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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008.

OR



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No: 333-108818





SUMMIT FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                    
|-------------------------------------------------------------- |  | -----------------------------------
|Florida                                                        |  | 05-0577932                         
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. EmployerIdentification No.)

980 North Federal Highway

Suite 310

Boca Raton, FL 33432

(561) 338-2800

(Address, including
zip code, and telephone number, including area code, of Registrants principal executive offices)





Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act 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   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |   |  |                           |  |  
|--------------------------------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer                       |  |  ̈ |  | Accelerated filer         |  |  ̈
|                                              |  |   | 
|Non-accelerated filer                         |  |  ̈ |  | Smaller reporting company |  | x
|(Do not check if a smaller reporting company) |  |   |  |                          

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date:



|                                         |  |                                  
|---------------------------------------- |  | ---------------------------------
|Class                                    |  | Outstanding as of August 12, 2008
|Common Stock Par value $0.0001 per share |  | 25,857,570                       









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SUMMIT FINANCIAL SERVICES GROUP, INC.

INDEX



|                              |  |                                                                                                            |  |     
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                            |  | Page
|Part I. Financial Information |  | 3                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                       |  | 3   
|                              |  | Condensed Consolidated Statements of Financial Condition at June 30, 2008(unaudited) and December 31, 2007 |  | 3   
|                              |  | Condensed Consolidated Statements of Income for the Three Months ended June 30, 2008 and 2007(unaudited)   |  | 4   
|                              |  | Condensed Consolidated Statements of Income for the Six Months ended June 30, 2008 and 2007(unaudited)     |  | 5   
|                              |  | Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2008 and 2007(unaudited) |  | 6   
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                             |  | 7   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 8   
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                 |  | 12  
|Item 4.                       |  | Controls and Procedures                                                                                    |  | 12  
|Part II. Other Information    |  | 12                                                                                                        
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                |  | 12  
|Item 6.                       |  | Exhibits                                                                                                   |  | 12  
|Signatures                    |  | 13                                                                                                        

FORWARD LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act). When used in this 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 the Companys control, and actual results for future periods could differ materially from those discussed in this Report, depending on a variety of important factors, among which are the success or failure of managements efforts to
implement its business strategy; the level of acquisition opportunities available to the Company and the Companys ability to price and negotiate such transactions on a favorable basis; the Companys ability to properly manage growth and
successfully integrate any acquired companies and operations; the Companys ability to compete with major established companies; the Companys ability to attract and retain qualified personnel; the regulatory environment, economic and
financial market conditions generally; and other risks and uncertainties which may be described from time to time in the Companys filings with the Securities and Exchange Commission (the SEC), including the Companys annual
report on Form 10-KSB for the fiscal year ended December 31, 2007 (file no. 0-29337).



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

SUMMIT FINANCIAL
SERVICES GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition



|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                                                           |  | June 30, 2008 |            |   | December 31, 2007 |  
|                                                                                                                                                                                                           |  | (unaudited)   |            |   |                   |  
|ASSETS                                                                                                                                                                                                     |  |               |            |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                                                                  |  | $             | 4,804,101  |   |                   | $ | 4,828,606  |  
|Deposits held at clearing brokers                                                                                                                                                                          |  |               | 128,463    |   |                   |   | 28,144     |  
|Commissions receivable                                                                                                                                                                                     |  |               | 1,408,064  |   |                   |   | 943,117    |  
|Other receivables, net                                                                                                                                                                                     |  |               | 325,701    |   |                   |   | 251,030    |  
|Securities owned, at fair value                                                                                                                                                                            |  |               | 9,333      |   |                   |   | 23,290     |  
|Prepaid expenses                                                                                                                                                                                           |  |               | 222,773    |   |                   |   | 533,846    |  
|Property and equipment at cost, less accumulated depreciation of $174,358 and $134,870                                                                                                                     |  |               | 146,644    |   |                   |   | 135,740    |  
|Goodwill                                                                                                                                                                                                   |  |               | 500,714    |   |                   |   | 500,714    |  
|Customer list, less accumulated amortization of $997,899 and $907,947                                                                                                                                      |  |               | 89,961     |   |                   |   | 179,913    |  
|Deposits                                                                                                                                                                                                   |  |               | 91,375     |   |                   |   | 675,000    |  
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|TOTAL ASSETS                                                                                                                                                                                               |  | $             | 7,727,129  |   |                   | $ | 8,099,400  |  
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                       |  |               |            |   |                   |   |            |  
|LIABILITIES                                                                                                                                                                                                |  |               |            |   |                   |   |            |  
|Accounts payable and accrued expenses                                                                                                                                                                      |  | $             | 912,494    |   |                   | $ | 1,200,489  |  
|Accrued commission expense                                                                                                                                                                                 |  |               | 1,443,745  |   |                   |   | 1,433,155  |  
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                                          |  |               | 2,356,239  |   |                   |   | 2,633,644  |  
|STOCKHOLDERS EQUITY                                                                                                                                                                                       |  |               |            |   |                   |   |            |  
|Preferred stock, undesignated; par value $0.0001 per share; authorized 4,850,000 shares; none issued and outstanding                                                                                       |  |               |           |   |                   |   |           |  
|Preferred stock, Series A, 12% cumulative convertible; par value $0.0001 per share; authorized 150,000 shares; 125,000 issued and outstanding
(liquidation preference of $125,000)                         |  |               | 13         |   |                   |   | 13         |  
|Common stock, par value $0.0001 per share; authorized 100,000,000 shares; 25,872,482 issued and 25,857,570 outstanding at June 30, 2008;
28,249,987 issued and 28,235,075 outstanding at December 31, 2007 |  |               | 2,588      |   |                   |   | 2,825      |  
|Additional paid-in capital                                                                                                                                                                                 |  |               | 9,606,330  |   |                   |   | 10,088,338 |  
|Unearned stock-based compensation                                                                                                                                                                          |  |               | (791,140   | ) |                   |   | (983,982   | )
|Treasury stock (14,912 shares, at cost)                                                                                                                                                                    |  |               | (10,884    | ) |                   |   | (10,884    | )
|Accumulated deficit                                                                                                                                                                                        |  |               | (3,436,017 | ) |                   |   | (3,630,554 | )
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                 |  |               | 5,370,890  |   |                   |   | 5,465,756  |  
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                 |  | $             | 7,727,129  |   |                   | $ | 8,099,400  |  
|                                                                                                                                                                                                           |  |               |            |   |                   |   |            |  

See accompanying notes to unaudited condensed consolidated financial statements.



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SUMMIT FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income



|                                       |  |                                    |            |   |             |   |           
|-------------------------------------- |  | ---------------------------------- | ---------- | - | ----------- | - | ----------
|                                       |  | For The Three MonthsEnded June 30,
|                                       |  | 2008                               |            |   | 2007       
|                                       |  | (Unaudited)                        |            |   | (Unaudited)
|REVENUES                               |  |                                    |            |   |             |   |           
|Commissions                            |  | $                                  | 8,168,257  |   |             | $ | 9,578,999 
|Interest and dividends                 |  |                                    | 302,798    |   |             |   | 291,376   
|Other                                  |  |                                    | 95,166     |   |             |   | 87,420    
|                                       |  |                                    |            |   |             |   |           
|                                       |  |                                    | 8,566,221  |   |             |   | 9,957,795 
|                                       |  |                                    |            |   |             |   |           
|EXPENSES                               |  |                                    |            |   |             |   |           
|Commissions and clearing costs         |  |                                    | 6,483,744  |   |             |   | 7,960,725 
|Employee compensation and benefits     |  |                                    | 1,184,231  |   |             |   | 971,838   
|Occupancy and equipment                |  |                                    | 159,563    |   |             |   | 140,059   
|Communications                         |  |                                    | 115,373    |   |             |   | 89,353    
|Legal, accounting and litigation costs |  |                                    | (21,716    | ) |             |   | 109,813   
|Depreciation and amortization          |  |                                    | 66,658     |   |             |   | 57,463    
|Other operating expenses               |  |                                    | 323,028    |   |             |   | 255,821   
|                                       |  |                                    |            |   |             |   |           
|                                       |  |                                    | 8,310,881  |   |             |   | 9,585,072 
|                                       |  |                                    |            |   |             |   |           
|INCOME BEFORE INCOME TAXES             |  |                                    | 255,340    |   |             |   | 372,723   
|                                       |  |                                    |            |   |             |   |           
|PROVISION FOR INCOME TAXES             |  |                                    | 105,567    |   |             |   |          
|                                       |  |                                    |            |   |             |   |           
|NET INCOME                             |  | $                                  | 149,773    |   |             | $ | 372,723   
|                                       |  |                                    |            |   |             |   |           
|BASIC EARNINGS PER SHARE               |  | $                                  | 0.0056     |   |             | $ | 0.0131    
|                                       |  |                                    |            |   |             |   |           
|DILUTED EARNINGS PER SHARE             |  | $                                  | 0.0048     |   |             | $ | 0.0118    
|                                       |  |                                    |            |   |             |   |           
|WEIGHTED AVERAGE SHARES OUTSTANDING    |  |                                    |            |   |             |   |           
|BASIC                                  |  |                                    | 25,852,457 |   |             |   | 28,210,075
|                                       |  |                                    |            |   |             |   |           
|DILUTED                                |  |                                    | 30,255,719 |   |             |   | 31,168,182
|                                       |  |                                    |            |   |             |   |           

See accompanying notes to unaudited condensed consolidated financial statements.



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SUMMIT FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income



|                                       |  |                                  |            |             |   |           
|-------------------------------------- |  | -------------------------------- | ---------- | ----------- | - | ----------
|                                       |  | For The Six MonthsEnded June 30,
|                                       |  | 2008                             |            | 2007       
|                                       |  | (Unaudited)                      |            | (Unaudited)
|REVENUES                               |  |                                  |            |             |   |           
|Commissions                            |  | $                                | 16,452,827 |             | $ | 18,402,087
|Interest and dividends                 |  |                                  | 642,969    |             |   | 558,713   
|Other                                  |  |                                  | 194,468    |             |   | 158,787   
|                                       |  |                                  |            |             |   |           
|                                       |  |                                  | 17,290,264 |             |   | 19,119,587
|                                       |  |                                  |            |             |   |           
|EXPENSES                               |  |                                  |            |             |   |           
|Commissions and clearing costs         |  |                                  | 13,304,413 |             |   | 15,252,688
|Employee compensation and benefits     |  |                                  | 2,428,589  |             |   | 2,037,358 
|Occupancy and equipment                |  |                                  | 317,885    |             |   | 324,229   
|Communications                         |  |                                  | 216,404    |             |   | 177,339   
|Legal, accounting and litigation costs |  |                                  | 1,823      |             |   | 88,354    
|Depreciation and amortization          |  |                                  | 129,439    |             |   | 113,825   
|Other operating expenses               |  |                                  | 578,347    |             |   | 646,615   
|                                       |  |                                  |            |             |   |           
|                                       |  |                                  | 16,976,900 |             |   | 18,640,408
|                                       |  |                                  |            |             |   |           
|INCOME BEFORE INCOME TAXES             |  |                                  | 313,364    |             |   | 479,179   
|                                       |  |                                  |            |             |   |           
|PROVISION FOR INCOME TAXES             |  |                                  | 111,327    |             |   |          
|                                       |  |                                  |            |             |   |           
|NET INCOME                             |  | $                                | 202,037    |             | $ | 479,179   
|                                       |  |                                  |            |             |   |           
|BASIC EARNINGS PER SHARE               |  | $                                | 0.0075     |             | $ | 0.0167    
|                                       |  |                                  |            |             |   |           
|DILUTED EARNINGS PER SHARE             |  | $                                | 0.0062     |             | $ | 0.0154    
|                                       |  |                                  |            |             |   |           
|WEIGHTED AVERAGE SHARES OUTSTANDING    |  |                                  |            |             |   |           
|BASIC                                  |  |                                  | 25,854,140 |             |   | 28,210,075
|                                       |  |                                  |            |             |   |           
|DILUTED                                |  |                                  | 31,353,832 |             |   | 30,681,502
|                                       |  |                                  |            |             |   |           

See accompanying notes to unaudited condensed consolidated financial statements.



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SUMMIT FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows



|                                                                                 |  |                                  |           |   |             |   |           |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | --------- | - | ----------- | - | --------- | -
|                                                                                 |  | For The Six MonthsEnded June 30, |          
|                                                                                 |  | 2008                             |           |   | 2007        |  
|                                                                                 |  | (Unaudited)                      |           |   | (Unaudited) |  
|Cash flows from operating activities                                             |  |                                  |           |   |             |   |           |  
|Net income                                                                       |  | $                                | 202,037   |   |             | $ | 479,179   |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                                  |           |   |             |   |           |  
|Depreciation                                                                     |  |                                  | 39,487    |   |             |   | 23,873    |  
|Stock based compensation, net                                                    |  |                                  | 267,411   |   |             |   | 167,401   |  
|Amortization of customer list                                                    |  |                                  | 89,952    |   |             |   | 114,731   |  
|Changes in:                                                                      |  |                                  |           |   |             |   |           |  
|Deposit held at clearing broker                                                  |  |                                  | (100,319  | ) |             |   | (629      | )
|Commissions receivable                                                           |  |                                  | (464,947  | ) |             |   | (808,095  | )
|Other receivables                                                                |  |                                  | (74,670   | ) |             |   | 8,839     |  
|Prepaid expenses and other                                                       |  |                                  | 311,073   |   |             |   | 199,329   |  
|Securities owned                                                                 |  |                                  | 13,957    |   |             |   | 324       |  
|Accounts payable and accrued expenses                                            |  |                                  | (287,995  | ) |             |   | (132,338  | )
|Accrued commission expense                                                       |  |                                  | 10,589    |   |             |   | 161,872   |  
|Deposits                                                                         |  |                                  | 583,625   |   |             |   |          |  
|                                                                                 |  |                                  |           |   |             |   |           |  
|Net cash provided by operating activities                                        |  |                                  | 590,200   |   |             |   | 214,486   |  
|                                                                                 |  |                                  |           |   |             |   |           |  
|Cash flows from investing activities                                             |  |                                  |           |   |             |   |           |  
|Purchase of property and equipment                                               |  |                                  | (50,392   | ) |             |   | (27,287   | )
|                                                                                 |  |                                  |           |   |             |   |           |  
|Net cash used by investing activities                                            |  |                                  | (50,392   | ) |             |   | (27,287   | )
|                                                                                 |  |                                  |           |   |             |   |           |  
|Cash flows from financing activities                                             |  |                                  |           |   |             |   |           |  
|Purchase and retirement of common stock shares and options                       |  |                                  | (587,687  | ) |             |   |          |  
|Payment of preferred stock dividend                                              |  |                                  | (7,500    | ) |             |   | (7,500    | )
|Proceeds from exercise of warrants                                               |  |                                  | 30,874    |   |             |   |          |  
|                                                                                 |  |                                  |           |   |             |   |           |  
|Net cash used by financing activities                                            |  |                                  | (564,313  | ) |             |   | (7,500    | )
|                                                                                 |  |                                  |           |   |             |   |           |  
|Net increase (decrease) in cash and cash equivalents                             |  |                                  | (24,505   | ) |             |   | 179,699   |  
|Cash and cash equivalents at beginning of period                                 |  |                                  | 4,828,606 |   |             |   | 3,880,967 |  
|                                                                                 |  |                                  |           |   |             |   |           |  
|Cash and cash equivalents at end of period                                       |  | $                                | 4,804,101 |   |             | $ | 4,060,666 |  
|                                                                                 |  |                                  |           |   |             |   |           |  

See accompanying notes to unaudited condensed consolidated financial statements.



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SUMMIT FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

June 30, 2008

NOTE 1GENERAL

The condensed consolidated financial statements for the three-month and six-month periods ended
June 30, 2008 and June 30, 2007 reflect all adjustments (consisting only of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the
periods indicated. The consolidated financial statements herein should be read in conjunction with the audited consolidated financial statements and notes thereto, together with Managements Discussion and Analysis or Plan of
Operation, contained in the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 for Summit Financial Services Group, Inc. (the Company). The results of operations for the three- and six-month periods ended
June 30, 2008 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2008.

In the event the Companys
operations are negatively impacted by downturns in the economy, in general, or the financial markets, in particular, the Company may need to raise or borrow additional funds to support its operating requirements. There can be no assurance that any
such sources of financing would be available when needed, on commercially reasonable terms, or at all. Also, in the normal course of business, the Company evaluates acquisitions of businesses that compliment its business. In connection with any
acquisitions, the Company may issue additional securities, which could result in dilution for existing shareholders.

NOTE 2STOCKHOLDERS
EQUITY

Basic earnings per share is computed by dividing the net income available to common shareholders for the relevant period by the weighted average
number of shares of common stock issued and outstanding during the period. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock and the number of dilutive common
stock equivalents. The number of dilutive common stock equivalents includes the effect of stock options calculated using the treasury stock method and the number of issuable common shares upon the conversion of preferred stock using the if
converted method.

As of June 30, 2008, the Company had options and warrants outstanding entitling the holders thereof to purchase a total of
approximately 18.0 million shares of common stock. The Company also had outstanding shares of preferred stock convertible into approximately 140,000 shares of common stock. For purposes of computing diluted earnings per share for the
three-month period ended June 30, 2008, the Company has assumed the exercise of options and warrants for approximately 10.8 million shares only, since the options, warrants and shares issuable upon the conversion of the preferred stock for
the remaining approximately 7.3 million shares are either non- or anti-dilutive. For purposes of computing diluted earnings per share for the six-month period ended June 30, 2008, the Company has assumed the exercise of options and
warrants for approximately 11.8 million shares only, since the options, warrants and share issuable upon the conversion of the preferred stock for the remaining approximately 6.3 million shares are either non- or anti-dilutive.

Preferred stock dividends in arrears as of June 30, 2008 approximated $22,000.

Stock-Based Awards

The Company accounts for stock-based compensation of non-employees using the fair market value method
under the provisions of SFAS No. 123(R).

Most often, options are granted for the provision of future services, such as continued employment or, in
the case of independent financial advisors, their affiliation with the Company. Consequently, the options typically provide for vesting over a period of years, with a certain percentage of the options vesting each year upon the anniversary date of
the grant if the grantee is then still affiliated with the Company. In certain instances, unearned stock compensation is recorded for options issued to either employees or non-employees for services to be rendered in the future. Any unearned stock
compensation is generally amortized over the period the underlying options are earned, which is typically the vesting period. The fair value of each option grant is estimated at the date of grant using the Black-Scholes option pricing model. The
amortization of earned stock expense related to issuances to employees is included in the accompanying Consolidated Statement of Income under the caption Employee Compensation and Benefits, while the amortization of earned stock expense
related to issuances to non-employees is included under the caption Other Operating Expenses.



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During the three- and six-month periods ended June 30, 2008 the Company issued, in the aggregate, options to
employees with a fair market value of approximately $10,000 and $81,000, respectively. During both the three- and six-month periods ended June 30, 2008 the Company issued, in the aggregate, options to non-employees with a fair market value of
approximately $1,000. During the same periods, the Company recognized net amortization expense of approximately $61,000 and $202,000, respectively, of expense related to the issuance in the current and prior periods of options to employees, as well
as net amortization expense of approximately $33,000 and $65,000, respectively, of expense related to the issuance in the current and prior period of options to non-employees.

On December 12, 2007, Summit Brokerage Services, Inc. (SBS) entered into a Mediation Settlement Agreement (Agreement) with Richard Parker (Parker), SBSs former Vice
Chairman and President and a principal shareholder of the Company. In accordance with the terms of the Agreement, all disputes relating to the litigation styledSummit Brokerage Services, Inc. v. Richard Parker (the Suit), which
the Company commenced on August 18, 2003 in Palm Beach County, Florida, were resolved, subject to the fulfillment of certain conditions specified in the Agreement. The Agreement required Parker to relinquish all security interest he had in the
Company, totaling 3,421,927 shares of our Common Stock (including 500,000 shares to be acquired through the exercise of an option (the Option)). In exchange, the Company was obligated to, among other things, pay $675,000 to
Mr. Parker on or before December 31, 2007. On December 31, 2007, the Company paid the $675,000 to Parkers counsel, which amount was to be held in escrow pending the delivery by Parker of the shares and the Option. On
January 3, 2008, Parker delivered to the Company 2,479,252 shares, together with the Option. Accordingly, Summit authorized the release of $587,687 from escrow, with the balance, or $87,313, to be released upon the delivery by Parker of the
remaining shares. This amount is reflected in the consolidated statement of financial condition at June 30, 2008 as deposit. All of the shares acquired, or to be acquired, by the Company from Parker were retired.

NOTE 3INCOME TAXES

The Companys provision for income
taxes reflects an estimated income tax accrual for the three months and six months ended June 30, 2008 of approximately $105,000 and $111,000 respectively, based on the Companys estimated effective tax rate for the year ending
December 31, 2008.

NOTE 4NET CAPITAL REQUIREMENT

Summit Brokerage Services, Inc., the Companys wholly-owned broker-dealer subsidiary (Summit Brokerage or SBS), is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1),
which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At June 30, 2008, Summit Brokerage had net capital of approximately $2.88
million, which was $2.63 million in excess of its SEC-required minimum net capital of $250,000. Under SEC Rule 15c3-1, Summit Brokerages aggregate indebtedness to net capital ratio was .82 to 1 at June 30, 2008.

NOTE 5CONTINGENCIES

The Company is a party to legal
proceedings relating to various claims and lawsuits arising in the normal course of business. Management has provided an accrual for estimated probable losses, which could result from these matters. Management believes that the range of potential
net losses resulting from these proceedings in excess of the accrued amount, if any, will not be material to the Companys financial position or results of operations.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of the Companys financial condition and results of its operations for the three- and six-month periods ended June 30, 2008 and 2007 should be read in conjunction with
the Companys condensed consolidated financial statements included as Item 1 herein. When used in the following discussions, the words believes, anticipates, intends, expects, and similar
expressions are intended to identify forward-looking statements. As further explained in the section entitled Forward Looking Statements on page 2 herein, such statements are subject to certain risks and uncertainties, which could cause
results to differ materially from those projected.

Overview

Summit Financial Services Group, Inc. (SFSG or the Company) is a Florida-based financial services holding company that provides, through its Summit Brokerage Services, Inc. (Summit
Brokerage or SBS) operating subsidiary, a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and
life insurance, under licenses held by its SBS Insurance Agency of Florida, Inc. (SBSIA) subsidiary (or by SBSIAs subsidiary entities). Summit Brokerage also provides, through its Securities and Exchange Commission
(SEC) registered investment adviser subsidiary, Summit Financial Group, Inc. (SFG), asset management and investment advisory services.

Summit Brokerage is registered as a broker-dealer with the SEC, is a member of the Financial Industry Regulatory Authority (FINRA) (f/k/a National Association of Securities Dealers, Inc.
(NASD)), the Municipal Securities Rule Making Board (MSRB), the National Futures Association (NFA) and the Securities Investor Protection Corporation (SIPC), and is licensed to



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conduct its brokerage activities in all 50 states, plus the District of Columbia. SFG, our investment advisory firm, is registered or eligible to conduct
business as an investment advisor in 34 states and the District of Columbia. SBSIA, our subsidiary insurance agency, directly or through its subsidiary entities, is licensed to sell insurance, or is not required to be so licensed, in all
jurisdictions where the Company conducts its brokerage activities.

As of July 31, 2008, we had approximately 230 registered
representatives serving retail and, to a much lesser extent, institutional customer accounts. With the exception of our Boca Branch, our approximately 120 other branch offices are owned and operated by independent owners who maintain all appropriate
licenses and are responsible for all office overhead and expenses. Because these independent operators, many of whom are financial planners, are required to pay their own expenses, we generally pay them a much greater percentage of the commissions
and fee income they generate, typically 80%90%.

Our registered representatives offer a broad range of investment products and
services. These products and services allow us to generate both commissions (from transactions in securities and other investment products) and fee income (for providing investment advisory services, namely managing a clients account). The
investment products and services offered include mutual funds, annuities, insurance, individual stocks and bonds, and managed money accounts.

Summit Brokerage is a fully-disclosed broker dealer, and therefore relies on its clearing firms to provide the back office support and transaction processing services necessary to effect transactions on all principal national and
international securities exchanges. Additionally, because the clearing firms provide us with access to many other financial products and services that we would not otherwise be able to offer, we are able to provide our clients with products and
services comparable to much larger brokerage firms. In exchange for providing these services, the clearing firm typically charges us a fee every time they effect a transaction on behalf of the firm or its clients. We have clearing arrangements with
First Clearing, LLC (a subsidiary of Wachovia Corporation) and Pershing LLC (an affiliate of the Bank of New York Mellon).

By their
nature, our business activities are highly competitive and are subject to, among other things, general market conditions, including the volatility of the trading markets and the attractiveness of various forms of investment products. Consequently,
our revenues and net income or loss are subject to substantial positive and negative fluctuations due to a variety of factors that cannot be predicted with great certainty and may result in revenues and net income or loss in any particular period
that may not be representative of full-year results, or indicative of future results, and may vary significantly from period to period. In general, our financial results can be impacted by a number of factors, including our ability to recruit and
retain financial advisors as well as general market conditions and volatility, which is often an expression of investor confidence. Furthermore, our mix of business in any particular period will be impacted by several factors, including the
attractiveness of any particular type of investment when compared with other types of investments, and the types of investments sold by newly added financial advisors to our Company, many of whom specialize in the sale of specific types of
investment products.

For the three-month and six-month periods ended June 30, 2008, the Companys revenues declined over those
levels reported for the comparable periods of 2007. We believe that this decline was due to a lack of investor confidence and market volatility during both the three- and six-month periods, including as a result of the problems experienced by some
of the countrys largest financial institutions (including Bear Stearns & Co., Inc. and IndyMac Bank, F.S.B.) as well as in the housing market and rising gas prices. For the balance of 2008, we believe general market conditions, and
therefore investor confidence, will continue to be negatively impacted by a number of factors, including concern over the viability of some of the nations largest financial services firms, declining real estate values (and the resulting
problems with mortgage-backed securities related thereto), rising consumer prices, and a possible recession. Furthermore, investor confidence may be eroded by a tightening of liquidity in the capital markets and concern over the necessity of
government intervention in providing stability in the marketplace. Reductions in investor confidence will negatively impact our revenues and earnings. As we continue to grow, we may have increases in expenses related to, among other things,
marketing and recruiting, personnel, office space, and the amortization of forgivable loans provided to newly recruited financial advisors. There is no assurance that any increased revenue from growth will be sufficient to offset increased expenses.
Furthermore, the Company has determined that its long term growth strategy can best be maximized through the reinvestment of its earnings into the development of its infrastructure and its recruiting and business development efforts, including
through the payment of upfront amounts to advisors. As a result, we cannot predict with certainty our revenues and net income (or losses) in any particular period. Furthermore, the results for any period may not be representative of full-year
results and may vary significantly from year to year and from quarter to quarter.

In addition to declining revenues for both the three-
and six-month periods, we also experienced declining earnings. These declines in earnings were largely attributable to an increase in certain operating costs, primarily employee costs and benefits, which increase was only partially offset by
increases in income from interest and dividends, as well as from other income. Results for the three-month and six-month periods also benefited from the achievement of certain performance bonuses paid by one of Summit Brokerages clearing
firms, as well as the settlement of certain litigation brought by the Company against one of its former insurance carriers.

Our business
plan is focused primarily on increasing our network of affiliated registered representatives, which may permit the Company to expand its base of revenue and its network for the retail distribution of securities without the capital expenditures that
would be required to open company-owned offices and the additional administrative and other costs of hiring registered representatives as in-house employees. As was the case with the Boca Branch, however, we will opportunistically evaluate
acquisitions, including those that would result in registered representatives in acquired branches becoming employees of Summit Brokerage.



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Results of Operations

The following discussion relates to the results of operations for the three-month and six-month periods ended June 30, 2008 (the 2008 Quarter and the 2008 Period, respectively) and the
comparable period in the prior year (the 2007 Quarter and the 2007 Period, respectively).

Comparison of Three
Months Ended June 30, 2008 and June 30, 2007

Revenue:

Commission revenue of $8.17 million for the 2008 Quarter represents a decrease of $1.41 million, or 15%, when compared to commission revenue of $9.58
million for the 2007 Quarter. We believe the main factor contributing to this decline was a lack of investor confidence in the financial markets during the 2008 Quarter.

In any quarter, our mix of business will be impacted by several factors, including, among other things, investor confidence, as reflected by the movements of the equities markets, and the attractiveness of
non-equity-related investment products, including those affected by changes in interest rates, such as fixed income securities. Additionally, during any quarter, we may add or lose a significant number of registered representatives who focus
primarily on the sale of a particular type or types of investment product(s) (e.g., insurance, equities, fixed income, etc.).

Expenses:

Commissions and clearing costs decreased to $6.48 million during the 2008 Quarter, which represents a decrease of $1.48 million, or 19%, from the $7.96
million reported for the 2007 Quarter. In general, commissions and clearing costs are directly related to commission revenue, and will typically increase or decrease proportionately as commission revenue rises. Commissions and clearing costs, as a
percentage of commission revenue, decreased to approximately 79.4% in the 2008 Quarter versus approximately 83.1% in the 2007 Quarter. This decline was due to principally to the achievement of certain performance bonuses paid by one of Summit
Brokerages clearing firms, which amounts served to increase commission revenues while at the same time decreasing commissions and clearing costs. Because our independent financial advisors are responsible for the payment of all costs
associated with operating their offices, we must pay to them a higher percentage of the commissions they generate, typically 80% to 90%, than we pay to those financial advisors working from the Boca Branch, where Summit pays the costs associated
with operating the Branch. As a result, on a prospective basis, we would expect commissions and clearing costs, as a percentage of commission revenue, to increase as we recruit more independent financial advisors.

Employee compensation and benefits increased by approximately $.21 million to approximately $1.18 million during the 2008 Quarter, or an approximate
increase of 22% when compared with the approximately $.97 million reported for the 2007 Quarter. This increase was due primarily to an increase in management and other employee salaries and employment-related costs, as well as the addition of new
employees. Additionally, we include within employee compensation and benefits those net expenses related to the issuance of common stock and common stock equivalents, such as options, to our employees. For the 2008 Quarter, we recognized a net
expense of approximately $61,000 related to the amortization of unearned stock compensation. For the 2007 Quarter, we recognized a net expense of approximately $42,000 related to the amortization of unearned stock compensation.

Occupancy and equipment cost for the 2008 Quarter increased by approximately $20,000, to approximately $160,000, or an approximate increase of 14% when
compared with the approximately $140,000 reported for the 2007 Quarter. Although the Companys recurring occupancy costs were higher in the 2008 Quarter, results for the 2007 Quarter were negatively impacted by an assessment from the
Companys landlord during that period of approximately $45,000 over and above the Companys recurring monthly rent expense. There was no corresponding charge in the 2008 Quarter.

Communications costs increased by approximately $26,000, or 29%, to approximately $115,000 in the 2008 Quarter in comparison to $89,000 in the 2007
Quarter. The increase in communications costs between the 2008 Quarter and the 2007 Quarter is due primarily to an increase in certain technology infrastructure costs.

Legal, accounting and litigation costs decreased by approximately $132,000 to approximately ($22,000) during the 2008 Quarter, compared to approximately $110,000 reported for the 2007 Quarter. This decrease is largely
attributable to the reimbursement of $50,000 in previously paid legal fees by the Companys as part of a settlement with the Companys insurance carrier.

Other operating expenses typically include the general and administrative costs we incurred, to the extent such costs are not included elsewhere. Other operating expenses increased by approximately $67,000, or 26%, to
approximately $323,000 during the 2008 Quarter versus approximately $256,000 for the 2007 Quarter. Significant fluctuations in expenses when comparing the Quarters include an increase in business development and financial advisor-related costs, as
well as increases in licensing and regulatory costs and advertising and promotion costs, which increases was only partially offset by a decrease in travel and related expenses. Additionally, we include within other operating expenses those net
expenses related to the issuance of common stock and common stock equivalents, such as options, to non-employees. For the 2008 Quarter, we recognized a net expense of approximately $33,000 related to the amortization of unearned stock compensation.
For the 2007 Quarter, we recognized a net expense of approximately $20,000 related to the amortization of unearned stock compensation.

For
the 2008 Quarter, the Company recorded a tax provision of approximately $106,000. The Company did not record any tax provision for the 2007 Quarter as a result of the availability of net operating loss carryforwards.

Net Income:

For the 2008 Quarter, we generated net
income of approximately $150,000, or $0.0056 per basic and $0.0048 per diluted share, as compared to the net income reported for the 2007 Quarter of approximately $373,000, or $0.0131 per basic and $0.0118 per diluted share.

Comparison of Six Months Ended June 30, 2008 and June 30, 2007

Revenue:

Commission revenue of $16.45 million for the 2008 Period represents a decrease of $1.95
million, or 11%, when compared to commission revenue of $18.40 million for the 2007 Period. We believe the main factor contributing to this decline was a lack of investor confidence in the financial markets during the 2008 Period.

In any period, our mix of business will be impacted by several factors, including, among other things, investor confidence, as reflected by the movements
of the equities markets, and the attractiveness of non-equity-related investment products, including those affected by changes in interest rates, such as fixed income securities. Additionally, during any period, we may add or lose a significant
number of registered representatives who focus primarily on the sale of a particular type or types of investment product(s) (e.g., insurance, equities, fixed income, etc.).



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Expenses:

Commissions and clearing costs decreased to $13.30 million during the 2008 Period, which represents a decrease of $1.95 million, or 13%, from the $15.25 million reported for the 2007 Period. In general, commissions and clearing costs are
directly related to commission revenue, and will typically increase or decrease proportionately as commission revenue rises. Commissions and clearing costs, as a percentage of commission revenue, decreased to approximately 80.9% in the 2008 Period
versus approximately 82.9% in the 2007 Period. This decline was due to principally to the achievement of certain performance bonuses paid by one of Summit Brokerages clearing firms, which amounts served to increase commission revenues while at
the same time decreasing commissions and clearing costs. Because our independent financial advisors are responsible for the payment of all costs associated with operating their offices, we must pay to them a higher percentage of the commissions they
generate, typically 80% to 90%, than we pay to those financial advisors working from the Boca Branch, where Summit pays the costs associated with operating the Branch. As a result, on a prospective basis, we would expect commissions and clearing
costs, as a percentage of commission revenue, to increase as we recruit more independent financial advisors.

Employee compensation and
benefits increased by approximately $.39 million to approximately $2.43 million during the 2008 Period, or an approximate increase of 19% when compared with the approximately $2.04 million reported for the 2007 Period. This increase was due
primarily to an increase in management and other employee salaries and employment-related costs, as well as the addition of new employees. Additionally, we include within employee compensation and benefits those net expenses related to the issuance
of common stock and common stock equivalents, such as options, to our employees. For the 2008 Period, we recognized a net expense of approximately $202,000 related to the amortization of unearned stock compensation. For the 2007 Period, we
recognized a net expense of approximately $122,000 related to the amortization of unearned stock compensation.

Occupancy and equipment
cost for the 2008 Period decreased by approximately $6,000, to approximately $318,000, or an approximate decrease of 2% when compared with the approximately $324,000 reported for the 2007 Period. Although the Companys recurring occupancy costs
were higher in the 2008 Period, results for the 2007 Period were negatively impacted by an assessment from the Companys landlord during that period of approximately $45,000 over and above the Companys recurring monthly rent expense.
There was no corresponding charge in the 2008 Period.

Communications costs increased by approximately $39,000, or 22%, to approximately
$216,000 in the 2008 Period in comparison to $177,000 in the 2007 Period. The increase in communications costs between the 2008 Period and the 2007 Period is due primarily to an increase in certain technology infrastructure costs.

Legal, accounting and litigation costs decreased by approximately $86,000 to approximately $2,000 during the 2008 Period, compared to approximately
$88,000 reported for the 2007 Period. This decrease is largely attributable to a decrease in the Companys reserve for litigation, as well as the receipt of reimbursed legal fees in connection with an action brought by the Company against one
of its insurance carriers. The decrease is also attributable to a decline in the Companys reserve for litigation.

Other operating
expenses typically include the general and administrative costs we incurred, to the extent such costs are not included elsewhere. Other operating expenses decreased by approximately $69,000, or 11%, to approximately $578,000 during the 2008 Period
versus approximately $647,000 for the 2007 Period. This decrease is mainly associated with a decline in business development and financial advisor-related costs in the 2008 Period when compared to the 2007 Period, as well as a decline in travel and
related expenses, which declines were partially offset by an increase in advertising and promotion costs. Additionally, we include within other operating expenses those net expenses related to the issuance of common stock and common stock
equivalents, such as options, to non-employees. For the 2008 Period, we recognized a net expense of approximately $65,000 related to the amortization of unearned stock compensation. For the 2007 Period, we recognized a net expense of approximately
$46,000 related to the amortization of unearned stock compensation.

For the 2008 Period, the Company recorded a tax provision of
approximately $111,000. The Company did not record any tax provision for the 2007 Period as a result of the availability of net operating loss carryforwards.

Net Income:

For the 2008 Period, we generated net income of approximately $202,000, or $0.0075 per basic and $0.0062 per
diluted share, as compared to the net income reported for the 2007 Period of approximately $479,000, or $0.0167 per basic and $0.0154 per diluted share.



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Liquidity and Capital Resources

Net cash provided by operating activities totaled approximately $590,000 during the 2008 Period, compared to net cash generated by operating activities of
approximately $214,000 for the 2007 Period. Cash provided by, or used in, operating activities for any period includes net income or loss for that period adjusted for non-cash items and the effects of changes in working capital. For the 2008 Period,
cash flows from operating activities were positively impacted by non-cash stock-based compensation of approximately $267,000, versus approximately $167,000 during the 2007 Period. Cash provided by operating activities also improved as a result of
the net change in certain balance sheet accounts. For the 2008 Period, the net change in these balance sheet accounts resulted in a decrease in cash provided by operating activities of approximately $60,000, versus a decrease in cash provided by
operating activities of approximately $571,000 for the 2007 Period.

Cash and cash equivalents decreased by approximately $25,000 to
approximately $4,804,000 at June 30, 2008 from approximately $4,829,000 at December 31, 2007. During the period, the Company repurchased, for approximately $588,000, common stock, which amount was offset by cash provided by operations in
the amount of approximately $590,000.

During the 2008 Period, we purchased approximately $50,000 of property and equipment, which amount
was $23,000 more than the approximately $27,000 purchased during the 2007 Period. We do not project material capital expenditures over the next twelve months.

Financing activities used cash of approximately $564,000 during the 2008 Period, which was comprised primarily of the release of approximately $588,000 of the $675,000 held in escrow related to the purchase by the
Company of the common stock (and a stock option) held by a former officer and shareholder. During the 2008 Period, the Company also received $31,000 in proceeds from the exercise of a common stock warrant and a stock option.

Inflation. Inflation has not been a major factor in our business since inception.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Not
Applicable



|Item 4. | Controls and Procedures
|------- | -----------------------

The Companys Chief
Executive Officer and the Companys Chief Financial Officer evaluated the Companys disclosure controls and procedures as of June 30, 2008. Based upon this evaluation, the Companys Chief Executive Officer and the Companys
Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange
Commission.

During the quarter ended June 30, 2008, there were no changes in our internal controls over financial reporting that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

In
June 2008, the Company issued an aggregate 1,747 shares of its common stock to one person upon such persons exercise of a like number of outstanding common stock options at an exercise price of $.50 per share. The shares of common stock were
issued in reliance upon the exemption from the registration requirements under the Securities Act of 1933, as amended afforded by Section 4(2) of such Act.



|Item 6. | Exhibits
|------- | --------



|       |  |                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------
|Number |  | Name                                                                                               
|31.1   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|       | 
|31.2   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.1   |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.2   |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SUMMIT FINANCIAL SERVICES GROUP, INC.

SIGNATURES

In accordance with the requirements of
the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |                                                                                                              
|--------------------- |  | -------------------------------------------------------------------------------------------------------------
|Date: August 14, 2008 |  | Summit Financial Services Group, Inc.                                                                        
|                      |  | (Registrant)                                                                                                 
|                      | 
|                      |  | /s/ Marshall T. Leeds                                                                                        
|                      |  | Marshall T. Leeds, Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)
|                      | 
|Date: August 14, 2008 |  | /s/ Steven C. Jacobs                                                                                         
|                      |  | Steven C. Jacobs, Executive Vice President and Chief Financial Officer (Principal Accounting Officer)        



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EXHIBIT INDEX



|               |  |                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                        
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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