<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 8/31/00
Commission file number 000-30239
UNICO, INCORPORATED
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Arizona
(State or other jurisdiction of
incorporation or organization
86-0205130
(IRS Employer Identification Number)
6475 Grandview Avenue
P.O. Box 777
Magalia, California 95954
________________________________________
(Address of principal executive offices)
(530) 873-4394
________________________________________________
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of September 29, 2000, the issuer had outstanding 55,935,046 shares of
its Common Stock, $0.10 par value per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Unico, Incorporated, an Arizona
corporation, as of August 31, 2000 and the related audited consolidated balance
sheet of Unico, Incorporated as of February 29, 2000, the unaudited related
consolidated statements of operations and cash flows for the three and six month
periods ended August 31, 2000 and August 31, 1999, the unaudited related
consolidated statement of stockholders' equity for the six month period ended
August 31, 2000, and the notes to the financial statements are attached hereto
as Appendix "A" and incorporated herein by reference.
The accompanying financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the financial position
of Unico, Incorporated consolidated with HydroClear, Ltd., its wholly-owned
subsidiary which is currently inactive. The names "Unico", "we", "our" and "us"
used in this report refer to Unico, Incorporated.
Unico 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.
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 report 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. There are no known,
proven or probable reserves on the property.
During Unico's last 2 fiscal years ended February 29, 2000, and since then,
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.
During the past 2 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 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 expects to commence active mining operations on the property in
approximately October or November 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
During the next 12 months, Unico's plan of operation consists of the
following:
- complete the construction of a tailings pond;
- construct a holding pond for water;
- complete the installation of a ball mill by installing a
starter motor;
- hire additional employees needed to commence mining
operations;
- commence mining operations in approximately October or
November 2000;
- raise up to $1,000,000 in additional funds.
Between February 29, 2000 and August 31, 2000, Unico issued 5,460,000 shares
of its common stock at $0.10 per share. Unico has received approximately
$165,740 of cash proceeds and $96,000 of services from the sale of its shares
and Unico expects to receive approximately $284,260 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 approximately 2 to 3 additional months.
Results of Operations.
During the three months ended August 31, 2000, Unico experienced a net loss
in the amount of $164,734, or approximately ($0.003) per share, which is $3,164
less than the net loss of $167,898, or approximately ($0.003) per share,
incurred for the three months ended August 31, 1999. For the six months ended
August 31, 2000, Unico incurred a net loss of $333,870, or approximately
($0.006) per share. This was $49,633 less than the net loss of $383,503, or
approximately ($0.007) per share, incurred by Unico during the six month period
ended August 31, 1999.
Unico attributes the decreased net loss for the three month period ended
August 31, 2000 primarily to a $7,153 decrease in general and administrative
expenses. Unico attributes the decreased net loss for the six month period
ended August 31, 2000 primarily to a $48,093 decrease in general and
administrative expenses. Unico does not anticipate that general and
administrative expenses will continue to decrease in the future. To the
contrary, Unico anticipates that general and administrative expenses will likely
increase in its third and fourth fiscal quarters with the commencement of mining
activities anticipated to start in October or November 2000. Unico also
anticipates that it will commence earning revenues approximately 2 to 3
months after mining operations commence.
Liquidity and Capital Resources
Unico's stockholders' (deficit) increased $72,130 in the six months ended
August 31, 2000, from a deficit of ($1,694,310) as of February 29, 2000 to a
deficit of ($1,766,440) as of August 31, 2000. Cash and cash equivalents
decreased $62,303 to $150,483 at August 31, 2000 from $212,786 at February 29,
2000. Net cash used in operating activities for the six months ended August 31,
2000 reflects a net loss of $333,870, partially offset by non-cash expenses of
$96,000 for common stock issued for services.
This decrease in cash and cash equivalents for the six months ended August
31, 2000 was partially offset by net cash provided by financing activities
through $165,740 cash received for the issuance of shares of Unico's common
stock and a $134,000 increase in advances from related parties. Unico utilized
$235,450 cash for capital requirements for the purchase of real property,
personal property and equipment.
During the three month period ended August 31, 2000, Unico purchased 680
acres of land adjacent to the Deer Trail Mine property which it is leasing.
Unico paid $50,000 of the purchase price at the closing, and Unico still owes
$150,000 on a note payable which is due on or before April 20, 2001. Unico's
most significant cash needs during the next 12 months include raising funds to
pay the balance of the real property purchase price and to pay for expenses
associated with the commencement of mining activities. As of August 31, 2000,
Unico's cash resources are not adequate to sustain operations for more than
approximately 2 to 3 months. Unico will be required to raise additional capital
through borrowing or additional sale of equity.
Our auditors have issued a "going concern" opinion in note 8 of our
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 and/or collecting an additional $300,000 to
$500,000 in equity or debt capital in the next 3 to 6 months, we believe that
Unico will have sufficient funds to commence mining operations, pay off the
$150,000 balance of the real property purchase price, 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 the six month period ended August 31, 2000, Pellett Investments
purchased or arranged for the purchase of convertible notes for $400,000 which
were converted into 4,000,000 shares of Unico common stock at $0.10 per share.
Unico issued all 4,000,000 shares but Unico had received payment for only
approximately 1,157,400 of the shares as of August 31, 2000. Unico should soon
receive approximately $284,260 cash for the shares already issued. After
receiving payment of the remaining $284,260 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 approximately October or
November 2000.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The following legal proceedings involving Unico as a defendant were either
commenced during the three month period ended August 31, 2000, or a material
development occurred in the legal proceedings during the same time period:
1. 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
of an alleged breach of contract by Unico. The case was settled in
June 2000 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.
Item 2. Changes in Securities.
During the three month period ended August 31, 2000, Unico made the
following sales of shares of Unico's common stock which were not registered
under the Securities Act of 1933:
Date
Recipient
No. of
Shares
Consideration
Valuation
08/03/00
08/03/00
Dan Proctor
Richard R. & Leslie
Kennedy
210,000
250,000
Services
Services
$21,000
$25,000
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 the sales of securities to Dan Proctor
and Richard R. and Leslie Kennedy. 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 sold
to Dan Proctor and Richard R. and Leslie Kennedy were offered for investment
purposes only and not for the purpose of resale or distribution. The transfer
of the shares sold to Dan Proctor and Richard R. and Leslie Kennedy was
appropriately restricted by Unico.
During the three month period ended May 31, 2000, Unico made sales of
shares of Unico's common stock which were not registered under the Securities
Act of 1933. For a description of those sales, please see Unico's quarterly
report on Form 10-QSB for the period ended May 31, 2000.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a)There are no exhibits included with this report.
(b)No Current Reports on Form 8-K were filed by Unico during the quarter ended
August 31, 2000. However, on September 1, 2000, Unico filed a Current Report on
Form 8-K describing Unico's purchase of 680 acres of land adjacent to the Deer
Trail Mine as an Item 2 Acquisition of Assets. The report was dated September
1, 2000 and referred to the event as having occurred on August 28, 2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNICO, INCORPORATED
(Registrant)
Date: October 3, 2000 By: /s/ Ray C. Brown
Ray C. Brown, Chief Executive Officer
and Principal Financial and Accounting
Officer
<PAGE>
UNICO, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2000 and February 29, 2000
<PAGE>
UNICO, INC. AND SUBSIDIARY
Consolidated Balance Sheets
[CAPTION]
<TABLE>
ASSETS
August 31, February 29,
2000 2000
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 150,483 $ 212,786
Taxes receivable 433 433
Prepaid expenses - 9,719
Total Current Assets 150,916 222,938
PROPERTY AND EQUIPMENT
Property and equipment, net (Note 4) 544,878 178,029
Total Property and Equipment 544,878 178,029
OTHER ASSETS
Operating agreement (Note 10) - -
Refundable deposit 500 500
Total Other Assets 500 500
TOTAL ASSETS $ 696,294 $ 401,467
</TABLE
<PAGE>
UNICO, INC. AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
<CAPTION>
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
August 31, February 29,
2000 2000
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 53,915 $ 32,915
Accrued expenses 1,410 1,410
Advances from related parties (Note 7) 822,199 688,199
Notes payable (Notes 5 and 10) 436,000 286,000
Accrued interest payable 595,163 530,456
Total Current Liabilities 1,908,687 1,538,980
COMMITMENTS AND CONTINGENCIES (Note 10) 554,047 556,797
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized
at $0.10 par value; 55,726,712 and
50,266,712 shares issued and outstanding,
respectively 5,572,671 5,026,671
Additional paid-in capital 325,052 325,052
Stock subscription receivable (384,260) (100,000)
Accumulated deficit (7,279,903) (6,946,033)
Total Stockholders' Equity (Deficit) (1,766,440) (1,694,310)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 696,294 $ 401,467
</TABLE>
<PAGE>
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
[CAPTION]
<TABLE>
For the Six Months Ended For the Three Months Ended
August 31, August 31,
<S> <C> <C> <C> <C>
2000 1999 2000 1999
REVENUES
Sales $ - $ - $ - $ -
Total Revenues - - - -
EXPENSES
General
and administrative 242,503 290,596 115,098 122,251
Depreciation
and amortization 18,601 18,318 9,760 9,159
Total Expenses 261,104 308,914 124,858 131,410
Loss from Operations (261,104) (308,914) (124,858) (131,410)
OTHER INCOME (EXPENSES)
Investment income 941 1,066 526 499
Interest expense (73,707) (75,655) (40,402) (36,987)
Total Other Income
(Expenses) (72,766) (74,589) (39,876) (36,488)
NET LOSS $ (333,870) $ (383,503) $ (164,734) $ (167,898)
BASIC LOSS PER SHARE $ (0.01) $ (0.01) $ (0.00) $ (0.00)
</TABLE>
<PAGE>
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
[CAPTION]
<TABLE>
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
<S> <C> <C> <C> <C> <C>
Balance,
February 29, 2000 50,266,712 $5,026,671 $325,052 $(100,000) $(6,946,033)
Common stock
issued for cash
and subscription
receivable
at $0.10 per share 4,000,000 400,000 - (321,250) -
Common stock
issued for cash
at $0.10 per share 500,000 50,000 - - -
Common stock
issued for
services at
$0.10 per share 500,000 50,000 - - -
Partial receipt of
stock subscription - - - 11,990 -
Common stock issued
for services at
$0.10 per share 460,000 46,000 - - -
Partial receipt of
stock subscription - - - 25,000 -
Net loss for the
six months ended
August 31, 2000 - - - - (333,870)
Balance,
August 31, 2000 55,726,712 $5,572,671 $325,052 $(384,260) $(7,279,903)
</TABLE>
<PAGE>
UNICO, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
[CAPTION]
<TABLE>
For the Six Months Ended For the Three Months Ended
August 31, August 31,
<S> <C> <C> <C> <C>
2000 1999 2000 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (333,870) $ (383,503) $ (164,734) $(167,898)
Adjustments to
reconcile net loss
to net cash (used)
by operating
activities:
Stock issued
for services 96,000 21,900 46,000 -
Depreciation 18,601 18,318 9,760 9,159
Loss on disposition
of asset - 667 - -
Changes in operating
assets and liabilities:
Decrease in accounts
receivable and related
receivables - 29,100 - -
Decrease in
prepaid expenses 9,719 - 5,000 -
Increase in accounts
payable and
other liabilities 82,957 128,742 35,977 75,630
Net Cash (Used)
by Operating Activities (235,450) - (94,550) -
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of
fixed assets (235,450) - (94,550) -
Net Cash (Used)
by Investing
Activities (235,450) - (94,550) -
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in advances
from related parties 134,000 149,483 66,500 66,737
Issuance of stock
for cash 128,750 40,000 - -
Receipt of stock
subscription receivable 36,990 - 36,990 -
Net Cash Provided by
Financing Activities 299,740 189,483 103,490 66,737
NET INCREASE
(DECREASE) IN CASH (62,303) 4,707 (59,057) (16,372)
CASH AT BEGINNING
OF PERIOD 212,786 81,642 209,540 102,721
CASH AT END OF PERIOD $ 150,483 $ 86,349 $ 150,483 $ 86,349
CASH PAID DURING
THE PERIOD FOR:
Interest $ 9,000 $ 1,681 $ 3,000 $ -
Income taxes $ - $ - $ - $ -
NON-CASH
FINANCING ACTIVITIES:
Issuance of stock
for services $ 96,000 $ 21,900 $ 46,000 $ -
</TABLE>
<PAGE>
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial statements
August 31, 2000 and 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 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:
[CAPTION]
<TABLE>
For the For the
Six Months Ended Three Months Ended
August 31, August 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net loss (numerator) $ (333,870) $ (383,503) $ (164,734) $ (167,898)
Weighted average
shares outstanding
(denominator) 53,698,125 47,326,625 55,406,712 48,216,712
Basic loss per share $ (0.01) $ (0.01) $ (0.00) $ (0.00)
</TABLE>
Dilutive loss per share is not presented due to potentially dilutive
items being antidilutive in nature.
<PAGE>
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and February 29, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
At August 31, 2000, the Company had net operating loss carryforwards of
approximately $7,280,000 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
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.
h. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustments are of a normal recurring nature.
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.
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and 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:
August 31, February 29,
2000 2000
(Unaudited)
Automobiles $ 26,631 $ 26,631
Mining equipment 505,050 319,600
Lab equipment 800 800
Land 200,000 -
Total fixed assets 732,481 347,031
Less: accumulated depreciation (187,603) (169,002)
Net Fixed Assets $ 544,878 $ 178,029
Depreciation expense for the six months ended August 31, 2000 and 1999
amounted to $18,601 and $18,318, respectively.
During July 2000, the Company purchased land in Piute County, Utah for
cash of $50,000 and a note payable of $150,000 due on or before April
20, 2001.
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and 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 August 31, 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
Advances from related parties amounted to $822,199 at August 31, 2000,
are due on demand, and accrue interest at 10% per annum. Interest
expense amounted to $45,537 and $34,681 at August 31, 2000 and 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 August 31, 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:
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and February 29, 2000
NOTE 8 - GOING CONCERN (Continued)
Hire additional employees needed to commence mining operations;
Commence mining operations in approximately October or November
2000; and Raise up to $1,000,000 in additional funds.
Management believes the Company's current cash will sustain operations
for approximately 2 to 3 additional months. 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
$19,250 as a contingent liability at August 31, 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:
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and 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 August 31, 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.
UNICO, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
August 31, 2000 and 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 August 31, 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 April 2000, the Company issued 4,000,000 shares of stock for
cash of $78,500 and a receivable of $321,250 (or $0.10 per share).
During May 2000, the Company issued 500,000 shares of stock for cash of
$50,000 (or $0.10 per share).
During May 2000, the Company issued 500,000 shares of stock for
services valued at $50,000 (or $0.10 per share).
During August 2000, the Company issued 460,000 shares of stock for
services valued at $46,000 (or $0.10 per share).
NOTE 12 - SUBSEQUENT EVENTS
During September 2000, an officer advanced approximately $25,000 to the
Company in the form of a note payable, accruing interest at 10% per
annum, unsecured.
During September 2000, the Company issued 208,334 shares of its common
stock for $25,000 (or $0.12 per share).
During September 2000, the board of directors authorized the
acquisition of a minority interest, or 357,000 shares, of Silver Bell
Mining, Inc. for 457,500 shares of the Company's common stock.
