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 11/30/00
Commission file number 000-30239
UNICO, INCORPORATED
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Arizona 86-0205130
_________________________________
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization
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 December 27, 2000, the issuer had outstanding 64,785,046 shares of
its Common Stock, $0.10 par value per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Unico, Incorporated, an
Arizona corporation, as of November 30, 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 nine month periods ended November 30, 2000 and November 30, 1999,
the unaudited related consolidated statement of stockholders' equity for the
nine 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 10 acres
for both mine and mill. Unico plans to seek a permit for large scale mining
operations in the near future.
<PAGE> 2
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 March, 2001.
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 mill facility in approximately January 2001;
- test the mill facility after its completion to make certain
that it runs properly;
- hire additional employees needed to commence mining operations;
- commence mining operations on the Deer Trail Mine in
approximately March 2001;
- commence mining operations on the Silver Bell mining
property in late Spring 2001;
- raise approximately $250,000 to $500,000 in additional
equity capital;
- seek debt financing.
Between February 29, 2000 and November 30, 2000, Unico issued 11,625,834
shares of its common stock. A total of 1,281,429 of these shares were issued
for services rendered valued at $141,000 or at an average cost of
approximately $0.11 per share. A total of 5,000,000 shares were issued to
Unico's President, Ray C. Brown and his wife, Carryl, in consideration of
canceling $700,000 principal amount of debt owed to Ray Brown by Unico. A
total of 457,500 shares were issued in order to acquire a minority ownership
interest in Silver Bell Mining Incorporated, a Utah corporation.
<PAGE> 3
An additional 2,292,500 shares were issued after November 30, 2000, in order
to acquire the remaining stock ownership interest of Silver Bell Mining
Incorporated, which owns 29 mining claims in American Fork Canyon, Utah
County, Utah. Unico believes this mining property has not been mined for more
than 50 years.
The remaining 4,886,905 shares issued during the nine months ended
November 30, 2001 were issued for cash and/or stock subscriptions receivable
totaling approximately $500,000. Of this amount, Unico is still owed
approximately $279,260. Much of the cash Unico received for issuing stock was
spent acquiring equipment necessary for mining operations.
Unico's current cash will sustain operations only for approximately 3
additional months.
Results of Operations.
During the three months ended November 30, 2000, Unico incurred a net
loss of $216,713, or approximately ($0.004) per share, which is $92,413 more
than the net loss of $124,300, or approximately ($0.002) per share, incurred
for the three months ended November 30, 1999. For the nine months ended
November 30, 2000, Unico incurred a net loss of $550,583 or approximately
($0.009) per share. This was $42,780 more than the net loss of $507,803, or
approximately ($0.01) per share, incurred by Unico during the nine month
period ended November 30, 1999.
Unico attributes the increased net loss for the three and nine month
periods ended November 30, 2000 primarily to an increase of approximately
$80,099 (for the three month period) and $32,006 (for the nine month period)
in general and administrative expenses largely due to increased levels of
consulting and other professional services associated with Unico's work to
reopen the Deer Trail Mine. Unico anticipates that general and administrative
expenses will continue at a fairly high level in its fourth fiscal quarter in
preparing for the commencement of mining activities anticipated to start in
March 2001. Unico anticipates that it will commence earning revenues
approximately 2 to 3 months after mining operations commence.
Liquidity and Capital Resources
Unico's stockholders' (deficit) decreased $600,444 in the nine months
ended November 30, 2000, from a deficit of ($1,694,310) as of February 29,
2000 to a deficit of ($1,093,866) as of November 30, 2000. Cash and cash
equivalents increased $132,282 to $345,068 at November 30, 2000 from $212,786
at February 29, 2000. Net cash
<PAGE> 4
used in operating activities for the nine months ended November 30, 2000
reflects a net loss of $550,583, partially offset by non-cash expenses of
$152,513 for common stock issued for services (including $11,513 associated
with the granting of options), and depreciation of $33,103.
This increase in cash and cash equivalents for the nine months ended
November 30, 2000 was also affected by Unico's receipt of approximately
$220,740 cash as payment for Unico's common stock and an increase in advances
from related parties of $471,500. Unico utilized approximately $324,565 cash
for capital requirements for the purchase of real property, personal property
and equipment.
Accounts payable increased $27,451 from $32,915 to $60,366 during the
nine months ended November 30, 2000. Notes payable increased $150,000 from
$286,000 to $436,000 due to Unico's purchase of 680 acres of real property.
Although Ray Brown loaned Unico an additional $471,500 during the nine months
ended November 30, 2000, advances from related parties during this time period
actually decreased $228,500 due to Mr. Brown's conversion of $700,000
principal amount of debt to 5,000,000 shares of Unico common stock. Accrued
interest payable increased $100,481 from $530,456 to $630,937 during the nine
months ended November 30, 2000.
Unico's most significant cash needs during the next 12 months include
raising funds to pay the $150,000 balance of the purchase price of 680 acres
purchased by Unico, which is due on or before April 20, 2001, and to pay for
expenses associated with the commencement of mining activities. As of
November 30, 2000, Unico's cash resources are only adequate to sustain
operations for approximately 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 9 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
$250,000 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. We also intend to
seek debt financing from unrelated
<PAGE> 5
third parties. 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 nine month period ended November 30, 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 1,207,400 of the shares as of November 30, 2000. Unico should
receive an additional $279,260 cash for the shares already issued, unless
Unico renegotiates the terms of the transaction, which Unico may seek to do.
After receiving payment of another $79,260 cash from the purchasers, Unico is
obligated to issue an additional 600,000 shares to persons affiliated with
Pellett Investments for no additional consideration. When the final $200,000
stock subscription receivable is paid, Unico will then issue another 600,000
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
March 2001.
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 2. Changes in Securities.
During the three month period ended November 30, 2000, Unico made the
following sales of shares of Unico's common stock which were not registered
under the Securities Act of 1933:
<PAGE> 6
No. of
Date Recipient Shares Consideration Valuation
-------- ------------------ ----------- -------------- ------------
09/06/00 Brad Johnsen 208,334 Cash $ 25,000
10/10/00 Eben Loewenthal 178,571 Cash (Note 1)
10/10/00 Eben Loewenthal 321,429 Services (Note 1)
10/10/00 Ray C. Brown & 5,000,000 Debt conversion $ 700,000
Carryl W. Brown
10/10/00 Thomas G. Devine 150,000 (Note 2) $ 25,500
10/10/00 Peter Donovan 100,000 (Note 2) $ 17,500
10/10/00 Kjeld Thygessen 50,000 (Note 2) $ 8,500
10/10/00 Cynthia Grantham 150,000 (Note 2) $ 25,500
10/10/00 Glen Zinn 7,500 (Note 2) $ 1,275
Note 1: Unico agreed to issue to Mr. Loewenthal 250,000 shares for $25,000
cash ($0.10 per share), and 250,000 shares for $25,000 in services
($0.10 per share). Because Unico's common stock was trading at
$0.14 per share at that time, Unico had to impute an additional
$20,000 of services income to Mr. Loewenthal in connection with
these stock issuances. As a result, for financial accounting
purposes, Unico is treated as having issued 178,571 shares for cash
(at $0.14 per share) and 321,429 shares for services (at $0.14 per
share).
Note 2: Each of Thomas G. Devine, Peter Donovan, Kjeld Thygessen, Cynthia
Grantham and Glenn Zinn exchanged shares of common stock of Silver
Bell Mining, Incorporated to Unico for the shares of Unico common
stock issued to them.
In Addition, on or about October 3, 2000, Unico granted to Eben
Loewenthal an option to purchase up to 250,000 shares of Unico's common stock
at $0.10 per share, exercisable at any time on or before October 3, 2001.
All of the shares described above in the table and the option described above
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 each of the individuals. 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 were offered for investment purposes only
and not for the purpose of resale or distribution. The transfer of the shares
sold was appropriately restricted by Unico.
<PAGE> 7
During each of the two prior fiscal quarters ended May 31, 2000, and
August 31, 2000, respectively, 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 reports on Form 10-
QSB for the periods ended May 31, 2000 and August 31, 2000, respectively.
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) 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. Additionally, on
December 11, 2000, Unico filed a Current Report on Form 8-K describing Unico's
acquisition of 100% of the issued and outstanding shares of stock of Silver
Bell Mining, Incorporated, as an Item 5 Other Event. The report was dated
December 8, 2000 and referred to the event as having occurred on December 6,
2000.
<PAGE> 8
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: January 5, 2001 By: /s/ Ray C. Brown
___________________________________
Ray C. Brown, Chief Executive
Officer and Principal Financial and
Accounting Officer
<PAGE> 9
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2000 and February 29, 2000
<PAGE> 10
Letterhead of HJ & Associates
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Unico, Inc. and Subsidiary
(A Development Stage Company)
Magalia, California
We have reviewed the accompanying consolidated balance sheet of Unico, Inc.
and Subsidiary (a development stage company) as of November 30, 2000 and the
related statements of operations, stockholders' equity and cash flows for the
three and nine months ended November 30, 2000. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted audited standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made t the accompanying condensed financial statements referred to
above for them to be in conformity with accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of Unico, Inc. and Subsidiary
(a development stage company) as of February 29, 2000, and the related
statements of operations, stockholders' equity, and cash flows for the year
then ended (not presented herein) and in our report dated May 31, 2000, we
expressed an unqualified opinion on those consolidated financial statements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises 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 financial statements do not
include any adjustments that might result for the outcome of the uncertainty.
/s/ HJ & Associates
HJ & Associates, LLC
Salt Lake City, Utah
December 29, 2000
<PAGE> 11
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
November 30, February 29,
2000 2000
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 345,068 $ 212,786
Taxes receivable 433 433
Prepaid expenses - 9,719
------------- -------------
Total Current Assets 345,501 222,938
------------- -------------
PROPERTY AND EQUIPMENT
Property and equipment, net (Note 4) 619,491 178,029
------------- -------------
Total Property and Equipment 619,491 178,029
------------- -------------
OTHER ASSETS
Deposit on subsidiary acquisition (Note 5) 77,775 -
Operating agreement (Note 11) - -
Refundable deposit 500 500
Gold bond 2,576 -
------------- -------------
Total Other Assets 80,851 500
------------- -------------
TOTAL ASSETS $ 1,045,843 $ 401,467
============= =============
<PAGE> 12
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
November 30, February 29,
2000 2000
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 60,366 $ 32,915
Accrued expenses 1,410 1,410
Advances from related parties (Note 8) 459,699 688,199
Notes payable (Notes 6 and 11) 436,000 286,000
Accrued interest payable 630,937 530,456
------------- -------------
Total Current Liabilities 1,588,412 1,538,980
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 11) 551,297 556,797
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized at
$0.10 par value; 61,892,546 and 50,266,712
shares issued and outstanding, respectively 6,189,254 5,026,671
Additional paid-in capital 592,756 325,052
Stock subscription receivable (379,260) (100,000)
Accumulated deficit prior to development stage (3,788,522) (3,788,522)
Accumulated deficit from inception of
the development stage on March 1, 1997 (3,708,094) (3,157,511)
------------- -------------
Total Stockholders' Equity (Deficit) (1,093,866) (1,694,310)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,045,843 $ 401,467
============= =============
<PAGE> 13
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
Inception
of the
Development
Stage on
March 1, 1997
For the Nine Months Ended For the Three Months Ended Through
November 30, November 30, November 30,
2000 1999 2000 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales $ - $ - $ - $ - $ -
------------- ------------- ------------- ------------- -------------
Total Revenues - - - - -
------------- ------------- ------------- ------------- -------------
EXPENSES
General and administrative 403,277 371,271 160,774 80,675 2,340,033
Depreciation and amortization 33,103 21,854 14,502 3,536 154,984
------------- ------------- ------------- ------------- -------------
Total Expenses 436,380 393,125 175,276 84,211 2,495,017
------------- ------------- ------------- ------------- -------------
Loss from Operations (436,380) (393,125) (175,276) (84,211) (2,495,017)
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSES)
Investment income 1,278 1,546 337 480 7,576
Interest expense (115,481) (116,224) (41,774) (40,569) (611,248)
Decline in value of assets - - - - (651,810)
Settlement of debt - - - - 19,000
Loss on disposition of asset - - - - (667)
Gain on gold contract - - - - 24,072
------------- ------------- ------------- ------------- -------------
Total Other Income
(Expenses) (114,203) (114,678) (41,437) (40,089) (1,213,077)
------------- ------------- ------------- ------------- -------------
NET LOSS $ (550,583) $ (507,803) $ (216,713) $ (124,300) $ (3,708,094)
============= ============= ============= ============= =============
BASIC LOSS PER SHARE $ (0.01) $ (0.01) $ (0.00) $ (0.00)
============= ============= ============= =============
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
February 28, 1996 27,926,512 $ 2,792,651 $ 170,052 $ - $(3,788,522)
Common stock issued
for services rendered 8,961,200 896,120 - - -
Net loss for the year
ended February 28, 1997 - - - - (1,465,755)
------------ ------------ ------------- ------------ ------------
Balance,
February 28, 1997 36,887,712 3,688,771 170,052 - (5,254,277)
Common stock issued
for services rendered 1,760,000 176,000 - - -
Common stock issued
for cash 1,740,000 174,000 - - -
Common stock issued in
payment of debt 400,000 40,000 - - -
Common stock issued for
acquisition of fixed
assets 60,000 6,000 - - -
Stock subscription
receivable 1,000,000 100,000 - (100,000) -
Net loss for the year
ended February 28,1998 - - - - (670,808)
------------ ------------ ------------- ------------ ------------
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)
------------ ------------ ------------- ------------ ------------
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
(Unaudited)
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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)
Common stock issued for
cash and subscription
receivable at $0.10
per share (unaudited) 4,000,000 400,000 - (321,250) -
Common stock issued for
cash at $0.10 per share
(unaudited) 500,000 50,000 - - -
Common stock issued
for services at $0.10
per share (unaudited) 500,000 50,000 - - -
Partial receipt of stock
subscription (unaudited) - - - 11,990 -
Common stock issued
for services at $0.10
per share (unaudited) 460,000 46,000 - - -
Partial receipt of
stock subscription
(unaudited) - - - 25,000 -
Common stock issued for
cash at $0.12 per share
(unaudited) 208,334 20,833 4,166 - -
Common stock issued for
deposit on subsidiary
acquisition at $0.17
per share (unaudited) 457,500 45,750 32,025 - -
Partial receipt of stock
subscription(unaudited) - - - 5,000 -
Common stock issued for
cash and services at
$0.14 per share
(unaudited) 500,000 50,000 20,000 - -
------------ ------------ ------------- ------------ ------------
Balance Forward 56,892,546 $ 5,689,254 $ 381,243 $ (379,260) $(6,946,033)
------------ ------------ ------------- ------------ ------------
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
(Unaudited)
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance Forward 56,892,546 $ 5,689,254 $ 381,243 $ (379,260) $(6,946,033)
Common stock issued
for related party debt
and services at $0.14
per share (unaudited) 5,000,000 500,000 200,000 - -
Issuance of stock
options below market
price at $0.10 per
share (unaudited) - - 11,513 - -
Net loss for the nine
months ended November
30, 2000 (unaudited) - - - - (550,583)
------------ ------------ ------------- ------------ ------------
Balance,
November 30, 2000
(unaudited) 61,892,546 $ 6,189,254 $ 592,756 $ (379,260) $(7,496,616)
============ ============ ============= ============ ============
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception
of the
Development
Stage on
March 1, 1997
For the Nine Months Ended For the Three Months Ended Through
November 30, November 30, November 30,
2000 1999 2000 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (550,583) $ (507,803) $ (216,713) $ (124,300) $ (3,708,094)
Adjustments to reconcile net loss
to net cash (used) by operating
activities:
Stock issued for services and
equity discounts 152,512 21,900 56,512 - 1,426,532
Depreciation 33,103 21,854 14,502 3,536 154,984
Loss on disposition of asset - 667 - - 667
Settlement of debt - - - - 19,000
Gain on gold contract - - - - (24,072)
Decline in value of assets - - - - 651,810
Changes in operating assets and
liabilities:
Decrease in accounts receivable
and related receivables - 29,100 - - 152
Decrease in prepaid expenses 9,719 - - - -
(Increase) in other assets (2,578) - (2,576) - (3,076)
Increase in accounts payable and
other liabilities 122,434 203,677 39,475 74,935 688,151
------------- ------------- ------------- ------------- -------------
Net Cash (Used) by Operating
Activities (235,393) (230,605) (108,800) (45,829) (793,946)
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in investment - - - - 95,068
Purchase of fixed assets (324,565) (3,500) (89,115) (3,500) (351,165)
------------- ------------- ------------- ------------- -------------
Net Cash (Used) by Investing
Activities (324,565) (3,500) (89,115) (3,500) (256,097)
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in advances from related
parties 471,500 157,733 337,500 8,250 751,349
Issuance of stock for cash 178,750 90,000 50,000 50,000 597,750
Receipt of stock subscription
receivable 41,990 - 5,000 - 41,990
------------- ------------- ------------- ------------- -------------
Net Cash Provided by Financing
Activities $ 692,240 $ 247,733 $ 392,500 $ 58,250 $ 1,391,089
------------- ------------- ------------- ------------- -------------
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception
of the
Development
Stage on
March 1, 1997
For the Nine Months Ended For the Three Months Ended Through
November 30, November 30, November 30,
2000 1999 2000 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET INCREASE IN CASH $ 132,282 $ 13,628 $ 194,585 $ 8,921 $ 341,046
CASH AT BEGINNING OF PERIOD 212,786 81,642 150,483 86,349 4,022
------------- ------------- ------------- ------------- -------------
CASH AT END OF PERIOD $ 345,068 $ 95,270 $ 345,068 $ 95,270 $ 345,068
============= ============= ============= ============= =============
CASH PAID DURING THE PERIOD FOR:
Interest $ 15,000 $ 1,681 $ 6,000 $ - $ 17,132
Income taxes $ - $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Issuance of stock for services
and equity discounts $ 252,512 $ 21,900 $ 156,512 $ - $ 475,412
Issuance of stock for related party
debt $ 700,000 $ - $ 700,000 $ - $ 1,240,000
Issuance of stock for deposit on
subsidiary acquisition $ 77,775 $ - $ 77,775 $ - $ 77,775
Issuance of stock for fixed assets $ - $ - $ - $ - $ 56,000
</TABLE>
<PAGE> 19
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial statements
November 30, 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
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. The Company is
considered a development stage company per Statement of Financial Accounting
Standard No. 7 because it has not substantially began operations.
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 For the
Nine Months Ended Three Months Ended
November 30, November 30,
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net loss (numerator) $ (550,583) $ (507,803) $ (216,713) $ (124,300)
Weighted average
shares outstanding
(denominator) 55,737,627 48,098,148 59,861,456 48,524,404
----------- ----------- ----------- -----------
Basic loss per share $ (0.01) $ (0.01) $ (0.00) $ (0.00)
=========== =========== =========== ===========
Dilutive loss per share is not presented due to potentially dilutive
items being antidilutive in nature.
<PAGE> 20
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
At November 30, 2000, the Company had net operating loss carryforwards
of approximately $7,500,000 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.
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.
<PAGE> 21
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 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 5 and 12 years
Fixed assets consist of the following:
November 30, February 29,
2000 2000
------------- -------------
(Unaudited)
Automobiles $ 44,971 $ 26,631
Mining equipment 575,825 319,600
Lab equipment 800 800
Land 200,000 -
------------- -------------
Total fixed assets 821,596 347,031
------------- -------------
Less: accumulated depreciation (202,105) (169,002)
------------- -------------
Net Fixed Assets $ 619,491 $ 178,029
============= =============
Depreciation expense for the nine months ended November 30, 2000 and 1999
amounted to $33,103 and $21,854, 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.
<PAGE> 22
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 5- INVESTMENT
During September 2000, the Company entered into discussions to acquire
100% of the outstanding shares of Silver Bell Mining, Inc. in a stock for
stock transaction. The Company issued 457,500 shares of stock as a deposit on
the acquisition valued at $77,775, or $0.17 per share, the trading price of
the stock on the date of issue. The Company finalized the acquisition during
December 2000 (see Note 14).
NOTE 6 - 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 November 30, 2000
was $286,000.
NOTE 7 - INVESTMENT IN MINES
In May of 1995, the Company entered into an agreement to purchase 52
mining claims, 9 mill sites, water rights and 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 8 - ADVANCES FROM RELATED PARTIES
Advances from related parties amounted to $459,699 at November 30, 2000,
are due on demand, and accrue interest at 10% per annum. Interest expense
amounted to $53,922 and $50,374 at November 30, 2000 and 1999, respectively.
<PAGE> 23
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 9 - 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 November 30, 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:
* Completion and testing of mining and mill facilities;
* Hire additional employees needed to commence mining operations;
* Commence mining operations in approximately March 2001; and
* Raise up to $250,000 to $500,000 in additional funds.
Management believes the Company's current cash will sustain operations
for approximately 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 10 - 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 11 - 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 $16,500 as a contingent liability at
November 30, 2000.
<PAGE> 24
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
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:
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 November 30, 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.
<PAGE> 25
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 11 - 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 November 30, 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 12 - 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).
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 Company issued 457,500 shares of stock for an
investment in Silver Bell Mining, Inc. valued at $77,775 (or $0.17 per share).
During October 2000, the Company issued 500,000 shares for cash of
$25,000 and services valued at $45,000 (or $0.14 per share).
During October 2000, the Company issued 5,000,000 shares for the
cancellation of debt of $700,000 (or $0.14 per share).
<PAGE> 26
UNICO, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
November 30, 2000 and February 29, 2000
NOTE 13 - STOCK OPTIONS
During October 2000, the Company granted stock options for the purchase
of 250,000 shares of stock at an exercise price of $0.10 per share exercisable
for one year from the date of grant. The Company applied Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), to the issuance of these options. SFAS No. 123
requires the Company to estimate the fair value of each stock award at the
grant date by using an option pricing model such as the Black-Scholes option
pricing model. The Company used the following weighted average assumptions
for the option grant, respectively; dividend yield of zero percent for all
years; expected volatility of 1.24 percent; risk-free interest rate of 6.24
percent and an expected life of 1 year. The Company recognized $11,513 in
additional compensation expense associated with the grant of these options.
NOTE 14 - DEVELOPMENT STAGE COMPANY
The Company reverted to the status of a startup company during the year
ended February 28, 1998 due to a lack of revenue generation and will be a
development stage company as it commences its planned principal operations of
exploring and developing unpatented lode mining claims.
NOTE 15 - SUBSEQUENT EVENTS
During December 2000, the Company issued 350,000 shares of common stock
for cash of $35,000.
During December 2000, the Company granted options to purchase 350,000
shares of stock at $0.10 per share exercisable for one year.
During December 2000, the Company finalized an agreement to purchase
100% of the outstanding shares of Silver Bell for 2,542,500 shares of the
Company's outstanding stock. This acquisition was completed December 6, 2000.
Silver Bell had 29 mining claims at the date of acquisition.
