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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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

For the quarterly period ended September 30, 2007.

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: 0-29337



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SUMMIT FINANCIAL SERVICES GROUP,
INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 05-0577932                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification 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)



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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 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 November 5, 2007
|Common Stock Par value $0.0001 per share |  | 28,210,075                        

Transitional Small Business Disclosure Format ̈Yes    x  No



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##### Table of Contents

SUMMIT FINANCIAL SERVICES GROUP, INC.

INDEX



|                               |  |                                                                                                                  |  |     
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                  |  | Page
|PART I - FINANCIAL INFORMATION |  |                                                                                                                 
|Item 1.                        |  | Financial Statements                                                                                             |  |     
|                               |  | Condensed Consolidated Statement of Financial Condition at September 30, 2007(unaudited)                         |  | 3   
|                               |  | Condensed Consolidated Statements of Income for the Three Months ended September 30, 2007 and 2006(unaudited)    |  | 4   
|                               |  | Condensed Consolidated Statements of Income for the Nine Months ended September 30, 2007 and 2006(unaudited)     |  | 5   
|                               |  | Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2007 and 2006(unaudited) |  | 6   
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                   |  | 7   
|Item 2.                        |  | Managements Discussion and Analysis or Plan of Operation                                                        |  | 8   
|Item 3.                        |  | Controls and Procedures                                                                                          |  | 12  
|PART II - OTHER INFORMATION    |  |                                                                                                                 
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                              |  | 13  
|Item 6.                        |  | Exhibits                                                                                                         |  | 13  
|SIGNATURES                     |  | 14                                                                                                              

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 or Plan of Operation. 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
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, 2006.



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PART I. FINANCIAL INFORMATION



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

SUMMIT FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Financial Condition

September 30, 2007 (Unaudited)



|                                                                                                                                                                                   |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|ASSETS                                                                                                                                                                             |  |   |            |  
|Cash and cash equivalents                                                                                                                                                          |  | $ | 4,779,466  |  
|Deposit held at clearing broker                                                                                                                                                    |  |   | 27,866     |  
|Securities owned, at fair value                                                                                                                                                    |  |   | 21,427     |  
|Commissions receivable                                                                                                                                                             |  |   | 1,632,330  |  
|Prepaid expenses                                                                                                                                                                   |  |   | 52,662     |  
|Other receivables, net                                                                                                                                                             |  |   | 202,516    |  
|Goodwill & customer list, less accumulated amortization of $862,971                                                                                                                |  |   | 725,603    |  
|Property and equipment at cost, less accumulated depreciation of $118,363                                                                                                          |  |   | 136,896    |  
|                                                                                                                                                                                   |  |   |            |  
|TOTAL ASSETS                                                                                                                                                                       |  | $ | 7,578,766  |  
|                                                                                                                                                                                   |  |   |            |  
|                                                                                                                                                                                   | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                               |  |   |            |  
|LIABILITIES                                                                                                                                                                        |  |   |            |  
|Accounts payable and accrued expenses                                                                                                                                              |  | $ | 905,462    |  
|Accrued commission expense                                                                                                                                                         |  |   | 1,670,669  |  
|                                                                                                                                                                                   |  |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                  |  |   | 2,576,131  |  
|                                                                                                                                                                                   | 
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                      |  |   |            |  
|                                                                                                                                                                                   | 
|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         |  
|Common stock, par value $0.0001 per share; authorized 100,000,000 shares; 28,224,987 issued and 28,210,075 outstanding                                                             |  |   | 2,822      |  
|Additional paid-in capital                                                                                                                                                         |  |   | 9,576,442  |  
|Unearned stock-based compensation                                                                                                                                                  |  |   | (538,379   | )
|Treasury stock (14,912 shares, at cost)                                                                                                                                            |  |   | (10,884    | )
|Accumulated deficit                                                                                                                                                                |  |   | (4,027,379 | )
|                                                                                                                                                                                   |  |   |            |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                         |  |   | 5,002,635  |  
|                                                                                                                                                                                   |  |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                         |  | $ | 7,578,766  |  
|                                                                                                                                                                                   |  |   |            |  

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 Months Ended September 30,
|                                       |  | 2007                                     |            | 2006       
|                                       |  | (Unaudited)                              |            | (Unaudited)
|REVENUES                               |  |                                          |            |             |   |           
|Commissions                            |  | $                                        | 8,623,899  |             | $ | 6,831,791 
|Interest and dividends                 |  |                                          | 304,424    |             |   | 234,847   
|Other                                  |  |                                          | 67,675     |             |   | 99,680    
|                                       |  |                                          |            |             |   |           
|                                       |  |                                          | 8,995,998  |             |   | 7,166,318 
|                                       |  |                                          |            |             |   |           
|EXPENSES                               |  |                                          |            |             |   |           
|Commissions and clearing costs         |  |                                          | 7,030,297  |             |   | 5,609,363 
|Employee compensation and benefits     |  |                                          | 953,085    |             |   | 729,796   
|Occupancy and equipment                |  |                                          | 143,594    |             |   | 120,712   
|Communications                         |  |                                          | 84,081     |             |   | 92,581    
|Legal, accounting and litigation costs |  |                                          | 10,855     |             |   | 74,923    
|Depreciation and amortization          |  |                                          | 59,738     |             |   | 54,722    
|Other operating expenses               |  |                                          | 105,448    |             |   | 343,675   
|                                       |  |                                          |            |             |   |           
|                                       |  |                                          | 8,387,098  |             |   | 7,025,772 
|                                       |  |                                          |            |             |   |           
|INCOME BEFORE INCOME TAXES             |  |                                          | 608,900    |             |   | 140,546   
|                                       |  |                                          |            |             |   |           
|PROVISION FOR INCOME TAXES             |  |                                          |           |             |   |          
|                                       |  |                                          |            |             |   |           
|NET INCOME                             |  | $                                        | 608,900    |             | $ | 140,546   
|                                       |  |                                          |            |             |   |           
|BASIC EARNINGS PER SHARE               |  | $                                        | 0.0215     |             | $ | 0.0048    
|                                       |  |                                          |            |             |   |           
|DILUTED EARNINGS PER SHARE             |  | $                                        | 0.0177     |             | $ | 0.0046    
|                                       |  |                                          |            |             |   |           
|WEIGHTED AVERAGE SHARES OUTSTANDING    |  |                                          |            |             |   |           
|BASIC                                  |  |                                          | 28,210,075 |             |   | 28,210,075
|                                       |  |                                          |            |             |   |           
|DILUTED                                |  |                                          | 34,159,882 |             |   | 29,665,283
|                                       |  |                                          |            |             |   |           

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 Nine Months Ended September 30,
|                                       |  | 2007                                    |            | 2006       
|                                       |  | (Unaudited)                             |            | (Unaudited)
|REVENUES                               |  |                                         |            |             |   |           
|Commissions                            |  | $                                       | 27,025,985 |             | $ | 19,891,662
|Interest and dividends                 |  |                                         | 863,137    |             |   | 709,294   
|Other                                  |  |                                         | 226,462    |             |   | 303,254   
|                                       |  |                                         |            |             |   |           
|                                       |  |                                         | 28,115,584 |             |   | 20,904,210
|                                       |  |                                         |            |             |   |           
|EXPENSES                               |  |                                         |            |             |   |           
|Commissions and clearing costs         |  |                                         | 22,282,985 |             |   | 16,292,105
|Employee compensation and benefits     |  |                                         | 2,990,443  |             |   | 2,284,655 
|Occupancy and equipment                |  |                                         | 467,823    |             |   | 347,845   
|Communications                         |  |                                         | 261,421    |             |   | 283,256   
|Legal, accounting and litigation costs |  |                                         | 99,209     |             |   | 327,924   
|Depreciation and amortization          |  |                                         | 173,563    |             |   | 160,314   
|Other operating expenses               |  |                                         | 752,061    |             |   | 968,695   
|                                       |  |                                         |            |             |   |           
|                                       |  |                                         | 27,027,505 |             |   | 20,664,794
|                                       |  |                                         |            |             |   |           
|INCOME BEFORE INCOME TAXES             |  |                                         | 1,088,079  |             |   | 239,416   
|PROVISION FOR INCOME TAXES             |  |                                         |           |             |   |          
|                                       |  |                                         |            |             |   |           
|NET INCOME                             |  | $                                       | 1,088,079  |             | $ | 239,416   
|                                       |  |                                         |            |             |   |           
|BASIC EARNINGS PER SHARE               |  | $                                       | 0.0382     |             | $ | 0.0081    
|                                       |  |                                         |            |             |   |           
|DILUTED EARNINGS PER SHARE             |  | $                                       | 0.0337     |             | $ | 0.0077    
|                                       |  |                                         |            |             |   |           
|WEIGHTED AVERAGE SHARES OUTSTANDING    |  |                                         |            |             |   |           
|BASIC                                  |  |                                         | 28,210,075 |             |   | 28,210,075
|                                       |  |                                         |            |             |   |           
|DILUTED                                |  |                                         | 31,995,617 |             |   | 29,452,900
|                                       |  |                                         |            |             |   |           

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 Nine MonthsEnded September 30, |          
|                                                                                        |  | 2007                                   |           |   | 2006        |  
|                                                                                        |  | (Unaudited)                            |           |   | (Unaudited) |  
|Cash flows from operating activities                                                    |  |                                        |           |   |             |   |           |  
|Net income                                                                              |  | $                                      | 1,088,079 |   |             | $ | 239,416   |  
|Adjustments to reconcile net income to net cash provided (used) by operating activities |  |                                        |           |   |             |   |           |  
|Depreciation                                                                            |  |                                        | 38,635    |   |             |   | 24,828    |  
|Stock based compensation, net                                                           |  |                                        | 215,691   |   |             |   | 44,623    |  
|Amortization of customer list, imputed interest and forgivable notes receivable         |  |                                        | 172,494   |   |             |   | 173,736   |  
|Changes in:                                                                             |  |                                        |           |   |             |   |           |  
|Deposit held at clearing broker                                                         |  |                                        | (923      | ) |             |   | (789      | )
|Commissions receivable                                                                  |  |                                        | (472,403  | ) |             |   | (784,017  | )
|Other receivables                                                                       |  |                                        | 39,021    |   |             |   | (154,179  | )
|Prepaid expenses and other                                                              |  |                                        | 281,450   |   |             |   | 193,136   |  
|Securities owned                                                                        |  |                                        | (12,190   | ) |             |   | 1,482     |  
|Accounts payable and accrued expenses                                                   |  |                                        | (102,709  | ) |             |   | (486,707  | )
|Accrued commission expense                                                              |  |                                        | (267,171  | ) |             |   | 318,588   |  
|                                                                                        |  |                                        |           |   |             |   |           |  
|Net cash provided (used) by operating activities                                        |  |                                        | 979,974   |   |             |   | (429,883  | )
|                                                                                        |  |                                        |           |   |             |   |           |  
|Cash flows from investing activities                                                    |  |                                        |           |   |             |   |           |  
|Purchase of property and equipment                                                      |  |                                        | (70,225   | ) |             |   | (62,623   | )
|                                                                                        |  |                                        |           |   |             |   |           |  
|Net cash used by investing activities                                                   |  |                                        | (70,225   | ) |             |   | (62,623   | )
|                                                                                        |  |                                        |           |   |             |   |           |  
|Cash flows from financing activities                                                    |  |                                        |           |   |             |   |           |  
|Payment of preferred stock dividend                                                     |  |                                        | (11,250   | ) |             |   | (19,627   | )
|Payments on debt obligations                                                            |  |                                        |          |   |             |   | (440,071  | )
|                                                                                        |  |                                        |           |   |             |   |           |  
|Net cash used by financing activities                                                   |  |                                        | (11,250   | ) |             |   | (459,698  | )
|                                                                                        |  |                                        |           |   |             |   |           |  
|Net increase (decrease) in cash and cash equivalents                                    |  |                                        | 898,499   |   |             |   | (952,204  | )
|Cash and cash equivalents at beginning of period                                        |  |                                        | 3,880,967 |   |             |   | 3,448,247 |  
|                                                                                        |  |                                        |           |   |             |   |           |  
|Cash and cash equivalents at end of period                                              |  | $                                      | 4,779,466 |   |             | $ | 2,496,043 |  
|                                                                                        |  |                                        |           |   |             |   |           |  

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

September 30, 2007

NOTE 1GENERAL

The condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2007 and September 30, 2006 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, 2006 for Summit Financial
Services Group, Inc. (the Company). The results of operations for the three- and nine-month periods ended September 30, 2007 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2007.

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. The
Company may also issue additional securities in connection with a financing, the purpose of which would be to provide the capital necessary to accelerate the Companys growth plans, especially as such plans relate to the payment of amounts to
financial advisors in connection with their joining the Company.

Certain amounts from the prior period have been reclassified to conform to the
current-period presentation. These reclassifications had no impact on the reported net income for the three- and nine-month periods ended September 30, 2007.

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 September 30, 2007, 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 September 30, 2007, the Company has assumed the exercise of options and warrants for approximately 11.5 million shares only, since the options and warrants for the
remaining approximately 6.5 million shares are either non- or anti-dilutive. For purposes of computing diluted earnings per share for the nine-month period ended September 30, 2007, the Company has assumed the exercise of options and
warrants for approximately 9.5 million shares only, since the options and warrants for the remaining approximately 8.5 million shares are either non- or anti-dilutive.

Preferred stock dividends in arrears as of September 30, 2007 approximated $23,000.

Stock-Based Awards

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R) (revised 2004), Share-Based Payment, which is a
revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash
Flows. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values.

In April 2005, the Securities and Exchange Commission amended the effective date of SFAS
No. 123(R) to the first period of the first fiscal year beginning after June 15, 2005. The Company was required to adopt SFAS No. 123(R) on January 1, 2006. SFAS No. 123(R) permits public companies to adopt its requirements
using one of two methods: (1) a modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted
after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date; or (2) a modified
retrospective method, which includes the requirements of the modified prospective method described above, but also permits entities to restate all prior periods presented based on the amounts previously recognized under SFAS No. 123 for
purposes of pro forma disclosures. The Company has adopted SFAS No. 123(R) using the modified prospective method.



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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 Black-Scholes
model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Companys employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair
value estimate, in managements opinion, the existing models (including Black-Scholes) do not necessarily provide a reliable single measure of the fair value of the Companys employee stock options. 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.

During the three-month and nine-month periods ended September 30, 2007, the
Company issued, in the aggregate, options with a fair market value of approximately $11,000 and $323,000, respectively. During the three-month and nine-month periods ended September 30, 2007, the Company recognized net amortization expense of
approximately $48,000 and $216,000, respectively, of expense related to the issuance of options.

NOTE 3INCOME TAXES

The Companys provision for income taxes reflects an estimated income tax accrual for the three months and nine months ended September 30, 2007, which amount
was fully offset by the use of an equal portion of the Companys net operating loss carryforward.

NOTE 4NET CAPITAL REQUIREMENT

Summit Brokerage Services, Inc., the Companys wholly-owned broker-dealer subsidiary (Summit Brokerage), 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
September 30, 2007, Summit Brokerage had net capital of approximately $3.54 million, which was $3.29 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 0.73 to 1 at September 30, 2007.

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 or Plan of Operation
|------- | ---------------------------------------------------------

The
following discussion and analysis of the Companys financial condition and results of its operations for the three-month and nine-month periods ended September 30, 2007 and 2006 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

The Company is a Florida-based financial services holding company that provides, through its Summit Brokerage 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, through its SBS Insurance Agency of Florida, Inc. (SBSIA) subsidiary and related entities. Through its investment
advisor subsidiary, Summit Financial Group, Inc. (SFG), Summit Brokerage provides asset management services.



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Summit Brokerage is a financial services firm that provides full service retail securities brokerage
through its network of approximately 215 registered representatives serving retail and, to a much lesser extent, institutional customer accounts. With the exception of our Boca Branch, which we acquired from Wachovia Securities in January 2003, our
approximately 110 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 registered as a broker-dealer with the Securities and Exchange Commission, and is a member of FINRA (f/k/a NASD), the
Securities Investor Protection Corporation and the Municipal Securities Rulemaking Board. Summit Brokerage is licensed to conduct our brokerage activities in all 50 states, as well as the District of Columbia. Its registered investment advisor, SFG,
is licensed to conduct business in 34 states, as well as the District of Columbia.

Summit Brokerage is a fully-disclosed broker dealer,
and therefore relies on its clearing firm 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
firm provides 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 a clearing arrangement with First Clearing, LLC (a subsidiary of Wachovia Corporation).

We reported a profit for each of the three-month and nine-month periods ended September 30, 2007 and 2006. We believe our improved
revenue and earnings performance is due primarily to the addition of higher producing registered representatives. In addition to the aforementioned, our financial results, in general, can be impacted by a number of factors, including our ability to
recruit and retain registered representatives as well as general market conditions and volatility, which are often expressions of investor confidence. In particular, our ability to recruit registered representatives has, and may continue to be,
negatively impacted by our competitors willingness to offer greater financial incentives than Summit Brokerage is willing or able to offer registered representatives to affiliate with their respective firms. Our ability to retain registered
representatives may also be affected should such existing registered representatives opt to leave the Company to accept the financial incentives being offered by other firms. In periods of waning investor confidence, our revenues may suffer as our
clients make fewer investments. Furthermore, our results during any particular period may be negatively impacted by the incurrence of costs necessary to support our actual and projected growth. In addition to the aforementioned, our financial
results may be impacted by the investments we anticipate making in the near future in personnel, technology, and other infrastructure costs necessary to sustain our growth.

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.

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 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 losses) in any particular period that may not be representative of full-year results and may vary significantly from year to year and from quarter to quarter.

Results of Operations

The
following discussion relates to the results of operations for the three-months and nine-months ended September 30, 2007 (the 2007 Quarter and the 2007 Period, respectively) and the comparable period in the prior year
(the 2006 Quarter and the 2006 Period, respectively).

Comparison of Three Months Ended September 30,
2007 and September 30, 2006



Revenue:

Commission revenue of $8.62 million for the 2007 Quarter represents an increase of $1.79 million, or 26%, when compared to commission revenue of $6.83
million for the 2006 Quarter. We believe the main factor contributing to this growth is the net addition of financial advisors whose gross production exceeded the average gross production of existing Summit Brokerage registered representatives.

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, 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.).



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Expenses:

Commissions and clearing costs increased to $7.03 million during the 2007 Quarter, which represents an increase of $1.42 million, or 25%, over the $5.61 million reported for the 2006 Quarter. In general, commissions and clearing costs are
directly related to commission revenue, and will typically increase proportionately as commission revenue rises. Commissions and clearing costs, as a percentage of commission revenue, was approximately 82% for each of the 2007 Quarter and the 2006
Quarter. Prospectively, we would expect commissions and clearing costs, as a percentage of commission revenue, to continue to increase as we recruit more independent financial advisors. This is because our independent financial advisors are
responsible for the payment of all costs associated with operating their offices, and 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 Brokerage pays the costs associated with operating the Boca Branch.

Employee compensation and benefits increased by
approximately $223,000 to approximately $953,000 during the 2007 Quarter, or an approximate increase of 31% when compared with the approximately $730,000 reported for the 2006 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 2007 Quarter, we recognized a net expense of approximately $38,000 related to the amortization of unearned stock compensation. For the 2006 Quarter, we recognized a net expense of approximately
($21,000) related to the amortization of unearned stock compensation.

Occupancy and equipment cost for the 2007 Quarter increased by
approximately $23,000, to approximately $144,000, or an approximate increase of 19% when compared with the approximately $121,000 reported for the 2006 Quarter. This increase was due primarily to an increase in the monthly rent costs associated with
our headquarters and the Boca Branch.

Communications costs decreased by approximately $9,000, or 10%, to approximately $84,000 in the 2007
Quarter in comparison to $93,000 in the 2006 Quarter. The decrease in communications costs between the 2007 Quarter and the 2006 Quarter is due primarily to a decrease in certain technology infrastructure costs, as well as an increase in the amount
by which we are reimbursed for making such services available to our advisors.

Legal, accounting and litigation costs decreased by
approximately $64,000 to approximately $11,000 during the 2007 Quarter, or an approximate decrease of 85% when compared with the approximately $75,000 reported for the 2006 Quarter. This decrease is largely attributable to the settlement of certain
arbitrations for amounts less than the amounts accrued by the Company.

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 $239,000, or 69%, to approximately $105,000 during the 2007 Quarter versus approximately $344,000 for the 2006
Quarter. The decrease in costs is primarily attributable to a decrease in expenditures related to business development and net licensing and registration costs during the 2007 Quarter. 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 2007 Quarter, we recognized a net expense of approximately $11,000 related to the amortization of unearned stock
compensation. For the 2006 Quarter, we recognized a net expense of approximately $27,000 related to the amortization of unearned stock compensation.

Net Income:

For the 2007 Quarter, we generated net income of approximately $608,900, or $0.0215 per basic and $0.0177 per
diluted share, as compared to the net income reported for the 2006 Quarter of approximately $141,000, or $0.0048 per basic and $0.0046 per diluted share.

Comparison of Nine Months Ended September 30, 2007 and September 30, 2006

Revenue:

Commission revenue of $27.03 million for the 2007 Period represents an increase of $7.14 million, or 36%, when compared to commission
revenue of $19.89 million for the 2006 Period. We believe the main factor contributing to this growth is the net addition of several financial advisors whose gross production exceeded the average gross production of existing Summit Brokerage
registered representatives.

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, 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 cost increased to $22.28 million during the 2007 Period, which represents an increase of $5.99 million, or 37%, over the $16.29 million reported for the 2006 Period. In general, commissions and clearing costs are
directly related to commission revenue, and will typically increase proportionately as commission revenue rises. Commissions and clearing costs, as a percentage of commission revenue, was approximately 82% for each of the 2007 Quarter and the 2006
Quarter. Prospectively, we would expect commissions and clearing costs, as a percentage of commission revenue, to continue to increase as we recruit more independent financial advisors. This is because our independent financial advisors are
responsible for the payment of all costs associated with operating their offices, and 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 Brokerage pays the costs associated with operating the Boca Branch.

Employee compensation and benefits increased by
approximately $.71 million to approximately $2.99 million during the 2007 Period, or an approximate increase of 31% when compared with the approximately $2.28 million reported for the 2006 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 2007 Period, we recognized a net expense of approximately $159,000 related to the amortization of unearned stock compensation. For the 2006 Period, we recognized a net expense of
approximately ($35,000) related to the amortization of unearned stock compensation.

Occupancy and equipment cost for the 2007 Period
increased by approximately $120,000, to approximately $468,000, or an approximate increase of 34% when compared with the approximately $348,000 reported for the 2006 Period. The increase in occupancy and equipment cost for the Period was due to an
increase in our recurring monthly rent cost associated with our headquarters and the Boca Branch, as well as an assessment by the landlord in the approximate amount of $45,000.

Communications costs decreased by approximately $22,000, or 8%, to approximately $261,000 in the 2007 Period in comparison to $283,000 in the 2006
Period. The decrease in communications costs between the 2007 Period and the 2006 Period is due primarily to a decrease in certain technology infrastructure costs, as well as an increase in the amount by which we are reimbursed for making such
services available to our advisors.

Legal, accounting and litigation costs decreased by approximately $229,000 to approximately $99,000
during the 2007 Period, or an approximate decrease of 70% when compared with the approximately $328,000 reported for the 2006 Period. This decrease is largely attributable to the settlement of certain arbitrations for amounts less than the amounts
accrued by the Company.

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 $217,000, or 22%, to approximately $752,000 during the 2007 Period versus approximately $969,000 for the 2006 Period. The decrease in costs is primarily
attributable to a decrease in expenditures related to business development and net licensing and registration costs during the 2007 Period. This decrease was partially offset by an increase in costs related to financial advisor activities.
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 2007 Period, we recognized a net expense of approximately
$56,000 related to the amortization of unearned stock compensation. For the 2006 Period, we recognized a net expense of approximately $79,000 related to the amortization of unearned stock compensation.

Net Income:

For the 2007 Period, we generated net
income of approximately $1,088,000, or $0.0382 per basic and $0.0337 per diluted share, as compared to the net income reported for the 2006 Period of approximately $239,000, or $0.0081 per basic and $0.0077 per diluted share.

Liquidity and Capital Resources

Net cash
provided by operating activities totaled approximately $980,000 during the 2007 Period, compared to net cash used of approximately $430,000 for the 2006 Period, resulting in a net increase in cash flows generated by operating activities of
approximately $1,410,000. 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. The overall improvement in cash flows
from operating activities was due to several factors, including an increase of approximately $849,000 in net income, as well as an increase of approximately $184,000 in non-cash expenses (e.g., stock-based compensation and the amortization of
certain intangibles) when compared with the 2006 Period. Cash flows from operating activities were also impacted by changes in certain working capital-related balance sheet accounts, such as commissions receivable, prepaid expenses, commissions
payable and accounts payable. For the 2007 Period, the net effect of the changes in these accounts resulted in a reduction from cash flows from operating activities of approximately $535,000. For the 2006 Period, the amount of the reduction was
approximately $912,000.

Cash and cash equivalents increased during the 2007 Period by approximately $898,000 to approximately $4,779,000
at September 30, 2007 from approximately $3,880,000 at December 31, 2006. This increase was due almost entirely to the increase provided by operations as previously described.



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During the 2007 Period, we purchased approximately $70,000 of property and equipment, which amount was
$7,000 more than the approximately $63,000 purchased during the 2006 Period. We do not project material capital expenditures over the next twelve months.

Financing activities used cash of $11,250 during the 2007 Period, which was comprised entirely of a payment of dividends on our Series A preferred stock. Financing activity for the 2006 Period reflected the payment of
such dividends, as well as the payment of approximately $440,000 to Wachovia Securities in connection with our purchase of a branch in Boca Raton, Florida. The purchase price was paid in full as of December 31, 2006.

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



|Item 3. | 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 the end of the period covered by this report. 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 period covered by this report, 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.



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PART II. OTHER INFORMATION



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

On September 24, 2007, we held our annual meeting of shareholders. At the annual meeting, the shareholders elected Marshall T. Leeds, Steven C. Jacobs, Sanford B. Cohen, Paul D. DeStefanis, and William L. Harvey to the Board of
Directors to hold office until our next annual meeting of shareholders or until their successors are duly elected and qualified. In addition, the shareholders ratified the appointment of Moore Stephens Lovelace, P.A., as our independent public
accountants for the fiscal year ending December 31, 2007. The following table reflects the results of the meeting:

ELECTION OF DIRECTORS:



|                   |  |              |  |                  |  |                  |  |          
|------------------ |  | ------------ |  | ---------------- |  | ---------------- |  | ---------
|Name               |  | Shares Voted |  | Shares Voted For |  | Abstain/Withheld |  | Non-Votes
|Marshall T. Leeds  |  | 22,086,153   |  | 22,081,453       |  | 4,700            |  | 0        
|                   |  |              |  |                 
|Steven C. Jacobs   |  | 22,086,153   |  | 22,081,553       |  | 4,600            |  | 0        
|                   |  |              |  |                 
|Sanford B. Cohen   |  | 22,086,153   |  | 22,081,553       |  | 4,600            |  | 0        
|                   |  |              |  |                 
|Paul D. DeStefanis |  | 22,086,153   |  | 22,081,453       |  | 4,700            |  | 0        
|                   |  |              |  |                 
|William L. Harvey  |  | 22,086,153   |  | 22,081,453       |  | 4,700            |  | 0        

RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS:



|                 |  |                      |  |                  |  |          
|---------------- |  | -------------------- |  | ---------------- |  | ---------
|Shares Voted For |  | Shares Voted Against |  | Abstain/Withheld |  | Non-Votes
|22,083,287       |  | 1,600                |  | 1,266            |  | 0        



|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: November 14, 2007 |  | 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: November 14, 2007 |  | /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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