Back to GetFilings.com
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
UNIFIED FINANCIAL SERVICES, INC.
FORM 10-Q
INDEX
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
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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.
-1-
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
(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
=========== =============
The accompanying notes to financials are an integral part of these statements.
-2-
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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 - -
The accompanying notes to financials are an integral part of these statements.
-3-
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
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
========== ============
The accompanying notes to financials are an integral part of these statements.
-4-
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-
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-
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).
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
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-
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-
Note 7 - DISCLOSURES ABOUT REPORTING SEGMENTS (Continued)
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
============= =============
-9-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-