As filed with the Securities and Exchange Commission on
June 23, 2000
SEC Registration No. 000-30239
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(b) or (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
UNICO, INCORPORATED
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(Name of Small Business Issuer in its Charter)
Arizona 86-0205130
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(State or Jurisdiction (IRS Employer Identification
of Incorporation) Number)
6475 Grandview Avenue
Magalia, California 95954
(530) 873-4394
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(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Securities to be registered under Section 12(b) of the Act:
None None
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Title of each Class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12 (g) of the Act:
Common Stock, $0.10 par value
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(Title of Class)
Copies to:
Robert N. Wilkinson, Esq.
60 East South Temple, Suite 1680B
Salt Lake City, Utah 84111
(801) 533-9645
Fax (801) 220-0625
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
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Item 1. Description of business.
General
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Unico, Incorporated was formed as an Arizona corporation on May 27, 1966.
It was incorporated under the name of Red Rock Mining Co., Incorporated. It
was later known as Industries International, Incorporated and I.I.
Incorporated before the name was eventually changed to Unico, Incorporated in
1979. Unico, Incorporated has engaged in various mining activities since its
inception. The names "Unico", "we", "our" and "us" used in this registration
statement refer to Unico, Incorporated.
On March 30, 1992, Unico entered into a Mining Lease and Option to
Purchase agreement with Deer Trail Development Corporation, with headquarters
in Dallas, Texas. Deer Trail Development Corporation is now known as Crown
Mines, L.L.C. This Mining Lease and Option to Purchase is referred to in this
registration statement as the "Deer Trail Lease". The Deer Trail Lease runs
for a period of 10 years, and covers 28 patented claims, 5 patented mill sites
and 171 unpatented claims located approximately 5 miles South of Marysvale,
Utah. It includes mine workings known as the Deer Trail Mine, the PTH Tunnel
and the Carisa and Lucky Boy mines. The property has not been mined since
1981.
During Unico's last 3 fiscal years ended February 29, 2000, Unico has
worked toward reopening the Deer Trail Mine. Unico has acquired the necessary
permits to commence mining activities, provided that the surface disturbance
from the mining activities does not exceed 5 acres for both mine and mill.
Unico plans to seek a permit for large scale mining operations. Since the
mine is located on both patented and unpatented claims, which are located
within a national forest, all permitting is done through both the State of
Utah and the U.S. Forest Service.
During the past 3 fiscal years, Unico has explored the Deer Trail
property, conducted a geological evaluation of the property, repaired old
mining equipment and Unico has upgraded the infrastructure of the mine by
installing pumping equipment, thousands of feet of pipe, and some new mining
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track and mining timbers to prepare the way for new mining activities. The
only actual mining activities engaged in by Unico on the property have been
for testing and evaluation purposes only.
Unico has acquired and moved materials onto the property site for
construction of an 8,000 square foot metal building to house a gold and silver
mill which Unico intends to erect on the property. Unico recently acquired an
ore screening plant which has been erected on the property. Unico recently
acquired an ore floatation plant which it intends to erect on site. Unico
also intends to erect a jaw crusher and ball mill on the property which are
necessary to crush ore.
Unico has also acquired a front end loader and a new air compressor and
other personal property which are necessary for its planned mining operations.
Unico may acquire or build a heavy media separator, which can be used to
process up to 400 tons of low grade ore per day.
Unico expects to commence active mining operations on the property in
approximately late July or early August 2000. It plans to commence its
initial mining activities by mining approximately 50 tons per day of massive
sulfides. Unico hopes to increase its mining activities soon after, provided
that it can operate the mine economically, and provided Unico is able to
acquire other needed capital.
Unico intends to conduct mining and milling activities on site. Our
initial mining activities will focus on mining, crushing and milling ore into
lead concentrates and zinc concentrates which we will sell to other mining and
mineral companies. We will arrange for the lead concentrates and zinc
concentrates to be shipped to smelters or other locations designated by the
buyers.
Unico believes that there are a wide variety of sources for raw materials
needed in its proposed mining and milling operations, and that it will not be
dependent upon any one or few sources. Unico believes that there are a
variety of mining companies and other mineral companies that are potential
purchasers for the lead concentrates and zinc concentrates which Unico intends
to sell as the end product from its mining and milling operations. Unico does
not believe that it will be dependent on one or a few major customers for
sales of the lead and zinc concentrates.
The lead and zinc concentrates can be transported by either rail or
truck, and there are a variety of trucking companies that
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are willing and able to transport zinc and lead concentrates to smelters or
other places designated by purchasers.
Agreement to sell lead concentrates
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ASARCO Incorporated has offered to purchase lead concentrates from Unico
at the rate of approximately 100 tons per month through July 31, 2000 at its
East Helena, Montana smelter. ASARCO Incorporated drafted a proposed
agreement with Unico for this purpose. ASARCO Incorporated indicated it is
willing to sign the agreement once shipments of lead concentrates begin.
Smelting and Refining
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All of the smelting and refining of ore will be handled by other
companies. Smelters capable of handling the Deer Trail concentrates in the
U.S.A. include ASARCO in East Helena, Montana, for lead, gold and silver, and
Hayden, Arizona, for copper and gold, and Korea Zinc Co. in Sauget, Illinois.
Foreign smelters include the Caminco Lead and Zinc smelters in Trail, British
Columbia, Canada, the Doe Run smelter in Peru and one other smelter in Mexico.
Preliminary discussions with the Kennecott smelter and refining facility in
Magna, Utah for the high quality silver, gold and copper enriched quartz of
the 18 North fault as a silica flux source are in progress.
Dependence on Metal Prices
--------------------------
Unico's mining activities will be largely dependent on metal prices. The
prices may fluctuate on the world commodity markets and will be beyond the
influence of Unico. A substantial reduction in the price of metals might
impede Unico's ability to economically mine or to raise additional capital.
The Deer Trail Mine Development Agreement
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On October 5, 1998 Unico entered into the Deer Trail Mine Development
Agreement with Guilderbrook, Inc. and Aurora Resources & Mining Corp.
Guilderbrook, Inc. is owned by Gilbert A. Windheim, one of Unico's principal
stockholders. Aurora Resources & Mining Corp. is owned by David F. Poisson
and his wife. Mr. Poisson has been a director and assistant secretary of
Unico since November 1999. The Deer Trail Mine Development Agreement was
entered into at a time when Unico was seriously
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delinquent in its obligations under the Deer Trail Lease, and needed
assistance with making both delinquent lease payments and future lease
payments. The Deer Trail Mine Development Agreement required Guilderbrook,
Inc. to provide $60,000 to Unico in order to pay past due lease payments and
to provide $9,000 per month for future lease payments. In exchange for these
payments, Guilderbrook, Inc. is to receive 25% of the net profits from the
future mining operations ore sales, including all ore mined at the Deer Trail
Mine.
The Deer Trail Mine Development Agreement obligates Aurora Resources &
Mining Corp. to provide the mine operations management along with the other
necessary additional equipment to begin mining operations at the Deer Trail
Mine. This is to be done with Aurora Resources & Mining Corp.'s financial and
additional capital equipment resources. In consideration for this
contribution, the Deer Trail Mine Development Agreement provided that Aurora
Resources & Mining Corp. was to receive 50% of the net profits from all mined
ore sales from the Deer Trail Mine.
The Deer Trail Mine Development Agreement provided that at a future time
when exercising the existing option under the Deer Trail Lease is appropriate,
Guilderbrook, Inc. is to pay 25% of the option price, Aurora Resources &
Mining Corp. is to pay 50% of the option price and Unico is to pay 25% of the
option price. The total option price is presently $4,000,000. In the event
that the option is exercised under the Deer Trail Lease, the full ownership
interests of the parties and the property, rights and privileges, and any net
smelter returns to be shared between the parties would then be own/shared on
the following basis:
* Unico - 25%
* Guilderbrook, Inc. - 25%
* Aurora Resources & Mining Corp. - 50%.
In the event that the option is exercised, Unico is to continue to be a
leaseholder and operator of the Deer Trail Mine property.
In February 1999, Unico issued 500,000 shares of its common stock to
Aurora Resources & Mining Co. in exchange for a 26% net profits interest under
the Deer Trail Mine Development Agreement. In October 1999, Aurora Resources
& Mining Corp. agreed to return to Unico the remaining 24% right to net
profits under the Deer Trail Mine Development Agreement. As a result, Unico
is now entitled to 75% of any net profits generated under the Deer Trail
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Mine Development Agreement, and Guilderbrook, Inc. is entitled to the
remaining 25% of any net profits.
Gold Forwarding Contracts
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Unico entered into four contracts for the advance payment of gold which
is to be delivered by Unico. The contracts total $166,000. These contracts
are all currently due and outstanding. A lawsuit was filed against Unico for
breach of contract on the largest of these contracts, in which the plaintiffs
sought $150,000 plus interest. The lawsuit was recently settled, and Unico
has agreed to pay the Plaintiffs $141,500 over a period of approximately 6
years in satisfaction of their claims. This leaves Unico with three gold
forwarding contracts to satisfy which initially totaled only $16,000.
Employees
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Unico presently has 2 full time employee and 4 part-time employees.
Unico believes that when it commences mining operations in approximately late
July or early August 2000, that it will increase its number of employees to
approximately 25 full time employees. In the event the mining operations are
successful, additional employees may be added in the future.
Governmental Regulation
-----------------------
Mining and/or processing activities on the Deer Trail Mining claims are
subject to numerous permitting and environmental laws and regulations
administered by active federal, state, and local authorities, particularly the
Utah Division of Oil, Gas and Mining. Although Unico believes it already has
permits necessary to commence mining operations on the patented and unpatented
claims, Unico may be required to expand such permitting in order to fully
develop the property. In order to obtain expanded permits, it may be
necessary to gather and analyze baseline data, complete environmental
assessments or environmental impact statements with appropriate steps to
mitigate potential adverse impacts, and modify the proposed plans in order to
accommodate environmental impacts, all of which may take an indeterminate
amount of time to complete.
The mining operations are regulated under the jurisdiction of the Mine
Safety and Health Administration or "MSHA" to some degree to insure safe
operations. Without proper training of
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personnel and compliance to all MSHA rules, the mine could be subject to heavy
fines and closure. Presently Unico has no outstanding citations and has
complied with MSHA regulations and maintains a good working relationship with
MSHA. The mining operations are subject to periodic inspections by MSHA
which, depending on the outcome of an inspection, could curtail production
until any violations have been cured.
Item 2. Management's discussion and analysis or plan of operation.
Plan of operation
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During the next 12 months, our plan of operation consists of the
following:
- acquire a ball mill at a cost of approximately $30,000;
- pay an additional $55,000 for a heavy media separator and
a grinding circuit recently purchased by Unico;
- hire additional employees needed to commence mining
operations;
- commence mining operations in approximately late July
or early August 2000;
- raise up to $1,000,000 in additional funds.
Since February 29, 2000, Unico has issued approximately 5,000,000 shares
at $0.10 per share. Unico has received approximately $150,000 of cash
proceeds and $50,000 of services from the sale of its shares and Unico expects
to receive approximately $300,000 more in cash proceeds in the near future.
Much of these funds have been spent acquiring equipment necessary for mining
operations. Unico's current cash will sustain operations only for 2 to 3
additional months.
Management's discussion and analysis of financial condition and
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results of operations
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Liquidity and capital resources. Presently our liquid resources are
sufficient to pay for the newly purchased equipment and for the additional
equipment we intend to acquire before commencing mining operations in late
July or early August 2000.
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However, we are dependent on raising an additional $100,000 to $150,000 in
working capital to pay for initial mining expenses and successfully implement
our 12 month business plan described above.
Our auditors have issued a "going concern" opinion in note 8 of our
audited financial statements, indicating we do not have established revenues
sufficient to cover our operating costs and to allow us to continue as a going
concern. If we are successful in raising an additional $100,000 to $150,000 in
equity or debt capital in the next 2 to 3 months, we believe that Unico will
have sufficient funds to complete its planned equipment purchases, commence
mining operations, and meet operating expenses until income from mining
operations should be sufficient to cover operating expenses.
We intend to seek additional capital from private sales of Unico's common
stock and, if necessary, from loans from our management. In the event income
from mining operations is delayed or is insufficient to cover operating
expenses, then Unico will need to seek additional funds from equity or debt
financing, for which we have no commitments.
During December 1999, Unico entered into an engagement agreement with
Pellett Investments whereby Pellett agreed to buy convertible notes for
$1,000,000 which are convertible into 10,000,000 shares of Unico common stock
at $0.10 per share. Unico has issued 4,000,000 of the shares but Unico has
received payment for only approximately 1,000,000 of the shares. Unico should
soon receive approximately $300,000 cash for the shares already issued. Unico
and Pellett Investments have agreed that Pellett Investments will be released
from any obligation to purchase any more convertible notes or shares of Unico
common stock. After receiving payment of the remaining $300,000 cash Unico
will then issue an additional 1,200,000 shares to persons affiliated with
Pellett Investments for no additional consideration.
Revenue. We have had no revenues from operations during the past two
fiscal years or since our last fiscal year ended February 29, 2000. We do not
anticipate generating any revenues from operations until approximately 2 to 3
months after we commence active mining operations.
Cost of operations. During the last several months Unico has spent
substantial funds on purchasing equipment and preparing the Deer Trail mine
for active mining operations which we intend to commence in late July or early
August 2000. Unico has ongoing
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monthly lease payments on the mine which have been, and are being, paid by
Guilderbrook, Inc., a company owned by a principal stockholder of Unico. In
exchange for the monthly mine lease payments, Guilderbrook, Inc. will receive
25% of the net profits from mine operations subsequent ore sales.
Employees. Unico has 2 full time employee and 4 part time employees. We
anticipate that we will have approximately 10 full time employees when we
commence mining operations in late July or early August 2000, and that the
number of employees will increase to approximately 25 by late fall 2000.
Lease termination; option to purchase. Unico's existing lease agreement
for the Deer Trail mine expires May 31, 2002. We presently have an option to
purchase the mine for $4,000,000. In the event mining operations from the
mine are profitable, Unico will either need to obtain an extension of the
lease agreement or exercise the option to purchase the mine before May 31,
2002. No assurance can be given that the owner of the mine will extend the
lease. Unico presently does not have sufficient funds to exercise the option
to purchase the mine, and no assurance can be given that Unico will have
sufficient funds to purchase the mine when the lease expires.
Item 3. Description of property.
Deer Trail Lease
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On March 30, 1992, Unico entered into the Deer Trail Lease with Deer
Trail Development Corporation which became effective on June 1, 1992. The
Deer Trail Lease covers 28 patented claims (approximately 525 acres), 5
patented mill sites (25 acres) and 171 unpatented claims (approximately 3,420
acres). The claims include workings known as the Deer Trail Mine, the PTH
Tunnel and the Carisa and Lucky Boy mines. This is an underground mine.
The term of the lease is for a period of 10 years with an initial term of
6 months and continuing as long as the minimum royalty is paid and Unico is in
compliance with the terms of the lease. Unico has agreed to use its best
efforts to mine and remove minerals from the property and has assumed annual
maintenance and tax obligations on the property estimated at approximately
$25,000 per year during the lease. Currently, the minimum royalty payment is
$8,000 per month, and increases to $10,000 per month in July 2000, and is
payable whether or not mining operations are being conducted. Lease
royalty-rentals are equal to 5% of gross receipts received by Unico from sales
of
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minerals from the lease, less transportation (mine to smelter), assaying,
weighing, treatment and special sampling charges, but not less than the
minimum royalty.
The lease terminates after 10 years on May 31, 2002, upon default by a
party, by mutual agreement or upon exercise of Unico's option to purchase.
Each party has agreed to bear its own costs of environmental, pollution,
aesthetic or legal liability imposed by any governmental or regulatory
authority and attributable to its ownership of claims. Unico has the option
to purchase the claims for $4,000,000 until May 31, 2002. The option price
initially was $1,000,000 from June 1, 1992 until May 31, 1995. It increased
to $2,000,000 from June 1, 1995 until May 31, 1999. It increased to
$4,000,000 on June 1, 1999. The lessor has an option to take a 5% gross
royalty as a carried interest in lieu of the cash option exercise price. This
royalty can be reduced by up to one-half by Unico's paying to one-half of the
cash option exercise price and one-half of the royalty payment.
The Property
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The Deer Trail claims are located in the Tushar Mountains of East
Central, Utah in the Mount Baldy and Ohio Mining districts. They are located
on Deer Trail Mountain, approximately 5 miles South of Marysvale, Utah and are
accessible by a gravel county road which is in good condition.
The Deer Trail ore body was first discovered by deer hunters in 1878.
The ore body originally cropped out at the surface. It is estimated that
between 1878 and 1917, about 10,000 tons of ore were mined. A small mill was
installed in 1918, and between 1918 and 1923 the mine produced about 138,000
tons of predominately oxidized ore averaging 1.38 opt gold, 11.49 opt silver
and 3.26% lead. Zinc and copper were not recovered. In 1923, mining was
suspended when the workings encountered a fault that cut off the ore, and for
more than 20 years production was limited to drawing stopes and removing
pillars. In 1945, the PTH tunnel was started to explore for the faulted
extension of the Deer Trail ore body. The 3,400 ore body was encountered
unexpectedly by this tunnel and a total of 5,000 tons of ore averaging 2.84%
lead, 0.76% copper, 6.26% zinc, 15.17 opt silver and 0.19 opt gold were
shipped. By 1964, the PTH tunnel had intersected the offset part of the Deer
Trail ore body. From 1964 until 1981 this segment of the ore body produced
over 100,000 tons of unoxidized sulfide ore averaging 5% lead, 0.6% copper,
12% zinc, 15 opt silver, and 0.10 opt gold. The present working face is still
in ore.
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The PTH Tunnel penetrates more than 10,000 feet with a developed network
of tunnels, shafts and raises at the 3,400 foot area and at the 8,000 foot
area and was mined extensively for gold and silver for about 20 years. The
timbered and ventilated tunnel includes more than two miles of track for ore
cars accessed through a covered entrance structure.
The mine facilities also include ore cars, battery operated engines, an
engine storage and charging house, a electric power substation, a miner's
locker room, a compressor building, a 1000 gallon underground gasoline storage
tank with gas pump, two front end loaders, three dump trucks and a general
office, lab and core sampling facility. Unico believes water is accessible to
the site.
The Deer Trail mining property was developed by the Deer Trail
Development Corporation, now known as Crown Mines, LLC, and is presently owned
by the same company, located in Dallas, Texas. The property has been leased
out several times since production ceased in 1981. There has been little
production since then. Several major mining companies have explored the
property. These include Noranda, Phelps Dodge and Goldfields. One smaller
company drilled and analyzed the mill tailings from the upper Deer Trail Mine
area in 1990. The results of the drilling and other tests were not
conclusive, and at present there are no known proven or probable reserves on
the claims. Unico has no agreements or commitments from smelters to receive
ore.
Unico leased the property effective June 1, 1992 and has been actively
re-opening the mine since then. Unico has produced a few small lots of ore
from the stopes in the 8600 area of the PTH tunnel for testing and evaluation
purposes, and has developed several excellent targets within those workings.
Unico is presently developing the gold mineralization of the upper Deer Trail
area which contains the original workings. Plans consist of upgrading the
mine dumps and mineralized stope material by screening and further upgrading
by gravity concentration methods. At the same time Unico plans to gain access
to undeveloped ore bodies within the upper area.
Geological Information
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The Deer Trail mine workings expose westerly dipping sedimentary rocks of
three units: the Toroweap and Queantoweap Formations and the Callville
Limestone. The Deer Trail ore body is in the lower part of the Toroweap
Formation and consists of a nearly continuous group of semiconcordant
replacement bodies
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flanking a central vein. About half of this ore body is exposed in the Old
Deer Trail mine workings and is oxidized; the other half is located in the
8600 area workings and consists of unoxidized sulphide ore. The Queantoweap
Formation, which underlies the Toroweap, is a quartzite and hosts no known
mantos. The underlying Callville Limestone contained the 3400 ore body.
The Toroweap Formation exposed in the 8600 area consists of a wide range
of interbedded lithologies, including quartzite, limestone, dolomite, shale,
and chert, which form 50 or more recognizable units ranging in thickness from
a inch to several feet. In contrast, the underlying Queantoweap Sandstone
consists of a fairly uniform medium-grained, well-sorted massive quartzite.
The Calville Limestone in the Deer Trail mine lacks marker beds, and
lithologic facies change rapidly. The rocks are cut by several faults of
unknown displacement. The marked lateral variations in lithology have made it
possible to identify only seven correatable stratigraphic assemblages. The
upper 240 feet of the Callville Limestone in the 3400 area consists dominantly
of mudstones containing quartz silt, evaporite nodules, and sponge spicules.
Below 240 feet, dolomite containing microfossils and peloids is abundant and
evaporites are absent. In the 8600 area, the Callville has been observed in
drill core and there it contains thick beds of course-grained anhydrite.
The Toroweap Formation in the mine area strikes generally north-south and
dips 20 degrees W. The Deer Trail ore body rakes across this inclination with
a bearing of N 70 degrees W, so the average plunge of the ore zone into Deer
Trail Mountain is about 18 degrees.
The mantos in the Old Deer Trail mine workings closely followed the axis
of the Deer Trail anticline, a relationship that was used to guide
development. In the 8600 area, however, the mantos and the anticline axis
diverge and the deepest workings are about 1500 feet apart.
The Deer Trail ore body consists of a semicontinuous group of narrow,
elongate strata-bound replacement bodies developed adjacent to a central vein.
The ore body has a sinuous ribbon like shape in plain view and has been mined
for a length of approximately 5,525 feet over a width averaging 32 to 38 feet
and a height averaging about 15 to 30 feet.
A set of cross faults that trends east-northeast and dip steeply to the
north are exposed in the mine workings in the 8600 area. These have an
aggregate stratigraphic throw of about 150
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feet, down to the north. One of these faults is the 18 Drift fault or 18
North fault. These faults are now occupied by quartz veins as much as 15 feet
thick that contain substantial quantities of lead, zinc, arsenic, silver,
gold, copper and molybdennum. The 18 north fault consists of quartz with good
values in gold, silver and copper with very little other metals which could
possibly be marketed to smelters as a flux.
Mine Workings
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The mine workings at the Deer Trail consist of the upper Old Deer Trail
mine workings and the PTH tunnel mine workings. The Old Deer Trail mine
consists of three levels, approximately 100 vertical feet apart. The first
level was first accessed from the surface through the discovery shaft of 1878,
with several adits interconnecting from the surface. The second level or the
No. 2 Tunnel level is accessed through one known tunnel and consists of
several large stopes interconnected with a series of drifts, winzes, and
raises. The third level or the No. 3 Tunnel level was used as a haulage
tunnel and was the main level of the Old Deer Trail mine. It consists of
drifts and raises all accessed by 18" narrow gauge track. The present
workings are only partially accessible. Many drifts have caved. All three
levels are interconnected allowing for good ventilation.
The PTH Tunnel workings underlie the Old Deer Trail workings by
approximately 450 feet and accessed 4,000 feet to the south. The PTH Tunnel
was started in 1945 to intersect the faulted Deer Trail ore body. It is a
5'x7' tunnel that extends over 10,000 feet into Deer Trail Mountain. Almost
all areas of these workings are accessed by 18" narrow gauge track. The
tunnel trends to the north-northwest paralleling the base of Deer Trail
Mountain. At approximately 3,400 feet the tunnel intersected unexpectedly
mineralization in the Callville Limestone. This mineralization was developed
on the PTH Tunnel level as well as two levels below 100 vertical feet apart.
Bedded mineralization associated with the Wet Fault was produced via a series
of drifts, winzes, stopes and raises. A ventilation/escape shaft was driven
to the surface in this area. The tunnel next encountered mineralization at
approximately 8,600 feet, where the tunnel encountered the continuation of the
Deer Trail ore body. Several thousand feet of drifts was driven to explore
and exploit the deposit. An internal shaft was driven 250 feet to gain access
to the shallowing dipping ore where three more levels were established. Again
several hundred feet of drifts, stopes, raises and winzes were driven to mine
the ore body.
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Water was encountered in the 280 winze and pumps were installed in order
to continue mining. Mining was stopped in 1981 due to lack of processing and
smelting facilities. The present face in the 280 area is still in ore. The
width of the face was increasing as well as the value of the ore. A raise to
connect the PTH workings with the Old Deer Trail Mine was started located
approximately where the PTH Tunnel crossed the 18 North fault. It is
presently up 140 feet.
Mineral Resources
-----------------
The resources have been outlined above. However, further efforts to
increase the mineable resources of the mine are being explored. Further
drilling to prove up known resources are contemplated as well as ways to mine
more efficiently in order to mine lower grade ores at a profit. One such
method is now under review. The use of a heavy media separator could
significantly increases mineable reserves. The heavy media separator is a
method whereby low grade material can be upgraded underground for less than
$2.50 per ton. Areas left undeveloped in the mine due to the amount of waste
rock between narrow mineralized beddings might effectively be produced by
using heavy media separator technology.
The Deer Trail deposit is similar to many deposits in Utah, such as
Tintic and Park City, where mine reserves were drilled approximately two years
ahead of production due to the nature of the deposits and the costs involved
in drilling out entire reserves before mining began. It is planed that
reserves in the Deer Trail will be established two to three years ahead of
production. Exploration drilling will be conducted in conjunction with mine
production. Several prospective targets will be drilled from underground as
the workings advance.
To date only two known mineralized horizons have been exploited. Unico
believes the underlying formations contain very favorable horizons for
mineralization. But they have yet to be tested. Unico believes the potential
is excellent that more mineralization will be discovered.
Item 4. Security ownership of certain beneficial owners and management.
The following table describes, as of March 21, 2000, certain information
with respect to the beneficial ownership of our common stock by:
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* each person known by us to beneficially own more than 5% of our
common stock,
* each of our officers or directors, and
* all of our officers and directors as a group.
Amount and nature Percentage of
of beneficial ownership common stock
----------------------- --------------
Gilbert A. Windheim 5,166,000 9.2%
Ray C. Brown 4,000,000 7.2%
Kiyoshi Kasai 645,000 1.2%
Kenneth R. Brown -0- 0.0%
David F. Poisson 500,000 0.9%
Walter W. Harpst 500,000 0.9%
C. Wayne Hartle 1,372,000 2.5%
Each of the officers and directors has sole voting and investment power
over the shares listed in the table as being beneficially owned by him except:
* The amount listed as being beneficially owned by Ray C. Brown
excludes an additional 45,000 shares as to which Mr. Brown
disclaims ownership.
* 22,000 of the shares listed as being beneficially owned by Kiyoshi
Kasai are owned of record by his wife, Fumiko Kasai
* 150,000 of the shares listed as being beneficially owned by
Kiyoshi Kasai are owned of record by the Kasai Family Trust.
Kiyoshi Kasai is the trustee of the Kasai Family Trust, and has
sole voting and investment power over the shares held by the Trust.
The beneficiaries of the Kasai Family Trust are Kiyoshi Kasai, his
wife and their children.
* All 500,000 shares listed as being beneficially owned by David F.
Poisson are owned of record by Aurora Resources and Mining Co., a
privately held company owned by Mr. Poisson and his wife. Mr.
Poisson is president of Aurora Resources and Mining Co., and he has
sole voting and investment power over these shares.
* Of the shares listed as being beneficially owned by Gilbert A.
Windheim, 1,900,000 shares are held of record by Mr. Windheim,
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2,266,000 shares are reportedly held by Mr. Windheim through stock
brokerage accounts in his name, and the remaining 1,000,000 shares
are subject to an option granted by Unico on August 28, 1997. The
option is exercisable by Mr. Windheim in whole or in part at any
time prior to August 28, 2002 at the exercise price of $0.10 per
share.
There are no warrants or options outstanding which are exercisable by any of
our officers and directors.
Item 5. Directors, executive officers, promoters and control persons.
The names and ages of all directors and executive officers of Unico and
all persons nominated or chosen to become directors and officers appear in the
table below:
Name Age Position with Unico
---------------------- --- ---------------------------------
Ray C. Brown 77 President and chairman of board of
directors
Kiyoshi Kasai 81 Vice president and director
Kenneth R. Brown 42 Vice president, chief operating
officer and director
David F. Poisson 49 Assistant secretary and director
Walter W. Harpst 82 Treasurer and director
C. Wayne Hartle 62 Secretary and director
Ray C. Brown has been the president and director of Unico since 1983. He
is presently semi-retired. Mr. Brown served as the chairman of the board of
directors of Energy and Corrosion Research Corporation from 1979 to 1982. He
also served as president and as a director of Ecotech Corporation from 1971 to
1983. Mr. Brown served as president and as a director of Wasatch Mineral and
Construction Company from 1963 to 1971. He served as president and as a
director of Courtesy Finance Corporation from 1958 to 1963. Prior to 1958,
Mr. Brown served in various capacities with other financial institutions. Mr.
Brown attended the University of Utah majoring in banking and finance. Ray C.
Brown is the father of Kenneth R. Brown.
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Kiyoshi Kasai has served as vice president and as a director of Unico
since 1987. Mr. Kasai is presently semi-retired. For over 35 years prior to
1987, Mr. Kasai worked as an engineer for various companies including Hughes
Helicopter, Litton Systems, Inc., Hoffman Electronics Corporation, RCA Service
Company, Convair Astronautics and other companies. Mr. Kasai attended U.C.
Berkeley and the Illinois Institute of Technology.
Kenneth R. Brown has served as a vice president, chief operating officer
and as a director of Unico since November, 1999. Kenneth R. Brown is
currently working as a broadcast engineer for E! Entertainment Television, and
is responsible for technical management of digital/analog broadcast equipment.
He has held this position since December, 1997. From 1994 until December
1997, Mr. Brown worked as a customer services manager for Utah Scientific. He
was formally trained in electronic technology at Utah Technical College. He
also has an associate degree in computer programing from Chapman University of
Edwards, California. Kenneth R. Brown is the son of Ray C. Brown.
David F. Poisson has been an assistant secretary and director of Unico
since November, 1999. He is presently a project manager for Gibson
Construction of Nevada, a position which he has held since June, 1998. At
Gibson Construction, Mr. Poisson is responsible for the construction progress
and profitability of managing multiple projects contracted for that company.
From approximately February 1996 until June 1998, Mr. Poisson was a partner
and general manager of Aurora Iron Creations Company, an architectural iron
work company. From 1992 until late 1995, Mr. Poisson was vice president of
North Star Trading Company. He has had previous experience in various
construction related companies. He was previously involved with a family
owned coal mine in the Anthrasite Region of Pennsylvania. Mr. Poisson is
familiar with the initial start up of the Deer Trail Mine.
Walter W. Harpst has been treasurer of Unico since November 1999. Prior
to that he served as an assistant secretary of Unico since 1983. Mr. Harpst
has served as a director of Unico from 1983. Mr. Harpst is presently
semi-retired. He previously owned and operated a night club and golf course
in Palm Springs, California, and worked for over 40 years in the entertainment
industry as a musician, master of ceremonies and booking agent.
C. Wayne Hartle has served as the secretary and as a director of Unico
since 1990. Mr. Hartle owns and operates Wayne's Service Center, an
automobile repair and service business in Salt Lake City, Utah. Mr. Hartle is
the former chief
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financial officer of Energy and Corrosion Research Company from 1979 to 1981.
Mr. Hartle received a degree from Henagers Business College in Salt Lake City,
Utah.
Item 6. Executive compensation.
The following table describes compensation paid to Ray C. Brown as
Unico's chief executive officer as well as annual compensation of $100,000 or
more paid to any executive officer or director of Unico for services rendered
to Unico for the years ended February 28, 1998 and 1999 and February 29, 2000:
Year ended
February
Name and principal position 28 or 29 Salary Bonus
--------------------------- ---------- ------ -----
Ray C. Brown
President and director 2000 $-0- $-0-
1999 $-0- $-0-
1998 $-0- $-0-
Ray C. Brown was not paid any cash compensation during the years ended
February 28, 1998, 1999 and February 29, 2000. Mr. Brown has received the use
of an automobile owned by Unico during the last three fiscal years.
No officer or director of Unico has received total compensation of
$100,000 or more during any of the last three fiscal years of Unico. None of
our officers or directors has received any stock awards, options or warrants
to purchase any shares of Unico common stock during any of the past three
fiscal years.
Stock option plan
------------------
Unico has not adopted any stock option plan at this time. We reserve the
right to adopt a broad stock plan for officers, directors, employees and
consultants in the future.
Retirement plan
---------------
Unico has not adopted any retirement plan at this time. However, we may
establish a retirement plan for officers, directors and employees in the
future.
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Health insurance plan
---------------------
Unico presently offers no health insurance benefit plans to its officers,
directors or employees. We reserve the right to offer health insurance
coverage in the future.
Item 7. Certain relationships and related transactions.
Since March 1, 1998, Unico has entered into the following significant
related party transactions:
1. Unico has received advances from three related parties; Wayne Hartle,
Ray C. Brown and Mr. Brown's mother-in-law, Maxine Worthen. Most of these
were entered into prior to March 1, 1998, but are still outstanding. However,
the amount owing to Ray C. Brown has been increased and reduced from time to
time as additional advances are made or as the balance is paid down. As of
February 29, 2000, Unico owed the amounts described below to the following
related parties:
* $603,322 to Ray C. Brown.
* $ 61,245 to Wayne Hartle.
* $ 5,000 to Maxine Worthen.
Since February 29, 2000, Ray Brown has made additional advances to Unico which
total approximately $67,500. Unico has imputed accrued interest on the
advances at 10% per annum. The advances are non-interest bearing and are due
upon demand.
2. Prior to March 1, 1998, Unico advanced $29,100 to Richard Laga who
was then a director of Unico. The advance was non-interest bearing. Unico
wrote off this related party receivable as of February 29, 2000.
3. On February 1, 1999, Unico issued 4,000,000 shares to Ray C. Brown
in exchange for which Mr. Brown reduced the amount Unico owes him by $400,000.
Item 8. Description of securities.
Common stock
-------------
Unico has authorized 100,000,000 shares of common stock, $.10 par value
per share, of which approximately 55,266,712
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shares of common stock are issued and outstanding as of June 22, 2000. All
presently outstanding shares of common stock are validly issued, fully paid
and non-assessable. The holders of common stock do not and will not have any
preemptive or other subscription rights to subscribe for or purchase any
additional securities issued by Unico common stock nor will they have any
redemption or conversion rights. Holders of our common stock are entitled to
one vote per share for each share of Unico common stock owned of record by
them. Unico does not have cumulative voting rights.
The holders of Unico common stock are entitled to receive dividends,
when, as and if declared by the board of directors out of funds legally
available for payment of dividends. It is highly unlikely that dividends will
be paid by Unico in the foreseeable future on its common stock.
The holders of Unico common stock are entitled to receive on liquidation
of Unico, a pro rata distribution of the assets of Unico, subject to rights of
creditors and holders of any preferred stock then outstanding. At this time
there is no preferred stock authorized, issued or outstanding.
Shares eligible for future sale
--------------------------------
Unico has approximately 55,266,712 shares of common stock outstanding as
of June 22, 2000. Even though stock certificates representing approximately
29,045,294 of these shares bear a restricted legend, Unico estimates that all
of its outstanding shares of common stock, except approximately 3,635,000
shares, are available for resale under rule 144. In general, under rule 144 a
person who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of one percent of the then outstanding shares of
that class of securities or the average weekly trading volume in such shares
during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quality or other
limitation by a person who is not an affiliate of Unico and who has satisfied
a two year holding period. Any sales of a substantial amount of Unico common
stock in the open market, under rule 144 or otherwise, could have a
significant adverse effect on the market price of Unico's common.
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-----------------------------------------------------------------
PART II
-----------------------------------------------------------------
Item 1. Market price of and dividends on Unico's common equity and other
shareholder matters.
Market information
--------------------
Our common stock is traded in the over-the-counter market and quoted on
the NASD's OTC bulletin board under the ticker symbol "UNCN". The shares are
thinly traded and a limited market presently exists for the shares. The
following table describes, for the respective periods indicated, the prices of
Unico common stock in the over-the-counter market, based on inter-dealer bid
prices, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions. The quotations have been provided
by market makers in common stock and/or the National Quotation Bureau.
Quarter ended High bid Low bid
------------------------- -------------- ---------------
May 31, 1998 $.04 $.03
August 31, 1998 $.04 $.02
November 30, 1998 $.03 $.02
February 28, 1999 $.03 $.025
May 31, 1999 $.045 $.0275
August 31, 1999 $.04 $.03
November 30, 1999 $.07 $.03
February 29, 2000 $.20 $.04
Number of Stockholders
----------------------
As of June 22, 2000 there were approximately 497 stockholders of record.
Because many of the shares are held in broker or street name, Unico believes
that it has significantly more than 497 beneficial stockholders.
Dividend information
--------------------
We have not paid any dividends during the last two fiscal years or since
then. We currently intend to retain any earnings to finance the development
and expansion of our operations and do not anticipate paying cash dividends or
making any other distributions on our shares of common stock in the
foreseeable
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future. Our future dividend policy will be determined by our board of
directors on the basis of various factors, including our results of
operations, financial condition, business opportunities and capital
requirements.
Under Arizona state corporate law, no dividends may be paid if, after
giving effect to the dividends, either: (a) Unico would not be able to pay
its debts as they become due in the usual course of business; or (b) Unico's
total assets would be less than the sum of its total liabilities plus, unless
Unico's articles of incorporation provide otherwise, the amount that would be
needed, if Unico were to be dissolved at the time of the distribution, to
satisfy the preferential rights on dissolution of shareholders whose
preferential rights are superior to those receiving the dividend.
Item 2. Legal proceedings.
Except as described below:
* Unico is not a party to any material pending legal proceedings;
* Unico's property is not subject to any material pending legal
proceedings; and
* to the best of Unico's knowledge, no governmental authority or
other party has threatened or is contemplating the filing of any
material legal proceedings against Unico.
1. On August 8, 1996, The Allen Ball and Connie Ball Living Trust
filed a lawsuit against Unico in the Third Judicial District Court
in and for Salt Lake County, State of Utah (Case No. 960905503) in
which the trust sought to collect approximately $286,000 plus
accrued interest on a promissory note from Unico. In September
1996 Unico filed its answer to the complaint alleging that the
promissory note had been paid in full through the issuance of
151,512 shares of Unico common stock. Unico denies any liability.
This case has been inactive for approximately three years.
2. On February 9, 2000, a case was filed against Unico by Bill L.
Means, Sherman Milliner and Mary C. Milliner. The case was filed
in Superior Court, Maricopa County, State of Arizona (Case No.
CV2000-002588). The plaintiffs sought $150,000 plus interest as
the result
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<PAGE>
of an alleged breach of contract by Unico. The case was recently
settled with Unico agreeing to pay $141,500 to the plaintiffs over
a period of approximately 6 years. If Unico defaults on its
settlement payment obligations, a judgment will be entered against
Unico for the full $150,000 plus prejudgment interest from May 22,
1995 at 6% per annum, and post judgment interest at 10% per annum.
Unico is to provide 1,000,000 shares of its common stock as
security for the judgment.
3. In April, 2000, Melvin J. Sullivan filed a lawsuit against Unico
in the U.S. District Court, District of Utah, Central Division
(Case No. 2:00CV-0290) in which plaintiff alleges that he was
injured while operating a mucker on Unico's property. The
plaintiff alleges general damages of at least $100,000 and
unspecified damages. Unico denies any liability, intends to
defend the case vigorously, and Unico has filed a counterclaim
against Mr. Sullivan seeking reimbursement for the repair costs
incurred in repairing the mucker.
Item 3. Changes in and disagreements with accountants.
During our two most recent fiscal years ended February 29, 2000, or any
later interim period, Unico has not had a principal independent accountant or
an independent accountant on whom the principal independent accountant
expressed reliance in its report, resign, decline to stand for re-election, or
be dismissed.
Item 4. Recent sales of unregistered securities.
During the past three fiscal years ended February 29, 2000, and since
February 29, 2000, Unico made the following sales of securities which were not
registered under the Securities Act of 1933:
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<PAGE>
Date Recipient No. of Shares Consideration Valuation
----- ---------- ------------- -------------- ----------
04/09/97 150,000 Debt $ 15,000
04/09/97 600,000 Services 60,000
05/09/97 Dan Suggs 30,000 Equipment 3,000
05/09/97 Joseph F. Gabriel 40,000 Cash 4,000
05/09/97 Joseph F. Gabriel 310,000 Services 31,000
08/28/97 Gilbert Windheim 900,000 Cash 90,000
08/28/97 Gilbert Windheim 100,000 Debt 10,000
08/28/97 Joseph F. Gabriel 150,000 Debt 15,000
11/03/97 Rell Frederick 30,000 Equipment 3,000
11/03/97 Joseph F. Gabriel 800,000 Cash 80,000
12/22/97 Dan Shuput 250,000 Services 25,000
12/22/97 Joseph F. Gabriel 250,000 Services 25,000
12/22/97 Curtis Coe 350,000 Services 60,000
04/06/98 Donald Patton 600,000 Debt 60,000
04/06/98 Eileen Suggs 400,000 Debt 40,000
02/01/99 Ray Brown 4,000,000 Debt 400,000
02/01/99 Aurora Resources 500,000 26% interest- 50,000
& Mining Co. Deer Trail Mine
Development
Agreement
02/01/99 Eben Loewenthal 250,000 Services 25,000
03/ /99 39,000 Services 3,900
06/18/99 Richard & Leslie Kennedy 60,000 Services 6,000
06/18/99 Guy Price 60,000 Services 6,000
06/18/99 Rell Frederick 60,000 Services 6,000
06/18/99 Gilbert Windheim 400,000 Cash 40,000
10/22/99 Gilbert Windheim 500,000 Cash 50,000
02/14/00 David J. Capraro 1,550,000 Cash 155,000
04/26/00 Xion, Inc. 2,000,000 Cash 200,000
05/02/00 B & H Industries 2,000,000 Cash 200,000
05/26/00 David J. Capraro 500,000 Cash 50,000
05/26/00 Eben Loewenthal 500,000 Services 50,000
* In addition to the share issuances described above, Unico also
issued warrants or options to:
- Gilbert A. Windheim - option to purchase up to 1,000,000
shares at $0.10 per share on or before 08/28/02
- David J. Capraro - option to purchase up to 1,550,000 shares
at $0.10 per share on or before 02/14/02. Mr. Capraro
exercised a portion of this
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<PAGE>
option by purchasing 500,000 shares at $0.10 per share on or
about 05/26/00.
- Unico is presently owed approximately $300,000 for the
issuances of shares to Xion, Inc. and/or B & H Industries in
April and May, 2000.
All of the shares described above in the table were sold directly by Unico,
and no underwriters were involved in the transactions. Unico relied on
section 4(2) of the Securities Act of 1933 in making each sale of securities.
No advertising or general solicitation was employed in offering the shares.
Each purchaser received disclosure information concerning Unico. Each
purchaser also had the opportunity to investigate Unico and ask questions of
its president and board of directors. The securities were offered for
investment purposes only and not for the purpose of resale or distribution,
and, in each instance, the transfer of the shares was appropriately restricted
by Unico.
Item 5. Indemnification of directors and officers.
The only statutes, charter provisions, by-laws, contracts or other
arrangements under which any controlling person, director or officer of Unico
is insured or indemnified in any manner against any liability which he may
incur in that capacity, are as follows:
A. Section 10-202 B. and sections 10-850 through 10-858 of the Arizona
Revised Statutes offer limitation of liability protection for officers and
directors and/or indemnification protection of officers, directors, employees
and agents of Unico, and provide as follows:
Section 10-202. Articles of incorporation and certificate of disclosure;
violation; classification.
B. The articles of incorporation may set forth:
1. A provision eliminating or limiting the liability of a director to
the corporation or its shareholders for money damages for any action taken or
any failure to take any action as a director, except liability for any of the
following:
(a) The amount of a financial benefit received by a director to
which the director is not entitled.
(b) An intentional infliction of harm on the corporation or the
shareholders.
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(c) A violation of Section 10-833.
(d) An intentional violation of criminal law.
2. A provision permitting or making obligatory indemnification of a
director for liability, as defined in Section 10-850, to any person for any
action taken, or any failure to take any action, as a director, except
liability for any of the exceptions described in paragraph 1, subdivisions
(a), (b), (c) and (d) of this subsection.
3. Any other provision, not inconsistent with law.
Section 10-850. Definitions
In this article, unless the context otherwise requires:
1. "Corporation" includes any domestic or foreign predecessor entity of
a corporation in a merger or other transaction in which the predecessor's
existence ceased on consummation of the transaction.
2. "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other entity. A director is
considered to be serving an employee benefit plan at the corporation's request
if the director's duties to the corporation also impose duties on or otherwise
involve services by the director to the plan or to participants in or
beneficiaries of the plan. Director includes the estate or personal
representative of a director.
3. "Expenses" includes attorney fees and all other costs reasonably
related to a proceeding.
4. "Liability" means the obligation to pay a judgment, settlement,
penalty or fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding and
includes obligations and expenses that have not yet been paid by the
indemnified person but that they have been or may be incurred.
5. "Officer" means an individual who is or was an officer of a
corporation or an individual who, while an officer of a corporation, is or was
serving at the corporation's request as a
26
<PAGE>
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other entity. An officer is considered to be serving an employee benefit
plan at the corporation's request if the officer's duties to the corporation
also impose duties on or otherwise involve services by the officer to the plan
or to participants in or beneficiaries of the plan. Officer includes the
estate or personal representative of an officer.
6. "Official capacity" means, if used with respect to a director, the
office of director in a corporation and, if used, with respect to an officer
as contemplated in Section 10-856, the office in a corporation held by the
officer. Official capacity does not include service for any other foreign or
domestic corporation or any partnership, joint venture, trust, employee
benefit plan or other entity.
7. "Outside director" means a director who, when serving as a director,
was not an officer, employee or holder of more than five percent of the
outstanding shares of any class of stock of the corporation or of any
affiliate of the corporation.
8. "Party" includes an individual who was, is or is threatened to be
made a named defendant or respondent in a proceeding.
9. "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
Section 10-851. Authority to indemnify
A. Except as provided in subsection D of this section and in Section 10-854,
a corporation may indemnify an individual made a party to a proceeding because
either:
1. The individual is or was a director against liability incurred in the
proceeding if all of the following conditions exist:
(a) The individual's conduct was in good faith.
(b) The individual reasonably believed:
(i) In the case of conduct in an official capacity with the
corporation, that the conduct was in its best interests.
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(ii) In all other cases, that the conduct was at least not
opposed to its best interests.
(c) In the case of any criminal proceedings, the individual had no
reasonable cause to believe the conduct was unlawful.
2. The director engaged in conduct for which broader indemnification has
been made permissible or obligatory under a provision of the articles of
incorporation pursuant to Section 10-202, subsection b, paragraph 2.
B. A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection A, paragraph 2, subdivision (a) of this section.
C. The termination of a proceeding by judgment, order, settlement or
conviction or on a plea of no contest or its equivalent is not of itself
determinative that the director did not meet the standard of conduct described
in this section.
D. A corporation may not indemnify a director under this section either:
1. In connection with a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation.
2. In connection with any other proceeding charging improper financial
benefit to the director, whether or not involving action in the director's
official capacity, in which the director was adjudged liable on the basis that
financial benefit was improperly received by the director.
E. Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 10-852. Mandatory indemnification
A. Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was the prevailing party, on the merits or otherwise,
in the defense of any proceeding to which the director was a party because the
director is or was a director of the corporation against reasonable
28
<PAGE>
expenses incurred by the director in connection with the proceeding.
B. Unless limited by its articles of incorporation, Section 10-851,
subsection D or subsection C of this section, a corporation shall indemnify an
outside director against liability. Unless limited by its articles of
incorporation or subsection C of this section, a corporation shall pay an
outside director's expenses in advance of a final disposition of a proceeding,
if the director furnishes the corporation with a written affirmation of the
director's good faith belief that the director has met the standard of conduct
described in Section 10-851, subsection A and the director furnishes the
corporation with a written undertaking executed personally, or on the
director's behalf, to repay the advance if it is ultimately determined that
the director did not meet the standard of conduct. The undertaking required
by this subsection is an unlimited general obligation of the director but need
not be secured and shall be accepted without reference to the director's
financial ability to make repayment.
C. A corporation shall not provide the indemnification or advancement of
expenses described in subsection B of this section if a court of competent
jurisdiction has determined before payment that the outside director failed to
meet the standards described in Section 10-851, subsection A, and a court of
competent jurisdiction does not otherwise authorize payment under Section
10-854. A corporation shall not delay payment of indemnification or expenses
under subsection B of this section for more than sixty days after a request is
made unless ordered to do so by a court of competent jurisdiction.
Section 10-853. Advance for expenses
A. A corporation may pay for or reimburse the reasonable expenses incurred by
a director who is a party to a proceeding in advance of final disposition of
the proceeding if both of the following conditions exist:
1. The director furnishes the corporation with a written affirmation of
the director's good faith belief that the director has met the standard of
conduct described in Section 10-851 or that the proceeding involves conduct
for which liability has been eliminated under a provision of the articles of
incorporation pursuant to Section 10-202, subsection B, paragraph 1.
2. The director furnishes the corporation with a written undertaking,
executed personally or on the director's behalf, to repay the advance if the
director is not entitled to mandatory
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<PAGE>
indemnification under Section 10-852 and it is ultimately determined under
Section 10-854 or 10-855 that the director did not meet the standard of
conduct.
B. The undertaking required in subsection A, paragraph 2 of this section is
an unlimited general obligation of the director but need not be secured and
may be accepted without reference to financial ability to make repayment.
C. Authorizations of payments under this section shall be made in a manner
consistent with Section 10-830 or 10-842.
D. This section does not apply to advancement of expenses to or for the
benefit of an outside director. Advances to outside directors shall be made
pursuant to Section 10-852.
Section 10-854. Court order indemnification.
Unless a corporation's articles of incorporation provide otherwise, a
director of the corporation who is a party to a proceeding may apply for
indemnification or an advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court after giving any notice the court considers necessary
may order indemnification or advance for expenses if it determines either:
1. The director is entitled to mandatory indemnification under Section
10-852, in which case the court shall also order the corporation to pay the
director's reasonable expenses incurred to obtain court order indemnification.
2. The director is fairly and reasonably entitled to indemnification in
view of all of the relevant circumstances, whether or not the director met the
standard of conduct set forth in Section 10-851 or was adjudged liable as
described in Section 10-851, subsection D, but if the director was adjudged
liable under Section 10-851, subsection D, indemnification is limited to
reasonable expenses incurred.
Section 10-855. Determination and authorization of indemnification
A. A corporation may not indemnify a director under Section 10-851 unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because
the director has met the standard of conduct set forth in Section 10-851.
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<PAGE>
B. The determination shall be made either:
1. By the board of directors by a majority vote of the directors not at
the time parties to the proceeding.
2. By special legal counsel:
(a) Selected by majority vote of the disinterested directors.
(b) if there are no disinterested directors, selected by majority
vote of the board.
3. By the shareholders, but shares owned by or voted under the control
of directors who are at the time parties to the proceeding shall not be voted
on the determination.
C. Neither special legal counsel nor any shareholder has any liability
whatsoever for a determination made pursuant to this section. In voting
pursuant to subsection B of this section, directors shall discharge their duty
in accordance with Section 10-830.
D. Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection B,
paragraph 2 of this section to select counsel.
Section 10-856. Indemnification of officers
A. A corporation may indemnify and advance expenses under this article to an
officer of the corporation who is a party to a proceeding because the
individual is or was an officer of the corporation as follows:
1. To the same extent as a director.
2. If the individual is an officer but not a director, to the further
extent as may be provided by the articles of incorporation, the bylaws, a
resolution of the board of directors, or contract except for:
(a) Liability in connection with a proceeding by or in the right of
the corporation other than for reasonable expenses incurred in connection with
the proceeding.
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(b) Liability arising out of conduct that constitutes:
(i) Receipt by the officer of a financial benefit to which the
officer is not entitled.
(ii) An intentional infliction of harm on the corporation or
the shareholders.
(iii) An intentional violation of criminal law.
B. Subsection A, paragraph 2 of this section applies to an officer who is also
a director if the basis on which the officer is made a party to the proceeding
is an act or omission solely as an officer.
C. An officer of a corporation who is not a director is entitled to mandatory
indemnification under Section 10-852, subsection A and may apply to a court
under Section 10-854 for indemnification or an advance for expenses, in each
case to the same extent to which a director is entitled to indemnification or
advance for expenses under those sections.
Section 10.857. Insurance
A corporation may purchase and maintain insurance, including
retrospectively rated and self-insured programs, on behalf of an individual
who is or was a director or officer of the corporation or who, while a
director or officer of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other entity, against liability asserted against or
incurred by the individual in that capacity or arising from the individual's
status as a director or officer, whether or not the corporation would have
power to indemnify or advance expenses to the individual against the same
liability under this article.
Section 10-858. Application of article
A. A provision that treats a corporation's indemnification of or advance for
expenses to directors and that is contained in its articles of incorporation,
its bylaws, a resolution of its shareholders or board of directors or a
contract or otherwise is valid only if and to the extent the provision is
consistent with this article. If articles of incorporation limit
indemnification or advances for expanses, indemnification and advances for
expenses are valid only to the extent consistent with the articles.
32
<PAGE>
B. This articles does not limited a corporation's power to pay or reimburse
expenses incurred by a director in connection with the director's appearance
as a witness in a proceeding at the time when the director has not been made a
named defendant or respondent to the proceeding.
C. This article does not limit a corporation's power to indemnify, advance
expenses or maintain insurance on behalf of an employee or agent.
B. Article IX of Unico's articles of incorporation provides for
indemnification of the officers, directors and stockholders of Unico. It
provides as follows:
ARTICLE IX
EXEMPTION OF PRIVATE PROPERTY
AND INDEMNIFICATION OF DIRECTORS
The private property of the incorporators, stockholders, directors and
officers of the corporation shall be forever exempt from its debts and
obligations; and no share of stock of any class shall ever be subject to
assessment or levy of any kind or character. The corporation shall indemnify
its officers, directors and stockholders from all liability of any type or
sort whatever, as may exist as a direct or indirect result of their status or
actions as such officer, director or stockholder, except as may arise due to
the gross negligence or willfull misconduct of any such person.
C. Unico has no provision in its by-laws which gives indemnification
rights to its officers, directors or controlling persons to protect against
liabilities that may arise against them in those capacities.
D. Unico has no directors and officers insurance or any other type of
insurance that insures its officers, directors or controlling persons against
liabilities that may arise against them in those capacities.
33
<PAGE>
-----------------------------------------------------------------
PART F/S - Financial statements
-----------------------------------------------------------------
UNICO, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
<PAGE> 34
C O N T E N T S
Independent Auditors' Report..............................................3
Consolidated Balance Sheet................................................4
Consolidated Statements of Operations.....................................6
Consolidated Statements of Stockholders' Equity (Deficit).................7
Consolidated Statements of Cash Flows.....................................8
Notes to the Consolidated Financial Statements............................9
<PAGE> 35
HJ & ASSOCIATES, L.L.C.
Certified Public Accountants and Consultants
50 South Main Street, Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Unico, Inc. and Subsidiary
Magalia, California
We have audited the accompanying consolidated balance sheet of Unico, Inc. and
Subsidiary as of February 29, 2000 and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years
ended February 29, 2000 and February 28, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position
of Unico, Inc. and Subsidiary as of February 29, 2000 and the results of their
operations and their cash flows for the years ended February 29, 2000 and
February 28, 1999 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to
the consolidated financial statements, the Company's recurring losses from
operations and net accumulated deficit raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 9. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/S/ HJ & Associates,LLC
HJ & Associates, LLC
Salt Lake City, Utah
May 31, 2000
<PAGE> 36
UNICO, INC. AND SUBSIDIARY
Consolidated Balance Sheet
ASSETS
February 29,
2000
--------------
CURRENT ASSETS
Cash and cash equivalents $ 212,786
Taxes receivable 433
Prepaid expenses 9,719
--------------
Total Current Assets 222,938
--------------
PROPERTY AND EQUIPMENT
Property and equipment, net (Note 4) 178,029
--------------
Total Property and Equipment 178,029
--------------
OTHER ASSETS
Operating agreement (Note 11) -
Refundable deposit 500
--------------
Total Other Assets 500
--------------
TOTAL ASSETS $ 401,467
==============
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 37
UNICO, INC. AND SUBSIDIARY
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
February 29,
2000
--------------
CURRENT LIABILITIES
Accounts payable $ 32,915
Accrued expenses 1,410
Advances from related parties (Note 8) 688,199
Notes payable (Notes 5 and 11) 286,000
Accrued interest payable 530,456
--------------
Total Current Liabilities 1,538,980
--------------
COMMITMENTS AND CONTINGENCIES (Note 11) 556,797
--------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized at $0.10
par value; 50,266,712 shares issued and outstanding 5,026,671
Additional paid-in capital 325,052
Stock subscription receivable (100,000)
Accumulated deficit (6,946,033)
--------------
Total Stockholders' Equity (Deficit) (1,694,310)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 401,467
==============
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 38
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Years Ended
----------------------------
February 29, February 28,
2000 1999
------------- -------------
REVENUES
Sales $ - $ -
------------- -------------
Total Revenues - -
------------- -------------
EXPENSES
General and administrative 310,836 245,693
Depreciation and amortization 29,213 28,238
------------- -------------
Total Expenses 340,049 273,931
------------- -------------
Loss from Operations (340,049) (273,931)
------------- -------------
OTHER INCOME (EXPENSES)
Investment income 2,123 817
Interest expense (154,674) (145,257)
Decline in value of assets - (109,310)
Loss on disposition of asset (667) -
------------- -------------
Total Other Income (Expenses) (153,218) (253,750)
------------- -------------
NET LOSS $ (493,267) $ (527,681)
============= =============
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 39
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional Stock
------------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1998 41,847,712 4,184,771 170,052 (100,000) (5,925,085)
Common stock issued for
payment of debt at $0.10
per share 5,000,000 500,000 - - -
Common stock issued for
investment in mining
properties at $0.10 per
share 500,000 50,000 - - -
Common stock issued for
services rendered at $0.10
per share 250,000 25,000 - - -
Net loss for the year ended
February 28, 1999 - - - - (527,681)
------------ ------------ ------------ ------------ ------------
Balance, February 28, 1999 47,597,712 4,759,771 170,052 (100,000) (6,452,766)
Common stock issued
for services rendered at
$0.10 per share 39,000 3,900 - - -
Common stock issued for cash
and services at $0.10 per
share 580,000 58,000 - - -
Common stock issued for
cash at $0.10 per share 500,000 50,000 - - -
Common stock issued for
cash at $0.10 per share 1,550,000 155,000 - - -
Warrants issued below market
price (Note 12) - - 155,000 - -
Net loss for the year ended
February 29, 2000 - - - - (493,267)
------------ ------------ ------------ ------------ ------------
Balance, February 29, 2000 50,266,712 $ 5,026,671 $ 325,052 $ (100,000) $(6,946,033)
============ ============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
7
</TABLE>
<PAGE> 40
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended
----------------------------
February 29, February 28,
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (493,267) $ (527,681)
Adjustments to reconcile net loss to net cash
used) by operating activities:
Stock issued for services 21,900 25,000
Warrants issued below market value 155,000 -
Decline in value of assets - 109,310
Depreciation 29,213 28,238
Loss on disposition of asset 667 -
Changes in operating assets and liabilities:
Decrease in accounts receivable and
related receivables 29,100 219
(Increase) in prepaid expenses (9,719) -
Increase in accounts payable and other
liabilities 134,500 209,979
-------------- --------------
Net Cash (Used) by Operating Activities (132,606) (154,935)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash reserved for mining rights - 94,690
Purchase of fixed assets (6,500) (4,000)
-------------- --------------
Net Cash Provided (Used) by
Investing Activities (6,500) 90,690
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in advances from related parties 25,250 83,744
Issuance of stock for cash 245,000 -
-------------- --------------
Net Cash Provided by Financing Activities 270,250 83,744
-------------- --------------
NET INCREASE IN CASH 131,144 19,499
CASH AT BEGINNING OF YEAR 81,642 62,143
-------------- --------------
CASH AT END OF YEAR $ 212,786 $ 81,642
============== ==============
CASH PAID DURING THE YEAR FOR:
Interest $ 2,132 $ -
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Issuance of stock for services $ 21,900 $ 25,000
Issuance of stock for mining properties $ - $ 50,000
Issuance of stock for debt $ - $ 500,000
The accompanying notes are an integral part of these
consolidated financial statements.
8
<PAGE> 41
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial statements
February 29, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Unico, Inc. (the Company) was organized under the laws of the State of
Arizona on May 27, 1966 under the name of I.I. Incorporated. The name was
later changed to Industries International, Incorporated, then Red Rock Mining
Co., Inc. and finally Unico, Inc. The Company was incorporated for the
purpose of exploring and, if warranted, developing unpatented lode mining
claims. The Company is presently maintaining and drilling the claims through
sampling, tunnel cleaning, timbering, drill site preparation and other
evaluation activities while seeking financing for further exploration and
development. To date, there has been no material production from the claims
and there are no known, proven or probable reserves.
HydroClear, Ltd., the Company's wholly-owned subsidiary, was organized
for the purpose of marketing water purification units used for purifying
swimming pool or cooling tower water by eliminating bacteria and algae without
the use of chlorine or bromine. HydroClear, Ltd. is currently inactive.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The Company has elected a February 28, or 29, year end.
b. Basic Loss Per Share
The following is an illustration of the reconciliation of the numerators
and denominators of the basic loss per share calculation:
For the
Years Ended
--------------------------
February 29, February 28,
2000 1999
------------ ------------
Net loss (numerator) $ (493,267) $ (527,681)
Weighted average shares outstanding
(denominator) 48,438,117 43,160,212
------------ ------------
Basic loss per share $ (0.01) $ (0.01)
============ ============
Dilutive loss per share is not presented due to potentially dilutive
items being antidilutive in nature.
9
<PAGE> 42
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
At February 29, 2000, the Company had net operating loss carryforwards of
approximately $2,670,000 that may be offset against future taxable income
through 2020. No tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of
the net operating loss carryforwards are offset by a valuation allowance of
the same amount.
d. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
e. Principles of Consolidation
The consolidated financial statements include those of Unico, Inc. (the
Company) and its wholly-owned subsidiary, HydroClear, Ltd.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that 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.
g. Recoverability of Asset Costs
The Company assesses on an annual basis the recoverability of its
investment in mining rights. Any decline in value is recorded when
recognized. Any sale of assets is charged to asset costs until the cost has
been recovered in full.
NOTE 3 - MINING CLAIMS AND LEASES
The Company received four Quit Claim Deeds, all dated August 5, 1986,
from an unrelated corporation for thirty-two (32) unpatented mining claims
located in Piute County, Utah. The mine was obtained in exchange for the
issuance of two million seven hundred thousand (2,700,000) shares of Company's
common stock. No cost basis has been ascribed to the mine.
10
<PAGE> 43
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 3 - MINING CLAIMS AND LEASES (Continued)
On March 30, 1992, the Company entered into a ten-year Mining
Lease-Option to Purchase, to be effective June 1, 1992, of twenty-eight (28)
patented claims comprising 505.3 acres, five (5) patented mill sites with 30
acres and one hundred seventy one (171) unpatented claims encompassing 2,720
acres located near Marysvale, Utah (the Deer Trail Mine). Required lease
royalty-rentals are five percent (5%) of gross receipts from mineral sales
less certain specified operating costs but not less than, initially, four
thousand dollars ($4,000) per month. The minimum monthly royalty increased by
two thousand dollars ($2,000) in July 1994 and 1997, and will increase again
in July 2000. The option purchase price is two million dollars ($2,000,000)
until May 31, 1999, and four million dollars ($4,000,000) until May 31, 2002,
the end of the lease-purchase agreement.
NOTE 4 - FIXED ASSETS
Fixed assets are recorded at cost, major additions and improvements are
capitalized and minor repairs are expensed when incurred.
Depreciation of property and equipment is determined using the
straight-line method over the expected useful lives of the assets as follows:
Description Useful Lives
------------- ------------
Automobiles 4 years
Lab equipment 10 years
Mining equipment 12 years
Fixed assets consist of the following:
February 29,
2000
-------------
Automobiles $ 26,631
Mining equipment 319,600
Lab equipment 800
-------------
Total fixed assets 347,031
-------------
Less accumulated depreciation (169,002)
-------------
Net Fixed Assets $ 178,029
=============
Depreciation expense for the fiscal year ended February 29, 2000 amounted
to $29,213. Depreciation expense for the fiscal year ended February 28, 1999
amounted to $28,238.
11
<PAGE> 44
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 5 - NOTES PAYABLE
Joint Venture
-------------
The Company entered into a joint venture agreement with a limited
partnership to finance, own and operate a mining operation and processing
facility to be built near Marysvale, Utah. The claims described in Note 3,
above, were the properties to be exploited. In exchange for a $25,000 capital
contribution and the claims mentioned, the Company received a twenty-five
percent (25%) interest in the ownership, profits, gains, losses, deductions
and credits derived from the Joint Venture.
However, in response to litigation initiated by the Company, a proposed
settlement terminating the Joint Venture was signed on June 30, 1994.
Provisions included the return of all mine interests, all improvements
thereto, the benefit of all payments, engineering, etc. and a fluorite
contract to the Company. The Company is obligated to pay $250,000 plus
$36,000 plus interest at an annual rate of nine percent (9%) in thirty-six
(36) equal payments beginning in October 1994. The $250,000 could potentially
be convertible to the Company's stock. Additionally, the Company will be
obligated to pay approximately $580,000 from one-fourth of the net profit from
future mine operations. The note is currently in default, making the entire
balance due as of the balance sheet date. The balance due at February 29, 2000
was $286,000.
NOTE 6 - INVESTMENT IN MINES
In May of 1995, the Company entered into an agreement to purchase 52
mining claims, 9 mill sites, water rights ad mill equipment near Searchlight,
Nevada from E.R.I. Gold and Silver, Corp. (ERI) for $280,000. According to
the terms of the agreement, the Company issued two million of its restricted
investment, publicly traded shares as payment in full to seller. The company
was then committed to re-purchase the shares within nine months of the date of
closing at a price of $0.14 per share. The nine month period was extended to
June 1, 1996. The Company decided not to purchase the shares, and according
to the agreement, ERI kept all shares issued to it. The investment was
written down to its estimated net realizable value of $-0- at February 28,
1998.
NOTE 7 - ADVANCES FROM RELATED PARTIES
The advances from related parties amounted to $688,199, are due on
demand, and accrue interest at 10% per annum. Interest expense amounted to
$72,595 and $87,107 at February 29, 2000 and February 28, 1999, respectively.
NOTE 8 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred losses from its inception
through February 29, 2000. It has not established revenues sufficient to
cover its operating costs and to allow it to continue as a going concern.
During the next twelve months, the Company's plan of operation consists of the
following:
12
<PAGE> 45
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 8 - GOING CONCERN (Continued)
* Acquire a ball mill at a cost of approximately $30,000;
* Pay an additional $55,000 for a heavy media separator and a
grinding circuit recently purchased by the Company;
* Hire additional employees needed to commence mining operations;
* Commence mining operations in approximately June or July 2000; and
* Raise up to $1,000,000 in additional funds.
The Company raised $155,000 in February 2000 from the sale of 1,550,000
shares of common stock. Much of these funds have been spent acquiring
equipment necessary for mining operations. The Company's current cash will
sustain operations for approximately 2 to 3 additional months if the newly
purchased equipment and the additional equipment the Company expects to
purchase in the next 2 to 3 months is paid for with cash. In the event income
from mining operations is delayed or is insufficient to cover operating
expenses, the Company will need to seek additional funds from equity or debt
financing, for which the Company has no current commitments. In the interim,
management is committed to meeting the minimum operating needs of the Company.
NOTE 9 - DECLINE IN VALUE OF ASSETS
The Company issued 4,000,000 restricted common shares at $0.10 per share
for mining assets and an operating agreement for the Gold Button Mine located
in Wagoner, Arizona. The Company is not presently operating the mine due to
an order from the U.S. Forest Service regarding fire danger.
Due to the inability of the mine to produce revenues and the lack of
substantive evidence as to its net realizable value, the book value of the
operating agreement has been reduced to zero.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Litigation
----------
On August 8, 1996, the Allen Ball and Connie Ball Living Trust filed suit
against the Company. The suit is for the $286,000 and accrued interest as
summarized in Note 5. The Company has engaged counsel to defend itself in the
action.
In an action filed by the Mine Safety and Health Administration (MSHA)
the Company was assessed certain penalties as a result of citations issued by
MSHA. During January 2000, the Company settled with MSHA and is required to
pay penalties totaling $22,000. The penalties are to be paid in eight
installments of $2,750 beginning May 1, 2000 and continuing every six months
until paid. The Company has accrued $22,000 as a contingent liability at
February 29, 2000.
On February 9, 2000, a case was filed in Superior Court, Maricopa County,
Arizona against the Company. The Plaintiffs are seeking $150,000 plus
interest as a result of an alleged breach of contract by the Company. During
April 2000, the Company began settlement agreements with the plaintiffs for
$141,500 which has been accrued as part of gold contracts payable and is
payable as follows:
13
<PAGE> 46
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)
1. $12,000, comprised of $10,000 of principal plus $2,000 for attorney
fees to be paid upon execution of the release and discharge
agreement.
2. $12,000, comprised of $10,000 of principal plus $2,000 for attorney
fees to be paid on December 30, 2000.
3. $10,000 to be paid on June 30, 2001; and
4. $2,000 per month beginning July 31, 2001 until the total principal
amount of $137,500 has been paid.
The agreement also calls for security of judgment in the amount of
$150,000 plus 6% interest per year dating back to May 22, 1995. The judgment
will accrue interest at the statutory rate of 10% per year until paid in full.
Plaintiffs agree that they shall not record the judgment or attempt to execute
on it so long as the Company makes payment pursuant to the schedule set forth
above.
As further security, the amount owed under the judgment will be secured
by a stock pledge in the amount of 1,000,000 shares of the Company stock. An
escrow account will be established by the Company to hold the 1,000,000
shares.
Operating/Management Agreement
------------------------------
The Company had contracted with SLC Environmental, LLC (SLC) to manage
and operate all of its mines, mining property and mining claims. In return
for SLC's services, the Company was to pay all costs incurred by SLC in
operating and managing the mines. Additionally, the Company was to pay SLC
15% of the net profit, after taxes, from the operation and management of all
projects managed or operated by SLC. The Company terminated the services of
SLC during August 1996. SLC has claimed the Company owes it $318,870 as a
result of this agreement. The Company does not agree and plans to respond
vigorously to any legal proceedings, but has accrued this amount as a
contingent liability at February 29, 2000.
Commitments
-----------
On October 5, 1998, the company entered into a development agreement with
Guilderbrook, Inc. (NY Closely Held Corp.) whereby Guilderbrook, Inc. will
jointly provide necessary financial and management resources to retain the
Deer Trail Mine lease discussed in Note 3 and to provide necessary equipment
to put the mine into productive operation. For this, Guilderbrook, Inc. will
receive 25% of the net profits from the mine operations subsequent ore sales.
During December 1999, the Company entered into an engagement agreement
with Pellett Investments (Pellett) whereby Pellett agreed to buy a convertible
note bearing interest at 5% per annum, convertible into ten million
(10,000,000) shares of the Company's common stock at $0.10 per share.
14
<PAGE> 47
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)
The ten million shares are to be delivered as follows:
1. The Company shall deliver 2,000,000 shares of common stock to
Pellett as soon as practical;
2. Pellett will then forward $200,000 to the Company as soon as
practical;
3. Four subsequent conversions will be done in a duplicate manner as
described in 1. and 2. above to equal a total conversion of
$1,000,000; and
4. An additional 3,000,000 shares of common stock will be registered
in the name of Penny Pellett and Forest Minerals, Inc. upon payment
of each successful round of conversion as follows:
* 360,000 shares of common stock to Forest Minerals, Inc. and
* 240,000 shares of common stock to Penny Pellett.
Gold Delivery Contracts
-----------------------
The Company entered into four contracts for the advance payment of gold.
The contracts, which total to $166,000, allowed the Company to collect
$141,000, net of commissions. The contracts call for the Company to deliver
gold, in increments of not less than one troy ounce, beginning six months from
the various purchase dates. Three of these contracts are all currently due
and outstanding, one is currently being settled as described under litigation.
The amount accrued as a contingent liability associated with these contracts
at February 29, 2000 was $215,927 and was calculated by the ounces due under
these contracts at the February 28, 1997 spot rate as published in the Wall
Street Journal.
NOTE 11 - STOCK TRANSACTIONS
During March 1999, the Company issued 39,000 shares of stock for services
valued at $3,900 (or $0.10 per share).
During May 1999, the Company issued 580,000 shares of common stock for
cash of $40,000 and services valued at $18,000 (or $0.10 per share).
During October 1999, the Company issued 500,000 shares of common stock
for cash of $50,000 (or $0.10 per share).
During February 2000, the Company issued 1,550,000 shares of common stock
for cash of $155,000 (or $0.10 per share).
During February 2000, the Company issued warrants to purchase 1,550,000
shares of common stock for $155,000 (or $0.10 per share) for a period of two
years. The Company recognized $155,000 in expense during the year ended
February 29, 2000 due to the warrants being issued below market value.
NOTE 12 - SUBSEQUENT EVENTS
During April and May 2000, the Company issued 4,000,000 shares of common
stock in association with the engagement agreement with Pellett discussed in
Note 11 above.
15
<PAGE> 48
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 12 - SUBSEQUENT EVENTS (Continued)
During April and May 2000, an officer advanced $67,500 to the Company in
the form of a note payable, accruing interest at 10% per annum, unsecured.
During April and May 2000, the Company purchased $94,400 worth of mining
equipment.
As of May 2000, the Company had received approximately $80,000 of the
$400,000 note for stock issued to Pellett.
16
<PAGE> 49
-----------------------------------------------------------------
PART III
-----------------------------------------------------------------
Item 1. Index to exhibits.
Exhibit no. Description of exhibits
---------- -----------------------------------
3.1 Articles of incorporation
3.2 Amendment to articles of incorporation, dated
November 8, 1967
3.3 Amendment to articles of incorporation, dated
December 6, 1972
3.4 Amendment to articles of incorporation, dated
May 29, 1973
3.5 Amendment to articles of incorporation, dated
December 1, 1979
3.6 Amendment to articles of incorporation, dated
May 12, 1992
3.7 Amendment to articles of incorporation, dated
November __, 1999
3.8 By-laws
3.9 Board of directors' resolution amending Unico's
by-laws, dated April 1, 1992
10.1 Mining Lease and Option to Purchase dated March
20, 1992
10.2 Deer Trail Mine Development Agreement dated
October 5, 1998
10.3 Proposed ASARCO Incorporated agreement
27.1 Financial data schedule
Item 2. Description of exhibits.
Exhibit no. Description of exhibits Page no.
---------- -------------------------------- --------
3.1 Articles of incorporation Initial filing
3.2 Amendment to articles of incorpora- Initial filing
tion, dated November 8, 1967
3.3 Amendment to articles of incorpora- Initial filing
tion, dated December 6, 1972
3.4 Amendment to articles of incorpora- Initial filing
tion, dated May 29, 1973
3.5 Amendment to articles of incorpora- Initial filing
tion, dated December 1, 1979
3.6 Amendment to articles of incorpora- Initial filing
tion, dated May 12, 1992
50
<PAGE>
3.7 Amendment to articles of incorpora- Initial filing
tion, dated November __, 1999
3.8 By-laws Initial filing
3.9 Board of directors' resolution amend- Initial filing
ing Unico's by-laws, dated April 1,
1992
10.1 Mining Lease and Option to Purchase Initial filing
dated March 20, 1992
10.2 Deer Trail Mine Development Agreement Initial filing
dated October 5, 1998
10.3 Proposed ASARCO Incorporated agree- Initial filing
ment
27.1 Financial data schedule 53
51
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
UNICO, INCORPORATED
Date: June 23, 2000 By: /s/ Ray C. Brown
---------------------
Ray C. Brown
President
