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

General Information Regarding Unico and its Operations

During the three and six month periods ended August 31, 2005, Unico, Incorporated ("the Company" or "UNCN") an Arizona Corporation, was an investment holding company based on the Investment Company Act of 1940. Unico, Incorporated 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. The names "Unico", "we", "our", and "us" used in this report refer to Unico, Incorporated or to one of its portfolio investment companies.

On July 9, 2004 the Company's Board of Directors elected to have the company be regulated as a business development company under the Investment Company Act of 1940. As a business development company (BDC), the Company is required to maintain at least 70% of its assets invested in eligible portfolio companies.

As of August 31, 2005, the Company had the following three portfolio investments: Deer Trail Mining Company, LLC, Silver Bell Mining Company, Inc., and Bromide Basin Mining Company, LLC. Deer Trail Mining and Bromide Basin Mining were originally operations of Unico, Incorporated; however, in June 2004, Unico formed each company as a separate operating entity, wholly-owned by Unico, and transferred all respective operations and assets into these separate operating companies.

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 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 was subsequently extended through August 31, 2005. Unico and Deer Trail Mining Company, LLC are attempting to negotiate a new lease or an extension to the most recent lease which expired August 31, 2005. The most recent lease agreement is referred to in this report as the Deer Trail Lease. The Deer Trail Lease required Unico to make monthly lease payments and pay a 3% net smelter return on ore removed from the Deer Trail Mine.

Pursuant to a Modification of Mining Lease and Option to Purchase dated May 31, 2004. (a) Unico paid all past due royalties, taxes, assessments and all other amounts then owed under the Deer Trail Lease

(approximately $204,000) on or about September 1, 2004; (b) Unico paid a non-refundable payment of $1,000,000 on or about September 1, 2004, which will be counted as a payment toward exercise of the option to purchase the Deer Trail Mine if Unico pays an additional $3,000,000 to purchase the Deer Trail Mine on or before August 31, 2005 or any extended due date which may be agreed upon by both parties; and (c) Unico will continue to make the payments required under the Deer Trail Lease during the extended lease term and any extension thereof.

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 has assumed responsibility for making payments under the Deer Trail Lease. Deer Trail Mining Company has been making the payments required under the Lease Modification.
Deer Trail Mining Company's ability to make the required payments is dependent on either Unico or Deer Trail Mining Company raising substantial equity capital and/or securing substantial financing in the near future. No assurance can be given that either Unico or Deer Trail Mining Company will be successful in its efforts to raise the necessary funds and/or secure the necessary financing. If Unico and Deer Trail Mining Company fail in this regard, Unico and Deer Trail Mining Company will likely lose any rights they have to the Deer Trail Mine property.

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 seven full time employees, two full time consultants, and three part time consultants whose services are used on an as needed basis.

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.

Unico worked for more than two years to reopen the Deer Trail Mine. Unico commenced mining activities in late March or early April 2001 on the Deer Trail Mine. To date, the mining activities have been fairly limited. There have been between 2 and 5 miners at various times working full time in the Deer Trail Mine both on mine development work and production work until approximately October 2003. Their efforts were concentrated in the 3400 Area of the mine, from which they removed approximately 1,000 tons of ore per month. The ore has been 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. Unico started screening and crushing ore dumps on the upper Deer Trail Mine and moved the materials to the ball mill. Currently the Deer Trail Mining Company is reconstructing the mill to enhance productivity and efficiency. The Deer Trail Mining Company has temporarily suspended screening and crushing ore at the Deer Trail Mine to accommodate a construction project to upgrade the screening plant and crushing facility.

We believe that there are a variety of mining companies and other mineral companies that are potential purchasers for the lead concentrates, zinc concentrates and other concentrates which we intend to sell as the end product from our Deer Trail Mine mining and milling operations.

The concentrates can be transported by either rail or truck, and there are a variety of trucking companies that are willing and able to transport concentrates to smelters or other places designated by purchasers.

The Pennolies Smelter in Torreon, Mexico has agreed to purchase concentrates from Deer Trail Mining Company. Deer Trail Mining Company may 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, Deer Trail Mining Company may sell concentrates to the Teck Cominco Smelter.

Subsequent to the quarter ended August 31, 2005 Deer Trail Mining Company, LLC entered into a five-year purchase contract with PGM, LLC of Los Angeles where PGM will purchase precious metal bearing concentrates from the Deer Trail processing center. The contract will not fully commence until the mill processing center is complete at the Deer Trail Mine. PGM has advanced Deer Trail Mining Company, LLC $25,000 for an initial shipment of concentrates that will be produced on a pilot plant basis.

The Deer Trail Mine Development Agreement

On October 5, 1998 Unico entered into the Deer Trail Mine Development Agreement with Guilderbrook, Inc. and Aurora Resources & Mining Corp. The Deer Trail Mine Development Agreement was entered into at a time when Unico was seriously delinquent in its obligations under the Deer Trail Lease, and needed assistance with making both delinquent lease payments and future lease payments. The Deer Trail Mine Development Agreement required Guilderbrook, Inc. to provide $60,000 to Unico in order to pay past due lease payments and to provide $9,000 per month for future lease payments. In exchange for these payments, Guilderbrook, Inc. was to receive 25% of the net profits from ore sales, including all ore mined at the Deer Trail Mine.

The Deer Trail Mine Development Agreement obligates Aurora Resources & Mining Corp. to provide the mine operations management along with the other necessary additional equipment to begin mining operations at the Deer Trail Mine. This is to be done with Aurora Resources & Mining Corp.'s financial and additional capital equipment resources. In consideration for this contribution, the Deer Trail Mine Development Agreement provided that Aurora Resources & Mining Corp. was to receive 50% of the net profits from all mined ore sales from the Deer Trail Mine.

The Deer Trail Mine Development Agreement provided that at a future time when exercising the existing option under the Deer Trail Lease is appropriate, Guilderbrook, Inc. is to pay 25% of the option price, Aurora Resources & Mining Corp. is to pay 50% of the option price and Unico is to pay 25% of the option price. In the event that the option is exercised under the Deer Trail Lease, the Deer Trail Mine Development Agreement provided that the full ownership interests of the parties, and the property, rights and privileges, and any net smelter returns to be shared between the parties, would then be own/shared on the following basis:

. Unico - 25%

. Guilderbrook, Inc. - 25%

. Aurora Resources & Mining Corp. - 50%.

Unico was to continue to be a leaseholder and operator of the Deer Trail Mine property.

In February 1999, Unico issued 500,000 shares of its common stock to Aurora Resources & Mining Co. in exchange for a 26% net profits interest under the Deer Trail Mine Development Agreement. In October 1999, Aurora Resources & Mining Corp. agreed to return to Unico Aurora's remaining 24% right to net profits under the Deer Trail Mine Development Agreement. As a result of the February 1999 modification, Unico became entitled to 75% of any net profits generated under the Deer Trail Mine Development Agreement, and Guilderbrook, Inc. was entitled to the remaining 25% of any net profits.

Guilderbrook, Inc. ceased making payments under the Deer Trail Mine Development Agreement in approximately May, 2003. It is possible that Deer Trail Mining Company may seek to obtain a full release of any rights or claims Guilderbrook, Inc. may have under the Deer Trail Mine Development Agreement. In order to obtain such a release, Unico and/or Deer Trail Mining Company may have to agree to pay some consideration to Guilderbrook, Inc.

Silver Bell Mining Company, Incorporated

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 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 commence an exploration and resource definition program at the Silver Bell Mine beginning in Spring, 2006. 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.

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 (the "Second Revised Mining Lease"). Under the Second Revised Kaibab Mining Lease, Kaibab Industries, Inc. has 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 includes the Bromide Basin Mines. The Second Revised Mining Lease runs until November 1, 2005, and grants to Bromide Basin Mining Company the option to purchase six (6) fully permitted patented mining claims and twenty-one
(21) located mining claims comprising in all over 400 acres of Bromide Basin in the Henry Mountain Mining District located in Garfield County, Utah. The option exercise price is $835,000 for all specified mining claims, mill sites and dumps being leased. The Bromide Basin Mining Company also has the right to extend the lease and purchase option term until October 31, 2006 assuming it has met all of its obligations due under the agreement. As consideration for the Second Revised Mining Lease, Bromide Basin Mining Company has agreed to pay Kaibab Industries in advance the sum of $5,000 per month and pay a five percent (5%) net smelter return upon all ore taken from the leased premises each month, to the extent that the amount for any month exceeds the $5,000 monthly base rent.

The primary purpose of this agreement is 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 its purchase option from Kaibab Industries.

Unico commenced mining efforts on the Bromide Basin Mines in September 2001 with five full time miners. Ore removed from the Bromide Basin Mines was transported to the Deer Trail Mine site where it was crushed and stockpiled. Because of the Bromide Basin Mine's high elevation, mining activities are seasonal and occur only from May or early June through approximately mid-November.

In 2003 Unico began mining activities on the Bromide Mine by clearing snow and rocks from access roads. New discharge pipes were installed at the Bromide Mine and then the tunnels were de-watered.

During 2003, Unico had two problems that delayed progress at the Bromide Mine. The Mine rescue coverage, required by MSHA, was unexpectedly terminated due to policies at the company. This forced Unico to discontinue all work at the Bromide Mine until new coverage was secured and all MSHA concerns were satisfied. Two wild fires in the Henry Mountains also forced Unico to stop mining activities until the fires were contained. During the fires, mine water was dedicated to the fire fighting effort.

Through 2003, Unico continued exploration work in the Bromide Mine and re-confirmed the existence of a high-grade gold structure. 2.9 ounces of gold was recovered from a 400 pound sample of material extracted by crude methods from the high-grade area in the Bromide Mine. The work at the tunnel included laying track to connect with track already in the tunnel, compressed air service, and establishing electricity with the addition of a diesel-powered generator. Unico intended to use shrink, cut and fill stopping methods to extract the gold rich ore from the Bromide vein via the El Padre tunnel. In addition, the mineralized rock from the Kimble and Turner can be extracted by mechanical means and shipped for processing.

Previous soil survey work revealed many prospective areas for the discovery of more gold occurrences in the basin, but most importantly, re-confirmed the strike of the Bromide, Crescent Creek and Kimble and Turner mineralized structures. Past drilling clearly established that gold mineralization in Bromide Basin is structurally controlled and that no disseminated mineralization in the country rock was encountered.

The El Padre Tunnel will serve as access to the Bromide vein (400 feet above the tunnel) and possibly others, and provide drainage for the Bromide mine. Track for the El Padre Tunnel was obtained during the 2003 mining season and transported to the mine site. The high wall above the El Padre Tunnel was secured and timbering of the portal was completed. Preliminary ground leveling work at El Padre was begun in order to properly lay the track from the surface into the tunnel. A mine locomotive, charger and other mining equipment were also delivered to the El Padre. All infrastructure for completing the tunnel is in place.

Static screens were installed at Kimble and Turner and previously excavated gold rich mineralized rock was screened. The gold recovered from the fines was tested by simple gravity methods confirming a very high recovery rate of coarse gold. It is believed that the finer mesh gold (-10m) could be liberated by further pulverizing the ore and additional grinding would liberate even finer gold. Limited amounts of Kimble and Turner material were transported to a staging station where it could be loaded for delivery to the Deer Trail mill in Marysvale, Utah.

Despite some frustrations in the 2003 mining season, Unico was able to improve the infrastructure at the Bromide Mines and transport about 400 tons of Bromide material to the Deer Trail mill; 235 tons coming from Hanksville, Utah and 160 tons from Fredonia, Arizona, formerly a processing site for Bromide-ore.

During 2004, Bromide Basin Mining Company conducted geological sampling and completed required reclamation for the Bureau of Land Management.

The Company has started its pre-production feasibility study, and is currently analyzing the potential of the claims at the Bromide Basin Mines.

Plan of Operation

On July 9, 2004, the Company's Board of Directors elected to have the Company be regulated as a business development company under the Investment Company Act of 1940. As a business development company ("BDC"), the Company is required to maintain at least 70% of its assets invested in "eligible portfolio companies".
The Company terminated its election to be regulated as a business development company on October 12, 2005, and is now functioning as an operating company.

During the next 12 months, Unico's plan of operation is to raise approximately $5,000,000 which Unico intends to invest in its subsidiary companies, Deer Trail Mining Company, Bromide Basin Mining

Company and Silver Bell Mining Company. The Deer Trail Mining Company, Bromide Basin Mining Company and Silver Bell Mining Company intend to use the funds for the following purposes:

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Analyze and certify, by independent lab, the samples taken from the Deer Trail Mine in the 2nd phase of completed exploratory drilling;

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

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Upgrade the mine infrastructure at both the Deer Trail and Bromide Basin Mines;

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Continue sampling and testing ore from the Bromide Basin and Deer Trail Mines to evaluate the most efficient means to conduct mining and milling activities;

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

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Upgrade the screening plant and crushing facilities at the upper Deer Trail Mine and resume processing the ore dumps;

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Exercise the purchase option or extend the Bromide Basin Mine lease prior to November 1, 2005;

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Increase mining activities at the Deer Trail Mine and the Bromide Basin Mine;

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Increase milling activities at the Deer Trail Mine;

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Increase the number of employees from nine to approximately 25;

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Explore the possibility of obtaining a joint-venture partner to increase the development of Unico's mining operations;

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Commence an exploration and resource definition program at the Silver Bell Mine beginning in Spring, 2006;

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Acquire new mining equipment and vehicles to improve operations at the Deer Trail Mine and Bromide Basin Mine;

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Exercise or extend an option to purchase the Deer Trail Mine for $3,000,000 on or before August 31, 2005 or any extended expiration date;

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Evaluate and possibly pursue potential acquisitions in the mining industry which are compatible with Unico's status as a business development company; and

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Raise a minimum of $5,000,000 in additional equity capital and/or other debt financing transactions.

Accomplishing the 12-month plan of operations is dependent on Unico raising approximately $5,000,000 in equity and/or debt financing during the next 12 months. The Company's cash as of August 31, 2005 will sustain operations for approximately 60 days.

Valuation of Investments

As required by ASR 118, the investment committee of the company is required to assign a fair value to all investments. To comply with Section 2(a)(41) of the Investment Company Act and Rule 2a-4 under the Investment Company Act, it is incumbent upon the board of directors to satisfy themselves that all appropriate factors relevant to the value of securities for which market quotations are not readily available have been considered and to determine the method of arriving at the fair value of each such security. To the extent considered necessary, the board may appoint persons to assist them in the determination of such value, and to make the actual calculations pursuant to the board's direction. The board must also, consistent with this responsibility, continuously review the appropriateness of the method used in valuing each issue of security in the company's portfolio. The directors must recognize their responsibilities in this matter and whenever technical assistance is requested from individuals who are not directors, the findings of such intervals must be carefully reviewed by the directors in order to satisfy themselves that the resulting valuations are fair.

No single standard for determining fair value...in good faith can be laid down, since fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the board of directors would appear to be the amount which the owner might

reasonably expect to receive for them upon their current sale. Methods which are in accord with this principle may, for example, be based on a multiple of earnings, or a discount from market of a similar freely traded security, or yield to maturity with respect to debt issues, or a combination of these and other methods. Some of the general factors which the directors should consider in determining a valuation method for an individual issue of securities include:
1) the fundamental analytical data relating to the investment, 2) the nature and duration of restrictions on disposition of the securities, and 3) an evaluation of the forces which influence the market in which these securities are purchased and sold. Among the more specific factors which are to be considered are: type of security, financial statements, cost at date of purchase, size of holding, discount from market value of unrestricted securities of the same class at time of purchase, special reports prepared by analysis, information as to any transactions or offers with respect to the security, existence of merger proposals or tender offers affecting the securities, price and extent of public trading in similar securities of the issuer or comparable companies, and other relevant matters.

The board has arrived at the following valuation method for its investments. Where there is not a readily available source for determining the market value of any investment, either because the investment is not publicly traded, or is thinly traded, and in absence of a recent appraisal, the value of the investment shall be based on the following criteria:

1. Total amount of the Company's actual investment (AI). This amount shall include all loans, purchase price of securities, and fair value of securities given at the time of exchange.

2. Total revenues for the preceding twelve months (R).

3. Earnings before interest, taxes and depreciation (EBITD)

4. Estimate of likely sale price of investment (ESP)

5. Net assets of investment (NA)

6. Likelihood of investment generating positive returns (going concern).

The estimated value of each investment shall be determined as follows:

• Where no or limited revenues or earnings are present, then the value shall be the greater of the investment's a) net assets, b) estimated sales price, or c) total amount of actual investment.

• Where revenues and/or earnings are present, then the value shall be the greater of two point five times (2.5x) revenues or six times (6x) earnings, plus the greater of the net assets of the investment or the total amount of the actual investment.

• Under both scenarios, the value of the investment shall be adjusted down if there is a reasonable expectation that the Company will not be able to recoup the investment or if there is reasonable doubt about the investments ability to continue as a going concern.

The Board of Directors of the Company, using the above formula, has valued the Company's investments at $230,000. The Board has not retained independent appraisers to assist in the valuation of the portfolio investments because the cost was determined to be prohibitive for the current levels of investments.

Results of Operations

During the three months ended August 31, 2005, Unico experienced a net loss of $193,852 or approximately ($0.001) per share compared to a net loss of $1,714,480 or approximately ($0.02) per share for the same period last year.
During the six months ended August 31, 2005, Unico experienced a net loss of $880,975 or approximately ($0.004) per share compared to a net loss of $2,637,642 or approximately ($0.03) per share for the same period last year. Unico generated $300 of revenue in the three and six month periods ended August 31, 2005 compared to no revenue for the same periods ended August 31, 2004.

Unico attributes the $1,520,628 decrease in net loss for the three month period ended August 31, 2005 compared to the same period ended August 31, 2004 primarily to a $803,262 decrease in interest expense and a $423,191 decrease in . . .