Unico 10QSB 2008 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[ X ]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended August 31, 2007

[   ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ____________ to ________________

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 of incorporation or organization)	(I.R.S. Employer Identification No.)

8880 Rio San Diego Drive, 8th Floor, San Diego, California 92108

(Address of principal executive offices)

(619) 209-6124

(Issuer's telephone number)

N/A

(Former Name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ]  No [X]

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 19, 2007, the issuer had outstanding 4,815,363,072 shares of its common stock, $0.001 par value per share.

Transitional Small Business Disclosure Format Yes [  ]  No [X]

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

UNICO, INCORPORATED AND SUBSIDIARIES

FINANCIAL STATEMENTS

AUGUST 31, 2007

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UNICO, INCORPORATED
Consolidated Balance Sheet
ASSETS
			August 31, 2007
			(Unaudited)
Current Assets
	Cash	$	23,982
	Prepaid expense		1,000
Total Current Assets			24,982
Fixed Assets
	Equipment, furniture, etc. net of depreciation (Note 1)		3,608,242
	Construction in progress		2,041,321
	Total Fixed Assets		5,649,563
Other Assets:
	Cash- reclamation bonds		209,437
	Deposit		22,947
	Total Other Assets		232,384
	Total Assets	$	5,906,929
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
	Accounts Payable	$	455,984
	Wages payable		34,090
	Accrued Expenses		6,675
	Reclamation obligations		138,413
	Accrued interest payable		213,136
	Accrued interest payable - related party (Note 3)		33,492
	Taxes payable		6,569
	Derivative Liability		5,766,976
	Debentures payable, net of discount (Note 2)		2,632,833
	Debentures payable-related party (Note 3)		563,980
	Total Current Liabilities		9,852,148
	Total Liabilities		9,852,148
Stockholders' Deficit
	Preferred Stock, authorized 20,000,000 shares, $0.001 Par Value, 9,800,000 shares issued and outstanding		9,800
	Common Stock,  authorized 5,000,000,000 shares, $0.001 Par Value, 4,815,363,072 shares issued and outstanding		4,815,364
	Stock Payable		999,000
	Additional Paid in Capital		46,363,863
	Accumulated Deficit		(56,133,246)
Total Stockholders' Deficit			(3,945,219)
	Total Liabilities and Stockholders' Deficit	$	5,906,929
The accompanying notes are an integral part of these consolidated financial statements.

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UNICO, INCORPORATED

Consolidated Statements of Operations

(Unaudited)

	For the Six Months Ended				For the Three Months Ended
	August 31,				August 31,
	2007		2006		2007		2006
Total Revenues	$	-	$	-	$	-	$	-
Operating Expenses
Drilling, exploration and maintenance expense		188,830		148,881		82,907		67,044
Depreciation and accretion		74,939		60,137		37,187		30,229
Professional fees		255,983		93,404		161,552		33,698
Salaries/wages		151,629		171,938		76,986		69,148
General and administrative expense		228,897		347,059		126,680		159,223
Total Operating Expenses		900,278		821,419		485,312		359,342
Net Operating Loss		(900,278)		(821,419)		(485,312)		(359,342)
Other Income (Expense)
Interest expense		(2,634,960)		(1,663,804)		(1,939,453)		(974,887)
Interest income		5,403		1,608		3,653		1,608
Derivative gain (loss) on debentures		210,336		(537,551)		220,084		(204,026)
Loss on settlement of debt		(7,929,184)		(7,011,837)		(3,795,868)		(1,818,977)
Other income		200		-		200		-
Total Other Expense		(10,348,205)		(9,211,584)		(5,511,384)		(2,996,282)
Loss From Continuing Operations		(11,248,483)		(10,033,003)		(5,996,696)		(3,355,624)
Income Tax Expense		-		-		-		-
Net Loss	$	(11,248,483)	$	(10,033,003)	$	(5,996,696)	$	(3,355,624)
Net Loss Per Share	$	(0.006)	$	(0.25)	$	(0.002)	$	(0.06)
Weighted Average Shares Outstanding		2,044,746,341		40,512,349		2,707,483,323		51,628,064

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

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UNICO, INCORPORATED
Consolidated Statement of Cash Flows
(Unaudited)

		For the Six Months Ending August 31,
		2007		2006
Cash Flows from Operating Activities:
Net Loss	$	(11,248,483)	$	(10,033,003)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operations
Depreciation and accretion expense		74,939		60,136
Loss on settlement of debt		7,997,184		8,554,004
Derivative/Interest related to convertible debentures		2,274,497		537,551
Common stock issued for services		-		17,500
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Reclamation deposit		(1,734)		(1,388)
Deposits		(3,487)		-
Increase (Decrease) in:
Accrued expenses		116,522		(407,745)
Accounts payable and other liabilities		250,034		(207,213)
Net Cash Used by Operating Activities		(540,528)		(1,480,158)
Cash Flows from Investing Activities:
Purchase of fixed assets- Construction in progress		(314,460)		-
Purchase of fixed assets		(3,093,324)		(670,960)
Net Cash Used by Investing Activities		(3,407,784)		(670,960)
Cash Flows from Financing Activities:
Issuance of convertible debentures		3,965,100		2,325,000
Net Cash Provided by Financing Activities		3,965,100		2,325,000
Net Increase (Decrease) in Cash		16,788		173,882
Cash at Beginning of Period		7,194		29,508
Cash at End of Period	$	23,982	$	203,390
Cash Paid For:
Interest	$	-	$	-
Income Taxes	$	-	$	-
Non-Cash Financing Activities:
Common stock issued for services	$	-	$	17,500
Common Stock issued for debt extinguishments	$	3,809,944	$	1,032,500
The accompanying notes are an integral part of these consolidated financial statements.

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UNICO, INCORPORATED

Notes to the Consolidated Financial Statements

August 31, 2007 and August 31, 2006

NOTE 1 – NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING PRINCIPLES

This summary of significant accounting policies of Unico, Incorporated is presented to assist in understanding the Company's consolidated financial statements. The consolidated financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements.

a.

Organization and Business Activities

Unico, Incorporated was formed as an Arizona corporation on May 27, 1966 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 July 12, 2004, Unico filed an election with the U.S. Securities and Exchange Commission to become a business development company pursuant to Section 54 of the Investment Company Act of 1940. Unico's Deer Trail Mine operations are conducted through Deer Trail Mining Company, LLC, a Nevada limited liability company while Unico's Bromide Basin Mine operations are conducted through Bromide Basin Mining Company, LLC, a Nevada limited liability company. Unico also owns Silver Bell Mining Company, Inc., which is not presently operational.  On October 11, 2005, the Unico shareholders approved a proposal to authorize the Company’s Board of Directors to withdraw the Company’s election to be treated as a BDC.  On October 12, 2005 a Notification of Withdrawal of BDC Election was filed with the Securities and Exchange Commission so that Unico could begin conducting business as an operating company rather than as a BDC subject to the Investment Company Act.      

The Company presently has three wholly-owned subsidiaries: Deer Trail Mining Company, LLC, Silver Bell Mining Company, Inc., and Bromide Basin Mining Company, LLC.  While the Company reported under the Investment Company Act as a Business Development Company, the operations of these entities were not consolidated but, rather, were treated as investments and were carried on the Company’s books at their fair market value. As a result, the accompanying consolidated financial statements are those of the Company and its wholly owned subsidiaries, Deer Trail Mining Company, LLC, Silver Bell Mining Company, Inc. and Bromide Basin Mining Company, LLC.

b.

Fixed Assets

The Company’s property consists of mining equipment, vehicles, office furniture and computer equipment.  The property is depreciated in a straight-line basis over three, five, and ten years.  Fixed assets are recorded at cost. Major additions and improvement are capitalized. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as gain or loss on sale of assets.

Fixed Asset Schedule
		2007
Fixed Assets:
Furniture & Equipment	$	1,158,082
Land		200,000
Patented mining claims		640,000
Mining Claim		2,360,000
Autos		65,814
Total		4,423,896
Less Depreciation		(815,654)
Net Equipment	$	3,608,242

The Company exercised its option to purchase the claims covered by the Deer Trail lease and paid the balance of $1,700,000 that was owed on the purchase option agreement in the quarter ended August 31, 2007.    A total of $4,000,000 was paid to purchase the Deer Trail Claim over a period of approximately three years.  The initial $1,000,000 that was paid towards the lease purchase was expensed in the 2004 fiscal year based on the fact that the Company did not have

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independent third party verification of the mineable assets at the time.  As a result, only $3,000,000 of the total acquisition of $4,000,000 is being capitalized.  

The purchase of the Deer Trail mines claims is comprised of 32 patented mining claims and 170 unpatented mining claims.  The patented claims comprise 19% of the total claims purchased.  As a result, $640,000 ($4,000,000 x 16% = $640,000) will be treated as a purchase of land based on the fact that patented claims give the Company title to the use of the land.  The balance of the capitalized amount of $2,360,000 is for the unpatented claims and is subject to be amortized over the life of the mineable assets.  The mineable assets are in the process of being verified by an independent third party which will establish the bases for future cost amortization.

c.

Accounting for Derivatives

Convertible debentures, the Company’s sole derivative instruments, are accounted for under EITF 00-27 unless liability classification of the derivative is more appropriate.  Where the embedded conversion option appears to qualify for liability classification, derivatives are accounted for under EITF 00-19.

Under EITF 00-27, the Company records a beneficial conversion cost associated with the convertibility feature of the security that equals the value of any discount to market available at the time of conversion.  This beneficial conversion cost is recorded at the time the convertible security is first issued.  If the debenture is subsequently converted into stock, the liability is reduced and common stock is increased.

EITF 00-19 is applicable to debentures issued by the Company in instances where the number of shares into which a debenture can be converted is not fixed.  For example, when a debenture converts at a discount to market based on the stock price on the date of conversion.  In such instances, EITF 00-19 requires that the embedded conversion option of the convertible debentures be bifurcated from the host contract and recorded at their fair value.   In accounting for derivatives under EITF 00-19, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature.  The discount is then amortized over the life of the debentures and the derivative liability is adjusted periodically according to stock price fluctuations.  At the time of conversion, any remain ing derivative liability is charged to additional paid-in capital.  For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility.

d.

Accounting Method

The Company's consolidated financial statements are prepared using the accrual method of accounting. The Company has elected a February 28^th year-end.   With the Company’s withdrawal as a BDC, the Company now reports the operations of itself and its subsidiaries under the equity method of accounting, resulting in the consolidation of all assets and operations of wholly-owned subsidiaries.

NOTE 2 – RELATED PARTY DEBENTURES

The Company previously issued convertible debentures of $645,132 to Ray Brown, a member of the board of directors.  These debentures bear interest at 10% per annum and were due September 2005, and December 25, 2004, respectively. The debentures are convertible into common stock of the Company at a discount of 20% off the closing bid price of the common stock on the date of conversion. The Company has recorded an accrued interest payable of $33,492 for the related party convertible debentures as of August 31, 2007.  During the quarter ended August 31, 2007, the Company converted a total of $6,650 of interest to 4,156,463 shares of common stock and paid $10,714 of interest in cash, leaving a balance due as of August 31, 2007 to Mr. Brown of $449,514.  In addition, in a past period, Ray Brown assigned $114,466 of his loan to Joseph Lopez, father of the Company’s Chief Executive Officer, Mark Lopez, as satisfaction on a personal loan. The Company therefore owes a total of $563,980 in related party debentures.

NOTE 3 – CONVERTIBLE DEBENTURES

During the quarter ended August 31, 2007, the Company issued $1,425,100 of convertible debentures that were used primarily to support subsidiary operations.  The debentures were issued with terms of 180 days, accrued interest at 8% per annum, and convert at a discount of 50% of the closing bid for the Company’s common stock on the date of conversion.  The Company recorded interest expense of $1,939,453 during the quarter ended August 31, 2007 associated with the debentures and recorded a gain of $220,084 on the derivative portion of the debentures.  The net derivative liability at August 31, 2007 was $5,766,976.   As of August 31, 2007, the Company had $4,280,100 in non-affiliate convertible debentures issued and outstanding less discounts of $1,647,267.

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During the quarter ended August 31, 2007, the Company entered into a total of 4 settlement transactions in the Twelfth Circuit (State) Court in Florida stemming from defaulted convertible debentures totaling $450,000.  Unico agreed to settle these three actions by issuing a total of 2,900,000,000 shares of its common stock to the note holders.  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.  As a result of issuing shares under the settlements, the Company recorded an expense of $3,795,868 as part of the settlement.  

NOTE 4 –STOCKHOLDER’S EQUITY

Common Stock

As of August 31, 2007, the Company had 4,815,363,072 shares of common stock issued and outstanding with 184,636,928 shares authorized but unissued.  

During the quarter ended August 31, 2007 the Company issued 2,900,000,000 shares of free trading common stock under court ordered settlement agreements as satisfaction of convertible debentures totaling $450,000 which were in default.  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.   As a result of this settlement, the Company recorded an expense of $3,795,868 which represented the difference in market value of the stock issued compared with the value of the stock which would have been issuable under the conversion terms.

During the quarter ended August 31, 2007, the Company issued a total of 4,156,463 shares of common stock on the conversion of $6,650 of interest to Ray Brown.

Stock Options

During the year ended February 28, 2007, all stock options expired unexercised.  As of August 31, 2007, there were no stock options outstanding.

Preferred Stock

As of August 31, 2007, the Company had 9,800,000 shares of preferred stock issued and outstanding, all of which is Series A preferred stock.The Series A Preferred Stock entitle the holder to elect two of the Company’s directors and is convertible into shares of common stock on a 1:1 basis.

Stock Payable

During the year ended February 28, 2007, the Company sold a total of 76,119,033 shares of restricted common stock to a third party for total consideration of $999,000.  As of August 31, 2007, these shares had not been issued, resulting in a stock payable of $999,000.

Convertible Debentures

The Company has $4,280,100 of convertible debentures outstanding that are convertible at a rate of 50% discount of the closing bid for the Company’s common stock on the date of conversion, and it has $563,980 of convertible debentures outstanding that are convertible at a rate of 20% discount of the closing bid for the Company’s common stock on the date of conversion.     

NOTE 5 – LEGAL MATTERS

During the year ended February 28, 2007, the Company entered into a total of 108 settlement transactions in the Twelfth Circuit (State) Court in Florida stemming from defaulted convertible debentures totaling $2,740,000.  Unico agreed to settle each action by issuing a total of 986,744,018 shares of its common stock to the plaintiffs  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to

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be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.   

During the quarter ended May 31, 2007 the Company issued 901,315,790 shares of free trading common stock under court ordered settlement agreements as satisfaction of convertible debentures totaling $550,000 which were in default.  And during the quarter ended August 31, 2007 the Company issued 2,900,000,000 shares of free trading common stock under court ordered settlement agreements as satisfaction of convertible debentures totaling $450,000 which were in default.  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.   As a result of this settlement, the Company recorded an expense of $4,201 ,316 for the quarter ended May 31, 2007 and $3,795,868 for the quarter ended August 31, 2007 which represented the difference in market value of the stock issued compared with the value of the stock which would have been issuable under the conversion terms.

NOTE 6 – SUBSEQUENT EVENTS

Subsequent to the quarter ending August 31, 2007, the Company received $250,000 through the issuance of new convertible debentures.  The new debentures were issued with terms of 180 days , bear interest at the rate of 8% per annum, and are convertible by the holder into shares of the Company’s common stock at a discount of 50% of the closing bid price on the date of conversion.

NOTE 7 – GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America 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 of $56,133,246 from its inception through August 31, 2007.  It has not established any revenues with which to cover its operating costs and to allow it to continue as a going concern.   

During the current fiscal year, the Company’s plan of operation is to raise approximately $5,000,000 for investment into its subsidiary companies: Deer Trail Mining Company, Bromide Basin Mining Company and Silver Bell Mining Company. The funds are intended for the following purposes during the next twelve months:

§

Complete analytical certification by independent lab, ALS Chemex, and final reporting from consulting firm, Behre Dolbear & Company (USA), on the logging and shipment of core samples identified and taken from the completed 2^nd phase of exploratory drilling at the Deer Trail Mine;

§

Continue sampling and analyzing mineralized rock samples, stockpiles and dump material from the Deer Trail Mine to evaluate the most efficient means to conduct future mining and milling activities;

§

Expand metallurgical research department at the Deer Trail Mine and Mill Facility;

§

Purchase additional lab equipment for metallurgical purposes;

§

Upgrade mine infrastructure and begin underground mining activities including maintenance and rehabilitation work at the Deer Trail Mine;

§

Continue to upgrade and complete the re-construction project on the existing mill at the Deer Trail Mine;

§

Upgrade the crushing facility at the upper Deer Trail Mine and continue screening the ore dumps;

§

Begin milling and processing activities at the Deer Trail Mill and Processing Facility;

§

Acquire new mining equipment to improve operations at the Deer Trail Mine;

§

Complete the new electrical substation and secondary electrical substation at the Deer Trail Mine;

§

Conduct an extensive preproduction feasibility study at the Bromide Basin Mine prior to any additional mining production and analyze the potential of the claims before exercising the purchase option from Kaibab Industries;

§

Exercise the purchase option on the Bromide Basin Mine lease;

§

Conduct additional survey and mapping work on the Clyde and Crown Point mining claims including improvements to the property and potentially underground and surface exploratory drilling on the claims; and

§

Commence a feasibility study on the potential of the mining claims at the Silver Bell Mine beginning in the Summer of 2008.

Accomplishing the 12-month plan of operations is dependent on the Company raising approximately $5,000,000 in equity and/or debt financing during the current fiscal year.  In the quarter ended August 31, 2007 the Company raised $1,425,100, of this amount through the issuance of convertible debentures.  Subsequent to the quarter ending August 31, 2007, the

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Company received an additional $250,000 through the issuance of new convertible debentures.  The new debentures were issued with terms of 180 days, bear interest at the rate of 8% per annum, and are convertible by the holder into shares of the Company’s common stock at a discount of 50% of the closing bid price on the date of conversion.

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Item 2. Management's Discussion and Analysis or Plan of Operation.

Forward-Looking Statements.

When used in this Form 10-QSB, the words "expects", "anticipates", "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.  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.

General Information Regarding Unico and its Operations.

Unico, Incorporated (“the Company”, “Unico” or “UNCN”) an Arizona corporation, 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 July 12, 2004, Unico filed an election with the U.S. Securities and Exchange Commission to become a business development company (“BDC”) pursuant to Section 54 of the Investment Company Act of 1940.   On August 1, 2005, the Board of Directors unanimously approved a proposal to withdraw the Company’s election to be treated as a business development company as soon as practicable so that Unico could begin conducting business as an operating company rather than as a business development company subject to the Investment Company Act.  On October 11, 2005, a Special Meeting of the Unico shareholders was held to consider and vote upon a proposal to authorize the Company’s Board of Directors to withdraw the Company’s election to be treated as a BDC and the proposal was approved.  On October 12, 2005 a Notification of Withdrawal was filed with the Securities and Exchange Commission so that Unico could begin conducting business as an operating company rather than as a BDC subject to the Investment Company Act.   

The mining operations at the Deer Trail Mine have been conducted through Unico's subsidiary, Deer Trail Mining Company, LLC (“Deer Trail Mining Company” or “DTMC”) since soon after DTMC was formed in late June, 2004. The mining operations at the Bromide Basin Mines have been conducted through Unico's subsidiary, Bromide Basin Mining Company, LLC (“Bromide Basin Mining Company” or "BBMC") since soon after BBMC was formed in late June, 2004. Future mining operations at the Silver Bell Mine will be conducted through Unico's subsidiary, Silver Bell Mining Company, Inc. ("SBMC").

Deer Trail Mining Company, LLC

On March 30, 1992, Unico, Incorporated 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. The lease was to run for a period of 10 years, and cover 32 patented claims (including mill sites) and 170 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. There are no known, proven or probable reserves on the property.

Effective December 1, 2001, a new lease agreement was entered into between the parties (“Deer Trail Lease”) covering the same property for a period of thirty (30) months. It was subsequently extended through a series of amendments.  

In July 2007, Deer Trail Mining Companycompleted the purchase of the claims covered by the Deer Trail Lease.  A total of $4,000,000 was paid to purchase the property over a period of approximately three years.  A copy of the Agreement describing the purchase of the claims is attached as Exhibit 10.87.  The purchase of the claims also included the purchase of a fifty percent (50%) interest in Water Right No. 63-37, said fifty percent (50%) portion including a maximum flow of 0.125 cubic feet of water per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes.  The purchase of the claims also included a fifty percent (50%) interest in a contractual right to use water diverted under Water Right No. 63-3043 as evidenced and described in the Agreement between Cottonwood Irrigation Company and Deer Trail Development Corporation dated July 28, 1977.  The fifty percent (50%) interest in the contractual water right allows Deer Trail Mining Company to truck not more than 2,500 gallons of water per week from the Cottonwood Creek to the Deer Trail Mine for mining activities during the irrigation season (April 15 to October 15), and

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possibly more during the remaining portion of each year.  A Copy of the Assignment of Contractual Water Right is attached as Exhibit 10.88.   

Deer Trail Mining Company also obtained a lease from Crown Mines, L.L.C. of the remaining fifty percent (50%) interest in Water Right No. 63-37 and the remaining 50% interest in the contractual water right (Water Right 63-3043.  The lease is for an initial term of 5 years for no rent.  The lease may be terminated by Crown Mines, L.L.C. upon 12 months’ written notice if Crown Mines determines that the water rights covered by the lease are necessary for the operation and development of any of Crown Mines’ mining claims or for other permitted uses.  The lease may be extended if Crown Mines determines that the water rights covered by the lease are not required for the operation and development of any of Crown Mines’ mining claims or for other permitted uses during the extension period, provided that the parties can agree on other terms including a price or rent for the extended term.  A copy of the Water Rights Lease and Water Pipeline Easeme nt Agreement is attached as Exhibit 10.89.

Crown Mines, L.L.C. retained a perpetual royalty interest on minerals taken from the claims purchased by Deer Trail Mining Company.  The perpetual royalty is three percent (3.0%) of net smelter returns on minerals other than gold.  The royalty rate for gold is three percent (3.0%) when the price of gold is less than or equal to $500 per troy ounce, four percent (4.0%) when the price of gold is more than $500 and less than or equal to $600 per troy ounce, and five percent (5.0%) when the price of gold is greater than $600 per troy ounce.  Crown Mines, L.L.C. also retained an undivided three percent (3.0%) interest in any oil and gas and associated hydrocarbons produced from the claims.

Crown Mines, L.L.C. also retained an access easement and a water line pipeline easement across the claims sold to Deer Trail Mining Company.

Deer Trail Mining Company has agreed to provide Crown Mines, L.L.C. with information obtained as a result of Deer Trail Mining Company’s exploration activities on the claims, and Deer Tral Mining Company granted to Crown Mines, L.L.C. a right of first refusal to repurchase the claims or any portion thereof.

In August 2006, Deer Trail Mining Company entered into a Mining Lease with Joel Johnson covering the Clyde, Clyde Intermediate and Crown Point claims.  These claims are located near the Deer Trail Mine.  Deer Trail Mining Company has leased the claims for the purpose of conducting mine exploration, evaluation, and possible mining activities on the claims.  The Mining Lease is for two years, with options to extend the lease for 50 additional one year periods.  Under the terms of the Mining Lease, Deer Trail Mining Company paid initial down payments totaling $31,000 with $4,000 due in the second year of the lease.  If Deer Trail Mining Company elects to extend the lease, it must pay $3,000 for the first extension year, and the annual lease extension payment increases ten percent (10%) per year thereafter.  Additionally, Deer Trail Mining Company will pay three percent (3%) of the gross sale proceeds from the sale of any ore concentrates, or othe r mineral resources extracted from the claims.

In September 2006, Deer Trail Mining Company entered into a Non-Patented Mining Claims Lease covering approximately 70 additional claims covering approximately 1,500 acres in Piute County Utah for the purpose of exploration, evaluation and mining activities.  In consideration for the rights under the agreement, the Deer Trail Mining Company agreed to pay the lease holders $7,000 per year for each of the first three years.  Deer Trail Mining Company has the right to extend the lease for 50 additional one year periods.  If extended by Deer Trail Mining Company, the annual lease payment is $10,000 in each of years four and five, and thereafter the annual lease payment increases by ten percent (10%) per year.  In addition to the annual lease payments, Deer Trail Mining Company has also agreed to pay an amount equal to three percent (3%) of the gross sales proceeds from all ore, concentrates, and all other productions of mineral resources extracted from the claims.  The agreement contains an option to purchase the claims exercisable at $350,000 during the five first years of the lease.  The exercise price increases $50,000 per year thereafter.  It may only be exercised while the lease is effective.

Following the formation of the Deer Trail Mining Company in June 2004, Unico assigned all of the various assets, liabilities and operations associated with the Deer Trail Mine to Deer Trail Mining Company which assumed responsibility for making payments under the Deer Trail Lease.

Since June 2004 Deer Trail Mining Company has assumed operations, ownership and management control of the Deer Trail Mine.  Deer Trail Mining Company presently has 14 full time employees, 1 part time employee and 4 consultants.  The necessary permits to commence mining activities at the Deer Trail Mine have been acquired, provided that the surface disturbance from the mining activities does not exceed 10 acres for both mine and mill. In early 2005, Unico and Deer Trail Mining Company, received approval of the company's Large-Scale Mining Permit for the Deer Trail Mine in Marysvale, Utah. The State of Utah's Division of Oil, Gas and Mining granted approval of the company's application to expand its existing small mining project to a large mining operation, which is expected to significantly increase the area of mining activity and the capacity of the company's mill at the Deer Trail Mine. This Large-Scale permit takes the place of the

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previous two Small-Scale permits described above.  In 2004, Unico filed to obtain a construction permit with the State of Utah Department of Environmental Quality (both the Utah Division of Air Quality and the Utah Division of Water Quality) for the Deer Trail Mine tailings impoundment pond no. 2.

Unico worked for more than two years to reopen the Deer Trail Mine.  Unico commenced mining activities in late March or early April 2001 on the Deer Trail Mine.  To date, the mining activities have been fairly limited.  There have been between 2 and 5 miners at various times working full time in the Deer Trail Mine both on mine development work and production work until approximately October 2003.  Their efforts were concentrated in the 3400 Area of the mine, from which they removed approximately 1,000 tons of ore per month.  The ore was stock-piled and some of it has been crushed.  Some of the employees have worked on mine maintenance.

Unico completed a mill on site at the Deer Trail Mine. In November 2001, Unico began milling activities. Shortly thereafter, operations were suspended to accommodate a plan to reconstruct the entire facility. Currently the Deer Trail Mining Company is reconstructing the mill and processing facility to enhance both productivity and efficiency. The reconstruction project is now in its final stages of completion.  In July 2006, Deer Trail Mining Company completed the upgrades to the screening plant and began screening the ore dumps at the upper Deer Trail Mine. Once screened, the material is moved to the mill facility and stockpiled for further processing. The Company anticipates running this material through its mill once reconstruction is complete.

On August 31, 2005, Deer Trail Mining Company entered into a five-year purchase contract with PGM, LLC of Los Angeles under which PGM will purchase precious metal bearing concentrates from the Deer Trail processing center.  Most sales will not occur until the mill processing center is complete at the Deer Trail Mine.  PGM has advanced Deer Trail Mining Company $25,000 for an initial shipment of concentrates that will be produced on a pilot plant basis.

The Company also believes that there are a variety of mining companies and other mineral companies that are potential purchasers for the lead concentrates, zinc concentrates and other concentrates which we intend to sell as the end product from our Deer Trail Mine mining and milling operations. The concentrates can be transported by either rail or truck, and there are a variety of trucking companies that are willing and able to transport concentrates to smelters or other places designated by purchasers.

In September 2004, Deer Trail Mining Company completed its first phase of exploratory drilling at the Deer Trail Mine.  The Deer Trail Mining Company contracted Lang Exploratory Drilling to complete the phase of drilling.  Lang completed a total of 3,653 feet of reverse circulation drilling and finished 28 drill holes at specified targets located on the Upper Deer Trail Mine.  741 samples were safeguarded by Lang Exploratory Drilling during this phase and shipped to ALS Chemex at its Elko, Nevada facility for independent lab verification and analysis.

The first phase of exploration drilling was designed to identify near surface deposits, determine potential resources and define limits of mineralization south of the main ore channel mined at the Upper Deer Trail Mine. Historical data of the workings was sufficient to delineate the grade of mineralization remaining in the stopes, but no data was available to delineate the grade of mineralization outside the workings or how far that mineralization flowed into the surrounding formations. The initial phase of reverse circulation drilling serves as an adequate means to define the limits of mineralization south of the main ore channel, which is situated in the lower Toroweap formation, along the crest and down the northeast limb of the Deer Trail anticline.

This phase of drilling was accomplished with lower cost reverse circulation drill holes in order to establish the presence of mineralization at the Upper Deer Trail area. Once the limits of mineralization are established, work can begin to further define those zones by diamond core drilling. This initial phase of drilling is considered merely a starting point in generating data for pre-feasibility and feasibility studies for the Deer Trail Mine operations.

The most upper holes RC-1 through RC-7 were placed well above the elevation of the known workings of the No. 2 Tunnel and slightly south of the northwesterly trending ore channel. Significant mineralization was intercepted in holes RC-1 and RC-2, which were drilled in the area closest to the main ore channel.

Drill holes RC-5, 6, 8, 9, 13 and 14 were all drilled well south of the historically delineated mineralization, and on the southern most up-side of a post mineral fault. It can be concluded that mineralization intercepted in these holes is not directly related to the mineralization of the main Upper Deer Trail ore channel.

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	Interval	Gold	Silver	Lead	Zinc
Hole	from - to          (ft)	(grams/troy oz.)	(grams/Troy oz.)	(%)	(%)
RC-1	190 – 230          40	0.207	10.98	0.355	0.205
RC-2	40 - 45               5	0.364	95.36	3.61	0.390
Includes	175 - 180           5	0.369	45.71	2.87	1.41
RC-10	65 - 95               30	0.363	16.48	0.086	0.022
RC-11	60 - 70               10	1.36	52.25	0.758	0.191
Includes	65 - 70               5	2.26	32.69	0.961	0.289
RC-12	85 - 90               5	0.460	137.14	3.94	1.00
RC-17	55 - 65               10	0.799	13.02	0.033	0.012
RC-18	45 - 50               5	1.54	40.77	0.154	0.018
RC-19	0 – 140              140	0.527	14.65	0.116	0.107
Includes	35 - 45               10	2.64	14.11	0.840	1.26
Includes	35 - 40               5	4.66	21.15	1.30	2.14
Includes	75 - 120             45	0.930	34.86	0.135	0.021
Includes	95 - 105             10	3.17	88.63	0.303	0.019
Includes	100 - 105           5	4.78	151.02	0.682	0.008
RC-20	95 – 100            5	1.92	62.02	0.218	0.030
RC-21	95 - 110             15	0.899	74.29	0.145	0.014
RC-22	110 - 120           10	1.77	18.14	0.074	0.024
Includes��	115 - 120           5	3.25	27.52	0.079	0.014

In early 2005, Deer Trail Mining Company contracted with Connors Drilling to commence an underground diamond core drill program.  This 2nd phase of exploratory drilling inside the PTH Tunnel of the Deer Trail Mine has been completed. The Phase II underground diamond core drilling program was primarily designed to target known horizons of mineralization and identify new mineralized horizons throughout the main ore channel of the Deer Trail Mine. The Company completed 7,235 feet of diamond core drilling and finished 13 underground drill holes.  According to preliminary reports by the Company’s geologist, all of the holes drilled were reported to intersect mineralization within their designated targets. That report states that a total of approximately 514 feet of mineralization was intersected and consisted mostly of sulfide minerals (e.g. tetrahedrite, galena, pyrite, chalcopyrite and sphalerite). Other intercepts were encountered through oxidized mineral not reported in this total, as well as zones of subtly altered rock that may contain high mineral values and offer significant potential. The Company is now working on final independent core logging and splitting verification, and plans to ship its core samples to an independent lab for analysis.

In March 2006, Deer Trail Mining Company, LLC entered into an agreement with Behre Dolbear and Company (USA), Inc. to conduct geological services and consulting at Unico’s Deer Trail Mine in Marysvale, Utah. The focus of Behre Dolbear’s work is related to the underground diamond core drilling program undertaken at the Deer Trail Mine in 2005. Behre Dolbear is currently performing the geological core logging and spitting verification on the samples and overseeing the shipment of those samples to ALS Chemex for analysis. Behre Dolbear has also been contracted to report on the mineralization and provide additional technical advice on the project as desired by Deer Trail Mining Company, LLC.

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Behre Dolbear and Company (USA) has issued the following information from the Interim Summary Report on their work completed thus far. The report from Behre Dolbear states:

“Unico, Incorporated drilled 7,235 feet of BQ diameter core at various inclinations and azimuths from four drill stations in the Patrick Thomas Henry (PTH) adit at the Deer Trail Mine from December 2004 to April 2005.  At that time, the core was not logged in detail and no analyses were done.  Table 1 summarizes the drilling statistics.  The station locations are defined based on the approximate footage from the PTH adit portal.

Table 1

Unico Phase II Drill Holes

UDDH Drill Hole #	Station Location	Inclination (in degrees)	Azimuth	Total Length (Feet)
1*	4400	-45	102	740
2	4400	-40	102	648
3*	4400	-42	92	782
4*	4400	-42	150	554
5*	4400	-55	102	664
6	4400	-45	21	409
7	4400	-58	298	733
8	4400	-75	300	565
9*	4700	-45	116	460
10	4900	-75	0	460
11*	3400	+45	258	454
12*	3400	+45	162	355
13*	3400	-65	125	420
Total Footage				7,235

*Logged by Behre Dolbear

Behre Dolbear & Company (USA), Inc. (Behre Dolbear) contracted with Unico in March 2006 to geologically log the core, select intervals for analyses and assays, supervise the sawing of the selected intervals, submit those samples to a laboratory for analyses, opine on the mineralization  observed, and provide technical advice to Unico.  Between March 23, 2006 and October 6, 2006, Behre Dolbear logged in detail 4,429 feet of core from the eight holes indicated in Table1. A total of 550 samples totaling 611 feet of core containing trace to significant mineralization from six of the holes (UDDH 1, 5, 9, 11, 12, and 13) has been selected, sawed, submitted for analyses and assays, and the results received and evaluated.  Analyses are pending from 228 samples from 385 feet of core in UDDH 3. UDDH 4 has been logged, but sample intervals have not been selected.

ALS Chemex (Chemex) did the analyses and assays at its laboratory in North Vancouver, British Columbia. Sample preparation, analyses, and assays were done as requested by Behre Dolbear using Chemex’s standard protocols.  Gold was determined by fire assay with an atomic absorption spectrometry (AAS) finish. All samples were also analyzed for a 34-element suite of major and potentially significant trace elements using an aqua regia digestion and an emission spectrographic scan.  Chemex’s quality control-quality assurance system complies with the requirements of the international standards ISO 90001:2000 and ISO17025:1999.

The Pennsylvanian Callville Limestone is the host of the mineralization in the holes logged by Behre Dolbear at the Deer Trail Mine. Behre Dolbear has logged over 4,400 feet of core that traverses the various lithologies of the upper +700 feet of that formation.  This detailed logging has resulted in the recognition of ten previously unrecognized informal members and/or other subdivisions that will enable future work to place the mineralized horizons in the vicinity of the mine into stratigraphic perspective.

The mineralization in the Callville Limestone typically consists of stratabound narrow conformable bands of semi-massive to   massive sulfides separated by relatively long intervals of weakly mineralized to barren rock.   Ore minerals include sphalerite, galena, chalcopyrite, and tetrahedrite-tennantite.  Where the significantly mineralized zones are thicker, t  he mineralized bands are closer together.

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Based on the analytical results received to date, Behre Dolbear combined 33 continuous assay intervals from six holes into gross assay intervals ranging from 2.3 feet to 95 feet in length, uncorrected to true stratigraphic width.  Intervals within the gross intervals were combined into 113 detailed intervals based on their grades.

The best intervals based on thickness and grades in multiple metals in the six holes from which analyses have been received are listed in Table 2.

Table 2 shows that significant mineralization in most of the holes is confined to relatively narrow intervals ranging from 1.0 feet to 10.6 feet.  The thickest intercept with significant mineralization is in UDDH 12 at 55.2 feet.  The intervals are uncorrected for the true widths of the intercepts and will all be thinner than stated, some possibly as much as fifty percent thinner.  Overall, silver contributes the most value of the metals in Table 2 with zinc second and gold, copper, and lead contributing subordinate values.  In some of the intervals, the silver and gold are high but the base metals are low.  Copper contributes more value than zinc in some of these intervals.  Only one of the intervals (UDDH 11 at 105.0 to 110.6 feet) has high values in all of the metals.  The highest gold and silver values are in UDDH 1 (5.273 ppm Au=0.167oz/t Au; 366.9 ppm Ag= 10.71 oz/t Ag), and UDDH 11 (4.564 ppm Au= 0.133 oz/t Au; 585.1 ppm Ag= 17.08o z/t Ag).

Table 2

Best Interval from Each Analyzed Hole

UDDH	Analyzed From	Analyzed To	Interval (Feet)	Au (ppm)	Ag (ppm)	Cu (%)	Pb (%)	Zn (%)
1	365.5	370.4	4.9	5.723	366.9	0.01	0.16	0.42
	406.6	417.2	10.6	1.062	177.6	0.11	0.58	1.58
	456.0	462.5	6.5	0.350	156.4	0.24	1.38	2.08
5	322.0	327.0	5.0	0.870	164.1	0.25	2.09	1.27
	419.0	419.9	0.9	1.510	116.0	0.27	0.35	0.18
9	293.7	300.1	6.4	0.372	46.8	0.15	1.28	1.78
	434.6	435.6	1.0	0.310	102.0	0.39	5.20	6.59
11	7.7	13.4	5.7	4.564	585.1	0.45	0.71	0.83
	105.0	110.6	5.6	1.600	550.6	0.96	2.0	2.43
12	5.8	61.0	55.2	0.608	183.1	0.44	0.40	0.67
	220.0	221.9	1.9	2.170	128.0	0.01	0.01	3.32
13	77.9	78.9	1.0	0.380	188.0	0.60	3.10	3.89

There is potential for an economic deposit at the Deer Trail Mine if the metals occur together in significant grades and in widths (generally greater than 10 feet) that are adequate for mining.  Additional work is required to determine if those conditions exist.  Before additional drilling is done, the results of the logging, analyses, and observations by Behre Dolbear should be combined with the data and results from previous work to develop a three-dimensional model of the deposit.  Development of that model will require data from surface and underground mapping, previous mining, and drilling from this and previous campaigns.  All of this data on lithologies, structures, mineralization, and alteration must be put together on maps and cross sections to build the model.  Based on that model, the geometry (true widths and lateral extents) and grades of the mineralization as currently known will be indicated and decisions can be made if additional dr illing has the potential to define economically mineable mineralization.  It has not been determined if there is adequate data available from previous work to construct a good model.”

In November 2006, Deer Trail Mining Company modified and expanded the agreement with Behre Dolbear and Company (USA), Inc. forgeological services at Unico’s Deer Trail Mine. The new agreement and work order addsseveral new areas of consulting that will fall under Behre Dolbear’s scope of services on the Deer Trail project.  Under these new revisions Behre Dolbear will assemble all the available data relating to the locations, volumes, and grades of the tailings that Deer Trail intends to process through the Project's mill. Based on the information available, Behre Dolbear will estimate the volumes, tonnages, and grades of those tailings and will, if needed, recommend a drilling program to better define those tonnages and grades. Behre Dolbear will summarize the results of the drill core logging completed to date and correlate those results with pertinent assays of material from those holes to determine the factors from the logging that relate to and facilitate the location of significant mineralization. With Deer Trail's assistance, Behre Dolbear will assemble all the

16

available data (mineralization, rock types, structure, alteration, etc.) from past drilling and mining, focusing on the 3100-3400 zone in the PTH adit, i.e., the Proctor Stope and Proctor Stope Extension, which is the zone most easily accessible for near-term mining. Behre Dolbear will correlate data from the extant logging effort and assays with the data from past drilling and mining to locate and model, to the extent possible, potentially mineable mineralization in the 3100-3400 zone. Behre Dolbear will determine if logging of the holes not yet logged in the 4400 zone of the PTH adit is warranted, based upon the logging to date of holes in that zone and any available data from past drilling and mining. Behre Dolbear will assist Deer Trail with judgments and potential approaches to exploitation of the Toroweap Sandstone in the 8600 area of the PTH adit. (It appears that this area has the greatest potential for hosting high grade, large tonnage mi neralization at the Deer Trail Mine. That area is, however, the portion of the existing workings that is least accessible for mining in the near term.) The agreement calls for additional personnel and support for Behre Dolbear’s work at the Deer Trail Mine.  Further, the modifications call for reorganizing and redirecting site efforts that have heretofore focused specifically on the logging, chemical analyses, and interpretation of the drill cores.  Behre Dolbear will focus on those aspects of the expanded work scope that will most quickly lead to the definition and potential reporting of ore reserves in the form of mine tailings. They will also focus strongly on the development of mineralization models that facilitate judgments regarding the 3100-3400 area of the PTH adit and the timing of work in the 8600 area. The company is currently waiting on the final report and analysis from Behre Dolbear and Company.

In September 2007, Deer Trail Mining Company completed the construction of a new electrical substation that will supply power to the reconstructed mill and processing facility. The substation is designed to supply up to 2.5 megawatts of electrical power well beyond the 1.5 megawatts estimated to run the mill and processing facility. Additional power is expected to be used for future mining activities and expansion plans on site. The Company is currently constructing a secondary substation to interface directly with the mill and processing facility and is in the final stages of completion prior to being energized.

Silver Bell Mining Company, Inc.

Silver Bell Mining Company, Inc. was incorporated in the State of Utah on April 26, 1993. It has acquired 26 patented mining claims located in American Fork Canyon, Utah County, Utah, which is organized into three separate parcels. The claims contain mining properties that have not been mined for production since 1983. The properties were mined primarily for silver, lead and zinc. There are no known, proven or probable reserves on the property.

Silver Bell Mining Company conducted some exploration work on the Silver Bell Mine through 2004. Silver Bell Mining Company plans to conduct a feasibility study in order to analyze the claims prior to commencing any future mining activities on the claims.  Silver Bell Mining Company anticipates that any future ore mined from the Silver Bell Mine will be transported to the Deer Trail Mine site where it can be further processed.  Silver Bell Mining Company may also seek a joint venture mining partner to jointly develop the Silver Bell Mine.  

In August 2006, Silver Bell Mining Company reached a preliminary agreement for a joint venture with the Polymet Company, LLC for mining at the Silver Bell Mine and executed a letter of intent.  A subsequent definitive agreement to finalize the details of the joint venture was expected to be signed by August 31, 2006.  However, the parties failed to reach a definitive agreement, and the parties are no longer involved in negotiations.

Bromide Basin Mining Company, LLC

On July 20, 2001, Unico entered into a Mining Lease and Option to Purchase with Kaibab Industries, Inc., an Arizona corporation. The parties then entered into a Revised Mining Lease and Option to Purchase in April 2003 (the "Revised Kaibab Mining Lease").  Following the formation of the Bromide Basin Mining Company in June 2004, Unico assigned all of its assets, liabilities and operations associated with the Bromide Basin Mines to Bromide Basin Mining Company. A Second Revised Mining Lease and Option to Purchase was entered into with Bromide Basin Mining Company in May 2005 that expired November 1, 2005.   Effective May 1, 2006, the parties entered into a Third Revised Mining Lease and Option to Purchase (the “Third Revised Mining Lease”).  At that time Unico paid approximately $63,592 to Kaibab Indutries, Inc. for past due lease payments, taxes and BLM fees.  Under the Third Revised Mining Lease, Kaibab Industries, Inc. has lea sed to Bromide Basin Mining Company certain mining claims located in the Henry Mountain Mining District in Garfield County, Utah containing approximately 400 acres, which includes the Bromide Basin Mines. The Third Revised Mining Lease grants to Bromide Basin Mining Company the option to purchase six (6) fully permitted patented mining claims and twenty-one (21) located mining claims comprising in all over 400 acres of Bromide Basin in the Henry Mountain Mining District located in Garfield County, Utah. The option exercise price is $835,000 for all specified mining claims, mill sites and dumps being leased.  As consideration for the Third Revised Mining Lease, Bromide Basin Mining Company has agreed to pay Kaibab Industries in advance the sum of $5,000 per month and pay a five percent (5%) net smelter return

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upon all ore taken from the leased premises each month, to the extent that the amount for any month exceeds the $5,000 monthly base rent.  Prior to the Third Revised Mining Lease expiration date of November 1, 2006, Bromide Basin Mining Company formally requested to extend the lease for one additional year. Kaibab Industries accepted the request, and extended the Lease and Option for one year, from November 1, 2006 through October 31, 2007.

The primary purpose of the agreement was to allow Bromide Basin Mining Company access to the claims to conduct an extensive preproduction feasibility study prior to any additional mining production and to analyze the potential of the claims before exercising the purchase option from Kaibab Industries.

The Company is working on its pre-production feasibility study, and is currently analyzing the potential of the claims at the Bromide Basin Mines.  Once the feasibility has been completed and analyzed, the Company will decide whether to attempt to negotiate an extension of the existing lease, attempt to purchase the property, or abandon any plans for the property.

Plan of Operation

During the current fiscal year, the Company’s plan of operation is to raise approximately $5,000,000 for investment into its subsidiary companies: Deer Trail Mining Company, Bromide Basin Mining Company and Silver Bell Mining Company. The funds are intended for the following purposes during the next twelve months:

§

Complete analytical certification by independent lab, ALS Chemex, and final reporting from consulting firm, Behre Dolbear & Company (USA), on the logging and shipment of core samples identified and taken from the completed 2^nd phase of exploratory drilling at the Deer Trail Mine;

§

Continue sampling and analyzing mineralized rock samples, stockpiles and dump material from the Deer Trail Mine to evaluate the most efficient means to conduct future mining and milling activities;

§

Expand metallurgical research department at the Deer Trail Mine and Mill Facility;

§

Purchase additional lab equipment for metallurgical purposes;

§

Upgrade mine infrastructure and begin underground mining activities including maintenance and rehabilitation work at the Deer Trail Mine;

§

Continue to upgrade and complete the re-construction project on the existing mill at the Deer Trail Mine;

§

Upgrade the crushing facility at the upper Deer Trail Mine and continue screening the ore dumps;

§

Begin milling and processing activities at the Deer Trail Mill and Processing Facility;

§

Acquire new mining equipment to improve operations at the Deer Trail Mine;

§

Complete the new electrical substation and secondary electrical substation at the Deer Trail Mine;

§

Conduct an extensive preproduction feasibility study at the Bromide Basin Mine prior to any additional mining production and analyze the potential of the claims before exercising the purchase option from Kaibab Industries;

§

Exercise the purchase option on the Bromide Basin Mine lease;

§

Conduct additional survey and mapping work on the Clyde and Crown Point mining claims including improvements to the property and potentially underground and surface exploratory drilling on the claims; and

§

Commence a feasibility study on the potential of the mining claims at the Silver Bell Mine beginning in the Summer of 2008.

Accomplishing the 12-month plan of operations is dependent on the Company raising approximately $5,000,000 in equity and/or debt financing during the next 12 months.  In the six months ended August 31, 2007 the Company raised $3,965,100 of this amount through the issuance of convertible debentures.  Subsequent to the quarter ending August 31, 2007, the Company received $250,000 through the issuance of new convertible debentures.  The new debentures were issued with terms of 180 days, bear interest at the rate of 8% per annum, and are convertible by the holder into shares of the Company’s common stock at a discount of 50% of the closing bid price on the date of conversion.  The Company intends to raise approximately an additional $2,500,000 to $3,000,000 during the balance of the fiscal year ending February 28, 2008 to fulfill the 12-month plan.  

Reverse Stock Split

Effective August 11, 2006, the Company’s common stock underwent a 1 for 100 reverse stock split.  As a result, the number of outstanding shares of the Company’s common stock as of August 11, 2006 decreased from approximately 4,954,096,450 pre-reverse split shares to 49,540,965 post-reverse split shares.  Share figures appearing in this report are generally expressed in numbers of post-reverse split shares, unless otherwise noted.  

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Results of Operations.

For the three months ended August 31, 2007 and August 31, 2006, Unico reported no revenues. For the six months ended August 31, 2007 and August 31, 2006, Unico reported no revenues.

During the three months ended August 31, 2007 the Company incurred total operating expenses of $485,312, an increase of $125,970 from the $359,342 of total operating expenses incurred in the three months ended August 31, 2006.  The increase is primarily attributed to an $127,854 increase in professional fees partially offset by a $32,543 decrease in general and administrative expense during the later period.  During the six months ended August 31, 2007, the Company incurred total operating expenses of $900,278, an increase of $78,859 from the $821,419 of total operating expenses incurred in the six months ended August 31, 2006.  Professional fees increased $162,579 while general and administrative expense decreased $118,162 during the later period.  Also, drilling, exploration and maintenance expense increased $39,949 in the later period.

During the three months ended August 31, 2007, interest expense was $1,939,453, an increase of $964,566 over the $974,887 of interest expense incurred in the three months ended August 31, 2006.  Loss on settlement of debt was $3,795,868 in the three months ended August 31, 2007, an increase of $1,976,891 from the $1,818,977 loss on settlement of debt incurred during the three months ended August 31, 2006.  During the six months ended August 31, 2007, interest expense was $2,634,960, an increase of $971,156 over the $1,663,804 of interest expense incurred in the six months ended August 31, 2006.  Loss on settlement of debt was $7,929,184 in the six months ended August 31, 2007, an increase of $917,347 from the $7,011,837 loss on settlement of debt incurred in the six months ended August 31, 2006.  The Company attributes the increases in interest expense and loss on settlement of debt in the later periods primarily to increases in the amount of convertibl e debentures issued by the Company in the later periods, and losses associated with the settlements of increased amounts of convertible debentures in default.

During the three months ended August 31, 2007, Unico experienced a net loss in the amount of $5,996,696 or approximately ($0.002) per share compared to a net loss of $3,355,624 or approximately ($0.06) per share for the same period in 2006.  During the six months ended August 31, 2007, Unico incurred a net loss of $11,248,483 or approximately ($0.004) per share compared to a net loss of $10,033,003 or approximately ($0.25) per share for the same period in 2006.   

Unico attributes the $2,641,072 increase in net loss for the three month period ended August 31, 2007 compared to the three month period ended August 31, 2006 primarily to an increase in interest expense and an increase in loss on settlement of debt in the later period.

Liquidity and Capital Resources

The Company’s financial statements present an impairment in terms of liquidity. As of August 31, 2007 the Company had a deficit in working capital of $9,827,166.  The Company has accumulated $56,133,246 of net operating losses through August 31, 2007, which some of which may be used to reduce taxes in future years through 2026. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carry-forwards.  The potential tax benefit of the net operating loss carry-forwards have been offset by a valuation allowance of the same amount. Under continuing operations the Company has not yet established revenues to cover its operating costs.  Management believes that the Company will soon be able to generate revenues sufficient to cover its operating costs through the operations of its subsidiaries.  In the event the Company is unable to do so, and if suitab le financing is unavailable, there is substantial doubt about the Company’s ability to continue as a going concern.

The Company’s stockholders’ deficit increased $1,188,510 in the six month period ended August 31, 2007, from a deficit of ($2,756,709) as of February 28, 2007 to a deficit of ($3,945,219) as of August 31, 2007.

The Company’s cash as of August 31, 2007, when combined with $250,000 additional cash the Company received in early September 2007, will sustain operations for approximately 60 days.  As explained above, the Company has raised $250,000 through the issuance of convertible debentures since August 31, 2007.  The Company intends to raise an additional $2,500,000 to $3,000,000 during the balance of the current fiscal year.

Our auditors have issued a "going concern" opinion in note 6 of our February 28, 2007 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 $2,500,000 to $3,000,000 in equity, debt or through other financing transactions in the next 6months, we believe that Unico will have sufficient funds to meet operating expenses until income from mining operations should be sufficient to cover operating expenses.

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Item 3. Controls and Procedures.

Under the supervision and with the participation of management, acting as our principal executive officer and principal financial officer, Mark A. Lopez evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of August 31, 2007.  Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communication to our chief executive officer and chief financial officer, in a manner that allowed for timely decisions regarding required disclosure.

During the last fiscal quarter ended August 31, 2007, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.  

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

During the quarter ended May 31, 2005, the Company was notified by a staff attorney at the Securities and Exchange Commission (“Commission”) that certain debentures and convertible preferred stock issued by the Company were considered “senior securities” as defined by the Investment Company Act of 1940 (“Investment Act”). Unico believed at the time that the debentures and Series A Preferred shares that were issued were not senior securities.   The Company may not have been in compliance with Section 18 of the Investment Act which required that the Company maintain net asset to senior security coverage of at least 200% while the Company was a business development company (“BDC”).  The Company’s efforts to restructure the obligations and preferred stock into a format acceptable with the Commission were unsuccessful. As a result, the Company may have been out of compliance with Sections 18, 27 and 61 of the Investment Act while the Company was a BDC.  On October 11, 2005, the Company’s shareholders approved a proposal to authorize the Company’s Board of Directors to withdraw the Company’s election to be treated as a BDC.  On October 12, 2005 the Company filed a Notification of Withdrawal of Election to be Subject to Sections 55 through 65 of the Investment Company Act of 1940 pursuant to Section 54(c) of the Act with the Commission in order to withdraw the Company’s election to be treated as a BDC.

During the year ended February 28, 2007, the Company entered into a total of 108 settlement transactions in the Twelfth Circuit (State) Court in Florida stemming from defaulted convertible debentures totaling $2,740,000.  Unico agreed to settle all of the action by issuing a total of 986,744,018 shares of its common stock to the plaintiffs  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.   

During the six months ended August 31, 2007, the Company entered into a total of 4 settlement transactions in the Twelfth Circuit (State) Court in Florida stemming from defaulted convertible debentures totaling $450,000.  Unico agreed to settle all of the action by issuing a total of 2,900,000,000 shares of its common stock to the plaintiffs  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

From March 1, 2007 through August 31, 2007 Unico issued convertible debentures (“Debentures”) aggregating approximately $3,965,100 to Blue Marble and Compass Capital that were unpaid.  All of the debentures issued before March 1, 2007 are in default.  The debentures issued before March 1, 2007 were assigned to Blue Marble Investments, Outboard Investments, Umbrella Holdings, Compass Capital and Yanzu, Inc.  Because Unico, Incorporated failed to pay the Debentures when due, 7 lawsuits were filed by these Debenture holders against Unico, Incorporated in the Twelfth Circuit (State) Court in Florida during the six month period ended August 31, 2007.

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The Debentures provided that the principal amount and accrued interest were convertible, at the option of the holders of the Debentures, into Unico’s common stock at a price per share equal to 50% of the closing bid price of Unico’s common stock as quoted on the OTC Bulletin Board on the immediately preceding trading day prior to the notice of conversion.

Unico agreed to settle each action by issuing shares of its common stock to the plaintiffs using a valuation of approximately 14% to 20% of the then existing bid price of Unico, Incorporated common stock.  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.

From March 1, 2007 until August 31, 2007, in connection with the exercise of conversion rights by the holders of the Debentures and pursuant to the litigation settlements, Unico issued an aggregate of 3,801,315,790 shares of its common stock.

There were no underwriters involved in any of the stock issuances described above, and there were no underwriting discounts or commissions paid.  The stock in each transaction was issued pursuant to Section 3(a)(10) of the Securities Act of 1933 as “securities issued in exchange for one or more bona vide outstanding securities, claims or property interests . . . where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions . . . .”

During the fiscal quarter ended August 31, 2007, the Company issued a total of 4,156,463 shares of its common stock to Ray C. Brown pursuant to convertible debentures in consideration of the conversion of $6,650 in accrued interest to Ray C. Brown.  These shares were issued without registration in reliance on Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering, and the certificates representing the shares were appropriately restricted.  During the Fiscal year ended February 28, 2007 the Company entered into two stock purchase agreements with Cherry Creek Holdings, LLC where in Cherry Creek purchased 33,333,333 and 42,785,700 shares of unregistered and restricted shares of Common stock for $400,000 and $599,000 respectively.  The shares have not been issued and are reported as a stock payable on the financial statements.  The cash has been received and the stock will be issued in the fiscal year ending February 2 8, 2008.  These shares will be issued without registration in reliance on Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering, and the certificates representing the shares will be appropriately restricted.  

For information concerning sales of shares of Unico's Common Stock by Unico which were not registered under the Securities Act of 1933 during the fiscal years ended February 28, 2006 and February 28, 2007 please refer to Unico's annual reports on Form 10-KSB for the fiscal years ended February 28, 2006 and February 28, 2007, respectively, and to Unico’s quarterly reports on Form 10-QSB for the quarters ended May 31, 2005 and 2006, August 31, 2005 and 2006 and November 30, 2005 and 2006.

Item 3. Defaults Upon Senior Securities.

From January 1, 2007 through August 31, 2007 Unico issued convertible debentures (“Debentures”) aggregating approximately $15,000 to Reef Holding, Ltd., approximately $1,475,000 to Outboard Holdings that were unpaid, and in default, as of August 31, 2007.  The holders of the convertible debentures had assigned portions of the Debentures to Blue Marble Investments, Outboard Investments, Umbrella Holdings, Compass Capital and Yanzu, Inc.  Because Unico, Incorporated failed to pay the Debentures when due, a total of seven (7) lawsuits were filed by these Debenture holders against Unico, Incorporated in the Twelfth Circuit (State) Court in Florida from March 1, 2007 to August 31, 2007 in partial settlement of this debt.   The Debentures provided that the principal amount and accrued interest were convertible, at the option of the holders of the Debentures, into Unico’s common stock at a price per share equal to 50% of the closing bid price of Unico’s common stock as quoted on the OTC Bulletin Board on the immediately preceding trading day prior to the notice of conversion.  Unico agreed to settle each action by issuing shares of its common stock to the plaintiffs using a valuation of approximately 14% to 20% of the then existing bid price of Unico, Incorporated common stock.  These shares were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with notice to, and an opportunity to be heard from, interested parties, as to the fairness of each transaction, by a state court in Florida which specifically determined, prior to declaring that the transactions were exempt under Section 3(a)(10), that the transactions were fair to the interested parties.  From March 1, 2007 until August 31, 2007, in connection with the exercise of conversion rights by the holders of the Debentures and pursuant to the litigation settlements, Unico issued an aggregate of 3,801,315,790 shares of its common stoc k.  As of August 31, 2007, Unico has approximately $315,000 in outstanding debentures that were in default.  

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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) Exhibits

The following exhibits are filed as part of this statement:

The exhibits listed below are required by Item 601 of Regulation S-B.  

Exhibit No.	Description	Location
10.87 10.88 10.89 10.90 10.91 10.92 10.93 10.94 10.95 10.96 10.97 10.98 31.1	Agreement (concerning the sale of Deer Trail Mine claims) dated effective May 31, 2007 between Crown Mines, L.L.C. and Deer Trail Mining Company, LLC   Assignment of Contractual Water Right dated July 30, 2007 between Crown Mines, L.L.C. and Deer Trail Mining Company, LLC Water Rights Lease and Water Pipeline Easement Agreement dated July 30, 2007 between Crown Mines, L.L.C. and Deer Trail Mining Company, LLC Right of Way Easement dated June 21, 2007 granted to PacifiCorp Convertible Debenture No. 50 for $300,100 dated June 1, 2007 issued to Blue Marble Investments Convertible Debenture No. 51 for $375,000 dated June 8, 2007 issued to Blue Marble Investments Convertible Debenture No. 52 for $100,000 dated June 11, 2007 issued to Compass Capital Group, Inc. Convertible Debenture No. 53 for $50,000 dated June 20, 2007 issued to Compass Capital Group, Inc. Convertible Debenture No. 54 for $250,000 dated July 2, 2007 issued to Blue Marble Investments Convertible Debenture No. 55 for $200,000 dated July 30, 2007 issued to Blue Marble Investments Convertible Debenture No. 56 for $100,000 dated August 21, 2007 issued to Compass Capital Group, Inc. Convertible Debenture No. 57 for $50,000 dated August 29, 2007 issued to Compass Capital Group, Inc Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

(b) Reports on Form 8-K

During the quarter ended August 31, 2007, no Current Reports on Form 8-K were filed by Unico.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNICO, INCORPORATED

Date: October 11, 2007 /s/ Mark A. Lopez Mark A. Lopez Chief Executive Officer

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