NOTE 6:

OTHER LONG-TERM ASSET AND LIABILITY

On March 4, 2016, the Company entered into a share purchase and option agreement (the “SPOA”) with CIC Resources Inc. (the “Vendor”) pursuant to which the Company acquired (the “Acquisition”) all of the issued and outstanding shares of JDL Resources Inc. (“JDL”), a wholly-owned subsidiary of the Vendor, and was granted an option to acquire all of the issued and outstanding shares of CIC Resources (Paraguay) Inc. (“CIC”; the “Option”), another wholly-owned subsidiary of the Vendor. JDL’s principal assets include land located in the department of Alto Parana in the Republic of Paraguay. CIC is the beneficial owner of Paraguay Resources Inc. which is the 100% owner of certain titanium mineral concessions (the “Property”), which are located in the departments of Alto Parana and Canindeyú in the Republic of Paraguay.

Pursuant to the SPOA, the Company issued 1,333,560 restricted common shares in the capital of the Company and paid $50,000 in cash to complete the Acquisition. If the Company has paid or caused to have paid on the Vendor’s behalf certain maintenance payments and assessment work required to keep the Property in good standing as directed by the Vendor, during the one-year period following completion of the Acquisition (the “Option Period”), the Company may elect in its discretion to exercise the Option at any time, or if, in accordance with the SPOA, the Vendor satisfied certain conditions precedent to exercise, the Company will be deemed to have exercised the Option. Upon exercise of the Option the Company is required to pay, subject to certain adjustments, $250,000 in cash to the Vendor and to grant to the Vendor a 1.5% net smelter returns royalty (the “Royalty”) on the Property as contemplated by a proposed net smelter returns royalty agreement (the “Royalty Agreement”) to be executed by the parties upon exercise of the Option. Pursuant to the proposed Royalty Agreement, the Company has the right, exercisable at any time for a period of six years following exercise of the Option, to acquire one-half percent (0.5%) of the Royalty at a purchase price of $500,000.

In accordance with Accounting Standard Codification (“ASC”) 360: Property, Plant and Equipment, the acquisition of JDL was accounted for as an asset acquisition as it was determined that JDL’s operations do not meet the definition of a business as defined in ASC 805: Business Combinations.

The fair value of the consideration paid and its allocation to the identifiable assets acquired and liabilities assumed are summarized as follows:

Consideration transferred
1,333,560 UEC common shares at $0.92 per share	$	1,226,875
Cash consideration		50,000
Cash payable upon exercise the Option		250,000
Transaction costs		63,090
	$	1,589,965

Assets acquired and liabilities assumed
Cash and cash equivalents	$	3,916
Prepaid expenses		3,804
Land		344,376
Other long-term asset (Option to acquire CIC)		1,553,388
Due to CIC		(315,519)
	$	1,589,965

The Company holds a variable interest in CIC as a result of the Option, however, it is not the primary beneficiary due to the fact that the Company does not have the power over decisions that significantly affect CIC’s economic performance. Accordingly, the Company does not consolidate the results of CIC and therefore, the other long-term asset effectively represents the amount paid in advance for CIC’s assets totaling $1,303,388 and $250,000 to be paid upon the exercise of the Option for the acquisition of CIC.

The Company’s maximum exposure to loss from the unconsolidated variable interest entity at July 31, 2016, which would arise if UEC is unable to exercise the Option, was approximately $1.3 million, representing the value of the Option with allocated fair value of $1,553,388, net of cash payable of $250,000 upon exercise of the Option.

The $250,000 cash payment which the Company will be required to make upon exercise of the Option has been recorded as a liability within Accounts Payable and Accrued Liabilities, and included in the calculation of consideration transferred as it is probable that this payment will be made.

The liability of $315,519 represents the net amount due from JDL and its subsidiary to CIC and its subsidiary (formerly these entities were both part of the Vendor’s consolidated group). The amount has been classified as non-current as it has no stated terms of interest or repayment and not expected to be settled within the next twelve months.

If the Company elects to exercise the Option in accordance with the SPOA, the Company is required to pay annual maintenance fees totaling $152,000 for the titanium mineral concessions.