##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-QSB

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  |  | For the quarterly period ended September 30, 2003.                                     

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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

SUMMIT BROKERAGE SERVICES, INC.

(Exact name of registrant as specified in its charter)


|                                |  |                                     
|------------------------------- |  | ------------------------------------
|Florida                         |  | 59 - 3202578                        
|(State or other jurisdiction of |  | (I.R.S. Employer Identification No.)
|incorporation or organization)  |  |                                     

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)

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 12, 2003
|                           |  |                                    
|Common Stock               |  |                                    
|Par value $.0001 per share |  | 28,170,773                         

Transitional Small Business Disclosure
Format  o
Yesx No





---

TABLE OF CONTENTS



|                                                |                                                                                               |                                                                |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I                                         
|                                                | Item 1. Financial Statements                                                                 
|                                                |                                                                                               | Condensed Consolidated Statement of Financial Condition       
|                                                |                                                                                               | Condensed Consolidated Statements of Income                   
|                                                |                                                                                               | Condensed Consolidated Statements of Income                   
|                                                |                                                                                               | Condensed Consolidated Statements of Cash Flows               
|                                                |                                                                                               | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                | Item 3. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                     
|                                                | Item 1. Legal Proceedings                                                                    
|                                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                | Item 3. Defaults Upon Senior Securities                                                      
|                                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                | Item 5. Other Information                                                                    
|                                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                     
|EXHIBIT INDEX                                  
|EX-10.24 FORM OF WARRANT DATED 3/19/03         
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO   
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO   
|EX-32.1 SECTION 906 CERTIFICATION OF THE CEO   
|EX-32.2 SECTION 906 CERTIFICATION OF THE VP/CFO



---



##### Table of Contents



SUMMIT BROKERAGE SERVICES, INC.

INDEX

|           |                        |                                                                                                                       |  |     
|---------- | ---------------------- | --------------------------------------------------------------------------------------------------------------------- |  | ----
|           |                        |                                                                                                                       |  | Page
|PART I -   | FINANCIAL INFORMATION: |                                                                                                                       | 
|Item 1.    |                        | Financial Statements                                                                                                  |  |     
|           |                        | Condensed Consolidated Statement of Financial Condition at September 30, 2003 (unaudited)                             |  | 3   
|           |                        | Condensed Consolidated Statements of Income (Loss) for the Three Months ended
September 30, 2003 and 2002 (unaudited) |  | 4   
|           |                        | Condensed Consolidated Statements of Income (Loss) for the Nine Months ended
September 30, 2003 and 2002 (unaudited)  |  | 5   
|           |                        | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2003 and 2002 (unaudited)     |  | 6   
|           |                        | Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)                                            |  | 7   
|Item 2.    |                        | Managements Discussion and Analysis of Financial Condition and
Results of Operations                                 |  | 11  
|Item 3.    |                        | Controls and Procedures                                                                                               |  | 17  
|PART II -  | OTHER INFORMATION      |                                                                                                                       | 
|Item 1.    |                        | Legal Proceedings                                                                                                     |  | 17  
|Item 2.    |                        | Changes in Securities and Use of Proceeds                                                                             |  | 17  
|Item 3.    |                        | Defaults Upon Senior Securities                                                                                       |  | 17  
|Item 4.    |                        | Submissions of Matters to a Vote of Security Holders                                                                  |  | 17  
|Item 5.    |                        | Other Information                                                                                                     |  | 18  
|Item 6.    |                        | Exhibits and Reports on Form 8-K                                                                                      |  | 18  
|SIGNATURES | 20                    

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 acquired companies and operations; the Companys ability to compete
with major established companies; the Companys ability to attract and retain
qualified personnel; 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),

2



---



##### Table of Contents



including the Companys annual report on Form 10-KSB for the fiscal year ended
December 31, 2002 (file no. 0-29337.)

3



---



##### Table of Contents






PART I.




Item 1. Financial Statements



|Certain amounts from the prior periods have been reclassified to conform to the current year presentation.
|----------------------------------------------------------------------------------------------------------




SUMMIT BROKERAGE SERVICES, INC. AND
SUBSIDIARIES
Condensed Consolidated Statement of Financial Condition
September 30, 2003 (Unaudited)

|                     |                                                                                                                                                                                                         |                                      |                                            |                            |   |           |           | 
|-------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------ | -------------------------- | - | --------- | --------- | 
|                     |                                                                                                                                                                                                         | ASSETS                               |                                            |                            |   |          
|                     | Cash and cash equivalents                                                                                                                                                                               |                                      | $                                          | 2,698,028                  |  
|                     | Deposit held at clearing broker                                                                                                                                                                         |                                      |                                            | 76,007                     |  
|                     | Securities owned                                                                                                                                                                                        |                                      |                                            | 18,650                     |  
|                     | Commissions receivable                                                                                                                                                                                  |                                      |                                            | 774,508                    |  
|                     | Prepaid expenses                                                                                                                                                                                        |                                      |                                            | 16,986                     |  
|                     | Other receivables, net                                                                                                                                                                                  |                                      |                                            | 141,922                    |  
|                     | Due from related parties                                                                                                                                                                                |                                      |                                            | 10,723                     |  
|                     | Goodwill & customer list, net                                                                                                                                                                           |                                      |                                            | 1,540,520                  |  
|                     | Property and equipment at cost, less accumulated depreciation of $5,250                                                                                                                                 |                                      |                                            | 63,728                     |  
|                     |                                                                                                                                                                                                         |                                      |                                            |                           
|                     |                                                                                                                                                                                                         |                                      |                                            | TOTAL ASSETS               |   | $         | 5,341,072 | 
|                     |                                                                                                                                                                                                         |                                      |                                            |                           
|                     |                                                                                                                                                                                                         | LIABILITIES AND STOCKHOLDERS EQUITY |                                            |                            |   |          
|LIABILITIES          |                                                                                                                                                                                                         |                                      |                                            |                           
|                     | Accounts payable and accrued expenses                                                                                                                                                                   |                                      | $                                          | 380,560                    |  
|                     | Accrued commission expense                                                                                                                                                                              |                                      |                                            | 567,264                    |  
|                     | Note payable, net                                                                                                                                                                                       |                                      |                                            | 1,368,862                  |  
|                     |                                                                                                                                                                                                         |                                      |                                            |                           
|                     |                                                                                                                                                                                                         |                                      |                                            | TOTAL LIABILITIES          |   |           | 2,316,686 | 
|STOCKHOLDERS EQUITY |                                                                                                                                                                                                         |                                      |                                            |                           
|                     | Preferred stock, 150,000 authorized shares designated as Series A
12% cumulative convertible; par value $0.0001 per share; 125,000 Series A issued
and outstanding (liquidation preference of $125,000) |                                      |                                            | 13                         |  
|                     | Common stock, par value $0.0001 per share; authorized 50,000,000 shares;
28,120,064 issued and outstanding                                                                                              |                                      |                                            | 2,812                      |  
|                     | Additional paid-in capital                                                                                                                                                                              |                                      |                                            | 8,781,511                  |  
|                     | Unearned stock compensation                                                                                                                                                                             |                                      |                                            | (669,211                   | )
|                     | Accumulated deficit                                                                                                                                                                                     |                                      |                                            | (5,090,739                 | )
|                     |                                                                                                                                                                                                         |                                      |                                            |                           
|                     |                                                                                                                                                                                                         |                                      |                                            | TOTAL STOCKHOLDERS EQUITY |   |           | 3,024,386 | 
|                     |                                                                                                                                                                                                         |                                      |                                            |                           
|                     |                                                                                                                                                                                                         |                                      | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                            | $ | 5,341,072 |          
|                     |                                                                                                                                                                                                         |                                      |                                            |                           

See accompanying notes to financial statements.

4



---



##### Table of Contents






SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Loss)

|                                                        |                                     |                                       |                   |           |                            |       |             |           |          |          |  
|------------------------------------------------------- | ----------------------------------- | ------------------------------------- | ----------------- | --------- | -------------------------- | ----- | ----------- | --------- | -------- | -------- | -
|                                                        |                                     |                                       |                   |           | For The Three Months Ended
|                                                        |                                     |                                       |                   |           | September 30,             
|                                                        |                                     |                                       |                   |           |                           
|                                                        |                                     |                                       |                   |           | 2003                       |       | 2002       
|                                                        |                                     |                                       |                   |           |                            |       |            
|                                                        |                                     |                                       |                   |           | (Unaudited)                |       | (Unaudited)
|REVENUES                                                |                                     |                                       |                   |           |                            |       |             |          
|                                                        | Commissions                         |                                       | $                 | 3,575,406 |                            |       | $           | 1,545,736 |         
|                                                        | Interest and dividends              |                                       |                   | 137,909   |                            |       |             | 16,928    |         
|                                                        | Other                               |                                       |                   | 60,601    |                            |       |             | 6,063     |         
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|                                                        |                                     |                                       | 3,773,916         |           |                            |       | 1,568,727   |          
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|EXPENSES                                                |                                     |                                       |                   |           |                            |       |             |          
|                                                        | Commissions and clearing costs      |                                       |                   | 2,615,553 |                            |       |             | 1,258,428 |         
|                                                        | Employee compensation and benefits  |                                       |                   | 530,340   |                            |       |             | 182,313   |         
|                                                        | Occupancy and equipment             |                                       |                   | 113,368   |                            |       |             | 35,415    |         
|                                                        | Communications                      |                                       |                   | 83,151    |                            |       |             | 24,237    |         
|                                                        | Professional expenses               |                                       |                   | 135,581   |                            |       |             | 142,593   |         
|                                                        | Stock based compensation            |                                       |                   | 61,212    |                            |       |             | 46,176    |         
|                                                        | Depreciation and amortization       |                                       |                   | 46,421    |                            |       |             | 10,045    |         
|                                                        | Loss on disposition of fixed assets |                                       |                   | 94,632    |                            |       |             |          |         
|                                                        | Other operating expenses            |                                       |                   | 92,222    |                            |       |             | 126,612   |         
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|                                                        |                                     |                                       | 3,772,480         |           |                            |       | 1,825,819   |          
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|                                                        |                                     | NET INCOME (LOSS) BEFORE INCOME TAXES |                   |           | 1,436                      |       |             |           | (257,092 | )       
|PROVISION FOR INCOME TAXES                              |                                     |                                       |                  |           |                            |       |            |          
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|                                                        |                                     |                                       | NET INCOME (LOSS) |           | $                          | 1,436 |             |           |          | (257,092 | )
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|BASIC AND DILUTED LOSS PER SHARE                        |                                     | $                                     | (.00              | )         |                            | $     | (.02        | )        
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         
|WEIGHTED AVERAGE SHARES
OUTSTANDING  BASIC AND DILUTED |                                     |                                       | 28,120,064        |           |                            |       | 10,845,428  |          
|                                                        |                                     |                                       |                   |           |                            |       |             |           |         

See accompanying notes to financial statements.

5



---



##### Table of Contents






SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Loss)

|                                                        |                                     |                              |            |                           |          |             |           |           |          |  
|------------------------------------------------------- | ----------------------------------- | ---------------------------- | ---------- | ------------------------- | -------- | ----------- | --------- | --------- | -------- | -
|                                                        |                                     |                              |            | For The Nine Months Ended
|                                                        |                                     |                              |            | September 30,            
|                                                        |                                     |                              |            |                          
|                                                        |                                     |                              |            | 2003                      |          | 2002       
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|                                                        |                                     |                              |            | (Unaudited)               |          | (Unaudited)
|REVENUES                                                |                                     |                              |            |                           |          |             |           |          
|                                                        | Commissions                         |                              | $          | 8,450,786                 |          |             | $         | 4,814,423 |         
|                                                        | Interest and dividends              |                              |            | 378,950                   |          |             |           | 53,624    |         
|                                                        | Other                               |                              |            | 107,981                   |          |             |           | 7,661     |         
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|                                                        |                                     |                              | 8,937,717  |                           |          |             | 4,875,708 |          
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|EXPENSES                                                |                                     |                              |            |                           |          |             |           |          
|                                                        | Commissions and clearing costs      |                              |            | 6,225,741                 |          |             |           | 4,140,530 |         
|                                                        | Employee compensation and benefits  |                              |            | 1,628,981                 |          |             |           | 565,135   |         
|                                                        | Occupancy and equipment             |                              |            | 380,145                   |          |             |           | 115,067   |         
|                                                        | Communications                      |                              |            | 251,417                   |          |             |           | 90,303    |         
|                                                        | Professional expenses               |                              |            | 352,128                   |          |             |           | 466,452   |         
|                                                        | Stock based compensation            |                              |            | 228,636                   |          |             |           | 118,456   |         
|                                                        | Depreciation and amortization       |                              |            | 153,588                   |          |             |           | 30,135    |         
|                                                        | Loss on disposition of fixed assets |                              |            | 94,632                    |          |             |           |          |         
|                                                        | Other operating expenses            |                              |            | 379,089                   |          |             |           | 283,200   |         
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|                                                        |                                     |                              | 9,694,357  |                           |          |             | 5,809,278 |          
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|                                                        |                                     | NET LOSS BEFORE INCOME TAXES |            |                           | (756,640 | )           |           |           | (933,570 | )
|PROVISION FOR INCOME TAXES                              |                                     |                              |           |                           |          |             |          |          
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|                                                        |                                     | NET LOSS                     |            | $                         | (756,640 | )           |           |           | (933,570 | )
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|BASIC AND DILUTED LOSS PER SHARE                        |                                     | ($                           | .03        | )                         |          | ($          | .12       | )        
|                                                        |                                     |                              |            |                           |          |             |           |           |         
|WEIGHTED AVERAGE SHARES
OUTSTANDING  BASIC AND DILUTED |                                     |                              | 25,994,987 |                           |          |             | 8,050,422 |          
|                                                        |                                     |                              |            |                           |          |             |           |           |         

See accompanying notes to financial statements.

6



---



##### Table of Contents






SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows

|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |             |         |          |          |  
|------------------------------------------------ | -------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------------- | ------------------------------------- | --------- | ------------------------- | -------- | ----------- | ------- | -------- | -------- | -
|                                                 |                                                                            |                                                    |                                                 |                                       |           | For The Nine Months Ended
|                                                 |                                                                            |                                                    |                                                 |                                       |           | September 30,            
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                          
|                                                 |                                                                            |                                                    |                                                 |                                       |           | 2003                      |          | 2002       
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|                                                 |                                                                            |                                                    |                                                 |                                       |           | (Unaudited)               |          | (Unaudited)
|Cash flows from operating activities             |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|                                                 | Net loss                                                                   |                                                    | $                                               | (756,640                              | )         |                           | $        | (933,570    | )      
|                                                 | Adjustments to reconcile net loss to net cash used in
operating activities |                                                    |                                                 |                                       |           |                           |          |             |        
|                                                 |                                                                            | Depreciation                                       |                                                 |                                       | 26,706    |                           |          |             | 30,135  |         
|                                                 |                                                                            | Stock based compensation                           |                                                 |                                       | 228,636   |                           |          |             | 118,456 |         
|                                                 |                                                                            | Loss on disposition of assets                      |                                                 |                                       | 94,632    |                           |          |             |        |         
|                                                 |                                                                            | Amortization of customer list and imputed interest |                                                 |                                       | 191,943   |                           |          |             |        |         
|                                                 |                                                                            | Changes in:                                        |                                                 |                                       |           |                           |          |             |         |         
|                                                 |                                                                            |                                                    | Deposit held at clearing broker                 |                                       |           | (50,962                   | )        |             |         | 7        |         
|                                                 |                                                                            |                                                    | Deposit held at clearing broker  related party |                                       |           | 45,459                    |          |             |         |         |         
|                                                 |                                                                            |                                                    | Commissions receivable                          |                                       |           | (427,588                  | )        |             |         | 9,564    |         
|                                                 |                                                                            |                                                    | Other receivables                               |                                       |           | (28,558                   | )        |             |         | 1,708    |         
|                                                 |                                                                            |                                                    | Prepaid expenses                                |                                       |           | 60,659                    |          |             |         | 13,281   |         
|                                                 |                                                                            |                                                    | Securities owned                                |                                       |           | (15,350                   | )        |             |         |         |         
|                                                 |                                                                            |                                                    | Due from related parties                        |                                       |           | (50,923                   | )        |             |         | 31,473   |         
|                                                 |                                                                            |                                                    | Accounts payable and accrued expenses           |                                       |           | 150,469                   |          |             |         | 170,149  |         
|                                                 |                                                                            |                                                    | Accrued commission expense                      |                                       |           | 256,620                   |          |             |         | (231,957 | )       
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |             |        
|                                                 |                                                                            |                                                    |                                                 | Net cash used in operating activities |           |                           | (274,897 | )           |         |          | (790,754 | )
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|Cash flows from investing activities             |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|                                                 | Purchase of property and equipment                                         |                                                    |                                                 | (62,976                               | )         |                           |          | (6,388      | )      
|Cash flows from financing activities             |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|                                                 | Issuance of common stock                                                   |                                                    |                                                 | 1,960,000                             |           |                           |          | 979,990     |        
|                                                 | Payment of preferred stock dividend                                        |                                                    |                                                 | (7,000                                | )         |                           |          | (2,000      | )      
|                                                 | Common stock offering costs                                                |                                                    |                                                 | (175,172                              | )         |                           |          |            |        
|                                                 | Payment on capital lease obligation                                        |                                                    |                                                 |                                      |           |                           |          | (8,821      | )      
|                                                 | Payments on debt obligations                                               |                                                    |                                                 | (349,601                              | )         |                           |          | (37,030     | )      
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |             |        
|                                                 |                                                                            | Net cash provided by financing activities          |                                                 |                                       | 1,428,227 |                           |          |             | 932,139 |         
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|Net increase in cash and cash equivalents        |                                                                            |                                                    | 1,090,354                                       |                                       |           |                           | 134,997  |            
|Cash and cash equivalents at beginning of period |                                                                            |                                                    | 1,607,674                                       |                                       |           |                           | 43,218   |            
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |            
|Cash and cash equivalents at end of period       |                                                                            | $                                                  | 2,698,028                                       |                                       |           | $                         | 178,215  |            
|                                                 |                                                                            |                                                    |                                                 |                                       |           |                           |          |            

See accompanying notes to financial statements.

7



---



##### Table of Contents



SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

September 30, 2003

NOTE 1 - GENERAL



| |  | The condensed consolidated financial statements for the three and nine
month periods ended September 30, 2003 and September 30, 2002 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 interim periods.
The consolidated financial statements herein should be read in
conjunction with the consolidated financial statements and notes
thereto, together with managements discussion and analysis of
financial condition and results of operations, contained in the Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2002 for
Summit Brokerage Services, Inc. (Summit or the Company). The
results of operations for the three month and nine month periods ended
September 30, 2003 are not necessarily indicative of the results for
the entire fiscal year ending December 31, 2003.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 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.                                                                                                                                                                                                                                                                                                                
|
| |  | Certain amounts from the prior period have been reclassified to conform
to the current period presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

NOTE 2 - DUE FROM/TO RELATED PARTIES



| |  | At September 30, 2003, Summit has advances receivable of $10,723 from a
related company for expenses paid by Summit on the related companys
behalf. The related company is 100% owned by Summits former Vice
Chairman and President.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 3 - STOCKHOLDERS EQUITY



| |  | The 125,000 shares of outstanding preferred stock as of September 30,
2003 are convertible into shares of common stock. The number of shares
of common stock which may be issued in respect of the shares of
preferred stock shall be determined by dividing (i) a numerator equal
to the number of shares of Series A 12% Convertible Preferred Stock
being converted multiplied by 115% of the subscription price, (ii) a
denominator representing the per share price that is the lower of the
closing price and the average closing sale price for the 20 trading
days immediately preceding the Series A conversion date; provided,
however, in no event shall the
denominator be less than the subscription price. All such preferred
stock is non-voting stock. The holders of Series A 12%
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8



---



##### Table of Contents





| |  | Convertible
Preferred Stock shall be entitled to receive, out of funds legally
available for that purpose, cash dividends at the rate of $0.12 per
annum, subject to voluntary conversion. Such dividends shall accrue
and be cumulative from the issue date. Dividends shall be payable in
arrears, when and as declared by the Board of Directors, on March 31,
June 30, September 30 and December 31 of each year; provided, however,
the first dividend payment date shall not occur before the last
calendar day of the first full fiscal quarter following the issue date.
Undeclared dividends in arrears as of September 30, 2003 approximated
$12,000. Preferred stock dividends paid in 2003 amounted to $7,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the event of any liquidation, dissolution or winding up of the
Companys affairs for a price per share which is less than the
subscription price set forth herein, holders of the preferred shares
will be entitled to a liquidation preference of $1.00 per preferred
share, plus the dividends set forth above, prior to any distribution to
the holders of common stock in full and complete liquidation of the
interest of the holders of preferred shares. In the event that the
Company does not have sufficient funds to pay the full liquidation
preference payable to the holders of preferred shares, and any other
shares issued on a parity with the preferred shares (Parity Shares),
the existing funds will be allocated among the holders of all such
preferred shares and Parity Shares pro rata in proportion to the full
amounts to which they would respectively be entitled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | At any time after August 1, 2002, the Company may, unless otherwise
prevented by law, redeem from the holder thereof, the holders
preferred shares at the subscription price ($1.00 per share) together
with any accrued but unpaid dividends thereon to and including the date
of redemption, in whole or, from time to time, or in part. Any partial
redemption shall be allocated among the holders of preferred shares pro
rata or by lot, as determined by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | On October 14, 2002, the Company began a private offering of its
securities, which offering was completed on March 19, 2003. In
connection with that offering, the Company sold, to accredited
investors as such term is defined in Rule 501(a) of Regulation D under
the Securities Act of 1933, an aggregate of 12,040,000 shares of its
common stock for gross proceeds of $3,010,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | On April 11, 2003, the Company consummated, in a separate transaction,
the sale of 4,000,000 shares of its common stock for gross proceeds of
$1,000,000. As part of the agreement, the Companys principal
shareholder, chairman and chief executive officer (the Principal
Shareholder) entered into a Co-Sale and Voting Agreement (the
Agreement) which contains certain provisions, among other corporate
matters, under which he: (i) grants to the purchaser certain
tag-a-long rights upon a sale of common stock by the Principal
Shareholder, and (ii) agreed to vote his shares in favor of a nominee
director designated by the purchaser. Tag-a-Long rights, as define
within the Agreement, allow the purchaser, in its discretion, to
participate in any sale, transfer or other disposition of any shares of
common stock by the principal shareholder, his family members or
entities they control, on the same terms and conditions as their sale.
The number of shares the purchaser would be able to include in the sale
is subject to a formula set forth in the Agreement. The Agreement
terminates when the purchaser no longer owns 2,000,000 of the 4,000,000
shares purchased in April 2003 (as adjusted for stock split, dividends,
recapitalizations an similar events). The Agreement may also be
terminated upon the closing of a public offering of the Companys
securities resulting in
net proceeds to the Company of $20,000,000 at a per share price of at
least $2.50 (as adjusted for stock splits, dividends, recapitalizations
and the like).

9



---



##### Table of Contents





| |  | On June 3, 2003, we entered into an agreement with a vendor to issue
shares of our common stock in exchange for past and future services. As
of September 30, we had not yet issued, but were obligated to issue,
50,709 shares under the agreement, which shares were issued on October
29, 2003. As we become obligated under the agreement to issue shares,
we record an expense equal to the number of shares required to be
issued multiplied by the fair market value of our shares at the time
such obligation arises. In connection with the issuance of the 50,709
shares, we recorded an expense of $8,840 and $20,176 for the three
months ended September 30, 2003 and June 30, 2003, respectively. At
the time we become obligated to issue any shares under this agreement,
but prior to their issuance, we include their fair market value in
accounts payable.                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Stock-Based Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | In December 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure (SFAS No.
148). SFAS No. 148 provides companies alternative methods of
transitioning to Statement of Financial Accounting Standards No. 123
Accounting for Stock-Based Compensation (SFAS No. 123) fair value
of accounting for stock-based employee compensation. It also requires
certain disclosure requirements in both annual and quarterly financial
statements about the method of accounting for stock based employee
compensation and the effect of the method used on reported results.
SFAS No. 148
does not mandate fair value accounting for stock-based employee
compensation, but does require all companies to meet the disclosure
requirements. We do not recognize compensation expense for our stock
option grants, which are issued at fair value at the date of grant.
The Company has not adopted fair value accounting for its employee
stock options.                                                                                                                                                                                                
|
| |  | The Company currently accounts for its employee stock-based
compensation arrangements under the provisions of Accounting Principles
Board, Accounting for Stock Issued to Employees (APB No. 25). The
Company accounts for stock-based compensation of non-employees under
the provisions of SFAS No. 123. During the three months ended
September 30, 2003, 93,221 options were issued for which the Company
did not record any unearned stock compensation. The Company has also
agreed to issue options, as of August 7, 2003, entitling the holder
thereof to acquire up to 600,000 shares of common stock at a price of
$.45 per share. For purposes of computing pro-forma earnings per share
herein, we have assumed the issuance of these options. The Company did
not have any stock-based compensation to non-employees during 2003.
SFAS No. 123 also requires that companies electing to continue to use
the intrinsic value method make pro forma disclosure of net income and
net income per share as if the fair value method of accounting had been
applied. The Company used the Black-Scholes option-pricing model to
estimate the fair value of options. The effects of applying SFAS No.
123 during the periods ended September 30, 2003 and 2002 are as
follows:

10



---



##### Table of Contents



|                                                                                                                                   |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |            |  
|---------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | - | -------------- | -------- | -------------- | - | ------------- | -------- | ------------- | - | -------- | ---------- | - | - | ---------- | ---------- | -
|                                                                                                                                   |                                 |   | 3 Months Ended |          | 9 Months Ended
|                                                                                                                                   |                                 |   |                |          |               
|                                                                                                                                   |                                 |   | September 30,  |          | September 30,  |   | September 30, |          | September 30,
|                                                                                                                                   |                                 |   | 2003           |          | 2002           |   | 2003          |          | 2002         
|                                                                                                                                   |                                 |   |                |          |                |   |               |          |              
|Net income (loss) as reported:                                                                                                     |                                 | $ | 1,436          |          |                | $ | (257,092      | )        |               | $ | (756,640 | )          |   | $ | (933,570   | )         
|Deduct: Total stock-based
compensation expense determined
under fair value based method
for all awards, net of related
tax effects |                                 |   | (127,547       | )        |                |   | (35,690       | )        |               |   | (369,939 | )          |   |   | (1,604,710 | )         
|                                                                                                                                   |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |           
|                                                                                                                                   | Pro forma net loss              |   | $              | (126,111 | )              |   | $             | (292,782 | )             |   | $        | (1,126,579 | ) |   | $          | (2,538,280 | )
|                                                                                                                                   |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |           
|Net loss per share:                                                                                                                |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |           
|                                                                                                                                   | Basic and diluted  as reported |   | $              | (0.00    | )              |   | $             | (0.02    | )             |   | $        | (0.03      | ) |   | $          | (0.12      | )
|                                                                                                                                   |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |           
|                                                                                                                                   | Basic and diluted  pro forma   |   | $              | (0.00    | )              |   | $             | (0.03    | )             |   | $        | (0.04      | ) |   | $          | (0.32      | )
|                                                                                                                                   |                                 |   |                |          |                |   |               |          |               |   |          |            |   |   |            |           



| |  | The fair value of each option grant is estimated at the date of grant
using a Black-Scholes option pricing model. The Black-Scholes option
valuation 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 do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 4 - NET CAPITAL REQUIREMENT



| |  | The Company 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, 2003, the Company had net capital of
$2,520,577, which was $2,270,577 in excess of its required minimum net
capital of $250,000. The Companys aggregate indebtedness to net
capital ratio was .38 to 1 at September 30, 2003.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 5 - ACQUISITION



| |  | On January 2, 2003, the Company acquired, in an asset purchase
agreement, the Boca Raton Branch of Wachovia Securities Financial
Network, Inc. (the Branch). The Branch was an affiliated retail
branch office of Wachovia Securities Financial Network, Inc.
(Wachovia), with approximately 30 registered representatives
conducting retail brokerage business. The purchase price was
approximately $1,800,000, payable to Wachovia over four years. The
purchase price contemplated the signing of a registered representative
agreement with each of the registered representatives. Substantially
all of the registered representatives have signed agreements with the
Company. The purchase price approximated the unamortized outstanding
balance of sign-on bonuses paid by Wachovia to the registered
representatives, which bonuses are subject to reimbursement by the
representatives in an amount equal to the unamortized outstanding
balance if the representative leaves before the designated date. The
purchase price is being paid by Summit in equal monthly payments over
the four-year period
commencing
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11



---



##### Table of Contents





| |  | January 2003. The continuous employment of all of the
representatives is not guaranteed; however, for representatives who do
not maintain employment with the Company through the entire four-year
period ending January 2, 2007, a pro-rata adjustment to the purchase
price for the remaining non-employed period will be made. Upon leaving
the Company, Wachovia, not the Company, retains the right to reclaim
the unamortized portion of the original bonuses paid to the
representatives. Management believes that the acquisition will expand
its market presence and overall customer base. In accordance with
Financial Accounting Standards (SFAS) No. 141, Business
Combinations, the results of operations of the Branch have been
included in the Companys financial statements from the date of
acquisition. Based upon managements estimates, the purchase price,
including transaction costs, has been allocated as follows: Customer
list - $1,142,000; Goodwill - $532,000; Equipment - $6,000; imputed
interest - $176,000. Customer list is being amortized over its
estimated beneficial life of six years. Amortization of customer list
for the three-month period ended September 30, 2003 approximated
$48,000. Imputed interest is presented as a discount on the note
payable and is being amortized over the life of the loan, at 5.25%,
using the effective interest method. Amortization of imputed interest
for the three-month period ended September 30, 2003 approximated
$18,000. The Company anticipates this goodwill to be fully deductible
for tax purposes over fifteen years.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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 nine month periods ended
September 30, 2003 and 2002 should be read in conjunction with the Companys
condensed consolidated financial statements included elsewhere herein. When
used in the following discussions, the words believes, anticipates,
intends, expects, and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause results to differ materially from those
projected.

Certain amounts from the prior periods have been reclassified to conform
to the current year presentation.

Overview

Summit Brokerage Services, Inc. is a financial services firm that provides
full service retail securities brokerage through its network of almost 150
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 70
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 the sale of 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.

12



---



##### Table of Contents



Summit is registered as a broker-dealer with the Securities and Exchange
Commission, and is a member of NASD, the Securities Investor Protection
Corporation and the Municipal Securities Rulemaking Board. We are licensed to
conduct our brokerage activities in 47 states, as well as the District of
Columbia. Our Registered Investment Advisor, Summit Financial Group, Inc., is
licensed to conduct business in 22 states.

Summit 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 firms typically charge 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 joint venture between
Wachovia Corporation and Prudential) and with RBC Dain Correspondent Services,
Inc. (a division of RBC Dain Rauscher Incorporated).

We have a history of operating losses. For the nine month period ended
September 30, 2003, we reported a loss of $756,640, versus a loss of $933,570
for the comparable period of 2002. However, for the three month period ended
September 30, 2003, we reported income of $1,436, versus a loss of $257,092 for
the same period in 2002. We believe our improved performance is due primarily
to increased investor confidence and the addition of several registered
representatives during 2003. In general, our financial results can be impacted
by a number of factors, including general market conditions and volatility,
which is often an expression of investor confidence. In periods of waning
investor confidence, such as 2002, our revenues suffer as our clients make
fewer investments. Furthermore, our results during 2002 were negatively
impacted by costs incurred in connection with the expansion and improvement of
our infrastructure which included the hiring of new employees, including
several members of senior management, the leasing of additional office space in
Boca Raton, Florida, and improving our information technology systems.

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.

On August 18, 2003, we terminated for cause the employment of Richard
Parker, our then Vice Chairman, President and Chief Operating Officer. In
connection with such termination, the company may pursue, as well as be the
subject of, litigation with Mr. Parker. Although the Company believes that it
would prevail in any such litigation on the merits, the ultimate outcome of any
such actions cannot be predicted.

Results of Operations

The following discussion relates to the results of operations for the
three months and nine months ended September 30, 2003 (the 2003 Quarter and
the 2003 Period, respectively) compared to the
same period in the prior year (the 2002 Quarter and the 2002 Period,
respectively).

13



---



##### Table of Contents



Comparison of Three Months Ended September 30, 2003 and September 30, 2002

Revenue:

Commission revenue of $3,575,406 for the 2003 Quarter represents an
increase of $2,029,670, or 131%, over commission revenue for the 2002 Quarter.
Importantly, commission revenue for the 2003 Quarter reflects the single
highest quarterly revenue recorded by the Company since its inception. We
believe several factors contributed to this growth, including a rise in
investor confidence and the addition of approximately 15 registered
representatives during the 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, such as fixed income securities. Additionally, during any
quarter, we may add a significant number of registered representatives who
focus only on the sale of a particular type of investment product (e.g.,
insurance, equities, fixed income, etc.).

Expenses:

Commission and clearing costs increased to $2,615,553 during the 2003
Quarter, which represents an increase of $1,357,125, or 108%, over the
$1,258,428 reported for the 2002 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, however, decreased in the 2003 Quarter to
73% from 81% in the 2002 Quarter. This decrease is primarily attributable to
acquisition of the Boca Branch. Because we pay the costs associated with the
operation of the Boca Branch, as opposed to an independent branch where the
owner of the branch is responsible for the payment of the branchs expenses, we
pay to the Boca Branchs registered representatives a smaller percentage of the
commission revenue they generate than we would pay to our independent
registered representatives.

Employee compensation and benefits increased to $530,340 during the 2003
Quarter, which represents an increase of $348,027, or 191%, over the 2002
Quarter. This increase was due primarily to the addition of several new
employees during 2003, as well as the incurrence of severance costs associated
with the closing of the Companys Indialantic office in the second and third
quarter of 2003. In addition to wages, employee benefits also increased, not
only as a result of an increase in the number of employees but also a result of
the company providing more extensive benefits in 2003 than it offered in 2002.

Occupancy and equipment cost increased to $113,368 during the 2003
Quarter, which represents an increase of $77,953, or 220%, over $35,415
reported for the 2002 Quarter. This increase was largely due to our need to
acquire additional space in Boca Raton for our operations, as well as for the
Boca Branch. On August 31, 2003, however, the Company terminated the lease for
its office space in Indialantic. Monthly lease payments on the Indialantic
property were approximately $8,800.

Professional fees decreased by $7,012, or 5%, from $142,593 during the
2002 Quarter to $135,581 during the 2003 Quarter. During the 2003 Quarter, an
increase in legal and accounting fees was offset by a reduction in consulting
fees.

Communications costs increased by $58,914, or 243%, to $83,151 in the 2003
Quarter from $24,237 in the 2002 Quarter. The increase in these costs was due
primarily to the addition of several new employees, as well as the addition of
the Boca Branch.

14



---



##### Table of Contents



Stock based compensation increased by $15,036, or 33%, to $61,212 in the
2003 Quarter from $46,176 in the 2002 Quarter. Stock based compensation expense
reflects the amount of unearned stock compensation that we amortize. Although
we did not issue any common stock or common stock equivalents during the 2003
Quarter that required us to increase the amount that we reflect as unearned
stock compensation, stock based compensation increased during the 2003 Quarter
over the 2002 Quarter as a result of the issuance, primarily during the first
quarter of 2003, of options that resulted in our increasing unearned stock
compensation by approximately $548,000, which amount is being amortized over 48
months.

Loss on disposition of fixed assets for the 2003 Quarter was $94,632. We
did not recognize any similar loss for the 2002 Quarter. The loss on
disposition of fixed assets was attributable to the closing of the Indialantic
office in the third quarter of 2003 and the related write-off of leasehold
improvements and fixed assets.

Other operating expenses decreased by $34,390, or 27%, to $92,222 during
the 2003 Quarter versus $126,612 for the 2002 Quarter. Other operating expenses
typically include the general and administrative costs incurred by the Company,
to the extent such costs are not included elsewhere. Examples of other
operating expenses include insurance expense, office supplies and printing,
postage and related expenses, and interest expense. For the 2003 Quarter,
other operating expenses decreased over amounts reported in the 2002 Quarter
primarily as a result of a reduction in, among other things, contract labor
costs, which declined by $31,146 and certain costs incurred in connection with
being a public company, such as EDGAR filing preparation fees and other
financial printing costs, which decreased by $20,607. We also include interest
expense in other operating expenses, which increased by $12,720 during the 2003
Quarter. This increase is primarily attributable to the recognition of imputed
interest resulting from a note we issued to Wachovia Securities in connection
with the acquisition of the Boca Branch.

Net Income / Loss:

For the 2003 Quarter, we reported net income of $1,436 or $.00 per basic
and diluted share, as compared to the net loss reported for the 2002 Quarter of
($257,092) or ($.02) per basic and diluted share. Our improved performance
overall is mainly attributable to improved investor confidence in the equity
markets which occurred primarily in the fiscal quarter ended September 30,
2003, and a substantial increase in the number of registered representatives
working for us. However, the increase in revenue was off-set by increased
operating costs from improvements made to our infrastructure and costs related
to the acquisition and integration of the Boca Branch, as described above.

Comparison of Nine Months Ended September 30, 2003 and September 30, 2002

Revenue:

Commission revenue of $8,450,786 for the 2003 Period represents an
increase of $3,636,363, or 75%, over commission revenue for the 2002 Period. We
believe several factors contributed to this growth, including a rise in
investor confidence and the addition of approximately 60 registered
representatives during the 2003 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, such as fixed income securities.
Additionally, during any quarter, we may add a significant number of registered
representatives who focus only on the sale of a particular type of investment
product (e.g., insurance, equities, fixed income, etc.).

15



---



##### Table of Contents



Expenses:

Commission and clearing costs increased to $6,225,741 during the 2003
Period, which represents an increase of $2,085,211, or 50%, over the $4,140,530
reported for the 2002 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, however, decreased in the 2003 Period to
74% from 86% in the 2002 Period. This decrease is primarily attributable to
acquisition of the Boca Branch. Because we pay the costs associated with the
operation of the Boca Branch, as opposed to an independent branch where the
owner of the branch is responsible for the payment of the branchs expenses, we
pay to the Boca Branchs registered representatives a smaller percentage of the
commission revenue they generate than we would pay to our independent
registered representatives.

Employee compensation and benefits increased to $1,628,981 during the 2003
Period, which represents an increase of $1,063,846, or 188%, over the 2002
Period. This increase was due primarily to the addition of several new
employees during 2003, as well as the incurrence of severance costs associated
with the closing of the Companys Indialantic office in the second and third
quarter of 2003.
In addition to wages, employee benefits also increased, not only as a result of
an increase in the number of employees but also a result of the Company
providing more extensive benefits in 2003 than it offered in 2002.

Occupancy and equipment cost increased to $380,145 during the 2003 Period,
which represents an increase of $265,078, or 231%, over $115,067 reported for
the 2002 Period. This increase was largely due to our need to acquire
additional space in Boca Raton for our operations, as well as for the Boca
Branch. On August 31, 2003, however, the Company terminated the lease for its
office space in Indialantic. Monthly lease payments on the Indialantic
property were approximately $8,800.

Professional fees decreased by $114,324, or 24%, from $466,452 during the
2002 Period to $352,128 during the 2003 Period. This decrease was largely due
to a reduction of approximately $63,000 in consulting fees and approximately
$38,000 in recruiting fees. The reduction in recruiting fees was largely
attributable to our reduced use of outside recruiters.

Communications costs increased by $161,114, or 178%, to $251,417 in the
2003 Period from $90,303 in the 2002 Period. The increase in these costs was
due primarily to the addition of several new employees, as well as the addition
of the Boca Branch.

Stock based compensation increased by $110,180, or 93%, to $228,636 in the
2003 Period from $118,456 in the 2002 Period. Stock based compensation
expense reflects the amount of unearned stock compensation that we amortize.
Stock based compensation increased significantly as a result of the issuance,
during the first quarter of 2003, of options allowing the holders thereof to
purchase approximately 1.6 million shares of our stock. This issuance resulted
in the recognition of approximately $548,000 in unearned stock compensation,
which amount is being amortized over 48 months.

Loss on disposition of fixed assets for the 2003 Period was $94,632. We
did not recognize any similar loss for the 2002 Period. The loss on
disposition of fixed assets was attributable to the closing of the Indialantic
office in the third quarter of 2003 and the related write-off of leasehold
improvements and fixed assets.

Other operating expenses increased to $379,089 during the 2003 Period,
which represents an increase of $95,889, or 34%, over the 2002 Period. Other
operating expenses typically include the general and

16



---



##### Table of Contents



administrative costs
incurred by the Company, to the extent such costs are not included elsewhere.
Examples of other operating expenses include insurance expense, office supplies
and printing, postage and related expenses, and interest expense. For the 2003
Period, other operating expenses increased over amounts reported in the 2002
Period primarily as a result of both the inclusion of the operating costs
associated with the Boca Branch and our effort to expand our infrastructure.
Examples of expenses that increased significantly during the 2003 Period when
compared to the 2002 Period include office supplies and printing, which
increased by $39,290, postage, which increased by $21,569 and advertising and
promotions, which increased by $21,201. We also include interest expense in
other operating expenses, which increased by $41,957 during the 2003 Period.
This increase is primarily attributable to the recognition of imputed interest
resulting from note we issued to Wachovia Securities in connection with the
acquisition of the Boca Branch. During the 2003 Period, certain costs included
in other operating expenses decreased. Examples of costs that decreased during
the period include contract labor expense, which decreased by $28,012, and
costs incurred in connection with being a public company, such as EDGAR filing
preparation fees and other financial printing costs, which decreased by
$24,175.

Net Income / Loss:

For the 2003 Period, we reported a net loss $756,640 or $.03 per basic and
diluted share, as compared to the net loss reported for the 2002 Period of
$933,570 or $.12 per basic and diluted share. Our improved performance overall
is mainly attributable to improved investor confidence in the equity markets
which occurred primarily in the fiscal quarter ended September 30, 2003, and a
substantial increase in the number of registered representatives working for
us. However, the increase in revenue was off-set by increased operating costs
from improvements made to our infrastructure and costs related to the
acquisition and integration of the Boca Branch, as described above.

Liquidity and Capital Resources

Net cash used in operating activities totaled ($274,897) during the 2003
Period, compared to net cash used of ($790,754) for the 2002 Period. The
decrease in cash used by operating activities was due largely to the
significant increase in our revenues, and the resulting positive impact on our
earnings. More specifically, during the 2003 Period, we added an additional
$3.6 million of commission revenue, on which we paid commissions and clearing
costs of approximately 74%, or $2.7 million. The difference, or $.9 million,
helped to offset our increased operating expenses. Additionally, our earnings
were impacted by charges for several non-cash items, such as stock based
compensation, depreciation and amortization and imputed interest. During the
2003 Period, such charges amounted to $541,917, compared to $157,441 for the
2002 Period. For the 2003 Quarter, we generated cash from operating activities
of $236,040, compared to net cash used by operating activities of $142,228 for
the 2002 Quarter.

Cash and cash equivalents increased during the 2003 period by $1,090,354
to $2,698,028. This increase was due largely to the cash received from
financing activities (primarily in connection with our private financings) of
$1,428,227, which amount was partially offset by cash used in operating
activities of $274,897.

During the 2003 Period, we purchased $62,976 of property and equipment,
which amount exceeded by $56,588 the $6,388 used during the 2002 Period. The
Company does not project material capital expenditures over the next twelve
months.

Financing activities provided cash of $1,428,227 during the 2003 Period,
which amount included

17



---



##### Table of Contents



$1,960,000 that we raised through two private offerings
of our common stock. These amounts raised, however, were offset by aggregate
payments of $349,601 made by us to Wachovia Securities in connection with our
purchase of the Boca Branch.

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.

Inflation.Inflation has not been a major factor in the Companys
business since inception. There can be no assurances that this will continue
if and when the Company completes an acquisition or merger.




Item 3. Controls and Procedures

We have evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of September 30, 2003. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer have each concluded that our
disclosure controls and procedures are effective to ensure that we record,
process, summarize, and report information required to be disclosed by us in
our quarterly reports filed under the Securities Exchange Act within the time
periods specified by the Securities and Exchange Commissions rules and forms.

During the quarterly 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.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings

From time to time we are engaged in various legal and regulatory
proceedings arising in the normal course of business. While it is not possible
to determine with certainty the outcome of these matters, we are of the opinion
the eventual resolution of such proceedings will not have a material adverse
effect on our financial position or operating results.




Item 2. Changes in Securities and Use of Proceeds



| |  | Not applicable.
| |  | ---------------




Item 3. Defaults Upon Senior Securities



| |  | Not applicable.
| |  | ---------------




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



| |  | Not applicable.
| |  | ---------------

18



---



##### Table of Contents






Item 5. Other Information

As of March 2003, the Company was obligated to issue a total of 1,478,000
common stock purchase warrants, exercisable at $0.30 per share, to certain
registered representatives and employees in connection with the Companys
private placements and other services rendered to the Company. The warrant
agreements were delivered by the Company during the quarter ended September 30,
2003 and a form of the warrant is attached to this report as an exhibit.




Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

|       |  |                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Name                                                                                                                                                      
|       |  |                                                                                                                                                           
|3.1    |  | Amended and Restated Articles of Incorporation, effected September 27, 2001 (1)                                                                           
|       |  |                                                                                                                                                           
|3.1.1  |  | Amendment to Amended and Restated Articles of Incorporation, effected August 8, 2001(1)                                                                   
|       |  |                                                                                                                                                           
|3.1.2  |  | Amendment to Amended and Restated Articles of Incorporation effected March 27, 2002 (8)                                                                   
|       |  |                                                                                                                                                           
|3.1.3  |  | Amendment to Amended and Restated Articles of Incorporation effected August 28, 2002 (10)                                                                 
|       |  |                                                                                                                                                           
|3.1.4  |  | Amendment to Amended and Restated Articles of Incorporation effected April 9, 2003 (13)                                                                   
|       |  |                                                                                                                                                           
|3.2    |  | Amended and Restated Bylaws (2)                                                                                                                           
|       |  |                                                                                                                                                           
|10.1   |  | 2000 Incentive Compensation Plan (3)                                                                                                                      
|       |  |                                                                                                                                                           
|10.2   |  | Stock Option Agreement between the Company and Richard Parker (4)                                                                                         
|       |  |                                                                                                                                                           
|10.3   |  | Stock Option Agreement between the Company and Mark F. Caulfield (4)                                                                                      
|       |  |                                                                                                                                                           
|10.4   |  | Employment Agreement between the Company and Richard Parker (5)                                                                                           
|       |  |                                                                                                                                                           
|10.5   |  | Employment Agreement between the Company and Mark F. Caulfield (5)                                                                                        
|       |  |                                                                                                                                                           
|10.6   |  | Secured Demand Note Collateral Agreement between the Company and Summit Group of
Companies, Inc. (6)                                                      
|       |  |                                                                                                                                                           
|10.7   |  | Amendment to Secured Demand Note Collateral Agreement (6)                                                                                                 
|       |  |                                                                                                                                                           
|10.8   |  | Employment Agreement between the Company and Ronald Caprilla (7)                                                                                          
|       |  |                                                                                                                                                           
|10.9   |  | Stock Purchase Agreement (8)                                                                                                                              
|       |  |                                                                                                                                                           
|10.10  |  | Employment Agreement between the Company and Marshall T. Leeds (8)                                                                                        
|       |  |                                                                                                                                                           
|10.11  |  | Stock Option Agreement between the Company and Marshall T. Leeds (8)                                                                                      
|       |  |                                                                                                                                                           
|10.12  |  | Stock Option Agreement between the Company and Richard Parker (8)                                                                                         
|       |  |                                                                                                                                                           
|10.13  |  | Stock Option Agreement between the Company and Richard Parker (8)                                                                                         
|       |  |                                                                                                                                                           
|10.14  |  | Employment Agreement between the Company and Richard Parker (9)                                                                                           
|       |  |                                                                                                                                                           
|10.15  |  | Amended and Restated Employment Agreement between the Company
and Marshall T. Leeds (9)                                                                   
|       |  |                                                                                                                                                           
|10.16  |  | Shareholders Voting Agreement and Irrevocable Proxy by and among the
Company, Marshall T. Leeds, Richard Parker and Joan Parker (9)                      
|       |  |                                                                                                                                                           
|10.17  |  | Commercial Lease between the Company and First America Living Trust (9)                                                                                   
|       |  |                                                                                                                                                           
|10.18  |  | Form of Registration Rights Agreement between the Company and certain investors (11)                                                                      
|       |  |                                                                                                                                                           
|10.19  |  | Purchase Agreement dated January 2, 2003 between Summit Holding Group, Inc. and Wachovia
Securities Financial Network, Inc. (w/o exhibits) (12)           
|       |  |                                                                                                                                                           
|10.20  |  | Stock Purchase Agreement between the Company and Antares Capital Fund
III Limited Partnership (Antares) (13)                                             
|       |  |                                                                                                                                                           
|10.21  |  | Supplemental Letter between the Company and Antares (w/o exhibits) (13)                                                                                   
|       |  |                                                                                                                                                           
|10.22  |  | Registration Rights Agreement between the Company and Antares (13)                                                                                        
|       |  |                                                                                                                                                           
|10.23  |  | Co-Sale and Voting Rights Agreement between the Company and Antares (13)                                                                                  
|       |  |                                                                                                                                                           
|10.24  |  | Form of Warrant Agreement dated effective March 19, 2003*                                                                                                 
|      
|31.1   |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as amended.*
|       |  |                                                                                                                                                           

19



---



##### Table of Contents



|     |  |                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as amended*
|     |  |                                                                                                                                                          
|99.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*      
|     |  |                                                                                                                                                          
|99.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 1002.*      



---

|*    |  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  |  | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the fiscal
quarter ended September 30, 2001, filed November 14, 2001, file no. 0-29337.                                                                                                                                                                                                                                                                            
|    
|(2)  |  | Exhibit 3.2 filed with the Companys Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30, 2001 was filed prematurely
and subsequently not adopted by the Board of Directors. As a result, the Amended and Restated Bylaws dated July 21, 2000 remain in effect and
were re-filed with, and are incorporated by reference to, the Companys Quarterly Report for the fiscal quarter ended September 30, 2001, on
Form 10-QSB.
|    
|(3)  |  | Incorporated by reference to the Companys Proxy Statement on Schedule 14A, filed July 31, 2000.                                                                                                                                                                                                                                                                                                                                                  
|    
|(4)  |  | Incorporated by reference to the Companys Information Statement on Schedule 14C, filed September 26, 2000.                                                                                                                                                                                                                                                                                                                                       
|    
|(5)  |  | Incorporated by reference to the Companys Quarterly Report for the fiscal quarter ended September 30, 2000 on Form 10-QSB, filed August 14,
2000 and amended August 15, 2000.                                                                                                                                                                                                                                                                    
|    
|(6)  |  | Incorporated by reference to the Companys Quarterly Report for the fiscal quarter ended September 30, 2001, on Form 10-QSB filed November
14, 2001.                                                                                                                                                                                                                                                                                              
|    
|(7)  |  | Incorporated by reference to the Companys Annual Report for the fiscal year ended December 31, 2001 on Form 10-KSB filed April 15, 2002.                                                                                                                                                                                                                                                                                                         
|    
|(8)  |  | Incorporated by reference to the Companys Quarterly Report for the fiscal quarter ended March 31, 2002 on Form 10-QSB filed May 24, 2002.                                                                                                                                                                                                                                                                                                        
|    
|(9)  |  | Incorporated by reference to the Companys Quarterly Report for the fiscal quarter ended September 30, 2002 on Form 10-QSB filed August 19,
2002.                                                                                                                                                                                                                                                                                                 
|    
|(10) |  | Incorporated by reference to the Companys Quarterly Report for the fiscal quarter ended September 30, 2002, on Form 10-QSB filed
November 14, 2002.                                                                                                                                                                                                                                                                                              
|    
|(11) |  | Incorporated by reference to the Companys Annual Report for the fiscal year ended December 31, 2002 on Form 10-KSB filed March 31, 2003.                                                                                                                                                                                                                                                                                                         
|    
|(12) |  | Incorporated by reference to the Companys amendment to Current Report on Form 8-K filed
March 18, 2003.                                                                                                                                                                                                                                                                                                                                          
|    
|(13) |  | Incorporated by reference to the Companys Current Report on Form 8-K filed April 21, 2003.                                                                                                                                                                                                                                                                                                                                                       

(b) Reports on Form 8-K

None

[Signature Page Follows]

20



---



##### Table of Contents



SUMMIT BROKERAGE SERVICES, 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.

|                        |  |                                                  |                       | 
|----------------------- |  | ------------------------------------------------ | --------------------- | 
|                        |  | Summit Brokerage Services, Inc.                 
|                        |  | (Registrant)                                    
|                        |  |                                                  |                       | 
|Date: November 14, 2003 |  |                                                  | /s/ Marshall T. Leeds | 
|                        |  |                                                  |                       | 
|                        |  |                                                  |                       | 
|                        |  | Marshall T. Leeds, Chairman of the Board & Chief
|                        |  | Executive Officer                               
|                        |  | (Principal Executive Officer)                   
|                        |  |                                                  |                       | 
|Date: November 14, 2003 |  |                                                  | /s/ Steven C. Jacobs  | 
|                        |  |                                                  |                       | 
|                        |  |                                                  |                       | 
|                        |  | Steven C. Jacobs, Executive Vice President and  
|                        |  | Chief Financial Officer                         
|                        |  | (Principal Accounting Officer)                  

21



---



##### Table of Contents








| |              
| | -------------
| | EXHIBIT INDEX

|        |  |                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                           
|NUMBER  |  | DESCRIPTION                                                                                                                                               
|        |  |                                                                                                                                                           
|10.24   |  | Form of Warrant dated effective March 19, 2003*                                                                                                           
|        |  |                                                                                                                                                           
|31.1    |  | Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a),promulgated under the Securities
Exchange Act of 1934, as amended* 
|        |  |                                                                                                                                                           
|31.2    |  | Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a),promulgated under the Securities
Exchange Act of 1934, as amended.*
|        |  |                                                                                                                                                           
|32.1    |  | Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.*       
|        |  |                                                                                                                                                           
|32.2    |  | Certification Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.*          



---

|* |  | Filed herewith.
|- |  | ---------------

22