SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 5/31/03
Commission file number 000-30239
UNICO, INCORPORATED
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Arizona 86-0205130
____________________________ ____________________________
(State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization)
6475 Grandview Avenue
P.O. Box 777
Magalia, California 95954
________________________________________
(Address of principal executive offices)
(530) 873-4394
________________________________________________
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of July 10, 2003, the issuer had outstanding 78,257,974 shares of its
Common Stock, $0.10 par value per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Unico, Incorporated, an
Arizona corporation, as of May 31, 2003, the related audited consolidated
balance sheet of Unico, Incorporated as of February 28, 2003, the unaudited
related consolidated statements of operations and cash flows for the three
month periods ended May 31, 2003 and May 31, 2002 and from inception of the
exploration stage on March 1, 1997 through May 31, 2003, the unaudited related
consolidated statement of stockholders' equity for the period from February
28, 2003 through May 31, 2003, and the notes to the consolidated financial
statements are attached hereto as Appendix "A" and incorporated herein by
reference.
The accompanying financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of Unico, Incorporated consolidated with HydroClear, Ltd. and Silver
Bell Mining Company, Incorporated, its wholly-owned subsidiaries. The names
"Unico", "we", "our" and "us" used in this report refer to Unico,
Incorporated.
Unico was formed as an Arizona corporation on May 27, 1966. It was
incorporated under the name of Red Rock Mining Co., Incorporated. It was
later known as Industries International, Incorporated and I.I. Incorporated
before the name was eventually changed to Unico, Incorporated in 1979.
Deer Trail Mine.
On March 30, 1992, Unico entered into a Mining Lease and Option to
Purchase agreement with Deer Trail Development Corporation, with headquarters
in Dallas, Texas. Deer Trail Development Corporation is now known as Crown
Mines, L.L.C. The lease was to run for a period of 10 years, and cover 28
patented claims, 5 patented mill sites and 171 unpatented claims located
approximately 5 miles South of Marysvale, Utah. It includes mine workings
known as the Deer Trail Mine, the PTH Tunnel and the Carisa and Lucky Boy
mines. 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 covering the same property for a period of thirty (30)
months. It expires in May 2004. The new lease agreement is referred to in
this report as the "Deer Trail Lease". The Deer Trail Lease requires Unico to
make monthly lease payments and pay a 3% net smelter return on ore removed
from the Deer Trail Mine.
-2-
Unico acquired the necessary permits to commence mining activities,
provided that the surface disturbance from the mining activities does not
exceed 10 acres for both mine and mill. Unico plans to seek a permit for
large scale mining operations.
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.
Unico presently has eight full time employees. There have been between 2 and
5 miners at various times working full time in the Deer Trail Mine and/or in
the Bromide Basin Mine both on mine development work and production work.
Their efforts have been concentrated in the 3400 Area of the mine, from which
they have been removing approximately 1,000 tons of ore per month. The ore is
being stock-piled and some of it has been crushed. Some of the employees have
worked on mine maintenance.
Unico has completed a mill on site at the Deer Trail Mine. In November
2001 Unico began milling activities
In order to commence making sales as soon as possible, Unico has started
screening ore dumps on the upper Deer Trail Mine and moving the screened
materials to its ball mill. Unico intends to begin processing the screened
materials through its ball mill and a duplex jig in mid-July 2003. The
material will then be run over gravity tables in order to obtain the free gold
and silver which Unico intends to sell. Sales should commence in late July
2003.
Unico is attempting to purchase some gravity or centrifugal bowls, 24
inches in diameter, which could be used by Unico to process mine tailings to
obtain free gold.
Unico also intends to sell lead and zinc concentrates. We believe that
there are a variety of mining companies and other mineral companies that are
potential purchasers for the lead concentrates and zinc concentrates which we
intend to sell as the end product from our Deer Trail Mine mining and milling
operations.
The lead and zinc concentrates can be transported by either rail or
truck, and there are a variety of trucking companies that are willing and able
to transport zinc and lead concentrates to smelters or other places designated
by purchasers.
The Pennolies Smelter in Torreon, Mexico recently agreed to purchase
concentrates from Unico. Unico also plans to send some concentrates to the
Teck Cominco Smelter in Trail, British Columbia, Canada to be tested and
evaluated. Depending on the results of the tests, Unico may sell concentrates
to the Teck Cominco Smelter.
-3-
Silver Bell Mine.
In September and December 2000, Unico acquired all of the issued and
outstanding shares of stock of Silver Bell Mining Company, Incorporated, a
Utah corporation, in consideration for the issuance of 3,000,000 restricted
shares of Unico common stock. Of the 3,000,000 shares of Unico common stock
issued in the acquisition, approximately 2,300,000 shares were issued to W.
Dan Proctor. W. Dan Proctor is the President and a director of Silver Bell
Mining Company, Incorporated. Mr. Proctor also serves as a business consultant
to Unico and project manager.
Silver Bell Mining Company, Incorporated 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 which 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.
Unico intends to commence some mining activities on the Silver Bell Mine
in late Summer, 2003. Unico anticipates that it may mine approximately 60
tons of ore per day from the Silver Bell Mine initially. Unico intends to
transport the ore to the Deer Trail Mine site where it will be crushed and
milled.
Bromide Basin Mines.
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 effective
April 1, 2003 (the "Revised Kaibab Mining Lease"). Under the Revised Kaibab
Mining Lease, Kaibab Industries, Inc. has leased to Unico 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 Revised Kaibab Mining Lease runs until March 31, 2005, and grants to Unico
the option to purchase all of the property being leased. The option is
exercisable during the two year term of the Revised Kaibab Mining Lease.
There are no known, proven or probable reserves on the property.
Under the Revised Kaibab Mining Lease, Unico has agreed to pay to Kaibab
Industries, Inc. a 5% net smelter return upon all ore taken from the property
during the term of the Revised Kaibab Mining Lease. The Revised Kaibab Mining
Lease requires Unico to produce a minimum of 2,500 ounces of gold (or to pay
to Kaibab Industries, Inc. a net smelter return equivalent to the amount that
would have been paid if Unico had produced 2,500 ounces of gold)
-4-
during the first year ending March 31, 2004, and to produce a minimum of 5,000
ounces of gold during the second year ending March 31, 2005. In the event
that Unico is unable to meet the minimum production requirements, then Kaibab
Industries, Inc. may terminate the Revised Kaibab Mining Lease.
Unico commenced mining efforts on the Bromide Basin Mines in September
2001 with five full time miners. Mining efforts stopped in November 2001 due
to weather. Mining activities resumed in late May 2002 and continued until
early November 2002 when they stopped due to weather. They should resume in
June 2003. At that time, Unico will continue to remove ore from the property,
and transport the ore to the Deer Trail Mine site where it will be crushed and
milled. Unico plans to continue to work to extend the El Padre Tunnel
approximately 200 feet to get under the Bromide Vein in order to reach higher
grade ore and make the mining efforts more efficient. Because of the Bromide
Basin Mine's high elevation, mining activities are seasonal and will likely
occur only from June through November.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
During the next 12 months, our plan of operation consists of the
following:
. Increase mining activities at the Deer Trail Mine and the Bromide
Basin Mine;
. Increase milling activities at the Deer Trail Mine;
. Begin screening ore dumps and processing the screened materials in
July 2003 in order to begin selling free gold and silver in late
July 2003;
. Attempt to purchase gravity or centrifugal bowls to use to process
mine tailings in late Summer 2003;
. Begin shipping concentrates to smelters for smelting and refining;
. Begin mining activities at the Silver Bell Mine in late Summer 2003;
. Increase the number of full-time employees from 8 to approximately
35;
. Explore the possibility of obtaining a joint-venture partner to more
fully develop Unico's mining operations;
. Explore the possibility of building a small portable gold processing
plant to be located at the Deer Trail Mine and/or the Bromide Basin
Mine to recover gold by gravity or flotation means; and
-5-
. Raise a minimum of $250,000 in additional equity capital, loans
and/or other financing transactions.
Accomplishing our 12-month plan of operations is dependent on the Company
raising approximately $250,000 in equity or debt financing during the next 2
to 3 months. The Company's current cash will sustain operations for
approximately 60 days.
Results of Operations.
During the three months ended May 31, 2003, Unico experienced a net loss
in the amount of $411,924, or approximately ($0.01) per share, compared to the
net loss of $152,528, or approximately ($0.00) per share, for the three months
ended May 31, 2002.
Unico attributes the $259,396 increase in net loss for the three month
period ended May 31, 2003 primarily to a $242,601 increase in general and
administrative expenses, a $9,713 increase in interest expense, and a $6,640
increase in depreciation and amortization. Unico anticipates that general and
administrative expenses will increase as additional employees are hired in
order to increase Unico's mining operations.
Liquidity and Capital Resources.
Unico's stockholders' deficit increased $214,368 in the three months
ended May 31, 2003, from a deficit of ($1,208,695) as of February 28, 2003 to
a deficit of ($1,423,063) as of May 31, 2003. Cash and cash equivalents
decreased $557 to $33,000 at May 31, 2003 from $33,557 at February 28, 2003.
Cash used in operating activities reflects a net loss of $411,924 partially
offset by non-cash expenses of $170,000 for stock issued for services, $24,755
for depreciation expense, $24,556 for warrants issued below market value and
$1,670 increase in accounts payable and other liabilities.
Presently our liquid resources are sufficient to support operations for
approximately 60 days. We are dependent on raising approximately $250,000 to
successfully implement our 12 month business plan described above.
Our auditors have issued a "going concern" opinion in note 2 of our
audited financial statements, indicating we do not have established revenues
sufficient to cover our operating costs and to allow us to continue as a going
concern. If we are successful in raising an additional $250,000 in equity or
debt capital or through other financing transactions in the next 2 to 3
months, we believe that Unico will have sufficient funds to meet
-6-
operating expenses until income from mining operations should be sufficient to
cover operating expenses.
We intend to seek additional capital from private sales of Unico's common
stock and, if necessary, from loans from our management and/or others. In the
event income from mining operations is delayed or is insufficient to cover
operating expenses, then Unico will need to seek additional funds from equity
or debt financing, for which we have no commitments.
Revenue.
We have had no revenues from operations during the past two fiscal years.
We anticipate generating revenues from operations beginning in Summer 2003.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No legal proceedings involving Unico as a defendant were commenced during
the three month period ended May 31, 2002. No material developments occurred
in any legal proceedings involving Unico as a defendant during the same
period.
Item 2. Changes in Securities.
During the three month period ended May 31, 2003, Unico made the
following sales of shares of Unico's common stock which were not registered
under the Securities Act of 1933:
No. of
Date Recipient Shares Consideration Valuation
- --------- --------------------------- ---------- ----------------- -----------
03/17/03 Michael & Debra Margolin 30,000 Cash $0.10/share
Michael & Debra Margolin also received a warrant to purchase up to 30,000
shares at the exercise price of $0.10 per share which expires March 17, 2005.
Joseph Lopez received a warrant to purchase up to 2,000,000 shares at the
exercise price of $0.10 per share which expires April 18, 2006. The shares to
be issued upon any exercise of either warrant shall be restricted.
-7-
All of the shares described above in the table were sold directly by
Unico, and no underwriters were involved in the transactions. Unico relied on
section 4(2) of the Securities Act of 1933 in making the sales of securities.
No advertising or general solicitation was employed in offering the shares.
Each purchaser received disclosure information concerning Unico. Each
purchaser also had the opportunity to investigate Unico and ask questions of
its president and board of directors. The securities sold were offered for
investment purposes only and not for the purpose of resale or distribution.
The transfer of the shares sold was appropriately restricted by Unico.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a)
Exhibits
Exhibit
Number Description
----------- ------------
99.1 906 Certifications
(b) No Current Reports on Form 8-K were filed by Unico during the quarter
ended May 31, 2003.
-8-
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNICO, INCORPORATED
(Registrant)
Date: July 14, 2003 By: /S/ Ray C. Brown
______________________________________
Ray C. Brown, Chief Executive Officer
and Principal Financial and Accounting
Officer
-9-
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Ray C. Brown, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Unico,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, the results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the
-10-
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/S/ Ray C. Brown
Date: July 14, 2003 ___________________________________
Ray C. Brown, Chief Executive
Officer
-11-
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Ray C. Brown, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Unico,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, the results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the
-12-
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/S/ Ray C. Brown
Date: July 14, 2003 _______________________________________
Ray C. Brown, Chief Financial
Officer
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EXHIBIT INDEX
Exhibit Exhibit
Number Description Location
------- ----------- --------
99.1 Certifications _____
-14-
APPENDIX "A"
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003 and February 28, 2003
15
UNICO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
May 31, February 28,
2003 2003
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 33,000 $ 33,557
Certificate of deposit 5,293 5,293
Employee advances 650 650
------------- -------------
Total Current Assets 38,943 39,500
------------- -------------
PROPERTY AND EQUIPMENT
Property and equipment, net 902,603 767,203
------------- -------------
OTHER ASSETS
Refundable deposit 500 500
Reclamation bond 38,401 38,401
------------- -------------
Total Other Assets 38,901 38,901
------------- -------------
TOTAL ASSETS $ 980,447 $ 845,604
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
2
16
UNICO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
May 31, February 28,
2003 2003
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Bank overdraft $ 6,166 $ 411
Accounts payable 35,805 30,271
Accrued expenses 9,778 9,778
Notes payable - related party 853,482 697,716
Notes payable - current 368,000 319,000
Accrued interest payable 231,312 216,655
Accrued interest payable - related party 84,636 69,387
Commitments and contingencies 128,865 162,615
------------- -------------
Total Current Liabilities 1,718,044 1,505,833
------------- -------------
LONG-TERM LIABILITIES
Notes payable - non current 685,466 548,466
------------- -------------
Total Long-Term Liabilities 685,466 548,466
------------- -------------
Total Liabilities 2,403,510 2,054,299
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized
at $0.10 par value; 76,157,974 and 74,427,974
shares issued and outstanding, respectively 7,615,799 7,442,799
Additional paid-in capital 795,437 770,881
Deficit accumulated prior to exploration stage (3,788,522) (3,788,522)
Deficit accumulated during the exploration stage (6,045,777) (5,633,853)
------------- -------------
Total Stockholders' Equity (Deficit) (1,423,063) (1,208,695)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 980,447 $ 845,604
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
3
17
UNICO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
From
Inception
of the
Exploration
Stage on
For the Three Months Ended March 1, 1997
May 31, Through
--------------------------- May 31,
2003 2002 2003
------------- ------------- -------------
REVENUES $ - $ - $ -
EXPENSES
Bad debt expense - - 279,260
General and administrative 343,512 100,911 4,119,835
Depreciation and amortization 24,755 18,115 326,898
------------- ------------- -------------
Total Expenses 368,267 119,026 4,725,993
------------- ------------- -------------
Loss from Operations (368,267) (119,026) (4,725,993)
------------- ------------- -------------
OTHER INCOME (EXPENSES)
Interest income - 442 13,957
Interest expense (43,657) (33,944) (943,211)
Decline in value of assets - - (651,810)
Settlement of debt - - (91,000)
Loss on valuation of assets - - (309,817)
Gain on expiration of debt - - 638,025
Gain on gold contract - - 24,072
------------- ------------- -------------
Total Other Income (Expenses) (43,657) (33,502) (1,319,784)
------------- ------------- -------------
NET LOSS $ (411,924) $ (152,528) $ (6,045,777)
============= ============= =============
NET LOSS PER SHARE $ (0.01) $ (0.00)
============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 75,385,583 71,965,691
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
4
18
UNICO, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
------------- ------------- ------------ ------------
Balance, February 28, 2003 74,427,974 $ 7,442,799 $ 770,881 $(9,422,375)
March 6, 2003, common stock issued
for services at $0.10 per share
(unaudited) 50,000 5,000 - -
March 14, 2003 common stock issued
for services at $0.10 per share
(unaudited) 350,000 35,000 - -
April 1, 2003 common stock issued
for services at $0.10 per share
(unaudited) 300,000 30,000 - -
April 4, 2003 common stock issued
for services at $0.10 per share
(unaudited) 300,000 30,000 - -
April 14, 2003 common stock
issued for services at $0.10 per
share (unaudited) 350,000 35,000 - -
April 22, 2003 common stock
issued for cash at $0.10 per
share (unaudited) 30,000 3,000 - -
May 23, 2003 common stock
issued for services at $0.10 per
share (unaudited) 350,000 35,000 - -
Additional expense recognized on
stock warrants granted - - 24,556 -
Net loss for the three months
ended May 31, 2003 (unaudited) - - - (411,924)
------------- ------------- ------------ ------------
Balance, May 31, 2003
(unaudited) 76,157,974 $ 7,615,799 $ 795,437 $(9,834,299)
============= ============= ============ ============
Deficit accumulated prior to the exploration stage $(3,788,522)
Deficit accumulated during the exploration stage (6,045,777)
------------
Total accumulated deficit $(9,834,299)
============
The accompanying notes are an integral part of these
consolidated financial statements
5
19
UNICO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception
of the
Exploration
Stage on
For the Three Months Ended March 1, 1997
May 31, Through
--------------------------- May 31,
2003 2002 2003
------------- ------------- -------------
<s> <c> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (411,924) $ (152,528) $ (6,045,777)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock issued for services 170,000 7,500 1,496,099
Bad debt expense - - 279,260
Warrants issued below market value 24,556 - 179,556
Pre-paid services expensed - 1,730 -
Depreciation expense 24,755 18,115 326,898
Loss on disposition of asset - - (21,055)
Settlement of debt - - 19,000
Gain on expiration of debt - - (638,025)
Gain on gold contract - - (24,072)
Decline in value of assets - - 960,960
Changes in operating assets and liabilities:
Decrease in accounts receivable
and related receivables - - (65)
Increase in other assets - - (6,192)
Decrease in prepaid expenses - - 3,460
Increase in accounts payable and
other liabilities 1,670 1,790 977,383
------------- ------------- -------------
Net Cash Used by Operating Activities (190,943) (123,393) (2,492,570)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land - - (50,000)
Decrease in investment - - 95,068
Purchase of fixed assets (160,155) (8,874) (722,570)
------------- ------------- -------------
Net Cash Used by Investing Activities (160,155) (8,874) (677,502)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in bank overdraft 5,775 (4,055) 6,166
Proceeds from notes payable - related party 155,766 43,617 1,266,678
Proceeds from notes payable 190,000 85,000 808,000
Payments on notes payable (4,000) - (155,534)
Issuance of stock for cash 3,000 25,000 1,231,750
Receipt of stock subscription receivable - - 41,990
------------- ------------- -------------
Net Cash Provided by Financing Activities $ 350,541 $ 149,562 $ 3,199,050
------------- ------------- -------------
The accompanying notes are an integral part of these
consolidated financial statements.
6
20
UNICO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception
of the
Exploration
Stage on
For the Three Months Ended March 1, 1997
May 31, Through
--------------------------- May 31,
2003 2002 2003
------------- ------------- -------------
<s> <c> <c> <c>
NET INCREASE (DECREASE) IN CASH $ (557) $ 17,295 $ 28,978
CASH AT BEGINNING OF PERIOD 33,557 33,009 4,022
------------- ------------- -------------
CASH AT END OF PERIOD $ 33,000 $ 50,304 $ 33,000
============= ============= =============
CASH PAID DURING THE PERIOD FOR:
Interest $ 13,751 $ 9,000 $ 34,563
Income taxes $ - $ - $ -
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of stock for services $ 170,000 $ 7,500 $ 1,496,099
Issuance of stock for related party debt $ - $ - $ 1,384,068
Issuance of stock for subsidiary acquisition $ - $ - $ 309,150
Issuance of stock for fixed assets $ - $ - $ 58,400
Issuance of stock for prepaid services $ - $ - $ 3,460
Acquisition of assets with note payable $ 165,000 $ - $ 165,000
The accompanying notes are an integral part of these
consolidated financial statements.
7
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UNICO, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial statements
May 31, 2003 and February 28, 2003
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim consolidated financial statements
include normal recurring adjustments and reflects all adjustments, which, in
the opinion of management, are necessary for a fair presentation of such
financial statements. Although management believes the disclosures and
information presented are adequate to make the information not misleading, it
is suggested that these interim consolidated financial statements be read in
conjunction with the Company's most recent audited consolidated financial
statements and notes thereto included in its February 28, 2003 Annual Report
on Form 10-KSB. Operating results for the three months ended May 31, 2003 are
not necessarily indicative of the results that may be expected for the year
ending February 28, 2004.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred losses from its inception
through May 31, 2003. It has not established revenues sufficient 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 consists of the following:
.. Increase mining activities at the Deer Trail Mine and the Bromide Basin
Mine;
.. Increase milling activities at the Deer Trail Mine;
.. Begin screening ore dumps and processing the screened materials in July
2003 in order to begin selling free gold and silver in late July 2003;
.. Attempt to purchase gravity or centrifugal bowls to use to process mine
tailings in late Summer 2003;
.. Begin shipping concentrates to smelters for smelting and refining;
.. Begin mining activities at the Silver Bell Mine in late Summer 2003;
.. Increase the number of full-time employees from 8 to approximately 35;
.. Explore the possibility of obtaining a joint-venture partner to more fully
develop Unico's mining operations;
.. Explore the possibility of building a small portable gold processing plant
to be located at the Deer Trail Mine and/or the Bromide Basin Mine to
recover gold by gravity or flotation means; and
.. Raise a minimum of $250,000 in additional equity capital, loans and/or
other financing transactions.
Management believes the Company's current cash as of May 31, 2003, will
sustain operations for approximately two additional months. In the event
income from mining operations is delayed or is insufficient to cover operating
expenses, the Company will need to seek additional funds from equity or debt
financing, for which the Company has
8
22
UNICO, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
May 31, 2003 and February 28, 2003
NOTE 2 - GOING CONCERN (Continued)
no current commitments. In the interim, management is committed to meeting
the minimum operating needs of the Company.
NOTE 3 - MATERIAL EVENTS
During the three months ended May 31, 2003, the Company borrowed an additional
$155,766 from a related party. At May 31, 2003, the total balance on this
related party note was $827,764, plus an additional $81,134 in accrued
interest. Additionally, the Company borrowed $25,000 from an unaffiliated
individual. This note bears interest at a rate of 10.0% per annum, and has no
formal payment terms.
During the three months ended May 31, 2003, the Company issued 1,700,000
shares of common stock to various consultants for services rendered. These
shares were valued by the Company at $0.10 per share. Additionally, the
Company issued 30,000 shares of common stock for cash at $0.10 per share to an
unaffiliated individual.
On April 1, 2003, the Company elected to purchase certain fixed assets from an
unaffiliated entity for $165,000. As a part of this purchase, certain of
these fixed assets were expensed as minor supplies, while capitalizing a total
of $160,155. Per the terms of the asset purchase agreement, the seller agreed
to finance the purchase price of $165,000 for the Company, such that the
Company is to make 24 monthly installment payments of $2,000, with the
remaining outstanding balance due on April 1, 2005. The note bears interest
at a rate of 10.0% per annum. The Company made two of these installment
payments during the period, leaving the principal balance of the note at
$161,000, with $2,733 in accrued interest.
NOTE 4 - OUTSTANDING STOCK OPTIONS AND WARRANTS
During the three months ended May 31, 2003, the Company granted 2,030,000
common stock warrants to purchase the Company's common stock. Each option and
warrant is convertible into one share of common stock at an exercise price of
$0.10 per share. The options and warrants have been granted as compensation
for consulting services and as incentives for the purchase of common stock for
cash, and generally have a life of two to three years.
A summary of the Company's outstanding stock options as of May 31, 2003,
including all changes during the current quarter, is presented below:
9
23
UNICO, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
May 31, 2003 and February 28, 2003
NOTE 4 - OUTSTANDING STOCK OPTIONS AND WARRANTS (Continued)
Weighted
Average
Shares Exercise Price
-------------- --------------
Options outstanding at May 31, 2003:
Options issued in 1997 1,000,000 $ 0.10
Options issued in 2000 950,000 0.10
Options issued in 2001 1,037,500 0.13
Options issued in 2002 4,278,041 0.11
Options issued in 2003 2,030,000 0.10
-------------- --------------
Total options outstanding, May 31, 2003 9,295,541 $ 0.11
============== ==============
Summary of activity for the three months ended May 31, 2003:
Granted 2,030,000 $ 0.10
Canceled - -
Exercised - -
Expired - -
-------------- --------------
Outstanding, May 31, 2003 2,030,000 $ 0.10
============== ==============
Exercisable, May 31, 2003 2,030,000 $ 0.10
============== ==============
NOTE 5 - SUBSEQUENT EVENTS
On June 3, 2003, the Company issued 350,000 shares of common stock for
services, valued at $0.10 per share.
On June 16, 2003, the Company issued 350,000 shares of common stock for
services, valued at $0.10 per share.
On June 23, 2003, the Company issued 850,000 shares of common stock for
services, valued at $0.10 per share.
On July 1, 2003, the Company issued 350,000 shares of common stock for
services, valued at $0.10 per share.
On July 8, 2003, the Company issued 200,000 shares of common stock for
services, valued at $0.10 per share.
10
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