Inner Unicorn by Kriss Erickson
Approx. 84,930 words.
Published on September 26, 2012 by
Deila (an elf), Jaime, and Falimar have been thrown out of Brodantia and Falimar has been tragically turned back into a common horse by Lightningbolt, the King of the Unicorns. Things can't get any worse.
But they do when the trio are captured by dwarves under the supervision of Skalle, dragged back home, and sold to the Rivermaster as slaves.