10-K/A 1 a08-7327_110ka.htm 10-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Mark One)

x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the fiscal year ended December 31, 2006 or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33404

URANIUM RESOURCES, INC.

(Exact name of Registrant as specified in its charter)

\DELAWARE | 75-2212772
(State of Incorporation) | (I.R.S. Employer Identification No.)
405 State Highway Bypass 121, Building A, Suite 110 |
Lewisville, Texas | 75067
(Address of principal executive offices) | (Zip code)

(972) 219-3330
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value per share
(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o |  | Accelerated filer x |  | Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the Common Stock held by non-affiliates of the Registrant at June 30, 2006, was approximately $200,393,826.

Number of shares of Common Stock, $0.001 par value, outstanding as of March 9, 2007: 51,797,339 shares.

This report on Form 10-K/A is being filed in response to comments from the Securities and Exchange Commission. The information contained herein has been updated as if it were being disclosed as of April 2007.

URANIUM RESOURCES, INC.

ANNUAL REPORT ON FORM 10-K/A
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

TABLE OF CONTENTS

PART I |  |  |
Item 1. Business |  | 1 |
The Company and Current Plan of Operation |  | 1 |
Uranium Reserves/Mineralized Material |  | 3 |
Long-Term Delivery Contracts |  | 4 |
Joint Venture for Churchrock Property |  | 5 |
Overview of the Uranium Industry |  | 5 |
The In Situ Recovery Mining Process |  | 6 |
Environmental Considerations and Permitting |  | 7 |
Reclamation and Restoration Costs and Bonding Requirements |  | 7 |
Water Rights |  | 8 |
Competition |  | 8 |
Item 1A. Risk Factors |  | 8 |
Item 1B. Unresolved Staff Comments |  | 11 |
Item 2. Properties |  | 11 |
South Texas |  | 11 |
New Mexico Properties |  | 16 |
Insurance |  | 23 |
Reclaimed Properties |  | 23 |
Item 3. Legal Proceedings |  | 23 |
New Mexico Radioactive Material License |  | 23 |
New Mexico UIC Permit |  | 23 |
Texas Department of Health Bonding Issues |  | 24 |
Kingsville Dome Production Area Authorization 3 |  | 24 |
Other |  | 24 |
Item 4. Submission of Matters to a Vote of Security Holders |  | 24 |
GLOSSARY OF CERTAIN URANIUM INDUSTRY TERMS |  | 25 |
PART II |  | 27 |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 27 |
Dividends |  | 27 |
Securities Authorized for Issuance Under Equity Compensation Plans |  | 27 |
Performance Graph |  | 27 |
Recent Sales of Unregistered Securities |  | 28 |
Item 6. Selected Financial Data |  | 28 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation |  | 30 |
Forward Looking Statements |  | 30 |
Restatement of Financial Statements |  | 30 |
Financial Condition and Results of Operations |  | 30 |
Liquidity—Cash Sources and Uses for 2007 |  | 33 |

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Derivative Financial Instruments |  | 33 |
Contingent Liabilities |  | 34 |
Off Balance Sheet Arrangements |  | 34 |
Critical Accounting Policies |  | 34 |
Impact of Recent Accounting Pronouncements |  | 35 |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |  | 35 |
Uranium Price Volatility |  | 35 |
Derivative Financial Instruments |  | 35 |
Item 8. Financial Statements and Supplementary Data |  | 36 |
Financial Statements |  | 36 |
Supplemental Financial Data Tables |  | 36 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |  | 37 |
Item 9A. Controls and Procedures |  | 37 |
Management’s Report on Internal Control Over Financial Reporting |  | 37 |
Changes in Internal Control |  | 38 |
Report of Independent Registered Public Accounting Firm |  | 38 |
Item 9B. Other Information |  | 39 |
PART III |  | 40 |
Item 10. Directors, Executive Officers and Corporate Governance |  | 40 |
Directors |  | 40 |
Other Executive Officers |  | 41 |
Section 16(a) Beneficial Ownership Reporting Compliance |  | 42 |
Amended Code of Ethics for Senior Financial Officers |  | 42 |
Audit Committee |  | 42 |
Item 11. Executive Compensation |  | 42 |
Compensation Discussion and Analysis |  | 42 |
Summary Compensation Table |  | 47 |
Grant of Plan Based Awards |  | 48 |
Employment Agreements |  | 48 |
Outstanding Awards at Fiscal Year-End |  | 48 |
Option Exercises and Stock Vested |  | 49 |
Potential Payments Upon Termination or Change in Control |  | 50 |
Director Compensation |  | 50 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 51 |
Securities Authorized for Issuance Under Equity Compensation Plans |  | 51 |
Security Ownership of Certain Beneficial Owners and Management |  | 51 |
Item 13. Certain Relationships and Related Transactions and Director Independence |  | 53 |
Item 14. Principal Accountant Fees and Services |  | 53 |
Audit Fees |  | 53 |
Audit Related Fees |  | 53 |
Tax Fees |  | 53 |
All Other Fees |  | 53 |
Audit Committee Pre-Approval Policies and Procedures |  | 53 |
PART IV |  | 53 |
Item 15. Exhibits and Financial Statement Schedules |  | 53 |
SIGNATURES |  | 54 |
Index to Consolidated Financial Statements |  | F-1 |
Exhibit Index |  | E-1 |

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URANIUM RESOURCES, INC.

ANNUAL REPORT ON FORM 10-K/A
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

PART I

The “Company” or “Registrant” is used in this report to refer to Uranium Resources, Inc. and its consolidated subsidiaries. This 10-K/A contains “forward-looking statements.” These statements include, without limitation, statements relating to management’s expectations regarding the Company’s ability to remain solvent, capital requirements, mineralized materials, timing of receipt of mining permits, production capacity of mining operations planned for properties in South Texas and New Mexico and planned dates for commencement of production at such properties, business strategies and other plans and objectives of the Company’s management for future operations and activities and other such matters. The words “believes,” “plans,” “intends,” “strategy,” “projects,” “targets,” or “anticipates” and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company’s disclosures under the heading: “Risk Factors” beginning on page 8.

Certain terms used in this Form 10-K/A are defined in the “Glossary of Certain Terms” appearing at the end of Part I hereto.

Item 1. Business.

The Company and Current Plan of Operation

Our History

We were organized in 1977 to mine uranium in the United States by using an in situ recovery (ISR) mining method, a process by which groundwater is fortified with an oxidizing agent and pumped into the ore body causing the uranium contained to dissolve. The resulting solution is then pumped to the surface where it is further processed into uranium concentrates that are shipped to a conversion facility for sale to our customers. This ISR process is generally more cost effective and environmentally benign than conventional mining techniques.

From 1988 through 1999 we produced approximately 6.1 million pounds of uranium from two South Texas properties; 3.5 million pounds from Kingsville Dome and 2.6 million pounds from Rosita. In 1999, we shut-down all production because of depressed uranium prices. From the first quarter of 2000 until December 2004, we had no source of revenue, and therefore, had to rely on equity infusions to remain in business and maintain the critical employees and assets of the Company.

When prices began to improve in mid-2003, we took the first steps to bring our Vasquez property into production. Vasquez was our only fully licensed and permitted property at the time. We signed two long-term contracts, calling for deliveries of 600,000 pounds of uranium each year from 2005 through 2008. The planned source of production for those contracts was the Vasquez property, which we had expected to produce at an annual volume and at a production cost that would meet the contracted delivery requirements. The property was brought online in the fourth quarter of 2004.

During 2005, the Vasquez property produced fewer pounds than expected due to chemical and permeability obstacles in the ore body. In addition, our cost of production exceeded the sales price under the contracts, and we lost money on each pound sold. These contracts were renegotiated in March 2006 (see “Business—Long-Term Delivery Contracts”).

In 2006, we brought Kingsville Dome back into production and are in the process of restarting Rosita in 2007.

In addition to our South Texas properties, we own 183,000 acres of mineral holdings in New Mexico that were acquired during the 1980s and 90s. We also acquired a vast database of exploration logs and drill results for these properties that were developed by Homestake Mining, Mobil Oil, Kerr-McGee, Phillips Petroleum, United Nuclear, and Westinghouse Electric Corporation.

2006 Events

In March 2006, we renegotiated our supply contracts with Itochu and UG. We committed to each of them one-half of whatever our production is in Texas at a price that is based on the market price at the time of delivery less a discount. Prior to March 2006, these contracts were priced based on fixed prices that contained nominal price increases indexed to inflationary changes. The average price for the deliveries under our previous contract terms was $17.95 in 2005 and was anticipated to have been $14.58 per pound in 2006. The renegotiated contracts provided us with the ability to take advantage of the increases in uranium market prices realized in 2006 and more closely aligned the prices we received for uranium sales to the pricing occurring in the uranium marketplace. For 2006, uranium spot market prices rose from $36.25 per pound in January

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to $72.00 per pound in December. We expect to see a continued strengthening in uranium market prices for 2007, which in turn is projected to provide increased sales prices for our uranium sales.

Based upon our projected uranium production for 2007, current uranium prices and uranium market outlooks, we expect 2007 to show increased sales volumes and increased uranium sales revenues compared to 2006. We expect our Kingsville Dome production to contribute more towards our total production in 2007 than our production from Vasquez and, as a result of projected lower Kingsville Dome production costs, expect 2007 operations to reflect higher profitability than 2006. See “Business—Long-Term Delivery Contracts ” for a discussion of the terms of the revised contracts, including certain conditions thereto.

In April 2006, we raised $50 million in equity by a sale of 10,200,307 shares of Common Stock at $4.90 per share in a private placement to selected accredited investors. The Company used the proceeds of the offering to pay UG the $12 million discussed under “ Business—Long-Term Delivery Contracts ” and the remainder for capital costs for upgrades to the Rosita plant, permitting and development drilling for Rosita, delineation drilling for properties contiguous to the Rosita plant, land acquisition and exploration costs and working capital.

In July 2006, the Company stated our Texas production was being adversely affected by a shortage of drill rigs, logging trucks, permitting delays, and weather related problems. This shortage of drill rigs and logging trucks was the result of intense industry-wide competition for exploration and development tools. These problems continued through August and into September 2006. The loss of key personnel to competitors also hindered production development plans.

In November 2006, we launched a pre-feasibility study to evaluate the ability of the company to develop several of its properties in New Mexico by conventional mining and milling methods, including mine sites at Crownpoint, Nose Rock, and Roca Honda. These mine sites were designed by previous owners to produce nearly 4 million pounds of uranium per year. All three projects were deferred in the early 1980s after uranium prices fell from $43 per pound U 3 O 8 to below $10 per pound by the end of that decade. On these sites are six completed mine shafts that are estimated to have a replacement cost of $25 to $50 million. With these shafts already in place, we believe the cost of development should be lower. In addition, once all required permits are received, production on the sites with mine shafts already in place should begin considerably sooner than on comparable undeveloped sites.

The pre-feasibility study will include the following:

· An economic evaluation of the Nose Rock project that was developed by a division of Phillips Petroleum in the late 1970s. This project was designed to produce approximately 2.5 million pounds of uranium per year, but was shutdown in 1981 before mining began. There are two plugged shafts that were sunk to the ore zone.

· An economic evaluation of the Roca Honda project that was developed by Kerr-McGee in the late 1970s. There is a partially completed shaft that was being developed to produce 1 million pounds per year. Production from this project was deferred in 1981 before mining began and the shaft was plugged at the surface.

· An economic evaluation of the West Largo project that was drilled out by Kerr-McGee in the 1970s. The property appears to be amenable to both ISR and conventional mining methods.

· A thorough evaluation of the Company’s extensive data base that includes over 16,000 logs, feasibility studies, mine development plans, and ore reserve analyses. This evaluation will focus on the Company’s 43,000 acres located in the prolific Ambrosia Lake District where there exists the greatest potential to discover new uranium resources.

· A complete examination of the Company’s 183,000 acres of mineral holdings in New Mexico to determine which properties are more amenable to conventional development as opposed to in-situ recovery mining methods.

· An analysis to determine the feasibility of building a conventional mill to process company mined ore, as well as the potential for toll milling.

Update and Operational Plans

Total production from Kingsville Dome and Vasquez in January and February was 33,400 and 29,200 pounds U 3 O 8, respectively. March production through the 15th of the month was 20,700 pounds U 3 O 8. Production for the first quarter of 2007 is estimated to be in the range of 98,000 to 108,000 pounds U 3 O 8. For the quarter, Kingsville production is estimated to be in the range of 60,000 to 65,000 pounds U 3 O 8, while Vasquez is expected to produce between 38,000 and 43,000 pounds.

Production from Wellfield 13 at Kingsville Dome, which was brought online at the end of January, has been meeting company expectations and should produce between 44,000 to 49,000 pounds U 3 O 8 for the quarter. Wellfield 14 is scheduled to come online in April, while Wellfield 15 should startup early in the third quarter. Vasquez is currently producing at a rate around 350 pounds per day.

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Our Vasquez operation continued to operate below expectations throughout 2006. At the beginning of the project in 2004, our mining plan indicated we could produce the Vasquez property at an annual rate of 700,000 pounds. The geological and chemical problems we experienced in 2005 caused us to revise that estimate downward in July 2006 to an annual capacity of 400,000 pounds. This estimate assumed steps we implemented would successfully resolve production problems that we had never experienced at our other mines. While partially successful, these steps have not lead to higher production levels. At the end of the third quarter 2006 and again in December 2006 we reduced our estimation of recoverable reserves at the Vasquez property to include only those pounds under developed and producing wellfields, from which we expect future production to be in the 90,000 to 100,000 pound range. This reduced our estimated recoverable reserves at Vasquez by 1.987 million pounds. We intend to continue mining existing wellfields at Vasquez as long as they generate positive results on an operating basis. We are not currently planning to add any new wellfields at Vasquez.

In October 2006, we began a $3.5 million program to drill 1,440 holes totaling over 575,000 feet by the end of the second quarter 2007. This program will allow us to develop the reserves needed for production at Kingsville Dome and Rosita over the next few years, and should result in lower production costs for our Texas operations.

As of the end of February 2007, we had 16 drill rigs under contract, up from 11 rigs in September 2006. In addition, the Company acquired two prompt fission neutron (PFN) logging tools in late 2006.

In New Mexico, we received a decision from the US Environmental Protection Agency (EPA) in February 2007 determining that section 8 of our Churchrock Project was deemed by EPA to be Indian country, and therefore, the underground injection permit should be issued by EPA and not by the New Mexico Environmental Department. We have appealed this decision to the United States Court of Appeals for the Tenth Circuit.

Total production for all of 2006 was 259,112 pounds and production costs per pound were $47.46.

As of December 31, 2006, we had 121 employees, including eight geologists, ten engineers and two certified public accountants. We have field offices at Kingsville Dome, Vasquez, Rosita and Crownpoint, New Mexico.

The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act may be accessed free of charge through the Company’s web site. The Company’s web site address is www.uraniumresources.com.

Future Strategy

Our strategy moving forward is to generate cash from our Texas operations while developing the future production potential of our New Mexico properties. We plan to utilize the most efficient and economic mining methods available including in situ recovery and conventional mining and milling. We are planning to proceed immediately with the development of all our projects, especially those in New Mexico that are not on Indian lands. We also intend to increase our reserve position through acquisitions or joint ventures in order to exploit the strong market for uranium.

The Company has recently adopted a strategic plan with the goal of URI becoming a 10 million pound producer of uranium by 2014 using both ISR and conventional mining and milling methods. As part of its strategy, we intend to build our uranium base to between 200 and 300 million pounds through exploration of our own properties and by acquisition.

In Texas, we intend to maximize production from existing properties at Kingsville Dome and Rosita. We plan to add additional properties to feed these operations, with the ultimate goal being to achieve 1 to 2 million pounds of production annually within the next several years. To accomplish this objective, the Company plans to complete its drill out program by the end of the second quarter of 2007, mine all identified uranium expeditiously and acquire or lease new properties as necessary.

In New Mexico, the Company is working to obtain the final permit for the joint venture Churchrock ISR project while also looking to develop its conventional assets beginning with Roca Honda. The ongoing evaluation of the Company’s extensive database should be completed by the end of June, while an internal pre-feasibility study on conventional mining and milling of Company properties should be finished by the end of March.

We believe 2006 was a pivotal year. We renegotiated our supply contracts on far more favorable terms, raised $50 million in equity which will allows us to move forward with our strategic plans for Texas and New Mexico, entered into the joint venture with Itochu and commenced a pre-feasibility study on conventional mining of our New Mexico uranium assets. The Company intends to execute on its strategic plan to make the Company a leading uranium producer.

Uranium Reserves/Mineralized Material

In accordance with the SEC’s Guideline of Non-Reserve Mineralized Material, and as shown in the following table, the Company estimates 91.7 million pounds of in-place mineralized uranium material on its New Mexico properties as of

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March 15, 2007. This estimate reflects the Company’s ongoing reevaluation of its New Mexico properties, including its decision to consider development of certain properties by conventional mining and milling methods in addition to ISR methods. The estimate for each New Mexico property is based on studies and geologic reports prepared by prior owners, along with studies and reports prepared by geologists engaged by the Company. The estimates presented below were reviewed and affirmed by Behre Dolbear & Company (USA), an independent private engineering firm.

SUMMARY OF IN-PLACE NON-RESERVE MINERALIZED MATERIAL IN NEW MEXICO

|  | Tonnage |  | Grade |  | Non-Reserve Mineralized Material |
Property |  | Millions |  | Percent |  | Millions of Pounds U3O8 |
Mancos |  | 2.3 |  | 0.09 | % | 4.2 |
Church Rock |  | 8.5 |  | 0.11 | % | 18.6 |
Nose Rock |  | 7.8 |  | 0.14 | % | 21.7 |
West Largo |  | 2.9 |  | 0.30 | % | 17.2 |
Roca Honda |  | 3.9 |  | 0.19 | % | 14.7 |
Crownpoint |  | 4.8 |  | 0.16 | % | 15.3 |
Total |  | 30.1 |  | 0.15 | % | 91.7 |

The foregoing table does not include estimates for our Texas properties. The following table summarizes the Company’s estimates of Proven Reserves for the Company’s Kingsville Dome and Vasquez properties in South Texas. The Company has completed wide spaced drilling on extensions of the Kingsville Dome properties that it intends to mine after the identified reserves have been mined. When the Company finishes the delineation drilling for the wellfields on those extensions it will then assign reserve numbers thereto.

SUMMARY OF IN-PLACE RESERVES IN SOUTH TEXAS

Property |  | Tonnage Millions |  | Grade Percent |  | Proven Uranium Reserves Millions of Lbs U3O8 at 12/31/06 |
Kingsville Dome |  | 0.304 |  | 0.102 | % | 0.445 |
Vasquez |  | 0.187 |  | 0.096 | % | 0.144 |

Long-Term Delivery Contracts

Prior to March 2006 we had two contracts with Itochu Corporation and two with UG USA, Inc. Under those contracts the Company was obligated to deliver an aggregate of 600,000 pounds in each of the years 2005 through 2008, and the buyer had the right to increase or decrease those deliveries by 15%. The average price for such deliveries was $17.95 in 2005 and was anticipated to have been $14.58 per pound in 2006. These contracts were entered into at a time when the spot price for uranium was less than $15 per pound, substantially below the $40 per pound in effect as of March 25, 2006. Two other contracts with these buyers called for aggregate deliveries of 645,000 pounds by December 31, 2007 priced at the spot price at the time of delivery less an average of $3.80 per pound.

In March 2006 we entered into a new contract with Itochu and a new contract with UG that supersede the existing contracts. Each of the new contracts calls for delivery of one-half of our actual production from our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding certain large potential exploration plays). The terms of such contracts are summarized below.

The Itochu Contract. Under the Itochu contract all production from the Vasquez property will be sold at a price equal to the average spot price for the eight weeks prior to the date of delivery less $6.50 per pound, with a floor for the spot price of $37 and a ceiling of $46.50. Other Texas production will be sold at a price equal to the average spot price for the eight weeks prior to the date of delivery less $7.50 per pound, with a floor for the spot price of $37 and a ceiling of $43. On non-Vasquez production the price paid will be increased by 30% of the difference between the actual spot price and the $43 ceiling up to and including $50 per pound. If the spot price is over $50 per pound the price on all Texas production will be increased by 50% of such excess. The floor and ceiling and sharing arrangement over the ceiling applies to

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3.65 million pounds of deliveries, after which there is no floor or ceiling. Itochu has the right to cancel any deliveries on six-month’s notice.

On December 5, 2006, HRI-Churchrock, Inc., a wholly-owned subsidiary of the Company, entered into an agreement with a wholly-owned subsidiary of Itochu to develop jointly the Company’s Churchrock property in New Mexico (the “Joint Venture”) ( see “ Business—Joint Venture for Churchrock Property ”). A feasibility study was completed and delivered by the end of 2006. Under the terms of the Joint Venture, both parties had until the end of March 2007 to make a preliminary investment decision (“Preliminary Investment Decision”) whether to move forward with the Joint Venture. Itochu has requested an extension, and the parties have agreed to extend that date until May 1, 2007. If Itochu should terminate the venture at that time, we would no longer receive the additional price of 30% of the excess over $43 per pound outlined above. If we should terminate the venture at that time, the original contract terms will be reinstated from that time forward.

The UG Contract . Under the UG contract all production from the Vasquez property and other Texas production will be sold at a price equal to the month-end long-term contract price for the second month prior to the month of delivery less $6 per pound until (i) 600,000 pounds have been sold in a particular delivery year and (ii) an aggregate of 3 million pounds of uranium has been sold. After the 600,000 pounds in any year and 3 million pounds total have been sold, UG will have a right of first refusal to purchase other Texas production at a price equal to the average spot price for a period prior to the date of delivery less 4%. In consideration of UG’s agreement to restructure its previously existing contract, we paid UG $12 million in cash with funds raised in our equity offering completed in April 2006.

Joint Venture for Churchrock Property

On December 5, 2006, HRI-Churchrock, Inc., a wholly-owned subsidiary of the Company, entered into a Joint Venture with a wholly-owned subsidiary of Itochu to develop jointly our Churchrock property in New Mexico.

A feasibility study was completed and delivered at the end of 2006. Under the terms of the Joint Venture, both parties had until April 2, 2007 to make a Preliminary Investment Decision whether to move forward with the Joint Venture. The parties have agreed to extend that date until May 1, 2007. If a positive decision is made, Itochu will reimburse us for 50% of our permitting costs from November 1, 2005, through the completion of the feasibility study, up to a maximum contribution of $180,000. The parties will split costs incurred after completion of the feasibility study 50-50 until a final investment decision is made by the parties after receipt of necessary permits and resolution of the Indian country status of certain of the properties included in the venture, which is currently pending with the US Environmental Protection Agency (“Final Investment Decision”).

If a positive Final Investment Decision is made, we will convey to the Joint Venture certain permits and certain of our Churchrock properties in New Mexico, and Itochu will contribute $8 million in cash and cause a $24 million debt facility to be made available to us. Cash flow from the first $30 per pound of uranium sold by us will be split 50-50 and cash flow from uranium sales in excess of $30 per pound will be split 70% to us and 30% to Itochu. We will manage the Joint Venture and receive a management fee.

If Itochu makes a positive Preliminary Investment Decision or a Positive Final Investment Decision and we make a negative decision at either time, the Joint Venture will terminate and the terms of the parties’ original delivery contracts applicable to South Texas production will be reinstated prospectively. The average price of deliveries under the original contracts would have been about $15 per pound for 2006. If we make a negative Final Investment Decision and Itochu makes a positive Final Investment Decision, we will reimburse Itochu 30% of the permitting expenses paid by Itochu, and we will be prohibited from developing the Churchrock property for 18 months.

If both parties make a negative decision at either the Preliminary or Final Investment Decision time, or if we make a positive decision at either time and Itochu makes a negative decision, the Joint Venture will terminate and there will be no reinstatement of the original delivery contracts with Itochu for South Texas production. However, our sales price will be reduced by $2.10 per pound on some of our South Texas production from that date forward.

The Company and Itochu have each guaranteed the obligations of its subsidiary that is the member of the Joint Venture. Certain obligations are limited to the amount of distributions received from the venture.

Overview of the Uranium Industry

The only significant commercial use for uranium is as a fuel for nuclear power plants for the generation of electricity. According to the World Nuclear Association, there were 435 nuclear power plants operating in the world at the end of 2006 with an annual consumption of more than 170 million pounds of uranium. Based on reports by the Ux Consulting Company, LLC (“Ux”) worldwide production of uranium in 2005 (the most recent year for which statistics are available) was approximately 108 million pounds. Ux reported the gap between production and demand has been filled by secondary supplies, such as inventories held by governments, utilities and others in the fuel cycle, including the highly enriched

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uranium (HEU) inventories which are a result of the agreement between the US and Russia to blend down nuclear warheads. These secondary supplies are currently meeting nearly a third of worldwide demand.

Spot market prices have risen over the past three years in anticipation of sharply higher projected demand as a result of a resurgence in nuclear power, and by the fact that as secondary supplies are depleted, future production will have to rise closer to demand. Spot market prices, according to Ux, rose from $36.25/lb to $75/lb during 2006. The spot price as of the end of February 2007 was $85/lb.

The following graph shows average spot prices per pound from 1983 to March 5, 2007, as reported by Trade Tech and Ux.

All prices beginning in 1993 represent U 3 O 8 deliveries available to U.S. utilities.

The In Situ Recovery Mining Process

The in situ recovery mining process is a form of solution mining. It differs dramatically from conventional mining techniques. The in situ recovery technique avoids the movement and milling of significant quantities of rock and ore as well as mill tailing waste associated with more traditional mining methods. It is generally more cost-effective and environmentally benign than conventional mining. Historically, the majority of United States uranium production resulted from either open pit surface mines or underground shaft operations.

The in situ recovery process was first tested for the production of uranium in the mid-1960s and was first applied to a commercial-scale project in 1975 in South Texas. It was well established in South Texas by the late 1970’s, where it was employed in about twenty commercial projects, including two operated by us.

In the in situ recovery process, groundwater fortified with oxygen and other solubilizing agents is pumped into a permeable ore body causing the uranium contained in the ore to dissolve. The resulting solution is pumped to the surface. The fluid-bearing uranium is then circulated to an ion exchange column on the surface where uranium is extracted from the fluid onto resin beads. The fluid is then reinjected into the ore body. When the ion exchange column’s resin beads are loaded with uranium, they are removed and flushed with a salt-water solution, which strips the uranium from the beads. This leaves the uranium in slurry, which is then dried and packaged for shipment as uranium powder.

We have historically used a central plant for the ion exchange. In order to increase operating efficiency and reduce future capital expenditures, we are now designing and developing wellfields using a wellfield-specific remote ion exchange methodology. Instead of piping the solutions over large distances through large diameter pipelines and mixing the waters of several wellfields together, each wellfield will be mined using a dedicated satellite ion exchange facility. This will allow ion exchange to take place at the wellfield instead of at the central plant. A wellfield consists of a series of injection wells, production (extraction) wells and monitoring wells drilled in specified patterns. Wellfield pattern is crucial to minimizing costs and maximizing efficiencies of production. The satellite facilities allow mining of each wellfield using its own native groundwater.

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Environmental Considerations and Permitting

Uranium mining is regulated by the federal government, states and, where conducted in Indian Country, by Indian tribes. Compliance with such regulation has a material effect on the economics of our operations and the timing of project development. Our primary regulatory costs have been related to obtaining licenses and permits from federal and state agencies before the commencement of mining activities.

Radioactive Material License. Before commencing operations in both Texas and New Mexico, we must obtain a radioactive material license. Under the federal Atomic Energy Act, the United States Nuclear Regulatory Commission has primary jurisdiction over the issuance of a radioactive material license. However, the Atomic Energy Act also allows for states with regulatory programs deemed satisfactory by the Commission to take primary responsibility for issuing the radioactive material license. The Commission has ceded jurisdiction for such licenses to Texas, but not to New Mexico. Such ceding of jurisdiction by the Commission is hereinafter referred to as the “granting of primacy.”

The Texas Department of Health is the permitting agency for the radioactive material license. For operations in New Mexico, radioactive material licensing is handled directly by the United States Nuclear Regulatory Commission.

See “Properties ” and “ Legal Proceedings ” for the status of our radioactive material license for New Mexico and our Texas properties.

Underground Injection Control Permits (“UIC”). The federal Safe Drinking Water Act creates a nationwide regulatory program protecting groundwater. This act is administered by the United States Environmental Protection Agency (the “USEPA”). However, to avoid the burden of dual federal and state (or Indian tribal) regulation, the Safe Drinking Water Act allows for the UIC permits issued by states (and Indian tribes determined eligible for treatment as states) to satisfy the UIC permit required under the Safe Drinking Water Act under two conditions. First the state’s program must have been granted primacy. Second, the USEPA must have granted, upon request by the state, an aquifer exemption. The USEPA may delay or decline to process the state’s application if the USEPA questions the state’s jurisdiction over the mine site.

Texas has been granted primacy for its UIC programs, and the Texas Commission on Environmental Quality administers UIC permits. The Texas Commission on Environmental Quality also regulates air quality and surface deposition or discharge of treated wastewater associated with the in situ recovery mining process.

New Mexico has also been granted primacy for its program. The Navajo Nation has been determined eligible for treatment as a state, but it has not requested the grant of primacy from the USEPA. Until the Navajo Nation has been granted primacy, in situ recovery uranium mining activities within Navajo Nation jurisdiction will require UIC permit from the USEPA. Despite some procedural differences, the substantive requirements of the Texas, New Mexico and USEPA underground injection control programs are very similar.

Properties located in Indian Country remain subject to the jurisdiction of the USEPA. Some of our properties are located in areas that are in dispute.

See “Properties ” and “ Legal Proceedings ” for a description of the status of our UIC permits in Texas and New Mexico.

Other. In addition to radioactive material licenses and underground injection control permit, we are also required to obtain from governmental authorities a number of other permits or exemptions, such as for wastewater discharge, for land application of treated wastewater, and for air emissions.

In order for a licensee to receive final release from further radioactive material license obligations after all of its mining and post-mining clean up have been completed in Texas, approval must be issued by the Texas Department of Health along with concurrence from the United States Nuclear Regulatory Commission and in New Mexico by the United States Nuclear Regulatory Commission.

In addition to the costs and responsibilities associated with obtaining and maintaining permits and the regulation of production activities, we are subject to environmental laws and regulations applicable to the ownership and operation of real property in general, including, but not limited to, the potential responsibility for the activities of prior owners and operators.

The current environmental regulatory program for the in situ recovery industry is well established. Many in situ recovery mines have gone full cycle without any significant environmental impact. However, the public anti-nuclear lobby can make environmental permitting difficult and timing unpredictable.

Reclamation and Restoration Costs and Bonding Requirements

At the conclusion of mining, a mine site is decommissioned and decontaminated, and each wellfield is restored and reclaimed. Restoration involves returning the aquifer to its pre-mining use and removing evidence of surface disturbance. Restoration can be accomplished by flushing the ore zone with native ground water or using reverse osmosis to remove ions, minerals and salts to provide clean water for reinjection to flush the ore zone. Decommissioning and decontamination entails dismantling and removing the structures, equipment and materials used at the site during the mining and restoration activities.

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The Company is required by the State of Texas regulatory agencies to obtain financial surety relating to certain of its future restoration and reclamation obligations. The Company has a combination of bank Letters of Credit (the “L/C’s) and performance bonds issued for the benefit of the Company to satisfy such regulatory requirements. The L/C’s were issued by Bank of America and the performance bonds have been issued by United States Fidelity and Guaranty Company (“USF&G”). The L/C’s relate primarily to our operations at our Vasquez project and amounted to $2,072,000 and $944,000, at December 31, 2006 and 2005, respectively. The L/C’s are collateralized in their entirety by certificates of deposit.

The performance bonds were $2,835,000 on December 31, 2006 and 2005, respectively, and related primarily to our operations at Kingsville Dome and Rosita. USF&G has required that the Company deposit funds collateralizing a portion of the bonds, and we have deposited approximately $360,000 and $344,000 at December 31, 2006 and 2005, respectively, as cash collateral for such bonds. We are obligated by agreement with the bonding company to increase the cash collateral to an amount equal to 50% of the amount of the bonds, plus an additional $0.50 for each pound of uranium produced until the account accumulates an additional $1.0 million.

We estimate that our actual reclamation liabilities for completed operations at Kingsville Dome and Rosita and current operations at Vasquez at December 31, 2006, are about $5.0 million of which the present value of $4.1 million is recorded as a liability as of December 31, 2006. Under an agreement reached on March 1, 2004 with the Texas regulatory agencies and our bonding company, we agreed to fund ongoing groundwater restoration at the Kingsville Dome and Rosita mine sites at specified treatment rates, utilizing a portion of our cash flow from sales of uranium from the Vasquez site as a substitute for additional bonding.

These financial surety obligations are reviewed and revised periodically by the Texas regulators.

In New Mexico, surety bonding will be required before commencement of mining and will be subject to annual review and revision by the United States Nuclear Regulatory Commission and the State of New Mexico or the USEPA.

Water Rights

Water is essential to the in situ recovery process. It is readily available in South Texas. In Texas, water is subject to capture, and we do not have to acquire water rights through a state administrative process. In New Mexico, water rights are administered through the New Mexico State Engineer and can be subject to Indian tribal jurisdictional claims. New water rights or changes in purpose or place of use or points of diversion of existing water rights, such as those in the San Juan and Gallup Basins where our properties are located, must be obtained by permit from the State Engineer. Applications may be approved subject to conditions that govern exercise of the water rights.

Jurisdiction over water rights becomes an issue in New Mexico when an Indian nation, such as the Navajo Nation, objects to the State Engineer’s authority and claims tribal jurisdiction over Indian Country. This issue may result in litigation between the Indian nation and the state, which may delay action on water right applications, and can require applications to the appropriate Indian nation and continuing jurisdiction by the Indian nation over use of the water. The foregoing issues arise in connection with certain of our New Mexico properties.

In New Mexico, we hold approved water rights to provide sufficient water to conduct mining at the Churchrock project and Section 24 for the Crownpoint project for the projected life of these mines. We also hold two unprotested senior water rights applications that, when approved, would provide sufficient water for future extensions of the Crownpoint project.

Competition

We market uranium to utilities in direct competition with supplies available from various sources worldwide. The Company competes primarily based on price.

Item 1A. Risk Factors.

The factors identified below are important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that, while we believe such assumptions or bases to be reasonable and make them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to the future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result, or be achieved or accomplished. Taking into account the foregoing, the following are identified as important risk factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company.

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Our ability to function as an operating mining company is dependent on our ability to mine our properties at a profit sufficient to finance further mining activities and for the acquisition and development of additional properties.

Our ability to operate on a positive cash flow basis is dependent on mining sufficient quantities of uranium at a profit sufficient to finance our operations and for the acquisition and development of additional mining properties.

The Navajo Nation ban on uranium mining in Indian country encompasses some of our properties in New Mexico and will adversely affect our ability to mine unless the ban is overturned.

In April 2005, the Navajo Nation Council passed the Diné Natural Resources Protection Act of 2005 prohibiting uranium mining and processing on any sites within Indian Country. Some of our New Mexico properties have been determined to be Indian country and the status of others as Indian country is in dispute. We believe that the ban is beyond the jurisdiction of the Navajo Nation. However, the ban may prevent us from developing and operating the properties until the jurisdictional issues is resolved.

In February 2007, the USEPA determined that Section 8 of our Churchrock property was Indian country and that the USEPA and not the state of New Mexico has the authority to issue the UIC permits for Section 8 that are a precondition to mining. We are appealing that decision to the United States Court of Appeals for the Tenth Circuit.

As of December 31, 2006, we identified a material weakness in internal control over financial reporting and concluded that our disclosure controls were not effective. If we fail to maintain an effective system of internal and disclosure controls, we may not be able to accurately report our financial results or prevent fraud. As a result, investors may be misled and lose confidence in our financial reporting and disclosures and the price of our common stock may be negatively affected.

The Sarbanes-Oxley Act of 2002 requires that we report annually on the effectiveness of our internal control over financial reporting. Among other things, we must perform systems and process evaluation and testing. We must also conduct an assessment of our internal controls to allow management to report on, and our independent registered public accounting firm to attest to, our assessment of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.

In connection with the assessment of our internal control over financial reporting for this Annual Report on Form 10-K/A, as further described in Item 9A, management and our registered public accounting firm determined that as of December 31, 2006 our disclosure controls and procedures were ineffective because of the material weakness in our internal control over financial reporting.

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

Our inability to obtain financial surety would threaten our ability to continue in business.

Future bonding requirements will increase significantly when future development and production occurs at our sites in Texas and New Mexico. The amount of the bonding for each producing property is subject to annual review and revision by regulators. We expect that the issuer of the bonds will require us to provide cash collateral equal to the face amount of the bond to secure the obligation.

Because we have limited capital, inherent mining risks pose a significant threat to us.

Because we are small with limited capital, we are unable to withstand significant losses that can result from inherent risks associated with mining, including environmental hazards, industrial accidents, flooding, interruptions due to weather conditions and other acts of nature. Such risks could result in damage to or destruction of our wellfield infrastructure and production facilities, as well as to adjacent properties, personal injury, environmental damage and processing and production delays, causing monetary losses and possible legal liability.

More stringent federal and state regulations could adversely affect our business.

If we are unable to obtain or maintain permits or water rights for development of our properties or otherwise fail to manage adequately future environmental issues, our operations could be materially and adversely affected. We have expended significant resources, both financial and managerial, to comply with environmental protection laws, regulations and permitting requirements and we anticipate that we will be required to continue to do so in the future. Although we believe our

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properties comply in all material respects with all relevant permits, licenses and regulations pertaining to worker health and safety as well as those pertaining to the environment and radioactive materials, the historical trend toward stricter environmental regulation may continue. The volatility of uranium prices makes our business uncertain.

The volatility of uranium prices makes long-range planning uncertain and raising capital difficult.

The price of uranium is affected by numerous factors beyond our control, including the demand for nuclear power, political and economic conditions, and legislation and production and costs of production of our competitors.

The only market for uranium is nuclear power plants world wide, and there are only a few customers.

We are dependent on a small number of electric utilities that buy uranium for nuclear power plants. Because of the limited market for uranium, a reduction in purchases of newly-produced uranium by electric utilities for any reason (such as plant closings) would adversely affect the viability of our business.

The price of alternative energy sources affects the demand for and price of uranium.

The attractiveness of uranium as an alternative fuel to generate electricity is to some degree dependent on the prices of oil, gas, coal and hydro-electricity and the possibility of developing other low cost sources for energy.

Public acceptance of nuclear energy is uncertain.

Maintaining the demand for uranium at current levels and future growth in demand will depend upon acceptance of nuclear technology as a means of generating electricity. Lack of public acceptance of nuclear technology would adversely affect the demand for nuclear power and increase the regulation of the nuclear power industry.

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

We currently have liability and property damage insurance that we believe is adequate. However, the insurance industry is undergoing change and premiums are being increased. If premiums should increase to a level we cannot afford, we could not continue in business.

If we cannot add additional reserves to replace production in the future, we would not be able to remain in business.

Our future uranium production, cash flow and income are dependent upon our ability to mine our current properties and acquire and develop additional reserves. There can be no assurance that our properties will be placed into production or that we will be able to continue to find and develop or acquire additional reserves.

Competition from better-capitalized companies affects prices and our ability to acquire properties and personnel.

There is global competition for uranium properties, capital, customers and the employment and retention or qualified personnel. In the production and marketing of uranium there are about 15 major producing entities, some of which are government controlled and all of which are significantly larger and better capitalized than we are. We also compete with uranium recovered from the de-enrichment of highly enriched uranium obtained from the dismantlement of United States and Russian nuclear weapons and imports to the United States of uranium from the former Soviet Union.

Industry-wide competition for exploration and development tools could delay production.

Intense industry-wide competition for exploration and development tools can create the shortage of drill rigs, logging trucks and other equipment. Such shortages could delay our production.

Competition from numerous small companies affects our ability to acquire properties and personnel and retain existing personnel.

There are numerous entities in the market that compete with us for properties and are attempting to become licensed to operate ISR facilities. In addition, we are aware several entities have expressed interest in hiring certain of our employees. To retain key employees, we may face increased compensation costs, including potential new option grants.

Over 56% of our shares of Common Stock is controlled by Principal Stockholders and Management.

Over 56% of our Common Stock is controlled by six stockholders of record. In addition, our directors and officers are the beneficial owners of about 6.8% of our Common Stock. This includes with respect to both groups shares that may be purchased upon the exercise of outstanding options. Such ownership by the Company’s principal shareholders, executive officers and directors may have the effect of delaying, deferring, preventing or facilitating a sale of the Company or a business combination with a third party.

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

The Company has 51,797,339 shares of Common Stock currently outstanding, all of which are transferable under a Registration Statement on Form S-1, S-8 prospectuses or otherwise. The availability for sale of such a large amount of shares may depress the market price for our Common Stock and impair our ability to raise additional capital through the public sale of Common Stock. The Company has no arrangement with any of the holders of the foregoing shares to address the possible effect on the price of the Company’s Common Stock of the sale by them of their shares.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

South Texas

We currently control 3 major properties in the state of Texas. The Kingsville Dome, Rosita and Vasquez properties are shown in Figure No. 2.1 and are described below.

Figure No 2.1. Texas Properties Location Map

Kingsville Dome (Figure 2.2)

The Property. The Kingsville Dome property consists of mineral leases from private landowners on about 2,354 gross and net acres located in central Kleberg County, Texas. The leases provide for royalties based upon a percentage of uranium sales of 6.25%. The leases have expiration dates ranging from 2000 to 2007. We hold most of these leases by production; and with a few minor exceptions, all the leases contain clauses that permit us to extend the leases not held by production by payment of a per acre royalty ranging from $10 to $30. We have paid such royalties on all material acreage. Mineralization is found in the Goliad formation at depths of 600 to 750 feet.

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Production History. Initial production commenced in May 1988. From then until July 1999, we produced a total of 3.5 million pounds. Production was stopped in July 1999, because of depressed uranium prices. We spent about $10.4 million in capital expenditures at Kingsville Dome in 2006. We resumed production at Kingsville Dome in April 2006 and produced 94,100 pounds of uranium in 2006. We believe that there is a significant quantity of uranium remaining at Kingsville Dome.

Permitting Status. A radioactive material license and underground injection control permit have been issued. As new areas are proposed for production, additional authorizations under the area permit are required. Approval of our Production Area Authorization #3 was received in February 2006 which allowed for the start-up of production at Kingsville Dome in April 2006. See “ Legal Proceedings .”

Restoration and Reclamation. During 2006, we conducted restoration activities as required by the permits and licenses on this project, spending approximately $321,000 on such activities. In 2005 and 2004, we spent about $358,000 and $256,000 in restoration costs.

Figure No. 2.2. Kingsville Dome Property

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Rosita (Figure 2.3)

The Property: The Rosita and Rosita South property consists of mineral leases from private landowners on about 2075 gross and net acres (775 acres in Rosita and 1300 acres in Rosita South) located in north-central Duval County, Texas. The leases provide for sliding scale royalties based on a percentage of uranium sales. Royalty percentages on average increase from 6.25% up to 18.25 % when uranium prices reach $80.00 per pound. The leases have expiration dates ranging from 2012 to 2015. We are holding these leases by payment of rentals ranging from $10 to $30 per acre.

Production History: Initial production commenced in 1990. From then until July 1999, URI produced a total of 2.64 million pounds. Production was stopped in July of 1990 because of depressed uranium prices. Based on the significant increase in the market price of uranium, we are re-evaluating the potential for uranium production at the Rosita project and believe the project could resume operations by either producing uranium from Rosita or in conjunction with processing uranium mined from other South Texas projects. In order to restart the plant facility, we have spent about $2.8 million in 2006 for plant refurbishment and wellfield development. We will need to spend additional funds for the development and plant refurbishment to bring this project back on-line and are evaluating the range of such cash requirements, depending on the projected scope of the operation. We are conducting restoration and reclamation, of which $676,000 was spent in 2006. In 2005 and 2004, we spent about $618,000 and 315,000 for restoration and reclamation activities. Mineralization is found in the Goliad Formation at depths of 125 to 350 feet.

Permitting Status: A radioactive material license and an underground injection control permit have been issued for the Rosita property. The underground injection control permit is being amended to include the Rosita South property. Production could resume in areas already included in existing Production Area Authorizations. As new areas are proposed for production, additional authorizations under the permit will be required.

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Figure No. 2.3. Rosita Property Mineral Ownership

Vasquez (Figure 2.4)

The Property. We have a mineral lease on 872 gross and net acres located in southwestern Duval County, in South Texas. The primary term expires in February 2008. We hold the lease by production. The lease provides for royalties based upon 6.25% of uranium sales below $25.00 per pound and royalty rate increases on a sliding scale up to 10.25% for uranium sales occurring at or above $40.00 per pound. Mineralization is found in the Oakville formation at depths of 200 to 250 feet.

Production History. We commenced production from this property in October 2004. We spent about $3.4 million in capital expenditures at Vasquez and produced 165,000 pounds of uranium in 2006. We spent about $3.9 million in capital expenditures at Vasquez in 2005. We produced 310,000 pounds of uranium in 2005 and sold 271,000 pounds. We spent about $2.7 million in capital expenditures at Vasquez in 2004. We produced 76,200 pounds of uranium in 2004 and sold 72,350 pounds.

Permitting Status. All of the required permits for this property have been received.

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Figure No. 2.4. Vasquez Property

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New Mexico Properties

General. We have various interests in properties located in New Mexico (Figure 2.5). We have fee lands, patented and unpatented mining claims, mineral leases and some surface leases. We have spent $11.2 million to date on permitting for New Mexico. Additional expenditures will be required and could be material. We are unable to estimate the amount. We expect that whatever is spent will occur over multiple years. See “ Legal Proceedings ” for a discussion of the current status of our license for New Mexico.

Figure No. 2.5. Location of New Mexico Properties

Church Rock/ Mancos (Figure 2.6)

The Property. The Church Rock project encompasses about 2,200 gross and net acres. The properties are located in McKinley County, New Mexico and consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation. Access to the Church Rock property is via State Highway 566 and access to Mancos is via 4-wheel drive ranch roads west of State Highway 566.

We own the mineral estate in fee for the NE ¼ and the SW ¼ of the NW ¼ of Section 17, T16N, R16W. In Section 8, T16N, R16W, we own the SE ¼ in fee and hold the minerals in the rest of the section with 26 unpatented federal mining claims (UNC1A thru UNC 26). For the Mancos Property, we own the minerals in Section 13, T16N, R17W, in fee, the minerals in the NW ¼ of Section 7, T16N, R16W, in fee and hold the minerals in the E ½ of Section 12, T16N, R17W, with 20 unpatented federal mining claims (KP1A thru KP5A, KP19, KP36, 121617-14A thru 121617-18A, 121617-20A thru

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121617-23A and 121617-32A thru 121617-35A). The federal unpatented mining claims are all held through the payment of a $125.00 assessment fee each year on each claim.

Mineralization occurs in the Westwater Member of the Morrison Formation at depths of 800 to 1700 feet.

The surface estate on Section 17, Mancos Section 13 and Mancos Section 7 is owned by the United States Government and held in trust for the Navajo Nation. On those sections we have royalty obligations ranging from 5% to 6 ¼% and a 2% overriding royalty obligation to the Navajo Nation for surface use agreements. The total royalties on Section 8 depend on the sales’ price of uranium. The royalty agreements are unclear, but depending on the interpreation of the royalty agreements the aggregate royalties could be as much as 39.25% at the current price of uranium, although we believe the aggregate royalties are a lower amount.

Development Plan. We anticipate that Churchrock will be the first of our New Mexico properties we will develop. We spent about $305,000 and $382,000 in 2006 and 2005, respectively, for permitting activities and land holding costs and about $124,000 in 2004 for permitting activities and land holding costs. In December 2006, we entered into a joint venture with Itochu to jointly develop this property (see “ Business—Joint Venture for Churchrock Property ”).

Water Rights. The State Engineer approved our water rights application in October 1999 and granted us sufficient water rights for the life of Churchrock.

Permitting Status. We have the radioactive material license for Section 8. This license is subject to the continuing proceedings described under “ Legal Proceedings .” With respect to the UIC permits, see “ Legal Proceedings. ” We do not plan to pursue permits for Mancos at this time.

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Figure No. 2.6. Church Rock / Mancos Property Mineral Ownership

Crownpoint (Figure 2.7)

The Property. The Crownpoint properties are located in the San Juan Basin, 22 miles northeast of our Churchrock deposits and 35 miles northeast of Gallup, New Mexico, adjacent to the town of Crownpoint, New Mexico. The Properties consist of 619 gross and 521.8 net acres. We hold the minerals in the NW ¼ of Section 9, T17N, R13W with 9 unpatented federal mining claims (CP-1 thru CP9) and the minerals in the SW ¼ of Section 24, T17N, R13W with 10 unpatented federal mining claims (CP-10 thru CP-19). In the SE ¼ of Section 24, T17N, R13W we hold a 40% interest in the minerals through a lease (the “Walker” lease) on approximately 139 acres and hold 100% of the minerals on the remaining 21 acres with two unpatented federal mining claims (Consol I and Consol II). In the NE ¼ of Section 25, T17N, R13W we hold the minerals with eight unpatented federal mining claims (Hydro-1 thru Hydro-8). The federal unpatented mining claims are held through

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the payment of a $125.00 assessment fee each year on each claim. Access is via paved road from State Highway 371, through the town of Crownpoint to Church Road to the main gate of the property.

Mineralization is found in the Westwater Member of the Morrison Formation at a depth of from 2,100 to 2,300 feet. Three pilot shafts were completed on the property in the early 1980’s but were never completed. Surface facilities dating from those activities including buildings and their associated electrical/water infrastructure are still in-place and are currently used as offices and storage facilities.

Development Plan. We spent about $91,000 and $397,000 in 2006 and 2005, respectively, for permitting activities and land holding costs and about $61,000 in 2004 for permitting activities and land holding costs.

Water Rights. We have three pending applications for appropriations of water, which give us the first three “positions in line” on the hearings list for the San Juan Basin. Certain of the water rights may involve a claim of jurisdiction by the Navajo Nation.

Permitting Status. See “ Legal Proceedings ” for a discussion of the radioactive material license for Crownpoint. The surface estate on Section 19 and 29 is owned by the United States Government and held in trust for the Navajo Nation and may be subject to the same jurisdictional dispute with respect to the UIC permit as for Section 8 and 17 in Churchrock.

Figure No. 2.7. Crownpoint Property Mineral Ownership

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Nose Rock (Figure 2.8)

The Nose Rock property consists of approximately 6,400 acres and is located about 12 miles northeast of Crownpoint, New Mexico. The minerals is held in fee on Sections 10, 11, 15, 17, 18, 19, 20, 29, 30 and 31 all in T19N, R11W. Access to the property is via a 4-1/2 mile private paved road north of Tribal Road 9. The property was developed by Philips Uranium Corporation in the early 1980’s and includes two circular concrete-lined shafts that have been completed to a depth of 3,300 feet. Both shafts have been plugged at surface and just above the Westwater. There is no usable surface infrastructure on site. Mineralization occurs in the Westwater Member of the Morrison Formation,

Figure No. 2.8. Nose Rock Property Mineral Ownership

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West Largo(Figure 2.9)

The West Largo property is comprised of six contiguous sections of land located in McKinley County, New Mexico about 21 miles north of the town of Milan, New Mexico and about three miles west of State Highway 509. Access is via a nine-mile 4-wheel drive road from State Highway 509. The minerals on sections 17, 19, 21 and 29 T15N, R10W is held in fee and the minerals on sections 20 and 28 T15N, R10W is held by 75 unpatented federal mining claims (ID21 thru ID91 and ID95 thru ID98). The Federal unpatented mining claims are held through the payment of a $125.00 assessment fee each year on each claim.

Mineralization occurs in the Westwater Member of the Morrison Formation at depths ranging from 2,000 to 2,750 feet depending on surface topography. Over 1,000 drill holes were used to define the mineralization in the late 1970’s and early 1980’s. Other than this exploration drilling, there has been no development on this property.

Figure 2.9. West Largo Property Mineral Ownership

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Roca Honda (Figure 2.10)

The Roca Honda property is comprised of four sections of land totaling approximately 2,560 acres located about 4 miles northwest of the town of San Mateo in McKinley County, New Mexico. Sections 13, 15 and 17, T13N, R8W are held in fee and Section 8, T13N, R8W is held by 36 unpatented federal mining claims (Roca Honda 55 thru Roca Honda 63, Roca Honda 82 thru Roca Honda 90, Roca Honda 109 thru 117 and Roca Honda 136 thru Roca Honda 144). The federal unpatented mining claims are held through the payment of a $125.00 assessment for each year on each claim. The property is accessed over various 4-wheel drive ranch roads north of State Highway 605.

Mineralization occurs in the Westwater Member of the Morrison Formation at depths ranging from 1,700 on Section 17 to over 3,300 feet in Section 13. In the late 1970’s and early 1980’s, various operators drilled 620 exploration holes on the property. In the late 1980’s, Kerr-McGee sank a shaft to a depth of 1,475 feet on Section 17 to develop the property, then known as the Lee Mine. The shaft was stopped short of the ore zone and the mine closed down when uranium prices fell in 1983. There is no useable infrastructure on surface.

Figure No. 2.10. Roca Honda Property Mineral Ownership

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Insurance

Our property is covered by various types of insurance including property and casualty, liability and umbrella coverage. We have not experienced any material uninsured or under insured losses related to our properties in the past and believe that sufficient insurance coverage is in place. Future losses if sustained would not be material.

Reclaimed Properties

We have completed production and groundwater restoration on our Benavides and Longoria projects in South Texas. We completed the final stages of surface reclamation on these projects and received full and final release for these sites in 1999.

We acquired the Section 17 leases in the New Mexico Churchrock district from United Nuclear Corporation. It had conducted underground mining for uranium on Section 17 and had reclaimed these properties. In the acquisition, we assumed any liability of United Nuclear Corporation for any remaining remediation work that might be required. The New Mexico Energy Minerals and Natural Resources Department has not determined what, if any, additional remediation would be required under the New Mexico Mining Act. If more remediation work is required, we believe it would not involve material expenditures.

Item 3. Legal Proceedings.

New Mexico Radioactive Material License

In the State of New Mexico, uranium recovery by in situ recovery (“ISR”) technology requires a radioactive material license issued by the United States Nuclear Regulatory Commission (the “NRC” or the “Commission”). We applied for one license covering the properties located in both the Churchrock and Crownpoint districts collectively known as the Crownpoint Uranium Project. The Commission issued an operating license for the Crownpoint Uranium Project in January 1998 that allowed ISR uranium recovery operations to begin in the Churchrock district. In mid-1998, the Commission determined that certain Churchrock and Crownpoint residents who requested a hearing had standing to raise certain objections to the license. An Administrative Law Judge conducted a hearing during 1999. The Administrative Law Judge upheld the Churchrock Section 8 license and granted our request to defer any dispute on all but the Churchrock Section 8 property until we make a decision whether to mine these other properties.

The ruling was appealed to the Commission. On January 31, 2000, the Commission issued an order concurring with the technical, substantive and legal findings of the Administrative Law Judge, but the Commission also determined that we must proceed with the hearing process for the other New Mexico properties beyond Churchrock Section 8. Subsequently, the hearing process was held in abeyance until 2004 pursuant to NRC supervised settlement negotiations between the parties.

In February 2004, the Administrative Law Judge issued an order, which concluded that we must make three specific changes to our submitted restoration action plan for Churchrock Section 8 in order to commence mining operations at Churchrock. The Commission accepted our petition for review on two of three issues and subsequently overruled the Administrative Law Judge on these issues. The parties agreed to truncate the number and scope of the issues remaining for consideration at the three sites, and the Administrative Law Judge is proceeding with the hearing on four remaining issues at the remaining three sites.

All contested issues regarding the Crownpoint Uranium Project have been decided by the Administrative Law Judge in our favor, with a few minor amendments, and affirmed on appeal by the full Commission. Intervenors have appealed the Commission’s final endorsement to the United States Court of Appeals for the Tenth Circuit. The Company has intervened to defend the license.

New Mexico UIC Permit

The State of New Mexico, the USEPA and the Navajo Nation are engaged in a jurisdictional dispute as to which entity has the authority to issue Underground Injection Control (“UIC”) program permits and, in the case of some of the Churchrock and Crownpoint properties, aquifer exemptions required to mine a portion of our Churchrock and Crownpoint properties. The dispute was taken to the United States Court of Appeals for the Tenth Circuit, which in January 2000 remanded to the USEPA the issue whether the Section 8 Churchrock property was Indian Country. In February 2007, the USEPA issued a decision that found that Section 8 was Indian country and that the USEPA was the proper authority to issue the UIC permit. We have appealed that decision to the United States Court of Appeals for the Tenth Circuit. The decision can be accessed at the USEPA Region 9 website at http://www.epa.gov/region09/water/groundwater/permit-determination.html.

23

Texas Department of Health Bonding Issues

On March 1, 2004, the Company entered into a Restoration Performance Agreement with the Texas Department of Health (“TDH”), later renamed the Texas Department of State Health Services, (“DSHS”), the Texas Commission on Environmental Quality and United States Fidelity and Guaranty Insurance Company under which the Company agreed to fund ongoing groundwater restoration at the Kingsville Dome and Rosita mine sites at specified treatment rates, utilizing a portion of the Company’s cash flow from sales of uranium from the Vasquez site as a substitute for additional bonding. Kleberg County and an ad hoc citizen group brought suit challenging the Restoration Agreement. However, Kleberg County has settled with the Company and withdrew its support and funding of the suit.

Kleberg County, Texas, has advised the Company that it has retained counsel to investigate the possibility of seeking an injunction against new uranium mining at the Company’s Kingsville Dome operations. The dispute relates to differing interpretations of the Restoration Performance Agreement regarding the degree of restoration of previously mined wellfields. In trying the resolve these issues amicably, the Company elected to defer the startup of production at the new wellfield. When the negotiations failed, the Company notified the County of its intent to begin new production. The Company believes it is in full compliance. We are engaged in a mediation of this dispute. The Company does not anticipate this dispute will interfere with its mining at Kingsville Dome.

Kingsville Dome Production Area Authorization 3

After a hearing held in August 2005, the Texas Commission on Environmental Quality (“TCEQ”) voted unanimously February 22, 2006 to renew the Company’s disposal well permits, WDW-247 and WDW-248, and to issue Kingsville Dome Production Area Authorization 3 (“PAA 3”). Two petitions for judicial review were filed. The Texas Attorney General has answered in defense of the TCEQ Order. The TCEQ is in the process of preparing the administrative record for submission to the court. The TCEQ decision stands until and unless vacated by the court. The Company believes the TCEQ decision is well-founded and will intervene with the Attorney General to defend its interests.

Other

The Company is subject to periodic inspection by certain regulatory agencies for the purpose of determining compliance by the Company with the conditions of its licenses. In the ordinary course of business, minor violations may occur; however, these are not expected to cause material expenditures.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

24

GLOSSARY OF CERTAIN URANIUM INDUSTRY TERMS

claim |  | A claim is a tract of land, the right to mine of which is held under the federal General Mining Law of 1872 and applicable local laws.
concentrates |  | A product from a uranium mining and milling facility, which is commonly referred to as uranium concentrate or U 3 O 8 .
conversion |  | A process whereby uranium concentrates are converted into forms suitable for use as fuel in commercial nuclear reactors.
cut-off grade |  | Cut-off grade is determined by the following formula parameters: estimates over the relevant period of mining costs, ore treatment costs, general and administrative costs, refining costs, royalty expenses, process and refining recovery rates and uranium prices.
gross acres |  | Total acres under which we have mineral rights and can mine for uranium.
Indian Country |  | A term derived from jurisdictional determinations in criminal law enforcement proceedings under 18 U.S.C. § 1151 and understood to encompass territory situated within Indian reservations, land owned by Indian allottees and land within a dependent Indian community.
mineralized material |  | A mineralized body which has been delineated by appropriately spaced drilling and/or underground sampling to support a sufficient tonnage and average grade. Such a deposit does not qualify as a reserve, until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.
net acres |  | Actual acres under lease which may differ from gross acres when fractional mineral interests are not leased.
ore |  | Naturally occurring material from which a mineral or minerals of economic value can be extracted at a reasonable profit.
over feeding |  | Operating enrichment plants in a manner that reduces plant operating costs but increases the amount of uranium required to produce a given quantity of enriched uranium.
probable reserves |  | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
proven reserves |  | Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
reclamation |  | Reclamation involves the returning of the surface area of the mining and wellfield operating areas to a condition similar to pre-mining.
recoverable reserves |  | Reserves that are either proven or probable, are physically minable and can be profitably recovered under conditions specified at the time of the appraisal, based on a positive feasibility study. The calculation of minable reserves is adjusted for potential mining recovery and dilution.
reserve |  | That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
restoration |  | Restoration involves returning an aquifer to a condition consistent with our pre-mining use and removing evidences of surface disturbance. The restoration of wellfield can be accomplished by flushing the ore zone with native ground water and/or using reverse osmosis to remove ions to provide clean water for reinjection to flush the ore zone.
resources |  | A resource is a concentration of naturally occurring minerals in such a form that economic extraction is potentially feasible.
roll front |  | The configuration of sedimentary uranium ore bodies as they appear within the host sand. A term that depicts an elongate uranium ore mass that is “C” shaped.
shut in |  | A term that refers to ceasing production or the absence of production.
shut-in royalty |  | A lease clause permitting the extension of a lease not held by production by payment of a per acre royalty.
slurry |  | Fine particles of uranium concentrated and suspended in water.
spot price |  | The price at which uranium may be purchased for delivery within one year.
surety obligations |  | A bond, letter of credit, or financial guarantee posted by a party in favor of a beneficiary to ensure the performance of its or another party’s obligations, e.g., reclamation bonds, workers’ compensation bond, or guarantees of debt instruments.

25

tailings |  | Waste material from a mineral processing mill after the metals and minerals of a commercial nature have been extracted; or that portion of the ore which remains after the valuable minerals have been extracted.
uranium or uranium concentrates |  | U 3 O 8 or triuranium octoxide.
U 3 O 8 |  | Triuranium octoxide equivalent contained in uranium concentrates, referred to as uranium concentrate.
waste |  | Barren rock in a mine, or uranium in a rock formation that is too low in grade to be mined and milled at a profit.

26

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Since April 12, 2007, our Common Stock has been listed on the NASDAQ Global Market under the symbol “URRE.” Between April 11, 2007 and October 15, 2004, our shares were quoted on the Over the Counter Bulletin Board and we were dually quoted on both the OTCBB and the Pink Sheets during those dates. From January 1, 2003 until June 24, 2003, we were quoted on the OTCBB. From June 25, 2003, until October 15, 2004, we were quoted only on the Pink Sheets.

The following table sets forth the high and low bid prices for the Common Stock as reported on the applicable markets for the periods indicated:

|  | Common |
|  | Stock |
Fiscal Quarter Ending |  | High |  | Low |
December 31, 2006 |  | $ | 6.86 |  | $ | 2.51 |
September 30, 2006 |  | 5.30 |  | 1.83 |
June 30, 2006 |  | 7.60 |  | 4.60 |
March 31, 2006 |  | 7.68 |  | 3.12 |
December 31, 2005 |  | 3.28 |  | 2.20 |
September 30, 2005 |  | 3.40 |  | 1.68 |
June 30, 2005 |  | 2.84 |  | 1.60 |
March 31, 2005 |  | 3.88 |  | 2.60 |

As of December 31, 2006, we had 51,791,339 shares of Common Stock outstanding. On that date, there were 175 holders of record.

On March 29, 2006 the Board of Directors declared a 1 for 4 reverse stock split for stockholders of record on April 10, 2006. All of the common stock share information, share price information and share ownership information in this Annual Report on Form 10-K/A has been revised to give effect to the reverse stock split. The split was approved by the Company’s Stockholders at the 2005 Annual Meeting of Stockholders.

Dividends

We have never paid any cash or other dividends on our Common Stock, and we do not anticipate paying dividends for the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2006 regarding equity compensation to the Company’s employees, officers and directors under equity compensation plans.

|  | Number of shares |  |  |  |  |
|  | issuable under |  |  |  | Number of shares |
|  | outstanding options |  | Weighted average |  | available for |
Plan category |  | and rights |  | exercise price |  | future issuance |
Equity compensation plans approved by security holders |  | 4,524,246 |  | $ | 2.36 |  | 500 |
Equity compensation plans not approved by security holders |  | 1,201,234 |  | $ | 1.34 |  | 700,000 |
Total |  | 5,725,480 |  | $ | 2.14 |  | 700,500 |

Performance Graph

The following chart compares the yearly changes in total stockholder return on the Company’s common stock against four other measures of performance. The comparison is on a cumulative basis for the Company’s last five fiscal years. The four other performance measures are the Russell 2000 index, the NASDAQ stock market index, the Dow Jones Wilshire Microcap index and a peer group consisting of Cameco Corp. and US Energy Corp. In each case, we assumed an initial investment of $100 on December 31, 2001 and reinvestment of all dividends. Dates on the following chart represent the last trading day of the indicated fiscal year.

27

Recent Sales of Unregistered Securities.

In January and February 2004 we sold 875,000 and 812,500 shares of common stock at $0.40 per share (an aggregate of $675,000) in a transaction not involving a public offering under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D thereunder, to certain accredited investors.

In May 2005 we sold 833,333 shares of common stock at $1.80 per share (an aggregate of $1.5 million) in a transaction not involving a public offering under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D thereunder, to certain accredited investors of which George R. Ireland, a director of the Company, is an affiliate.

In August 2005 we sold 6 million shares of common stock at $2.00 per share (an aggregate of $12 million) in a transaction not involving a public offering under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D thereunder, to certain accredited investors. The Company paid a fee of $336,000 in cash and 112,000 shares of Common stock to a placement agent in connection with the offering. Two private investment partnerships managed by George R. Ireland, a director of the Company, purchased 400,000 shares in the offering.

In April 2006 we sold 10,200,307 shares of common stock at $4.90 per share (an aggregate of $50.0 million) in a transaction not involving a public offering under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D thereunder, to certain accredited investors. The Company paid a 6% fee (3% in cash and 3% in common stock) to a placement agent in connection with the offering. Two private investment partnerships managed by George R. Ireland, a director of the Company, purchased 300,000 shares in the offering.

Item 6. Selected Financial Data.

The following tables provide selected financial and operating data for each of the fiscal years in the five-year period ended December 31, 2006. The selected financial and operating data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of

28

Operation ” and the Company’s financial statements and related notes included elsewhere in this annual report. Historical results are not necessarily indicative of results to be expected in any future period.

|  | For the Year Ended December 31, |
|  | 2006 |  | 2005 |  | 2004 |  | 2003 |  | 2002 |
|  |  |  |  |  | (Restated) |  | (Restated) |  |  |
|  | (In thousands except per share and per pound amounts) |
Uranium sales |  | $ | 8,581 |  | $ | 4,865 |  | $ | 1,009 |  | $ | — |  | $ | — |
Cost of sales—operations |  | 12,687 |  | 6,299 |  | 1,768 |  | 797 |  | 1,159 |
(Gain) loss on derivatives |  | (34,821 | ) | 30,975 |  | 13,112 |  | 2,734 |  | — |
Writedown of uranium properties and other uranium assets |  | 3,495 |  | 0 |  | 46 |  | 341 |  | 515 |
Total cost of uranium sales |  | (18,639 | ) | 37,274 |  | 14,926 |  | 3,872 |  | 1,674 |
Gain (loss) from operations before corporate expenses |  | 27,220 |  | (32,409 | ) | (13,917 | ) | (3,872 | ) | (1,674 | )
Corporate expenses |  | 6,791 |  | 3,209 |  | 2,006 |  | 883 |  | 1,202 |
Gain (loss) from operations |  | 20,429 |  | (35,618 | ) | (15,923 | ) | (4,755 | ) | (2,876 | )
Interest and other, net |  | 1,081 |  | 531 |  | 58 |  | 244 |  | 18 |
Gain (loss) before accounting change |  | 21,510 |  | (35,087 | ) | (15,865 | ) | (4,511 | ) | (2,858 | )
Cumulative effect of accounting change |  | — |  | — |  | — |  | 1,447 |  | — |
Net earnings (loss) |  | $ | 21,510 |  | $ | (35,087 | ) | $ | (15,865 | ) | $ | (3,064 | ) | $ | (2,858 | )
Gain (loss) per common share before cumulative effect of accounting change: |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.44 |  | $ | (0.96 | ) | $ | (0.55 | ) | $ | (0.17 | ) | $ | (0.20 | )
Diluted |  | $ | 0.42 |  | $ | (0.96 | ) | $ | (0.55 | ) | $ | (0.17 | ) | $ | (0.20 | )
Cumulative effect of accounting change per common share: |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | — |  | $ | — |  | $ | — |  | $ | 0.08 |  | $ | — |
Diluted |  | $ | — |  | $ | — |  | $ | — |  | $ | 0.08 |  | $ | — |
Net earnings (loss) per common share: |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.44 |  | $ | (0.96 | ) | $ | (0.55 | ) | $ | (0.09 | ) | $ | (0.20 | )
Diluted |  | $ | 0.42 |  | $ | (0.96 | ) | $ | (0.55 | ) | $ | (0.09 | ) | $ | (0.20 | )
Weighted average common stock and equivalents outstanding: |  |  |  |  |  |  |  |  |  |  |
Basic |  | 48,338 |  | 36,644 |  | 28,725 |  | 18,194 |  | 14,421 |
Diluted |  | 51,560 |  | 36,644 |  | 28,725 |  | 18,194 |  | 14,421 |
CONSOLIDATED OPERATING AND OTHER DATA |  |  |  |  |  |  |  |  |  |  |
Cash used in operations |  | $ | (2,215 | ) | $ | (1,722 | ) | $ | (2,541 | ) | $ | (1,952 | ) | $ | (1,342 | )
Capital expenditures and investing activities |  | (31,906 | ) | (6,364 | ) | (4,777 | ) | 655 |  | (534 | )
Financing activities |  | 48,445 |  | 13,670 |  | 7,277 |  | 581 |  | 2,352 |
Net increase (decrease) in cash and equivalents |  | $ | 14,324 |  | $ | 5,584 |  | $ | (41 | ) | $ | (716 | ) | $ | 476 |
Pounds of uranium produced |  | 259 |  | 310 |  | 76 |  | — |  | — |
Pounds of uranium delivered |  | 263 |  | 271 |  | 72 |  | — |  | — |
Average sales price per pound |  | $ | 32.63 |  | $ | 17.95 |  | $ | 13.95 |  | — |  | — |
Average cost of produced pounds sold |  | $ | 43.36 |  | $ | 20.32 |  | $ | 11.76 |  | — |  | — |
Royalties/commissions per pound sold |  | $ | 2.92 |  | $ | 1.31 |  | $ | 0.94 |  | — |  | — |

CONSOLIDATED BALANCE SHEET DATA

|  | At December 31, |
|  | 2006 |  | 2005 |  | 2004 |  | 2003 |  | 2002 |
|  |  |  |  |  | (Restated) |  | (Restated) |  |  |
|  | (In thousands) |
Cash and cash equivalents |  | $ | 20,177 |  | $ | 5,853 |  | $ | 269 |  | $ | 310 |  | $ | 1,025 |
Working capital |  | 18,371 |  | (16,370 | ) | (5,650 | ) | 115 |  | (166 | )
Net property, plant and equipment |  | 18,196 |  | 8,689 |  | 4,308 |  | 684 |  | 716 |
Total assets |  | 45,936 |  | 17,913 |  | 6,592 |  | 1,499 |  | 3,222 |
Unrealized loss on derivatives |  | — |  | 46,821 |  | 15,846 |  | 2,734 |  | — |
Total debt |  | 838 |  | 626 |  | 585 |  | 585 |  | 585 |
Total liabilities |  | 9,167 |  | 53,903 |  | 21,884 |  | 8,299 |  | 7,539 |
Total shareholders’ equity (deficit) |  | $ | 36,769 |  | $ | (35,990 | ) | $ | (15,293 | ) | $ | (6,800 | ) | $ | (4,317 | )

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Forward Looking Statements

This Item 7 contains “forward looking statements.” These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices and other matters. The words “believes,” “expects,” “projects,” “targets,” “estimates” or similar expressions identify forward-looking statements. We do not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with our disclosures under the heading: “Risk Factors” beginning on page 11.

Restatement of Financial Statements

The financial statements for the year ended December 31, 2004 have been restated to give effect for fair value accounting of certain uranium sales contracts under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company determined that at December 31, 2003, its long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of such date, to record these contracts at fair value.

Financial Condition and Results of Operations

Comparison of Twelve Months Ended December 31, 2006, 2005 and 2004

Production and Sales. Our uranium production increased from 76,200 pounds in 2004, to 310,000 pounds in 2005 and trailed off to 259,100 pounds in 2006. Production began at our Vasquez project in the fourth quarter of 2004 and increased in 2005 as Vasquez’s wellfields reached there peak production output.

In 2006 we saw a drop off in Vasquez production and the start-up of production from our Kingsville project. We expect this trend to continue in 2007, with Vasquez contributing a lower percentage of overall production and Kingsville Dome contributing the majority of our uranium production. The start-up of production from Kingsville Dome wellfield 13 in January 2007, the first new production from our Production Area 3 at Kingsville Dome is expected to allow us to increase production from 2006 levels.

We expect our 2007 production rates to increase from 2006 levels as a result of increases in production from our Kingsville Dome project. Our focus in 2007 will be to maximize production from our existing wellfields at Kingsville Dome, bring on additional wellfields at this project, ready our Rosita project for a return to production and continue to produce the existing wellfields at Vasquez providing they remain economically viable. These production increases will be dependent upon certain factors including continuing strong uranium market prices, the continued availability of development and production resources and ability to continue to delineate and develop new production wellfields as existing wellfields are produced.

In 2006, we sold a total of 263,000 pounds of uranium produced from our Kingsville Dome and Vasquez projects, resulting in revenues of $8.581 million. In 2005, we sold 271,000 pounds of Vasquez production, resulting in revenues of $4.865 million (including $253,000 from the renegotiation of the contract price of sales that were made in the fourth quarter of 2004). We sold 72,350 pounds in 2004 (having commenced production in October of that year) and had revenues of $1.009 million.

Cost of Goods Sold. We expect to see an improvement in our production costs in 2007 compared to 2006. With a higher percentage of our production in 2007 projected from our Kingsville Dome project we expect this historically lower cost production to contribute significantly in reducing both our operating and capital costs of production in 2007.

Our average cost of pounds sold was $43.36 for 2006 compared to $20.32 for 2005. This cost increase resulted from our incurring both higher operating and capital costs in 2006 when compared to 2005 and were primarily caused by inefficiencies at our Vasquez project. We encountered chemical and permeability obstacles in the Vasquez project’s formation which caused us to attempt a variety of new operating techniques including the use of different oxidizing components and more concentrated drilling patterns for our wellfields. These and other attempted solutions did not have the desired effect of increasing the production rates and reducing our operating and capital costs at Vasquez. The cost of pounds sold includes operating expenses and depreciation and depletion. These costs for 2006 include a cumulative $1.5 million related to lower of cost or market inventory adjustments made quarterly. The adjustments resulted from the book carrying value of our uranium inventory exceeding the expected market value of the inventory. These adjustments had the effect of reducing the carrying value of the uranium inventory and accelerating the timing of recording operating expenses and depreciation and depletion recorded in the statement of operations for each quarter. The cost of goods sold for 2006 exclude $761,000 ($17.77 per pound) from a lower of cost or market adjustment made in December 2005 for 42,900pounds of Vasquez inventory at that date that were sold in the first quarter of 2006. In 2004, we sold 72,350 pounds of Vasquez production and incurred cost of sales of $852,000 or $11.77 per pound related such sales.

Operating Expenses. During 2006, operating expenses and related royalties and commissions for Vasquez and Kingsville Dome production sold was $6.279 million. In 2006 we incurred $64,000 of stand-by costs at the Rosita project, such costs were charged to operations. During 2005, operating expenses and related royalties and commissions for Vasquez production sold was $3.702 million. We incurred $73,000 of stand-by costs at the Rosita project that were charged to

30

operations. The operating expenses and related royalties and commissions for Vasquez production sold in 2004 totaled $683,000; and we incurred $579,000 of pre-production and stand-by costs at the Vasquez, Kingsville Dome and Rosita projects that were charged to operations in 2004.

Depreciation and Depletion. During 2006, we incurred depreciation and depletion expense attributable to our Vasquez and Kingsville Dome production of $5.827 million. During 2005, we incurred depreciation and depletion expense attributable to our Vasquez production of $1.399 million. We incurred $16,000 of stand-by depreciation cost for the Kingsville Dome and Rosita projects that was charged to operations in December 2005. In 2004, we incurred depreciation related to Vasquez production and for stand-by activities of $236,000 and $27,000, respectively.

Impairment of Uranium Properties. During 2006, we determined the carrying value of the Vasquez project assets exceeded their fair value as provided in SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. Such determination resulted primarily our reducing the estimated recoverable reserves projected to be produced from Vasquez in the future and resulted in an impairment provision related to the Vasquez project assets of approximately $3.260 million in 2006.

Accretion and Amortization of Future Restoration Costs. During 2006 and 2005, the accretion and amortization of future restoration costs was $517,000 and $348,000, respectively. In 2004 these expenses were $242,000.

General and Administrative Charges. We incurred general and administrative charges and corporate depreciation of $6.8 million in 2006 compared to $3.2 in 2005 and $2.0 million in 2004.

Significant expenditures for general and administrative expenses for year ended December 31, 2006, 2005 and 2004 were:

|  | (Amounts in 000’s) |
|  | Year Ended |
|  | 2006 |  | 2005 |  | 2004 |
Stock compensation expense |  | $ | 2,422 |  | $ | 582 |  | $ | — |
Salaries and payroll burden |  | 1,570 |  | 1,110 |  | 943 |
Legal, accounting, public company expenses |  | 1,279 |  | 801 |  | 530 |
Insurance and bank fees |  | 406 |  | 359 |  | 241 |
Consulting and professional services |  | 563 |  | 183 |  | 82 |
Office expenses |  | 292 |  | 136 |  | 90 |
Travel expenses |  | 162 |  | 80 |  | 55 |
Other, project allocations |  | 61 |  | (60 | ) | 58 |
Total |  | $ | 6,755 |  | $ | 3,191 |  | $ | 1,999 |

The non-cash compensation expense recorded for the year ended December 31, 2006 resulted from the adoption of SFAS 123(R) in January 2006, requiring the recognition of expense related to the Company’s stock option grants. The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted was derived from historical data on our employee exercise and post-vesting employment termination experience. The expected volatility was based on the historical volatility of our stock. The non-cash stock compensation expense recorded in 2005 resulted from the grant of stock options that were subject to approval of an amendment to the Company’s stock option plan which was received in June 2005.

Salary and payroll costs increases for the year presented resulted primarily from the additions to the engineering, professional and executive levels in South Texas and New Mexico made in late 2005 and 2006, compensation increases for the Company’s key personnel in 2006 and a discretionary match made to the Company’s 401(k) profit sharing plan for the plan year ended July 2006. Salary and payroll costs increased in 2005 compared to 2004 from additions to the engineering, professional and executive levels in South Texas and New Mexico made in late 2004 and 2005.

The Company’s legal, accounting and public company expenses increased for the year from the increase in transactions and activities occurring in 2006. Such transactions and activities included the renegotiation of the Company’s long-term sales contracts, the negotiation of a joint venture in New Mexico with Itochu Corporation, increased costs to conduct the annual shareholder meeting, an increase in the number of Board of Directors meetings and preparation of the Company’s NASDAQ application listing. Legal, accounting and public company expenses increased in 2005 from 2004 because of legal and accounting costs related to our SEC filings, our resale registration statements, negotiation of our New Mexico joint venture and increased Board meeting activity during the year.

31

Our insurance costs increased in the year from higher directors and officer’s insurance premiums and increased vehicle coverage premiums resulting from additional vehicles in 2006. Bank fees increased as a result of additions to our financial surety requirements for our South Texas uranium projects. Insurance costs increased in 2005 compared to 2004 from higher general liability, property, directors and officers and auto insurance premiums when compared to 2004.

The costs for consulting and professional services increased in year as a result of an increase in project related activities in 2006. Such activities include the Company’s compliance work related to it’s Sarbanes-Oxley requirements in 2006, the increase in activities in New Mexico related to the preparation of these projects towards their final licensing and permitting phase, increases in environmental, health and safety training and consulting work, computer networking and web site design work and activities performed in the formulation of a corporate strategic plan. Increased consulting and professional services in 2005 from 2004 related to expansion of our New Mexico and South Texas community awareness activities, uranium industry consulting fees and costs related to the update of our uranium reserve report.

Increased office costs incurred in the year resulted primarily from the opening of a corporate office location in Corpus Christi, Texas in June 2006 and increases in the South Texas Kingsville operations office resulting from the personnel added in 2006. Office related cost increases in 2005 compared to 2004 were for additional telephone, office equipment and miscellaneous office expenses from the increase in South Texas staffing.

Net Income (Loss). For the twelve months ended December 31, 2006 we had net earnings of $21.5 million compared to a net loss of $35.1 million in 2005 and a net loss of $15.9 million in 2004. On a diluted per share basis, earnings were $0.42 in 2006 compared to a loss of $(0.96) and $(0.55) for 2005 and 2004, respectively. Included in 2006 results was a non-cash gain on derivatives of $34.8 million somewhat offset by a non-cash impairment provision for the Vasquez project of $3.3 million. The loss in 2005 and 2004 included a non-cash loss on derivatives of $31.0 million and $13.1 million, respectively.

Cash Flow. As of December 31, 2006 we have a cash balance of approximately $20.2 million compared to $5.9 million and $269,000 at December 31, 2005 and 2004, respectively.

In 2006, we had a negative cash flow from operations of $2.2 million, resulting primarily from our low production volumes coupled with high production costs incurred during the year. We also used $31.9 million in investing activities, the largest component of which was the payment of $12.0 million to one of our customers in connection with the restructuring of our uranium sales contract. Other significant investing activities were for production start-up capital at Kingsville Dome of $10.4 million, additional wellfield development at Vasquez of $3.4 million, Rosita project expenditures of $2.8 million, other Texas property and other assets of $1.7 million and other property additions in New Mexico of $396,000.

In 2006, we raised net proceeds of approximately $48.2 million through the sale of 10,200,307 shares at $4.90 per share in April 2006 and $458,000 from the issuance of 229,000 shares from the exercise of employee stock options.

Since the receipt of the proceeds raised in April 2006, the Company has received the following funds and has made the following expenditures (amounts in millions):

Receipts |  |  |
Net proceeds from April 2006 equity offering |  | $ | 48.2 |
Proceeds from stock option exercise |  | 0.5 |
Proceeds from uranium sales |  | 7.0 |
Interest/other income/feasibility study funding |  | 1.0 |
Total receipts |  | $ | 56.7 |
Expenditures |  |  |
Buyout of long-term uranium sales contract |  | $ | 12.0 |
Working capital |  | 4.3 |
Kingsville Dome capital expenditures |  | 7.0 |
Kingsville Dome operations/restoration expenditures |  | 2.4 |
Vasquez capital expenditures |  | 2.6 |
Vasquez operations expenditures |  | 2.2 |
Rosita project capital expenditures |  | 2.4 |
Rosita project operations/restoration expenditures |  | 0.6 |
Other South Texas capital expenditures |  | 1.8 |
New Mexico land and permitting expenditures |  | 0.3 |
Financial surety funding |  | 1.0 |
Total Expenditures |  | $ | 36.6 |

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In 2005 we had a negative cash flow from operations of $1.7 and raised $13.7 million from financing activities. In 2005 we spent $3.9 million at Vasquez for property, plant and equipment, $889,000 at Kingsville Dome and $1.5 for other property additions in Texas and New Mexico. Our net cash flow from operations in 2004 was a negative $2.5 and we raised $7.3 million from financing activities. In 2004 we spent $2.7 million at Vasquez for property, plant and equipment, $905,000 at Kingsville Dome and $316,000 for other property additions in Texas and New Mexico.

Impact of Contract Renegotiation

In March 2006, we renegotiated our supply contracts with Itochu and UG. We committed to each of them one-half of whatever our production is in Texas at a price that is based on the market price at the time of delivery less an agreed discount. Prior to March 2006, these contracts were priced based on fixed prices subject to agreed nominal price increases indexed to inflationary changes. The average price for the deliveries under our previous contract terms was $17.95 in 2005 and was anticipated to have been $14.58 per pound in 2006. The renegotiated contracts provided us with the ability to take advantage of the increases in uranium market prices realized in 2006 and more closely aligned the prices we received for uranium sales to the pricing occurring in the uranium marketplace. For 2006, uranium spot market prices rose from $36.25 per pound in January to $72.00 per pound in December. We expect to see a continued strengthening in uranium market prices for 2007, which in turn is projected to provide increased sales prices for our uranium sales.

Based upon our projected uranium production for 2007, current uranium prices and uranium market outlooks, we expect 2007 to show increased sales volumes and increased uranium sales revenues compared to 2006. We expect our Kingsville Dome production to contribute more towards our total production in 2007 than our production from Vasquez and as a result of projected lower Kingsville Dome production costs expect 2007 operations to reflect higher profitability than 2006. See “Business—Long-Term Delivery Contracts ” for a discussion of the terms of the revised contracts, including certain conditions thereto.

Liquidity—Cash Sources and Uses for 2007

In April 2006 we raised net proceeds of approximately $48.2 million by a sale of 10,200,307 shares of Common Stock at $4.90 per share in a private placement to selected accredited investors. In addition to the foregoing proceeds, the Company had $5.9 million in cash on hand at December 31, 2005.

From April to December 2006, our net cash outflows have averaged $1.7 to $1.8 million per month.. Our cash on hand at December 31, 2006 of $20.2 million and the cash generated from operations is expected to be the source to fund all of our cash requirements during the year. These requirements include uranium production operations, capital expenditures for development of new production wellfields, permitting and licensing of new production areas, acquisition and exploration of new properties with uranium production potential, restoration and reclamation activities at existing and previously mined wellfields, increases for financial surety needs and our general and administrative costs. The cash we expect to generate from our uranium operations in 2007 will be dependent on our ability to achieve the production increases projected from our Kingsville Dome project as well as the continuation of strong uranium market prices during the year. These production increases will be dependent upon certain factors including the continued availability of development and production resources and ability to continue to delineate and develop new production wellfields as existing wellfields are produced. In the event that we are unable to achieve our targeted production rates or our projected production costs, or if uranium prices should fall substantially below their expected prices, we may not be able meet our continued cash requirements in the future.

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes and are recorded on the balance sheet at fair value at December 31, 2005 and 2004. Changes in the fair value of such derivatives recorded on the balance sheet are recorded in the consolidated statements of operations in current earnings as they occur. Such changes in the Company’s derivatives represent non-cash charges to earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the deliveries under both of its long-term uranium sales contracts. See Note 5 to the Consolidated Financial Statements for discussion of renegotiated sales contracts.

The Company amended these contracts in March 2006. The amended contracts obligate the Company to deliver 50% of its uranium production to each customer, and do not obligate the Company to deliver any uranium in excess of its production. The Company has determined that the terms of the amended contracts substantially eliminate their qualification as derivatives.

33

We recorded a gain on derivatives in 2006 of $34.8 million compared to losses of $30.9 million and $13.1 million in 2005 and 2004, respectively. The gain in 2006 resulted from changes in the contract terms of long-term uranium sales contracts that were finalized in March 2006. In March 2006 we entered into a new contract with Itochu and a new contract with UG that supersede the prior contracts. Each of the new contracts calls for delivery of one-half of our actual production from our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding certain large potential exploration plays). The terms of such contracts are summarized in “ Business—Long Term Delivery Contracts ”.

Contingent Liabilities

In April 2006, the Company completed the sale of 10,200,307 shares of its Common Stock at $4.90 per share to accredited investors resulting in gross proceeds of approximately $50 million before expenses of the offering. The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares. Such shares are subject to certain resale registration rights that include penalties in the event the registration statement fails to remain effective.

Off Balance Sheet Arrangements

The Company has obtained financial surety relating to certain of its future restoration and reclamation obligations as required by the State of Texas regulatory agencies. The Company has bank Letters of Credit (the “L/C’s) and performance bonds issued for the benefit of the Company and these off balance sheet financing arrangements permit us to meet the financial surety requirements as directed by the Texas regulatory agencies that permit and license our operations. L/C’s, issued by Bank of America in the amount of $2.0 million and $1.1 million, were issued on December 31, 2006 and December 31, 2005, respectively, and are collateralized in their entirety by certificates of deposit. Since we are collateralizing these L/C’s for their face amount, we do not receive any significant benefits from a liquidity or capital resource standpoint. The collateral deposited to facilitate the issuance of the L/C’s does provide a nominal rate of return that approximates the annual cost of the L/C. We do not expect any significant changes in the terms or availability of additional L/C’s we may require in the future.

Performance bonds totaling $2.8 million were issued by United States Fidelity and Guaranty Company (“USF&G”) for the benefit of the Company on December 31, 2006 and December 31, 2005. USF&G has required that the Company deposit funds collateralizing a portion of the bonds. The amount of bonding issued by USF&G exceeded the amount of collateral by $2.5 million as of December 31, 2006 and December 31, 2005, respectively. In the event that USF&G is required to perform under its bonds or the bonds are called by the state agencies, the Company would be obligated to pay any expenditure in excess of the collateral. The amount by which the bonding exceeds the collateral provides us a liquidity and capital resource benefit. If we were required to provide additional financial surety for these bonds on terms similar to those of our L/C’s, we would be required to fund approximately $2.5 million in additional collateral on both December 31, 2006 and 2005. No new bonds have been issued by USF&G, or any other bonding or insurance entities, for us.

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated financial statements on page F-8 of this prospectus. We believe our most critical accounting policies involve those requiring the use of significant estimates and assumptions in determining values or projecting future costs.

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

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

Such estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

The accounts of the Company are maintained in United States dollars. All dollar amounts in the financial statements are stated in United States dollars except where indicated.

34

Impact of Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS No. 123R) “Share-Based Payments.” SFAS No. 123R requires that the cost from all share-based payment transactions, including stock options, be recognized in the financial statements at fair value. SFAS No. 123R is effective for the Company in the first interim period after December 15, 2005. SFAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for a grant of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. The Company adopted the provisions of SFAS No. 123R on January 1, 2006. Compensation expense will be recognized for all newly granted options after January 1, 2006. The implementation of SFAS No. 123R resulted in a non-cash charge against earnings in 2006 of $2.422 million.

In March 2005, the FASB ratified Emerging Issues Task Force Issue No. 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” (EITF 04-6) which addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in operating costs in the same period as the revenue from the sale of inventory. The EITF 04-6 applies specifically to conventional mining operations (open pit mining), and as a result the company does not believe it is applicable to the Company’s in situ recovery mining operations.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The Company adopted SAB 108 in the fourth quarter of 2006. SAB 108 allows a one-time transitional cumulative effect adjustment to beginning retained earnings as of January 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Uranium Price Volatility

The Company is subject to market risk related to the market price of uranium. The Company’s cash flow has historically been dependent on the price of uranium, which is determined primarily by global supply and demand, relative to the Company’s costs of production. Historically, uranium prices have been subject to fluctuation, and the price of uranium has been and will continue to be affected by numerous factors beyond the Company’s control, including the demand for nuclear power, political and economic conditions, and governmental legislation in uranium producing and consuming countries and production levels and costs of production of other producing companies.

The spot market price for uranium has demonstrated a large range since January 2001. Prices have risen from $7.10 per pound at January 2001 to a high of $113.00 per pound as of April 23, 2007.

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes and are recorded on the balance sheet at fair value at December 31, 2005 and 2004. Changes in the fair value of such derivatives recorded on the balance sheet are recorded in the consolidated statements of operations in current earnings as they occur. Such changes in the Company’s derivatives represent non-cash charges to earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the deliveries under both of its long-term uranium sales contracts. See Note 5 to the Consolidated Financial Statements for discussion of renegotiated sales contracts.

The Company amended these contracts in March 2006. The amended contracts obligate the Company to deliver 50% of its uranium production to each customer, and do not obligate the Company to deliver any uranium in excess of its production.

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The Company has determined that the terms of the amended contracts substantially eliminate their qualification as derivatives.

Management applies significant judgment in estimating the fair value of instruments that are highly sensitive to assumptions regarding uranium prices and market volatilities. Future factors, such as changes in uranium market price, changes in pricing and delivery terms and the physical delivery of produced uranium under the contracts, among others, may impact the amount of the liability. Variations in these factors could materially affect amounts credited or charged to operations to reflect the changes in fair market value of derivatives.

Item 8. Financial Statements and Supplementary Data.

Financial Statements

The financial statement information called for by this item appears on pages F-1 through F-23.

Supplementary Financial Data Table

SUPPLEMENTARY FINANCIAL DATA
(UNAUDITED)

|  | For the Quarter Ended(1) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 3/31/2005 |
|  | 12/31/2006 |  | 9/30/2006 |  | 6/30/2006 |  | 3/31/2006 |  | 12/31/2005 |  | 9/30/2005 |  | 6/30/2005 |  | (Restated) |
|  | (Amounts in Thousands) |
Uranium sales |  | $ | 2,903 |  | $ | 2,765 |  | $ | 1,844 |  | $ | 1,069 |  | $ | 836 |  | $ | 1,263 |  | $ | 1,060 |  | $ | 1,706 |
Earnings (loss) from operations |  | (2,999 | ) | (6,371 | ) | (2,148 | ) | 31,947 |  | (21,114 | ) | (2,051 | ) | (10,077 | ) | (2,376 | )
Net earnings (loss) |  | (2,543 | ) | (5,989 | ) | (2,116 | ) | 32,158 |  | (20,629 | ) | (2,018 | ) | (10,082 | ) | (2,358 | )
Net earnings (loss) per common share:(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.05 | ) | $ | (0.12 | ) | $ | (0.04 | ) | $ | 0.79 |  | $ | (0.50 | ) | $ | (0.05 | ) | $ | (0.30 | ) | $ | (0.07 | )
Diluted |  | $ | (0.05 | ) | $ | (0.12 | ) | $ | (0.04 | ) | $ | 0.73 |  | $ | (0.50 | ) | $ | (0.05 | ) | $ | (0.30 | ) | $ | (0.07 | )

(1) | Unaudited quarterly results.
(2) | Net earnings (loss) per common share information reflects the effect of a reverse 1 for 4 stock split made effective April 11, 2006.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

During the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2006 were not effective as a result of the material weakness in our internal controls over financial reporting discussed below.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Securities and Exchange Act of 1934 defines internal control over financial reporting in Rule 13a-15(f) and 15d-15(f) as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework .

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting in connection with preparation of the annual report on Form 10-K for the year ended December 31, 2006. As a result of these assessments, a material weakness was identified in March 2007, in connection with our year ended December 31, 2006 audit procedures, leading management to conclude that our internal controls over financial reporting were not effective as of December 31, 2006. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

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

· | Controls over the Review of Financial Statements. Our financial and accounting organization consists of the Vice President—Finance and the Corporate Controller. Due to a lack of financial and accounting resources, the financial records preparation and review procedures performed by our personnel with respect to our application of the fair value recognition provisions of Statement of Financial Accounting Standard 123(R) “ Share-Based Payment”

37

| (“SFAS 123(R)”) for the fourth quarter of 2006 did not correctly record certain terms of stock option grants made in the fourth quarter of 2006. This matter was identified by our auditors in March 2007 during the course of their audit procedures and resulted in an audit adjustment increasing stock compensation expense by $629,000 in our year end 2006 financial statements. Because of this lack of resources, review procedures were not consistently performed on a timely basis to ensure that financial reporting and fraud risk controls were operating in the manner designed.

Hein & Associates LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K/A, has issued an audit report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. The report, dated March 27, 2007, which expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an opinion that the Company had not maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) is included below.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management is continuing to evaluate and implement procedures necessary to fully remediate the material weakness described above. Management is in the process of making the following changes to its system of internal controls:

· | We are planning for a relocation and expansion of our Corporate office in the second quarter of 2007, which will allow for the hiring of additional personnel, including both experienced accounting and support staff to allow for improved segregation of duties and allow for a more thorough review, by senior financial personnel, of the financial statements and underlying supporting documentation. In March and April 2007, we contacted various search firms specializing in the accounting and financial services areas to identify and recruit qualified personnel. We are in the process of reviewing potential candidates to expand our internal accounting resources.
· | The addition of accounting and support staff will allow for the formal documentation our purchasing and procurement policies and permit the implementation of review procedures at each uranium project location and in the financial reporting area for compliance with such policies.

Report of Independent Registered Public Accounting Firm

To the Board of Directors
Uranium Resources, Inc.
Lewisville, TX 75067

We have audited management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that Uranium Resources, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Uranium Resources, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

38

directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment.

Due to a lack of an adequate amount of accounting resources, review procedures are not consistently performed on a timely basis to ensure that financial reporting and fraud risk controls are operating in the manner designed.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2006 financial statements, and this report does not affect our report dated March 27, 2007 on those financial statements.

In our opinion, management’s assessment that Uranium Resources, Inc. did not maintain effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Uranium Resources, Inc. has not maintained effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Uranium Resources, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 of Uranium Resources, Inc. and our report dated March 27, 2007 expressed an unqualified opinion thereon.

HEIN & ASSOCIATES LLP
Dallas, Texas
March 27, 2007

Item 9B. Other Information.

None.

39

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors

The Board of Directors consists of five individuals listed below who hold office until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected below by plurality vote.

Name |  | Age |  | Positions and Offices with the Company |
Paul K. Willmott |  | 67 |  | Chairman, Chief Executive Officer and Director |
David N. Clark |  | 52 |  | President, Chief Operating Officer and Director |
Leland O. Erdahl |  | 78 |  | Director |
George R. Ireland |  | 50 |  | Director |
Terence J. Cryan |  | 44 |  | Director |

Leland O. Erdahl, George R. Ireland and Terence J. Cryan have been determined by our Board of Directors to be independent directors under the rules of the NASDAQ Global Market.

Paul K. Willmott has served as a director since August 1994, as President from February 1995 to October 2006, and as Chairman of the Board and Chief Executive Officer since July 31, 1995. Mr. Willmott served as our Chief Financial Officer from April 12, 1995 to September 25, 1995. Mr. Willmott retired from Union Carbide Corporation (“Union Carbide”) where he was involved for 25 years in the finance and operation of Union Carbide’s world-wide mining and metals business. Most recently, Mr. Willmott was President of UMETCO Minerals Corporation, a wholly owned subsidiary of Union Carbide, from 1987 to 1991, where he was responsible for Union Carbide’s uranium and vanadium businesses. From January 1993 until February 1995, Mr. Willmott was engaged by the Concord Mining Unit as a senior vice president where he was primarily involved in the acquisition of UMETCO Minerals Corporation’s uranium and vanadium operating assets. Mr. Willmott graduated from Michigan Technological University with a Bachelor of Science degree in Mining in 1964 and a Bachelor of Science Degree in Engineering Administration in 1967. He has been an active member of the American Institute of Mining Engineers, the Canadian Institute of Mining Engineers and a number of state professional organizations.

David N. Clark has served as a director since June 2006 and as President since October 2006. Prior to April 2007, Mr. Clark was the principal owner of Ux Consulting Company LLC (“UxC”). UxC publishes the Ux Weekly and the UxC Market Outlook Reports, which cover the complete nuclear fuel cycle including uranium, conversion and enrichment. Mr. Clark co-founded UxC in March 1994 as an affiliate of The Uranium Exchange Company (“Ux”), a uranium brokerage and consulting company he founded in 1987. Mr. Clark has also held marketing positions with other entities in the nuclear fuel business. He began his career as a Field Geologist and Market Analyst for the uranium division of the Cleveland-Cliffs Iron Company. Mr. Clark holds a Bachelor of Science degree in Geology (1978) from the University of Akron.

Leland O. Erdahl has served as a director since July 11, 1994. From 1986 to 1991, Mr. Erdahl served as President and Chief Executive Officer for Stolar, Inc., a high-tech company involved in the radio wave imaging of geologic media and underground radio transmission for voice and data. He was President and CEO of Albuquerque Uranium Corporation, a uranium mining company, from 1987 to 1991 and served as Vice President of AMAX Gold in 1997 and 1998. From January 2001 to September 14, 2001 Mr. Erdahl served as President of Nord Pacific Limited, a mining company with gold and copper interests in Australia and Papau, New Guinea. He is a Certified Public Accountant and is a graduate from the College of Santa Fe. He is currently a director of Canyon Resources Corporation (a mining company whose primary business is the discovery and production of precious metals). Mr. Erdahl also serves on the Compensation Committee of Canyon Resources Corporation and is Chairman of its Audit Committee.

George R. Ireland has served as a director since 1995. Mr. Ireland is President and Chief Investment Officer of Geologic Resource Partners LLC, an investment management company which manages Ring Partners L.P., a Colorado limited partnership, the Geologic Resource Fund Ltd., a Grand Cayman investment company, and Geologic Resource Fund L.P., a Delaware Limited Partnership, which positions he has held since June 2000. Prior to such time, Mr. Ireland was an analyst at Knott Partners L.P., a Delaware limited partnership, where he worked since May 1993. Mr. Ireland is also a director of Peru Copper Inc. since 2004 and director of Geoinformatics Exploration Inc. since November 2005. Both companies are listed on the TSX Venture Exchange. Mr. Ireland serves as Chairman of the Investment Committee of the Society of Economic Geologists. He received a Bachelor of Science degree in Resource Economics and Geology from the University of Michigan in 1980 and is a citizen and resident of the United States.

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Terence J. Cryan has served as director since October 2006. Mr. Cryan has over twenty years of experience in international business as an investment banker in the US and Europe. In 2001, Mr. Cryan co-founded and serves as the Managing Director of Concert Energy Partners, an investment banking and private equity firm based in New York City. Prior to that, Mr. Cryan was a Senior Managing Director in the Investment Banking Division at Bear Stearns. Earlier in his career, Mr. Cryan was a Managing Director, Group Head and member of the Investment Banking Operating Committee at Paine Webber. Mr. Cryan joined Paine Webber following its acquisition of Kidder, Peabody in 1994. Mr. Cryan is an adjunct professor at the Metropolitan College of New York Graduate School of Business, has served as director of a number of international companies and is a frequent lecturer at finance and energy industry gatherings. Mr. Cryan holds a Master of Science degree in Economics from the London School of Economics and a B.A. from Tufts University.

Arrangements Regarding Election of Directors

There are no arrangements regarding the election of directors.

Other Executive Officers

The executive officers serve at the discretion of the Board of Directors and are subject to annual appointment by the Board at its first meeting following the Annual Meeting of the Stockholders. The officers hold office until their successors are appointed by the Board of Directors. All officers are employed on a full-time basis. There is no family relationship between any director and executive officer.

The following table sets forth certain information concerning executive officers that are not also directors:

Name |  | Age |  | Positions and Offices |
Richard A. Van Horn |  | 59 |  | Senior Vice President—Operations |
Thomas H. Ehrlich |  | 47 |  | Vice President, Chief Financial Officer, Secretary and Treasurer |
Mark S. Pelizza |  | 53 |  | Vice President—Health, Safety and Environmental Affairs |
Craig S. Bartels |  | 57 |  | Senior Vice President—Technology and New Project Development and President, Hydro Resources, Inc. |
William M. McKnight, Jr. |  | 69 |  | Vice President—Exploration |

The following sets forth certain information concerning the business experience of the foregoing executive officers during the past five years.

Richard A. Van Horn joined us in March 1997 and assumed the position of Senior Vice President of Operations on April 1, 1997. Previously, he spent three years with Energy Fuels Nuclear, Inc. as General Manager—Colorado Plateau Operations with responsibility for the daily management of and planning for Energy Fuels Nuclear, Inc. mining activities on the Colorado Plateau. Before his work at Energy Fuels Nuclear, Inc., Mr. Van Horn spent eighteen years with Union Carbide Corporation where he was involved with the finance and operation of that company’s worldwide mining and metals business. From 1990 to 1994, Mr. Van Horn was Director of Operations of UMETCO Minerals Corporation, a wholly owned subsidiary of Union Carbide Corporation, responsible for all operating aspects of UMETCO’s uranium and vanadium business on the Colorado Plateau prior to its sale to Energy Fuels Nuclear, Inc. Mr. Van Horn graduated from the Colorado School of Mines with a Engineer of Mines degree in mining in 1973.

Thomas H. Ehrlich, a certified public accountant, rejoined us in September 1995 as Vice President and Chief Financial Officer and was appointed Secretary and Treasurer in December 1995. Immediately before that, Mr. Ehrlich spent nine months as a Division Controller with Affiliated Computer Services, Inc., an information technology services provider in Dallas, Texas. Mr. Ehrlich originally joined us in November 1987 as Controller—Public Reporting and was promoted to Controller and Chief Accounting Officer in February 1990. In February 1993, Mr. Ehrlich assumed the additional duties of Vice President and Secretary. Before joining us, he spent four years with Deloitte Haskins & Sells and worked primarily with clients that were publicly held companies. Prior to his work at Deloitte Haskins & Sells, he spent three years in various accounting duties at Enserch Exploration, Inc., an oil and gas company in Dallas, Texas. Mr. Ehrlich received his B.S. B.A. degree in Accounting from Bryant College in 1981.

Mark S. Pelizza has served as our Environmental Manager since 1980, and as such, he has been responsible for all environmental regulatory activities. In February 1996, he was appointed Vice President—Health, Safety and Environmental Affairs. In November 1999, he was appointed President and a Director of Hydro Resources, Inc., a wholly owned subsidiary. Before joining us, he was employed for two years by Union Carbide as an Environmental Planning Engineer at

41

Union Carbide’s Palangana solution mining plant in South Texas. Mr. Pelizza received a M.S. degree in Engineering Geology from Colorado School of Mines in 1978 and a B.S. degree in Geology from Fort Lewis College in 1974.

Craig S. Bartels, a Licensed Professional Engineer and a Licensed Professional Geoscientist, rejoined the Company as Senior Vice President—Technology and New Project Development, and President of Hydro Resources, Inc., a wholly owned subsidiary of the Company in December 2004. He was previously an officer of HRI from July 1996 until September 1999, when he started a consulting company specializing in ISR technology, hydrology and geochemistry. Among his projects as a consultant, he helped with design and startup of the Beverley ISR project in Australia, evaluated an Arizona copper ISR project for a Canadian firm, and began an upgrade of his commercial groundwater model. From January 1995 to July 1996, he was Manager of Wellfield Operations for Crow Butte Resources, Inc., a uranium ISR mining company. Mr. Bartels originally joined the Company in early 1981 and held varied positions with the Company as Reservoir Engineer, Plant Manager and Manager of Wellfield Operations through October 1994. Earlier, he was with Union Carbide, eventually becoming Technical and Plant Superintendent for their solution mining operation. Mr. Bartels also spent six years with Natural Gas Pipeline Company of America, a major gas transmission company, as drilling and reservoir engineer for their gas storage operations. Mr. Bartels received a B.S. Degree in Petroleum Engineering from Montana School of Mines in 1972.

William M. McKnight, Jr., rejoined the Company in September 2005 as Vice President—Exploration. Mr. McKnight is responsible for exploration and land acquisition activities of the Company. Mr. McKnight was one of the founders of the Company and served as Sr. Vice President—Operations and Chief Operating Officer from 1978 to 1997. He also served as a director of the Company until 1994. Before rejoining the Company he served as an independent consultant for several companies, evaluating uranium mineralization potential for projects located both domestically and in foreign countries. Mr. McKnight also served as President of ACHEMCO, Inc. from 1999 to 2004, a privately held company, specializing in the treatment of municipal waste.

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and the National Association of Securities Dealers, Inc. Officers, directors, and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) filings.

Directors and officers of the Company have filed all required Form 4s and Form 5s.

Amended Code of Ethics for Senior Financial Officers

In December 2006, we adopted an Amended Code of Ethics for Senior Financial Officers including the Company’s chief executive officer, chief financial officer, controller, treasurer, and chief internal auditor, if any (“Amended Code of Ethics”). A copy of the Amended Code of Ethics can be found on the Company’s Web site or a copy will be furnished without charge upon request to our Vice President and Chief Financial Officer at the Company’s principal executive offices.

Audit Committee

The Company has a standing Audit Committee that was established in accordance with section 3(a)(58)(A) of the Securities and Exchange Act of 1934, as amended, and operates under a written charter adopted and approved by the Board of Directors. The current members of the Audit Committee are Leland O. Erdahl, George R. Ireland and Terence J. Cryan. Mr. Erdahl, Mr. Ireland and Mr. Cryan are independent directors under the requirements of the NASDAQ Global Market as determined by our Board of Directors. The Company’s Board of Directors has reviewed the qualifications of those serving on our Audit Committee and has determined that we have at least one audit committee financial expert serving on our Audit Committee. Mr. Leland O. Erdahl has been designated as our Audit Committee financial expert. Mr. Erdahl serves as chairman of the Audit Committee and is independent of the management of the Company. Mr. Erdahl is a certified public accountant and has served on audit committees of other public companies as a member and, in several cases, as chairman.

Item 11. Executive Compensation.

Compensation Discussion and Analysis

The Compensation Committee of the Board of Directors oversees the Company’s compensation programs, which are designed specifically for the Company’s most senior executives officers, including the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and the other executive officers named in the Summary Compensation Table

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(collectively, the “named executive officers”). Additionally, the Compensation Committee is charged with the review and approval of all annual compensation decisions relating to named executive officers.

The Compensation Committee is composed entirely of independent, non-management members of the Board of Directors. No Compensation Committee member participates in any of the Company’s employee compensation programs. Each year the Company reviews any and all relationships that each director has with the Company and the Board of Directors subsequently reviews these findings. The Board of Directors has determined that none of the Compensation Committee members have any material business relationships with the Company.

The responsibilities of the Compensation Committee, as stated in its charter, include the following:

· review and assess the adequacy of the Compensation Committee charter annually and submit any proposed changes to the Board of Directors for approval;

· produce an annual report on executive compensation for inclusion in the Company’s proxy statement relating to its annual meeting of stockholders;

· review and make such recommendations to the Board of Directors as the Compensation Committee deems advisable with regard to all incentive-based compensation plans and equity-based plans;

· review and approve the corporate goals and objectives that may be relevant to the compensation of the Company’s chief executive officer and chief operating officer;

· evaluate the chief executive officer’s and chief operating officer’s performance in light of the goals and objectives that were set and determine and approve the chief executive officer’s and chief operating officer’s compensation based on such evaluation; and

· review and approve the recommendations of the chief executive officer and/or chief operating officer with regard to the compensation of all officers of the Company other than the chief executive officer and chief operating officer.

Objectives of Compensation Program

The primary objectives of our compensation program are to (i) design competitive total compensation and rewards programs to enhance the Company’s ability to attract and retain knowledgeable and experienced senior executives, (ii) drive and reward performance which supports the Company’s core values, (iii) provide a percentage of total compensation that is “at-risk”, or variable, based on predetermined performance criteria, (iv) require significant stock holdings to align the interests of named executive officers with those of stockholders, and (v) set compensation and incentive levels that reflect competitive market practices.

What Our Compensation Program is Designed to Reward

The Company’s compensation program is designed to reward exceptional organizational and individual performance.

Elements of Company’s Compensation Plan and Why We Chose Each (How It Relates to Objectives)

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In furtherance of the Company’s compensation objectives and to reward exceptional organization and individual performance, the Company’s compensation program includes a base salary component, performance goals component (both financial and non-financial), stock incentive component, and retirement, health and welfare benefit component, each of which is reviewed by the Compensation Committee collectively in establishing the various forms and levels of the compensation program. The Company does not have an exact formula for allocating between cash and non-cash compensation.

(i) Base Salary

We establish base salaries for our executives based on the scope of their responsibilities, and take into account competitive market compensation paid by comparable uranium industry companies. For 2006, such peers included Denison Mines, Laramide Resources, Strathmore Minerals, Uranium One, Uranium Energy, Energy Metals, Cameco, and Palladin. Base salaries are adjusted annually, and from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience.

(ii) Performance Goals

Financial. The Compensation Committee believes that a significant portion of each` senior executive’s compensation should be tied to the Company’s performance measured against profitability and stockholder value creation. By doing so, named executive officers have the incentive of increasing Company profitability and stockholder return. The Company measures financial performance awards against certain (i) production targets, (ii) production cost targets, and (iii) budget targets. During periods when performance meets or exceeds these established financial objectives, named executive officers should be paid at or more than expected levels. When the Company’s performance does not meet key financial objectives, named executive officers should be paid less than expected levels. Performance goals have changed from time to time and will continue to change as the conditions of the Company and the uranium market evolve.

Non-Financial. The Compensation Committee also believes that a significant portion of a senior executive’s compensation should be tied to the Company’s performance as a whole measured against the Company’s performance in relation to its (a) performance goals:

(i) continued viability of the company as a going concern through the low price cycle for uranium concentrate and as conditions permit develop a strong balance sheet;

(ii) maximizing shareholder value;

(iii) develop and implement strategy for market competitiveness in acquiring additional properties for uranium resources for future development and operation;

(iv) continued retention of existing uranium properties and resources for development and operation at a time when an economic cycle for uranium selling prices returns; and

(v) continued retention of a valuable cadre of personnel for future development and operation of uranium properties in the United States, and

(b) core values:

(i) safety,

(ii) community involvement,

(iii) environmental friendliness,

(iv) development of future leaders, and

(vi) adherence with a strict code of ethics.

During periods when performance meets or exceeds these established non-financial objectives, named executive officers should be paid at or more than expected levels. When the Company’s performance does not meet or exceed these established non-financial objectives, named executive officers should be paid less than expected levels. Performance goals have changed from time to time and will continue to change as the conditions of the company and the uranium market evolve.

(iii) Stock Incentive Compensation

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The Company has two stock Incentive Plans for Employees, both of which were approved by the Company’s stockholders. Under the 1995 Stock Incentive Plan (the “1995 Plan”) 2,600,521 shares may be purchased upon the exercise of outstanding options with exercise prices ranging from $0.76 to $28.50 per share. No new options may be granted under the 1995 Plan. Under the Company’s 2004 Stock Incentive Plan (the “2004 Plan”) a total of 1,750,000 shares may be purchased upon exercise of options granted under the 2004 Plan. At December 31, 2006 there were outstanding under the 2004 Plan options for the purchase of 1,722,688 shares of Common Stock at exercise prices ranging from $2.97 to $5.19 per share. At December 31, 2006, 500 shares were available for future grants under the 2004 Plan. Employee stock options generally vest ratably over a 3 or 4 year time frame and have a contractual term of 10 years.

An important objective of the long-term incentive program is to strengthen the relationship between the long-term value of our stock price and the potential financial gain for employees. Stock options provide employees with the opportunity to purchase our Common Stock at a price fixed on the grant date regardless of future market price. A stock option becomes valuable only if our Common Stock price increases above the option exercise price (at which point the option will be deemed “in-the-money”) and the holder of the option remains employed during the period required for the option to “vest” thus, providing an incentive for an option holder to remain employed by the Company. In addition, stock options link a portion of an employee’s compensation to stockholders’ interests by providing an incentive to increase the market price of our stock.

The exercise prices of all stock options granted to the named executive officers as of December 31, 2006 are shown in the Grant of Plan-Based Awards Table on page 44. Additional information on these grants, including the number of shares subject to each grant, also is shown in the Grants of Plan-Based Awards Table.

Options are granted periodically. The exercise price for each stock option is the market value on the date of grant. The Compensation Committee may approve stock option awards to a new employee at the time he or she is hired if the Compensation Committee determines that he or she can substantially contribute to meeting the performance goals of the company. The only such award during 2006 was to Mr. David Clark for 800,000 shares when he was hired as President and Chief Operating Officer in 2006 by the Company. The only other stock option awards to employees during 2006 were on November 8, 2006 at the time of a regularly scheduled board meeting for a total of 230,000 shares to eight tier two employees with individual awards ranging from 15,000 shares to 50,000 shares. It has been the Company’s practice not to make any stock option awards to employees during a period when there is material non public information.

Upon a Change of Control (as defined in the Plans) of the Company, all stock options granted under the 2004 Plan will become exercisable in full. Also, in the event the number of outstanding shares of Common Stock is increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another Company, as a result of a stock split, stock dividend, combination or exchange of shares, merger or otherwise, each share subject to an unexercised option will be substituted for the number and kind of shares into which each share of outstanding Common Stock is to be changed or for which each such share is to be exchanged and the option price will be increased or decreased proportionately.

Option holders generally forfeit any unvested options if their employment with the Company terminates, except that upon, death or disability while employed with the Company then outstanding stock options may be exercised within the one year period ending on the anniversary of such death or permanent and total disability to the same extent that the option was exercisable on the date of death or disability.

The Compensation Committee has recently retained GK Partners, a compensation consulting firm, to advise it on establishing appropriate criteria for considering stock option grants to named executive officers.

(iv) Retirement, Health and Welfare Benefits

The Company offers a variety of health and welfare and retirement programs to all eligible employees. The named executive officers generally are eligible for the same benefit programs on the same basis as the rest of the broad-based employees. The Company’s health and welfare programs include medical, dental and vision. In addition to the foregoing, the named executive officers are eligible to participate in the following programs:

Supplemental Health Care Plan. The Company has adopted a health care plan (the “Supplemental Plan”) for the Company’s named executive officers and certain of its other employees, which supplements the standard health care plan available to all eligible employees (the “Standard Plan”). The Supplemental Plan pays directly to the participant 80% of all out-of-pocket medical and dental expenses not covered under the Standard Plan, including deductibles and co-insurance amounts. Additionally, the Supplemental Plan provides to each participant $100,000 of accidental death and dismemberment insurance protection and a worldwide medical assistance benefit. Each participant in the Supplemental Plan will receive a maximum annual benefit of $100,000. The Company pays an annual premium under the Supplemental

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Plan equal to $250 per participant plus 10% of claims paid. In addition to other officers and employees, the named executive officers covered by the Supplemental Plan are Paul K. Willmott, Richard A. Van Horn, Mark S. Pelizza, Thomas H. Ehrlich and David N. Clark.

401(k) Profit Sharing Plan. The Company maintains a defined contribution profit sharing plan for employees (the “401(k)”) that is administered by a committee of trustees appointed by the Company. All Company employees are eligible to participate upon the completion of six months of employment, subject to minimum age requirements. Each year the Company makes a contribution to the 401(k) without regard to current or accumulated net profits of the Company. These contributions are allocated to participants in amounts equal to 25% (or a higher percentage, determined at the Company’s discretion) of the participants’ contributions, up to 4% of each participant’s gross pay. For the plan year ended July 31, 2006, the Company contributed amounts equal to 100% of the participant’s contributions, up to 4% of gross pay. Participants become 20% vested in their Company contribution account for each year of service until full vesting occurs upon the completion of five years of service. Distributions are made upon retirement, death or disability in a lump sum or in installments.

Deferred Compensation Plans. The Company has four separate deferred compensation plans covering the years 1999 through 2004. Under these plans executive officers and directors of the Company and its subsidiaries were permitted to defer up to 100% of their 1999, 2000, 2001, 2002, 2003 and 2004 salary with payment thereof to be made on January 11, 2011. On or before that date, the participant may elect to receive the deferred amount in shares of the Company’s Common Stock valued at a weighted average of $0.71 per share under the 1999 deferred compensation plan and $0.80 per share under the 2000-2004 plans. As of December 31, 2006, a total of $789,228 has been deferred under such plans. In 2006, no elections were made to convert deferred compensation into shares of Common Stock under the 1999 plan or under the plans for the years 2000 through 2004.

(v) Competitive Compensation Program

The Compensation Committee reviews the overall compensation of executives at peer companies to ensure that the compensation program is competitive. For 2006, such peers included Denison Mines, Laramide Resources, Strathmore Minerals, Uranium One, Uranium Energy, Energy Metals, Cameco, and Palladin. The Compensation Committee focused on such peers salary levels, performance bonuses, long term incentive compensation, and any other relevant executive compensation to provide a base of comparison. The Company believes that a competitive compensation program will enhance its ability to attract and retain senior executives. The Compensation Committee has recently retained GK Partners, an executive compensation consultant, to advise the Compensation Committee on developing appropriate financial metrics to be used in settling executive compensation. The Company does not have a long term contract in place with GK Partners.

How the Company Chose Amounts and/or Formulas for Each Element

The Compensation Committee reviews, on an annual basis, each compensation package for the named executive officers. The Company does not have an exact formula for allocating between cash and non-cash compensation. In each case, the Compensation Committee takes into account each named executive officers (i) current and prior compensation, (ii) scope of responsibilities, (iii) experience, (iv) comparable market salaries, and (v) the Company’s achievement of performance goals (both financial and non-financial). The Compensation Committee also (i) has the opportunity to meet with the named executive officers at various times during the year, which allows the Compensation Committee to form its own assessment of each individual’s performance, and (ii) reviews the report of the Chief Executive Officer presented to the Compensation Committee, evaluating each of the other named executive officers, including a review of their contributions and performance over the past year, strengths, weaknesses, development plans and succession potential.

Upon review of each of the above named items, and after giving particular consideration to Mr. Van Horn’s knowledge and experience in developing and operating uranium deposits, Mr. Pelizza’s knowledge and experience in securing permits for operating uranium properties and processing facilities, Mr. Ehrlich’s knowledge of accounting rules and regulations governing the accounting for uranium operations, and Mr. Clark’s knowledge and experience in (i) the uranium industry, (ii) marketing of uranium concentrate, and (iii) developing a strategic plan of operations for the company, the Compensation Committee approved the following increases to each named executive officer’s base salary:

· | Mr. Van Horn’s base salary was increased from $156,000 to $210,000;
· | Mr. Pelizza’s base salary was increased from $126,000 to $210,000;
· | Mr. Ehrlich’s base salary was increased from $126,000 to $165,000;
· | Mr. Willmott’s base salary was set at $237,000; and

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· | Mr. David Clark was hired in 2006, and his base salary of $240,000 and initial option award associated with his hiring as our president and chief operating officer was set on November 13, 2006.

The above-referenced adjustments to base salary reflect the Compensation Committee’s total compensation adjustments.

While the Company did meet a number of non-financial performance goals, no performance based awards were granted because the Company failed to meet its production target for 2006 of 800,000 pounds and its production cost target for 2006 of $20-$25 per pound.

No stock option awards were made during 2006 to any of the above-named employees other than Mr. Clark. The other named executive officers of the Company had received long term incentive stock option grants in prior years which were not yet fully vested and the Compensation Committee determined that there was not an additional need to issue additional incentive compensation awards. Mr. Clark received a grant of stock options that were awarded on his appointment as President of the Company. Mr. Clark’s award was made in part to strengthen the relationship between the long term value of our stock and his ability to participate in that gain financially, thereby further aligning his interests with that of the Company’s shareholders. The size of the stock option award to Mr. Clark was determined after analyzing and deliberating on the appropriate level of total compensation for Mr. Clark given his importance to the Company in reaching its stated operating and financial objectives. The Compensation Committee also considered the level of incentive stock awards to Mr. Clark’s peers at industry competitors, with the goal of establishing a level that would allow the Company to both retain Mr. Clark and serve as an appropriate incentive to Mr. Clark in a highly competitive industry.

Mr. Willmott’s and Mr. Clark’s Compensation

Mr. Willmott’s annual base salary as Chairman and CEO was set at $237,000 on October 13, 2005 based on his responsibility for all phases of meeting the company’s performance and adherence to core values and remained unchanged in 2006. Mr. Clark was hired in October, 2006 at a base annual salary of $240,000 ss President and Chief Operating Officer and assumed the duties of (i) supervising the day to day activities of the Company’s operations and (ii) developing and implementing a strategy for the Company’s participation in the renaissance of the nuclear power industry in the United States and worldwide. Mr. Clark’s experience in developing strategic plans for the uranium industry was deemed to be extremely important to the Company as the uranium mining and nuclear power industry began to undergo dramatic changes throughout the world. It was therefore the judgment of the Compensation Committee that we should structure Mr. Clark’s compensation package to both align his financial interest with that of the shareholders and incentivize him to remain with the Company for a longer period of time in a very competitive environment for experienced uranium industry executives. The Compensation Committee also reviewed the compensation packages of its peer group companies in reaching a determination as to the size and terms of Mr. Clark’s compensation package. Based on the above factors and determinations, he was granted a stock option to purchase 800,000 shares, subject to vesting over time.

Summary Compensation Table

The following table sets forth certain information with respect to compensation for services in all capacities for the years ended December 31, 2006, 2005 and 2004 paid to our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers who were serving as such as of December 31, 2006.

|  |  |  |  |  |  |  |  |  |  |  |  |  | Change in |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Pension |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Value and |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Nonqualified |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  | Non-Equity |  | Deferred |  | All Other |  |
|  |  |  |  |  |  |  | Stock |  | Option |  | Incentive Plan |  | Compensation |  | Compensation |  |
|  |  |  | Salary |  | Bonus |  | Awards |  | Awards |  | Compensation |  | Earnings |  | (1) |  | Total
Name and Principal Position |  | Year |  | ($) |  | ($) |  | ($) |  | ($) |  | ($) |  | ($) |  | ($) |  | ($)
Paul K Willmott(2)(7) |  | 2006 |  | 238,021 |  | 0 |  | — |  | — |  | — |  | — |  | 14,608 |  | 252,629
Chairman and Chief |  | 2005 |  | 207,676 |  | 0 |  | — |  | — |  | — |  | — |  | 6,140 |  | 213,816
Executive Officer |  | 2004 |  | 202,725 |  | 0 |  | — |  | 630,000 |  | — |  | — |  | 3,126 |  | 835,851
Richard A. Van Horn(3)(7) |  | 2006 |  | 191,173 |  | 0 |  | — |  | — |  | — |  | — |  | 248,982 |  | 440,155
Senior Vice President— |  | 2005 |  | 139,792 |  | 0 |  | — |  | — |  | — |  | — |  | 2,452 |  | 142,244
Operations |  | 2004 |  | 137,950 |  | 0 |  | — |  | 420,000 |  | — |  | — |  | 2,372 |  | 560,322
Mark S. Pelizza(4)(7) |  | 2006 |  | 174,787 |  | 0 |  | — |  | — |  | — |  | — |  | 241,115 |  | 415,902
Vice President—Health, |  | 2005 |  | 109,908 |  | 0 |  | — |  | — |  | — |  | — |  | 9,143 |  | 119,051
Safety and Environmental |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affairs/President—Hydro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resources Inc. |  | 2004 |  | 109,108 |  | 0 |  | — |  | 420,000 |  | — |  | — |  | 5,3271 |  | 534,429
Thomas H. Ehrlich(5)(7) |  | 2006 |  | 148,672 |  | 0 |  | — |  | — |  | — |  | — |  | 7,077 |  | 155,749
Vice President and Chief |  | 2005 |  | 109,908 |  | 0 |  | — |  | — |  | — |  | — |  | 2,162 |  | 112,070
Financial Officer |  | 2004 |  | 106,780 |  | 0 |  | — |  | 420,000 |  | — |  | — |  | 1,923 |  | 528,703
David N. Clark(6)(7) |  | 2006 |  | 58,154 |  | 0 |  | — |  | 2,579,500 |  | — |  | — |  | 40,892 |  | 2,678,546
President and Chief |  | 2005 |  | 0 |  | 0 |  | — |  | — |  | — |  | — |  | 0 |  | 0
Operating Officer |  | 2004 |  | 0 |  | 0 |  | — |  | — |  | — |  | — |  | 0 |  | 0

(1) | Includes amounts paid for out-of-pocket medical and dental expenses under the Company’s Supplemental Health Care Plan described below, contributions made by the Company under the Company’s 401(k) Profit Sharing Plan described below, life insurance premiums paid by the Company on behalf of the named officer, the value realized from the exercise of stock options and directors’ fees.
(2) | Salary for 2004 includes $90,000 which was deferred under the 2004 Deferred Compensation Plan.

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(3) | Salary for 2004 includes $20,800 which was deferred under the 2004 Deferred Compensation Plan. All Other Compensation includes $238,690 for income related to the exercise of stock options as described below and $856 for gross ups to cover taxes related to annual lease value of company vehicle.
(4) | All Other Compensation includes $217,150 for income related to the exercise of stock options as described below.
(5) | Salary for 2004 includes $15,938 which was deferred under the 2004 Deferred Compensation Plan.
(6) | All Other Compensation includes $40,892 for directors’ fees. The value of the Stock Option awards includes 800,000 options and 50,000 using a fair market value of $2.91 and $5.03 per share, respectively. The fair market value per share is calculated as described in Footnote 9 Stock Based Compensation Plan of the Notes to Consolidated Financial Statements.
(7) | See Footnote 8 — Shareholder’s Equity of the Notes to Consolidated Financial Statements for discussion of stock option grants issued or issuable for deferred compensation. See Footnote 9 — Stock Based Compensation Plan of the Notes to Consolidated Financial Statements for discussion of valuation assumptions for stock option grants.

Grant of Plan Based Awards

This table discloses the actual number of stock options and restricted stock awards granted in 2006 and the grant date fair value of these awards. It also captures potential future payouts under the Company’s non-equity and equity incentive plans.

|  |  |  |  |  |  |  | All Other |  | All Other |  |  |  |
|  |  |  |  |  |  |  | Stock |  | Option |  |  |  |
|  |  |  |  |  |  |  | Awards: |  | Awards: |  | Exercise |  | Grant
|  |  |  | Estimated Future Payouts |  | Estimated Future Payouts |  | Number |  | Number of |  | or Base |  | Date Fair
|  |  |  | Under Non-Equity |  | Under Equity |  | of Shares |  | Securities |  | Price of |  | Value of
|  |  |  | Incentive Plan Awards |  | Incentive Plan Awards |  | of Stock |  | Underlying |  | Option |  | Stock and
|  | Grant |  | Threshold |  | Target |  | Maximum |  | Threshold |  | Target |  | Maximum |  | or Units |  | Options |  | Awards |  | Option
Name |  | Date |  | ($) |  | ($) |  | ($) |  | (#) |  | (#) |  | (#) |  | (#) |  | (#) |  | ($/Sh) |  | Awards
David N. Clark |  | 10/3/2006 |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | 800,000 |  | 2.97 |  | 2,328,000
|  | 6/6/2006 |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | 50,000 |  | 5.13 |  | 251,500

Employment Agreements

We have standard agreements in place for our key employees that become effective in the event of a change in control. The Committee has made the determination that such agreements are necessary to retain key employees during the process leading to a possible change in control and insure that such employees can proceed to review the elements regarding the change in control in the best regard for shareholders without concern for continued salary payments if the change in control in fact does occur. The amount of the compensation payable to any particular employee is based on the compensation earned by such employee immediately prior to the change in control. Except for these agreements, we have not employment contracts with employees.

Outstanding Awards at Fiscal Year-End

The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 29, 2006 for the named executive officers. The table also shows unvested and unearned stock awards (both time-based awards and performance-contingent) assuming a market value of $5.80 a share (the closing market price of the Company’s stock on December 29, 2006).

48

|  | Option Awards |  | Stock Awards
Name |  | Number of Securities Underlying Unexercised Options (#) Exercisable |  | Number of Securities Underlying Unexercised Options (#) Unexercisable |  | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |  | Option Exercise Price ($) |  | Option Expiration Date |  | Number of Shares or Units of Stock That Have Not Vested (#) |  | Market Value of Shares or Units of Stock That Have Not Vested ($) |  | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |  | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Paul K. Willmott |  | 6,570 |  | 0 |  | — |  | 28.50 |  | 2/10/2007 |  | — |  | — |  | — |  | —
|  | 10,000 |  | 0 |  | — |  | 11.75 |  | 2/23/2008 |  | — |  | — |  | — |  | —
|  | 131,684 |  | 0 |  | — |  | 0.80 |  | 9/27/2010 |  | — |  | — |  | — |  | —
|  | 217,940 | (1) | 164,060 |  | — |  | 1.16 |  | 6/2/2014 |  | — |  | — |  | — |  | —
|  | 135,375 | (2) | 45,125 |  | — |  | 1.16 |  | 6/2/2014 |  | — |  | — |  | — |  | —
Richard A. Van Horn |  | 13,750 |  | 0 |  | — |  | 22.00 |  | 4/10/2007 |  | — |  | — |  | — |  | —
|  | 6,250 |  | 0 |  | — |  | 11.75 |  | 2/23/2008 |  | — |  | — |  | — |  | —
|  | 75,000 |  | 0 |  | — |  | 0.80 |  | 9/27/2010 |  | — |  | — |  | — |  | —
|  | 16,000 |  | 0 |  | — |  | 0.76 |  | 2/28/2011 |  | — |  | — |  | — |  | —
|  | 219,828 | (1) | 155,172 |  | — |  | 1.16 |  | 6/2/2014 |  | — |  | — |  | — |  | —
Mark S. Pelizza |  | 1,925 |  | 0 |  | — |  | 28.50 |  | 2/10/2007 |  | — |  | — |  | — |  | —
|  | 2,250 |  | 0 |  | — |  | 11.75 |  | 2/23/2008 |  | — |  | — |  | — |  | —
|  | 75,000 |  | 0 |  | — |  | 0.80 |  | 9/27/2010 |  | — |  | — |  | — |  | —
|  | 8,100 |  | 0 |  | — |  | 0.76 |  | 2/28/2011 |  | — |  | — |  | — |  | —
|  | 219,828 | (1) | 155,172 |  | — |  | 1.16 |  | 6/2/2014 |  | — |  | — |  | — |  | —
Thomas H. Ehrlich |  | 3,500 |  | 0 |  | — |  | 28.50 |  | 2/10/2007 |  | — |  | — |  | — |  | —
|  | 3,000 |  | 0 |  | — |  | 11.75 |  | 2/23/2008 |  | — |  | — |  | — |  | —
|  | 125,000 |  | 0 |  | — |  | 0.80 |  | 9/27/2010 |  | — |  | — |  | — |  | —
|  | 13,050 |  | 0 |  | — |  | 0.76 |  | 2/28/2011 |  | — |  | — |  | — |  | —
|  | 219,828 | (1) | 155,172 |  | — |  | 1.16 |  | 6/2/2014 |  | — |  | — |  | — |  | —
David N. Clark |  | 33,500 | (3) | 24,000 |  | — |  | 2.97 |  | 10/3/2016 |  | — |  | — |  | — |  | —
|  | 233,166 | (3) | 509,334 |  | — |  | 2.97 |  | 10/3/2016 |  | — |  | — |  | — |  | —
|  | 0 | (4) | 50,000 |  | — |  | 5.13 |  | 6/6/2016 |  | — |  | — |  | — |  | —

(1) | Remaining unexercisable options vest ratably at 06/02/2007 and 06/02/2008.
(2) | Remaining unexercisable options vest at 06/02/2007.
(3) | Remaining unexercisable options vest ratably at 10/03/2007 and 10/03/2008.
(4) | Remaining unexercisable options vest ratably at 06/06/2007, 06/06/2008, 06/06/2009 and 06/06/2010.

Option Exercises and Stock Vested

The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, during 2006 for the named executive officers.

|  | Option Awards |  | Stock Awards |
|  | Number of Shares |  | Value Realized |  | Number of Shares |  | Value Realized |
|  | Acquired on Exercise |  | on Exercise |  | Acquired on Vesting |  | on Vesting |
Name |  | (#) |  | ($) |  | (#) |  | ($) |
Richard A. Van Horn |  | 50,000 |  | 238,690 |  | — |  | — |
Mark S. Pelizza |  | 50,000 |  | 217,150 |  | — |  | — |

49

Potential Payments Upon Termination or Change in Control

In June 1997, the Company entered into Compensation Agreements with each of Messrs. Willmott, Van Horn, Pelizza, Ehrlich and in February 2007, with Messrs. Clark and Bartels that provide that, in the event of a change in control, such officers will have certain rights and benefits for a period of thirty-six months for Mr. Willmott and twenty-four months for the other officers, following such change in control.

For purposes of the Compensation Agreements, a “change in control” means (a) the consummation of any transaction pursuant to which any “person” (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board of Directors within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company.

Rights under the Compensation Agreement will be triggered in the event that, following a change in control, the executive’s employment is terminated by (a) the Company without cause; or (ii) by the executive if (i) the executive is assigned substantial duties or responsibilities that are materially inconsistent with the executive’s position, duties, responsibilities or status during the twelve-month period immediately prior to the Change in Control; (ii) the executive’s base compensation is reduced or the executive experiences in any year a reduction in the ratio of the executive’s incentive compensation payment to the executive’s base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company’s other salaried officers; or (iii) the executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the executive’s current principal work location.

Assuming a change in control occurred on December 29, 2006, the total estimated compensation that would be paid in the aggregate under the Compensation Agreements to these six executive officers is $2.781 million. The Compensation Agreements provide that the base salary payments shall be made on a monthly basis for the duration of the term and incentive payments shall be paid annually until the obligation to make such payments expires.

Director Compensation

On June 2, 2004 the Company adopted the 2004 Amended and Restated Directors’ Stock Option Plan (the “2004 Directors’ Plan”). Under the 2004 Directors’ Plan, each non-employee Director elected or appointed to the Board of Directors for the first time will be granted an option to purchase twenty-five thousand (25,000) shares of the Company’s Common Stock and each Non-Employee Director will be granted an option to purchase twenty-five thousand (25,000) shares either (a) upon his or her re-election at an annual meeting of the Company’s stockholders, or (b) in any calendar year in which an annual meeting of stockholders is not held, on June 1 of such year.

Compensation for 2006 for the non-employee directors was earned at the rate of $4,000 per quarter plus $1,200 per meeting attended. The Chairman of the Audit Committee earns compensation at the rate of $1,250 per quarter and each non-employee director earns $600 for each meeting of the Audit Committee attended. The Chairman of the Strategic Planning Committee earns compensation at the rate of $1,250 per quarter and each non-employee director earns $600 for each meeting attended. Non-employee members of the Strategic Planning Committee are also compensated at a rate of $2,000 per day, and a pro rata portion thereof for less that a full eight hour day for non-meeting work performed by a Strategic Planning Committee member. Non-employee members of the Compensation and Nominating Committees earn $600 for each such meeting attended.

The following table summarizes all compensation earned by the Company’s directors in the year ended December 31, 2006.

Name |  | Fees Earned or Paid in Cash ($) |  | Stock Awards ($) |  | Option Awards (2) ($) |  | Non-Equity Incentive Plan Compensation ($) |  | Change in Pension Value and Nonqualified Deferred Compensation Earnings |  | All Other Compensation ($) |  | Total ($) |
Leland O. Erdahl (1) |  | 42,000 |  | — |  | 126,250 |  | — |  | — |  | — |  | 168,250 |
George R. Ireland (1) |  | 40,200 |  | — |  | 126,250 |  | — |  | — |  | — |  | 166,450 |
Terence J. Cryan (1) |  | 10,050 |  |  |  | 146,000 |  | — |  | — |  | — |  | 156,050 |

(1) See Footnote 8 — Shareholder’s Equity of the Notes to Consolidated Financial Statements for discussion of stock option grants issued or issuable for deferred compensation. See Footnote 9 — Stock Based Compensation Plan of the Notes to Consolidated Financial Statements for discussion of valuation assumptions for stock option grants.

(2) Option Award represents the grant date fair value of equity awards granted during 2006.

50

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this annual report.

Compensation Committee:

Mr. Leland O. Erdahl

Mr. George R. Ireland

Mr. Terence J. Cryan

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Securities Authorized for Issuance Under Equity Compensation Plans

Please refer to our response in Item 11 of this Annual Report on Form 10-K/A for equity compensation plan information.

Security Ownership of Certain Beneficial Owners and Management

The following tables set forth, as of December 31, 2006, information regarding persons known by us to be the beneficial owner of more than 5% of the outstanding shares of our Common Stock. Shown separately in the second table below is information regarding the beneficial ownership of our Common Stock by (i) each director, (ii) each of the named executive officers, and (iii) all directors and named executive officers as a group.

Principal Stockholders

Name and Address of Beneficial Owner |  | Amount and Nature of Beneficial Ownership(1) |  | Percent of Class(2) |
Zesiger Capital Group, LLC |  | 8,604,807 | (3) | 16.6 | %
320 Park Avenue, 30th Floor |  |  |  |  |
New York, NY 10022 |  |  |  |  |
Rudolf J. Mueller |  | 2,736,680 | (4) | 5.3 | %
c/o The Winchester Group, Inc. |  |  |  |  |
153 East 53 rd Street, Suite 5101 |  |  |  |  |
New York, NY 10022 |  |  |  |  |
Gilder, Gagnon, Howe & Co. LLC |  | 5,915,096 | (5) | 11.4 | %
1775 Broadway, 26 th Floor |  |  |  |  |
New York, NY 10019 |  |  |  |  |
Dreman Value Management LLC |  | 6,481,150 |  | 12.53 | %
Harbourside Financial Center |  |  |  |  |
Plaza 10, Suite 800 |  |  |  |  |
Jersey, City, NJ 07311 |  |  |  |  |
Deutsche Asset Management, Inc. |  | 5,282,200 |  | 10.21 | %
Taunusanlage 12 |  |  |  |  |
D-60325 Frankfurt am Main |  |  |  |  |
Federal Republic of Germany |  |  |  |  |

(1) Each person has sole voting and investment power with respect to the shares listed, unless otherwise indicated. Beneficial ownership includes shares over which the indicated beneficial owner exercises voting and/or investment power.

51

(2) The shares owned by each person, and the shares included in the total number of shares outstanding, have been adjusted, and the percentages owned have been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934. Shares subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other person.

(3) Includes 8,604,807 shares as to which Zesiger Capital Group, LLC (“ZCG”) holds dispositive power and 5,342,740 shares as to which they hold voting power for shares that are owned by their investment advisory clients. ZCG disclaims beneficial ownership of all of these shares.

(4) Includes 2,317,030 shares as to which Mr. Mueller holds sole dispositive and voting power and 431,650 shares as to which Mr. Mueller holds shared dispositive power and 9,000 shares as to which Mr. Mueller holds shared voting power. Includes (i) 14,000 shares owned by members of Mr. Mueller’s family in which Mr. Mueller shares voting and dispositive power. Mr. Mueller disclaims beneficial ownership of such shares.

(5) Includes 5,750,951 shares held in customer accounts over which partners and/or employees of the Gilder Gagnon has discretionary authority to dispose of or direct the disposition of the shares, 111,145 shares held in accounts owned by the partners of the Reporting Person and their families, and 53,000 shares held in the account of the profit-sharing plan of Gilder Gagnon.

Directors and Named Executive Officers

Name of Beneficial Owner |  | Amount and Nature of Beneficial Ownership(1) |  | Percent of Class(2) |
Paul K. Willmott |  | 1,293,145 | (3) | 2.4% |
Leland O. Erdahl |  | 206,643 | (4) | 0.4% |
George R. Ireland |  | 1,735,949 | (5) | 3.3% |
David N. Clark |  | 316,666 |  | 0.6% |
Terence J. Cryan |  | 1,000 |  | — |
Richard A. Van Horn |  | 474,161 | (6) | 0.90 |
Mark S. Pelizza |  | 374,983 | (7) | 0.7% |
Thomas H. Ehrlich |  | 475,375 | (8) | 0.9% |
All named executive officers and directors as a group (8 persons) |  | 4,877,922 |  | 9.2% |

(1) Each person has sole voting and investment power with respect to the shares listed, unless otherwise indicated. Beneficial ownership includes shares over which the indicated beneficial owner exercises voting and/or investment power.

(2) The shares owned by each person, and the shares included in the total number of shares outstanding, have been adjusted, and the percentages owned have been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934. Shares subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other person.

(3) Includes 1,153,688 shares that may be obtained by Mr. Willmott through the exercise of stock options and deferred compensation plans that are currently exercisable or will become exercisable within 60 days. Does not include 290,185 shares that may be obtained by Mr. Willmott through the exercise of stock options exercisable more than 60 days from the date hereof.

(4) Includes 69,687 shares that may be obtained by Mr. Erdahl through the exercise of stock options and deferred compensation plans that are currently exercisable or will become exercisable within 60 days. Does not include 11,626 shares that may be obtained by Mr. Erdahl through the exercise of stock options exercisable more than 60 days from the date hereof.

(5) Includes 184,937 shares that may be obtained by Mr. Ireland through the exercise of stock options and deferred compensation plans that are currently exercisable or will become exercisable within 60 days. Does not include 11,626 shares that may be obtained by Mr. Ireland through the exercise of stock options exercisable more than 60 days from the date hereof. Includes 1,218,466 and 314,866 shares owned by Geologic Resource Fund Ltd. and Geologic Resource Fund LP, respectively. Mr. Ireland is the managing partner and has an economic interest in each of these funds.

(6) Includes 460,828 shares that may be obtained by Mr. Van Horn through the exercise of stock options and deferred compensation plans that are currently exercisable or will become exercisable within 60 days. Does not include 155,172 shares that may be obtained by Mr. Van Horn through the exercise of stock options exercisable more than 60 days from the date hereof.

(7) Includes 307,103 shares that may be obtained by Mr. Pelizza through the exercise of stock options that are currently exercisable or will become exercisable within 60 days. Does not include 155,172 shares that may be obtained by Mr. Pelizza through the exercise of stock options exercisable more than 60 days from the date hereof.

52

(8) Includes 467,275 shares that may be obtained by Mr. Ehrlich through the exercise of stock options and deferred compensation plans that are currently exercisable or will become exercisable within 60 days. Does not include 155,172 shares that may be obtained by Mr. Ehrlich through the exercise of stock options exercisable more than 60 days from the date hereof.

Item 13. Certain Relationships and Related Transactions and Director Independence.

None

Item 14. Principal Accountant Fees and Services.

The Audit Committee approved the engagement of Hein & Associates, LLP as the Company’s independent auditors for the year ended December 31, 2006.

Audit Fees.

The Company was billed for audit fees and services by Hein & Associates, LLP the Company’s principal independent accountants, during the years ended December 31, 2006 and 2005 of $214,653 and $52,588, respectively. Audit fees include fees for the audits of the Company’s consolidated financial statements and fees in connection with internal controls testing and evaluation under Sarbanes-Oxley requirements.

Audit Related Fees.

The Company was billed audit related fees of $23,465 in 2006 and $29,559 in 2005. Audit related fees include fees for the review of registration statements and issuance of consent letters in 2006.

Tax Fees.

The Company was billed $1,279 in tax fees in 2006. No such tax fees were billed in 2005.

All Other Fees.

None.

Audit Committee Pre-Approval Policies and Procedures.

The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor to assure that the provision of such services do no impair the auditor’s independence.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

See Index to Exhibits on page E-1 for a listing of the exhibits filed as part of this Annual Report.

53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 13, 2008 |  |  |
| URANIUM RESOURCES, INC.
|  | By: | /s/ DAVID N. CLARK
|  |  | David N. Clark
|  |  | Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature |  | Date
/s/ PAUL K. WILLMOTT |  | March 13, 2008
Paul K. Willmott, |  |
Director and Chairman |  |
/s/ DAVID N. CLARK |  | March 13, 2008
David N. Clark |  |
Director, President and Chief Executive Officer |  |
/s/ THOMAS H. EHRLICH |  | March 13, 2008
Thomas H. Ehrlich, |  |
Vice President—Finance and Chief Financial Officer |  |
(Principal Financial and Accounting Officer) |  |
/s/ LELAND O. ERDAHL |  | March 13, 2008
Leland O. Erdahl, Director |  |
/s/ GEORGE R. IRELAND |  | March 13, 2008
George R. Ireland, Director |  |
/s/ TERENCE J. CRYAN |  | March 13, 2008
Terence J. Cryan, Director |  |
/s/ MARVIN K. KAISER |  | March 13, 2008
Marvin K. Kaiser, Director |  |

54

URANIUM RESOURCES, INC. AND CONSOLIDATED SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements For The Years Ended December 31, 2006, 2005 and 2004

Report of Independent Registered Public Accounting Firm |  | F-2 |
Consolidated Balance Sheets |  | F-3 |
Consolidated Statements of Operations |  | F-5 |
Consolidated Statements of Common Shareholders’ Deficit |  | F-6 |
Consolidated Statements of Cash Flows |  | F-7 |
Notes to Consolidated Financial Statements |  | F-8 |

The following consolidated financial statements are presented reflecting the effects of the 1 for 4 reverse split effective April 10, 2006.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors
Uranium Resources, Inc.
Lewisville, TX 75067

We have audited the consolidated balance sheets of Uranium Resources, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, common shareholders’ deficit and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board ( United States ). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Uranium Resources, Inc. as of December 31, 2006, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 13 to the consolidated financial statements, the Company restated the financial statements for the year ended December 31, 2004.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Uranium Resources, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 27, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of Uranium Resources, Inc.’s internal control over financial reporting and an opinion that the Company had not maintained effective internal control over financial reporting as of December 31, 2006.

Hein & Associates, LLP
Dallas, TX
March 27 , 2007

F-2

URANIUM RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS

|  | December 31, |
|  | 2006 |  | 2005 |
Current assets: |  |  |  |  |
Cash and cash equivalents |  | $ | 20,176,771 |  | $ | 5,852,716 |
Receivables, net |  | 713,529 |  | 32,940 |
Uranium and materials/supplies inventory |  | 1,603,585 |  | 707,949 |
Prepaid and other current assets |  | 410,000 |  | 269,835 |
Total current assets |  | 22,903,885 |  | 6,863,440 |
Property, plant and equipment, at cost: |  |  |  |  |
Uranium properties |  | 67,153,797 |  | 51,662,223 |
Other property, plant and equipment |  | 465,613 |  | 302,164 |
Less—accumulated depreciation, depletion and impairment |  | (49,423,848 | ) | (43,275,660 | )
Net property, plant and equipment |  | 18,195,562 |  | 8,688,727 |
Other assets |  | 2,369,434 |  | 1,072,026 |
Long-term investment: |  |  |  |  |
Certificate of deposit, restricted |  | 2,467,491 |  | 1,288,411 |
|  | $ | 45,936,372 |  | $ | 17,912,604 |

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

F-3

URANIUM RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ DEFICIT

|  | December 31, |
|  | 2006 |  | 2005 |
Current liabilities: |  |  |  |  |
Accounts payable |  | $ | 1,994,184 |  | $ | 1,139,005 |
Current portion of restoration reserve |  | 1,520,192 |  | 1,061,491 |
Accrued interest and other accrued liabilities |  | 816,877 |  | 432,683 |
Unrealized loss on derivatives, current portion |  | — |  | 20,424,291 |
Current portion of long-term debt |  | 201,804 |  | 175,833 |
Total current liabilities |  | 4,533,057 |  | 23,233,303 |
Other long-term liabilities and deferred credits |  | 3,998,229 |  | 3,823,015 |
Unrealized loss on derivatives, net of current portion |  | — |  | 26,396,656 |
Long-term debt, less current portion |  | 635,691 |  | 450,000 |
Commitments and contingencies (Notes 1, 2, 3, 4, 5, and 11) |  |  |  |  |
Shareholders’ equity (deficit): |  |  |  |  |
Common stock, $.001 par value, shares authorized: 200,000,000; shares issued and outstanding (net of treasury shares): 2006—51,791,339; 2005—40,952,127 |  | 51,829 |  | 40,990 |
Paid-in capital |  | 126,252,871 |  | 75,013,668 |
Accumulated deficit |  | (89,525,887 | ) | (111,035,610 | )
Less: Treasury stock (38,125 shares), at cost |  | (9,418 | ) | (9,418 | )
Total shareholders’ deficit |  | 36,769,395 |  | (35,990,370 | )
|  | $ | 45,936,372 |  | $ | 17,912,604 |

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

F-4

URANIUM RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

|  | Year Ended December 31, |
|  | 2006 |  | 2005 |  | 2004 |
|  |  |  |  |  | (Restated) |
Revenues: |  |  |  |  |  |  |
Uranium sales— |  | $ | 8,580,799 |  | $ | 4,865,156 |  | $ | 1,009,283 |
Total revenue |  | 8,580,799 |  | 4,865,156 |  | 1,009,283 |
Costs and expenses: |  |  |  |  |  |  |
Cost of uranium sales— |  |  |  |  |  |  |
Royalties and commissions |  | 767,788 |  | 355,011 |  | 67,956 |
Operating expenses |  | 5,574,926 |  | 3,935,225 |  | 1,194,938 |
Accretion/amortization of restoration reserve |  | 516,956 |  | 348,415 |  | 241,810 |
Depreciation and depletion |  | 5,827,464 |  | 1,660,219 |  | 263,380 |
(Gain) loss on derivatives |  | (34,820,947 | ) | 30,974,837 |  | 13,111,772 |
Writedown of uranium properties and other uranium assets |  | 3,494,847 |  | —- |  | 46,188 |
Total (gain on) cost of uranium sales |  | (18,638,966 | ) | 37,273,707 |  | 14,926,044 |
Earnings (loss) from operations before corporate expenses |  | 27,219,765 |  | (32,408,551 | ) | (13,916,761 | )
Corporate expenses— |  |  |  |  |  |  |
General and administrative |  | 6,755,532 |  | 3,191,312 |  | 1,999,394 |
Depreciation |  | 35,542 |  | 18,027 |  | 7,033 |
Total corporate expenses |  | 6,791,074 |  | 3,209,339 |  | 2,006,427 |
Earnings (loss) from operations |  | 20,428,691 |  | (35,617,890 | ) | (15,923,188 | )
Other income (expense): |  |  |  |  |  |  |
Interest expense |  | (16,204 | ) | (93,418 | ) | (8,122 | )
Interest and other income, net |  | 1,097,236 |  | 624,630 |  | 66,554 |
Net earnings (loss) |  | $ | 21,509,723 |  | $ | (35,086,678 | ) | $ | (15,864,756 | )
Net earnings (loss) per common share: |  |  |  |  |  |  |
Basic |  | $ | 0.44 |  | $ | (0.96 | ) | $ | (0.55 | )
Diluted |  | $ | 0.42 |  | $ | (0.96 | ) | $ | (0.55 | )

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

F-5

URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

|  | Common Stock |  | Paid-In |  | Accumulated |  | Treasury |
|  | Shares |  | Amount |  | Capital |  | Deficit |  | Stock |
Balances, December 31, 2003 (Restated) |  | 20,492,047 |  | $ | 20,494 |  | $ | 53,272,970 |  | $ | (60,084,176 | ) | $ | (9,418 | )
Net loss |  | — |  | — |  | — |  | (15,864,756 | ) | — |
Common stock issuance |  | 13,015,643 |  | 13,052 |  | 7,263,838 |  | — |  | — |
|  | 119,125 |  | 119 |  | 95,181 |  | — |  | — |
Balances, December 31, 2004 (Restated) |  | 33,626,815 |  | $ | 33,665 |  | $ | 60,631,989 |  | (75,948,932 | ) | $ | (9,418 | )
Net loss |  | — |  | — |  | — |  | (35,086,678 | ) | — |
Common stock issuance |  | 6,833,333 |  | 6,833 |  | 13,063,281 |  | — |  | — |
Common stock issued for services |  | 112,000 |  | 112 |  | (112 | ) | — |  | — |
Common stock issued for debt conversion |  | 314,166 |  | 314 |  | 628,019 |  | — |  | — |
Stock compensation expense |  | — |  | — |  | 581,960 |  | — |  | — |
Beneficial conversion on debt modification |  | — |  | — |  | 55,947 |  | — |  | — |
Common stock issued for deferred compensation |  | 65,813 |  | 66 |  | 52,584 |  | — |  | — |
Balances, December 31, 2005 |  | 40,952,127 |  | $ | 40,990 |  | $ | 75,013,668 |  | $ | (111,035,610 | ) | $ | (9,418 | )
Net income |  | — |  | — |  | — |  | 21,509,723 |  | — |
Common stock issuance |  | 10,200,307 |  | 10,200 |  | 49,675,960 |  | — |  | — |
Common stock issued for services |  | 306,009 |  | 306 |  | (1,499,751 | ) | — |  | — |
Common stock issued for debt conversion |  | 103,896 |  | 104 |  | 182,752 |  | — |  | — |
Stock compensation expense |  | — |  | — |  | 2,422,281 |  | — |  | — |
Common stock issued for stock option exercise |  | 229,000 |  | 229 |  | 457,961 |  | — |  | — |
Balances, December 31, 2006 |  | 51,791,339 |  | $ | 51,829 |  | $ | 126,252,871 |  | $ | (89,525,887 | ) | $ | (9,418 | )

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

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URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | Year Ended December 31, |
|  | 2006 |  | 2005 |  | 2004 |
Cash flows from operations: |  |  |  |  |  |  |
Net income (loss) |  | $ | 21,509,723 |  | $ | (35,086,678 | ) | $ | (15,864,756 | )
Reconciliation of net loss to cash used in operations— |  |  |  |  |  |  |
(Gain) loss on derivatives |  | (34,820,947 | ) | 30,974,837 |  | 13,111,772 |
Accretion/amortization of restoration reserve |  | 516,956 |  | 348,415 |  | 241,810 |
Depreciation and depletion |  | 5,863,006 |  | 1,678,246 |  | 270,413 |
Writedown of uranium properties and other assets |  | 3,260,201 |  | — |  | 46,188 |
Decrease in restoration and reclamation accrual |  | (886,987 | ) | (974,161 | ) | (571,705 | )
Stock compensation expense |  | 2,422,281 |  | 581,960 |  | — |
Deferred compensation |  | — |  | — |  | 181,888 |
Other non-cash items, net |  | 448,042 |  | 433,636 |  | 226,253 |
Effect of changes in operating working capital items— |  |  |  |  |  |  |
(Increase) decrease in receivables |  | (680,589 | ) | 336,554 |  | (344,244 | )
Increase in inventories |  | (705,132 | ) | (446,769 | ) | (19,644 | )
Increase in prepaid and other current assets |  | (380,904 | ) | (507,563 | ) | (272,765 | )
Increase in payables and accrued liabilities |  | 1,239,373 |  | 939,659 |  | 453,666 |
Net cash used in operations |  | (2,214,977 | ) | (1,721,864 | ) | (2,541,124 | )
Investing activities: |  |  |  |  |  |  |
Increase in certificate of deposit, restricted |  | (1,179,080 | ) | (56,344 | ) | (830,947 | )
Derivative settlement |  | (12,000,000 | ) | — |  | — |
Additions to property, plant and equipment— |  |  |  |  |  |  |
Kingsville Dome |  | (10,414,835 | ) | (889,479 | ) | (905,001 | )
Rosita |  | (2,767,801 | ) | (279,975 | ) | (43,448 | )
Vasquez |  | (3,405,581 | ) | (3,915,760 | ) | (2,724,312 | )
Rosita South |  | (502,646 | ) | — |  | — |
Churchrock |  | (304,632 | ) | (382,147 | ) | (124,037 | )
Crownpoint |  | (91,392 | ) | (396,523 | ) | (61,157 | )
Other property |  | (819,901 | ) | (444,172 | ) | (87,573 | )
Other assets/notes receivable |  | (420,034 | ) | — |  | — |
Net cash used in investing activities |  | (31,905,902 | ) | (6,364,400 | ) | (4,776,475 | )
Financing activities: |  |  |  |  |  |  |
Proceeds from (payments of) borrowings |  | (199,971 | ) | 600,000 |  | — |
Issuance of common stock, net |  | 48,644,905 |  | 13,070,114 |  | 7,276,840 |
Net cash provided by financing activities |  | 48,444,934 |  | 13,670,114 |  | 7,276,840 |
Net increase (decrease) in cash and cash equivalents |  | 14,324,055 |  | 5,583,850 |  | (40,759 | )
Cash and cash equivalents, beginning of year |  | 5,852,716 |  | 268,866 |  | 309,625 |
Cash and cash equivalents, end of year |  | $ | 20,176,771 |  | $ | 5,852,716 |  | $ | 268,866 |

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

F-7

URANIUM RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

1. DESCRIPTION OF THE COMPANY

Uranium Resources, Inc. (“ URI”) was formed in 1977 and domesticated in Delaware in 1987. 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 utilities who utilize nuclear power to generate electricity. At present the Company owns producing and undeveloped uranium properties in South Texas and undeveloped uranium properties in New Mexico.

The Company resumed uranium production in the fourth quarter of 2004 at its Vasquez project in South Texas and began wellfield development in the fourth quarter of 2005 at its Kingsville Dome project, in South Texas, in anticipation of production from this project, which began in April 2006. Prior to resuming Vasquez production, the Company had been in production stand-by since the first quarter of 1999 at its Kingsville Dome and Rosita projects. Groundwater restoration activities have been conducted and are currently ongoing at both the Kingsville Dome and Rosita projects.

Reverse Stock Split

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Description of Company

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of URI and its wholly owned subsidiaries (collectively “the Company”). All significant intercompany transactions have been eliminated in consolidation.

Inventories

Uranium and materials and supplies inventory for each of the Company’s projects are valued at the lower of average cost or market. Uranium inventories at December 31, 2006 and 2005 reflect a lower of cost or market adjustment of $397,000 and $761,000, respectively.

Uranium Properties

Capitalization of Development Costs. All acquisition and development costs (including financing, salary and related overhead costs) incurred in connection with the various uranium properties are capitalized. Exploration and evaluation costs associated with uranium properties are expensed as incurred until such time that the existence of a commercially minable uranium deposit is confirmed. All properties with significant acquisition or incurred costs are evaluated for their realizability on a property-by-property basis. Any impairment of such costs is recognized through a reduction in the net carrying value of the asset. (See Note 3—“Uranium Properties—Property Realizability”).

Depreciation and Depletion. Depletion of uranium mineral interests, permits, licenses and related development costs are computed on a property-by-property basis using the units-of-production method based on each projects pounds of recoverable uranium. The determination of the depleteable base for each uranium mineral interest is calculated by the Company’s professional geologists to determine the estimated recoverable uranium to be produced over the projected life for each uranium mineral interest. Depreciation and depletion are provided on the investment costs, net of salvage value, of the various uranium properties’ production plants and related equipment using the estimated production life of the uranium reserves. During the periods that our facilities are not in production, depletion on our mineral interests, permits, licenses and development properties are ceased. Depreciation and depletion of our plant facilities, machinery and equipment continues, at significantly reduced amounts, in accordance with the level of stand-by activity being conducted at each site. Other ancillary plant equipment and vehicles are depreciated using a straight line method based upon the estimated useful lives of the assets.

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Other Property, Plant and Equipment

Other property, plant and equipment consists of corporate office equipment, furniture and fixtures and transportation equipment. Depreciation on other property is computed based upon the estimated useful lives of the assets. Repairs and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed.

Capitalization of Interest

The Company capitalizes interest cost with respect to properties undergoing exploration or development activities that are not subject to depreciation or depletion. The average interest rate on outstanding borrowings during the period is used in calculating the amount of interest to be capitalized. No interest was capitalized in the twelve months ended December 31, 2006, 2005 and 2004. Total interest costs in these periods were $16,000, $93,000 and $8,000, respectively.

Restoration and Remediation Costs (Asset Retirement Obligations)

Various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality for its mine projects to the pre-existing mine area average quality after the completion of mining. In August 2001, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted January 1, 2003, when the Company recorded the estimated present value of reclamation liabilities and increased the carrying amount of the related asset, which resulted in a net expense for the cumulative effect of a change in accounting principle of $1,447,000. Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and remediation costs.

In March 2005, the FASB issued Interpretation 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations”—an interpretation of FASB No. 143. FIN 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 was effective for fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on our consolidated financial position, results of operations or cash flows.

Future reclamation and remediation costs are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred at each project. Such estimates are determined by the Company’s engineering studies calculating the cost of future of surface and groundwater activities.

During the years ended December 31, 2006, 2005 and 2004 the Company increased its cash flow estimate for restoration and reclamation costs by $543,707, $620,774 and $0.00, respectively.

Contingent Liabilities—Off Balance Sheet Arrangements

The Company has obtained financial surety relating to certain of its future restoration and reclamation obligations as required by the State of Texas regulatory agencies. The Company has bank Letters of Credit (the “L/C’s) and performance bonds issued for the benefit of the Company to satisfy such regulatory requirements. The L/C’s were issued by Bank of America and the performance bonds have been issued by United States Fidelity and Guaranty Company (“USF&G”). L/C’s for $2,072,000, $944,000 and $897,000 at December 31, 2006, 2005 and 2004, respectively such L/C’s are collateralized in their entirety by certificates of deposit.

Performance bonds totaling $2,835,000 were issued for the benefit of the Company at December 31, 2006, 2005 and 2004. USF&G has required that the Company deposit funds collateralizing a portion of the bonds. The amount of bonding issued by USF&G exceeded the amount of collateral by $2.5 million at December 31, 2006, 2005 and 2004, respectively. In the event that USF&G is required to perform under its bonds or the bonds are called by the state agencies, the Company would be obligated to pay any expenditures in excess of the collateral.

Revenue Recognition for Uranium Sales

The Company delivers uranium to its customers at third-party conversion facilities. The third-party converters warehouse our uranium and transfer title to our customers via book transfer upon instructions supplied by the Company. The Company recognizes revenue from the sale of uranium when title to the uranium transfers and delivery is completed through such book

F-9

transfer. The Company bears the risk of loss while its uranium is held at the converter prior to its sale to our customers, except in the case of negligence by the converter, whereby the converter would bear such risk. Upon completion of the book transfer, which is a record keeping entry rather than a physical transfer of goods to the customer, the risk of loss passes to our customer.

Earnings Per Share

Net earnings (loss) per common share—basic has been calculated based on the weighted average shares outstanding during the year and net earnings (loss) per common share—diluted has been calculated assuming the exercise or conversion of all dilutive securities. Due to net losses incurred for 2005 and 2004 there were no dilutive securities included in each of these years.

The weighted average number of shares used to calculate basic and diluted earnings (loss) per share was 48,338,172 and 51,559,867 respectively in 2006 and 36,644,468 and 28,725,320 in 2005 and 2004, respectively. The difference in the number of weighted average shares used to calculate basic and diluted earnings per share in 2006 resulted from potential common stock issuances of shares related to the Company’s stock option and deferred compensation plans. The potential Common Stock that was excluded from the calculation of diluted earnings per share was 4,402,984 and 2,439,690 in 2005 and 2004, respectively.

Consolidated Statements of Cash Flows

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Additional disclosures of cash flow information follow:

|  | Year Ended December 31, |
|  | 2006 |  | 2005 |  | 2004 |
Cash paid during the period for: |  |  |  |  |  |  |
Interest |  | $ | 13,603 |  | $ | 0 |  | $ | 0 |
The following non-cash transactions occurred in 2006, 2005 and 2004 and such transactions are summarized as follows: |  |  |  |  |  |  |
The Company issued 65,812 and 119,125 shares of Common Stock in 2005 and 2004 in satisfaction of the conversion of deferred compensation |  | $ | 0 |  | $ | 52,649 |  | $ | 95,300 |

In connection with a private placement in April 2006, the Company paid a fee of $1,449,445 in cash and 306,009 shares of Common Stock to a placement agent.

In March 2006, the Company issued 103,896 shares of Common Stock in connection with the conversion of the Convertible Notes described in Footnote 6.

During 2006, 2005 and 2004, the Company entered into capital leases to acquire certain property plant and equipment totaling $225,000, $266,000 and $165,000. The balance of the capital leases at December 31, 2006 was $387,000.

In the fourth quarter of 2005, the Company issued 1,256,664 shares of Common Stock in satisfaction of the conversion of $600,000 in principal and $28,333 in accrued interest for borrowings made pursuant to a Note Purchase Agreement dated March 24, 2005.

In September 2005, the Company recorded $138,000 in stock compensation expense for stock options granted to a non-employee for services provided to the Company.

In connection with a $12 million private placement in August 2005 the Company paid a fee of $336,000 in cash and 448,000 shares of Common Stock to a placement agent.

In June 2005, the Company recorded $443,960 in stock compensation expense related to stock options granted to employees and directors of the Company that were contingent upon shareholder approval of amendments to the stock option plans under which the grants were issued.

Cash Balances in Excess of Federally Insured Limits

The Company’s cash balance at December 31, 2006 was $20.2 million and it maintains its cash accounts primarily with Bank of America, N.A. The total cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per account. The Company has cash balances with Bank of America, N.A. that exceeded the balance insured by the FDIC that totaled approximately $20 million at December 31, 2006.

F-10

Restricted Cash

At December 31, 2006 and 2005, the Company had pledged certificates of deposit and money market accounts of $2,467,000 and $1,288,000, respectively, in order to collateralize letters of credit required for future restoration and reclamation obligations related to the Company’s South Texas production and development properties. These funds are not readily available to the Company and are not included in cash equivalents.

Stock-Based Compensation

On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “ Share-Based Payment” (“FAS 123(R)”). The Company adopted FAS 123(R) using the modified prospective transition method. Under this method, compensation cost recognized in 2006 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of FAS 123, and b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R).

As a result of adopting FAS 123(R), the Company’s Earnings from operations and Net earnings for 2006 is $2.422 million ($0.05 per share) lower, than if we had continued to account for share-based compensation under APB 25 as we did in the comparable prior year periods.

On June 2, 2004, 1,687,500 options were granted to officers at an exercise price of $1.16 per share. Stock compensation expense of $444,000 was recorded in June 2005 (the date an amendment to the stock option plan was approved by the Company’s stockholders) and is reflected in the Consolidated Statements of Operations under general and administrative expenses for the year ended December 31, 2005.

On September 28, 2005, 50,000 options were granted to a non-employee of the Company for services provided to the Company. Stock compensation expense of $138,000 is reflected in the Consolidated Statements of Operations under general and administrative expenses for the year ended December 31, 2005.

Derivative Financial Instruments

The Company determined that its original long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes and are recorded on the balance sheet at fair value at December 31, 2005 and 2004. Changes in the fair value of such derivatives recorded on the balance sheet are recorded in the consolidated statements of operations in current earnings as they occur. Such changes in the Company’s derivatives represent non-cash charges to earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the deliveries under both of its long-term uranium sales contracts. See Footnote 5 for discussion of renegotiated sales contracts.

In March 2006 we entered into a new contract with Itochu and a new contract with UG that supersede the prior contracts. Each of the new contracts calls for delivery of one-half of our actual production from our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding certain large potential exploration plays). The terms of such contracts are discussed in Footnote 5. “Contract Commitments—Sales Contracts”. The Company has determined that the terms of the amended contracts substantially eliminate their qualification as derivatives.

We recorded a gain on derivatives in 2006 of $34.8 million compared to losses of $30.9 million and $13.1 million in 2005 and 2004, respectively. The gain in 2006 resulted from changes in the contract terms of long-term uranium sales contracts that were finalized in March 2006.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions. Such estimates and assumptions may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Specifically regarding the Company’s uranium properties, significant estimates were utilized in determining the carrying value of these assets and in the case of producing and development properties the pounds of uranium to be recovered. The actual values received from the disposition of these assets and the amount of uranium recovered from these projects may vary significantly from these estimates based upon market conditions, financing availability and other factors.

Regarding the Company’s reserve for future restoration and reclamation costs, significant estimates were utilized in determining the future costs and timing to complete the groundwater restoration and surface reclamation at the Company’s mine sites. The actual cost to conduct these activities may vary significantly from these estimates.

F-11

Risks and Uncertainties

Historically, the market for uranium has experienced significant price fluctuations. Prices are significantly impacted by global supply and demand, which is affected by the demand for nuclear power, political, and economic conditions, governmental legislation in uranium producing and consuming countries, and production levels and costs of production of other producing companies. Increases or decreases in prices received could have a significant impact on the Company’s future results of operations.

The Company has outstanding surety bonds issued on its behalf by USF&G at December 31, 2006, 2005 and 2004. The Company has deposited funds collateralizing a portion of these bonds. In the event that USF&G is required to perform under the bonds or the bonds are called by the state agencies, the Company would be obligated to pay USF&G for its expenditures in excess of the collateral. See “Summary of Significant Accounting Policies—Restoration and Reclamation Costs” for further discussion.

Impact of Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs,” which amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (“spoilage”) and requires such costs to be recognized as current-period charges. Additionally, SFAS No. 151 requires that allocation of fixed production overhead costs be based on normal capacity. The Statement is effective for years beginning after June 15, 2005, with early adoption permitted. Implementation of the Statement did not have a significant effect on the Company’s financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS No. 123R) “Share-Based Payments.” SFAS No. 123R requires that the cost from all share-based payment transactions, including stock options, be recognized in the financial statements at fair value. SFAS No. 123R is effective for the Company in the first interim period after December 15, 2005. SFAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for a grant of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. The Company will adopt the provisions of SFAS No. 123R on January 1, 2006. Compensation expense will be recognized for all newly granted options after January 1, 2006. Compensation expense for the unvested portion of awards that are outstanding as of January 1, 2006, based on the fair value at date of grant as calculated for our pro forma disclosure under SFAS No. 123R, will be recognized ratably over the remaining vesting period. The implementation of SFAS No. 123R resulted in a non-cash charge against earnings in 2006 of approximately $2.422 million.

In March 2005, the FASB ratified Emerging Issues Task Force Issue No. 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” (EITF 04-6) which addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in operating costs in the same period as the revenue from the sale of inventory. The EITF 04-6 applies specifically to conventional mining operations (open pit mining) and as a result the Company does not believe it is applicable to the Company’s in situ recovery mining operations.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The Company adopted SAB 108 in the fourth quarter of 2006. SAB 108 allows a one-time transitional cumulative effect adjustment to beginning retained earnings as of January 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.

F-12

3. LIQUIDITY

The Company’s net cash used in operations for the years ended December 31, 2006, 2005, and 2004 was $2.2 million, $1.7 million and $2.5 million, respectively, and from April to December 2006, our net cash outflows have averaged $1.7 to $1.8 million per month.

Our cash balance at December 31, 2006 was $20.2 million and based upon our current plan of operations we anticipate that our operating and capital requirements for 2007 will be met through existing cash and cash generated from operations.

4. URANIUM PROPERTIES

Property, Plant and Equipment

|  | Property, Plant and Equipment Balances (net) At December 31, |
|  | 2006 |  | 2005 |
Uranium plant |  | $ | 7,052,000 |  | $ | 2,315,000 |
Uranium wellfield development |  | 5,128,000 |  | 3,592,000 |
Permits and licenses |  | 1,970,000 |  | 1,308,000 |
Mineral rights |  | 1,081,000 |  | 659,000 |
Exploration |  | 423,000 |  | 56,000 |
Vehicles/depreciable equipment |  | 1,402,000 |  | 247,000 |
Other |  | 1,140,000 |  | 512,000 |
Total |  | $ | 18,196,000 |  | $ | 8,689,000 |

Property Realizability

Uranium Properties

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected uranium prices, production levels and operating costs of production and capital, based upon the projected remaining future uranium production from each project. The Company’s estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, uranium prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

The Company recorded an impairment and reduced the carrying value of its uranium properties by $3,260,000 and $46,000 in 2006 and 2004, respectively. No impairment was recorded in 2005.

Vasquez Property

The Company has a mineral lease on 872 gross and net acres located in southwestern Duval County, in South Texas. The term expires in February 2008. The lease provides for royalties based upon 6.25% of uranium sales below $25.00 per pound and royalty rate increases on a sliding scale up to 10.25% for uranium sales occurring at or above $40.00 per pound.

The net carrying value of the property was approximately $1,580,000 at December 31, 2006. Such assets consisted of mineral rights ($51,000), permits/licenses ($15,000), wellfield development ($426,000), plant buildings/uranium processing/drying facilities ($784,000) and restoration and other equipment ($304,000). The net carrying value of the property was approximately $4,611,000 at December 31, 2005. Such assets consisted of mineral rights ($104,000), permits/licenses ($60,000), wellfield development ($3,395,000), plant buildings/uranium processing/drying facilities ($963,000) and restoration and other equipment ($89,000).

Kingsville Dome Property

The Kingsville Dome property consists of mineral leases from private landowners on about 2,354 gross and net acres located in central Kleberg County, Texas. The leases provide for royalties based upon a percentage of uranium sales of 6.25%. The leases have expiration dates ranging from 2000 to 2007. With a few minor exceptions, all the leases contain clauses that permit us to extend the leases not held by production by payment of a per acre royalty ranging from $10 to $30.

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The net carrying value of the property was approximately $10,017,000 at December 31, 2006. Such assets consisted of mineral rights ($386,000), permits/licenses ($556,000), plant buildings/uranium processing/drying facilities ($4,115,000), wellfield development ($4,169,000) and restoration and other equipment ($792,000). The net carrying value of the property was approximately $2,110,000 at December 31, 2005. Such assets consisted of mineral rights ($239,000), permits/licenses ($379,000), plant buildings/uranium processing/drying facilities ($1,179,000), wellfield development ($197,000) and restoration and other equipment ($116,000).

Rosita Property

The Company holds several lease holdings in a uranium prospect (“Rosita”) in Duval County, Texas. The Company has produced over 3 million pounds of uranium from this property in the early to mid 1990’s but the property was placed on stand-by in 1999 because of low uranium prices. With the significant increase in uranium prices the company is re-evaluating this property for additional future uranium production.

Cost of uranium sales in 2006, 2005 and 2004 in the Consolidated Statements of Operations includes $64,000, $83,000 and $105,000, respectively of costs incurred to maintain the facility while Rosita was on standby and not in production.

The net carrying value of the property at December 31, 2006 and 2005 was approximately $3,089,000 and $173,000, respectively. Such assets consisted of mineral rights ($63,000), permits/licenses ($67,000), plant buildings/uranium processing/drying facilities ($2,154,000) , wellfield development ($535,000) and other equipment of ($270,000) in 2006. Rosita assets consisted of plant buildings ($173,000) in 2005.

South Rosita

In the fourth quarter of 2005, the Company entered into leases on approximately 1,300 acres in Duval County near its Rosita property. Evaluation of the uranium mineralization potential of this property began in 2006 and continues in 2007. The net carrying value of the property at December 31, 2006 was approximately $757,000. Such assets consisted of mineral rights ($247,000), permits/licenses ($122,000) and evaluation costs ($388,000).

Churchrock Properties

The Churchrock project encompasses about 2,200 gross and net acres. The properties are located in McKinley County, New Mexico and consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation. We own the mineral estate in fee for both Section 17 and the Mancos properties. We own patented mining claims on Section 8.

The surface estate on Section 17 is owned by the United States Government and held in trust for the Navajo Nation. We have royalty obligations ranging from 5% to 6 1/4 % and a 2% overriding royalty obligation to the Navajo Nation for surface use agreements.

Permitting activities are currently ongoing on both of these properties. The net carrying value of these properties was $810,000 and $506,000 at December 31, 2006 and 2005, respectively. The assets consisted of mineral rights and permitting/licensing at December 31, 2006 and 2005.

Crownpoint Property

The Crownpoint properties are located in the San Juan Basin, 22 miles northeast of our Churchrock deposits and 35 miles northeast of Gallup, New Mexico, adjacent to the town of Crownpoint. The Properties consist of 619 gross and 521.8 net acres.

The net carrying value of these properties was $610,000 and $518,000 at December 31, 2006 and 2005, respectively, and consisted primarily of mineral rights, permits/licenses and plant buildings and equipment.

West Largo and Roca Honda

In March 1997, we acquired the fee interest in 177,000 acres in northwestern New Mexico. Several significant occurrences of uranium mineralization are know to be within this acreage, including a uranium mineralized property called the West Largo and a uranium mineralized property called the Roca Honda.

The West Largo property is about 21 miles north of the town of Milan and about 1.5 miles west of State Highway 509 in McKinley County, New Mexico. The property lies about 3 miles to the northwest of the Ambrosia Lake District, a major producer of uranium by means of underground operations from the late 1950s to the early 1980s.

The Roca Honda property lies about 4 miles northwest of the town of San Mateo in McKinley County, New Mexico. We also own 36 unpatented mining claims encompassing approximately 640 acres that are adjacent to the fee land.

The net carrying value of the property was $65,000 and $29,000 at December 31, 2006 and 2005, respectively.

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5. CONTRACT COMMITMENTS

Sales Contracts

In March 2006 we entered into a new contract with Itochu and a new contract with UG that supersede the previously existing contracts and provide for delivery of one-half of our actual production from our Vasquez property and other properties in Texas currently owned or hereafter acquired by the Company (excluding certain large potential exploration plays). The terms of such contracts are summarized below.

The Itochu Contract. Under the Itochu contract all production from the Vasquez property will be sold at a price equal to the average spot price for the eight weeks prior to the date of delivery less $6.50 per pound, with a floor for the spot price of $37 and a ceiling of $46.50. Other Texas production will be sold at a price equal to the average spot price for the eight weeks prior to the date of delivery less $7.50 per pound, with a floor for the spot price of $37 and a ceiling of $43. On non-Vasquez production the price paid will be increased by 30% of the difference between actual spot price and the $43 ceiling up to and including $50 per pound. If the spot price is over $50 per pound the price on all Texas production will be increased by 50% of such excess. The floor and ceiling and sharing arrangement 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 any deliveries on six-month’s notice.

In December 2005 we entered into a joint venture with Itochu to develop our Churchrock property in New Mexico. See “ Joint Venture for Churchrock Property .” Under the terms of the joint venture, both parties must make an investment decision after the completion of a feasibility study, which was completed at the end of 2006. If Itochu should terminate the venture at that time, we would no longer receive the additional price of 30% of the excess over $43 per pound outlined above. If we should terminate the venture at that time, the original contract terms will be reinstated from that time forward. The parties expect to make the preliminary investment decision the first week of May 2007.

The UG Contract. Under the UG contract all production from the Vasquez property and other Texas production will be sold at a price equal to the month-end long-term contract price for the second month prior to the month of delivery less $6 per pound until (i) 600,000 pounds have been sold in a particular delivery year and (ii) an aggregate of 3 million pounds of Uranium has been sold. After the 600,000 pounds in any year and 3 million pounds total have been sold, UG will have a right of first refusal to purchase other Texas production at a price equal to the average spot price for a period prior to the date of delivery less 4%. In consideration of UG’s agreement to restructure its previously existing contract, we paid UG $12 million in cash with funds raised in our equity offering completed in April 2006.

Derivative Financial Instruments

The Company has determined that its long-term uranium sales contracts in effect prior to March 2006 meet the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of January 1, 2004, to record these contracts at fair value.

Changes in the Company’s derivatives represent non-cash charges to earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the delivery obligations under the uranium sales contracts. The Company does not enter into hedge transactions with respect to its uranium sales contracts.

Impact of Amended Sales Contracts on Derivatives

Both of the amended contracts obligate the Company to deliver 50% of its uranium production to each customer, and is does not obligate the Company to deliver any uranium in excess of it’s production. The Company has determined that at March 31, 2006 the terms of the amended contracts eliminated their qualification as derivatives and therefore, as of May 2006, are not required to be valued at fair value. The amendment to these contracts resulted in a gain on derivatives recorded to the consolidated statements of operations of $34.3 million and $527,000 in the first and second quarters of 2006, respectively.

6. LONG-TERM DEBT

Convertible Notes

In 2000, the Company issued a $135,000 Convertible Note due July 17, 2005 in settlement of certain outstanding claims. Interest of 6% per annum was due at maturity. The Company could prepay the Note at any time and the holder of the Note had the right to convert all principal and accrued interest into shares of the Company’s Common Stock at a conversion price of $3.00 per share. In the third quarter of 2005, the maturity was extended to July 17, 2006, and the accrued and unpaid interest of $40,833 was added to the principal of the Convertible Note. The conversion price was reduced to $1.76 per share. In connection with these amended terms, the Company recorded interest expense of approximately $56,000 in 2005 related to the beneficial conversion terms of the modified Note. In March 2006, all of the principal and accrued interest ($182,900) under the note were converted into 103,896 shares of the Company’s Common Stock.

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On March 28, 2005 the Company borrowed $600,000 from five (5) stockholders of the Company, each of whom may be considered an affiliate. The Notes were unsecured, with a maturity date of March 24, 2006 and bore interest at the rate of 10% per annum. Each of the Notes carried conversion rights entitling the holder the right to convert the face value of the Note plus accrued interest into shares of common stock of the Company at a price equal to the share price the Company received under subsequent debt or equity offerings. In the fourth quarter of 2005 each lender elected to convert their note and accrued interest into common stock of the Company. A total of 314,166 shares were issued at a share price of $2.00 per share.

Summary of Long-Term Debt

|  | At December 31, |
|  | 2006 |  | 2005 |
Long-term debt of the Company consists of: |  |  |  |  |
Crownpoint property (Note 3) |  | $ | 450,000 |  | $ | 450,000 |
Capital leases |  | 387,495 |  | — |
Convertible Note |  | — |  | 175,833 |
|  | 837,495 |  | 625,833 |
Less—Current portion |  | 201,804 |  | 175,833 |
Total long-term debt |  | $ | 635,691 |  | $ | 450,000 |

Maturities of long-term debt are as follows:

For the Twelve Months Ended: |  |  |
December 31, 2007 |  | $ | 201,804 |
December 31, 2008 |  | $ | 141,280 |
December 31, 2009 |  | $ | 39,327 |
December 31, 2010 |  | $ | 5,084 |
December 31, 2011 and beyond |  | $ | 450,000 |

7. RELATED-PARTY TRANSACTIONS

In the second quarter of 2006, the Company issued a total of 162,500 shares of Common Stock (50,000 shares each to Richard A. Van Horn and Mark S. Pelizza at $0.80 per share and 62,500 shares to William M. McKnight, Jr. at $2.80 per share), each of them an executive officer of the Company, upon their election to exercise stock options under the terms of the Company’s stock option plans. The exercise price was the closing price of the shares on the date the stock option was granted.

In April 2006, August 2005 and May 2005 the Company issued shares of its common stock in private placement transactions. Two private investment partnerships managed by George R. Ireland, a director of the Company, purchased 300,000 out of 10,200,307 shares in the April 2006 offering, 400,000 shares out of 6,000,000 shares in the August 2005 offering and all of the 833,333 shares in the May 2005 offering. The partnerships managed by Mr. Ireland paid the same price for their shares as that paid by other investors who were not affiliated with the Company, and Mr. Ireland did not participate in the pricing of those offerings. The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares issued in these private placements.

In September 2005, the Company issued a total of 9,562 shares of Common Stock at $0.80 per share to Leland O. Erdahl, a director of the Company, upon his election to convert deferred compensation into shares under the terms of the Company’s deferred compensation plans adopted in 1999 through 2004.

On March 28, 2005 the Company borrowed $600,000 pursuant to a Note Purchase Agreement dated March 24, 2005. The lenders were five (5) stockholders of the Company, Robert K. Winters, Domenic Mizio, J.P. Morgan Trust Co. (Bahamas) Ltd. as Trustee U/A/D 11/30/93, City of Milford Pension & Retirement Fund, and Mellon Bank NA, Custodian for PERSI-Zesiger Capital each of whom may be considered an affiliate. In the fourth quarter of 2005 each lender elected to convert their note and accrued interest in common stock of the Company. A total of 314,166 shares were issued at a share price of $2.00 per share in connection with the conversion of the Notes. The Board of Directors determined that the interest rate on the loans and the conversion price was no less favorable to the Company that the terms available from unrelated parties.

In January 2005, the Company issued a total of 56,250 shares of Common Stock at $0.80 per share to a former director and holder of in excess of 5% of outstanding common shares of the Company upon his election to convert deferred compensation under the terms of the Company’s deferred compensation plans adopted in 1999 through 2004.

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In November 2004, the Company raised an additional $100,000 of equity by the issuance of 128,641 shares of Common Stock at $0.80 and $0.76 per share to Paul K. Willmott an executive officer and director of the Company, upon the exercise of outstanding stock options. The exercise price was the closing price of the shares on the date the stock option was granted.

In June and December 2004, the Company issued a total of 119,125 shares of Common Stock at $0.80 per share to, Leland O. Erdahl, a director of the Company upon his election to convert deferred compensation under the terms of the Company’s deferred compensation plans adopted in 1999 through 2004.

8. SHAREHOLDERS’ EQUITY (DEFICIT)

Reverse Stock Split

On March 29, 2006 the Company’s Board of Directors declared a 1 for 4 reverse stock split for stockholders of record on April 10, 2006. The split was approved by stockholders at the 2005 Annual Meeting of Stockholders.

Equity Infusions

In 2006 and 2005 the Company sold shares of common stock in the following private placements:

Date |  | Price per Share |  | Amount |  | Shares Issued |
April 2006 |  | $ | 4.90 |  | $ | 49,981,504 |  | 10,200,307 |
August 2005 |  | $ | 2.00 |  | $ | 12,000,000 |  | 6,000,000 |
May 2005 |  | $ | 1.80 |  | $ | 1,499,999 |  | 833,333 |
May 2004 |  | $ | 0.60 |  | $ | 5,897,550 |  | 9,829,251 |
February 2004 |  | $ | 0.40 |  | $ | 325,000 |  | 812,500 |
January 2004 |  | $ | 0.40 |  | $ | 350,000 |  | 875,000 |

In connection with the April 2006 placement the Company paid a fee of $1,449,445 in cash and 306,009 shares of Common Stock to a placement agent. In connection with the August 2005 placement the Company paid a fee of $336,000 in cash and 112,000 shares of Common Stock to a placement agent.

Two private investment partnerships managed by George R. Ireland, a director of the Company, purchased 300,000 out of 10,200,307 shares in the April 2006 offering, 400,000 shares out of 6,000,000 shares in the August 2005 offering and all of the 833,333 shares in the May 2005 offering. The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares issued in these private placements.

Common Stock Issued Upon Conversion of Warrants/Options

In 2006, the Company raised $458,000 of equity through the issuance of 229,000 shares of Common Stock of the Company upon the exercise of outstanding stock options.

In September 2005, the Company issued 9,562 shares of Common Stock of the Company at $0.80 per share to a director of the Company upon his election to convert deferred compensation. In January 2005, the Company issued 56,250 shares of Common Stock of the Company at $0.80 per share to a former director of the Company upon his election to convert deferred compensation.

In November 2004, the Company raised $100,000 of equity by the issuance of 55,816 and 72,825 shares of Common Stock at $0.80 and $0.76 per share respectively, to an executive officer and director of the Company upon the exercise of outstanding stock options.

In the fourth quarter of 2004, the Company raised $675,000 of equity by the issuance of 1,406,250 shares of Common Stock at $0.48 upon the exercise of Warrants that were issued in August 2000.

In June and December 2004, the Company issued a total of 119,125 shares of Common Stock at $0.80 per share to a director of the Company upon his election to convert deferred compensation.

Stock Options

Employee Stock Options

The Company has two stock Incentive Plans for Employees, both of which were approved by the Company’s stockholders. Under the 1995 Stock Incentive Plan (the “1995 Plan”) 2,600,521 shares may be purchased upon the exercise of outstanding options with exercise prices ranging from $0.76 to $28.50 per share. No new options may be granted under the 1995 Plan.

Under the Company’s 2004 Stock Incentive Plan (the “2004 Plan”) a total of 1,750,000 shares may be issued upon exercise of options granted under the 2004 Plan. At December 31, 2006 there were outstanding under the 2004 Plan options for the

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purchase of 1,722,688 shares of Common Stock at exercise prices ranging from $2.97 to $5.19 per share. At December 31, 2006, 500 shares were available for future grants under the 2004 Plan.

Employee stock options generally vest ratably over a 3 or 4 year time frame and have a contractual term of 10 years.

Directors Stock Options

On June 19, 2001, the Company granted to certain outside directors options to purchase 75,000 shares of the Company’s Common Stock at an exercise price of $0.88 per share. All such options were immediately exercisable and will expire June 19, 2011 or 30 days after the holder ceases to be a director of the Company or one year after such holder’s death, whichever occurs first. These options have not been exercised and 25,000 of these options were cancelled as of December 31, 2006.

On June 2, 2004 the Company adopted the 2004 Directors’ Stock Option Plan (the “2004 Directors’ Plan”). Under the 2004 Directors’ Plan, each non-employee director on the date the Plan was adopted was granted an option to purchase 75,000 shares of Common Stock. Each non-employee Director elected or appointed to the Board of Directors for the first time will be granted an option to purchase 25,000 shares of Common Stock and, each Non-Employee Director shall be granted an option to purchase 25,000 shares either, (a) upon his or her reelection at an annual meeting of the Company’s stockholders or (b) in any calendar year in which an annual meeting of stockholders is not held, on June 1 of such year. In June 2006, the Directors’ Stock Option Plan was amended to increase the initial grants to non-employee Directors to 50,000 shares of Common Stock. The 2004 Directors’ Plan replaces an earlier plan that expired in 2004. At December 31, 2006, there were outstanding options for the exercise of 2,000 shares under the old plan.

At the June 2006 and 2005 annual meeting of the stockholders, each of the non-employee directors of the Company (Leland O. Erdahl and George R. Ireland) was granted an option under the 2004 Directors Plan to purchase 25,000 shares of the Company’s common stock at an exercise price of $5.15 and $1.80 per share, respectively. In June and October 2006 options to purchase 50,000 shares of the Company’s Common Stock were granted to two new non-employee directors of the Company (David N. Clark in June and Terence J. Cryan in October) at exercise prices of $5.13 and $2.97, respectively. The non-employee directors hold options covering 350,000 shares under the 2004 Directors’ Plan at December 31, 2006. At December 31, 2006, 700,000 shares were available for future grants under the 2004 Directors’ Plan.

Options Issuable for Deferred Compensation

The Company has a 1999 Deferred Compensation Plan (the “1999 Plan”) and Deferred Compensation Plans for 2000-2001, 2002, 2003 and 2004 (the “2000-2004 Plans”) whereby executive officers and directors were permitted to defer up to 100% of their compensation for the years 1999-2004.

Under the 1999 Deferred Compensation Plan (the “1999 Plan”), executive officers and directors of the Company and its subsidiaries were permitted to defer until January 11, 2006 up to 100% of their 1999 salary. At the time of the deferral election, a participant could elect to receive payment of up to 100% of the deferred amount of salary in shares of our Common Stock. A total of approximately $242,000 was deferred under the 1999 Plan of which $133,450 was paid by issuing 88,965 shares of Common Stock at $1.50 per share. As of December 31, 2006, approximately $108,000 remains outstanding as deferred compensation under the 1999 Plan.

Under the 2000-2004 Plans, the executive officers and directors were permitted to defer up to 100% of their 2000, 2001, 2002, 2003 and 2004 salary with payment thereof to be made on January 11, 2006. On or before that date, the participant may elect to receive the deferred amount in shares of our Common Stock valued at $0.80 per share. A total of $829,000 was deferred under the 2000-2004 Plans of which $95,300 was paid in 2004 by issuing 119,125 shares of Common Stock at $0.80 per share. As of December 31, 2006, approximately $681,000 remains outstanding as deferred compensation under the 2000-2004 Plans.

In December 2005, the 1999 Plan and the 2000-2004 Plans were amended, extending the election of the participants under the plans to receive their deferred compensation until January 11, 2011. All of the participants with accrued deferred compensation at December 2005 elected to defer their election to such date.

9. STOCK-BASED COMPENSATION PLANS

Adoption of SFAS 123(R)

Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standard 123(R) “ Share-Based Payment” (“SFAS 123(R)”) using the modified prospective transition method. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 “ Share-Based Payment “ (“SAB 107”) in March, 2005, which provides supplemental SFAS 123(R) application guidance based on the views of the SEC. Under the modified prospective transition method, compensation cost recognized in the quarter ended March 31, 2006 and beyond includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on

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the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In accordance with the modified prospective transition method, results for prior periods have not been restated.

The adoption of SFAS 123(R) resulted in stock compensation expense for the year ended December 31, 2006 of $2,422,000 to general and administrative expenses. The Company did not recognize a tax benefit from the stock compensation expense because the Company considers it is more likely than not that the related deferred tax assets, which have been reduced by a full valuation allowance, will not be realized.

The Black-Scholes option-pricing model was used to estimate the option fair values. The option-pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire). Expected volatility was calculated based upon actual historical stock price movements through the measurement date of the stock option grant. Expected pre-vesting forfeitures were estimated based on actual historical pre-vesting forfeitures over the most recent periods ending December 31, 2006 for the expected option term. The expected option term was estimated based on historical averages over the most recent periods ending December 31, 2006.

A total of 100,000 new option grants were made to the non-employee directors of the Company in June 2006 at grant prices of $5.15 and $5.13 per share. In October 2006 a total of 800,000 new options were made to an executive officer of the Company and 50,000 new option grants were made to a non-employee director of the Company at a grant price of $2.97 per share. In November 2006, a total of 295,000 new option grants were made to employees of the Company at a grant price of $5.19 per share.

Stock Options as of December 31, 2006

The Company has four stock option plans as summarized under Footnote 8 “Stock Options.” The following table summarizes stock options outstanding and changes during the year ended December 31, 2006:

|  | Outstanding Options |
|  | Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value |
Options outstanding at Jan. 1, 2006 |  | 3,743,064 |  | $ | 2.17 |  |  |  |  |
Granted |  | 1,245,000 |  | $ | 3.67 |  |  |  |  |
Exercised |  | (229,000 | ) | $ | 2.00 |  |  |  |  |
Canceled or forfeited |  | (83,855 | ) | $ | 9.71 |  |  |  |  |
Options outstanding at December 31, 2006 |  | 4,675,209 |  | $ | 2.44 |  | 7.88 |  | $ | 15,686,685 |
Options exercisable at December 31, 2006 |  | 2,550,743 |  | $ | 2.29 |  | 7.21 |  | $ | 8,956,122 |

The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $793,000, $0 and $312,000, respectively.

Shares available for grant under the Plans as of December 31, 2006 were 700,500.

Stock options outstanding and currently exercisable at December 31, 2006 are as follows:

|  | Options Outstanding |  | Options Exercisable |
Stock Option Plan |  | Number of Options Outstanding |  | Weighted Average Remaining Contractual Life (in years) |  | Weighted Average Exercise price |  | Number of Options Exercisable |  | Weighted Average Exercise Price |
1995 Stock Incentive Plan |  | 2,600,521 |  | 6.94 |  | $ | 1.74 |  | 1,694,569 |  | $ | 1.80 |
2004 Employee Incentive Plan |  | 1,722,688 |  | 9.17 |  | 3.46 |  | 804,474 |  | 3.35 |
Directors Stock Option Plan |  | 2,000 |  | 2.73 |  | 7.79 |  | 1,700 |  | 9.14 |
2004 Directors Plan |  | 350,000 |  | 8.55 |  | 2.65 |  | 50,000 |  | 1.32 |
|  | 4,675,209 |  | 7.88 |  | $ | 2.44 |  | 2,550,743 |  | $ | 2.29 |

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Total estimated unrecognized compensation cost from unvested stock options as of December 31, 2006 was approximately $4.7 million, which is expected to be recognized over a weighted average period of approximately 2 years.

Pro-Forma Stock Compensation Expense for the Year Ended December 31, 2005

Prior to 2006, the Company applied the intrinsic value method of accounting for stock options as prescribed by APB 25. Since all options granted prior to the year ended December 31, 2005 had an exercise price equal to the closing market price of the underlying common stock on the grant date, no compensation expense was recognized. If compensation expense had been recognized based on the estimated fair value of each option granted in accordance with the provisions of SFAS 123 as amended by Statement of Financial Accounting Standard 148, our net loss and net loss per share would have been reduced to the following pro-forma amounts:

|  | Year Ended December 31, 2005 |  | Year Ended December 31, 2004 |
Net Loss: As reported |  | $ | (35,086,678 | ) | $ | (15,864,756 | )
Pro forma stock based compensation costs under the fair value method, net of tax |  | (430,255 | ) | (27,458 | )
Pro forma |  | $ | (35,516,933 | ) | $ | (15,892,214 | )
As reported |  | $ | (0.96 | ) | $ | (0.55 | )
Basic EPS: Pro forma |  | $ | (0.96 | ) | $ | (0.55 | )
As reported |  | $ | (0.96 | ) | $ | (0.55 | )
Diluted EPS: Pro forma |  | $ | (0.96 | ) | $ | (0.55 | )

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model.

Using the Black-Scholes option pricing model, the weighted average assumptions for grants in 2006: fair market value: $5.05, $5.03, $2.91, $2.92 and $5.09 expected volatility of 155.0%, 155.0%, 154.6%, 148.1% and 155.0% and risk-free interest rates of 5.18%, 5.08%, 4.13%, 5.13% and 4.66%. An expected life of 8.58, 8.58, 8.58, 9.53 and 8.58 years was used for the options granted. The weighted average fair value of the options granted in 2006 was $3.60.

The following are the weighted average ranges for assumptions used for grants in 2005: Expected volatility of 150% and risk-free interest rates of 4.0%-4.5%. An expected life of 9.2 years was used for options granted to the employees and directors. The weighted average fair value of options granted in 2005 ranged from $1.80 to $3.12 per share.

The following are the weighted average ranges for assumptions used for grants in 2004: Expected volatility of 149%-179% and risk-free interest rates of 4.2%-5.0%. The range of the expected life of 5.7-9.4 years was used for options granted to the employees and directors. The weighted average fair value of options granted in 2004 ranged from $1.16 to $3.36 per share.

On June 2, 2004, 1,687,500 options were granted to officers at an exercise price of $1.16 per share. Stock compensation expense of $444,000 was recorded in June 2005 (the date an amendment to the stock option plan was approved by the Company’s stockholders) and is reflected in the Consolidated Statements of Operations under general and administrative expenses for the year ended December 31, 2005. On September 28, 2005, 50,000 were granted to a non-employee of the Company for services provided to the Company. Stock compensation expense of $138,000 is reflected in the Consolidated Statements of Operations under general and administrative expenses for the year ended December 31, 2005.

Additional details about the options granted under the stock option plans are as follows:

Date of Grant |  | Exercise Price |  | Options Granted |  | Options Available for Exercise |  | Options Exercised |  | Options Canceled |  | Options Outstanding |
Balances at Dec. 31, 2003 |  |  |  | 1,198,118 |  | 498,159 |  | 311,799 |  | 387,860 |  | 498,459 |
June 2, 2004 |  | $ | 1.16 |  | 150,000 |  | 37,500 |  | — |  | — |  | 150,000 |
June 2, 2004 |  | $ | 1.16 |  | 1,687,500 |  | 1,012,799 |  | — |  | — |  | 1,687,500 |
November 12, 2004 |  | $ | 2.96 |  | 247,000 |  | 89,059 |  | 26,812 |  | 92,500 |  | 127,688 |
December 7, 2004 |  | $ | 3.36 |  | 500,000 |  | 374,999 |  | — |  | — |  | 500,000 |
Balances at Dec. 31, 2004 |  |  |  | 3,782,618 |  | 2,012,516 |  | 338,611 |  | 480,360 |  | 2,963,647 |
June 1, 2005 |  | $ | 1.80 |  | 50,000 |  | 12,500 |  | — |  | — |  | 50,000 |
September 28, 2005 |  | $ | 2.80 |  | 300,000 |  | 112,499 |  | 62,500 |  | — |  | 237,500 |
October 6, 2005 |  | $ | 3.12 |  | 262,500 |  | 72,812 |  | 39,688 |  | 43,750 |  | 179,062 |
Balances at Dec. 31, 2005 |  |  |  | 4,395,118 |  | 2,210,327 |  | 440,799 |  | 524,110 |  | 3,430,209 |
June 1, 2006 |  | $ | 5.15 |  | 50,000 |  | — |  | — |  | — |  | 50,000 |
June 6, 2006 |  | $ | 5.13 |  | 50,000 |  | — |  | — |  | — |  | 50,000 |
October 3, 2006 |  | $ | 2.97 |  | 850,000 |  | 266,666 |  | — |  | — |  | 850,000 |
November 8, 2006 |  | $ | 5.19 |  | 295,000 |  | 73,750 |  | — |  | — |  | 295,000 |
Balances at Dec. 31, 2006 |  |  |  | 5,640,118 |  | 2,550,743 |  | 440,799 |  | 524,110 |  | 4,675,209 |

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The exercise price for the options granted under the plans is the fair market value of the Common Stock on the date granted. The terms of the options are determined by the Board of Directors upon grant; however, no options may be exercised after a period of ten years. The weighted average fair value of options granted in 2006, 2005 and 2004 was $3.67, $3.08 and $1.76, respectively.

10. FEDERAL INCOME TAXES

The deferred federal income tax asset (liability) consists of the following:

|  | December 31, |
|  | 2006 |  | 2005 |  | 2004 |
Property development costs—net of amortization |  | $ | 8,883,000 |  | $ | 7,552,000 |  | $ | 7,860,000 |
Accelerated depreciation |  | 28,000 |  | 62,000 |  | 75,000 |
Restoration reserves |  | 1,106,000 |  | 1,087,000 |  | 812,000 |
Derivative valuation allowance |  | — |  | 15,919,000 |  | 5,388,000 |
Net operating loss and percentage depletion carryforwards |  | 59,711,000 |  | 51,343,000 |  | 47,593,000 |
Valuation allowance and other—net |  | (69,728,000 | ) | (75,963,000 | ) | (61,728,000 | )
Total deferred income tax asset (liability) |  | $ | 0 |  | $ | 0 |  | $ | 0 |

Major items causing the Company’s tax provision to differ from the federal statutory rate of 34% were:

|  | For the Twelve Months Ended December 31, |
|  | 2006 |  | 2005 |  | 2004 (Restated) |
|  | Amount |  | % of Pretax Income |  | Amount |  | % of Pretax Income |  | Amount |  | % of Pretax Income |
Pretax income (loss) |  | $ | 21,509,723 |  | — |  | $ | (35,086,678 | ) | — |  | $ | (15,864,756 | ) | — |
Pretax income (loss) times statutory tax rate |  | 7,313,000 |  | (34 | )% | (11,929,000 | ) | (34 | )% | (5,394,000 | ) | (34 | )%
Increases (decreases) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |
Change in valuation allowance |  | (7,313,000 | ) | 34 | % | 11,929,000 |  | 34 | % | 5,394,000 |  | 34 | %
Income tax benefit |  | $ | 0 |  | 0 | % | $ | 0 |  | 0 | % | $ | 0 |  | 0 | %

The Company’s net operating loss carryforwards generated in 2006 and in prior years have generally been valued, net of valuation allowance, at Alternative Minimum Tax (“AMT”) rates imposed by the Tax Reform Act of 1986. It is assumed that these deferred tax assets will be realized at such rates.

At December 31, 2006, approximately $57,225,000 of percentage depletion (available for regular tax purposes) had not been utilized to offset book income and is available to carry forward to future accounting periods.

The Company also has available for regular federal income tax purposes at December 31, 2006 estimated net operating loss (“NOL”) carryforwards of approximately $57,234,000 which expire primarily in 2007 through 2026, if not previously utilized. Following the issuance of the Company’s Common Stock in 2001, use of the Company’s NOL will be severely limited on an annual and aggregate basis. For this reason, the NOL is not included as a deferred tax asset in the table above.

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11. OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS

Other long-term liabilities and deferred credits on the balance sheet consisted of:

|  | December 31, |
|  | 2006 |  | 2005 |
Reserve for future restoration and reclamation costs (Asset Retirement Obligations), net of current portion of $1,520,491 and $1,061,491 in 2006 and 2005. (Note 1) |  | $ | 2,709,001 |  | $ | 2,533,787 |
Royalties payable |  | 500,000 |  | 500,000 |
Deferred compensation |  | 789,228 |  | 789,228 |
|  | $ | 3,998,229 |  | $ | 3,823,015 |

The following table shows the change in the balance of the restoration and reclamation liability (Asset Retirement Obligation) during the years ended December 31, 2006, 2005 and 2004:

|  | Year Ended December 31 |
|  | 2006 |  | 2005 |  | 2004 |
Reserve for future restoration and reclamation costs at January 1, |  | $ | 3,595,278 |  | $ | 3,410,293 |  | $ | 3,480,656 |
Additions |  | 886,978 |  | 339,771 |  | 317,675 |
Changes in cash flow estimates |  | 543,707 |  | 620,774 |  | — |
Costs incurred |  | (997,134 | ) | (975,924 | ) | (571,705 | )
Accretion expense |  | 200,364 |  | 200,364 |  | 183,667 |
Reserve for future restoration and reclamation costs at Dec. 31, |  | $ | 4,229,193 |  | $ | 3,595,278 |  | $ | 3,410,293 |

12. COMMITMENTS AND CONTINGENCIES

The Company’s mining operations are subject to federal and state regulations for the protection of the environment, including water quality. These laws are constantly changing and generally becoming more restrictive. The ongoing costs of complying with such regulations have not been significant to the Company’s annual operating costs. Future mine closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-production basis. The Company reviews its reclamation obligations each year and determines the appropriate unit charge. The Company also evaluates the status of current environmental laws and their potential impact on their accrual for costs. The Company believes its operations are in compliance with current environmental regulations.

The Company is from time to time involved in various legal proceedings of a character normally incident to its business. Management does not believe that adverse decisions in any pending or threatened proceedings will have a material adverse effect on the Company’s financial condition or results of operations.

In April 2006, the Company completed the sale of 10,200,307 shares of its Common Stock at $4.90 per share to accredited investors resulting in gross proceeds of approximately $50 million before expenses of the offering. The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares. Such shares are subject to certain resale registration rights that include penalties in the event the registration statement fails to remain effective.

Compensation Agreements

The Company has entered into Compensation Agreements with Executive Officers of the Company that provide that, in the event of a change in control, such officers will have certain rights and benefits for a period of thirty-six months for the Chairman and CEO of the Company and twenty-four months for the other officers, following such change in control. The Compensation Agreements provide that the executive’s base salary payments shall be made on a monthly basis for the duration of the term and any incentive payments shall be paid annually until the obligation to make such payments expires.

13. RESTATEMENT OF FINANCIAL STATEMENTS

The financial statements for the year ended December 31, 2004 have been restated in our Form 10-KSB/A filed in July 2005 to give effect for fair value accounting of certain uranium sales contracts under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company determined that its long-term uranium sales contracts meet the definition of derivative financial instruments for financial statement and reporting purposes, and the financial statements have been restated as December 31, 2004, to record these contracts at fair value.

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The impact of such restatement to the financial statements at December 31, 2004 are:

|  | As Originally Presented |  | As Restated |
Consolidated Balance Sheet |  |  |  |  |
Liabilities and Shareholders Equity (Deficit) |  |  |  |  |
Unrealized loss on derivatives, current portion |  | $ | — |  | $ | 4,406,134 |
Total current liabilities |  | $ | 2,036,522 |  | $ | 6,442,656 |
Unrealized loss on derivatives, net of current portion |  | $ | — |  | $ | 11,439,976 |
Accumulated deficit |  | $ | (60,102,822 | ) | $ | (75,948,932 | )
Total shareholders equity (deficit) |  | $ | 553,414 |  | $ | (15,292,696 | )
Consolidated Statement of Operations |  |  |  |  |
Unrealized loss on derivatives |  | $ | — |  | $ | 13,111,772 |
Total cost of uranium sales |  | $ | 1,814,272 |  | $ | 14,926,044 |
Loss from operations before corporate expenses |  | $ | (804,989 | ) | $ | (13,916,761 | )
Loss from operations |  | $ | (2,811,416 | ) | $ | (15,923,188 | )
Loss before accounting change |  | $ | (2,752,984 | ) | $ | (15,864,756 | )
Net loss |  | $ | (2,752,984 | ) | $ | (15,864,756 | )
Loss before accounting change per common share: |  |  |  |  |
Basic and Fully Diluted |  | $ | (0.08 | ) | $ | (0.55 | )
Net loss per common share: |  |  |  |  |
Basic and Fully Diluted |  | $ | (0.08 | ) | $ | (0.55 | )
Consolidated Statement of Shareholders Equity (Deficit) |  |  |  |  |
Net loss |  | $ | (2,752,984 | ) | $ | (15,864,756 | )
Accumulated deficit |  | $ | (60,102,822 | ) | $ | (75,948,932 | )
Consolidated Statement of Cash Flows |  |  |  |  |
Net loss |  | $ | (2,752,984 | ) | $ | (15,864,756 | )
Unrealized loss on derivatives |  | $ | — |  | $ | 13,111,772 |

14. JOINT VENTURE FOR CHURCHROCK PROPERTY

In December 2006, HRI-Churchrock, Inc., a wholly owned subsidiary of the Company, entered into a Joint Venture with a wholly owned subsidiary of Itochu to develop jointly our Churchrock property in New Mexico, under which Itochu will fund all development costs, primarily through a debt facility that it will provide. Itochu and the Company will split the profits 50-50 and the Company will be the Managing Partner and receive a management fee. For revenues in excess of $30 per pound, the Company will receive additional payments under the joint venture. The Company estimates that the Churchrock property will yield about 12 million pounds of uranium. A feasibility study was completed and delivered at the end of 2006. Under the terms of the Joint Venture, both parties has until April 2, 2007 to make a Preliminary Investment Decision whether to move forward with the Joint Venture. The parties have agreed to extend that date until May 1, 2007. If a positive decision is made, Itochu will reimburse us for 50% of our permitting costs from November 1, 2005, through the completion of the feasibility study, up to a maximum contribution of $180,000. The parties will split costs incurred after completion of the feasibility study 50-50 until a final investment decision is made by the parties after receipt of necessary permits.

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EXHIBIT INDEX

Exhibit Number |  | Description
3.1* | Restated Certificate of Incorporation of the Company, dated February 15, 2004 (filed with the Company’s Registration Statement on Form SB-2 dated July 26, 2004, SEC File Number 333-117653).
3.1.1* | Certificate of Amendment of Restated Certificate of Incorporation of the Company (filed with the Company’s Form 8-K dated April 11, 2006, SEC File Number 000-17171).
3.2* | Restated Bylaws of the Company (filed with the Company’s Form 8-K on April 14, 2005).
4.1* | Common Stock Purchase Agreement dated February 28, 2001 between the Company and Purchasers of the Common Stock of the Company (filed with the Company’s Annual Report on Form 10-KA dated July 26, 2001, SEC File Number 000-17171).
10.1* | Amended and Restated Directors Stock Option Plan (filed with the Company’s Form S-8 Registration No. 333- 00349 on January 22, 1996).
10.2* | Amended and Restated Employee’s Stock Option Plan (filed with the Company’s Form S-8 Registration No. 333-00403 on January 24, 1996).
10.3* | Amended and restated 1995 Stock Incentive Plan (filed with the Company’s Form SB-2 Registration No. 333-117653 on July 26, 2005).
10.4* | Non-Qualified Stock Option Agreement dated June 19, 2001 between the Company and Leland O. Erdahl (filed with the Company’s 10-QSB dated August 13, 2001, SEC File Number 000-17171).
10.5* | Non-Qualified Stock Option Agreement dated June 19, 2001 between the Company and George R. Ireland (filed with the Company’s 10-QSB dated August 13, 2001, SEC File Number 000-17171).
10.7* | Summary of Supplemental Health Care Plan (filed with Amendment No. 1 to the Company’s Form S-1 Registration Statement (File No. 33-32754) as filed with the Securities and Exchange Commission on February 20, 1990).
10.9* | License to Explore and Option to Purchase dated March 25, 1997 between Santa Fe Pacific Gold Corporation and Uranco, Inc. (filed with the Company’s Annual Report on Form 10-K dated June 30, 1997, SEC File Number 000-17171).
10.1 2* | Compensation Agreement dated June 2, 1997 between the Company and Paul K. Willmott (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171).
10.1 3* | Compensation Agreement dated June 2, 1997 between the Company and Richard A. Van Horn (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171).
10.1 4* | Compensation Agreement dated June 2, 1997 between the Company and Thomas H. Ehrlich (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171).
10.1 5* | Compensation Agreement dated June 2, 1997 between the Company and Mark S. Pelizza (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171).
10.1 6* | Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with the Company’s Annual Report on Form 10-K dated June 30, 1999, SEC File Number 000-17171).

10.1 6.1* | 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).
10.1 7* | 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).
10.1 7.1* | 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).
10.2 2* | 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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10.2 3* | 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)
10.2 4* | 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)
10.2 4.1* | 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)
10.2 6* | 2004 Directors Stock Option Plan dated June 2, 2004 (filed with the Company’s Registration Statement on Form SB-2 dated July 26, 2004, SEC File Number 333-117653)
10.2 7* | Contract with UG U.S.A., Inc for the Purchase of Natural Uranium Concentrates (U 3 O 8) dated August 12, 2003 (filed with the Company’s Pre-Effective Amendment No
10.2 7.1* | Amendment No. 1 with UG U.S.A., Inc. dated August 30, 2004 to Exhibit 10.27 (filed with the Company’s Pre-Effective Amendment No
10.2 7.2* | Amendment No. 2 with UG U.S.A., Inc. dated April 29, 2005 to Exhibit 10.27 (filed with the Company’s Pre-Effective Amendment No
10.2 8* | Amended and Restated Uranium Supply Contract with Itochu Corporation dated June 7, 2005 (filed with the Company’s Pre-Effective Amendment No
10.3 1* | Note Purchase Agreement dated March 24, 2005 and promissory notes issued thereunder (filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, SEC File Number 000-17171)
10.3 2* | Uranium Supply Contract with UG U.S.A., Inc. dated April 29, 2005 (filed with the Company’s Pre-Effective Amendment No
10.3 3* | Uranium Supply Contract with Itochu Corporation dated June 15, 2005 (filed with the Company’s Pre-Effective Amendment No
10.3 4* | Stock Purchase Agreement by and between Uranium Resources, Inc. and accredited investors (filed with the Company’s Form 8-K dated August 12, 2005, SEC File No
10.3 5* | 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).
10.3 6* | Feasibility Study Funding Agreement between Itochu Corporation, Uranium Resources, Inc. and Hydro Resources, Inc. effective March 29, 2006 (filed with the Company’s Form 10KSB dated March 31, 2006, SEC file Number 000-17171).
10.3 7* | 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).
10.3 8* | 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).
10.3 9* | Stock Purchase Agreement dated as of April 19, 2006, by and between Uranium Resources, Inc. and accredited investors (filed with the Company’s Current Report on Form 8-K dated April 19, 2006, SEC File No
10.4 0* | Limited Liability Company Agreement of Churchrock Venture LLC (filed with the Company’s Current Report on Form 8-K dated December 5, 2006, SEC File No
10.4 1* | Compensation Agreement dated March 12, 2007 between the Company and Craig S. Bartels (filed with the Company’s Form 8-K dated March 13, 2007, SEC File No
10.4 2* | Compensation Agreement dated March 12, 2007 between the Company and David N. Clark (filed with the Company’s Form 8-K dated March 13, 2007, SEC File No

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14* | Uranium Resources, Inc. Amended Code of Ethics for Senior Executives. (filed with the Company’s Form 10-K dated March 30, 2007, SEC File No. 000-17171).
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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