FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


           (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                      MARCH 31, 2004
                              --------------------------------------------------


Commission file number                              0-22629
                      ----------------------------------------------------------


                        UNIFIED FINANCIAL SERVICES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              DELAWARE                                 35-1797759
-------------------------------------    ---------------------------------------
     (State or other jurisdiction           (I.R.S. Employer Identification No.)
         of incorporation or
            organization)

                              2353 ALEXANDRIA DRIVE
                            LEXINGTON, KENTUCKY 40504
--------------------------------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (859) 442-0347
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by  Section 13 or 15(d) of the  Securities  Exchange Act of
1934  during  the  preceding  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.                          |X| Yes|_| No


     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).                       |_| Yes |X| No


                                                         Number of shares
          Title of class                          outstanding as of May 12, 2004
--------------------------------------      ------------------------------------
     Common stock, $0.01 par value                          2,767,092


<PAGE>


                        UNIFIED FINANCIAL SERVICES, INC.
                                    FORM 10-Q

                                      INDEX
<TABLE>
<S>                      <C>                     <C>                            <C>               <C>             <C>           <C>

                                                                                              Page
                                                                                              ----

PART I.        FINANCIAL INFORMATION

  Item 1.      Financial Statements

               Consolidated Statements of Financial Condition - March 31, 2003 (Unaudited)
               and December 31, 2002.............................................................1

               Consolidated Statements of Operations (Unaudited) - Three Months Ended
               March 31, 2003 and 2002...........................................................3

               Consolidated Statements of Cash Flow (Unaudited) - Three Months Ended
               March 31, 2003 and 2002...........................................................4

               Notes to Consolidated Financial Statements........................................5

  Item 2.      Management's Discussion and Analysis of Financial Condition and
               Results of Operations............................................................12

               Cautionary Statement Regarding Forward-Looking Statements........................12

               General..........................................................................12

               Comparison of Results for the Three Months Ended March 31, 2003 and 2002.........13

               Liquidity and Capital Resources..................................................17

  Item 3.      Quantitative and Qualitative Disclosure About Market Risk........................18

  Item 4.      Controls and Procedures..........................................................18

PART II.       OTHER INFORMATION

  Item 6.      Exhibits and Reports on Form 8-K.................................................19

SIGNATURES......................................................................................20

EXHIBIT INDEX...................................................................................21
</TABLE>


                                      -i-
<PAGE>


PART I.        FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<S>                        <C>                   <C>                       <C>                            <C>            <C>    <C>

                                     ASSETS
                                     ------
                                                                            (UNAUDITED)
                                                                              MARCH 31,             DECEMBER 31,
                                                                                2004                    2003
                                                                            -----------             ------------
Current Assets
    Cash and cash equivalents.........................................      $ 5,684,601            $ 5,536,622
    Investment in securities and mutual funds.........................          604,752              3,801,072
    Accounts receivable (net of allowance for doubtful accounts
     of $2,495 for 2004 and $10,995 for 2003).........................        2,609,613              2,644,376
    Receivables from premium financings...............................        4,427,023              4,320,251
    Prepaid assets and deposits.......................................          544,310                683,800
                                                                            -----------            -----------

        Total current assets..........................................       13,870,299             16,986,121
                                                                            -----------            -----------

Fixed Assets, at cost
    Equipment and furniture (net of accumulated depreciation
     of $2,083,598 for 2004 and $1,990,697 for 2003)..................        1,141,520              1,191,540
                                                                            -----------            -----------

         Net fixed assets.............................................        1,141,520              1,191,540
                                                                            -----------            -----------

Non-Current Assets
   Investment in affiliate............................................            1,010                  1,010
   Goodwill ..........................................................        1,006,061              1,006,061
   Restricted cash - contract settlement (see note 2).................        1,943,429                      -
   Other non-current assets...........................................          162,560                155,060
                                                                            -----------            -----------

      Total non-current assets........................................        3,113,060              1,162,131
                                                                            -----------            -----------

          TOTAL ASSETS................................................      $18,124,879            $19,339,792
                                                                            ===========            ===========

(Continued on next page)

The accompanying notes to financials are an integral part of these statements.
</TABLE>

                                      -1-
<PAGE>


UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<S>                  <C>                    <C>                   <C>                    <C>              <C>                   <C>

                                                                            (UNAUDITED)
                                                                              MARCH 31,             DECEMBER 31,
                                                                                2004                    2003
                                                                            -----------             ------------

Current Liabilities:
    Borrowed under line of credit.....................................      $    65,000          $      55,000
    Accounts payable and accrued expenses.............................        1,526,202              1,658,340
    Accrued liabilities - contract settlement ........................               -               3,192,436
    Accrued compensation and benefits.................................          464,464                393,559
    Payable to broker-dealers.........................................           34,353                 31,935
    Other liabilities.................................................          416,769                359,387
                                                                            -----------          -------------

        Total current liabilities.....................................        2,506,788              5,690,657
                                                                            -----------          -------------

Long-Term Liabilities
   Other long-term liabilities........................................          162,509                162,509
   Contract Settlement (see note 2)...................................        1,943,429                      -
                                                                            -----------          -------------
      Total long-term liabilities.....................................        2,105,938                162,509
                                                                            -----------          -------------

              Total liabilities.......................................        4,612,726              5,853,166
                                                                            -----------          -------------

Commitments and Contingencies.........................................                -                      -
                                                                            -----------          -------------

Stockholders' Equity
    Preferred stock, par value $.01 per share (authorized shares -
      1,000,000; none issued).........................................                -                      -
    Common stock, par value $.01 per share (authorized shares -
      20,000,000; issued and outstanding shares including shares
      held in treasury - 2,826,117 for 2004 and 2003).................           32,761                 32,761
    Additional paid-in capital........................................       15,643,845             15,643,845
    Retained deficit..................................................       (1,680,095)            (1,705,622)
                                                                            -----------          -------------
           Subtotal...................................................       13,996,511             13,970,984
    Treasury stock (47,025 common shares, at cost)....................         (484,358)              (484,358)
                                                                            -----------          -------------
            Total stockholders' equity................................       13,512,153             13,486,626
                                                                            -----------          -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................      $18,124,879          $  19,339,792
                                                                            ===========          =============
</TABLE>



The accompanying notes to financials are an integral part of these statements.

                                      -2-
<PAGE>


UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S>               <C>                    <C>               <C>                  <C>                            <C>              <C>


                                                                             THREE MONTHS ENDED
                                                                                  MARCH 31,
                                                                        -------------------------------
                                                                           2004                 2003
                                                                        ----------          ------------

REVENUE  ....................................................           $4,078,943          $  3,636,751
OPERATING EXPENSES
   Commissions and third-party payments......................              457,963               453,304
   Employee compensation.....................................            1,688,347             1,672,770
   Employee insurance and benefits...........................              352,396               297,562
   Data processing...........................................              355,251               329,373
   Mail and courier..........................................               31,670                25,263
   Telephone.................................................               32,673                44,155
   Equipment rental and maintenance..........................              102,975                82,519
   Occupancy.................................................              227,605               200,107
   Provision for depreciation and amortization...............               92,901                94,137
   Professional fees.........................................              388,847                62,847
   Travel and entertainment..................................               52,200                64,923
   Errors/(recovery) expense.................................              (56,709)               25,357
   Provision/(recovery) for bad debt.........................               (6,843)               45,340
   Business development costs................................               11,570                12,000
   Insurance.................................................              143,473               113,787
   Other operating expenses..................................              189,378               100,327
                                                                        ----------          ------------
       Total operating expenses..............................            4,063,697             3,623,771
                                                                        ----------          ------------
Income from operations.......................................               15,246                12,980
OTHER EXPENSE
   Other losses..............................................                3,035                 4,527
   Interest..................................................                    -                   698
                                                                        ----------          ------------
        Total other expense..................................                3,035                 5,225
                                                                        ----------          ------------
Income from continuing operations, before income taxes.......               12,211                 7,755
    Income tax expense.......................................                  842                10,000
                                                                        ----------          ------------
Net income (loss) from continuing operations.................               11,369                (2,245)

Income from discontinued operations (net of income taxes
   of $9,158 for 2004 and $0 for 2003) ......................               14,158                11,896
                                                                        ----------          ------------
Net income...................................................           $   25,527          $      9,651
                                                                        ==========          ============

Per share income (loss)
     Average basic common shares outstanding.................            2,779,092             2,839,246
     Net income - basic......................................           $     0.01          $          -
     Net income (loss) from continuing operations............                    -                     -
     Average fully diluted common shares outstanding.........            2,814,592             2,839,246
     Net income - fully diluted..............................           $     0.01          $          -
     Net income (loss) from continuing operations - fully diluted                -                     -
</TABLE>

The accompanying notes to financials are an integral part of these statements.

                                      -3-
<PAGE>


UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<S>                 <C>                  <C>                     <C>                 <C>                    <C>                 <C>

                                                                             THREE MONTHS ENDED
                                                                                  MARCH 31,
                                                                        --------------------------------
                                                                           2004                 2003
                                                                        ----------          ------------
CASH FLOW FROM OPERATING ACTIVITIES
  Net income.....................................................       $   25,527          $      9,651
  Adjustments to reconcile net income to cash
  provided by (used in) operating activities:
     Income tax payable, net of deferred tax.....................           10,000                10,000
     Depreciation and amortization...............................           92,901                94,137
     Provision for bad debt......................................           (6,843)               45,340
     Change in market value of securities........................            7,736                 4,528
     Loss on sale/disposal of securities.........................           (4,701)                    -
     Income from discontinued operation available for sale-pretax          (14,158)              (11,896)
     (Increase) decrease in operating assets:
         Accounts receivable.....................................           42,134              (276,521)
         Receivables from premium financings.....................         (107,300)             (219,036)
         Prepaid and sundry assets...............................          129,490               150,381
         Notes receivable........................................                -               800,000
         Other non-current assets................................           (7,500)                    -
     Increase (decrease) in operating liabilities:
         Accounts payable and accrued expenses...................         (132,138)              (88,005)
         Contract settlement (see note 2)........................       (1,251,748)                    -
         Accrued compensation and benefits.......................           70,905                45,852
         Other liabilities.......................................           73,958              (265,321)
                                                                        ----------          ------------
            Net cash provided by (used in) operating activities..       (1,071,737)              299,110
                                                                        ----------          ------------

CASH FLOW FROM INVESTING ACTIVITIES
  Increase in restricted cash - contract settlement (see note 2).       (1,940,688)                    -
  Purchase of equipment..........................................          (42,881)              (11,440)
  Proceeds from sale of securities and mutual funds..............        3,209,319                     -
  Investment in securities and mutual funds......................          (16,034)                 (574)
                                                                        ----------          ------------
           Net cash provided by (used in) investing activities...        1,209,716               (12,014)
                                                                        ----------          ------------

CASH FLOW FROM FINANCING ACTIVITIES
  Retirement of common stock.....................................                -              (300,000)
  Proceeds from bank line of credit..............................           10,000             1,600,000
                                                                        ----------          ------------
           Net cash provided by financing activities.............           10,000             1,300,000
                                                                        ----------          ------------
Net increase in cash and cash equivalents........................          147,979             1,587,096
Cash and cash equivalents - beginning of year....................        5,536,622             4,269,657
                                                                        ----------          ------------
Cash and cash equivalents - end of period........................       $5,684,601          $  5,856,753
                                                                        ==========          ============
</TABLE>


The accompanying notes to financials are an integral part of these statements.

                                      -4-
<PAGE>



Note 1 -       NATURE OF OPERATIONS

               Unified Financial Services,  Inc., a Delaware holding company for
               various   financial   services   companies,   was   organized  on
               December 7,  1989. We distribute our services via the traditional
               industry  channels  of our  subsidiaries  and via  the  Internet.
               Through  our  subsidiaries,  all of which are  wholly  owned,  we
               provide services primarily in three lines of business:  trust and
               retirement  services;  mutual fund administration  services;  and
               investment advisory services.

Note 2 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

               Basis of Presentation
               ---------------------
               The  consolidated  financial  statements  include the accounts of
               Unified  Financial  Services,  Inc.  and our  subsidiaries  after
               elimination   of   all   material   intercompany   accounts   and
               transactions.

               The accompanying unaudited consolidated financial statements have
               been  prepared  in  accordance  with  U.  S.  generally  accepted
               accounting  principles for interim financial information and with
               the  instructions  to Form 10-Q and Article 10 of Regulation S-X.
               Accordingly,  they  do not  include  all of the  information  and
               footnotes  required by generally accepted  accounting  principles
               for complete financial statements.  In the opinion of management,
               all  adjustments   (consisting  of  normal  recurring   accruals)
               considered  necessary for a fair presentation have been included.
               Operating  results for the  quarter  ended March 31, 2004 are not
               necessarily  indicative  of the results  that may be expected for
               the year ending December 31, 2004.

               The balance sheet at December 31,  2003 has been derived from the
               audited  financial  statements  at that date but does not include
               all of the information and footnotes  required by U. S. generally
               accepted accounting principles for complete financial statements.

               For  further  information  refer  to the  consolidated  financial
               statements and footnotes thereto included in our Annual Report on
               Form 10-K for the year ended December 31, 2003.

               Restricted  Cash - Contract  Settlement  and Contract  Settlement
               -----------------------------------------------------------------
               Liability
               ---------
               Pursuant to the settlement of the  employment  contracts with two
               former  executive  officers  of our  company,  during  the  first
               quarter  of  2004 we  deposited  $1,940,688  into a  supplemental
               retirement   income  trust  (Rabbi  Trust)  for  such   officers.
               Correspondingly,  we recorded a non-current liability - "Contract
               settlement" for the same amount. As of March 31, 2004, the amount
               held in the Rabbi Trust was $1,943,429,  which included  earnings
               through the period.

               The  payment and  distribution  terms of the Rabbi Trust for each
               participant  follows:  One-fifth  of the  trust  estate  as  then
               constituted  shall be distributed on January 1, 2011;  one-fourth
               of the trust estate as then  constituted  shall be distributed on
               January  1,  2012;   one-third   of  the  trust  estate  as  then
               constituted shall be distributed on January 1, 2013;  one-half of
               the trust  estate as then  constituted  shall be  distributed  on
               January 1, 2014;  and all of the  remaining  trust estate as then
               constituted shall be distributed on January 1, 2015.

               The contract settlement  reflected on the cash flow as $1,251,748
               included the payment of $484,358 for 47,025  shares of our common
               stock purchased during the first quarter 2004.

                                      -5-
<PAGE>


Note 2 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

               Use of Estimates
               ----------------
               During 2002, we experienced  operational  issues with respect our
               mutual  fund  administrative  services  affiliate,  which  issues
               primarily   were   related  to  problems   associated   with  our
               reconciliation of various accounts. In connection  therewith,  we
               established an $854,000 reserve, $454,000 of which was related to
               possible  reconciliation losses and $400,000 of which was related
               to  estimated  costs to  ascertain  the extent and nature of such
               losses and to design control  procedures and system  enhancements
               to ensure that such  reconciliation  issues did not recur. During
               the first  quarter of 2003,  we expended  $44,561 of the $400,000
               reserve and the  remainder  was  expended  during the nine months
               ended December 31, 2003.  During the year ended December 31, 2003
               we expended $292,900 of the $454,000  reserve.  No amount of such
               reserve was expended  during the quarter ended March 31, 2003. At
               December  31,  2003 and  March  31,  2004,  we had  $161,100  and
               148,753, respectively, of such reserve remaining on our records.

               Off-Balance Sheet Arrangements
               ------------------------------
               In connection with the organization of VSX Holdings, LLC ("VSX"),
               a  third-party  investor made a $3.0 million loan to VSX, that is
               evidenced by a note issued by VSX to such investor. In connection
               with our  subscription  for member interests in VSX, we issued an
               option  to the  third-party  investor  to  acquire  shares of our
               common stock, which option is exercisable for up to 50,000 shares
               before May 23, 2004 and 46,153  shares  after May 23,  2004.  The
               holder of the option may  surrender  the $3.0 million  promissory
               note  issued  with  respect  to  VSX   Holding's   loan  in  full
               satisfaction of the exercise price of the option (see note 8).

               Financial Statement Presentation
               --------------------------------
               Certain  amounts  in the  2003  financial  statements  have  been
               reclassified to conform to the 2004 presentation.

Note 3 -       OPTIONS

               Under  the  terms  of  our  stock  incentive   plan,   employees,
               directors,  advisers  and  consultants  of our  company  and  its
               subsidiaries are eligible to receive the following: (a) incentive
               stock  options;   (b) nonqualified   stock   options;   (c) stock
               appreciation rights;  (d) restricted stock;  (e) restricted stock
               units; and (f) performance awards.

               Options  granted under our plan may be  nonqualified or incentive
               stock  options and  typically are granted at a price equal to the
               quoted market price (or valuation made by  independent  valuation
               experts) on our common stock on the trading day immediately prior
               to the date of grant. Generally, options granted will have a term
               of ten  years  from  the  date of the  grant,  and  will  vest in
               increments  of 33% per year over a  three-year  period or be 100%
               vested on the date of grant.


                                      -6-
<PAGE>


Note 3 -       OPTIONS (Continued)

               As of March 31,  2004 and 2003,  options to acquire  115,008  and
               105,011   shares,   respectively,   of  our  common   stock  were
               outstanding and issued to certain of our employees, directors and
               advisers pursuant to our stock incentive plan. In addition, as of
               such dates,  our board had granted  options to acquire 50,000 and
               54,545 shares, respectively,  of our common stock outside of such
               plan (see note 8).

<TABLE>
<S>                <C>                    <C>                     <C>                  <C>                   <C>                <C>

               A summary of our outstanding stock options as of March 31, 2004 and 2003 is as follows:

                                                                                   MARCH 31,
                                                               ------------------------------------------------
                                                                        2004                        2003
                                                               --------------------       ---------------------
                                                                           WEIGHTED                    WEIGHTED
                                                                            AVERAGE                     AVERAGE
                                                                           EXERCISE                    EXERCISE
                                                               SHARES       PRICE         SHARES         PRICE
                                                               ------       -----         ------         -----

              Options outstanding at beginning of year......  133,858      $41.14        161,986         $38.24
              Forfeitures...................................   (4,350)      25.87         (2,430)         16.78
              Grants........................................   35,500       10.30              -            n/a
              Options outstanding at end of period..........  165,008       34.90        159,556          38.56
              Options exercisable at end of period..........  165,008       34.90        159,222          38.56
              Options available for future grants...........  134,992         n/a        144,989            n/a
</TABLE>


               As of March 31, 2004,  55,333 of such  options  were  intended to
               qualify as incentive stock options pursuant to Section 422 of the
               Internal Revenue Code of 1986, as amended.

               We apply Accounting  Principles Board Opinion No. 25, "Accounting
               for Stock Issued to  Employees,"  in accounting  for  stock-based
               employee  compensation  arrangements  whereby  compensation costs
               related  to  stock  options   generally  are  not  recognized  in
               determining net income.  Had we computed  compensation  costs for
               our stock options pursuant to Financial Accounting Standard Board
               Statement of Financial  Accounting Standards No. 123, "Accounting
               for  Stock-Based   Compensation,"  the  effect  would  have  been
               immaterial  for the quarters ended March 31, 2004 and 2003 (based
               upon the Black-Scholes option pricing model).

Note 4 -       COMMITMENTS AND CONTINGENCIES

               We are a party  to  various  lawsuits,  claims  and  other  legal
               actions  arising  in the  ordinary  course  of  business.  In the
               opinion of management, after consultation with legal counsel, all
               such  matters are without  merit or are of such kind,  or involve
               such  amounts,  that  unfavorable  disposition  would  not have a
               material adverse effect on our consolidated financial position or
               results of operations.

               On November 15, 2001, an  arbitration  was filed against  Unified
               Financial  Securities,  Inc. and certain other defendants (Martin
               and Diane Saniski v. Unified Financial Securities,  Inc., Hackett
               Associates,   Inc.,  Donald  Friedman,  Louis  Aarons  and  Cliff
               Cardine,  NASD Arbitration No.  01-05465).  The claimants in such
               action opened a joint account with Unified Financial  Securities,
               Inc. into which they  deposited  restricted  shares of PMC Sierra
               common stock registered to Martin Saniski.  Apparently for estate
               and income tax planning purposes,  claimants sought to transfer a
               portion of the shares to an account  belonging  to Diane  Saniski
               only,  and then  transfer  the shares to a  charitable  remainder
               trust, which then would sell the

                                      -7-
<PAGE>

Note 4 -      COMMITMENTS AND CONTINGENCIES (Continued)

               shares.  The entire sequence of transfers took a little less than
               60 days to complete.  During such 60-day period, the market price
               of the PMC Sierra  shares  declined.  Claimants  allege that they
               placed an order to sell the PMC Sierra shares with the individual
               financial  planner with whom they were dealing (an individual who
               is not a registered agent of Unified Financial Securities, Inc.),
               but that the order was not executed.  Claimants  request at least
               $6.5 million in compensatory damages.  Management believes,  upon
               consultation with counsel,  that the claims are without merit and
               intends  to  defend  the  action  vigorously.  Unified  Financial
               Securities,  Inc.  has  filed  cross  claims  against  the  other
               defendants in this arbitration and also has filed a claim against
               Hackett Associates,  Inc., pursuant to its agreement with Hackett
               Associates,   Inc.,  for   reimbursement  of  Unified   Financial
               Securities,  Inc.'s expenses to defend this matter. (Hackett is a
               broker dealer who cleared through Unified Financial  Securities.)
               The  arbitration   with  respect  to  this  matter  currently  is
               scheduled to be held in June 2004.

Note 5 -       REGULATORY REQUIREMENTS

               Several of our  subsidiaries  are  required to  maintain  minimum
               capital  and  capital  ratios.  We exceed the capital and capital
               ratios required by the regulatory authorities.

Note 6 -       FAIR VALUE OF FINANCIAL INSTRUMENTS

               The carrying  amounts and  estimated  fair value of our financial
               instruments at March 31, 2004 and 2003  approximated  fair value.
               Financial   Accounting   Standards   Board   Statement  No.  107,
               "Disclosures About Fair Value of Financial  Instruments," defines
               the fair value of a financial  instrument  as the amount at which
               the  instrument  could  be  exchanged  in a  current  transaction
               between willing parties.

Note 7 -       DISCLOSURES ABOUT REPORTING SEGMENTS

               We have four reportable operating segments:  trust and retirement
               services;   mutual  fund  administration   services,   investment
               advisory services;  and premium financing.  Generally,  corporate
               expenses are not allocated to the segment for purposes of segment
               reporting.  The accounting  policies of the segments are the same
               as those  described  in the  summary  of  significant  accounting
               policies.  We evaluate  performance  based on profit or loss from
               operations before income taxes, not including non-recurring gains
               and losses.

               Our reportable  segments are business units that offer  different
               products and services.  They are managed  separately because each
               business requires different technology and marketing  strategies.
               Most of the businesses were acquired as a unit and the management
               at the time of the acquisition was retained.  Reportable  segment
               revenue, results from operations,  total assets, depreciation and
               amortization  and capital  expenditures  were as follows as of or
               for the three months ended March 31, 2004 and 2003:


                                      -8-

<PAGE>


Note 7 -       DISCLOSURES ABOUT REPORTING SEGMENTS (Continued)
<TABLE>
<S>                <C>                  <C>                      <C>                       <C>                   <C>            <C>


                                                                                AS OF OR FOR THE
                                                                             THREE MONTHS ENDED
                                                                                  MARCH 31,
                                                                    -----------------------------------
                                                                         2004                 2003
                                                                    --------------        -------------
Revenue:
-------
    Trust and retirement.................................           $   1,581,944         $   1,257,847
    Mutual fund administration...........................               1,944,194             1,802,999
    Investment advisory..................................                 290,211               371,127
    Premium finance......................................                 228,484               179,171
    Corporate............................................                  34,110                25,607
                                                                    -------------         -------------
       Total.............................................           $   4,078,943         $   3,636,751
                                                                    =============         =============

Results from operations:
-----------------------
    Trust and retirement.................................           $     162,581         $      62,632
    Mutual fund administration...........................                 320,722               133,993
    Investment advisory..................................                 (26,179)               18,740
    Premium finance......................................                 104,754               114,994
    Corporate............................................                (549,667)             (322,604)
                                                                    -------------         -------------
    Income from continuing operations, before income taxes                 12,211                 7,755
    Income taxes expense.................................                     842                10,000
    Income from discontinued operations, net.............                  14,158                11,896
                                                                    -------------         -------------
       Net income........................................           $      25,527         $       9,651
                                                                    =============         =============

Total assets:
------------
     Trust and retirement.................................          $   3,240,694         $   2,577,257
     Mutual fund administration...........................              2,713,456             2,857,041
     Investment advisory..................................              1,350,057             1,415,369
     Premium finance......................................              4,441,761             3,192,115
     Corporate............................................              6,378,911             4,523,217
     Discontinued operations..............................                      -            72,148,286
                                                                    -------------         -------------
        Total.............................................          $  18,124,879         $  86,713,285
                                                                    =============         =============

Depreciation and amortization:
-----------------------------
    Trust and retirement.................................           $      31,474         $      32,703
    Mutual fund administration...........................                  54,731                45,030
    Investment advisory..................................                   1,868                 2,697
    Premium finance......................................                     243                 2,372
    Corporate............................................                   4,585                11,335
                                                                    -------------         -------------
       Total.............................................           $      92,901         $      94,137
                                                                    =============         =============

Capital expenditures:
--------------------
     Trust and retirement.................................          $      27,815         $           -
     Mutual fund administration...........................                 15,066                 9,268
     Investment advisory..................................                      -                     -
     Premium finance......................................                      -                 2,172
     Corporate............................................                      -                     -
                                                                    -------------         -------------

        Total.............................................          $      42,881         $      11,440
                                                                    =============         =============
</TABLE>

                                      -9-
<PAGE>


Note 8 -       INVESTMENT IN AFFILIATE

               On May 23, 2000, we  subscribed  for 10 shares of VSX, a Delaware
               limited  liability  company,  in  exchange  for $10  and  certain
               intangible  property rights. We currently own approximately  0.5%
               of the outstanding  shares of VSX, but have the right to purchase
               up to an  additional  1,990  (19.9%)  shares at a price of $1 per
               share,  upon the  occurrence  of certain  specified  events.  Our
               investment  in  VSX  is  accounted  for on  the  cost  method  of
               accounting.

               VSX is  involved in the  development  of an  alternative  trading
               system  to be known  as  VSX.com,  which,  upon  and  subject  to
               organization  and regulatory  approval,  will serve as a virtual,
               real-time  private financial market place. In connection with the
               organization  of VSX, a third-party  investor made a $3.0 million
               loan to VSX, which loan is evidenced by a debenture issued by VSX
               to such  investor.  The  debenture is secured by 49,500 shares of
               our common stock pledged by certain executive  officers or former
               executive officers of our company and 35,500 shares of our common
               stock  pledged by Unified Fund  Services,  Inc..  During  January
               2004, we paid $365,650 for 35,500  shares  previously  pledged by
               former   officers  of  our  company,   which  remain  pledged  as
               collateral   by  Unified  Fund   Services,   Inc..  In  addition,
               concurrent  with the  issuance  of such  debenture,  we issued an
               option  to the  third-party  investor  to  acquire  shares of our
               common stock, which option has a five-year term. The investor may
               elect to  foreclose  on the pledged  collateral  or exercise  the
               option. Pursuant to such option, the holder of the option and the
               debenture is entitled to surrender the debenture to us in payment
               of the  exercise  price of the  option.  During the years  ending
               May 23, 2004 and 2005, the exercise price per share of our common
               stock  subject to the option  will be $60 and $65,  respectively.
               Should the  investor  foreclose  on the pledged  collateral,  the
               executive officers and Unified Fund Services would succeed to the
               option and/or the claim against VSX.

               We also  have  entered  into a  management  arrangement  with VSX
               whereby we provide  consulting and  development  services to VSX.
               For the three months  ended March 31, 2004 and 2003,  we received
               payments totaling $0 and $25,850, respectively, from VSX for such
               consulting and development  services,  which amounts are recorded
               as a reduction of "Other operating  expenses" on our Consolidated
               Statements of Operations.

Note 9 -       INCOME (LOSS) PER SHARE OF STOCK

               Income  (loss) per share of stock is  computed  using the average
               number of common shares outstanding during the applicable period.
               Diluted  income  (loss) per  average  share of stock is  computed
               using  the  average  number  of  common  shares  outstanding  and
               dilutive potential common shares (outstanding stock options).

               Dilutive  potential  common shares included in the diluted income
               (loss) per share  calculation  were determined using the treasury
               stock method. Under the treasury stock method,  outstanding stock
               options  are  dilutive  when the  average  "market  price" of our
               common  stock  exceeds  the  option  price  during a  period.  In
               addition,  proceeds from the assumed exercise of dilutive options
               along with the  related  tax  benefit  are  assumed to be used to
               repurchase  common  shares at the  average  market  price of such
               stock during the period.  For the  quarters  ended March 31, 2004
               and  2003,  potential  common  shares  of  129,508  and  159,556,
               respective were considered to be anti-dilutive  and were excluded
               from the calculation of diluted loss per share.

                                      -10-

<PAGE>

Note 10 -      RECENT CORPORATE ACTIVITY

               As  of  December  17,  2003,  we  purchased  20%  of  Latinvalley
               Securities,  LLC. The  remaining  80%  ownership  will occur upon
               approval  of a change in  control  and  change in  management  of
               Latinvalley  Securities,  LLC  by  the  National  Association  of
               Securities   Dealers,   Inc.  On  January  14,  2004,   the  name
               Latinvalley Securities,  LLC was changed to Unified Distributors,
               LLC.

               On March 2, 2004, we and our wholly owned  registered  investment
               advisory  firm,  Fiduciary  Counsel,  entered  into a  definitive
               agreement  to  contribute  substantially  all of the  assets  and
               business  of  Fiduciary  Counsel  to a newly  organized  Delaware
               limited  liability  company named Oaktree Asset  Management,  LLC
               ("Oaktree"). Also contributing to Oaktree is a group of companies
               collectively  owned  by DNB  Acquisition  Corp.  These  companies
               operate   a   registered   investment   advisor   as  well  as  a
               broker-dealer.   Each  of  Unified  Financial  Services/Fiduciary
               Counsel, on the one hand, and DNB Acquisition Corp., on the other
               hand, each anticipates to own 50% of Oaktree upon consummation of
               the  transaction.  The  transaction  is  expected to close in the
               third quarter upon the approval of Oaktree's  registration  as an
               investment advisor and broker-dealer.

               On April 21, 2004,  we  repurchased  12,000  shares of our common
               stock from a former officer of Equity Underwriting Group pursuant
               to the terms of an agreement that we entered with such officer in
               December  2001 in  connection  with  the  sale  of our  insurance
               operations.






                                      -11-
<PAGE>







ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Certain  statements  contained in this Quarterly Report on Form 10-Q are or
may  constitute  forward-looking  statements  (as such  term is  defined  in the
Private  Securities   Litigation  Reform  Act  of  1995).  Such  forward-looking
statements are based on current  expectations,  estimates and projections  about
Unified Financial  Services'  industries,  management's  beliefs and assumptions
made by management. For example, a downturn in economic conditions generally and
in particular those affecting bond and securities  markets could lead to an exit
of  investors  from mutual  funds.  Similarly,  an increase in Federal and state
regulations  of the mutual fund,  securities  or the  imposition  of  regulatory
penalties could have an effect on our operating results. Investments may decline
in value  in a  rising  interest  rate  environment.  Although  we  believe  our
allowance for loan losses and our allowance for doubtful  accounts are adequate,
they may prove inadequate if one or more clients,  or numerous smaller borrowers
or clients,  or a  combination  of both,  experience  financial  difficulty  for
individual,  national or international  reasons.  Because the financial services
industry is highly regulated,  decisions of governmental  authorities can have a
major effect on operating results.  These uncertainties,  as well as others, are
present in the  financial  services  industry and we caution  stockholders  that
management's  view of the future on which we price and  distribute  our products
and estimate costs of operations and  regulations  may prove to be other than as
anticipated.  In addition,  our current  expectations  with respect to our three
primary   business  lines,  our  ability  to  enhance   stockholder   value  and
aggressively and profitably grow assets under management,  under  administration
and under service,  our ability to provide a high level of service  satisfaction
and manage costs and our ability to expand profit  margins may prove to be other
than  expected.  Words such as  "anticipates,"  "expects,"  "intends,"  "plans,"
"believes,"  "seeks,"   "estimates,"   variations  of  such  words  and  similar
expressions  are intended to identify  such  forward-looking  statements.  These
statements are not guarantees of future  performance  and are subject to certain
risks,  uncertainties and assumptions that are difficult to predict;  therefore,
actual  results and  outcomes  may differ  materially  from what is expressed or
forecasted in any such forward-looking  statements. Such risks and uncertainties
include those listed under "Risk  Factors" in our Annual Report on Form 10-K for
the year ended  December  31,  2003.  Unless  required by law, we  undertake  no
obligation  to update  publicly  any  forward-looking  statements,  whether as a
result of new information, future events or otherwise.

GENERAL

     Unified  Financial  Services,  Inc.,  a Delaware  holding  company that was
organized  on  December 7,  1989,  provides  financial  products  and  services,
principally through three principal businesses:

o    The  provision of complete  back-office  and  shareholder  services for the
     assets of  third-party  mutual  fund  families,  as well as our  affiliated
     series funds; including mutual fund distribution services;

o    Management and  administration of 401(k) and other  ERISA-directed  assets;
     and

o    Management of wealth for  individuals  through  portfolio  management and a
     suite of family-office services.

     Our fundamental  objective is to enhance  stockholders' value by profitably
growing assets under management, service and administration. We believe that our
ability to provide a high level of service  satisfaction,  with an  emphasis  on
managing  costs,  combined with a dedication to maintaining a highly trained and
motivated workforce should help us to our goal of expanding profit margins.

                                      -12-
<PAGE>


     Our  principal  executive  offices  are located at 2353  Alexandria  Drive,
Lexington,   Kentucky  40504,  telephone  number  (859)  442-0347.  We  and  our
subsidiaries   also  maintain   offices  at  431  North   Pennsylvania   Street,
Indianapolis,  Indiana,  telephone number (317) 917-7001; 2353 Alexandria Drive,
Lexington,  Kentucky 40504, telephone number (859) 296-4407; 220 Lexington Green
Circle, Lexington, Kentucky 40502, telephone number (859) 245-2500; 36 West 44th
Street,  The Bar  Association  Building,  Suite 1310,  New York, New York 10036,
telephone  number (212) 852-8852 and 30 Wall Street,  12th floor,  New York, New
York 10005, telephone number (212) 269-6720.

     The  following  presents  management's   discussion  and  analysis  of  our
consolidated  financial  condition and results of operations as of the dates and
for the periods  indicated.  This discussion  should be read in conjunction with
the other information set forth in this Quarterly Report on Form 10-Q, including
our consolidated financial statements and the accompanying notes thereto.

COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

     CONSOLIDATED OPERATIONS

     Revenue for the quarter  ended March 31, 2004  compared to the same quarter
of 2003 increased  $442,192,  or 12.2%,  from $3,636,751 to $4,078,943.  Of such
increase, $465,292 relates to increased assets under management,  administration
and service at our trust and retirement  services and mutual fund administration
services  operations.  Our  premium  finance  and  corporate  revenue  increased
$57,816,  which  partially  offset  the  decrease  of  $80,916 in revenue at our
investment  advisory  operation  due to the loss of a large  client in  November
2003.

     Total operating expenses increased  $439,926,  or 12.1%, from $3,623,771 to
$4,063,697.  Professional  fees accounted for $326,000 of the increase.  Of such
increase,  $172,704 was due to an increase in legal and consulting  cost related
to the  contract  settlement  with our  general  counsel and  associate  general
counsel and  preparation  of the proxy  statement for our 2004 annual meeting of
stockholders.  Also,  our mutual fund  administration  operation  experienced  a
$129,096  increase  in  professional  fees  related  to quality  and  efficiency
improvements  which should enable such operation to enhance  controls and should
positively   impact  quality  through  the   introduction  of  new  systems  and
procedures.  Our employee  insurance and benefits  cost  increased  $54,834,  or
18.4%,  principally  due to a one time payroll tax and benefit charge of $37,812
related to payments made on the contract  settlement  discussed above.  Mail and
courier increased  $6,407,  or 25.4%, due to increased  volume.  Telephone costs
decreased $11,482,  or 26.0%, due to switching vendors and canceling a T-1 line.
Equipment  rental  and  maintenance  expense  increased  by  $20,456,  or 24.8%,
primarily  due to  licensing  fees  related to new  software  at our mutual fund
administration  services  operation,  partially  offset by a decline in expenses
associated  with  our  brokerage  clearing  relationships.  Occupancy  increased
$27,498,  or  13.7%,  due to a new  contract  with a  Lexington,  Kentucky-based
managing general agent that extended the contract period.  Travel cost decreased
$12,723,  or 19.6%,  primarily due to less  traveling by our corporate  staff in
connection  with our cash  management  project,  which is winding down. This was
partially  offset by increased mutual fund  administration  travel related to an
expanded effort to increase business at our mutual fund distribution  operation.
Our general  insurance cost increased  $29,686,  or 26.1%,  primarily due to our
purchase  of  expanded  insurance  coverage  and due to a  general  increase  in
insurance  premiums  rates  in  the  insurance   industry.   For  such  periods,
errors/recovery expense declined $82,066 to a credit of $56,709 for 2004 from an
expense of $25,357 for 2003 primarily due to the favorable resolution in 2004 of
prior year errors, for which liabilities had previously been recorded. Provision
for  bad  debt  decreased  $52,183,  or  115.1%,  due  to  collection  and  less
receivables  being deemed  uncollectible in 2004 than in 2003. For such periods,
other operating expenses increase $89,051, or 88.8%,  primarily due to a $59,346
increase  of  expenses  at our trust and  retirement  services  and fund  mutual
administration  operations.  The quarter  ended March 31, 2003 also  included an
expensereimbursement   from  VSX   Holdings,   LLC  of   $25,850,   without  any
corresponding reimbursement during 2004.

                                      -13-

<PAGE>

     Net income from  continuing  operations  increased  $13,614  from a loss of
$2,245 to a profit of $11,369.  Income from  operations  increased  $2,266,  or
17.5%, from $12,980 in the first quarter of 2003 to $15,246 in the first quarter
of 2004. This is due to the increase in revenue of $442,192, partially offset by
the increase in expenses of $439,926.  Income from discontinued operations,  net
of income  taxes,  increased  $2,262  from 2003 to 2004.  Net income  increased
$15,876 from $9,651 in the first  quarter of 2003 to $25,527 for the same period
of 2004.  Net income per share for the first  quarter  2004 was $0.01 based upon
average common shares  outstanding for both basic and fully diluted earnings per
share.

     TRUST AND RETIREMENT

     Assets under  management  and  administration  at our trust and  retirement
services operation  (collectively,  "AUMA") at March 31, 2004, December 31, 2003
and March 31,  2003 were $712.4  million,  $677.4  million  and $529.9  million,
respectively. The March 31, 2004 AUMA levels increased 34.4% from March 31, 2003
and increased  5.2% from December 31, 2003.  Assets under  management and assets
under administration totaled $290.6 million and $421.8 million, respectively, at
March 31, 2004.  The $35.0  million  increase in AUMA from  December 31, 2003 to
March 31, 2004 was the result of an  approximate  $19.0 million change in market
value from the  beginning of the year and an  approximate  net increase of $16.0
million in new business.

     Gross  revenue for the quarter  ended  March 31,  2004,  as compared to the
three  months  ended March 31,  2003,  increased  by  $324,097,  or 25.8%,  from
$1,257,848 to  $1,581,944.  The primary reason for the increase was more trustee
fees earned tied to the increase in AUMA.

     Expenses  for the  quarter  ended  March 31,  2004 as compared to the three
months ended March 31, 2003 increased  $210,647,  or 17.4%,  from  $1,208,715 to
$1,419,362.  Of the $210,647  increase in expenses period over period,  $104,663
was a result of increased commissions paid to third party advisors. Compensation
and  benefits  increased  $19,416 as a result of increased  commissions  paid to
trust company account managers and increased health care costs.  Other increases
period  over period were  attributable  to  professional  fees  ($22,755),  data
processing  ($43,339),   software  ($18,099)  and  general  insurance  ($8,890).
Decreases period over period are primarily  attributable to bad debts ($12,539),
occupancy ($7,932) and management fees ($13,500).

     Results  from  operations  before  income  taxes for the three months ended
March 31, 2004 as compared to the quarter ended March 31, 2003 increased $99,949
from $62,632 to $162,581.

     MUTUAL FUND ADMINISTRATION

     Mutual fund  administration  consists of the  business of two wholly  owned
subsidiaries,  Unified Fund Services,  Inc. ("Funds"),  which is in the transfer
agency,  fund accounting,  administration,  retirement plan support and Internet
services business, and Unified Financial Securities, Inc. ("Securities"),  which
is in the active and passive distribution business for mutual funds. Mutual fund
administration  revenue increased by $141,195,  or 7.8%, from $1,802,999 for the
first quarter 2003 to $1,944,194  for the first  quarter  2004.  Funds'  revenue
increased  due to the  addition of several  new  clients,  which were  partially
offset by a  $72,895  revenue  decline  at  Securities  due to our exit from the
retail brokerage business. Trail commissions decreased $51,640 due to a decrease
in basis points  received  from one of our mutual fund  providers.  Assets under
service at March 31, 2004 increased to $15,074,751,243  from  $10,272,993,364 at
March 31, 2003. Total funds increased to 32 from 30. Portfolios increased to 185
from 180.

                                      -14-

<PAGE>

     Total expenses for the quarter ended March 31, 2004 decreased  $44,586,  or
2.7%,  compared to the same period of 2003.  This is due a $126,606  decrease in
expense at  Securities,  partially  offset by an $82,020  increase in expense at
Funds.  Commission and third party expense  decreased  $75,717,  or 44.7%.  This
relates to  Securities  getting  out of lower  margin  businesses  and  focusing
strictly on mutual fund distribution  services.  Data processing costs decreased
$15,692,  or 11.2% for the reason discussed above.  Professional  fees increased
$129,096.  Of such increase,  $41,250 relates to a consultant  assisting in fund
accounting  at Funds.  Consulting  costs to improve the  internal  controls  and
operations of Unified Fund Services,  which began in the second quarter of 2003,
amounted to $74,063 during the quarter ended March 31, 2004. The  outsourcing of
systems projects contributed $25,525 of such increase.  Consulting fees on a new
cash  management  system added $5,995.  Errors/recovery  cost  decreased from an
expense  of  $22,064,  to income of  $62,307,  a change  of  $84,371  due to the
favorable  resolution in 2004 of prior year errors,  for which  liabilities  had
previously  been recorded,  which amounted to $62,000.  Temporary help increased
$18,188,  due  to  help  related  to  the  finalizing  of  the  cash  management
reconciliation  project.  Bad debt  decreased  $39,948  due to writing  off more
receivables in 2003 and collecting receivables written off previously.

     Results  from  operations  before  income taxes  increased by $186,729,  or
159.6%,  from  $133,993  for the first  quarter  2003 to $320,722  for the first
quarter  2004.  This is due  primarily due to the increase in revenues and, to a
lesser extent a decline in expenses.

     INVESTMENT ADVISORY

     Investment  advisory revenue decreased by $80,916,  or 21.8%, from $371,127
for the first  quarter  2003  compared to $290,211 for the first  quarter  2004.
Assets  under  management  ("AUM") as of March 31,  2004,  December 31, 2003 and
March 31, 2003 were $200,080,889,  $207,598,658, and $215,209,630, respectively.
The first  quarter of 2004  experienced  some  meaningful  volatility  in equity
markets producing some strong gains early in the quarter and finishing flat. The
market did favor  investment  advisory type of stocks.  Our investment  advisory
operation's  AUM  decreased due to the loss of a very large client at the end of
November 2003,  which  represented  $45,929,216 in AUM and $48,750 in fee income
for the  quarter.  Also  affecting  the decrease in revenues was the net loss of
other clients.

     Operating  expenses  declined  $34,884,  or 10.0%, from $350,181 during the
first quarter 2003 to $315,297  during the first quarter 2004.  Commissions  and
third-party expense decreased $27,699,  or 41.6%, from $66,574 to $38,875.  This
decline directly related to the termination of a representatives'  agreement. In
addition, the decrease in fee income from the loss of the large client mentioned
above also resulted in a decrease of  approximately  $19,500 in commissions  for
the quarter.

     Results from operations before income taxes decreased $44,919 from a profit
of $18,740  for the first  quarter  in 2003 to a loss of  $26,179  for the first
quarter in 2004.

     PREMIUM FINANCE

     Results of operations for the quarter ended March 31, 2004 were $104,754 as
compared  to results of  operations  of $114,994  for the same  quarter of 2003.
Revenues increased $49,313, or 27.5%, from $179,171 in the first quarter of 2003
to $228,484 in the first three months of 2004, primarily the result of increased
volume  of loans  outstanding.  Expenses  increased  $59,553  between  reporting
periods.  Increases  in  expenses  came in the  areas  of  occupancy  ($47,809),
compensation ($11,383) and postage ($2,925). These revenue and expense increases
are  primarily  the result of a new contract  with a  Lexington,  Kentucky-based
managing general agent ("Agent").

                                      -15-

<PAGE>

     On June 1, 2003, our premium finance  operation entered into a new contract
with the Agent,  which  provides for premium  financing  for policies  placed or
issued by the Agent. In addition, such operation agreed to sublease office space
from the Agent and to employ certain  employees of the Agent. The Agent extended
the contract  period until  December  31, 2005 in exchange  for  increasing  the
sublease rent from 1% of contracts  financed to 2% of contracts  financed.  As a
result of the new  contract,  premium  finance  has been  able to  significantly
increase  its  outstanding  loans from $3.1  million  at March 31,  2003 to $4.4
million at March 31, 2004.

     CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     GENERAL.  Management's  Discussion and Analysis of Financial  Condition and
     -------
Results of  Operations is based on the  consolidated  financial  statements  and
accompanying  notes  that have  been  prepared  in  accordance  with  accounting
principles  generally  accepted in the United States  ("GAAP").  Our significant
accounting  policies  are  described  in  note 2 to the  consolidated  financial
statements  contained in this report and in note 2 to the audited,  consolidated
financial  statements  contained in our Annual  Report on Form 10-K for the year
ended December 31, 2003. The  preparation of financial  statements in accordance
with GAAP requires  management to make estimates and assumptions that affect the
reported amounts of assets,  liabilities,  revenues and expenses, and disclosure
of contingent  assets and  liabilities.  Actual  results could differ from those
estimates.  Management  bases its  estimates  on  historical  experience  and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances,  the results of which form the basis for making  judgments  about
the carry values of assets and  liabilities  that are not readily  apparent from
other sources. Certain policies inherently have a greater reliance on the use of
estimates,  assumptions and judgments and as such, have a greater possibility of
producing results that could be materially  different than originally  reported.
However,  we  are  not  currently  aware  of any  reasonable  likely  events  or
circumstances  that  would  result  in  materially  different  results.   Senior
management  has discussed  the  development,  selection and  disclosure of these
policies and estimates with our company's independent auditor and the members of
the audit,  nominating  and  compensation  committee of our board of  directors.
Management  believes the following critical accounting policies reflect its more
significant   estimates  and   assumptions   used  in  the  preparation  of  the
consolidated financial statements. This discussion should be read in conjunction
with the  audited,  consolidated  financial  statements  and the  related  notes
contained  in our  Annual  Report on Form 10-K for the year ended  December  31,
2003.

     VALUATION OF LONG-LIVED ASSETS,  INCLUDING  GOODWILL.  We review intangible
     ----------------------------------------------------
assets and our operating assets,  including goodwill, for impairment when events
or changes in  circumstances  indicate the carrying value of an asset may not be
recoverable. Our asset impairment review assesses the fair value of assets based
on the future cash flows the assets are expected to generate. An impairment loss
is recognized  when  estimated  discounted  future cash flows expected to result
from the use of the asset plus net proceeds  expected  from  disposition  of the
asset (if any) are less than the carrying value of the asset. This approach uses
our estimates of future market growth,  forecasted  revenue and costs,  expected
periods the assets will be utilized and the appropriate  discount methods.  Such
evaluations  of impairment  of long-lived  assets,  including  goodwill,  are an
integral part of, but not limited to, our strategic  reviews of our business and
operations performed in conjunction with restructuring  actions. When impairment
is identified,  the carrying value of the asset is reduced to its estimated fair
value. Deterioration of our business in a geographic region or within a business
segment in the future could also lead to impairment  adjustments  as such issues
are identified.

     Critical  estimates in valuing  goodwill  include,  but are not limited to,
those  discussed  above.  Management's  estimates  of fair  value are based upon
assumptions  believed to be reasonable,  but which are inherently  uncertain and
unpredictable  and,  as a result,  actual  results  may differ  from  estimates.
Effective  January 1, 2002, we adopted  Financial  Accounting  Standard No. 142,
"Goodwill  and Other  Intangible  Assets," at which time  goodwill  amortization
ceased.  Goodwill was tested for  impairment  by comparing  implied value to its
carry value. Based upon a third-party valuation as of December 31, 2003, we have
determined that our recorded  goodwill was not impaired during the quarter ended
March 31, 2004. Impairment adjustments after adoption of the accounting rule, if
any, are required to be recognized as operating expense when determined.

                                      -16-

<PAGE>

     ACCRUED  LIABILITY FOR  OPERATIONAL  ISSUES.  During 2002,  we  experienced
     -------------------------------------------
operational  issues  with  respect  our  mutual  fund  administrative   services
affiliate,  which issues primarily were related to problems  associated with our
reconciliation of various accounts. In connection  therewith,  we established an
$854,000  reserve,  $454,000  of which was  related to  possible  reconciliation
losses and  $400,000 of which was related to estimated  costs to  ascertain  the
extent and nature of such  losses and to design  control  procedures  and system
enhancements to ensure that such reconciliation issues did not recur. During the
first  quarter of 2003,  we  expended  $44,561 of the  $400,000  reserve and the
remainder was expended  during the nine months ended  December 31, 2003.  During
the year ended  December 31, 2003 we expended  $292,900 of the $454,000  reserve
(no amount of such reserve was expended  during the first  quarter of 2003).  At
December 31, 2003 and March 31, 2004, we had $161,100 and 148,753, respectively,
of such reserves still recorded on our records.

     REVENUE RECOGNITION.  Our trust and retirement services operation's revenue
     -------------------
reflects a revenue sharing arrangement,  which is recorded on the accrual basis.
The  fees  earned  by the  operation  and  paid to a third  party  are  based on
established fee schedules and contracts.  Generally,  fees paid to our trust and
retirement services operation by the various mutual funds in which client assets
are invested are used to offset the fees due from the client.  In the event such
fees do not cover all fees due to our operation, the remainder is collected from
the client. In the event such fees exceed the fees due, a credit is given to the
client.  Revenue is recorded as it is earned each month based upon assets  under
management times a stated fee schedule.  Historically,  we have experienced very
low levels of deviation from recorded estimates, and we assume the estimates are
reasonable.

     ALLOWANCES  FOR  DOUBTFUL   ACCOUNTS  AND  LOAN  LOSSES.  We  evaluate  the
     -------------------------------------------------------
collectibility of our trade and financing  receivables based on a combination of
factors.  We regularly analyze our customer accounts and, in the event we become
aware of a specific customer's inability to meet its financial obligations to us
(such as in the case of  bankruptcy  filings or  deterioration  in the  client's
financial  position or operating  results),  we record a reserve for bad debt or
loan loss to reduce the related receivable to an amount we reasonably believe is
collectible.   If  circumstances  related  to  specific  customers  change,  our
estimates of the recoverability of receivables could be further adjusted.

     TAXES ON  EARNINGS.  Our  effective  tax rate is low because of our federal
     ------------------
income tax net operating  loss  carryforwards.  We record the tax benefit of the
net operating loss when realized.

LIQUIDITY AND CAPITAL RESOURCES

     LIQUIDITY.  Our primary  sources of  liquidity  historically  have been and
     ---------
continue to be cash flow from  operating  activities,  as well as cash generated
through our private  placements  in 1998 and 1999 and the sale of our  insurance
and banking subsidiaries in 2001 and 2003, respectively.

     The net  increase  in cash and cash  equivalents  at March  31,  2004  from
December  31,  2003 was  $147,979.  Net cash  provided by  investing  activities
increased $1,209,976. Of such increase,  $3,209,319 was related to proceeds from
the sale of securities and mutual funds,  which was used to fund the increase in
restricted  cash of $1,940,688  due to the contract  settlement  with our former
general counsel and associate general counsel.  Capital  expenditures  accounted
for a $42,881 usage of cash in investing activities.  Net cash used in operating
activities  was  $1,071,737.  This  included a cash  payment due to the contract
settlement  reflected  in the  payment of  $1,251,748.  Excluding  the  contract
settlement  of  $1,251,748,  net  cash  provided  by  operating  activities  was
$180,013. At March 31, 2004, our premium finance company had outstanding debt of
$65,000  under  a $2.5  million  bank  line of  credit  agreement.  This  amount
increased  $10,000 from December 31, 2003. The debt is secured with  receivables
from premium financings and bears interest at the prime rate. In addition, as of
March 31, 2004,  our premium  finance  company had a  $2,430,000  line of credit
funded by Unified Financial Services, Inc.

                                      -17-
<PAGE>


     CAPITAL RESOURCES.  Total stockholders' equity was $13,512,153 at March 31,
     -----------------
2004 compared to  $13,486,626 at December 31, 2003. The increase in total equity
was due to change in net  income.  We had no  material  commitments  for capital
expenditures as of March 31, 2004.

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     There has been no  material  change  from the  information  reported in our
Annual Report on Form 10-K for the year ended December 31, 2003.

ITEM 4.       CONTROLS AND PROCEDURES

     As required by Rule 13a-15 under the  Securities  Exchange Act of 1934,  as
amended, our company's management, with the participation of our chief executive
officer and chief financial  officer,  evaluated the effectiveness of the design
and operation of our  disclosure  controls and  procedures as of March 31, 2004.
Based on that  evaluation,  our chief  executive  officer  and  chief  financial
officer  concluded that our company's  disclosure  controls and procedures  were
effective  as of  March  31,  2004.  As a  matter  of  practice,  our  company's
management  continues to review and document disclosure controls and procedures,
including internal controls and procedures for financial reporting. From time to
time, we may make changes aimed at enhancing the  effectiveness  of the controls
and to ensure that the  systems  evolve  with our  business.  During the quarter
ended March 31, 2004,  there were no material  changes in our internal  controls
over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.

                                      -18-
<PAGE>



PART II.          OTHER INFORMATION

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  See Exhibit Index attached hereto.

         (b)      Reports on Form 8-K.

                  We did not file any Current Reports on Form 8-K during the
                  quarter ended March 31, 2004


                                      -19-
<PAGE>



                                   SIGNATURES


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

                                   UNIFIED FINANCIAL SERVICES, INC.
                                   (Registrant)



Dated:  May 12, 2004               By:  /s/ John S. Penn
                                        ----------------------------------------
                                        John S. Penn, President, Chief Executive
                                        Officer and Acting Chairman



Dated:  May 12, 2004               By:  /s/ Thomas G. Napurano
                                        ----------------------------------------
                                        Thomas G. Napurano, Executive Vice
                                        President and Chief Financial Officer

                                      -20-
<PAGE>



                                  EXHIBIT INDEX

Ex. No.                            Description
-------                            -----------

 10.1           Asset Contribution Agreement, dated as of March 2, 2004, by and
                among  Oaktree Asset Management LLC, Fiduciary Counsel, Inc. and
                Unified Financial Services, Inc., is filed herewith.

 31.1           Certification of Chief Executive Officer pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002, is filed herewith.

 31.2           Certification of Chief Financial Officer pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002, is filed herewith.

 32.1           Certification of Chief Executive Officer and Chief Financial
                Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002, is filed herewith.

                                      -21-

<PAGE>