Unico 10Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

ACT OF 1934

For the quarterly period ended May 31, 2008

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 registrant 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)

Indicate by check mark whether the registrant (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. YesR No£

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer£

Accelerated filer£

Non-accelerated filer £ (Do not check if a smaller reporting company)

Smaller reporting companyR

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£ NoR

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 July 1, 2008, the issuer had outstanding 9,880,726 shares of its common stock, $0.001 par value per share.

Transitional Small Business Disclosure Format : Yes£ NoR

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

UNICO, INCORPORATED AND SUBSIDIARIES

FINANCIAL STATEMENTS

May 31, 2008


UNICO, INCORPORATED
Consolidated Balance Sheets
				May 31,		February 29,
				2008		2008
		ASSETS		(Unaudited)		(Audited)
Current Assets
	Cash		$	35,304	$	-
	Accounts receivable			1,420		1,420
	Prepaid expense			10,000		20,000
Total Current Assets				46,724		21,420
Fixed Assets
	Equipment, furniture, etc. net of depreciation (Note 1)			4,111,926		4,167,132
	Construction in progress			2,261,387		2,174,952
	Total Fixed Assets			6,373,313		6,342,084
Other Assets:
	Cash- reclamation bonds			215,799		215,799
	Deposit			8,947		8,947
	Total Other Assets			224,746		224,746
	Total Assets		$	6,644,783	$	6,588,250
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
	Bank overdraft		$	-	$	3,142
	Accounts payable			793,537		785,427
	Wages payable			19,114		27,196
	Accrued expenses			400		400
	Reclamation obligations			148,176		144,862
	Accrued interest payable			26,022		24,510
	Accrued interest payable - related party (Note 2)			490,399		355,845
	Taxes payable			34,815		17,369
	Derivative liability			8,952,712		8,311,182
	Debentures payable, (Note 3)			75,000		75,000
	Debentures payable-related party net of discount (Note 2)			6,269,628		5,496,821
	Total Current Liabilities			16,809,803		15,241,754
	Total Liabilities			16,809,803		15,241,754
Stockholders' Deficit
	Preferred Stock, authorized 20,000,000 shares, $0.001
	Par Value, 9,800,000 shares issued and outstanding			9,800		9,800
	Common Stock, authorized 5,000,000,000 shares, $0.001
	Par Value, 9,880,727 shares issued and outstanding			9,881		9,881
	Stock payable			999,000		999,000
	Additional paid in capital			51,252,507		51,252,507
	Accumulated deficit			(62,436,208)		(60,924,692)
Total Stockholders' Deficit				(10,165,020)		(8,653,504)
	Total Liabilities and Stockholders' Deficit		$	6,644,783	$	6,588,250
.
The accompanying notes are an integral part of these consolidated financial statements


UNICO, INCORPORATED
Consolidated
Statements of Operations (Unaudited)

		For the Quarter Ended
		May 31,
		2008		2007

Total Revenues	$	-	$	-
Operating Expenses
Drilling, exploration and maintenance expense		120,723		105,923
Depreciation and accretion		58,944		37,752
Professional fees		93,517		94,431
Salaries/wages		208,097		74,643
General and administrative expense		136,071		102,217
Total Operating Expenses		617,352		414,966
Net Operating Loss		(617,352)		(414,966)
Other Income (Expense)
Interest expense		(912,691)		(695,507)
Interest income		56		1,750
Derivative gain (loss) on debentures		18,470		(9,748)
Loss on settlement of debt		-		(4,133,316)
Total Other Expense		(894,165)		(4,836,821)
LOSS FROM CONTINUING OPERATIONS		(1,511,517)		(5,251,787)
Income Tax Expense		-		-
Net Loss	$	(1,511,517)	$	(5,251,787)
Net Loss Per Share	$	(0.15)	$	(1.90)
Weighted Average Shares Outstanding		9,880,727		2,764,019
The accompanying notes are an integral part of these consolidated financial statements.


UNICO, INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)

		For the Quarter Ending
		May 31,
		2008		2007
Cash Flows from Operating Activities:
Net Loss	$	(1,511,517)	$	(5,251,787)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operations:
Depreciation and accretion expense		58,944		37,751
Loss on settlement of debt		-		4,201,316
Derivative/Interest related to convertible debentures		754,337		651,748
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Reclamation deposit		-		(1,734)
Prepaid expense		10,000		-
Deposits		-		(2,487)
Accounts receivable		-		-
Increase (Decrease) in:
Accrued expenses		136,066		30,615
Accounts payable and other liabilities		17,475		62,786
Net Cash Used by Operating Activities		(534,695)		(271,792)
Cash Flows from Investing Activities:
Purchase of fixed assets- Construction in progress		(86,435)		(1,165,718)
Purchase of fixed assets		(424)		(87,935)
Sale of fixed assets		-		-
Net Cash Used by Investing Activities		(86,859)		(1,253,653)
Cash Flows from Financing Activities:
Decrease in cash overdraft		(3,142)		-
Issuance of convertible debentures		660,000		2,540,000
Net Cash Provided by Financing Activities		656,858		2,540,000
Net Increase (Decrease) in Cash		35,304		1,014,555
Cash at Beginning of Period		-		7,194
Cash at End of Period	$	35,304	$	1,021,749
Cash Paid For:
Interest	$	-	$	-
Income Taxes	$	-	$	-
Non-Cash Financing Activities:
Common stock issued for services	$	-	$	-
Common Stock issued for debt extinguishments	$	-	$	905,787
The accompanying notes are an integral part of these consolidated financial statements.

UNICO, INCORPORATED

Notes to the Consolidated Financial Statements

May 31, 2008

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. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.

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 of the Company’s withdrawal as a BDC, the equity method of accounting is now appropriate. 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.

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. Mineral rights are recorded at cost of acquisition. When there is little likelihood of a mineral right being exploited, or the value of mineral rights have diminished below cost, a write-down is affected against income in the period that such determination is made.


Fixed Asset Schedule		May 31,
		2008
Fixed Assets:
Furniture & Equipment	$	1,809,857
Land		200,000
Patented mining claims		640,000
Mining Claim		2,360,000
Autos		65,814
Total		5,075,671
Less Depreciation		(963,745)
Net Equipment	$	4,111,926

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 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 16% 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.

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 remaining 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.

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. The Company 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.

Significant Accounting Policies

The Company files income tax returns in the U. S. federal jurisdiction, and in the following state jurisdictions: California, Arizona, and Utah. With few exceptions, the Company is no longer subject to U. S. federal, state and local, or non-U. S. income tax examinations by tax authorities for years before 2000. The company has not filed tax returns since the year 2000 and is therefore subject to examination by the IRS under the rules of the statute of limitations.

The Company adopted the provisions of the FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes, on January 1, 2007.

The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

FIN 48 – Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 contains a two step approach to recognizing and

measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. This provision is effective for fiscal years beginning after December 15, 2006, which will be the Company’s fiscal year 2008. The Company is evaluating the impact, if any; the adoption of this statement will have on its results of operations, financial position, or cash flows. Given the Company’s substantial loss carry-forward, it does not, in the near term, expect to have any impact of the Company’s tax position with the adoption of FIN 48.

h. Recent Accounting Pronouncements

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (FAS 159). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of FAS 159 become effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact that FAS 159 will have on our financial statements.

In March of 2008, the FASB issued statement 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement no. 133” (FAS 161). FAS 161 requires companies to enhance disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. The provisions of FAS 161 become effective as of November 15, 2008. We are currently evaluating the impact that FAS 161 will have on our financial statements.

In May of 2008 the FASB issued statement 162, “The Hierarchy of Generally Accepted Accounting Principles” (FAS 162). FAS 162 addresses the principles used in the preparation of financial statements that are presented in conformity with GAAP. FAS 162 concludes that the GAAP hierarchy should reside in the accounting literature established by FASB thereby directing accounting principles directly to the entity and not to the auditors as has been done in the past with GAAP literature. The provisions of FAS 162 become effective 60 days following the SEC’s approval. The Company believes that FAS 162 will have no effect on its financial statements.

NOTE 2 – RELATED PARTY DEBENTURES

The Company previously issued convertible debentures of $645,132 to Ray Brown, a member of the board of directors. Ray Brown assigned $114,466 of his outstanding convertible debenture to Joseph Lopez, father of the Company’s Chief Executive Officer, Mark Lopez, as satisfaction on a personal loan. 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 $20,271 for Ray Brown’s debenture and $41,509 for Joseph Lopez’s debenture as of May 31, 2008. As of the quarter ended May 31, 2008, the Company owes Mr. Brown of $449,514 in principal and $20,271 in interest, and it owes Joseph Lopez $114,466 in principal and $41,509 in interest.

In January of 2008 all of the debentures issued to Compass Capital Corporation, Blue Marble and Reef Holdings totaling $5,179,954 that remained unpaid by Unico were assigned to Moore Investment Holdings. Moore Investment Holdings is controlled by Joseph Lopez, the father of CEO Mark Lopez. The Company also issued convertible debentures of $500,000 to Moore Investment Holdings during the fiscal year ending February 29, 2008 for a total due Moore Investment Holdings of $5,679,954. During the quarter ending May 31, 2008 the Company issued an additional $660,000 of convertible debentures to Moore Investment Holdings. The debentures were issued with terms of 180 days, accrued interest at 8% per annum, and converted at a discount of 50% of the closing bid for the Company’s common stock on the date of conversion.

The summary of outstanding related party debt of $6,269,628 of which $5,544,080 is in default as of May 31, 2008 is as follows:

Moore Investment Holdings

$6,339,954

Ray Brown

$449,514

Joseph Lopez

$114,466

Total

$6,903,934

Less: Discount on debt

$634,306

Net related part debt

$6,269,628

As of May 31, 2008 the Company has accrued $490,399 for interest due to related parties in regard to these outstanding debentures..

NOTE 3 – CONVERTIBLE DEBENTURES

In January of 2008 all of the debentures issued to Compass Capital Corporation, Blue Marble and Reef Holdings totaling $5,179,954 that remained unpaid by Unico were assigned to Moore Investment Holdings, a related party. During the quarter ended May 31, 2008, the Company issued $660,000 of convertible debentures To Moore Investment Holdings 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 $908,873 during the quarter ended May 31, 2008 associated with the debentures and recorded a gain of $18,470 on the derivative portion of the debentures. The net derivative liability at May 31, 2008 was $8,952,712. As of May 31, 2008 the Company had $75,000 in non-affiliate and $6,903,934 of affiliated convertible debentures issued and outstanding less discounts of $634,306.

The Company did not enter into any agreements to settle or convert any of its common stock for debt during the quarter ended May 31, 2008.

NOTE 4 –STOCKHOLDER’S EQUITY

Common Stock

As of May 31, 2008, the Company had 9,880,726 post reverse shares of common stock issued and outstanding with 4,990,119,274 post reverse shares authorized but unissued. On June 30, 2008 the Company announced a reverse split of its issued and outstanding common stock on the basis of one share of common stock to be issued for each 500 shares issued and outstanding. As a result of this reverse split all shares of stock reported as of this filing have been accounted for as though the reverse split occurred prior to the quarter ending May 31, 2008.

During the quarter ended May 31, 2008 the Company did not enter into any agreement to issue any shares of common stock.

Stock Options

During the year ended February 28, 2007, all stock options expired unexercised. As of May 31, 2008, there were no stock options outstanding.

Preferred Stock

As of May 31 2008, 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 152,238 shares of restricted common stock to a third party for total consideration of $999,000. As of May 31 2008, these shares had not been issued, resulting in a stock payable of $999,000.

Convertible Debentures

The Company has $6,414,954 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

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.

The Company scheduled a special meeting of its shareholders on December 21, 2007 at which shareholders were to vote on a proposal to amend the Company’s articles of incorporation to authorize the Company’s board of directors, in its discretion, to effect a reverse stock split of the Company’s common stock at a ratio of up to one-for-five hundred during the six month period following the date of a special meeting of shareholders. On December 17, 2007, plaintiff Legacy Trading Group (“Legacy”), a California limited liability company, filed an action against Unico alleging violation of Section 14(a) and (c) of the Securities Exchange Act of 1934 and the rules promulgated thereunder, and Arizona Revised Statute § 19-705. The action was filed in the United States District Court, Southern Division of California (Civil No. 07CV 2344-L (RBB)). Legacy filed an ex parte application for a Temporary Restraining Order (“TRO”), contending that notice of the special meeting of Unico’s shareholders and/or the related proxy statement was not provided to all shareholders. At a hearing held on December 18, 2007, the Court granted the application for a TRO, and enjoined and restrained Unico from holding the special meeting of the shareholders on December 21, 2007 or at any other time until the preliminary injunction hearing in this matter was heard. The preliminary injunction hearing was held on January 8, 2008. Plaintiff’s application for a preliminary injunction was denied at the hearing on the grounds of being moot. Unico believes notice of the special meeting of Unico’s shareholders and the related proxy statement for the December 21, 2007 special meeting were sent to all shareholders entitled to receive such pursuant to applicable federal proxy rules and the Arizona Revised Statutes. However, since the TRO prevented the Company from holding the special meeting of shareholders on December 21, 2007, the Company rescheduled the special meeting which was held on January 28, 2008 at 10:00 a.m.

On April 29, 2007, Bromide Basin Mining Company, LLC was served with a lawsuit filed on April 10, 2008 by Kaibab Industries, Inc. in Maricopa County, Arizona state court (No. CV2008-008121). The plaintiff alleges that Bromide Basin Mining Company, LLC owes $30,000 in rent for the months of May through October 2007, when a mining lease expired. The plaintiff also alleges that Bromide Basin Mining Company, LLC has failed to vacate the premises and that it owes an additional $5,000 per month as a holdover tenant commencing November 1, 2007 until it vacates the premises. The plaintiff has also asked for interest, attorney’s fees and court costs. Bromide Basin Mining Company, LLC has vacated the premises. The Company has tentatively reached an agreement to settle this lawsuit in July 2008 for $30,000.

NOTE 6 – SUBSEQUENT EVENTS

Subsequent to the quarter ending May 31, 2008, the Company received $95,000 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 $62,436,208 from its inception through May 31, 2008. 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 next 12 months, the Company’s plan of operation is to raise approximately $3,500,000 for investment into its subsidiary companies: Deer Trail 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;

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: (a) the Company raising approximately $3,500,000 in equity and/or debt financing during the next 12 months to be used for the Company’s operations, of which approximately $1,000,000 is needed in the next 120 days. Subsequent to the quarter ending May 31, 2008, the Company received $95,000 through the issuance of new convertible debentures to Moore Investments. 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 in 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 $3,405,000 during the fiscal year ending February 28, 2009 to fulfill the 12-month plan.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements.

When used in this Form 10-Q, 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-Q 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 Company completed 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. 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 possibly more during the remaining portion of each year.

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.

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 Trail 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 other 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 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.

Prior to June 2004, Unico worked to reopen the Deer Trail Mine. Unico commenced limited mining activities in late March 2001 on the Deer Trail Mine. There were 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 is currently in contact with several smelters and a trading company to determine how best to sell the lead concentrates, and zinc concentrates which will be produced by the 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.



Hole	Interval from - to (ft)	Gold(grams/troy oz.)	Silver(grams/troy oz.)	Lead (%)	Zinc (%)

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.

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, the mineralized bands are closer together.

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= 17.08oz/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 drilling 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

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 mineralization 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 estimated 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 recently completed the construction of a secondary substation to interface directly with the mill and processing facility and it is now energized.

In February, 2008, the Deer Trail Mining Company completed underground rehabilitation work up through to the 3400 level of the PTH tunnel of the Deer Trail Mine. The work was contracted through Atlas Mining Company to conduct initial underground maintenance including the replacement of timber sets, clean up of the main haulage way and installation of ground support where needed to the main PTH haulage tunnel.

The Deer Trail Mining Company is in the process of finalizing reconstruction work of the floatation circuit at the mill and processing facility at the Deer Trail Mine. Testing of the floatation circuit is currently underway utilizing screened material from the stockpiles on site.

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. Silver Bell Mining Company anticipates that any ore mined from the Silver Bell Mine will be transported to the Deer Trail Mine site where it will be crushed and milled.

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 which 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. leased to Bromide Basin Mining Company certain mining claims located in the Henry Mountain Mining District in Garfield County, Utah containing approximately 400 acres, which included the Bromide Basin Mines. The Third Revised Mining Lease granted 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 was $835,000 for all specified mining claims, mill sites and dumps being leased. The lease was extended until October 31, 2007 at which time it expired. The Company has chosen not to extend it or pursue the purchase option.

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 has concluded its evaluation of the property, and has determined that the leased premises outlined under the Kaibab Mining Lease is not feasible for large scale mining activities by Bromide Basin Mining Company, and will not exercise its purchase option with Kaibab Industries.

Plan of Operation