 |   |   |   |   |   |
| Canceled or forfeited                          |       | (815,123                     | )          | 2.73 |   |   |   |   |   |
| Options outstanding at September 30, 2010 |       | 3,725,888                    |       | $ | 2.68 |   | 5.3 |   | $ | 301,995 |   |
|                                           |       |                         |       |   |   |   |   |   |   |
| Options exercisable at September 30, 2010 |       | 3,403,388                    |       | $ | 2.64 |   | 4.9 |   | $ | 180,093 |   |

 

Sharesavailable for grant under the Stock Option Plans as of September 30, 2010were 646,833.

 

Stockoptions outstanding and currently exercisable at September 30, 2010 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       |       | 1,882,262                                |       | 3.8                                                         |       | $ | 1.31 |   | 1,882,262 |   | $ | 1.31 |   |
| 2004 Stock Incentive Plan       |       | 1,099,876                                |       | 6.3                                                         |       | 3.14 |   | 1,014,876 |   | 3.34 |   |
| 2004 Directors’ Plan       |       | 743,750                                  |       | 7.5                                                         |       | 5.50 |   | 506,250 |   | 6.21 |   |
|                            |       | 3,725,888                                |       | 5.2                                                         |       | $ | 2.66 |   | 3,403,388 |   | $ | 2.65 |   |

 

Totalestimated unrecognized compensation cost from unvested stock options at September 30,2010 was approximately $705,000, which is expected to be recognized over theweighted average vesting period of the individual grants which range fromapproximately 2-4 years.

 

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

 

Thefollowing table shows the change in the balance of the restoration andreclamation liability during the nine months ended September 30, 2010:

 
| Reserve for future restoration and reclamation  costs beginning of period |   | $          | 5,526,949 |   |
|---------------------------------------------------------------------------|--------|------------|-----------|--------|
| Additions and changes in estimates                                        |   | 604,377    |      |
| Costs incurred                                                            |   | (1.072,148 | )         |
| Accretion expense                                                         |   | 116,431    |      |
| Reserve for future restoration and reclamation  costs at end of period    |   | $          | 5,175,609 |   |

 

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

 

OnJune 25, 2010, the Company completed an underwritten public offering underwhich 23,809,500 shares common stock of were sold at a price of $0.42 pershare. Net proceeds to the Company, after deducting underwriting discounts andcommissions and estimated offering expenses, were approximately $9.0 million.

 

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OnJuly 16, 2010, the Company sold an additional 3,333,330 shares at $0.42per share in connection with the full exercise of the over-allotment optionheld by ROTH Capital Partners, the underwriter in the June 2010transaction.  With the exercise of the over-allotment option, a total of27,142,830 shares of common stock were sold in the offering with net proceedsto URI of approximately $10.2 million, after deducting underwriting discountsand commissions and estimated offering expenses.

 

Theofferings were made pursuant to a shelf registration statement on Form S-3filed with the Securities and Exchange Commission on May 7, 2010, whichbecame effective on May 21, 2010.

 

Thefollowing table details the changes in shareholders equity for the quarterended September 30, 2010:

 
| ** **                                       | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------|------------|
| ** **                                       | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Treasury Stock** | ** ** |
| Balances, December 31, 2009                 |       | 56,781,792            |       | $           | 56,820     |            | $          | 147,837,204 |       | $ | (125,023,571 | ) | $ | (9,418 | ) |
| Common stock issuance                            |       | 27,142,830            |       | 27,143      |       | 10,176,473      |       |        |       |   |   |
| Net loss                                         |       | —                |       | —      |       | —          |       | (7,733,187  | )          | — |   |
| Stock compensation expense                       |       | —                |       | —      |       | 795,743         |       | —      |       | — |   |
| Common stock issuance for stock options exercise |       | 63                    |       | —      |       | 10              |       | —      |       | — |   |
| Restricted stock issuance                        |       | 339,571               |       | 302         |       | (302            | )          |        |       |   |   |
| Balances, September 30, 2010                |       | 84,264,256            |       | $           | 84,265     |            | $          | 158,809,128 |       | $ | 132,756,758 | ) | $ | (9,418 | ) |

 

SeeNote 6 — Stock Based Compensation, for further discussion of stock compensationexpense and restricted stock issuance.

 

**10.****                              ****EARNINGSPER SHARE**

 

Basicearnings per share includes no dilution and is computed by dividing income orloss attributed to common stockholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflects thepotential dilution that could occur if stock options were exercised orconverted into common stock.  Potentially dilutive shares of 6,045,313were excluded from the calculation of earning per share because they wereanti-dilutive due to our net loss position for the nine months ended September 30,2010.

 

**11.****                              ****TENTHCIRCUIT COURT OF APPEALS DECISION**

 

OnJune 15, 2010 the United States Court of Appeals for the Tenth Circuit enbanc held that the Company’s Section 8 property in Churchrock, New Mexicois not Indian Country.  The result of the ruling means the authority toissue a UIC permit to URI falls under the jurisdiction of the State of NewMexico, and not the U.S. Environmental Protection Agency (USEPA).  Theopposing parties had the right to petition the Supreme Court for review untilSeptember 13, 2010; however no petitions were filed as of the deadline andthe allowable time for opposing parties to petition the United States SupremeCourt has expired.

 

InMarch 2010, the Tenth Circuit Court upheld URI’s NRC license to conduct insitu recovery (ISR) uranium mining in McKinley County, the only such license inthe state of New Mexico. That license allows for the production of up to 1million pounds per year from Churchrock until a successful commercialdemonstration of restoration is made, after which mining on other propertiescan begin and the quantity of production can be increased to 3 million poundsper year.  Petitioners filed a motion with the United State Supreme Courtto extend the time of filing a petition for certiorari or final review. The Supreme Court granted petitioners’ motion and extended the time for filinga petition to September 15, 2010. Prior to the deadline the petitionersfiled for review of this ruling to the United States Supreme Court.

 

**12.****                              ****COMMITMENTSAND CONTINGENCIES**

 

TheCompany’s mining operations are subject to federal and state regulations forthe protection of the environment, including water quality. These laws areconstantly changing and generally becoming more restrictive. Future mineclosure and reclamation costs are provided for as each pound of uranium isproduced on a unit-of-production basis. The Company reviews its reclamationobligations each year and determines the appropriate unit charge. The Companyalso evaluates the status of current environmental laws and their potentialimpact on its accrual for costs. The Company believes its operations are incompliance with current environmental regulations.

 

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TheCompany is from time to time involved in various legal proceedings of acharacter normally incident to its business. Management does not believe thatadverse decisions in any such pending or threatened proceedings will have amaterial adverse effect on the Company’s financial condition or results ofoperations.

 

TheCompany has filed a registration statement under the Securities Act of 1933, asamended, to register the resale of the shares of its common stock issued in aMay 2008 private placement. Such shares are subject to certain resaleregistration rights that would include penalties in the event the registrationstatement fails to remain effective. At September 30, 2010, the Company’sregistration statement was and remains effective.

 

TheCompany has entered into Compensation Agreements with Executive Officers of theCompany that provide that, in the event of a change in control, such officerswill have certain rights and benefits for a period of thirty-nine months forthe Executive Chairman of the Company and twenty-four months for the otherofficers, following such change in control. The Compensation Agreements providethat the executive’s base salary payments shall be made on a monthly basis forthe duration of the term and any incentive payments shall be paid annuallyuntil the obligation to make such payments expires.  The Company has anemployment agreement with Mr. Donald C. Ewigleben, the Company’s Presidentand CEO, which provides for severance payments to Mr. Ewigleben upontermination of his employment under certain circumstances.  Severancepayments for Mr. Ewigleben’s termination range from one year’s base salaryplus 60% bonus to two year’s base salary plus a 60% bonus.  The agreementalso contains certain change of control provisions which provide for two year’sbase salary plus a 60% bonus, continuation of health benefits, acceleration ofunvested stock options and restricted common stock awards and the extension ofexercise periods for stock options by 90 days.

 

TheCompany has obtained financial surety relating to certain of its futurerestoration and reclamation obligations as required by the State of Texasregulatory agencies. Performance bonds totaling $2,834,000 were issued for thebenefit of the Company at September 30, 2010 and December 31, 2009.  At September 30, 2010 the Company haddeposited funds totaling $386,000 to collateralize the bond obligation.  In September 2010, the Company receivednotice from the bonding company requesting that the Company either increase thecollateral supporting the bonds to 100% of the bond amount by making equalquarterly payments of $500,000 or cause the release of the bonds by the fourthquarter of 2011.  The amount of bondingissued by the carrier exceeded the amount of collateral by $2.5 million atSeptember 30, 2010 and December 31, 2009, respectively.  In the event that the carrier is required toperform under its bonds or the bonds are called by the state agencies, theCompany would be obligated to pay any expenditure in excess of the collateral.

 

InJune 2008 a suit for declaratory judgment titled, ***Saenz v. URI Inc.,***was filed in the 105th Judicial District Court, Kleberg County, Texas bythe owners of the mineral estate of property in Kleberg County, Texas leased tothe Company, seeking a declaratory judgment that a certain lease is limited toone specific lot only and does not encompass other adjacent lands. The Companyhas a lease on the adjacent lands from the same mineral owners and has producedover 340,000 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 September 29, 2010, the counsel for UraniumResources, Inc. and the plaintiffs signed a settlement agreement in thismatter.  While the Company believes thatits defense in this matter is valid, counsel to the Company was unable toconclusively predict the outcome of the litigation and a reasonable cost forcompletion.  If a determination were madethat invalidated the leases on which the Company has previously produceduranium, the outcome could have had material adverse affect on the Company’sfinancial condition.  As a result, theCompany believed it was in its best interest to settle the matter. Under the settlement,the Plaintiffs will ratify, confirm and recognize the validity in all respectsof the leases, agree to cooperate with the Company and execute a stipulation ofinterest with regard to their respective interests and agree to support and notinterfere, either directly or indirectly, with the Company’s efforts to obtainpermits, licenses or other authorizations from the different regulatory andgovernmental agencies with regard to any mining or other operations.  The Company will pay to Plaintiffs $1.375million in cash which includes amounts for prior royalties that the plaintiffshad previously rejected.  In additionroyalties due for future production from the leases will be amended from a6.25% royalty rate to a sliding scale royalty ranging from 9% to 15%.  The settlement is subject to execution ofamendments to the leases to reflect the foregoing and to documentation of otheraspects of the settlement and dismissal of the suit.

 

**13.****                              ****SUBSEQUENTEVENTS**

 

InNovember 2010, the Company sold 8,222,500 shares of common stock at a price of$1.16 per share in an underwritten registered offering. Net proceeds to theCompany, after deducting underwriting discounts and commissions and estimatedoffering expenses, were approximately $9.0 million. Proceeds will be used forgeneral corporate purposes and to fund potential future acquisitions. Theoffering was made pursuant to a shelf registration statement on Form S-3filed with the Securities and Exchange Commission on May 7, 2010, whichbecame effective on May 21, 2010.

 

On November 3, 2010, the Company signed anon-binding letter of intent with Power Resources, Inc. doing business asCameco Resources (“CR”), a subsidiary of Cameco, for a three-phase explorationprogram funded by CR and an option for a production joint venture on a largeranch in South Texas.  The agreement iscontingent upon URI successfully completing a three-year lease option agreementwith the land owner as well as the negotiation and execution of finaldefinitive agreements between the Company and CR.

 

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**ITEM 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 of1934.  Forward-looking statements convey our current expectations orforecasts of future events. We intend such forward-looking statements to becovered by the safe harbor provisions for forward-looking statements containedin the Private Securities Litigation Reform Act of 1995.

 

Forward-lookingstatements are generally identifiable by use of the words “estimate,” “project,”“believe,” “intend,” “plan,” “anticipate,” “expect” and similar expressions.These forward-looking statements include management’s expectations regardingour liquidity and burn rate, reserves and mineralized uranium material, timingof receipt of mining permits, production capacity of mining operations plannedfor properties in South Texas and New Mexico and dates for commencement ofproduction at such properties. Our ability to predict results or the actualeffect of future plans or strategies is inherently uncertain. Actual resultscould differ materially from those in forward-looking statements because of,among other reasons, the factors described below and in the periodic reportsthat we file with the SEC from time to time, including Forms 10-K, 10-Q and 8-Kand any amendments thereto. The forward-looking statements are not guaranteesof future performance. They are based on numerous assumptions that we believeare reasonable, but they are open to a wide range of uncertainties and businessrisks.

 

Keyfactors that could cause actual results to be different than expected oranticipated include, but are not limited to the price of uranium; weatherconditions; operating conditions at our mining projects; government regulationof the mining industry and the nuclear power industry; the world-wide supplyand demand of uranium; availability of capital; timely receipt of mining andother permits from regulatory agencies; and the risks set forth herein underthe caption “Risk Factors.”

 

Inlight of these risks, uncertainties and assumptions, you are cautioned not toplace undue reliance on forward-looking statements, which speak only as of thedate of this report. When considering forward-looking statements, you shouldkeep in mind the cautionary statements in this report. We are not under anyobligation, and we expressly disclaim any obligation, to update or alter anyforward-looking statements, whether as a result of new information, futureevents or otherwise, except as required by law. In light of these risks,uncertainties and assumptions, the forward-looking events discussed in orincorporated by reference in this prospectus might not occur.

 

**Overview**

 

URIexplores for and produces uranium in South Texas where it has two remainingproduction operations that are currently on stand-by: Kingsville Dome andRosita. URI also has an estimated 101.4 million pounds of in placemineralized uranium material on 183,000 acres in New Mexico. Our operations areheavily influenced by the price of uranium both on the spot and long-termmarkets. The spot price of uranium, which has fluctuated from a high of $136.00per pound in June 2007 to its recent price level of $53.50 per pound, hasbeen the primary driver of the strategic decisions of the Company.

 

Ourstrategy has been focused on two main fronts: 1) advancing our New Mexicoassets towards production, and 2) expanding our resource base in Texas.

 

Duringthe first quarter of 2010, our Board of Directors approved a revised strategicplan which emphasized cash conservation and addressed the Company’s future cashneeds, as well as its strategic options for unlocking potential value forshareholders by utilizing its current assets and by evaluating possibleregional and structural synergies.  Key operational points of the plan forour Texas properties are (i) prepare to be in a position to return toproduction in Texas should the price of uranium return to a level sufficient togenerate positive cash flow; (ii) analyze exploration potential in SouthTexas and enhance exploration capabilities; (iii) maintain restorationactivities in South Texas in accordance with existing agreements andrequirements; and (iv) analyze synergistic opportunities and assetmonetization prospects in Texas.

 

*South Texas Production:*    Sinceconcluding uranium production from our last remaining wellfields in Texas inJuly 2009, we no longer have a source of revenue or operating cashflow.  We produced approximately 58,500 pounds of uranium from our SouthTexas operations in the first nine months of 2009 but currently have noproduction operations.  Current activity at Kingsville Dome is primarilyfocused on the restoration of depleted wellfields. The last wellfield atVasquez was fully depleted in October 2008 and the project is nowundergoing restoration. Production from Rosita was started in June 2008,but was suspended in October 2008 due to poor economics driven by increasedoperating costs as a result of technical operating challenges and the decreasedprice of uranium.  We are currently in the stabilization phase ofgroundwater restoration at the Rosita project.

 

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Dueto higher costs, combined with geologic and technical risk and unknown marketrisk, we suspended development activities in the fourth quarter of 2008 untilthe economics justify further activity. We are continuing to seek opportunitiesfor the rights to potential uranium properties in South Texas and New Mexico ingeographic areas that have historically held significant uranium resources.There can be no assurance that we will be successful in the acquisition of suchproperties, or if acquired, that such properties will contain commerciallyviable uranium deposits.

 

**Financial Condition and Results of Operations**

 

***Comparison of Three and Nine months Ended September 30,2010 and 2009***

 

*Production and production costs. *We had nouranium production in the first nine months of 2010.  In the first ninemonths of 2009, we produced 47,200 pounds and received positive inventoryadjustments of 11,300 pounds.

 

Wecompleted production at the Vasquez project and shut-in production at theRosita project in the fourth quarter of 2008 and we shut-in production atthe Kingsville Dome project in the second quarter of 2009. The Vasquez projectwas mined out in 2008 and is now being restored. At the Kingsville Dome andRosita projects, we shut-in production to conserve the in-place reserve base inresponse to a drop in uranium market prices. We do not intend to resumeproduction at these sites until there is a significant recovery of uraniumprices.

 

Thefollowing table details our production and production cost breakdown for thethree and nine months ended September 30, 2010 and 2009.

 
| ** **                          | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine months Ended  September 30,** | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                          | ** ** | **2010 (1)**                                    | ** ** | **2009 (1)**                                   | ** ** | **2010 (1)** | ** ** | **2009** | ** ** |
| **Total uranium production (lbs.)** |       | —                                               |       | 6,600                                               |       | — |   | 58,500 |   |
|                                |       |                                                 |       |                                                |       |   |   |   |   |
| Total operating costs               |       | $                                                    | 67,000     |                                                | $          | 284,000 |   | $ | 298,000 |   | $ | 1,508,000 |   |
| Per pound operating costs           |       | N/A                                                  |       | $                                                   | N/A        |   | N/A |   | $ | 25.77 |   |
| Total deprec. and depletion costs   |       | $                                                    | 187,000    |                                                | $          | 366,000 |   | $ | 576,000 |   | $ | 685,000 |   |
| Per pound DD&A cost             |       | N/A                                                  |       | $                                                   | N/A        |   | N/A |   | $ | 11.71 |   |
| Total production cost               |       | $                                                    | 254,000    |                                                | $          | 650,000 |   | $ | 874,000 |   | $ | 2,193,000 |   |
| Production cost per pound           |       | N/A                                                  |       | $                                                   | N/A        |   | N/A |   | $ | 37.48 |   |

 

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(1) 2010and 3rd Quarter 2009 operating costs and totaldepreciation and depletion costs represent stand-by costs at our KingsvilleDome, Rosita and Vasquez facilities.

 

Totaloperating costs, total depreciation and depletion costs and total productioncosts incurred for 2009 presented above differ from the cost of uranium salesrecorded in consolidated statements of operations because of changes in theamounts recorded to inventory for the same periods.  The cost of uraniumsales includes the sales of uranium inventory on hand at the beginning of theperiod and does not include certain uranium produced during the period that wasnot sold at period end.

 

Reconciliationof production costs to cost of uranium sales:

 
| ** **                                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine months Ended  September 30,** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                              | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Operating costs                                         |       | $                                                    | 67,000     |                                                | $          | 284,000 |   | $ | 298,000 |   | $ | 1,508,000 |   |
| Change in uranium inventory                             |       | $                                                    | —     |                                                | $          | 603,000 |   | $ | — |   | $ | 1,011,000 |   |
| Operating expense for uranium production sold           |       | $                                                    | —     |                                                | $          | 887,000 |   | $ | — |   | $ | 2,519,000 |   |
| Depreciation and depletion costs                        |       | $                                                    | 187,000    |                                                | $          | 366,000 |   | $ | 576,000 |   | $ | 685,000 |   |
| Change in uranium inventory                             |       | $                                                    | —     |                                                | $          | 108,000 |   | $ | — |   | $ | 202,000 |   |
| Depreciation and depletion for uranium production  sold |       | $                                                    | —     |                                                | $          | 474,000 |   | $ | — |   | $ | 887,000 |   |
| Total production costs                                  |       | $                                                    | 254,000    |                                                | $          | 650,000 |   | $ | 874,000 |   | $ | 2,193,000 |   |
| Change in uranium inventory                             |       | $                                                    | —     |                                                | $          | 711,000 |   | $ | — |   | $ | 1,213,000 |   |
| Direct cost of uranium production sold                  |       | $                                                    | —     |                                                | $          | 1,361,000 |   | $ | — |   | $ | 3,406,000 |   |

 

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*Uranium Sales.  *For the first nine months of2010 we did not have any uranium sales.  * *Inthe first nine months of 2009, we sold 94,000 pounds, generating revenue of$4.6 million ($49.11 per pound).

 

*Cost of Uranium Sales. * Our costof uranium sales from the sale of produced uranium in the first nine months of2010 was $1.7 million compared with $6.0 million in the same period of2009.  Total cost of uranium sales includes royalties and commissionsrelated to our uranium sales, production costs, including operating expenses,depreciation and depletion expenses, amortization of our restoration andreclamation cost estimates, exploration costs and impairment costs for thewrite-down of uranium assets.

 

Thefollowing table details the direct cost of uranium sales and royalties andcommissions breakdown for the three and nine months ended September 30,2010 and 2009.

 
| ** **                             | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine months Ended  September 30,** | ** ** |
|----------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                             | ** ** | **2010**                                             | ** ** | **2009 (1)**                                   | ** ** | **2010** | ** ** | **2009** | ** ** |
| **Total pounds sold**                  |       | —                                               |       | 29,800                                              |       | — |   | 94,000 |   |
| Total operating expenses               |       | $                                                    | 67,000     |                                                | $          | 887,000 |   | $ | 298,000 |   | $ | 2,519,000 |   |
| Per pound operating expense            |       | $                                                    | —     |                                                | $          | N/A |   | $ | — |   | $ | 26.80 |   |
| Depreciation and depletion             |       | $                                                    | 187,000    |                                                | $          | 474,000 |   | $ | 576,000 |   | $ | 887,000 |   |
| Per pound DD&A expense             |       | $                                                    | —     |                                                | $          | N/A |   | $ | — |   | $ | 9.44 |   |
| Direct cost of uranium production sold |       | $                                                    | 254,000    |                                                | $          | 1,361,000 |   | $ | 874,000 |   | $ | 3,406,000 |   |
| Direct cost of sales per pound         |       | $                                                    | —     |                                                | $          | N/A |   | $ | — |   | $ | 36.24 |   |
|                                   |       |                                                 |       |                                                |       |   |   |   |   |
| **Royalties and commissions**          |       | $                                                    | —     |                                                | $          | 143,000 |   | $ | — |   | $ | 449,000 |   |
| Royalties and commissions per pound    |       | $                                                    | —     |                                                | $          | 4.81 |   | $ | — |   | $ | 4.78 |   |

 

----

(1)          Costs incurred during the quarter for our SouthTexas projects related to stand-by or care and maintenance costs and are notapplicable to uranium production on a per pound basis.  The productionreflected for the quarter resulted from positive assaying adjustments fromprevious uranium shipments.

 

Thecosts for the nine months ended September 30, 2010 resulted from shut-incosts at our Kingsville Dome, Rosita and Vasquez projects. Our 2009 productionwas sourced from the remaining two wellfields at Kingsville Dome and wassupplemented by nominal amounts derived from finalized assaying of priorVasquez shipments.

 

*Royalties and Commissions.*   Forthe first nine months of 2010, we did not have any royalties and commissionsfrom uranium sales.  During the first nine months of 2009, royalties andcommissions for Vasquez and Kingsville Dome production sold totaled $449,000,representing 9.7% of sales.

 

*Operating Expenses.*    Duringthe first nine months of 2010, operating expenses resulted from stand-by costsrelated to our Kingsville Dome, Vasquez and Rosita projects of $298,000 withsuch costs charged to operations. During the first nine months of 2009,operating expenses for Vasquez and Kingsville Dome production sold was $2.5million. During this period we incurred approximately $374,000 of stand-bycosts related to our Vasquez and Rosita projects with such costs charged tooperations.

 

*Depreciation and Depletion.*    Duringthe first nine months of 2010, we incurred stand-by depreciation and depletionexpense attributable to our Rosita, Vasquez and Kingsville Dome projects of$576,000. During the same period in 2009, we incurred depreciation anddepletion expense attributable to our Vasquez and Kingsville Dome productionand stand-by costs of $887,000.

 

*Impairment of Uranium Properties.*    Duringthe first nine months of 2010 and 2009, we determined the carrying value of oururanium assets were impaired and recorded an impairment provision ofapproximately $742,000 and $1.8 million in 2010 and 2009, respectively.

 

*Accretion and Amortization of Future RestorationCosts.*    Accretion and amortization of futurerestoration costs in the first nine months of 2010 and 2009 was $116,000 and$254,000, respectively.

 

*General and Administrative Charges.*  Weincurred general and administrative charges and corporate depreciation of $6.2million and $5.1 million, respectively during the nine months ended September 30,2010 and 2009.

 

Significantexpenditures for general and administrative expenses for the three and ninemonths ended September 30, 2010 and 2009 were:

 

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| ** **                                 | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine months Ended  September 30,** | ** ** |
|--------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                 | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Stock compensation expense                 |       | $                                                    | 270,000    |                                                | $          | 579,000 |   | $ | 796,000 |   | $ | 961,000 |   |
| Salaries and payroll burden                |       | 606,000                                              |       | 493,000                                             |       | 1,676,000 |   | 1,600,000 |   |
| Provision for legal settlement             |       | 1,375,000                                            |       | —                                              |       | 1,375,000 |   | — |   |
| Legal, accounting, public company expenses |       | 327,000                                              |       | 423,000                                             |       | 1,271,000 |   | 1,012,000 |   |
| Insurance and bank fees                    |       | 169,000                                              |       | 167,000                                             |       | 402,000 |   | 408,000 |   |
| Consulting and professional services       |       | 169,000                                              |       | 184,000                                             |       | 365,000 |   | 611,000 |   |
| Office, travel and other expenses          |       | 133,000                                              |       | 143,000                                             |       | 343,000 |   | 418,000 |   |
|                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Total                                      |       | $                                                    | 3,049,000  |                                                | $          | 1,989,000 |   | $ | 6,228,000 |   | $ | 5,010,000 |   |

 

Thenon-cash stock compensation expense recorded for the nine months ended September 30,2010 and 2009 resulted from issuance of stock options and restricted stock. Thevalue of each option award is estimated on the date of grant using theBlack-Scholes option-pricing model. The Black-Scholes option-pricing modelrequires the input of subjective assumptions, including the expected term ofthe option award and stock price volatility. The expected term of optionsgranted was derived from historical data on our employee exercise andpost-vesting employment termination experience. The expected volatility wasbased on the historical volatility of our stock.

 

Increasedsalary and payroll costs in 2010 compared with 2009 of $76,000 resultedprimarily from an increase in the number of employees for 2010 when compared to2009.

 

Theprovision for legal settlement of $1.375 million in the third quarter of 2010resulted from the signing on September 29, 2010, of a settlement agreementin the June 2008 suit for declaratory judgment titled, ***Saenz v. URI Inc.***which wasfiled in the 105th Judicial District Court, Kleberg County, Texas by theowners of the mineral estate of property in Kleberg County, Texas.  Under the Settlement, the Plaintiffs willratify, confirm and recognize the validity in all respects of the leases, agreeto cooperate with the Company and execute a stipulation of interest with regardto their respective interests and agree to support and not interfere, eitherdirectly or indirectly, with the Company’s efforts to obtain permits, licensesor other authorizations from the different regulatory and governmental agencieswith regard to any mining or other operations. The Company will pay to Plaintiffs $1.375 million in cash which includesamounts for prior royalties that the plaintiffs had previously rejected.  In addition royalties due for futureproduction from the leases will be amended from a 6.25% royalty rate to asliding scale royalty ranging from 9% to 15%. The Settlement is subject to execution of amendments to the leases toreflect the foregoing and to documentation of other aspects of the settlementand dismissal of the suit.

 

TheCompany’s legal, accounting and public company expenses had a net increase of$259,000 in the first nine months of 2010 compared with 2009. The primaryincrease related to a significant amount of pre-trial legal activities in 2010related to the Saenz lawsuit, and preparation of the proxy statement inconjunction with the 2010 annual meeting.  We also recorded higher audit andSarbanes-Oxley Section 404 (“SOX 404”) fees in the first nine monthsof 2010 compared to 2009.  Fees paid to directors were higher in the ninemonths ended September 2010 than in the same period in 2009 due to both anincrease in the number of meetings held and the addition of another director inJanuary 2010.

 

Consultingand professional service expenses were reduced in the nine months ended September 30,2010 compared with 2009 as a result of lower public relations costs associatedwith New Mexico community relations and community information educationactivities incurred during the period when compared with the same period in2009.

 

*Net Losses.*For the nine months ended September 30,2010 and 2009, we had net losses of $7.7 million and $6.3 million, respectively.

 

*Cash Flow. *At of September 30,2010 we had a cash balance of approximately $10.5 million compared with $8.2million at the same date in 2009.

 

Inthe first nine months of 2010, we had cash used in operations of $5.2 million.We used $499,000 in investing activities during the first nine months of2010.  We increased the collateral supporting our South Texas financialsurety requirements by $42,000 and made additions to our South Texas and NewMexico property, plant and equipment of $457,000 during the period.  Theseexpenditures were primarily for land and mineral lease payments during thequarter.  During the first nine months of 2010 our net cash from financingactivities increased by $10.1 million, primarily from the sale of 27,142,830 sharesof common stock that were sold at a price of $0.42 per share on June 25,2010 and July 16, 2010 in an underwritten public offering. Net proceeds tothe Company, after deducting underwriting discounts and commissions andestimated offering expenses, were approximately $10.1 million.  We usedapproximately $90,000 during the period for principal payments for the Company’scapital leases.

 

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Inthe first nine months of 2009, we had cash used in operations of $3.3 million.We used $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.  For the period we also used approximately $122,000 duringthe period for principal payments for the Company’s capital leases.

 

**Liquidity—Cash Sources and Uses for 2010**

 

Ourhighest priority is to maintain a positive cash position while we await thereturn of the uranium market and improved prices.  Production ceased in the second quarter of2009 when it was determined that the best economic decision for shareholdersgiven the price of uranium at the time was to preserve the asset until appropriatemargins could be made with the expected return of uranium prices.

 

Wehad $6.1 million in cash at year-end 2009 and had $10.5 million at the end ofSeptember 2010.  As of December 31, 2009 the Company had soldits entire uranium inventory and as such, we do not expect any additional salesrevenue or related cash inflows for the Company in 2010.  The Companyraised additional capital in June and July 2010 through anunderwritten public offering. Under the transactions, a total of 27,142,830shares of common stock were sold in the offering with net proceeds ofapproximately $10.1 million, after deducting underwriting discounts andcommissions and estimated offering expenses.

 

The Company raisedadditional capital in November 2010 through an underwritten publicoffering. Under the transaction, a total of 8,222,500 shares of common stockwere sold in the offering with net proceeds of approximately $9.0 million,after deducting underwriting discounts and commissions.

 

OnSeptember 29, 2010, in connection with the legal action initiated in June 2008titled, ***Saenz v.URI Inc.***,******weentered into a settlement agreement in the June 2008 under which wewill pay to Plaintiffs $1.375 million in cash which includes amounts for priorroyalties that the plaintiffs had previously rejected. The payment of thissettlement is subject to execution of amendments to the leases and todocumentation of other aspects of the settlement and dismissal of the suit andis expected to be made prior to year end 2010.

 

**Contingent Liabilities—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 $5,841,000 and $5,761,000 were issued at September 30,2010 and December 31, 2009, respectively, such L/C’s are collateralized intheir entirety by certificates of deposit.

 

Performancebonds totaling $2,834,000 were issued for the benefit of the Company at September 30,2010 and December 31, 2009.  At September 30,2010 the Company had deposited funds totaling $386,000 to collateralize thebond obligation.  In September 2010,the Company received notice from the bonding company requesting that theCompany either increase the collateral supporting the bonds to 100% of the bondamount by making equal quarterly payments of $500,000 or cause the release ofthe bonds by the fourth quarter of 2011. The amount of bonding issued by the carrier exceeded the amount ofcollateral by $2.5 million at September 30, 2010 and December 31,2009, respectively.  In the event thatthe carrier is required to perform under its bonds or the bonds are called bythe state agencies, the Company would be obligated to pay any expenditure inexcess of the collateral.

 

**Critical Accounting Policies**

 

Oursignificant accounting policies are described in Note 2 to the consolidatedfinancial statements included in the Company’s 2009 Annual Report onForm 10-K.  We believe our most critical accounting policies involvethose requiring the use of significant estimates and assumptions in determiningvalues or projecting 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.

 

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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.

 

Theaccounts of the Company are maintained in United States dollars. All dollaramounts in the financial statements are stated in United States dollars exceptwhere indicated.

 

**ITEM3.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

**Uranium Price 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 subject tofluctuation, and the price of uranium has been and will continue to be affectedby numerous factors beyond the Company’s control, including the demand fornuclear power, political and economic conditions, and governmental legislationin uranium producing and consuming countries and production levels and costs ofproduction of other producing companies.

 

Thespot market price for uranium has demonstrated a large range sinceJanuary 2001. Prices have risen from $7.10 per pound at January 2001to a high of $136.00 per pound in June 2007. The spot market price was$53.50 per pound as of November 1, 2010.

 

**ITEM4.  CONTROLS AND PROCEDURES**

 

TheCompany maintains disclosure controls and procedures that are designed toensure that information required to be disclosed in its filings with theSecurities and Exchange Commission (SEC) are recorded, processed, summarizedand reported within the time period specified in the SEC’s rules andforms, and that such information is accumulated and communicated to management,including its Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure based onthe definition of “disclosure controls and procedures” as defined inRule 13a-15(e) promulgated under the Securities Exchange Act of 1934,as amended (the “Exchange Act”). In designing and evaluating the disclosurecontrols and procedures, management has recognized that any controls andprocedures, no matter how well designed and operated, can provide only reasonableassurance of achieving the desired control objectives, and management isrequired to apply judgment in evaluating its controls and procedures.

 

Duringthe fiscal period covered by this report, the Company’s management, with theparticipation of the Chief Executive Officer and Chief Financial Officer of theCompany, carried out an evaluation of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of1934, as amended (the “Exchange Act”)). Based on that evaluation, our ChiefExecutive Officer and Chief Financial Officer have certified that ourdisclosure controls and procedures were effective as of and September 30,2010.

 

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

 

Managementof the Company is responsible for establishing and maintaining adequateinternal control over financial reporting as defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’sinternal control over financial reporting is designed, under the supervision ofthe Company’s Chief Executive Officer and Chief Financial Officer, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States of America(GAAP). The Company’s internal control over financial reporting includes thosepolicies and procedures that: (i) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP, and that receipts andexpenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and(iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use or disposition of the Company’sassets that could have a material effect on the financial statements

 

TheCompany conducted an evaluation of the effectiveness of its internal controlover financial reporting as of December 31, 2009. This evaluation wasbased on the framework in “Internal Control—Integrated Framework” issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). Allinternal control systems, no matter how well designed, have 

 

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inherentlimitations. Therefore, even those systems determined to be effective canprovide only reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with GAAP.

 

Basedon the Company’s evaluation under the framework in *Internal Control—Integrated Framework*, our Chief ExecutiveOfficer and Chief Financial Officer concluded that internal control overfinancial reporting was effective as of December 31, 2009.

 

**Changes in Internal Controls**

 

Duringthe first nine months of 2010 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.

 

**PART II- OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

**New Mexico Radioactive Material License**

 

Inthe State of New Mexico, uranium recovery by ISR technology requires a combinedsource and 11e. (2) byproduct material (uranium recovery) license issuedby the United States Nuclear Regulatory Commission (the “NRC” or the “Commission”).We applied for one license covering the four properties located in theChurchrock and Crownpoint districts collectively known as the CrownpointUranium Project (CUP). The Commission issued a uranium recovery license for theCUP in January 1998 that allowed licensed ISR operations to begin in theChurchrock district. In mid-1998, a panel of administrative law judges (NRC’sAtomic Safety and Licensing Board (hereinafter “Licensing Board”) determinedthat certain interested stakeholders who requested an NRC administrativehearing had standing to raise certain objections to the NRC license. TheLicensing Board conducted administrative hearings from 1999 through 2007 whichincluded a bifurcated hearing schedule, initial Licensing Board decisions,appeals to the Commission, settlement discussions, and a final Commissiondecision upholding HRI’s license.

 

Intervenorsappealed the Commission’s final approved action to the United States Court ofAppeals for the Tenth Circuit. On March 8, 2010 the Tenth Circuit rejectedthe petition and affirmed the action of the Commission in all respects. Afterthis decision, petitioners requested that the Tenth Circuit rehear the case *en banc*.  In May 2010, theUnited States Court of Appeals for the Tenth Circuit denied the petition for arehearing *en banc.*  Petitioners filed a motion with the United States Supreme Court (“Supreme Court”)to extend the time for filing a petition for certiorari or final review. The Supreme Court granted petitioners’ motion and extended the time for filinga petition to September 15, 2010 and prior to the deadline the petitionersfiled for review of this ruling to the United States Supreme Court.

 

**Tenth Circuit Court of Appeals Decision**

 

OnJune 15, 2010 the United States Court of Appeals for the Tenth Circuit enbanc held that the Company’s Section 8 property in Churchrock, New Mexicois not Indian Country.  The result of the ruling means the authority toissue a UIC permit to URI falls under the jurisdiction of the State of NewMexico, and not the U.S. Environmental Protection Agency (USEPA).  Theopposing parties had the right to petition the Supreme Court for review untilSeptember 13, 2010; however no petitions were filed as of deadline and theability for opposing parties to petition the United States Supreme Court hasexpired.

 

**Kingsville Dome Lessor Legal Action**

 

InJune 2008 a suit for declaratory judgment titled, ***Saenz v. URI Inc.,***was filed in the 105th Judicial District Court, Kleberg County, Texas bythe owners of the mineral estate of property in Kleberg County, Texas leased tothe Company, seeking a declaratory judgment that a certain lease is limited toone specific lot only and does not encompass other adjacent lands. The Companyhas a lease on the adjacent lands from the same mineral owners and has producedover 340,000 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 September 29, 2010, the counsel for UraniumResources, Inc. and the plaintiffs signed a settlement agreement in thismatter.  While the Company believes thatits defense in this matter is valid, counsel to the Company was unable toconclusively predict the outcome of the litigation and a reasonable cost forcompletion.  If a determination was madethat invalidated the leases on which the Company has previously produceduranium, the outcome could have had a material adverse affect on the Company’sfinancial condition.  As a result, theCompany believed it was in its best interest to settle the matter. Under theSettlement, the Plaintiffs will ratify, confirm and recognize the validity inall respects of the leases, agree to cooperate with the Company and execute astipulation of interest with regard to their respective interests and agree tosupport and not interfere, either directly or indirectly, with the Company’sefforts to obtain permits, licenses or other authorizations from the differentregulatory and governmental agencies with regard to any mining or otheroperations.  The Company will pay to 

 

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Plaintiffs$1.375 million in cash which includes amounts for prior royalties that theplaintiffs had previously rejected.  Inaddition royalties due for future production from the leases will be amendedfrom a 6.25% royalty rate to a sliding scale royalty.  The Settlement is subject to execution ofamendments to the leases to reflect the foregoing and to documentation of otheraspects of the settlement and dismissal of the suit.

 

**ITEM1A.  RISK FACTORS**

 

None,in addition to those risk factors set forth in our Form 10-Q for theperiod ended March 31, 2010 and our Form 10-K for the year endedDecember 31, 2009 and the following:

 

***Liquidity***

 

OnSeptember 29, 2010, in connection with the legal action initiated in June 2008titled, *Saenz v. URI Inc.*, weentered into a settlement agreement under which we will pay to plaintiffs$1.375 million in cash which includes amounts for prior royalties that theplaintiffs had previously rejected. The payment of this settlement is subjectto execution of amendments to the related leases and to documentation of otheraspects of the settlement and dismissal of the suit and is expected to be madein November 2010.

 

Wehad $6.1 million in cash at December 31, 2009 and $10.5 million atSeptember 30, 2010. As of December 31, 2009 the Company had sold itsentire uranium inventory and as such, we do not expect any additional salesrevenue or related cash inflows for the Company in 2010. The Company raisedadditional capital in June and July 2010 through an underwrittenpublic offering. Under the transactions, a total of 27,142,830 shares of commonstock were sold in the offering with net proceeds of approximately $10.1million, after deducting underwriting discounts and commissions and estimatedoffering expenses. The Company raised additional capital in November 2010through an underwritten public offering. Under the transaction, a total of 8,222,500shares of common stock were sold in the offering with net proceeds ofapproximately $9.0 million, after deducting underwriting discounts andcommissions and estimated offering expenses.

 

TheCompany expects that its existing cash, together with the net proceeds of theseofferings, will provide sufficient liquidity into 2012. At such time,additional sources of cash will be required to maintain our liquidity.

 

***Our inability to obtain financialsurety would threaten our ability to continue in business.***

 

Bondingrequirements to comply with federal and state environmental and remediationrequirements and to secure necessary licenses and approvals will increasesignificantly when future development and production occurs at our sites inTexas and New Mexico. The amount of the bonding for each producing property issubject to annual review and revision by regulators. We expect that the issuerof the bonds will require us to provide cash collateral equal to the faceamount of the bond to secure the obligation. We have received notice from oursurety company demanding that we either increase the collateral supporting thebonds to 100% of the bond amount totalling approximately $2.5 million, or causethe release of the bonds by the fourth quarter of 2011. In the event we are notable to raise, secure or generate sufficient funds necessary to satisfy thesebonding requirements, we will be unable to develop our sites and bring theminto production, which inability will have a material adverse impact on ourbusiness and may negatively affect our ability to continue to operate.

 

 

**ITEM2.  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

None

 

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES.**

 

None

 

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS.**

 

None

 

**ITEM 5.  OTHERINFORMATION.**

 

None

 

**ITEM6.  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 8, 2010 | By:                              | /s/  Donald C. Ewigleben |
|                          |                             | Donald  C. Ewigleben |
|                          |                             | President  and Chief Executive Officer |
|                          |                             |   |
| Dated:  November 8, 2010 | 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 10-K on  March 16, 2010).                                                                                                                                           |
|                |       |                                                                                                                                                                                                                                              |
| 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).                                                                                           |
|                |       |                                                                                                                                                                                                                                              |
| 10.7*               |       | 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  September 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  September 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  September 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 September 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 September 30, 1999, SEC  File Number 000-17171).                                                         |
|                |       |                                                                                                                                                                                                                                              |
| 10.16.1*            |       | Amendment  No. 1 to the Uranium Resources, Inc. 1999 Deferred Compensation  Plan (filed with the Company’s Annual Report on Form 10KSB dated  March 31, 2006, SEC File Number 000-17171).                                |
|                |       |                                                                                                                                                                                                                                              |
| 10.17*              |       | 2000-2001  Deferred Compensation Plan (filed with the Company’s Annual Report on Form 10-K  dated December 31, 2004, SEC File Number 000-17171).                                                                                   |
|                |       |                                                                                                                                                                                                                                              |
| 10.17.1*            |       | Amendment  No. 2 to the Uranium Resources, Inc. Deferred Compensation Plan for  2000-2001 (filed with the Company’s Annual Report on Form 10KSB dated  March 31, 2006, SEC File Number 000-17171).                       |
|                |       |                                                                                                                                                                                                                                              |
| 10.22*              |       | Uranium  Resources, Inc. Deferred Compensation Plan for 2002 (filed with the  Company’s Quarterly Report on Form 10-QSB dated November 13, 2002,  SEC File Number 000-17171).                                                 |

 

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| 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). |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.35*   |   | 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).                                                                                                             |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.37*   |   | 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).                                                       |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.43*   |   | 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).                                      |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 10.43.1* |   | Amended  and Restated 2004 Directors’ Stock Option and Restricted Stock Plan dated  April 1, 2010 (filed with the Company’s Form 10-Q dated  August 9, 2010, SEC File No. 000-17171)..                                                                                   |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 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*   |   | Consulting  Services Agreement with RMG Consulting, LLC dated October 1, 2010 (Filed  with the Company’s Form 8-K dated October 4, 2010, SEC File  No. 001-33404).                                                                                                            |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 14*      |   | Uranium  Resources, Inc. Code of Ethics for Senior Executives. Filed with the  Company’s Annual Report on Form 10-KSB dated March 30, 2004, SEC  File Number 000-17171).                                                                                                           |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 21*      |   | Subsidiaries  of the Registrant                                                                                                                                                                                                                                                                        |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 31.1     |   | Certification  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 31.2     |   | Certification  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 32.1     |   | Certification  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                                                                                   |
| 32.2     |   | Certification  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                             |

 

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

 

E-2

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