<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]   Annual Report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934
For the fiscal year ended December 31, 2000
                  or
[ ]   Transition Report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934 For the transition period from ___________ to ___________

                                    000-29337
                              (Commission File No.)

                         SUMMIT BROKERAGE SERVICES, INC.
                 (Name of Small Business Issuer in Its Charter)

                      FLORIDA                                   59-3041826
  (State or other jurisdiction of incorporation or           (I.R.S. Employer
                   organization)                           Identification No.)

    25 FIFTH AVENUE, INDIALANTIC, FLORIDA                        32903
  (Address of principal executive offices)                     (Zip Code)

         Issuer's Telephone Number, including area code: (407) 245-3636

                    Securities registered under Section 12(b)
                    of the Securities Exchange Act of 1934:

                                      NONE

                    Securities registered under Section 12(g)
                    of the Securities Exchange Act of 1934:

                         COMMON STOCK, $.0001 PAR VALUE

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. [ ]

Issuer's revenues for its most recent fiscal year were $6,979,686.

As of March 8, 2001, the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was
recently sold was $953,573.

As of March 8, 2001, there were 4,654,525 shares of issuer's common stock
outstanding.


<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE
                                                                                                                   ----


<S>                                                                                                                <C>
PART I...........................................................................................................    1

   ITEM 1.     DESCRIPTION OF BUSINESS...........................................................................    1
   ITEM 2.     DESCRIPTION OF PROPERTY...........................................................................    5
   ITEM 3.     LEGAL PROCEEDINGS.................................................................................    5
   ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................    5

PART II..........................................................................................................    5

   ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........................................    5
   ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............    6
   ITEM 7.     FINANCIAL STATEMENTS..............................................................................   11
   ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..............   11

PART III.........................................................................................................   12

   ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
               WITH SECTION  16(A) OF  THE EXCHANGE ACT..........................................................   12
   ITEM 10.    EXECUTIVE COMPENSATION............................................................................   13
   ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...................................................   15
   ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................................   16
   ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K..................................................................   17
</TABLE>


INTRODUCTORY COMMENT

         Throughout this Annual Report on Form 10-KSB, the terms "we," "us,"
"our," "Summit" and "our company" refer to Summit Brokerage Services, Inc., a
Florida corporation, and, unless the context indicates otherwise, includes our
wholly owned subsidiaries: Summit Holding Group, Inc., Summit Financial Group,
Inc. and Summit Insurance Agency Corporation.

FORWARD LOOKING STATEMENTS

         This contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. When used in this Annual Report, the words
"may," "will," "expect," "anticipate," "continue," "estimate," "project" or
"intend" and similar expressions identify forward-looking statements regarding
events, conditions and financial trends in connection with our future plan of
operations, business strategy, operating results and financial position.
Discussions containing such forward-looking statements may be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Current shareholders and prospective investors are cautioned that
any forward-looking statements are not guarantees of future performance. Such
forward-looking statements by their nature involve substantial risks and
uncertainties, certain of which are beyond our control, and actual results for
future periods could differ materially from those discussed in this Annual
Report, depending on a variety of important factors, among which are the success
or failure of our management's efforts to implement our business strategy; the
level of acquisition opportunities available to us and our ability to price and
negotiate such transactions on a favorable basis, our ability to properly manage
growth and successfully integrate acquired companies and operations, our ability
to compete with major established companies, our ability to attract and retain
qualified personnel, and other risks which may be described from time to time in
future filings with the Securities and Exchange Commission.


                                       i


<PAGE>   3




                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

A.       GENERAL OVERVIEW AND HISTORY

         We are an independent broker dealer offering financial services to
clients across the country and are a National Association of Securities Dealers,
or NASD, member firm. As of the date of this Annual report, we currently have 51
branch offices nationwide and five new branch offices pending licensing.

         We provide the following financial services to our clients through our
Registered Representatives:

         -        Full service and discount stock and bond brokerage services;
         -        Load and no-load mutual fund executions;
         -        Asset allocation services for mutual funds, stocks and bonds;
         -        Mortgage origination;
         -        Life, health and disability insurance coverage;
         -        Money market funds;
         -        Clearing services for its branch offices;
         -        Registered Investment Advisor services; and
         -        Financial Planning Services.

         Richard Parker, the founder of our company, is our Chairman of the
Board, Chief Executive Officer and majority shareholder. Mr. Parker founded
Summit in 1994 as a "one-man firm," and was our company's sole source of revenue
and management.

         Our branch offices are located throughout the United States, with the
majority located in Florida. While we service retail customers for the most
part, we also service a number of corporate and institutional clients. We are
essentially a "financial planning" firm, whereby a Registered Representative,
who we sometimes refer to as "Planners," discusses a clients' financial needs
and objectives in detail, develops a plan (at no cost), and implements the plan
with the clients' approval.

         We have a history of significant operating losses, as outlined in "Item
6. Management's Discussion and Analysis of Financial Condition and Results of
Operations." While we believe that our operations and current capital resources
will be sufficient to fund our working capital needs through fiscal year 2001,
we cannot assure you that we will be able to limit our future negative cash flow
or that we will be able to obtain any outside financing that we may require in
the future. Additionally, unless we are able to continue increasing our
revenues, adding new branch offices and Registered Representatives, and/or
significantly reduce our operating costs, we may need to fund any future
negative cash flows from additional debt or equity financing. Our failure to
obtain the amount of any financing that we may need in the future could have a
material adverse effect on our operations and our ability to continue as a going
concern.

B.       ORGANIZATION

         Summit, incorporated under the laws of the State of Florida in
September 1993, has three wholly owned subsidiaries:

         -        Summit Holding Group, Inc., a holding company;
         -        Summit Financial Group, Inc., a registered investment advisor;
                  and
         -        Summit Insurance Agency Corporation, an insurance business

         Our common stock is quoted on the Over-the-Counter Electronic Bulletin
Board under the symbol "SUBO" and began trading in June 1998.


                                      -1-
<PAGE>   4


         We are located in the Summit Building located at 25 Fifth Ave.,
Indialantic, Florida, 32903; telephone: 321-724-2303; web site:
www.summitbrokerage.com.

C.       INDUSTRY BACKGROUND

         The financial services industry has been in existence for over 100
years. Traditionally, the industry came from three separate areas: the banking
industry, the brokerage industry and the insurance industry. Over the last 25
years, the three industries have slowly merged together to form an industry now
commonly referred to as `financial services.' The industry offers financial
planning services to a wide array of individuals and companies. With the
introduction of the Internet, a host of industry publications, and several
financial television networks, the general public has become increasingly versed
with the financial instruments available and much more savvy about investments
in general.

         Over the last two decades, 401K plans have become the investment of
choice for many investors. Companies desiring to limit their ongoing liability
have moved away from defined benefit and profit sharing plans, electing to
utilize the 401K to invest retirement funds for their employees. Many investors
begin working with the financial services industry through participation in
their company's 401(k) plan.

D.       PRODUCTS

         Summit offers a broad range of products to the investing public through
our Registered Representatives and branch offices. These products include mutual
funds, variable annuities, individual stocks, bonds and insurance products and
managed money accounts.

         We earn income, which we record as "commission revenue," as products
are sold by our Registered Representatives. We receive commission revenue from
our product suppliers, such as mutual fund companies or insurance companies. We
then pay out a percentage of this amount, which we record as "commission
expense," to the Registered Representative who sold the product, in accordance
with the contract agreement between us and the Registered Representative.

         Our Registered Representatives offer "package products" to the
investing public, which include mutual funds, variable annuities and unit
investment trusts. This term describes a package of securities, usually common
stocks, which are managed by an investment company. While many are licensed to
sell individual stocks and bonds, it is a relatively small percentage of
Summit's business, amounting to less than 12% of revenue. We believe that the
use of a package product provides:

         -        More suitable products to the general public;
         -        More efficient management of the funds;
         -        A reduction of risks from buying individual securities; and
         -        An easier process of supervision by the Summit compliance
                  team.

         The managed accounts are charged a fee which provides a steady base of
revenue for Summit in both good and bad markets. This provides a more
predictable stream of income. While investors are sometimes reluctant to buy
individual securities and to pay what they may consider high commission fees,
they have invested heavily in mutual funds and variable annuities in recent
years. These products are usually part of a group of mutual funds sometimes
referred to as a "family." It is possible for the investor, through management
of these accounts, to move from fund to fund within the family, and take
advantage of sectors of the economy which are experiencing growth which may be
greater than that of other sectors at that particular time. For example, an
investor may be in a growth and income fund and move to a technology fund based
upon the advice of an investment adviser. By managing the investor's portfolio
within the mutual fund family and advising as to when the move should be made,
the adviser continues to earn the fee from the amount of money under management
rather than a one-time commission, which may or may not materialize based upon
whether or not the stock markets move up or down.

         For example, if an investor has $200,000 under management, Summit will
realize a management fee of 1.75%, or $3,500, on an annual basis. Even if the
value of portfolio decreases to $150,000, Summit continues to realize income
from the management fee in the amount of $2,625, which is less than in the
previous year. On the


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<PAGE>   5


positive side, if the portfolio grew to $250,000, Summit will realize an annual
fee $4,375. Currently, Summit has over $27 million under management and is
adding funds on a monthly basis. By offering our product mix, we believe that
our Registered Representatives will be viewed more as advisers than traditional
stock brokers. This helps by creating personal relationships with the clients
that provide a long and mutually beneficial working relationship.

         Revenues, by product, for fiscal 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                    2000                             1999
                                                          ------------------------         ------------------------

<S>                                                       <C>                <C>           <C>                <C>
Mutual funds .....................................        $ 2,775,635           45%        $ 2,318,800           49%
Variable annuities ...............................        $ 2,082,181           34%        $ 1,526,100           32%
Equities .........................................        $   576,645            9%        $   522,000           11%
Registered Investment ............................                               7%        $   153,900            3%
Advisory Fees ....................................        $   278,091
Insurance ........................................        $   348,547            5%        $   145,300            3%
Miscellaneous ....................................        $   787,873           12%        $    90,500            1%
                                                          -----------        -----         -----------        -----
     Total .......................................        $ 6,848,973          100%        $ 4,756,600          100%
                                                          ===========        =====         ===========        =====
</TABLE>

E.       BUSINESS STRATEGY

         Since 1995, we have implemented a strategy of affiliating independent
financial planning offices across the country with our company. These
independent offices bear the full expense of the day-by-day operations of their
independently owned branch office. We receive, on average, a 10% to 20 over-ride
of the gross revenue provided by these branch offices. In addition, there are
several other forms of income we derive from our branches.

         One additional source of revenue is Registered Investment Advisory, or
RIA, fees. We derive revenue in the form of fee-based management of individual
stocks and/or bond accounts and mutual fund accounts offered by our Registered
Representatives. Much of the management of these funds are out-sourced to
outside managers for the day-by-day management.

         Another source of revenue comes from the wide array of insurance
products we offer, including life insurance, fixed annuities, long-term care and
disability insurance.

         Revenues are also derived from our Master Marketing Area business
model. In order to build a more rapid method of distribution, we contract with
experienced and well-capitalized industry producers for a geographical location
in the country, usually three-to-five counties. These producers receive the
right to add offices and Registered Representatives in that area, in return for
the contractual obligation to build out that territory within a specific period
of time, which is usually three years.

F.       MARKET SEGMENTS

         One of the positive aspects of the financial services industry is that
virtually any person or company is a potential client. In the early years of
life, young families invest for college funding and begin to prepare for their
retirement. Middle age families focus more on retirement planning and capital
accumulation to achieve other financial goals. The seniors' market focuses on
preservation of capital and providing income through the retirement years.

         With a growing population, there is no sign that these trends will
diminish. Based on interaction with our clients, it is our belief that most
people feel that the days of relying on government to provide for their
retirement via Social Security are all but gone. To maintain sufficient income
during retirement requires investing on an ongoing basis throughout their
lifetime. This only serves to help the financial services industry continue the
same growth it has seen for the last 12 years. It is our belief, based upon
current economic conditions, that for individuals' investments to appreciate,
they must find alternative products, other than savings accounts, CDS and the
like, in which to invest their money. Securities investments, while representing
an inherent risk to principal, also provide a means for appreciation. While
future performance of the securities markets cannot be predicted from past


                                      -3-
<PAGE>   6


performance, we believe as long as individuals seek these alternative means for
capital appreciation, securities markets have the potential to continue at
substantial growth rates. We believe this is supported by the growth in the
securities markets from 1987 through 1999.

G.       SEASONALITY AND CYCLICAL FACTORS

         Our revenues are affected only slightly by the traditional U.S.
vacation seasons, such as July, August and December. Our revenues may be more
adversely affected by cyclical factors, such as financial market downturns,
problems or recessions in the U.S. or global economies. These downturns cause
investor concern, which has historically resulted in fewer transactions and less
investing through broker/dealers and financial planners such as Summit, thereby
reducing our revenues and potential profits.

         Such conditions would present risk in the need for us to raise
additional capital to offset related significant reductions in revenues. This
was the case in the third and fourth quarters of fiscal 2000, as revenues were
significantly lower than the same periods of 1999.

H.       COMPETITION

         We compete with numerous investment banking and brokerage firms,
consulting firms and financial service companies that are larger, have more
financial resources, have longer operating histories and, in some cases, offer
more services to a client than we do. In addition, there is increasing
competition from businesses such as commercial banking and insurance companies
and certain accounting firms that now offer financial services. Businesses in
the securities industry compete primarily in the following areas:

         -        Quality and ability of professional personnel;
         -        Experience and reputation of the firm;
         -        Relative prices of services and products offered;
         -        The scope of products and services; and
         -        The efficiency of back office operations.

         We have focused our efforts on positioning our company competitively by
targeting our services to middle-market companies providing the with
competitively priced products and services. Our targeted markets are those we
believe are not adequately served by, and not the primary focus of, the larger
firms.

I.       EMPLOYEES

         As of December 31, 2000, we employed 20 full-time people, consisting of
five in management and 15 in general staff positions. We also contract with over
100 licensed Registered Representatives, who are engaged by us as independent
contractors. None of our employees are represented by a labor union or are
subject to a collective bargaining agreement. We believe that our relations with
our employees are good.

J.       REGULATION.

         The securities industry in the United States is subject to extensive
regulation under various federal and state laws and regulations. While the SEC
administers most of the federal securities laws, much of the regulation of the
securities industry is subject to various self regulatory organizations such as
the NASD. The self regulatory organizations, among other things, promulgate
regulations and provide oversight in the following areas:

         -        Sales practices;
         -        Trade practices among broker-dealers;
         -        Capital requirements;
         -        Record keeping; and
         -        Conduct of employees and affiliates of member organizations.


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<PAGE>   7


         The SEC and the self regulatory organizations also have the authority
to conduct administrative proceedings which can result in the censure, fine,
suspension or expulsion of a broker-dealer, its employees or officers. Also, new
legislation, changes in the rules and regulations promulgated by the SEC or self
regulatory organizations, or changes in the interpretation or enforcement of
existing laws and rules often directly affect the operation and profitability of
broker-dealers. The stated purpose of much of the regulation of broker-dealers
is the protection of customers and the securities markets rather than the
protection of creditors and shareholders of broker-dealers.

ITEM 2.  DESCRIPTION OF PROPERTY

         We lease approximately 6,000 square feet of office space for
approximately $9,600 a month pursuant to a lease that expires in October 2007.
The lessor is First America Living Trusts, Inc., an entity majority owned by
Richard Parker, our Chairman and Chief Executive Officer.

ITEM 3.  LEGAL PROCEEDINGS

         We are not involved in any material legal proceedings or litigation,
and we are not aware of any pending litigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is traded in the Over-the-Counter market and is quoted
on the Electronic Bulletin Board under the symbol "SUBO." The following table
represents the range of the high and the low last sale prices, as reported by
the NASDAQ Trading and Market Services, for each fiscal quarter for the last two
fiscal years ended December 31, 1999 and 2000. These quotations represent prices
between dealer, may not include retail mark-ups, mark-downs or commissions, and
may not necessarily represent actual transactions.

MARKET INFORMATION

<TABLE>
<CAPTION>
             FISCAL QUARTER ENDED                       LOW                             HIGH
             --------------------                       ---                             ----

      <S>                                              <C>                              <C>
      June 30, 1998(1)                                 $2.50                            $3.38
      September 30, 1998                               $3.00                            $3.57
      December 31, 1998                                $3.32                            $3.94
      March 31, 1999                                   $1.50                            $4.00
      June 30, 1999                                    $3.50                            $4.00
      September 30, 1999                               $2.25                            $6.13
      December 31, 1999                                $4.13                            $6.25
      March 31, 2000                                   $3.00                            $4.50
      June 30, 2000                                    $2.69                            $4.38
      September 30, 2000                               $1.56                            $3.75
      December 31, 2000                                $0.66                            $1.13
</TABLE>

--------------

(1) Trading on the Over-the-Counter Electronic Bulletin Board commenced June 24,
1998.

         On March 8, 2001, the closing price of our common stock was $0.75 and
we had approximately 167 holders of record.


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<PAGE>   8


DIVIDENDS AND DIVIDEND POLICY

         We have not paid any cash dividends on our common stock during the last
two fiscal years and we do not anticipate paying any cash dividends on our
common stock in the foreseeable future. We currently intend to retain any future
earnings for reinvestment in our business. Any future determination to pay cash
dividends will be at the discretion of our Board of Directors and will be
dependent on our financial condition, results of operations, capital
requirements and other relevant factors. However, pursuant to the terms of a
private placement of our common stock we conducted in 1997 pursuant to Rule 504
of the Securities Act and Regulation D promulgated thereunder, in December,
1999, we issued an aggregate of 5,400 shares of common stock in non-cash
dividends to the investor/shareholders who had at that time held their shares of
common stock for at least two years.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion and analysis of our consolidated financial
condition and results of operations for the fiscal years ended December 31,
2000, 1999 and 1998 should be read in conjunction with our consolidated
financial statements included elsewhere in this Annual Report.

         When used in conjunction in the following discussions, the words
"believes," "anticipates," "intends," "expects," and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties, which could cause results to differ materially
from those projected, including, but not limited to, those set forth in "Risk
Factors" of this Item 6.

A.       GENERAL DISCUSSION OF THE COMPANY

         Summit, an NASD member firm, is an independent broker-dealer offering
financial services to clients across the country via Registered Representatives.

         In 1997, we began an aggressive expansion of new branch offices. In
order to accomplish this, it was necessary to build up our infrastructure,
including additional management and staff personnel, computer systems and
offices. These increased expenditures resulted in lower earnings and the need
for additional capital infusions. Therefore, from 1997 through 1999, our
financial statements reflect significant losses during this period of building
current and future revenues, while we were raising the necessary capital through
two private offerings of our common stock.

         For more information about our ability to continue as a going concern,
please refer to the notes to our consolidated financial statements included
elsewhere in this Annual Report.

B.       RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 2000 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1999

         Revenues increased in fiscal 2000 by $2,223,067, or 47%, to $6,979,686
from $4,756,619 in fiscal 1999. The increase was due to several factors:

         -        the large increase, from 39 to 51, in the number of branch
                  offices from 1999 to 2000;
         -        the increased revenues from existing offices, which are those
                  added prior to 1999; and
         -        an increase in new offices with higher producing registered
                  representatives.

         Expenses increased in fiscal 2000 by $2,134,416, or 39%, to $7,625,045
from $5,490,629 in fiscal 1999. The higher expenses were also attributable to
the related cost of the increased revenue - commissions expense, which represent
the payments to the Registered Representatives for their portion of the revenue.

         Non-cash expenses for amortization of unearned stock compensation
increased in fiscal 2000 by $134,524, to $349,028 from $214,504 in 1999.
Amortization of unearned stock compensation is explained further in note 7 of
the notes to our consolidated financial statements.


                                      -6-
<PAGE>   9


FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1998

         Revenues increased in fiscal 1999 by $1,862,340, or 65%, to $4,756,619
from $2,894,279 in fiscal 1998. The increase was due to several factors:

         -        the large increase, from 24 to 39, in the number of branch
                  offices from 1998 to 1999;
         -        the increased revenues from existing offices, which were those
                  added prior to 1999; and
         -        an increase in new offices with higher producing registered
                  representatives.

         Expenses increased in fiscal 1999 by $2,086,678, or 61%, to $5,490,629
from $3,403,951 in fiscal 1998. The higher expenses were also attributable to
the related cost of the increased revenue - commissions expense, which
represents the payments to the Registered Representatives for their portion of
the revenue.

         For 1999, we incurred higher non-cash expenses as follows:

<TABLE>
         <S>                                                                        <C>
         Reserve for deferred tax asset                                             $ 139,000
         Amortization of unearned stock compensation                                  214,504
         Reserve for uncollectable receivable                                          31,040
         Capitalized marketing expenses written off                                     8,828
                                                                                    ---------
                  Total 1999 Non-Cash Expenses                                      $ 393,372
                                                                                    =========
</TABLE>

C.       LIQUIDITY AND CAPITAL RESOURCES

         Historically, our cash flows from operations have been negative and
have been funded by stock issuances. During the first and second quarters of
fiscal 2000, we succeeded in building our revenue base to a level at which we
could provide sufficient cash flow to meet existing operating costs. Until these
levels of revenue resume, we will have a need for additional outside capital in
order to meet operating costs in the near term. We are presently attempting to
increase revenue through additional new sources, such as insurance products sold
through our new Insurance Division, and through increased equities transactions
provided by our new Trading Desk revenue center.

         Additionally, the possibility exists that additional capital may be
required for future acquisition purposes in order to achieve more rapid
additional revenue growth. As a result, our business plan calls for a registered
offering either in fiscal 2001 or 2002, as market conditions permit.

         If necessary, additional liquidity is available to us through a
commitment from Richard Parker, our majority shareholder, to enter into a
subordinated debt agreement of at least $100,000. For purposes of compliance
with NASD Net Capital Rules, a subordinated loan of $40,000 from this commitment
was funded on February 24, 2000, and approved by the NASD on March 14, 2000.

         Our net cash from operations was $(567,821) at December 31, 2000 and
$(200,591) at December 31, 1999. The $367,230 reduction in cash flows from
operations is mainly the result of timing, as we received commissions at
year-end, but the related commission liability was not paid until January, 2001.

         Cash flows from financing activities were $414,223 in fiscal year 2000
and $533,422 in fiscal year 1999. As previously mentioned, these cash inflows
resulted from the our stock issuance in 2000, and from two private placements in
the previous period.

D.       SIGNIFICANT BUSINESS RELATIONSHIPS

         On January 26, 1994, we entered into a clearing agreement with First
Clearing Corporation, a subsidiary of First Union Bank (formerly Wheat First
Securities, Inc.), to execute securities orders and maintain accounts for
clients on behalf of our company.

         On December 17, 1993, we entered into a Broker-Dealer Management
Agreement with Summit Group of Companies, Inc., which we refer to as the
"management company," to provide management services for the broker-


                                      -7-
<PAGE>   10


dealer aspect of our business. These services include administrative, clerical,
accounting functions, and other services necessary to conduct our broker-dealer
business. As disclosed in note 17 of our audited consolidated financial
statements included elsewhere in this Annual Report, the management company is
wholly owned by Richard Parker, our Chairman, Chief Executive Officer and
majority shareholder. However, we are not dependent upon the services of the
management company, and the relationship ceased as of January 1, 2000.

E.       RISK FACTORS

WE HAVE HAD RECENT LOSSES.

         We realized net losses for the twelve months ended December 31, 1999
and 2000 of $645,359 and $734,010, respectively, and we cannot assure you that
we will be profitable in the near future or that our revenues will grow.

OUR AUDITORS HAVE QUALIFIED THEIR REPORT ON OUR FINANCIAL STATEMENTS WITH
RESPECT TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.

         As noted in the Report of Independent Certified Public Accountants
included elsewhere herein, we have experienced recurring net losses which raise
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments that might result from this
uncertainty.

OUR BUSINESS COULD BE HARMED BY MARKET VOLATILITY, DECLINES IN GENERAL ECONOMIC
CONDITIONS AND OTHER SECURITIES INDUSTRY RISKS.

         Our revenues are derived primarily from securities brokerage and
related services, and we expect this business to continue to account for almost
all of our revenues. We, like other securities firms, are directly affected by
economic and political conditions, broad trends in business and finance and
changes in the conditions of the securities markets in which our customers
trade. Over the past several years, the securities markets in the United States
have fluctuated considerably. A downturn in these markets would adversely affect
our operating results. Recently, the markets for technology and Internet-related
stocks have been especially volatile, and a significant downturn would have an
even greater effect on us. In previous major stock market declines, many firms
in the securities industry suffered financial losses, and the level of
individual investor trading activity decreased after these events. When trading
volume is low, our profitability would likely be adversely affected because a
significant portion of our costs do not vary with revenue. For these reasons,
severe market fluctuations could have a material adverse effect on our business,
financial condition and operating results. Some of our competitors with more
diversified business lines might withstand such a downturn in the securities
industry better than we would.

OUR BUSINESS RELIES HEAVILY ON COMPUTERS AND OTHER ELECTRONIC SYSTEMS AND
CAPACITY CONSTRAINTS AND FAILURES OF THESE SYSTEMS COULD HARM OUR BUSINESS.

         As our business expands, we face risks relating to the need to expand
and upgrade our transaction processing systems, network infrastructure and other
aspects of our technology. While many of our systems are designed to accommodate
additional growth without redesign or replacement, we may nevertheless need to
make significant investments in additional hardware and software to accommodate
growth. We cannot assure you that we will be able to predict accurately the
timing or rate of such growth, or expand and upgrade our systems and
infrastructure on a timely basis.

WE OPERATE IN A HIGHLY REGULATED INDUSTRY AND COMPLIANCE FAILURES COULD
ADVERSELY AFFECT OUR BUSINESS.

         The securities industry in the jurisdictions in which we operate is
subject to extensive regulation covering all aspects of the securities business.
The various governmental authorities and industry self-regulatory organizations
that supervise and regulate us generally have broad enforcement powers to
censure, fine, issue cease-and-desist orders or suspend or expel us or any of
our officers or employees who violate applicable laws or regulations. Our
ability to comply with all applicable laws and rules is largely dependent on our
establishment and maintenance of compliance and reporting systems, as well as
our ability to attract and retain qualified compliance and other personnel. We
could be subject to disciplinary or other regulatory or legal actions in the
future due to


                                      -8-
<PAGE>   11


noncompliance. In addition, it is possible that any past noncompliance could
subject us to future civil lawsuits, the outcome of which could have a material
adverse effect on our financial condition and operating results.

         In addition, we use the Internet as a major distribution channel to
provide products and services to our customers. Due to the increasing popularity
of the Internet, it is possible that new laws and regulations may be adopted
dealing with such issues as user privacy, content and pricing. Such laws and
regulations might increase our cost of using, or limit our ability to use, the
Internet as a distribution channel. In addition, the growth of the Internet as a
means of conducting international business has raised many legal issues
regarding, among other things, the circumstances in which countries or other
jurisdictions have the right to regulate Internet services that may be available
to their citizens from service providers located elsewhere. In many cases, there
are no laws, regulations, judicial decisions or governmental interpretations
that clearly resolve these issues. This uncertainty may adversely affect our
ability to use the Internet to expand our international operations, and creates
the risk that we could be subject to disciplinary sanctions or other penalties
for failure to comply with applicable laws or regulations.

WE FACE SUBSTANTIAL COMPETITION WHICH COULD WHICH COULD REDUCE OUR MARKET SHARE
AND HARM OUR FINANCIAL PERFORMANCE.

         All aspects of our business are highly competitive. We compete directly
with national and regional full service broker-dealers and, to a lesser extent,
with discount brokers, dealers, investment banking firms, investment advisors
and certain commercial banks. The financial services industry has become
considerably more concentrated as numerous securities firms have either ceased
operations or have been acquired by or merged into other firms. These mergers
and acquisitions have increased competition from these firms, many of which have
significantly greater equity capital and financial and other resources than we
do. With respect to retail brokerage activities, certain regional firms with
which we compete have operated in certain markets longer than we have and have
established long-standing client relationships. In addition, we expect
competition from commercial banks to increase because of recent and anticipated
legislative and regulatory initiatives in the United States to remove or relieve
certain restrictions on commercial banks' securities activities. We also compete
with others in the financial services industry in recruiting new employees and
retaining current employees.

         We expect to face increasing competition from companies offering
electronic brokerage services, which is a rapidly developing industry. These
competitors may have lower costs or provide fewer services, and may offer
certain customers more attractive pricing or other terms, than we offer. In
addition, disintermediation may occur as issuers attempt to sell their
securities directly to purchasers, including sales using electronic media such
as the Internet. To the extent that issuers and purchasers of securities
transact business without the assistance of financial intermediaries like us,
our operating results could be adversely affected.

WE MAY BE UNABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL.

         Most aspects of our business are dependent on highly skilled
individuals. We devote considerable resources to recruiting, training and
compensating these individuals. In addition, one component of our strategy is to
increase market penetration by recruiting experienced Registered
Representatives. We cannot assure that these recruiting efforts will be
successful or, if successful, that they will enhance our business, results of
operations, or financial condition.

         Competition for key personnel is intense. We cannot assure that losses
of key personnel due to such competition, or for other reasons, will not occur
in the future. The loss of any key employee, particularly Richard Parker, our
Chairman and Chief Executive Officer, could materially and adversely affect our
operating results.

         While we generally do not have employment agreements with employees
other than senior management, we attempt to retain employees with incentives
such as long-term deferred compensation plans, stock issuances or other
investment opportunities conditioned on continued employment, and options to buy
stock that vest over a number of years of employment. These incentives, however,
may be insufficient in light of the increasing competition for experienced
professionals in the securities industry, particularly if our stock price were
to decline, or fail to appreciate sufficiently. If that happened, our long-term
deferred compensation plans might no longer be a competitive incentive for our
key employees to stay with us.


                                      -9-
<PAGE>   12


FAILURE TO INTRODUCE NEW SERVICES AND PRODUCTS IN A TIMELY MANNER MAY AFFECT OUR
ABILITY TO COMPETE EFFECTIVELY.

         Our future success will depend in large part on our ability to develop
and enhance our services and products. We operate in a very competitive industry
in which the ability to develop and deliver advanced services through the
Internet and other channels is a key competitive factor. There are significant
technical risks in the development of new or enhanced services and products,
including the risk that we will be unable to:

-        effectively use new technologies;
-        adapt our services and products to emerging industry standards; or
-        develop, introduce and market enhanced or new services and products.

         Historically, we have been able to develop and introduce enhanced or
new products and services in response to market and customer requirements and
emerging industry standards. However, if in the future we are unable to develop
and introduce enhanced or new services and products quickly enough to respond to
market or customer requirements or to comply with emerging industry standards,
or if these services and products do not achieve market acceptance, our
business, financial condition and operating results could be materially
adversely affected.

WE NEED TO COMPLY WITH STRINGENT CAPITAL REQUIREMENTS.

         Many of the regulatory agencies, securities exchanges and other
industry self-regulatory organizations that regulate us have stringent rules
with respect to the maintenance of specific levels of net capital by securities
broker-dealers. Net capital is the net worth of a broker or dealer, less
deductions for certain types of assets. If we fail to maintain the required net
capital, we may be subject to suspension or revocation of our licenses, which
could ultimately lead to us being liquidated. If such net capital rules are
changed or expanded, or if there is an unusually large charge against net
capital, we might be required to limit or discontinue those portions of our
business that require the intensive use of capital. A large operating loss or
charge against net capital could adversely affect our ability to expand or even
maintain our present levels of business.

BECAUSE WE RELY ON ENCRYPTION TECHNOLOGY, OUR BUSINESS IS VULNERABLE TO SECURITY
RISKS WHICH MAY COMPROMISE OUR CUSTOMER TRANSACTION DATA.

         A significant barrier to Internet commerce is the secure transmission
of confidential information over public networks. We rely on third-party
encryption and authentication technology to facilitate secure transmission of
confidential information. We cannot assure you that advances in computer and
cryptography capabilities or other developments will not result in a compromise
of the algorithms we use to protect customer transaction data.

WE MAY BE UNABLE TO MANAGE EFFECTIVELY OUR RAPID GROWTH.

         Our rapid growth has placed significant demands on our management and
other resources and is likely to continue. To manage the currently anticipated
growth of our business, we will need to attract, hire and retain highly skilled
and motivated officers and employees. In particular, we currently need to hire a
significant number of Registered Representatives and other service personnel to
support the expansion of our branch offices and expect that a need for increased
staffing will continue. In addition, most of our competitors are facing similar
staffing shortages, making the competition for qualified employees particularly
strong. We will also need to improve existing systems and/or implement new
systems for transaction processing, operational and financial management and
training, integrating and managing our growing employee base. We cannot assure
you that we will be able to attract the employees or conduct the system
improvements necessary to manage this growth effectively or that we will be able
to achieve the rate of growth we have experienced in the past.

OUR EXPOSURE TO POSSIBLE SECURITIES LITIGATION COULD ADVERSELY AFFECT OUR
BUSINESS.

         Many aspects of the securities brokerage business involve substantial
risks of liability. In recent years, there has been an increasing incidence of
litigation involving the securities brokerage industry, including class action
and other suits that generally seek substantial damages, including in some cases
punitive damages. Any such litigation brought in the future could have a
material adverse effect on our business, financial condition and operating
results.


                                      -10-
<PAGE>   13


F.       ADDITIONAL INFORMATION

         We intend to provide an annual report to our security holders and to
make quarterly reports available for inspection by our security holders. The
annual report will include audited financial statements.

         We are subject to the informational requirements of the Exchange Act
and, in accordance with the rules and regulations of the SEC, we file reports,
proxy statements and other information.  You may inspect such reports, proxy
statements and other information at public reference facilities of the
Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549;
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; 7 World Trade Center, New York, New York, 10048; and 5670 Wilshire
Boulevard, Los Angeles, California 90036. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington, D.C. 20549, at prescribed rates. For further
information, the SEC maintains a website that contains reports, proxy and
information statements, and other information regarding reporting companies at
http://www.sec.gov or call (800) SEC-0330.

ITEM 7.  FINANCIAL STATEMENTS.

         The financial statement required by this item are set forth on pages
F-1 through F-18.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         Effective January 13, 2000, we replaced Flavin, Jackson, Zirilli &
Bouvier as the independent auditors of our financial statements. We appointed
Hoyman, Dobson & Company, P.A , effective January 13, 2000, as our independent
auditors. The termination of the client-auditor relationship was due to our
desire to engage a firm that was registered with the SEC Practice Section of the
AICPA in anticipation of filing a registration statement with the SEC.

         No report of Flavin, Jackson, Zirilli & Bouvier on our financial
statements for the past two years contained an adverse opinion, disclaimer of
opinion, nor was any such report qualified or modified as to uncertainty, audit
scope, or accounting principles. The decision to change accountants was approved
by our Board of Directors. During the two most recent fiscal years and through
the date of their letter, there were no disagreements nor differences of opinion
with Flavin, Jackson, Zirilli & Bouvier on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope of procedure,
which disagreements, if not resolved to the satisfaction of Flavin, Jackson,
Zirilli & Bouvier, would cause it to make reference to the subject matter of the
disagreements in connection with its report. During the two most recent fiscal
years and through the date of their letter, there were no events as listed in
Regulation S-K, Item 304, (a) (1) (v) paragraphs (A) through (D), which led to
any disagreements or differences of opinion with Flavin, Jackson, Zirilli &
Bouvier.

         We have furnished Flavin, Jackson, Zirilli & Bouvier with a copy of our
above statements, which are made in response to Item 304 (a) of the SEC
Regulation S-K (a) and have requested that Flavin, Jackson, Zirilli & Bouvier
furnish us with a letter addressed to the SEC, stating whether or not Flavin,
Jackson, Zirilli & Bouvier agrees with such statements. A copy of Flavin,
Jackson, Zirilli & Bouvier's letter, dated March 27, 2001 is attached as an
exhibit to this Annual Report.

         During the two most recent fiscal years and through the date of the
letter of Hoyman, Dobson & Company, P.A.,'s, there have been no reportable
events as defined in regulation S-K Item 304(a)-(1) (v). A copy of Hoyman,
Dobson & Company, P.A.,'s letter, dated March 26, 2001 is attached as an exhibit
to this Annual Report.


                                      -11-
<PAGE>   14


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

A.       DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the names, positions and ages of our
executive officers and directors. Directors will be elected at the annual
meeting of shareholders and serve for one year or until their successors are
elected and qualify. Officers are elected by our Board of Directors and their
terms of office are at the discretion of our Board, except to the extent
governed by employment contract.

<TABLE>
<CAPTION>
NAME                                AGE               TITLE
----                                ---               -----

<S>                                 <C>               <C>
Richard Parker                      49                Chairman of the Board and Chief Executive Officer
Mark F. Caulfield                   42                Chief Financial Officer, Secretary and Treasurer
Brian Best                          31                Director
Harry Green                         59                Director
Jack Root                           67                Director
</TABLE>

         The directors are elected annually at the annual shareholders meeting
and serve until re-elected at the next annual shareholder's meeting. All of the
current directors were elected at the annual shareholder meeting held on August
12, 2000.

         Our Board of Directors held one meeting during its fiscal year ended
December 31, 2000 and took action 17 times by written consent. We do not have an
audit committee or nominating committee.

         We established a Compensation Committee comprised of Messrs. Best and
Root. The Compensation Committee is responsible for establishing the
compensation of the Chief Executive Officer and the next four most highly-paid
executive officers, including salaries, bonuses, termination arrangements, stock
options and other incentive compensation and executive officer benefits.

         Set forth below is a brief description of the background of each of our
executive officers and directors, based on the information provided to us by
them.

         Richard Parker, Chairman of the Board and Chief Executive Officer. Mr.
Parker has served as our Chairman of the Board and Chief Executive Officer since
our inception in 1993. Mr. Parker, our founder, began his career in the
financial services industry in 1974 as a licensed realtor. In 1975, he became
the youngest licensed broker in the history of the Lakeland Board of Real Estate
when he and his mother, Doris Parker, opened R/D Parker Realty, a franchise of
Century 21, the nation's largest real estate sales organization. From 1975 to
1986, Mr. Parker sold, developed, built and managed real estate projects
primarily throughout Polk County. During that time, he was recognized as a
national sales leader for Century 21. In 1986, Mr. Parker became fully licensed
to sell securities and insurance with Dean Witter. Following his tenure with
Dean Witter, he became the branch manager of Anchor National Financial, a
SunAmerica company. With Anchor National, Mr. Parker was the second highest
producer nationally among the company's several hundred licensed
representatives. During this time, Mr. Parker incorporated and began doing
business as The Summit Financial Group, Inc. and the Summit Group of Companies.
Summit Brokerage Service Inc., a NASD licensed broker/dealer, was added to the
Summit Group of Companies by Mr. Parker in September 1993. Mr. Parker holds
series 7, 63, 65 and 24 licenses, as well as life insurance and real estate
licenses. Mr. Parker is employed full-time at Summit.

         Mark Caulfield, Chief Financial Office, Secretary and Treasurer. Mr.
Caulfield has served as our Chief Financial Officer, Secretary and Treasurer
since January 1998. Mr. Caulfield is a Certified Public Accountant with over 20
years in financial management, serving in such key roles as Chief Financial
Officer, Vice President of Finance and Administration, as well as Controller. He
has been involved with a number of similar rapidly growing companies, including
such industries as hospitality management, travel and tourism, restaurant, and
nuclear power service contracting. He has served on numerous business,
charitable, and community boards and committees. He


                                      -12-
<PAGE>   15


and his family currently devote a great deal of time to church and Rotary
involvement. He is also a member of several professional associations, including
the American Institute of Certified Public Accountants. Mr. Caulfield is
employed full-time at Summit.

         Brian R. Best, Director. Mr. Best was elected a director of Summit in
November 1999. Since 1998, Mr. Best has been a medical center representative for
COR Therapeutics, a bio-pharmaceutical company with a breakthrough product in
cardiac care. He is responsible for managing 12 coastal hospitals and over 100
physicians. Mr. Best was employed to create a new standard of care for cardiac
patients in the Emergency Room and in percutaneous coronary interventions with
the use of Integrilin. He is assisting in the development of research facilities
for NDA studies and international company representatives. From 1992 to 1998, he
was employed by Abbot Laboratories. As a Neurological Sales Specialist, he
marketed anti-consultants and anti-psychotics to neurologists and psychiatrists.
As PPR/SWAT, he fulfilled a variety of assignments during this time, including
three relocations to rebuild vacant territories. He received a Bachelor of
Science degree from Wake Forest University in 1992. Mr. Best is not employed
full-time at Summit.

         Harry S. Green, Director. Mr. Green was elected a director of Summit in
August 1998. From 1966 until he retired in 1994, Mr. Green worked for Wal-Mart.
After graduation from University of Arkansas in 1970, he started on their
management program and was promoted to District Manager in 1977. In 1984 he was
promoted to Regional Vice President and in 1988 he was Regional Vice President
of Sam's. From 1990 to 1994, he worked with SuperCenters and was Operations
Director for Bud's. Mr. Green is not employed full-time at Summit.

         Jack B. Root, Director. Mr. Root was elected a director of Summit in
August 1998. Mr. Root is a 40 year veteran of the financial service industry. He
began his career as a financial advisor and has worked his way up through the
ranks of the industry. Mr. Root developed the Successful Money Management
Seminar and has since helped develop similar courses for Canada and New Zealand.
He has presented over 3,500 hours of seminar instruction and has prepared
financial plans for hundreds of individuals and families. He retired from
Successful Money Management Seminars, Inc., in 1998. Mr. Root is not employed
full-time at Summit.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Based solely upon a review of Forms 3, 4 and 5 and amendments to these
forms furnished to us, all parties subject to the reporting requirements of
Section 16(a) of the Exchange Act filed all such required reports with respect
to fiscal year 2000. All such reports, however, were not filed on a timely
basis.

ITEM 10.   EXECUTIVE COMPENSATION

         The following table sets forth all compensation awarded to, earned by,
or paid for all services rendered to Summit during the fiscal years ended
December 31, 1998, 1999 and 2000 by our Chief Executive Officer and any
executive officer who received compensation in excess of $100,000 during those
years.


                                      -13-
<PAGE>   16
                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                          LONG-TERM
                                                         -------------------------       COMPENSATION
                                                          ANNUAL COMPENSATION (1)           AWARDS
                                                         -------------------------        ----------
           NAME AND                                                                       SECURITIES
           PRINCIPAL                     FISCAL                                           UNDERLYING
           POSITION                       YEAR            SALARY             BONUS          OPTIONS
           ---------                    --------         --------            -----        ----------

           <S>                          <C>              <C>                 <C>          <C>
           Richard Parker               12/31/00         $ 45,756             -0-          404,440(2)
           Chairman and                 12/31/99         $188,471             -0-           95,000(3)
             Chief Executive            12/31/98         $147,200             -0-               -0-
             Officer
</TABLE>


-----------------------

(1)  The amounts reflected in the above table do not include any amounts for
     perquisites and other personal benefits extended to the Named Executive
     Officer. The aggregate amount of such compensation for the named executive
     officer is less than 10% of the total annual salary and bonus.

(2)  Represents options granted in 2000 that are exercisable at $2.50 per share
     until 2010, 394,440 of which replaced the options granted in 1999 in
     footnote 3 below.

(3)  Represents an option granted in 1999 that is exercisable at $2.50 per share
     until December 31, 2009. This option was canceled and replaced by the
     options described in footnote 2 above.

                      STOCK OPTIONS GRANTED IN FISCAL 2000

         The following table sets forth certain information concerning grants of
options made during fiscal 2000 to the named executive officer.

<TABLE>

                                                                                  POTENTIAL REALIZED VALUE
                                                                                   AT ASSUMED ANNUAL RATES
                       NUMBER OF       PERCENT                                         OF STOCK PRICE
                      SECURITIES      OF TOTAL                                          APPRECIATION
                      UNDERLYING    OPTIONS/SARS                                     FOR OPTION TERM(1)
                       OPTIONS/      GRANTED TO      EXERCISE                     ------------------------
                         SARS         EMPLOYEES       OR BASE      EXPIRATION
NAME                   GRANTED (#)     IN 2000      PRICE ($/SH)      DATE          5% ($)        10% ($)
--------------        ---------     ------------    -----------    ----------       -----         ------

<S>                   <C>           <C>             <C>            <C>            <C>             <C>
Richard Parker          394,440          50%           $2.50       5/16/2010           0             0
                         10,000         1.3%           $2.50        8/3/2010           0             0
</TABLE>

-----------------

(1)  The dollar amounts set forth in these columns are the result of
     calculations at the five percent and ten percent rates set by the
     Securities and Exchange Commission, and therefore are not intended to
     forecast possible future appreciation, if any, of the market price of the
     common stock.

AGGREGATE STOCK OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE

         There were no options exercised by the named executive officer during
fiscal 2000.

EMPLOYMENT AGREEMENTS

         We entered into a two-year employment agreement with Richard Parker,
our Chief Executive Officer, in May 2000. The Parker employment agreement will
expire on December 31, 2001. The Parker employment agreement provides that, in
consideration for Mr. Parker's services, he is to be paid a base salary of
$155,000 during the first year of the agreement, and granted an option to
purchase 320,000 shares of our common stock at an option price of $2.50 per
share. During the second year of the agreement, Mr. Parker receives a $5,000
increase in his base salary. The contract is renewable upon agreement by both
parties. On May 16, 2000, in connection with an adjustment to Mr. Parker's
compensation arrangements, all previously granted options, none of which were


                                      -14-
<PAGE>   17


exercised, were canceled and we granted Mr. Parker immediately exercisable
non-qualified options to purchase 394,440 shares of common stock at $2.50 per
share pursuant to a stock option agreement between us and Mr. Parker. On August
3, 2000, pursuant to our 2000 Incentive Compensation Plan, Mr. Parker was
granted options to purchase an additional 10,000 shares of common stock at $2.50
per share in connection with his services as a director. All such options expire
ten years from the date of grant.

         We entered into a two-year employment agreement with Mark Caulfield,
our Chief Financial Officer, in May 2000. The Caulfield Employment Agreement
will expire on December 31, 2001. The Caulfield employment agreement provides
that, in consideration for Mr. Caulfield's services, he is to be paid a base
salary of $60,000 during the first year of the agreement, and granted an option
to purchase 160,000 shares of our common stock at an option price of $2.50 per
share. During the second year of the agreement, Mr. Caulfield receives a $5,000
increase in his base salary. The contract is renewable upon agreement by both
parties. On May 16, 2000, in connection with an adjustment to Mr. Caulfield's
compensation arrangements, all previously granted options, none of which were
exercised, were canceled we granted Mr. Caulfield immediately exercisable
non-qualified options to purchase 160,000 shares of common stock at $2.50 per
share pursuant to a stock option agreement between us and Mr. Caulfield. All
such options expire ten years from the date of grant.

2000 INCENTIVE COMPENSATION PLAN

         Our 2000 Incentive Compensation Plan was approved by our Board of
Directors in July 2000 and by our shareholders at the annual meeting of
shareholders held on August 12, 2000. A total of 900,000 shares of common stock
have been reserved for issuance under the 2000 Incentive Compensation Plan. As
of the date hereof, pursuant to the 2000 Incentive Compensation Plan, we have
granted immediately exercisable options to purchase an aggregate of 40,000
shares of common stock at an exercise price of $2.50 per share, expiring ten
years from the date of grant, comprised of options to purchase 10,000 shares of
common stock to each of our four directors granted on August 3, 2000.

DIRECTOR COMPENSATION

         Currently, directors do not receive compensation for serving on our
Board other than the grant of stock options from time to time at the discretion
of our Board. Directors are reimbursed for their reasonable expenses incurred in
attending Board on Committee meetings.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following table sets forth certain information as of March 8, 2001
with respect to the beneficial ownership of common stock by:

         -        each person who, to our knowledge, beneficially owned or had
                  the right to acquire more than 5% of the outstanding common
                  stock;
         -        each of our directors; and
         -        all executive officers and directors as a group:

<TABLE>
<CAPTION>
           NAME OF BENEFICIAL OWNER(1)(2)                              NUMBER OF SHARES          PERCENTAGE
           ------------------------------                              ----------------          ----------

           <S>                                                         <C>                       <C>
           Richard Parker (3)(4)                                          3,863,035               74.0%
           Mark F. Caulfield (5)                                            180,000                3.7%
           Harry S. Green (6)                                                87,500                1.9%
           Jack B. Root (6)                                                  57,500                1.2%
           Brian R. Best (7)                                                 27,500                 *
           All officers and directors
                as a group (5 persons) (8)                                4,215,535               77.5%
</TABLE>

---------------
* Less than one percent.


                                      -15-
<PAGE>   18


(1)      Unless otherwise noted, the address of each person or entity listed is
         Summit Brokerage Services, Inc., 25 Fifth Avenue, Indialantic, Florida
         32903.
(2)      Beneficial ownership is determined in accordance with the rules of the
         SEC and generally includes voting or investment power with respect to
         securities. Shares of common stock subject to options, warrants or
         convertible securities that are currently exercisable, or exercisable
         within 60 days of March 8, 2001, are deemed outstanding for computing
         the percentage of the person holding such options, warrants or
         convertible securities but are not deemed outstanding for computing the
         percentage of any other person. Except as indicated by footnote and
         subject to community property laws where applicable, the persons named
         in the table have sole voting and investment power with respect to all
         shares of common stock shown as beneficially owned by them.
(3)      Includes 527,675 shares owned by Richard & Joan Parker, Jt. Ten., and
         27,000 shares owned by Mr. Parker's spouse, Joan Parker.
(4)      Includes 564,440 shares issuable pursuant to a currently exercisable
         stock purchase option, 404,440 of which are held by Mr. Parker solely
         and 160,000 of which are held by Mr. Parker's spouse, Joan Parker.
(5)      Includes 160,000 shares issuable pursuant to a currently exercisable
         stock purchase option. (6) Includes 23,000 shares issuable pursuant to
         a currently exercisable stock purchase option. (7) Includes 18,000
         shares issuable pursuant to a currently exercisable stock purchase
         option. (8) Includes 788,440 shares issuable pursuant to currently
         exercisable stock purchase options.


ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         As disclosed in the notes to our financial statements included in our
Form 10-SB, as amended, we advanced certain funds on behalf of companies
wholly-owned by Richard Parker, a principal shareholder and an executive officer
of our company. During fiscal 1999 and 1998, we paid expenses of $5,739 and
$14,220, respectively, on behalf of Educational Seminars of America, Inc., a
company wholly owned by Mr. Parker, Educational Seminars of America, Inc., or
ESA. ESA conducts educational and training seminars for financial planners and
generates income from fees paid by participants. At December 31, 1999, there
remained a receivable of $19,959 for such expenses. The receivable is not
evidenced in writing and was repaid in fiscal 2000.

         We received $29,015 in commissions in fiscal 1999 from ESA for
referrals to the Seminars conducted by ESA.

         We lease approximately 6,000 square feet of office space for our
headquarters from First America Living Trust, Inc., a company wholly-owned by
Mr. Parker. Annual lease payments are $109,200 from 2000 through 2007. The lease
expires October 31, 2007. We paid rent under this lease of $115,752 in fiscal
2000, $109,874 in fiscal 1999 and $97,874 in fiscal 1998.

         We entered into a written agreement whereby we paid a management fee to
cover overhead expenses which included administrative services, clerical and
accounting to Summit Group of Companies, Inc., a company wholly-owned by Mr.
Parker. Under this agreement, the management fee is equal to 95% of our prior
month's net income. Net income is defined as gross income from whatever source,
less commissions paid to Registered Representatives and commissions re-allowed
to other broker-dealer firms and other expenses, excluding the monthly
management fee and income taxes incurred by us. The management fees may be
reduced or waived for any month where necessary to insure that our net capital
does not fall below $100,000 and/or the ratio of our aggregate indebtedness to
net capital does not exceed 1,000%, as such terms are defined by the NASD. The
term of the agreement is one year and can be extended for additional consecutive
one-year terms unless either party notifies the other at least one month prior
to the completion of any one-year term of its desire to terminate the agreement.
The management agreement was terminated effective January 1, 2000. In order to
reflect the true costs of the support services, we have instead of following the
management agreement, reflected all support services costs paid by the
management company on our behalf in our financial statements at December 31,
1999 and 1998. The total fees paid to the related party were $1,156,235 and
$885,482 for 1999 and 1998, respectively.

         Information concerning employment agreements with Richard Parker and
Mark F. Caulfield is provided under "Item 10. Executive Compensation."

         We believe that the terms of the foregoing arrangements were no less
favorable to us than we could have obtained from non-affiliated third parties.
We anticipate that all future transactions with our affiliates, if any, will be
on terms believed by our management to be no less favorable than are available
from unaffiliated third parties and will be approved by a majority of
disinterested directors.



                                      -16-
<PAGE>   19


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

A.       EXHIBITS

         Set forth below is a list of the exhibits to this Annual Report on Form
10-KSB.

<TABLE>
<CAPTION>
NUMBER              NAME
---------------     -----------------------------------------------------------------------------------------------
<S>                 <C>
3.1                 Amended and Restated Articles of Incorporation (1)
3.2                 Amended and Restated Bylaws (2)
10.1                2000 Incentive Compensation Plan (3)
10.2                Stock Option Agreement between the Company and Richard Parker (1)
10.3                Stock Option Agreement between the Company and Mark F. Caulfield (1)
10.4                Employment Agreement between the Company and Richard Parker (2)
10.5                Employment Agreement between the Company and Mark F. Caulfield (2)
10.6                Employment Agreement between William R. Turner, and Addendum thereto (2)
10.7                Form of Registered Representative Agreement (4)
16.1                Letter of Flavin, Jackson, Zirilli & Bouvier*
16.2                Letter of Hoyman, Dobson & Company, P.A.*
21.1                Subsidiaries of the Company*
23.1                Consent of Hoyman, Dobson & Company, P.A.*
</TABLE>

-----------------

* Filed herewith

(1)      Incorporated by reference to our Information Statement on Schedule 14C,
         filed September 26, 2000, file no. 000-29337.

(2)      Incorporated by reference to our Quarterly Report for the fiscal
         quarter ended June 30, 2000 on Form 10-QSB, filed August 14, 2000 and
         amended August 15, 2000, file no. 000-29337

(3)      Incorporated by reference to our Proxy Statement on Schedule 14A, filed
         July 31, 2000, file no. 000-29337.

(4)      Incorporated by reference to our Registration Statement on Form 10SB,
         filed February 4, 2000, file no. 000-29337.

B.       REPORTS ON FORM 8-K

         No reports on Form 8-K were required to be filed during the last
quarter of the period covered by this Annual Report.


                                      -17-
<PAGE>   20


                                   SIGNATURES

         Pursuant to the requirements of the Securities and Exchange Act of
1934, as amended, Summit Brokerage Services, Inc. has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

                              SUMMIT BROKERAGE SERVICES, INC.

                                    /s/ RICHARD PARKER
                              -------------------------------------------------
                                       Richard Parker
                              Chairman of the Board and Chief Executive Officer
                                  (principal executive officer)

Date:  March 29, 2001

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
Summit Brokerage Securities, Inc. and in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
                SIGNATURE                                            TITLE                            DATE
                ---------                                            -----                            ----

<S>                                                  <C>                                         <C>
           /s/ RICHARD PARKER                        President and Chief Executive
--------------------------------------------
             Richard Parker                          Officer and Director (principal
                                                     executive officer)                          March 29, 2001

          /s/ MARK F. CAULFIELD                      Chief Financial Officer,                    March 29, 2001
--------------------------------------------
            Mark F. Caulfield                        Secretary and Treasurer

            /s/ BRIAN R. BEST                        Chief Financial Officer,                    March 29, 2001
--------------------------------------------
              Brian R. Best                          Secretary and Treasurer (principal
                                                     financial officer)

           /s/ HARRY S. GREEN                        Director                                    March 29, 2001
--------------------------------------------
             Harry S. Green

            /s/ JACK B. ROOT                         Director                                    March 29, 2001
--------------------------------------------
              Jack B. Root
</TABLE>



                                      -18-
<PAGE>   21


                SUMMIT BROKERAGE SERVICES, INC, AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
Report of Independent Certified Public Accountants........................................................           F-2
Consolidated Statements of Financial Condition............................................................           F-3
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)..................................           F-4
Consolidated Statements of Changes in Stockholders' Equity................................................           F-5
Consolidated Statements of Cash Flows.....................................................................           F-6
Notes to Consolidated Financial Statements................................................................           F-8
</TABLE>


                                      F-1

<PAGE>   22


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Shareholders
Summit Brokerage Services, Inc. and Subsidiaries
Indialantic, Florida

We have audited the accompanying consolidated statements of financial condition
of Summit Brokerage Services, Inc. (a Florida Corporation) and Subsidiaries as
of December 31, 2000 and 1999, and the related consolidated statements of income
(loss) and comprehensive income (loss), changes in stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the consolidated financial position of Summit
Brokerage Services, Inc. and Subsidiaries as of December 31, 2000 and 1999 and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 20 to the
financial statements, the Company has suffered recurring losses from operations
at December 31, 2000 and 1999, which raises substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 20. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/S/Hoyman, Dobson & Company, P.A.
Melbourne, FL
February 27, 2001


                                      F-2


<PAGE>   23


SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 2000 and 1999

<TABLE>
<CAPTION>

ASSETS                                                                                            2000                   1999
                                                                                              -------------          -------------
<S>                                                                                           <C>                    <C>
   Cash                                                                                       $     226,150          $     408,957
   Cash with clearing broker                                                                         25,141                 25,132
   Investments available-for-sale                                                                    13,925                     --
   Commissions receivable                                                                           508,990                463,356
   Prepaid expenses                                                                                  46,780                 27,132
   Other receivable, net of $14,020 and $31,040 allowance for
      doubtful accounts at December 31, 2000 and 1999, respectively                                  17,855                     --
   Due from related parties                                                                          44,778                102,704
   Subscription receivable                                                                               --                 48,000
   Secured demand notes                                                                              40,000                     --
   Property and equipment at cost, less accumulated depreciation
      of $114,293 and $70,970 at December 31, 2000 and 1999,
      respectively                                                                                  105,603                 79,267
   Deferred tax asset, net of valuation allowance of $412,933 and
      $283,860 at December 31, 2000 and 1999, respectively                                               --                     --
                                                                                              -------------          -------------
TOTAL ASSETS                                                                                  $   1,029,222          $   1,154,548
                                                                                              =============          =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
   Accounts payable and accrued expenses                                                      $      77,025          $      63,896
   Accrued commission expense                                                                       380,634                645,925
   Deferred income                                                                                   21,333                 24,667
   Capital lease payable                                                                             12,055                     --
   Due to related party                                                                                 200                     --
                                                                                              -------------          -------------
     Total liabilities                                                                              491,247                734,488
                                                                                              -------------          -------------
LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS                                              40,000                     --
                                                                                              -------------          -------------
STOCKHOLDERS' EQUITY
   Common stock, par value $0.0001 per share. Authorized 10,000,000 shares,
      4,698,525 issued and 4,691,224 outstanding at December 31, 2000, 4,541,751
      issued and 4,538,132 outstanding
      at December 31, 1999                                                                              470                    454
   Additional paid-in capital                                                                     2,898,910              2,559,389
   Unearned stock compensation                                                                     (207,732)              (517,223)
   Treasury stock, at cost                                                                          (29,857)               (18,578)
   Accumulated other comprehensive income                                                             1,775                     --
   Subscriptions receivable                                                                         (10,250)               (94,000)
   Accumulated deficit                                                                           (2,155,341)            (1,509,982)
                                                                                              -------------          -------------
      Total stockholders' equity                                                                    497,975                420,060
                                                                                              -------------          -------------
TOTAL  LIABILITIES AND STOCKHOLDERS' EQUITY                                                   $   1,029,222          $   1,154,548
                                                                                              =============          =============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-3


<PAGE>   24



SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                  2000                   1999
                                                                                              -------------          -------------
<S>                                                                                           <C>                    <C>
REVENUES
   Commissions                                                                                $   6,847,362          $   4,712,651
   Interest and dividends                                                                            51,685                 27,565
   Other                                                                                             80,639                 16,403
                                                                                              -------------          -------------
                                                                                                  6,979,686              4,756,619
                                                                                              -------------          -------------
EXPENSES
   Commissions                                                                                    5,583,196              3,596,311
   Occupancy                                                                                        115,752                116,752
   Amortization of unearned stock compensation/ consultant expenses                                 349,028                214,504
   Management fees                                                                                       --              1,156,235
   Salaries and benefits                                                                            659,245                     --
   Recruiting expense                                                                               146,406                105,053
   Legal expense                                                                                    137,054                123,047
   Bad debt expense                                                                                      --                 31,040
   Other operating expenses                                                                         634,364                147,687
                                                                                              -------------          -------------
                                                                                                  7,625,045              5,490,629
                                                                                              -------------          -------------

NET LOSS BEFORE INCOME TAXES                                                                       (645,359)              (734,010)

PROVISION FOR INCOME TAXES                                                                               --                     --
                                                                                              -------------          -------------

NET LOSS                                                                                      $    (645,359)         $    (734,010)
                                                                                              =============          =============

WEIGHTED AVERAGE COMMON SHARES AND
   COMMON SHARE EQUIVALENTS OUTSTANDING                                                           4,575,534              4,180,322
                                                                                              =============          =============

EARNINGS PER SHARE                                                                            $     (0.1410)         $     (0.1756)
                                                                                              =============          =============

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
NET LOSS                                                                                           (645,359)              (734,010)

UNREALIZED GAIN ON SECURITIES:
   Gain arising during the year                                                                       1,775                     --
                                                                                              -------------          -------------

OTHER COMPREHENSIVE GAIN                                                                              1,775                     --
                                                                                              -------------          -------------

COMPREHENSIVE LOSS                                                                            $    (643,584)         $    (734,010)
                                                                                              =============          =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-4

<PAGE>   25

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                     Common Stock
                                               -------------------------                         Unearned
                                                Number of                       Additional         Stock
                                                 Shares                         Paid-In          Compen-         Treasury
                                               Outstanding     Par Value        Capital           sation          Stock
                                               -----------     ---------      -----------        ---------       --------
<S>                                             <C>              <C>          <C>                <C>              <C>
BALANCES, DECEMBER 31, 1998                     3,905,571        $ 391        $ 1,293,106        $(178,620)       $     --

Issuance of common stock for cash                 324,333           33            551,967               --              --

Issuance of common stock for
   subscription receivable                         94,667            9            141,991               --              --

Issuance of common stock for unearned
   Compensation/consultant expenses               110,011           10            525,952         (525,962)             --

Issuance of common stock for legal
   Services                                        15,000            1             54,449          (54,450)             --

Issuance of common stock for future
   private placement services                     100,000           10                 --              (10)             --

Amortization of unearned stock
   Compensation/consultant expenses                    --           --                 --          214,504              --

Stock dividends issued                              5,400            1             24,999               --              --

Retirement of common stock                        (13,225)          (1)           (33,075)          27,315              --

Purchase of treasure stock                         (3,625)          --                 --               --         (18,578)

Net loss                                               --           --                 --               --              --
                                                ----------       -----        -----------        ---------        --------

BALANCES, DECEMBER 31, 1999                     4,538,132          454          2,559,389         (517,223)        (18,578)

Issuance of common stock for cash                 150,000           15            299,985               --              --

Issuance of common stock for unearned
   Compensation                                    16,768            1             39,536          (39,537)             --

Amortization of unearned stock
   Compensation/consultant expenses                    --           --                 --          349,028              --

Retirement of common stock                        (10,000)          --                 --               --              --

Purchase of treasury stock                        (27,090)          --                 --               --         (91,850)

Sale of treasury stock                             23,414           --                 --               --          80,571

Accumulated unrealized gain on
   investments                                         --           --                 --               --              --
Collection of subscription receivable                  --           --                 --               --              --

Net loss                                               --           --                 --               --              --
                                                ---------        -----        -----------        ---------        --------
BALANCES, DECEMBER 31, 2000                     4,691,224        $ 470        $ 2,898,910        $(207,732)       $(29,857)
                                                =========        =====        ===========        =========        ========

<CAPTION>
                                            Accumulated                                         Total
                                              Other                                             Stock-
                                          Comprehensive  Subscription      Accumulated          holders'
                                              Income      Receivable         Deficit            Equity
                                          -------------  ------------      ------------        ---------

<S>                                       <C>            <C>               <C>                 <C>
BALANCES, DECEMBER 31, 1998                    $   --       $     --        $  (750,972)       $ 363,905

Issuance of common stock for cash                  --             --                 --          552,000

Issuance of common stock for
   subscription receivable                         --        (94,000)                --           48,000

Issuance of common stock for unearned
   Compensation/consultant expenses                --             --                 --               --

Issuance of common stock for legal
   Services                                        --             --                 --               --

Issuance of common stock for future
   private placement services                      --             --                 --               --

Amortization of unearned stock
   Compensation/consultant expenses                --             --                 --          214,504

Stock dividends issued                             --             --            (25,000)              --

Retirement of common stock                         --             --                 --           (5,761)

Purchase of treasure stock                         --             --                 --          (18,578)

Net loss                                           --             --           (734,010)        (734,010)
                                               ------       --------        -----------        ---------
BALANCES, DECEMBER 31, 1999                        --        (94,000)         1,509,982)         420,060


Issuance of common stock for cash                  --             --                 --          300,000


Issuance of common stock for unearned
   Compensation                                    --             --                 --               --


Amortization of unearned stock
   Compensation/consultant expenses                --             --                 --          349,028


Retirement of common stock                         --             --                 --               --


Purchase of treasury stock                         --             --                 --          (91,850)


Sale of treasury stock                             --             --                 --           80,571

Accumulated unrealized gain on
   investments                                  1,775             --                 --            1,775

Collection of subscription receivable              --         83,750                 --           83,750

Net loss                                           --             --          (649,359)         (645,359)
                                               ------       --------        -----------        ---------
BALANCES, DECEMBER 31, 2000                    $1,775       $(10,250)       $(2,155,341)       $ 497,975
                                               ======       ========        ===========        =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-5





<PAGE>   26

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                  2000                   1999
                                                                                              -------------          -------------

<S>                                                                                           <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Cash received from customers                                                               $   6,861,170          $   4,348,830
   Cash paid to suppliers and employees                                                          (7,480,685)            (4,559,387)
   Interest received                                                                                 51,685                 10,211
                                                                                              -------------          -------------
      Net cash used in operating activities                                                        (567,830)              (200,346)
                                                                                              -------------          -------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of investments                                                                          (12,150)                    --
   Purchase of property and equipment                                                               (17,050)               (30,923)
                                                                                              -------------          -------------
      Net cash used in investing activities                                                         (29,200)               (30,923)
                                                                                              -------------          -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Purchase of treasury stock                                                                       (91,850)               (18,578)
   Issuance of treasury stock                                                                        80,571                     --
   Issuance of common stock                                                                         300,000                552,000
   Proceeds received from subscription receivable                                                   131,750                     --
   Payments on capital lease obligation                                                              (6,248)                    --
                                                                                              -------------          -------------
       Net cash provided by financing activities                                                    414,223                533,422
                                                                                              -------------          -------------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                                                (182,807)               302,153

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                      408,957*               106,804*
                                                                                              -------------          -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                                      $     226,150          $     408,957*
                                                                                              =============          =============
</TABLE>


* Cash and cash equivalents at January 1, 2000 and 1999 and at December 31, 1999
have been revised to exclude cash with clearing broker consistent with the
December 31, 2000 presentation.

   The accompanying notes are an integral part of these financial statements.


                                      F-6


<PAGE>   27



SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Continued
For the Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                 2000                   1999
                                                                                              -----------            -----------

<S>                                                                                           <C>                    <C>
RECONCILIATION OF NET LOSS TO NET
  CASH USED IN OPERATING ACTIVITIES

  Net loss                                                                                    $  (645,359)           $  (734,010)

Adjustments to reconcile net loss to net cash used in
   operating activities
      Depreciation                                                                                 43,323                 37,529
      Amortization of unearned stock compensation
         expense                                                                                  349,028                214,504
      Retirement of common stock                                                                       --                 (5,761)
      Decrease (increase) in cash with clearing broker                                                 (9)                   245
      Increase in commissions receivable                                                          (45,634)              (383,946)
      Decrease (increase) in other receivable                                                     (17,855)                 9,850
      Decrease (increase) in prepaid expenses                                                     (19,648)                34,768
      Decrease (increase) in due from related party                                                23,620                (11,615)
      Decrease in other assets
                                                                                                       --                  9,537
      Increase in accounts payable and accrued expenses                                            13,129                 42,947
      Increase (decrease) in accrued commission expense                                          (265,291)               560,939
      Increase (decrease) in deferred income                                                       (3,334)                24,667

      Increase in due to related party                                                                200                     --
                                                                                              -----------            -----------
         Net cash used in operating activities                                                $  (567,830)           $  (200,346)
                                                                                              ===========            ===========
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
   FINANCING ACTIVITIES:

In January, 2000, the Company issued a $40,000 secured demand note for $40,000
   of subordinated debt.

In March, 2000, the Company issued 16,768 shares of common stock for $39,537 of
   unearned compensation.

In April, 2000, the Company obtained $52,609 of equipment in exchange for a
   reduction in due from related party of $34,306 and assuming a capital lease
   obligation of $18,303.

   The accompanying notes are an integral part of these financial statements.


                                      F-7

<PAGE>   28
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS - Summit Brokerage Services Inc. (the "Company") is a National
Association of Securities Dealers (NASD) member firm. The Company is an
independent broker dealer offering financial services to clients across the
country through its 55 branch offices.

On December 31, 1999 the Company acquired 100% of Summit Holding Group, Inc.
through the purchase of stock for $1. Summit Holding Group, Inc. had $200 of
assets at the time of the purchase and no liabilities. Summit Holding Group,
Inc. (a holding company) owns 100% of Summit Financial Group, Inc. (a registered
investment advisor) and Summit Insurance Agency Corporation (an insurance
business). There was no activity in these three entities during fiscal year
1999.

CONSOLIDATION POLICY - The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.

MUTUAL FUNDS - RESERVED - The Company has an interest bearing reserve deposit
with a clearing firm. The clearing firm requires this deposit of all introducing
firms for whom it transacts business.

INVESTMENTS AVAILABLE-FOR-SALE - Available-for-sale securities are recorded at
fair value in investments with the change in fair value during the period
excluded from earnings and recorded net of tax as a component of other
comprehensive income.

COMMISSION RECEIVABLE - The Company considers commissions receivable fully
collectible; accordingly, no allowance is required.

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation,
for financial reporting and tax purposes, is based on the straight-line and
double declining balance methods over the estimated useful lives of the related
assets, generally 3 to 7 years.

MARKETING COSTS - Marketing costs, except for costs associated with
direct-response marketing, are charged to operations when incurred. Marketing
costs incurred for fiscal years 2000 and 1999 were $18,113 and $10,029,
respectively. The costs of direct-response marketing costs are capitalized and
amortized over the period during which future benefits are expected to be
received. There were no direct response marketing costs for fiscal years 2000
and 1999.

DEFERRED INCOME - Deferred income represents advances received from the clearing
company for unearned commissions.

TREASURY STOCK - Treasury stock is shown at cost.


                                      F-8
<PAGE>   29

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMMISSIONS REVENUE AND EXPENSES - Commissions revenue is recorded on a
trade-date basis as transactions occur. The Company receives commissions on
products sold by their branch offices. The Company receives all commissions from
the transactions, takes their commission based on the terms agreed to in the
registered representative agreements and remits all remaining commissions to the
branch offices.

INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related to operating losses. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred tax also is recognized for operating losses and
tax credits that are available to offset future taxable income.

EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per share for the years ended
December 31, 2000 and 1999 have been computed by dividing net income (loss) by
the weighted average number of shares outstanding. Diluted earnings (loss) per
share for the years ended December 31, 2000 and 1999 did not differ from amounts
computed under the basic computation.

ESTIMATES - The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

NOTE 2 - INVESTMENTS AVAILABLE-FOR-SALE

All available-for-sale securities are invested in common stock. The fair value
of this stock at December 31, 2000 is $13,925. The securities have a gross
unrealized gain at December 31, 2000 of $1,775. There were no gross realized
gains or losses during fiscal year 2000.

NOTE 3 - DUE FROM/TO RELATED PARTIES

At December 31, 2000 and 1999, the Company has a receivable of $19,233 and
$14,220, respectively, from a related company for expenses paid by Summit
Brokerage Services, Inc. on the related company's behalf. The related company is
100% owned by a shareholder who is also the majority stockholder of Summit
Brokerage Services, Inc. This related company conducts educational and training
seminars, which generate income from fees paid by the participants. The
receivable is unwritten.

The Company, at December 31, 2000 and 1999, has advances of $3,251 and $88,484,
respectively, to an entity 100% owned by a shareholder who is also the Company's
majority shareholder. These advances were for expenses paid by Summit Brokerage
Services, Inc. on the related company's behalf. This related company owns an
office building that the Company leases. Interest of $6,521 and $17,354 was
accrued on the advance during fiscal year 2000 and 1999, respectively at 8% per
annum. On December 21, 2000, $93,705 was paid to the Company. The remaining
balance outstanding is intended to be repaid to the Company.


                                      F-9
<PAGE>   30

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 3 - DUE FROM/TO RELATED PARTIES (CONTINUED)

At December 31, 2000, the Company has a note receivable of $22,294 from an
officer of the Company. The note is unwritten and interest of $1,309 has been
accrued on the note using the federal applicable rate at December 31, 2000. The
accrued interest has been added to in the note receivable balance. There was no
note receivable from this officer at December 31, 1999.

At December 31, 2000, the Company owed $200 to a related company for an advance
for operating expenses. This amount is expected to be repaid in the next fiscal
year.

NOTE 4 - SUBSCRIPTION RECEIVABLE

At December 31, 1999, the Company had a subscription receivable of $142,000.
$48,000 of this subscription receivable was included as an asset at December 31,
1999 since it was collected before the financial statements were issued. The
remaining uncollected $94,000 was shown as a reduction of stockholders' equity.
There was no subscription receivable included in assets at December 31, 2000;
however, the remaining uncollected subscriptions of $10,250 from December 31,
1999 is included as a reduction of stockholders' equity at December 31, 2000.

NOTE 5 - OTHER RECEIVABLE

At December 31, 2000 and 1999, the Company has a receivable from a former sales
representative in the amount of $14,040 and $31,040, respectively, which
represents advances paid to the sales representative. The receivable had been
fully reserved for at December 31, 2000 and 1999. During fiscal year 2000, the
Company recovered $17,000 of the bad debt; this amount is included in other
income. In addition, there are advances to sales representatives of $17,855 at
December 31, 2000.

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                            2000                 1999
                                                          ---------           ---------
<S>                                                       <C>                 <C>
Computer systems and software                             $ 114,764           $  76,345
Equipment and furniture                                      27,371              15,655
                                                                                 16,809
Equipment and furniture held under capital lease                 --
Leasehold improvements                                       60,952              58,237
                                                          ---------           ---------
   Total                                                    219,896             150,237
      Less: accumulated depreciation                       (114,293)            (70,970)
                                                          ---------           ---------
         Total property and equipment                     $ 105,603           $  79,267
                                                          =========           =========
</TABLE>

Depreciation expense charged to operations was $43,323 for the year ended
December 31, 2000. and $37,529 for the year ended December 31, 1999.


                                      F-10
<PAGE>   31

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at December 31,
2000 and 1999:

<TABLE>
<CAPTION>
                                                             2000                1999
                                                          ---------           ---------
<S>                                                       <C>                 <C>
Accounts payable                                          $  38,303           $  51,792

Accrued interest payable
                                                              3,600                  --
Accrued wages and salaries payable
                                                              2,264                  --
Accrued benefits payable
                                                              4,969                  --
Stock payable to brokers
                                                             27,889              12,104
                                                          ---------           ---------
                                                          $  77,025           $  63,896
                                                          =========           =========
</TABLE>


NOTE 8 - CAPITAL LEASE

The Company has a capital lease obligation outstanding at December 31, 2000 in
the amount of $12,055 for capital equipment. The total amount is due in fiscal
year 2001. There was no capital lease obligation outstanding at December 31,
1999.

NOTE 9 - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS

On March 31, 2000, the Company entered into a secured demand note collateral
agreement with a corporation 100% owned by Summit's majority shareholder. The
note is due on April 30, 2001 and accrues interest at 12.0% per annum. The
subordinated borrowing is available in computing net capital under the SEC's
uniform net capital rate. To the extent that such borrowings are required for
the Company's continued compliance with minimum net capital requirements, it may
not be repaid.

NOTE 10 - COMMON STOCK

On July 16th, 1997, the Company established a restricted stock bonus plan as an
encouragement for employees and certain consultants to remain in the employment
or service of the Company. The shares granted under the plan were in the form of
restricted stock vesting over a two-year period beginning after the date of
grant of the award. Since the stock issued is subject to forfeiture until
two-years of continuous employment or service from the date of the grant award,
unearned compensation is recorded at the fair market value at the date awarded
as a reduction of stockholder's equity. Compensation and consultant expense is
recognized pro rata over the period during which the shares are earned in
accordance with FASB 123. Compensation expenses recognized for the year ended
December 31, 2000 is $28,956. Compensation and consultant expenses recognized
for the year ended December 31, 1999 was $185,313 and $1,966, respectively. The
Company amortized $349,028 and $214,504 of unearned stock compensation and
consultant expenses for the year ended December 31, 2000 and 1999, respectively.
In fiscal year 1999, 13,225 shares of stock issued for compensation originally
recorded at $33,075 was forfeited and retired. There was 10,000 shares retired
in fiscal year 2000.


                                      F-11
<PAGE>   32

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 10 - COMMON STOCK (CONTINUED)

On January 13, 1999, the Company granted 15,000 shares of restricted stock to an
attorney to pay for services rendered through the end of 2000. When the shares
were issued, unearned compensation for consulting services of $54,450 was
recorded at the fair market value of the stock on the date of issue as a
reduction of stockholder's equity. Consultant expense is recognized pro rata
over the period during which the services are being performed. Consultant
expenses recognized for the year ended December 31, 2000 and 1999 are $27,225
per year. Unearned consultant expenses at December 31, 2000 and 1999 are $0 and
$27,225, respectively.

On July 29, 1999, the Company placed into escrow 100,000 shares of restricted
stock in the name of a placement agent for services to be performed during 2000
and into 2001. The stock issued is being held in escrow as of December 31, 1999
pending performance of these services. The stock has been recorded at $10
(100,000 shares at par value of $.0001) at December 31, 1999. The fair value of
these shares will be determined and additional costs recorded when the services
begin.

NOTE 11 - PREFERRED STOCK

On September 1, 2000, the Company amended the Articles of Incorporation of the
Company. The amendment created blank preferred stock, par value $.0001 per
share, and authorized 5,000,000 shares. There were no preferred stock shares
outstanding at December 31, 2000. This amendment also provided that no
shareholder of any capital stock of the Company shall have preemptive rights of
any nature.

NOTE 12 - TREASURY STOCK

Treasury stock is shown at cost, and consists of 7,301 and 3,625 shares of
common stock at December 31, 2000 and 1999, respectively.

NOTE 13 - STOCK OPTIONS

On December 31, 1999, the Company granted stock options to key personnel to
purchase 155,000 shares of the Company's common stock at an exercise price of
$2.50 per share. The terms of the options provide that the options will expire
five years after the grant date and will vest one year from the grant date. At
December 31, 2000 and 1999 no shares had been exercised.

On May 16, 2000, the Company cancelled all previously issued outstanding options
to purchase the Company's common stock, none of which had been exercised. In
replacement thereof, the Company granted stock options to its officers,
directors and certain employees to purchase an aggregate of 1,037,878 of common
stock at an exercise price of $2.50 per share. The exercise price was not less
than 85% of the market price; therefore, under APB Number 25, the stock option
plan is not considered to be compensatory. Accordingly, no compensation expense
has been recognized in the financial statements.

On August 3, 2000, the Company issued options to its officers, directors and
certain employees to purchase an aggregate of 207,795 shares of the Company's
common stock at an exercise price of $2.50 per share. The exercise price was not
less than 85% of the market price; therefore, under APB Number 25, the stock
option plan is not considered compensatory. Accordingly, no compensation expense
has been recognized in the financial statements.


                                      F-12
<PAGE>   33


SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS (CONTINUED)

The terms of the options issued during 2000 provide that the options will expire
ten years after the grant date. The options granted to officers and directors
vest immediately. The options granted to employees vest 25% per year for the
next four years. At December 31, 2000, no shares have been exercised.

Stock option activity during fiscal year 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                            Weighted -
                                                                         Number of           average
                                                                          Options         Exercise Price
                                                                         ---------        --------------
<S>                                                                      <C>              <C>
Outstanding at January 1, 1999                                                  --          $      --

   Granted during fiscal year 1999                                         155,000               2.50

   Exercised during fiscal year 1999                                            --                 --

   Forfeited during fiscal year 1999                                            --                 --
                                                                         ---------          ---------
Outstanding at December 31, 1999                                           155,000               2.50

   Cancelled during fiscal year 2000                                      (155,000)              2.50

   Granted during fiscal year 2000                                       1,245,473               2.50

   Exercised during fiscal year 2000                                            --                 --

   Forfeited during fiscal year 2000                                       (82,750)              2.50
                                                                         ---------          ---------
Outstanding at December 31, 2000                                         1,162,723          $    2.50
                                                                         =========          =========
Shares exercisable at December 31, 2000                                    560,220          $    2.50
                                                                         =========          =========
</TABLE>

Using the Black-Scholes option pricing model, the per share weighted average
fair value of stock options granted on December 31, 1999 is $4.00, where market
price is greater than the exercise price on the grant date. The per share
weighted average fair value of stock options granted in 2000 is $3.00, where
market price is greater than the exercise price on the grant date.

The assumptions used and the weighted average information for each of the two
years in the period ended December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                       Year Ended       Year Ended
                                                          2000             1999
                                                       ----------       ----------
<S>                                                    <C>              <C>
Expected risk-free interest rate                          5.70%            7.00%
Expected dividend yield                                   0.00%            0.00%
Expected lives                                          10 years         5 years
Expected volatility                                      25.50%           50.00%
Weighted average fair value of grants                   $ 2.50           $ 2.50
Weighted average remaining contractual life of
   options outstanding                                  10 years         5 years
</TABLE>


                                      F-13
<PAGE>   34

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS (CONTINUED)

SFAS No. 123 (Accounting for Stock-Based Compensation) modifies the accounting
and reporting standards for the Company's stock-based compensation plans. SFAS
123 provides that stock-based awards be measured at their fair value at the
grant date in accordance with a valuation model. This measurement may either be
recorded in the Company's basic financial statements or the pro forma effect on
earnings may be disclosed in its financial statements. The Company has elected
to provide the pro forma disclosures. The Company reported a pro forma net
income and earnings per share are as follows:

<TABLE>
<CAPTION>
                                                  2000                     1999
                                              -----------                ---------
<S>                                           <C>                        <C>
Net income (loss):
      As reported                               (645,359)                (734,010)
      Pro forma                               (2,326,019)                (734,010)
Basic EPS:
      As reported                                (0.1410)                 (0.1756)
      Pro forma                                  (0.5084)                 (0.1756)
Diluted EPS:
      As reported                                (0.1410)                 (0.1756)
      Pro forma                                  (0.5084)                 (0.1756)
</TABLE>

NOTE 14 - OPERATING LEASE

The Company leases office space under a non-cancelable operating lease with an
entity whose major shareholder is also the Company's major shareholder. Under
the terms of the lease, the Company leases office space for its headquarters. In
addition, the Company has operating leases for a vehicle and office equipment.
The leases expire from 2003 to 2007. Minimum future rental payments for each of
the next five years and in the aggregate are as follows:

<TABLE>
<S>          <C>                                                        <C>
             2001                                                       $ 130,419
             2002                                                         118,536
             2003                                                         114,647
             2004                                                         109,200
             2005                                                         109,200
             Subsequent                                                   200,200
                                                                        ----------

                    Total                                               $ 782,202
                                                                        ==========
</TABLE>

Total rent expense, including month-to-month leases, for the years ending
December 31, 2000 and 1999 was $115,752 and $116,752, respectively.


                                      F-14
<PAGE>   35

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 15 - INCOME TAXES

A summary of the provision for income taxes at December 31, 2000 and 1999 is as
follows:

<TABLE>
<CAPTION>
                                                               2000                1999
                                                            ---------           ---------
Deferred tax benefit due to temporary differences:
<S>                                                         <C>                 <C>
   Federal                                                  $  96,804           $ 104,000
   State
                                                               32,268              35,000
Change in valuation allowance                                (129,072)           (139,000)
                                                            ---------           ---------
   Total income tax benefit (expense)                       $      --           $      --
                                                            =========           =========
</TABLE>

The deferred tax asset at December 31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                               2000                1999
                                                            ---------           ---------
<S>                                                         <C>                 <C>
Deferred tax asset - NOL carryforwards                      $ 412,933           $ 283,860
Valuation allowance                                          (412,933)           (283,860)
                                                            ---------           ---------
   Net deferred tax asset                                   $      --           $      --
                                                            =========           =========
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company has
established a valuation allowance for the entire deferred tax asset, which
consists of net operating loss carryforwards.

The Company has net operating loss carryforwards of approximately $2,060,000 for
federal and state income tax purposes, which are available to offset future
taxable income. These loss carryforwards expire in various years from 2012 to
2020.

Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rates of 34% for both 2000 and 1999 to income (loss) before
income taxes due to the effects of net operating loss carryforwards and the
valuation allowance.

NOTE 16 - CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with financial institutions. The amount of credit
exposure in excess of federally-insured limits at December 31, 2000 and 1999 was
$87,709 and $317,647, respectively.

All financial instruments are carried at amounts that approximate fair value
because of the short maturity of these instruments.


                                      F-15
<PAGE>   36

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 17 - RELATED PARTY TRANSACTIONS

During fiscal year 1999, the Company had entered into a written agreement
whereby it paid a management fee to cover overhead expenses which included
administrative services, clerical and accounting to an entity which was a wholly
owned company of the majority shareholder of the Company. Under this agreement,
the management fee was equal to 95% of the Company's prior month net income. Net
income was defined as gross income of the Company from whatever source, less
commissions paid to representatives and commissions re-allowed to other
broker-dealer firms and other expenses, excluding the monthly management fee and
income taxes incurred by the Company. The management fees could be reduced or
waived for any month where necessary to insure that the net capital of the
Company did not fall below $100,000 and/or the ratio of the Company's aggregate
indebtedness to net capital did not exceed 1,000%, as such terms are defined by
the National Association of Securities Dealers. The term of the agreement was
one year and could be extended for additional consecutive one-year terms unless
either party notified the other at least one month prior to the completion of
any one-year term of its desire to terminate the agreement. This management
agreement was terminated effective January 1, 2000. In order to reflect the true
costs of the support services for fiscal year 1999, the Company had, instead of
following the management agreement, reflected all support services costs paid by
the management company on their behalf in the financial statements for that
year. The total fees paid to the related party were $0 and $1,156,235 for 2000
and 1999, respectively.

The Company received $0 and $29,015 during the years ended December 31, 2000 and
1999, respectively, of commissions from a related company owned by the majority
stockholder for referrals to the seminars conducted by the related company. (See
Note 2)

The Company paid rent of $109,200 and $6,552 of other miscellaneous fees during
the year ended December 31, 2000, and $109,200 and $7,552 of other miscellaneous
fees during the year ended December 31,1999 to a related company owned by the
majority shareholder. The related company owns the building the Company is
leasing. (See Note 14)

NOTE 18 - NET CAPITAL REQUIREMENT

The Company is a "Fully Disclosed Broker Dealer". The Company does not carry
customer accounts and does not accept customer funds or securities. Instead, it
has entered into a "clearing agreement" with a clearing firm and has fully
disclosed all of its customer accounts to this firm.

The Company is subject to the Securities and Exchange Commission Uniform Net
Capital Rule (SEC Rule 15C 3-1), which requires the maintenance of minimum net
capital.

The fully phased-in net capital requirement for "fully disclosed" firms that
receive, but do not hold, customer or other securities, is $50,000. The rule
also requires that the ratio of aggregate indebtedness to net capital shall not
exceed 15 to 1.

At December 31, 2000 and 1999, the Company had net capital of $75,169 and of
$64,863, respectively. The net capital for both years is in excess of required
net capital of $50,000. The Company's aggregate indebtedness to net capital
ratio was 6 to 1 and 11 to 1 at December 31, 2000 and 1999, respectively.


                                      F-16
<PAGE>   37

SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 19 - COMMITMENTS AND CONTINGENCY

On May 16, 2000, the two-year employment agreement with William R. Turner (the
"Turner Employment Agreement") was amended. Mr. Turner, effective January 1,
2000 through the remaining term of the original agreement, was to forego his
rights to receive 15,000 shares of company stock per year and his rights to
receive 100,000 options (50,000 options each year of the term). In lieu of these
items, the Company granted to Mr. Turner on May 16, 2000, 160,000 options of the
Company's common stock exercisable at $2.50 per share. All other terms and
conditions of the agreement were to remain the same. Effective August 16, 2000,
Mr. Turner tendered his resignation to the Company for personal reasons and will
retain 80,000 options of the 160,000 options granted pursuant to his employment
agreement.

On May 16, 2000, the Company also entered into employment agreements with Mr.
Richard Parker, (the "Parker Employment Agreement"), the Company's Chairman and
Chief Executive Officer and Mr. Mark F. Caulfield (the "Caulfield Employment
Agreement"), the Company's Chief Financial Officer. Both agreements commenced on
January 1, 1998 and will expire December 31, 2001. The Parker Agreement provides
that in consideration for Mr. Parker's services, he was to be paid a salary of
$155,000 in year 2000 and his salary was to be increased by $5,000 per year each
year thereafter. Also on May 16, 2000, Mr. Parker was granted 340,440 common
stock options. Options are to be granted each year thereafter at a rate of
100,000 shares annually. The Caulfield Agreement provides that in consideration
for Mr. Caulfield's services, he was to be paid a salary of $60,000 in year 2000
and his salary was to be increased by $5,000 per year each year thereafter. Mr.
Caulfield was granted on May 16, 2000, 160,000 common stock options. Options are
to be granted each year thereafter at a rate of 50,000 shares annually. The
exercise price under both employment agreements is $2.50 per share.

No compensation has been recorded under APB 25, for the shares received since
the exercise price is not less than 85% of the market price on the date the
options were granted. These options have been included in Note 13.


NOTE 20 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has had recurring net losses.
These matters raise substantial doubt about the entity's ability to continue as
a going concern. Management plans to do a public offering in the future and is
seeking a merger or acquisition candidate. However, the Company's ability to
continue as a going concern is contingent on the success of future operations
and the potential for merging with or acquiring a company. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


                                      F-17
<PAGE>   38


SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
-------------------------------------------------------------------------------

NOTE 21 - OFF BALANCE SHEET RISK

Included in the Company's clearing agreement with its clearing broker-dealer, is
an indemnification clause. This clause relates to instances where the Company's
customers fail to settle security transactions. In the event this occurs, the
Company has indemnified the clearing broker-dealer to the extent of the net loss
on the unsettled trade. At December 31, 2000, management of the Company had not
been notified by the clearing broker-dealer, nor were they otherwise aware, of
any potential losses relating to this indemnification.

NOTE 22 - SUBSEQUENT EVENT

On January 23, 2001, the Company issued 600 common shares, par value $0.0001, as
a stock dividend to a shareholder.

NOTE 23 - RECLASSIFICATION

Certain reclassifications have been made to the December 31, 1999 financial
statements to conform to the December 31, 2000 financial statement presentation.
Such reclassifications have had no effect on net income as previously reported.

NOTE 24 - SEGMENT AND RELATED INFORMATION

In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The standard requires that companies
disclose "operating segment" based on the way management disaggregates the
company for making internal operating decisions. The Company believes that all
of its material operations are part of the financial services industry and it
currently reports a single industry segment.


                                      F-18
<PAGE>   39

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
NUMBER               NAME
-------              --------------------------------------------
<S>                  <C>
 16.1                Letter of Flavin, Jackson, Zirilli & Bouvier
 16.2                Letter of Hoyman, Dobson & Company, P.A.
 21.1                Subsidiaries of the Company
 23.1                Consent of Hoyman, Dobson & Company, P.A.
</TABLE>