UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
SUMMIT BROKERAGE SERVICES, INC.
(Name of Small Business Issuer in its charter)
Florida 59-3041826
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
25 Fifth Avenue, Indialantic, Florida 32903
(Address of principal executive offices) (zip code)
Issuer's telephone number: (321) 724-2303
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which each class
is to be registered
------------------- -----------------------------------------
Common OTC Bulletin Board
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, $.0001 par value
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INTRODUCTORY STATEMENT
Summit Brokerage Services, Inc. (the "Company" or "Summit") has elected to
file this Form 10-SB registration statement on a voluntary basis in order to
become a reporting company under the Securities Act of 1934. The primary purpose
for this is that the Company intends to be listed for trading on the OTC
Electronic Bulletin Board. Under the current NASD rules, in order to become
listed on the OTC Electronic Bulletin Board, a company now must be a reporting
company under the Securities Act of 1934.
This registration statement, including the information that may be
incorporated herein by reference, contains forward-looking statements including
statements regarding, among other items, the Company's business and growth
strategies, and anticipated trends in the Company's business and demographics.
These forward-looking statements are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of
factors described in this section "Risk Factors," including among others,
regulatory or economic influences.
ITEM 1. DESCRIPTION OF BUSINESS
A. General Overview
Summit Brokerage Services, Inc. is an independent broker dealer offering
financial services to clients across the country and is a National Association
of Securities Dealers (NASD) member firm.
The Company currently has 39 branch offices nationwide and several new
branch offices pending licensing as of this writing.
The Company provides the following financial services through its Planners
to their clients:
1. Both full service and discount stock and bond brokerage services
2. Load and no-load mutual fund executions
3. Asset allocation services for mutual funds, stocks and bonds
4. Mortgage origination
5. Life, health and disability insurance coverage
6. Money market funds
7. Clearing services for its branch offices
8. Registered Investment Advisor services
9. Financial Planning Services
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B. Organization
Summit was incorporated under the laws of the state of Florida in
September 1993. Additionally there are three wholly owned subsidiary
corporations:
o Summit Holding Group, Inc. - a holding company
o Summit Financial Group, Inc. - a registered investment advisor
o Summit Insurance Agency Corporation - an insurance business
Unless otherwise specified or indicated by the context, all references in
this Form 10-SB to the company are to Summit Brokerage Services, Inc. and all of
its subsidiaries.
The founder of the Company is Mr. Richard Parker, the Chairman of the
Board, Chief Executive Officer, and majority shareholder.
The Company's common stock is quoted on the OTC Bulletin Board under the
symbol SUBO and began trading in June 1998.
The Company is located in the Summit Building located at 25 Fifth Ave.,
Indialantic, Florida, 32903; telephone: 321-724-2303; web site:
www.summitbrokerage.com.
C. Industry Background
The financial services industry has been in existence for over 100 years.
Traditionally, the industry came from three separate areas: the banking
industry, the brokerage industry and the insurance industry. Over the last 25
years, the three industries have slowly merged together to form an industry now
commonly referred to as financial services. The industry offers financial
planning services to a wide array of individuals and companies. With the
introduction of the Internet, a host of industry publications, and several
financial television networks, the general public has become increasingly versed
with the financial instruments available and much more savvy about investments
in general. Today, industry surveys shows over half of American households have
money invested in the stock market in some form. Many of these investors enter
the market through their company's 401K plan.
Over the last two decades, 401K plans have become the investment of choice
for many investors. Companies desiring to limit their ongoing liability have
moved away from defined benefit and profit sharing plans electing the 401K to
invest retirement funds for their employees.
Over the last 20 to 30 years mutual funds have become the investment of
choice for most American investors and have grown steadily in acceptance with
both investors and the community.
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D. Products
Summit offers a broad range of products to the investing public through
its registered reps and branch offices. These products include mutual funds,
variable annuities, individual stocks, bonds, and insurance products and managed
money accounts. The Company's registered reps mainly offer package products to
the investing public. While many are licensed to sell individual stocks and
bonds, it is a relatively small percentage of Summit's business - less than ten
percent of revenue. Using a package product mix produces:
1. More suitable products to the general public
2. More efficient management of the funds
3. A reduction of risks from buying individual securities
4. An easier process of supervision by the Summit compliance team.
The managed accounts charge a wrap fee which provides a steady base of
revenue for Summit in both good and bad markets. This gives a more predictable
stream of income. Currently, Summit has over $27 million under management and is
adding money on a monthly basis. By offering the product mix that Summit offers,
it believes that its reps will be viewed more as advisers than traditional stock
brokers. This helps by creating personal relationships with the clients that
provide a long and mutually beneficial working relationship.
E. Business Strategy
Summit has since 1995 implemented a strategy of affiliating independent
financial planning offices across the country with the firm. These independent
offices bear the full expense of the day-by-day operations of their
independently owned branch office. Summit receives on average 10% to 20%
over-ride of the gross revenue provided by these branch offices. In addition,
there are several other forms of income Summit derives from its branches.
One additional source of revenue is Registered Investment Advisory (RIA)
fees. Summit derives revenue in the form of fee based management of individual
stocks and/or bond accounts and wrap fee mutual fund accounts offered by its
registered reps. Much of the management of these funds are out-sourced to
outside managers for the day-by-day management.
The average annual management fee paid by a client to Summit's RIA is 1.5%
(150 basis points). Summit receives an average of 30 to 50 basis points for its
management services. Then the remaining 100 to 120 basis points are paid to the
registered rep/branch office through Summit's normal payout grid (average
85/15%). Therefore, on an average account, Summit will earn as much as 50 basis
points for its management services plus an average of 15 to 20 additional basis
points for the broker/dealer over-ride, giving it a total of 65 to 70 basis
points.
Additional income is also derived from the wide array of insurance
products offered by Summit. The insurance products are also paid through the
Summit payout grid.
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The next area of revenue is derived from the master marketing areas. To
rapidly build our distribution, we offer a master marketing area to a select
group of branch offices. Growth oriented branch managers may, if approved by
Summit, purchase a geographical area therefore securing the exclusive rights to
build additional offices and reps in that area. These reps then work through
their office of supervisory jurisdiction (in master marketing area manager's
office). Not only does the MMA Manager have the exclusive right to the area, but
also the contractual obligation to build a pre-determined number of branches
within a specified period of time. The home office (Summit Brokerage Services)
gives support and training to the MMA's which not only assists in Summit's
growth, but also in the duties of supervising and training the branch offices.
F. Market Segments
One of the positive aspects of the financial services industry is
virtually any person or company is a potential client. In the early years of
life, young families invest for college funding and begin to prepare for their
retirement.
Middle age families focus more on retirement planning and capital
accumulation to achieve other financial goals.
The seniors market focuses on preservation of capital and providing income
through the retirement years. Company's foundations, trusts, and retirement
plans all need financial services also.
With a growing population there is no sign that this trend will diminish.
Most people realize that the days of relying on the government to provide for
their retirement via Social Security are all but gone. To maintain a sufficient
income during retirement requires investing on an ongoing basis through their
lifetime. This only serves to help the financial services industry continue the
same growth it has seen for the last two decades.
G. Seasonality
The Company's revenues are affected only slightly by the traditional US
vacation seasons, such as July, August, and December.
H. Employee
The Company currently employs 15 full time corporate office staff,
including officers and management, as well as 64 licensed representatives
(Financial Planners or Planners.)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
The following discussion and analysis of the Company's consolidated
financial condition and results of operation for the fiscal years ended December
31, 1999, 1998 and 1997, and for the fiscal quarters ended December 31, 1999,
1998 and 1997, should be read in conjunction with the Company's consolidated
financial statements included elsewhere herein.
When used in conjunction in the following discussions, the words
"believes," "anticipates," "intends," "expects," and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties, which could cause results to differ materially
from those projected, including, but not limited to, those set forth in "Factors
That May Affect Future Results and Financial Condition."
A. General Discussion of the Company
The Company is a National Association of Securities Dealers (NASD) member
firm. The Company is an independent broker-dealer offering financial services to
clients across the country. The firm provides financial services through its
Planners to their clients.
B Results of Operations for:
RESULTS OF OPERATIONS FOR:
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues increased in fiscal 1999 by $1,862,340 (65%) to $4,756,619 from
$2,894,279 in fiscal 1998. This increase was largely due to the addition of 15
new branch offices during 1999.
Expenses increased in fiscal 1999 by $2,046,810 (61%) to $5,450,761 from
$3,403,951 in fiscal 1998. This increase was largely attributable to the growth
in revenues during 1999, which resulted in higher commission expense as well as
higher general operating expenses. In addition, in 1999 the Company incurred a
higher expense due to the amortization of unearned stock compensation, which is
explained further in footnote 7 of the Notes to Consolidated Financial
Statements.
The Company believes that its registered investment advisory services and
investment income will continue to represent a larger portion of the Company's
overall revenues in the future.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues increased in fiscal 1998 by $1,266,120 (78%) to $2,894,279 from
$1,628,159 in fiscal 1997. This increase was largely due to the addition of 13
new branch offices during 1998.
Expenses increased in fiscal 1998 by $1,550,281 (84%) to $3,403,951 from
$1,853,670 in fiscal 1997. This increase was largely due to the growth in
revenues during 1998, which resulted in higher commission expense as well as
higher general operating expenses.
FISCAL QUARTER ENDED DECEMBER 31, 1999 COMPARED TO QUARTER ENDED DECEMBER 31,
1998
Sales increased in the fiscal quarter ended December 31, 1999 by $951,267
(145%) to $1,610,261 from $658,994 in fiscal quarter ended December 31, 1998.
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Expenses also increased in the recent period by $980,733 (131%) to
$1,728,853 from $748,120 in the previous period.
FISCAL QUARTER ENDED DECEMBER 31, 1998 COMPARED TO QUARTER ENDED DECEMBER 31,
1997
Sales increased in the fiscal quarter ended December 31, 1998 by $172,922
(36%) to $658,994 from $486,072 in fiscal quarter ended December 31, 1997.
Expenses also increased in the recent period by $189,568 (34%) to
$748,210 from $558,642 in the previous period.
C. Liquidity and Capital Resources
During the past two fiscal years, the Company has funded its operations
primarily through cash provided by operations, and through sales of its
securities. In a private placement that commenced July 1997 and concluded in May
1998, the Company raised approximately $807,000 through the sale of 322,800
shares of its common stock at a price of $2.50 per share. In a second private
placement that commenced in September 1998 and concluded in January 2000, the
Company raised approximately $864,000 through the sale of 400,200 shares of its
common stock.
The Company's net cash from operations was $(200,591) at December 31, 1999
and $(518,265) at December 31, 1998. The $317,674 reduction in cash flows from
operations is mainly the result of timing, as the Company received commissions
at year-end, but the related commission liability was not paid until January
2000.
Cash flows from financing activities were $533,422 in fiscal year 1999 and
$428,679 in fiscal year 1998. As previously mentioned, these cash inflows
resulted from the Company's two private placements.
Based on the its own internal projections the Company believes that its
operations and current capital resources will be sufficient to fund the
Company's working capital needs through the 2000 fiscal year, provided that
there are no significant increases in operating expenses. While it is
endeavoring to keep costs contained as much as possible, the failure of the
Company to prevent such increases in the immediate future will have a material
adverse effect on the
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Company's operations and on its ability to operate in the manner its business is
currently being conducted.
D. Significant Business Relationships
On January 26, 1994 the Company entered into a clearing agreement with
First Clearing Corporation, a subsidiary of First Union Bank (formerly Wheat
First Securities, Inc.) to execute securities orders and maintain accounts for
clients on behalf of the Company.
E. Factors That May Affect Future Results and Financial Condition
There are, of course, many factors that may affect the financial well
being of the company. The markets in general will have a direct impact on the
investing public and their willingness to invest in financial vehicles. While
over a long period of time markets have consistently gone up, the markets have
become more and more volatile over the years, therefore, causing concern with
the investing public. If a down turn in the market occurs for a substantial
period of time, it could affect negatively the Company's growth and even its
ability to maintain its current revenue stream.
Ability to attract reps and branch offices:
While Summit has shown strong growth for its first three years in
attracting branch offices and registered representatives, this is due primarily
to training provided in the industry by the Company's CEO and founder, Richard
Parker. If Mr. Parker was not physically able to continue this training, it
would have a negative effect on the recruiting aspect of the firm.
Regulators:
While Summit maintains a high standard of compliance and regulatory
adherence at all times, there is at least 102 regulatory bodies that Summit must
answer to with 50 state securities divisions, 50 state insurance divisions, the
NASD and the SEC. Many of the rules and regulations are extremely complex and,
even if a financial services firm desires and strives to adhere to all
regulations, there is always the potential of infraction of rules that could
result in regulatory action either monetarily or against the firm in general.
Financial liability from errors and omissions:
Whenever a company handles funds for another person, the potential of
litigation is always present. Summit strives through its supervisors, compliance
officers, and managers to maintain a high degree of compliance and supervision
in these areas. However, mistakes can occur. To assure that the financial
liability is manageable, Summit maintains errors and omissions insurance. There
are, of course, exceptions to all E&O policies and there is always the potential
that one or
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more events may not be covered through E&O insurance and therefore become a
liability to the company.
Competition:
There is strong competition in the financial services industry. Many of
Summit's competitors are extremely well capitalized and have decades of
experience in the business. This obviously presents business risks to the
company.
Limited depth of management:
The Company has a quality management team. However, that team is limited
in number. If one or more of the immediate management team was incapacitated,
this could have a negative effect on the company.
Outside managers:
Summit subcontracts much of its management managers in mutual funds,
variable annuities and managed accounts. Therefore, the investors judge their
financial results based on the performance of these managers. If Summit should
hire managers that do not perform adequately, it could lose the assets under
management and therefore have a negative effect on the company.
Capitalization:
There is always the possibility that inadequate capitalization could
curtail the growth and even affect the day-by-day operations of the firm. If the
current revenue sources or the current growth model was hampered in any way, it
could result in lack of capitalization to not only grow the company, but to run
its day-by-day operation.
F. Employees
As of the current date, the Company has 15 full time employees. As the
Company increases its operations, additional employees will be required. The
Company's future success depends on its ability to attract and retain other
qualified personnel, for which competition is intense. The loss of Mr. Richard
Parker or the Company's inability to attract and retain other qualified
employees could have a material adverse affect on the Company.
G. Risks Associated with Year 2000
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar
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problems may arise in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 Issue may be
experienced before, on, or after January 1, 2000, and, if not addressed the
impact on operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability to conduct
normal business operations. It is not possible to be certain that all aspects of
the Year 2000 Issue affecting the Company, including those related to the
efforts of customers, suppliers, or other third parties, will be fully resolved.
H. Additional Information
The Company intends to provide an annual report to its security holders,
and to make quarterly reports available for inspection by its security holders.
The annual report will include audited financial statements.
The Company will, as a result of this filing, become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Act")
and, in accordance with the Commission, such reports, proxy statements and other
information may be inspected at public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World
Trade Center, New York, New York, 10048; and 5670 Wilshire Boulevard, Los
Angeles, California 90036. Copies of such material can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549, at prescribed rates. For further information, the
SEC maintains a website that contains reports, proxy and information statements,
and other information regarding reporting companies at http://www.sec.gov.
ITEM 3. DESCRIPTION OF PROPERTY
The Company maintains its principal business operations at 25 Fifth
Avenue, Indialantic, Florida 32903. The Company's telephone number is (321)
724-2303 and the web site address is www.summitbrokerage.com.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31,
1999, with respect to the beneficial ownership of common stock by (i) each
person who, to the knowledge of the Company, beneficially owned or had the right
to acquire more than 5% of the outstanding common stock, (ii) each Director of
the Company, and (iii) all executive Officers and Directors of the Company as a
group:
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Name of Beneficial Owner(1) Number of Shares Percentage(2)
- --------------------------- ---------------- -------------
Richard Parker (3) (4) 3,327,595 73.3%
Brian Best (5) 14,250 .3%
Harry Green (6) 44,250 1.0%
D. Mark Olson (5) 6,250 .1%
Jack Root (6) 14,250 .3%
William R. Turner (7) 108,850 2.4%
Mark F. Caulfield (8) 67,500 1.5%
- ----------
(1) Unless otherwise indicated, the address of each person is c/o Summit
Brokerage Services, Inc., 25 Fifth Ave., Indialantic, FL 32903
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options, warrants or convertible securities that are currently
exercisable, or exercisable within 60 days of December 31, 1999, are
deemed outstanding for computing the percentage of the person holding such
options, warrants or convertible securities but are not deemed outstanding
for computing the percentage of any other person. Except as indicated by
footnote and subject to community property laws where applicable, the
persons named in the table have sole Voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Includes 640,175 shares owned by Richard & Joan Parker, JT TEN.
(4) Includes 95,000 shares issuable pursuant to a stock purchase option
currently exercisable.
(5) Includes 6,250 shares issuable pursuant to a stock purchase option
currently exercisable.
(6) Includes 11,250 shares issuable pursuant to a stock purchase option
currently exercisable.
(7) Includes 100,000 shares issuable pursuant to a stock purchase option
currently exercisable.
(8) Includes 47,500 shares issuable pursuant to a stock purchase option
currently exercisable.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names and positions with the Company
and ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of shareholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are at the discretion of the Board, except
to the extent governed by employment contract.
Name Age Title
---- --- -----
Richard Parker 48 Chairman & CEO
William R. Turner 56 President & COO
Mark F. Caulfield 41 CFO & Secretary/Treasurer
Brian Best 30 Director
Harry Green 58 Director
Mark Olson 51 Director
Jack Root 66 Director
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Duties, Responsibilities and Experience
Richard Parker, Chairman of the Board and Chief Executive Officer
Mr. Parker, the founder of the Company, began his career in the financial
services industry in 1974 as a licensed Realtor. A year later, he became the
youngest licensed broker in the history of the Lakeland Board of Real Estate
when he and his mother, Doris Parker, opened R/D Parker Realty, a franchise of
Century 21, the nation's largest real estate sales organization. For the next
decade, Mr. Parker sold, developed, built and managed real estate projects
primarily throughout Polk County. During that time, he was recognized as a
national sales leader for Century 21. In 1986, Mr. Parker became fully licensed
to sell securities and insurance with Dean Witter. Following his tenure with
Dean Witter, he became the branch manager of Anchor National Financial, a
SunAmerica company. With Anchor National, Mr. Parker was the second highest
producer nationally among the company's several hundred licensed
representatives. During this time, Mr. Parker incorporated and began doing
business as The Summit Financial Group, Inc. and the Summit Group of Companies.
The Summit Brokerage Service Inc., a NASD licensed broker/dealer, was added to
the Summit Group of Companies. Mr. Parker holds series 7, 63, 65 and 24
licenses, as well as life insurance and real estate licenses.
William R. Turner, President and Chief Operations Officer
William R. Turner, in addition to his duties with the Company, has a
consulting practice available to the securities and insurance industries. He is
a former Senior Vice President and Secretary of INVEST Financial Holding Co.,
Inc., as well as Senior Vice President and Director of Compliance for INVEST
Financial Corporation. Mr. Turner was with INVEST for over 11 years and helped
create the standards used by regulators on the sale of investment products
within banks and other non-traditional securities areas. INVEST's regulatory
record was flawless during Mr. Turner's tenure. Prior to INVEST, Mr. Turner was
a corporate officer and registered representative with Paine Webber, Jackson and
Curtis and a registered representative with Merrill Lynch. He has been on
numerous industry panels. He was also a regulator with the National Association
of Securities Dealers, Inc., as an examiner and the Assistant Director of
NASDAQ, the NASD's automated quotation system. He has been in the
securities/insurance industry for over 30 years.
Mark Caulfield, Chief Financial Officer and Secretary/Treasurer
Mark Caulfield is a Certified Public Accountant with over 20 years in
financial management, serving in such key roles as Vice President of Finance and
Administration, as well as Controller. He has been involved with a number of
similar rapidly growing companies, including such industries as hospitality
management, travel and tourism, restaurant, and nuclear power service
contracting. He has served on numerous business, charitable, and community
boards and committees. He and his family currently devote a great deal of time
to church and Rotary
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involvement. He is also a member of several professional associations, including
the American Institute of Certified Public Accountants.
Brian R. Best, Director
Since 1998, Mr. Best has been a medical center representative for COR
Therapeutics, a bio-pharmaceutical company with a breakthrough product in
cardiac care. He is responsible for managing 12 coastal hospitals and over 100
physicians. Mr. Best was employed to create a new standard of care for cardiac
patients in the Emergency Room and in percutaneous coronary interventions with
the use of Integrilin. He is assisting in the development of research facilities
for NDA studies and international company representatives. From 1992 to 1998, he
was employed by Abbot Laboratories. As a Neurological Sales Specialist, he
marketed anti-convulsants and anti-psychotics to neurologists and psychiatrists.
As PPR/SWAT, he fulfilled a variety of assignments during this time, including
three relocations to rebuild vacant territories. He received a Bachelor of
Science degree from Wake Forest University in 1992.
Harry S. Green, Director
From 1966 until he retired in 1994, Mr. Green worked for Wal-Mart. After
graduation from University of Arkansas in 1970, he started on their management
program and was promoted to District Manager in 1977. In 1984 he was promoted to
Regional Vice President and in 1988 he was Regional Vice President of Sam's.
From 1990 to 1994, he worked with SuperCenters and was Operations Director for
Bud's.
D. Mark Olson, Director
Mr. Olson began his securities industry career in 1978 as a registered
representative with Shearson. During his tenure as a registered rep, he was
ranked as the number one insurance producer nationally for six consecutive
years. In 1983, as Divisional Director of Sales, he directed the sales efforts
of 600 registered reps located in 39 branches in 10 states, where his division
was consistently number one in sales. In 1987, Mr. Olson joined Kemper Financial
Services as National Director of Sales. He directed the sale of Kemper mutual
funds, annuities, and unit investment trusts through banks, brokerage firms,
financial planners, and insurance agents. He is considered to be one of the
pioneers of bank brokerage and put many of the country's leading banks in the
securities business. In 1989, with Invest Financial Corporation, a struggling
wholly owned broker/dealer subsidiary of Kemper Financial Services serving
financial institutions, he served as Chairman, President, CEO and Director.
Under his leadership, Invest grew to 800 branches located in 44 states; produced
annual sales in excess of $3.5 billion, and became one of Kemper's most
profitable subsidiaries. In 1994, Mr. Olson became a management consultant to
the securities, banking, and insurance industries. His clients have been a
virtual who's who among US banks, insurance companies, mutual fund companies,
money managers, and NYSE member broker/dealers. He has also served numerous
clients in Canada. He created a financial services company for a leading
Midwestern bank holding company, created many of the innovative sales
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and marketing strategies used in the securities industry today. He has trained
thousands of registered representatives how to improve their business. He served
as President and CEO and helped turn around a troubled third party workers'
compensation administrator and a property and casualty insurance company. He
also served as President and CEO of a large managing general insurance agency
and risk manager. Mr. Olson is an accomplished public speaker and frequently
provides keynote addresses for national sales events of companies in the
securities industry.
Jack B. Root, Director
Mr. Root is a 40 year veteran of the financial service industry. He began
his career as a financial advisor and has worked his way up through the ranks of
the industry. Mr. Root developed the Successful Money Management Seminar and has
since helped develop similar courses for Canada and New Zealand. He has
presented over 3,500 hours of seminar instruction and has prepared financial
plans for hundreds of individuals and families. He retired from Successful Money
Management Seminars, Inc., in 1998.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for
its fiscal years ended December 31, 1999, December 31, 1998, and December 31,
1997 to its Chief Executive Officer and all other executive officers
(collectively, the "Named Executive Officers") whose total salary and bonus from
the Company exceeded $100,000 in the fiscal year ended December 31, 1999
Name and Fiscal Year Ended
Principal Position December 31 Salary
- ------------------ ----------------- ------
Richard Parker, CEO 1999 $188,471
1998 $147,200
1997 $149,400
Employment Agreements
The Company entered into a two-year employment agreement with William R.
Turner (the "Turner Employment Agreement"), the Company's Chief Operating
Officer and President, in September 1999. The term of the Turner Employment
Agreement commenced on September 22, 1999 and will expire on September 22, 2001.
The Turner Employment Agreement provides that in consideration for Mr. Turner 's
services, he is to be paid a salary of $100,000 during the first year of the
agreement, 15,000 shares of the Company's common stock, and options to purchase
50,000 shares of the Company's common stock at an option price of $2.50 per
share. During the second year of the agreement Mr. Turner will receive a 5%
increase in salary and 15,000 shares of the Company's common stock, and options
to purchase 50,000 shares of the Company's common
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stock at an option price of $2.50 per share. The contract is renewable upon
agreement by both parties.
The Company does not currently have an Executive Compensation Committee.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain family members of Richard Parker, the Company's Chairman and CEO,
and William Turner, the Company's President and COO, own shares of the Company's
common stock as set forth below:
# of Date
Name Shares Relationship Acquired
- --------------------------- ------ ------------ --------
Cole, Anthony Shane C/F Brittney 500 Granddaughter 12/19/97
Shane Cole UTMA/FL 5,000 9/2/99
Cole, Anthony Shane C/F Joshua
Brice Cole UTMA/FL 500 Grandson 12/19/97
Cole, Dabney Wayne C/F McKenna 500 Grandson 12/19/97
Cole UTMA/FL 5,000 10/4/99
Cole, Dabney & Melissa Cole, 2,000 Stepson 12/19/97
JTTEN 5,000 10/22/99
Cole, Dabney Wayne 5,720 Stepson 11/9/98 thru
10/4/99
Cole, Anthony & Gale, JTTEN 7,000 Son & 10/22/99
Daughter-in-law
Cole, Gale 5,000 Daughter-in-law 9/2/99
Parker, Aaron 1,040 Nephew 7/23/98
Parker, Roger 1,000 Brother 7/23/98
Parker, Joan 7,000 Wife 10/13/97
7,500 11/9/98
12,500 1999
Parker, Richard & Joan, JTTEN 640,175 Self & Wife 1999
15
<PAGE>
# of Date
Name Shares Relationship Acquired
- --------------------------- ------ ------------ --------
Parker, Doris 5,000 Mother 9/2/99
Parker, Richard Sr. 5,000 Father 9/2/99
Parker, Richard Sr. & Doris, JTTEN 2,000 Mother & Father 7/23/98
Turner, Darrell & Jennifer, JTTEN 400 Son & 12/14/99
Daughter-in-law
Turner, Stephen R. 200 Son & 12/14/99
Daughter-in-law
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorizes the issuance of
10,000,000 shares of common stock, $.0001 par value per share, of which
4,553,757 shares are outstanding, held of record by approximately 140
stockholders as of the date of this filing. The Company is not authorized to
issue shares of preferred stock. The holders of common stock are entitled to one
vote for each share held of record on all matters submitted to a vote of
stockholders. Subject to preferences applicable to the currently outstanding
shares, holders of common stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and liquidation preference of any then
outstanding preferred stock. All outstanding shares of common stock are fully
paid and nonassessable.
The transfer agent for the common stock is Florida Atlantic Stock
Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.
16
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The common stock is currently quoted on the OTC Bulletin Board operated by
The NASDAQ Stock Market, Inc. (the "OTC Bulletin Board") under the symbol
"SUBO." The following table sets forth the high and low last sale prices for the
common stock for each fiscal quarter, or interim period, in which the common
stock has been publicly traded, as reported by the OTC Bulletin Board. These
prices do not reflect retail mark-ups, markdowns or commissions and may not
represent actual transactions.
Quarter Ended Low High
------------------- ------ -----
June 30, 1998 (1) $ 2.50 $3.38
September 30, 1998 $ 3.00 $3.57
December 31, 1998 $ 3.32 $3.94
March 31, 1999 $ 1.50 $4.00
June 30, 1999 $ 3.50 $4.00
September 30, 1999 $ 2.25 $6.13
December 31, 1999 $ 4.13 $6.25
- ---------------
(1) The exchange occurred on June 24, 1998.
The closing sales price on January 12, 1999 reported on the OTC Bulletin
Board was $5.13 per share of common stock.
To date, the Company has not paid any cash dividends on its common stock.
However, pursuant to the terms of the Company's offering in 1997, shareholders
who held their stock for two years were entitled to and issued stock dividends.
ITEM 2. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation nor to the
knowledge of management is any litigation threatened against the Company which
would materially affect the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There was a change in accountants from Flavin, Jackson, Zirilli & Bouvier,
CPA to Hoyman, Dobson & Company, P.A. There were no disagreements with the
previous accountants.
17
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Private Placements
Between July 1997 and May 1998, the Company issued 322,800 shares of its
common stock for a total aggregate amount of $807,000. The 322,800 shares were
sold to approximately 48 investors in a transaction exempt from registration
pursuant to Rule 504 of Regulation D promulgated under the 1933 Act. No
underwriters were used in connection with this transaction.
Between September 1998 and January 2000, the Company issued 400,267 shares
of its common stock for a total aggregate amount of $864,000. The 400,267 shares
were sold to approximately 49 investors in a transaction exempt from
registration pursuant to Rule 504 of Regulation D promulgated under the 1933
Act. No underwriters were used in connection with this transaction
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 607 of the Florida Statutes provides for the indemnification of
officers and directors under certain circumstances against expenses incurred in
successfully defending against a claim and authorizes Florida corporations to
indemnify their officers and directors under certain circumstances against
expenses and liabilities incurred in legal proceedings involving such persons
because of their being or having been an officer or director.
Section 607.0850 of the Florida Statutes permits a corporation, by so
providing in its certificate of incorporation, to eliminate or to limit a
director's liability to the corporation and its stockholders for monetary
damages arising out of certain alleged breaches of their fiduciary duty. Section
607.0850 provides that no such limitation of liability may affect a director's
liability with respect to any of the following: (i) breaches of the director's
duty of loyalty to the corporation or its stockholders; (ii) acts or omissions
not made in good faith or which involve intentional misconduct of knowing
violations of law; (iii) liability for dividends paid or stock repurchased or
redeemed in violation of the Florida General Corporation Law; or (iv) any
transaction from which the director derived an improper personal benefit.
Section 607 does not authorize any limitation on the ability of the corporation
or its stockholders to obtain injunctive relief, specific performance or other
equitable relief against directors.
Article VIII of the Company's By-laws provide each director or officer of
the corporation shall be indemnified as of right to the fullest extent permitted
by current or future legislation or by current or future judicial or
administrative decisions against any fine, liability, cost, or expense,
including attorneys' fees, asserted against or incurred by the director or
officer. The corporation can agree to grant the same right of indemnification to
other agents or employees of the corporation and to persons serving at the
request of the corporation as its representative in the position of a director,
officer, agent, or employee of another enterprise. The right of indemnification
shall extend to the heirs, personal representatives, and estate of each person
18
<PAGE>
granted the right pursuant to the preceding sentences. The right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The corporation may maintain insurance at its
expense to protect itself and any such person against any fine, liability, cost,
or expense, whether or not the corporation would have the legal power to
directly indemnify the person against that liability.
The foregoing right of indemnification is not deemed to be exclusive of
any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
PART F/S
FINANCIAL STATEMENTS
The audited financial statements of the Company, prepared by Hoyman,
Dobson & Company, PA, Certified Public Accountants, 215 Baytree Drive, Suite 1,
Melbourne, Florida 32940, required by Regulation S-X commence on page F/S 1
hereof in response to this Item of this Registration Statement on Form 10-SB and
are incorporated herein by this reference.
PART III
ITEM 1. INDEX TO EXHIBITS
2 Reorganization Agreement (not applicable)
3 (i) Articles of Incorporation and Amendments
3 (ii) By-Laws
4 Instruments defining the rights of holders (refer to exhibit 3)
9 Voting Trust agreement (not applicable)
10 Material contracts (not applicable)
11 Statement re: Computation of per share earnings (not applicable)
21 Subsidiaries of the Registrant
24 Power of Attorney (not applicable)
27 Financial Data Schedule
99 Additional Exhibits (not applicable)
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-SB to be
signed on its behalf by the undersigned, thereunto duly authorized.
Summit Brokerage Services, Inc.
January 13, 2000 /s/ Richard Parker
------------------------------------
Richard Parker
Chairman of the Board and
Chief Executive Officer
20
<PAGE>
Board of Directors and Shareholders
Summit Brokerage Services, Inc. and Subsidiaries
Indialantic, Florida
We have audited the accompanying consolidated statement of financial condition
of Summit Brokerage Services, Inc. (a Florida Corporation) and Subsidiaries as
of December 31, 1999, and the related consolidated statement of income (loss),
changes in stockholders' equity, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The financial statements of Summit
Brokerage Services, Inc. and Subsidiaries as of December 31, 1998 were audited
by other auditors whose report dated February 17, 1999, expressed an unqualified
opinion on those statements. As discussed in Note 16, the Company has restated
its year ended December 31, 1998 financial statements during the current year to
properly reflect the amortization of unearned stock compensation, in conformity
with generally accepted accounting principles. The other auditors reported on
the 1998 financial statements before the restatement.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Summit Brokerage
Services, Inc. and Subsidiaries as of December 31, 1999 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
<PAGE>
Board of Directors and Shareholders
Summit Brokerage Services, Inc. and Subsidiaries
Page Two
We also audited the adjustment described in Note 16 that was applied to restate
the 1998 financial statements. In our opinion, such an adjustment is appropriate
and has been properly applied.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 18 to the
financial statements, the Company has suffered recurring losses from operations
at December 31, 1999 at December 31, 1999 which raises substantial doubt about
its ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 18. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Hoyman, Dobson & Company, P.A.
Hoyman, Dobson & Company, P.A.
January 28, 2000
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Cash $ 408,957 $ 106,804
Cash with clearing broker
25,132 25,377
Commissions receivable 463,356 79,410
Prepaid expenses 27,132 61,900
Other receivables 31,040 9,850
Due from related party 102,704 91,089
Subscription receivable 48,000 --
Treasury stock held for employees 12,104 --
Property and equipment at cost, less accumulated
depreciation of $70,970 and $33,442 at December 31,
1999 and 1998, respectively 79,267 85,873
Deferred tax asset 283,860 144,860
Other assets 8,828 9,537
----------- -----------
Total assets $ 1,490,380 $ 614,700
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 63,896 $ 20,949
Accrued commission expense 645,925 84,986
Deferred income 24,667 --
----------- -----------
Total liabilities 734,488 105,935
----------- -----------
Stockholders' equity
Common stock 454 391
Additional paid-in capital 2,909,379 1,293,106
Unearned stock compensation (867,213) (178,620)
Treasury stock, at cost (6,474) --
Subscriptions receivable (94,000) --
Accumulated deficit (1,186,254) (606,112)
----------- -----------
Total stockholders' equity 755,892 508,765
----------- -----------
Total liabilities and stockholders' equity $ 1,490,380 $ 614,700
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement. 3
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss)
For the years ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
Revenues
Commissions $ 4,712,651 $ 2,801,431
Interest and dividends 27,565 41,367
Other 16,403 51,481
----------- -----------
4,756,619 2,894,279
----------- -----------
Expenses
Commissions 3,596,311 2,091,083
Occupancy 116,752 111,622
Amortization of unearned stock compensation 214,504 32,287
Management fees 1,156,235 885,482
Other operating expenses 366,959 283,477
----------- -----------
5,450,761 3,403,951
----------- -----------
Net loss before income taxes (694,142) (509,672)
Provision for income taxes 139,000 98,630
----------- -----------
Net loss $ (555,142) $ (411,042)
=========== ===========
Weighted Average Common Shares and
Common Share Equivalents Outstanding
4,180,322 3,789,849
=========== ===========
Earnings per share $ (0.1328) $ (0.1085)
=========== ===========
The accompanying notes are an integral part of this statement. 4
- --------------------------------------------------------------------------------
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK.
5
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number of Additional
Shares Paid-In
Outstanding Par Value Capital
----------- ----------- -----------
<S> <C> <C> <C>
Balances, December 31, 1997 3,725,020 $ 373 $ 653,537
Issuance of common stock for cash 112,700 11 428,669
Issuance of common stock for unearned
compensation 67,851 7 210,900
Amortization of unearned stock compensation -- -- --
Net loss -- -- --
----------- ----------- -----------
Balances, December 31, 1998 3,905,571 391 1,293,106
Issuance of common stock for cash 324,333 33 551,967
Issuance of common stock for subscription
receivable 94,667 9 141,991
Issuance of common stock for unearned
compensation 110,011 10 525,952
Issuance of common stock for legal services 15,000 1 54,449
Issuance of common stock for future
private placement services 100,000 10 349,990
Amortization of unearned stock compensation -- -- --
Stock dividends issued 5,400 1 24,999
Retirement of common stock (13,225) (1) (33,075)
Purchase of treasury stock (1,350) -- --
Net loss -- -- --
----------- ----------- -----------
Balances, December 31, 1999 4,540,407 $ 454 $ 2,909,379
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement. 6
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Unearned Total
Stock Treasury Subscription Accumulated Stockholders'
Compensation Stock Receivable Deficit Equity
------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 $ -- $ -- $ -- $ (195,070) $ 458,840
Issuance of common stock for cash -- -- -- -- 428,680
Issuance of common stock for unearned (210,907) -- -- -- --
compensation
Amortization of unearned stock compensation 32,287 -- -- -- 32,287
Net loss -- -- -- (411,042) (411,042)
------------ ----------- ----------- ----------- -----------
Balances, December 31, 1998 (178,620) -- -- (606,112) 508,765
Issuance of common stock for cash -- -- -- -- 552,000
Issuance of common stock for subscription
receivable -- -- (94,000) -- 48,000
Issuance of common stock for unearned (525,962) -- -- -- --
compensation
Issuance of common stock for legal services (54,450) -- -- -- --
Issuance of common stock for future
private placement services (350,000) -- -- -- --
Amortization of unearned stock compensation 214,504 -- -- -- 214,504
Stock dividends issued -- -- -- (25,000) --
Retirement of common stock 27,315 -- -- -- (5,761)
Purchase of treasury stock -- (6,474) -- -- (6,474)
Net loss -- -- -- (555,142) (555,142)
------------ ----------- ----------- ----------- -----------
Balances, December 31, 1999 $ (867,213) $ (6,474) $ (94,000) $(1,186,254) $ 755,892
============ =========== =========== =========== ===========
</TABLE>
7
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
Cash flows from operating activities
Cash received from customers $ 4,348,585 $ 2,779,601
Cash paid to suppliers and employees (4,559,387) (3,339,233)
Interest received 10,211 41,367
----------- -----------
Net cash used in operating activities (200,591) (518,265)
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (30,923) (65,822)
----------- -----------
Net cash used in investing activities (30,923) (65,822)
----------- -----------
Cash flows from financing activities
Purchase of treasury stock (18,578) --
Issuance of common stock 552,000 428,679
----------- -----------
Net cash provided by financing activities 533,422 428,679
----------- -----------
Net increase (decrease) in cash and
cash equivalents 301,908 (155,408)
Cash and cash equivalents at beginning of year 132,181 287,589
----------- -----------
Cash and cash equivalents at end of year $ 434,089 $ 132,181
=========== ===========
The accompanying notes are an integral part of this statement. 8
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Continued
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
--------- ---------
RECONCILIATION OF NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES
Net loss $(555,142) $(411,042)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 37,529 29,932
Amortization 709 819
Amortization of unearned stock
compensation/expense 214,504 32,287
Retirement of common stock (5,761) --
Increase in commissions receivable (383,946) (73,311)
Increase in other receivables (21,190) --
Decrease (increase) in prepaid expenses 34,768 (47,272)
Increase in due from related party (11,615) (1,809)
Increase in deferred tax asset (139,000) (97,287)
Increase (decrease) in accounts payable 42,947 (20,589)
Increase in accrued commission expense 560,939 70,007
Increase in deferred income 24,667 --
--------- ---------
Net cash used in operating activities $(200,591) $(518,265)
========= =========
Cash and cash equivalents for the purpose of this
statement consisted of the following at December 31:
Cash $ 408,957 $ 106,804
Cash with clearing broker 25,132 25,377
--------- ---------
$ 434,089 $ 132,181
========= =========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES:
In fiscal year 1999, the Company issued 5,400 shares of common stock dividends
totaling $25,000.
In fiscal year 1999, the Company issued a $142,000 note receivable for 94,667
shares of common stock.
The accompanying notes are an integral part of this statement. 9
- --------------------------------------------------------------------------------
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK.
The accompanying notes are an integral part of this statement. 10
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Summit Brokerage Services Inc. (the "Company") is a National
Association of Securities Dealers (NASD) member firm. The Company is an
independent broker dealer offering financial services to clients across the
country through its 39 branch offices.
On December 31, 1999 the Company acquired 100% of Summit Holding Group, Inc.
through the purchase of stock for $1. Summit Holding Group, Inc. did not have
any net assets at the time of the purchase. Summit Holding Group, Inc. (a
holding company) owns 100% of Summit Financial Group, Inc. (a registered
investment advisor) and Summit Insurance Agency Corporation (an insurance
business). There was no activity in these three entities during fiscal year 1999
and 1998.
CONSOLIDATION POLICY - The accompanying consolidated financial statements
include the accounts of the Corporation and its subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
MUTUAL FUNDS - RESERVED - The Corporation has an interest bearing reserve
deposit with a clearing firm. The clearing firm requires this deposit of all
introducing firms for whom it transacts business.
COMMISSION RECEIVABLE - The Company considers commissions receivable fully
collectible; accordingly, no allowance is required.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation,
for financial reporting and tax purposes, is based on the straight-line and
double declining balance methods over the estimated useful lives of the related
assets, generally 5 to 39 years.
MARKETING COSTS - Marketing costs, except for costs associated with
direct-response marketing, are charged to operations when incurred. The costs of
direct-response marketing costs are capitalized and amortized over the period
during which future benefits are expected to be received.
DEFERRED INCOME - Deferred income represents advances received from the clearing
company for unearned commissions.
TREASURY STOCK - Treasury stock is shown at cost.
11
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related to operating losses. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred tax also is recognized for operating losses and
tax credits that are available to offset future taxable income.
EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per share for the years ended
December 31, 1999 and 1998 have been computed by dividing net income (loss) by
the weighted average number of shares outstanding. Diluted earnings (loss) per
share for the years ended December 31, 1999 and 1998 did not differ from amounts
computed under the basic computation.
ESTIMATES - The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - DUE FROM RELATED PARTY
At December 31, 1999 and 1998, the Company has a receivable of $14,220 and
$19,959, respectively, from a company owned by the majority stockholder for
expenses paid by Summit Brokerage Services, Inc. on the related company's
behalf.
The Company at December 31, 1999 and 1998 has advances of $88,484 and $71,130,
respectively, to an entity whose major shareholder is also the Company's major
shareholder for expenses paid by Summit Brokerage Services, Inc. on the related
company's behalf. Interest of $17,354 was accrued on the advance during fiscal
year 1999 at 8% per annum and is included in due from related party.
NOTE 3 - SUBSCRIPTION RECEIVABLE
At December 31, 1999 the Company has a subscription receivable of $142,000.
$48,000 of this subscription receivable is included as an asset at December 31,
1999 since it was collected before the financial statements were issued. The
remaining uncollected $94,000 is shown as a reduction of stockholders' equity.
NOTE 4 - OTHER RECEIVABLE
At December 31, 1999 the Company has a receivable from a former sales
representative in the amount of $31,040 which represents advances paid to the
sale representative.
12
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1999 and 1998:
1999 1998
--------- ---------
Computer systems and software $ 76,345 $ 50,948
Equipment 15,655 10,130
Leasehold improvements 58,237 58,237
--------- ---------
Total 150,237 119,315
Less: accumulated depreciation (70,970) (33,442)
--------- ---------
$ 79,267 $ 85,873
========= =========
Depreciation expense charged to operations was $37,529 for the year ended
December 31, 1999 and $29,932 for the year ended December 31, 1998.
NOTE 6 - OTHER ASSETS
Other assets at December 31, 1999 and 1998 consist of capitalized marketing
costs of $8,828 and $9,537, respectively. These costs are being amortized
straight-line over 15 years. Amortization expense for the years ended December
31, 1999 and 1998 was $709 and $819, respectively.
NOTE 7 - COMMON STOCK
At December 31, 1999 and 1998, the Company has 10,000,000 shares of $.0001 par
value stock authorized, 4,541,757 and 3,905,571 shares issued at December 31,
1999 and 1998, respectively and 4,538,132 and 3,905,571 shares outstanding at
December 31, 1999 and 1998, respectively.
On July 16th, 1997, the Company established a restricted stock bonus plan as an
encouragement for employees and certain consultants to remain in the employment
or service of the Company. The shares granted under the plan were in the form of
restricted stock vesting over a two-year period beginning after the date of
grant of the award. Since the stock issued is subject to forfeiture until
two-years of continuous employment from the date of the grant award, unearned
compensation is recorded at the fair market value at the date awarded as a
reduction of stockholder's equity. Compensation expense is recognized pro rata
over the period during which the shares are earned. Compensation expense
recognized for the years ended December 31, 1999 and 1998 was $187,279 and
$32,287, respectively. In fiscal year 1999, 13,225 shares of stock issued for
compensation originally recorded at $33,075 was forfeited and retired. The total
amount of compensation expense amortized in 1998 which was added back to
compensation expense in 1999 was $5,761. There was no stock forfeited in fiscal
year 1998.
13
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 7 - COMMON STOCK (CONTINUED)
On January 13, 1999, the Company granted restricted stock to an attorney to pay
for services rendered through the end of 2000. When the shares were issued,
unearned compensation for services was recorded at the fair market value of the
stock on the date of issue as a reduction of stockholder's equity. Compensation
expense is recognized pro rata over the period during which the services are
being performed. Compensation expense recognized for the year ended December 31,
1999 was $27,225.
On July 29, 1999, the Company granted restricted stock to a placement agent for
services to be performed during 2000 and into 2001. The stock issued is being
held in escrow pending performance of these services. The stock issued has been
recorded at the fair market value of the stock on the date of issue as unearned
compensation for services and is recorded as a reduction of stockholder's
equity. No compensation expense has been recognized for the year ended December
31, 1999 since no services have been performed.
NOTE 8 - TREASURY STOCK
Treasury stock is shown at cost, and in 1999 consists of 1,350 shares of common
stock. In addition, the treasury stock, shown as an asset in 1999, represents
2,275 shares of common stock reserved for issuance to employees.
NOTE 9 - STOCK OPTIONS
On December 31, 1999, the Company awarded stock options to key personnel to
purchase 155,000 shares of the Company's common stock at an exercise price of
$2.50 per share. The terms of the options provide that the options will expire
five years after the grant date and will vest one year from the grant date. At
December 31, 1999 no shares have been exercised.
The Company applies APB Opinion No. 25 in accounting for its option plans and,
accordingly, no compensation cost has been recognized in the financial
statements for stock options granted. Since no shares have vested at December
31, 1999, there is also no compensation cost to be recognized and disclosed
under the provisions of SFAS 123.
14
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<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 10 - OPERATING LEASE
The Company leases office space under a non-cancelable operating lease with an
entity whose major shareholder is also the Company's major shareholder. Under
the terms of the lease, the Company leases office space for its headquarters.
The lease expires in 2007. Minimum future rental payments for each of the next
five years and in the aggregate are as follows:
2000 $ 109,200
2001 109,200
2002 109,200
2003 109,200
2003 109,200
Subsequent 309,400
---------
Total $ 855,400
=========
Total rent expense for the years ending December 31, 1999 and 1998 was $116,752
and $111,622 respectively.
NOTE 11 - INCOME TAXES
A summary of the provision for income taxes at December 31, 1999 and 1998 is as
follows:
Deferred tax benefit due to temporary differences 1999 1998
---------- ---------
Federal $ 104,000 $ 72,168
State 35,000 26,462
---------- ---------
Total income tax benefit $ 139,000 $ 98,630
========== =========
The company has net operating loss carryforwards of approximately $1,415,000 for
federal and state income tax purposes, which are available to offset future
taxable income. These loss carryforwards expire in various years from 2012 to
2019.
Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rates of 34% for both 1999 and 1998 to income (loss) before
income taxes due to the effects of net operating loss carryforwards.
NOTE 12 - CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with financial institutions. The amount of credit
exposure in excess of federally-insured limits at December 31, 1999 and 1998 was
$317,647 and $0, respectively.
All financial instruments are carried at amounts that approximate fair value
because of the short maturity of these instruments.
15
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 13 - RELATED PARTY TRANACTIONS
The Company has entered into an agreement where it pays a management fee to
cover personnel costs to an entity which is a wholly owned company of the
majority shareholder of the Company. These fees are to cover employee
compensation, office supplies and utilities. The total fees paid to the related
party were $1,156,235 and $885,482 for 1999 and 1998, respectively.
NOTE 14 - NET CAPITAL REQUIREMENT
The company is a "Fully Disclosed Broker Dealer." The Company does not carry
customer accounts and does not accept customer funds or securities. Instead, it
has entered into a "clearing agreement" with a clearing firm and has fully
disclosed all of its customer accounts to this firm.
The Company is subject to the Securities and Exchange Commission Uniform Net
Capital Ruse (SEC Rule 15C 3-1), which requires the maintenance of minimum net
capital.
The fully phased-in net capital requirement for "fully disclosed" firms that
receive, but do not hold, customer or other securities, is $50,000. The rule
also requires that the ratio of aggregate indebtedness to net capital shall not
exceed 15 to 1.
At December 31, 1999 and 1998, the Company had net capital of $64,863 and
$103,607, respectively, which was in excess of its required net capital of
$50,000. The Company's aggregate indebtedness to net capital ratio was 11 to 1
and 1 to 1 at December 31, 1999 and 1998, respectively.
NOTE 15 - RECLASSIFICATION
Certain reclassifications have been made to the December 31, 1998 financial
statements to conform with the December 31, 1999 financial statement
presentation. Such reclassifications have had no effect on net income as
previously reported.
NOTE 16 - RESTATEMENT
The accompanying financial statements for December 31, 1998 have been restated
to properly reflect the amortization of unearned compensation expense. Net loss
for the year ended December 31, 1998 was increased by $32,287.
16
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT BROKERAGE SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 17 - COMMITMENTS AND CONTINGENCY
The Company entered into a two-year employment agreement with William R. Turner
(the "Turner Employment Agreement"), the Company's Chief Operating Officer and
President, in September, 1999. The term of the Turner Employment Agreement
commenced on September 22, 1999 and will expire on September 22, 2001. The
Turner Employment Agreement provides that in consideration for Mr. Turner's
services, he is to be paid a salary of $100,000 during the first year of the
agreement, 15,000 shares of the Company's common stock, and options to purchase
50,000 shares of the Company's common stock at an option price of $2.50 per
share. The stock compensation and options for the first year have been included
in Note 7 and 9. During the second year of the agreement, Mr. Turner will
receive a 5% increase in salary and 15,000 shares of the Company's common stock
and options to purchase 50,000 shares of the Company's common stock at an option
price of $2.50 per share. The contract is renewable upon agreement by both
parties.
NOTE 18 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has had recurring net losses.
These matters raise substantial doubt about the entity's ability to continue as
a going concern. Management plans to do a public offering in the future, is
continuing to open new branch offices and currently has commitments for several
new branch offices. In addition, the Company has a commitment from one of its
major shareholders to enter into a subordinated debt agreement of at least
$100,000 which will qualify as net capital. However, the Company's ability to
continue as a going concern is contingent on the success of future operations,
the formalization of existing commitments for new branch offices and the
subordinated debt agreement. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 19 - OFF BALANCE SHEET RISK
Included in the Company's clearing agreement with its clearing broker-dealer, is
an indemnification clause. This clause relates to instances where the Company's
customers fail to settle security transactions. In the event this occurs, the
Company has indemnified the clearing broker-dealer to the extent of the net loss
on the unsettled trade. At December 31, 1999, management of the Company had not
been notified by the clearing broker-dealer, nor were they otherwise aware, of
any potential losses relating to this indemnification.
17
- --------------------------------------------------------------------------------
EXHIBIT 3 (i)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
Summit Brokerage Services, Inc. -(ref. P93000062813)
Pursuant to the provision of section 607.1006, Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added or
deleted)
1. Article XI - Officers:
Appoint - Richard Parker, Chairman
William R. Turner, President
Mark F. Caulfield, Secretary / Treasurer
Remove - Richard Parker, President / Secretary / Treasurer
2. Article VIII - Directors:
Appoint - Brian Best
Harry Green
Mark Olson
Jack Root
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment are as follows:
<PAGE>
THIRD: The date of each amendment's adoption.
THIRD: The date of each amendment's adoption: November 6, 1999.
FOURTH: Adoption of Amendment(s) (CHECK ONE)
|X| The amendment(s) was/were approved by the shareholders. The
number of votes cast for the amendment(s) was/were sufficient for
approval.
|_| The amendment(s) was/were approved by the shareholders through
voting groups. The following statement must be separately
provided for each voting group entitled to vote separately on the
amendment(s):
"The number of votes cast for the amendment(s) was/were sufficient
For approval by ___________________________________________."
voting group
|_| The amendment(s) was/were adopted by the board of directors
without shareholder action and shareholder action was not
required.
|_| The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
Signed this 6th day of November 1999.
Signature /s/ Richard Parker, COB
---------------------------------------------------------
(By the Chairman or Vice Chairman of the Board of Directors, President or other
officer if adopted by the shareholders)
OR
(By a director if adopted by the directors)
OR
(By an incorporation if adopted by the incorporators)
Richard Parker
- --------------------------------------------------------------------------------
Type or printed name
Chairman
- --------------------------------------------------------------------------------
Title
<PAGE>
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
August 26, 1997
RICHARD P. GREENE, P.A.
2455 E. SUNRISE BLVD.
SUITE 905
FORT LAUDERDALE, FL 33304
Re: Document Number P93000062813
The Articles of Amendment to the Articles of Incorporation of SUMMIT BROKERAGE
SERVICES, INC., a Florida corporation, were filed on August 20, 1997.
Should you have any questions regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.
Teresa Brown
Corporate Specialist
Division of Corporations Letter Number: 297AOOO42893
Division of Corporations - P.O. BOX 6327 -Tallahassee, Florida 32314
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SUMMIT BROKERAGE SERVICES, INC.
The Articles of Incorporation of the above-named corporation (the
"Corporation"), filed with the Department of State on the 3rd day of September,
1993, and assigned Document Number P93000062813, are hereby amended pursuant to
a written consent in lieu of meeting executed by the holders of all of the
Corporation's Common Stock and all of the Corporation's Directors on the 9th of
July, 1997, as follows:
ITEM 1
1. ARTICLE IV - CAPITAL STOCK is hereby amended to read as follows:
ARTICLE IV - CAPITAL STOCK
This corporation is authorized to issue Ten Million (10,000,000)
shares of $.0001 par value common stock.
This Articles of Amendment to the Articles of Incorporation was adopted by
the shareholders and directors on the 9th day of July, 1997.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment to the Articles of Incorporation this 9 day of July, 1997.
By: /s/ Richard Parker, President
--------------------------------
Richard Parker,
President and Secretary
<PAGE>
ARTICLES OF INCORPORATION
OF
SUMMIT BROKERAGE SERVICES, INC.
The undersigned subscriber to these Articles of Incorporation, a natural
person competent to contract under the laws of the State of Florida, hereby
forms a corporation for profit under the laws of the State of Florida.
ARTICLE I - NAME
The name of this corporation is: SUMMIT BROKERAGE SERVICES, INC.
ARTICLE 11 - DURATION AND COMMENCEMENT
This corporation is to exist perpetually. The date when corporate
existence shall commence shall be upon the filing of this instrument in the
office of the Secretary of State.
ARTICLE III - PURPOSE
This corporation is organized for the following purposes:
To buy, sell, own, hold and operate real and personal property of all kinds.
To engage in the development and sale of real estate, including single
family and multi-family dwellings.
To buy and otherwise acquire, and to own, hold, sell, rent lease, mortgage
and otherwise convey and deal in and with real estate and personal property of
every sort, kind and description.
To buy and otherwise acquire, and to sell, real estate and personal
property of any and all kinds whatsoever, either for cash or on credit; to take
and accept notes and mortgages and contracts for the security of any debts; to
borrow money and otherwise obtain credit; to mortgage and otherwise pledge its
real or personal property, or both, for the purpose of securing its
indebtedness.
To subscribe for, purchase, or otherwise acquire, underwrite, obtain an
interest in, own, hold, pledge, hypothecate, assign, deposit, create trusts with
respect to, sell, exchange, or otherwise dispose of and generally deal in and
with securities of every kind and description of any government, state,
territory, district, municipality, or other political or governmental division
or subdivision, body politic, corporation, association, partnership, firm,
trustee, syndicate, individual, combination, organization, or entity whatsoever
located in or
<PAGE>
organized under the laws of any part of the world, including (without limiting
the generality of the foregoing) stocks, shares, voting trust certificates,
bonds, mortgages, deeds of trust, debentures, notes land trust certificates,
warrants, rights, scrip, commercial paper, chooses in action, evidences of
indebtedness, certificates of interest or other obligations or other securities
of any nature howsoever evidenced; to acquire or become interested in any such
securities by original subscription, underwriting, participation in syndicates,
or otherwise and irrespective of whether or not such securities are fully paid
or subject to further payments or assessments' and to exercise any and all
rights, powers, and privileges of individual ownership or interest in respect of
any such securities, including the right to vote thereon and otherwise act with
respect thereto, and to promote, manage, participate in, and act as agent for
any underwriting, purchasing, or selling syndicate or group and otherwise to
take part in and assist, in any legal matter, by guaranty or otherwise, the
purchase, sale, or distribution of any such securities.
To engage in the business of the accumulation and lending of money, by
lending the capital of the company and such other funds as it may from time to
time lawfully acquire from various borrowers upon such security as may be agreed
upon between the corporation and borrowers, and by re-lending in like manner the
funds arising from such loans when paid.
To purchase, or in any way acquire for investment or for sale or
otherwise, any business, assets of a business, contracts for the purchase or
sale of any business or the assets thereof, and any other property of any kind
or any interest therein, whether such is a going concern or not, and as the
consideration for same to pay cash or to issue the capital stock debenture
bonds, mortgage bonds, or other obligations of the corporation, and to sell,
convey, lease, mortgage, deed in trust, turn to account, or otherwise deal with
all or any part of the property of the corporation; to make and obtain loans
upon any business or the assets thereof in connection with the acquisition of
such or continuing operation of the same, giving or taking evidences of
indebtedness and securing the payment thereof by mortgage, trust deed, pledge or
otherwise, and to enter into contracts to buy or sell any property, real or
personal; to act as a consulting firm and provide managerial skills and
expertise to any business, whether owned by the corporation or not; to render
advise and assistance on any subject which, in the opinion of the Board of
Directors of the corporation, the corporation and its personnel are qualified to
render, , and to receive compensation for or pay for the same in cash, stock or
bonds or otherwise.
To manufacture, purchase or otherwise acquire and to own, mortgage,
pledge, sell, assign, transfer, or otherwise dispose of, and invest, trade in,
deal in and with, goods, wares, merchandise, real and personal property, and
services of every class, kind, and description, except that it is not to conduct
a
2
<PAGE>
banking, safe deposit, trust, insurance, surety, express, railroad, canal,
telegraph, telephone, or cemetery company, a building and loan association,
fraternal benefit society, state fair or exposition.
To conduct business in, and have one or more offices in, and buy, hold,
mortgage, sell, convey, lease, or otherwise dispose of real and personal
property, including franchises, patents, copyrights, trademarks, and licenses in
the State of Florida and in all other states and countries.
To contract debts and borrow money, issue and sell or pledge bonds,
debentures, notes and other evidence of indebtedness, and execute such
To purchase, hold, sell, reissue and otherwise deal in its own capital
stock, bonds, debentures and other forms or evidence of indebtedness and those
of other persons, firms and corporations.
To engage in any and every other business, occupation, and enterprise,
except banking, and to exercise any and all other powers and rights which are
conferred upon or granted to corporations by present existing laws of the State
of Florida, or of the United States, or of other states and authorities anywhere
or which may be granted to or conferred upon such corporation by any law or act
of the State of Florida, or of the United States, or elsewhere, which may be
hereafter enacted or adopted; and generally to do any and all such acts as may
be necessary, proper or convenient in carrying out or accomplishing the general
purposes for which said corporation is formed.
Without in anywise limiting the generality of the foregoing, to purchase,
sell or otherwise deal in any manner whatsoever in any and all other property of
any nature whatsoever customarily incident to or connected with any of the
foregoing.
To have, exercise and enjoy all of the powers, general and special, of
like corporations as now or hereafter may be provided by law, and to do and
perform all such other acts and things as may be necessary, profitable or
expedient in carrying on any of the business or acts above named or any business
or acts auxiliary thereto or connected therewith.
To do each and everything necessary, suitable or proper for the
accomplishment of any of the purposes, or the attainment of any one or more of
the purposes or objects herein enumerated which shall at any time appear
conducive or expedient for the protection or benefit of this corporation either
as holders or interested in any property, and in general to carry on any
business, it being the intention that the objects, purposes and powers specified
and the clauses contained in this paragraph of this instrument shall be in no
way limited
<PAGE>
or restricted by reference to or inference from the terms of this or any other
paragraph of this instrument, but that the mortgages, transfers of corporate
property and/or other instruments to secure the payment of corporate
indebtedness as requires.
To purchase, or in any way acquire for investment or for sate or
otherwise, lands, contracts for the purchase or sale of lands, buildings,
condominiums, improvements, and any other real property of any kind or any
interest therein, and as the consideration for same to pay cash or to issue the
capital stock, debenture bonds, mortgage bonds, or other obligations of the
corporation, and to sell, convey, lease, mortgage, deed of trust, turn to
account or otherwise deal with all or any part of the property is the
corporation; to make and obtain loans upon real estate, improved or un-improved,
and upon personal property, giving or taking evidences of indebtedness and
securing the payment thereof by mortgage, trust deed, pledge or otherwise; and
to enter into contracts to buy or sell any property, real or personal; to buy
and sell mortgages, trust deeds, contracts, and evidences of indebtedness; to
purchase or otherwise acquire, for the purpose of holding or disposing of the
same, real or personal property of every kind and description, including the
good will, stock, rights, and property of any person, firm association, or
corporation, paying for the same in cash, stock, or bonds of this corporation;
and to draw, make, accept, indorse, discount, execute, and issue promissory
notes, bills of exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments, or obligations of the corporation, from time to time,
for any of the objects or purposes of the corporation without restriction or
limit as to amount.
To purchase the corporate assets of any other corporation and engage in
the same or other character of business.
To guarantee, endorse, purchase, hold, sell, transfer, mortgage, pledge or
otherwise acquire or dispose of the shares of the capital stock of, or any
bonds, securities, or other evidence of indebtedness created by any other
corporations of the State of Florida, or any other state or government, and
while owner of such stock to exercise all rights, powers and privileges of
ownership, including the right to vote such stock, objects, purposes and powers
specified in each of the clauses of this paragraph shall be regarded as
independent objects, purposes and powers.
ARTICLE IV - CAPITAL STOCK
This corporation is authorized to issue Seven Thousand Five Hundred
(7,500) shares of One and no/1 00 ($1.00) Dollars each par value common stock.
4
<PAGE>
ARTICLE V - PREEMPTIVE RIGHTS
Every shareholder, upon the sale for cash of any new stock of this
corporation of the same kind, class or series as that which he already holds,
shall have the right to purchase his pro rata share (as nearly as may be done
without issuance of fractional shares) at the price at which it is offered to
others.
ARTICLE VI - PLACE OF BUSINESS
The initial post office address of the principal office of this
corporation in the State of Florida is 200 S. Harbor City Boulevard, Suite 501,
Melbourne, Florida 32901. The corporation may maintain such other offices, both
within and without the State of Florida, as the Board of Directors may from time
to time determine.
ARTICLE VII - INITIAL REGISTERED
OFFICE AND AGENT
The street address of the initial registered office of this corporation is
200 S. Harbor City Boulevard, Suite 501, Melbourne, Florida 32901, and the name
of the initial registered agent of this corporation at that address is RICHARD
PARKER.
ARTICLE VIII - INITIAL BOARD OF DIRECTORS
This corporation shall have one (1) director initially. The number of
directors may be increased or diminished from time to time by the By-Laws, but
shall never be less than one. The name and address of the initial director of
this corporation are:
NAME ADDRESS
Richard Parker 200 South Harbor City Boulevard
Suite 501
Melbourne, Florida 32901
ARTICLE IX - INCORPORATORS
The name and address of the person signing these Articles of Incorporation
are:
NAME ADDRESS
Richard Parker 200 South Harbor City Boulevard
Suite 501
Melbourne, Florida 32901
<PAGE>
ARTICLE X - BY-LAWS
The power to adopt alter, amend or repeal By-Laws shall be reserved to the
Board of Directors.
ARTICLE XI - OFFICERS
The initial officers of this corporation shall. be: Richard Parker,
President, Secretary and Treasurer, and said officer shall hold office until his
successors are chosen by the Board of Directors and Qualify.
IN WITNESS WHEREOF, the undersigned subscriber has hereunto set his hand
and seal on this the 30 day of August 1993.
/s/ Richard Parker
------------------------------- (L.S.)
Richard Parker
STATE OF FLORIDA
COUNTY OF BREVARD
I HEREBY CERTIFY that on this date before me, a Notary Public, duly
authorized in the State and County named above to take acknowledgments,
personally appeared RICHARD PARKER, to me known to be the person described as
incorporate in and who executed the foregoing Articles of Incorporation,
thereof, he subscribed to these Articles of Incorporation voluntarily on the day
the same bears date.
WITNESS my hand and official seal in the County and State named above this
30 day of August 1993.
/s/ Denise S. MacTaggart
--------------------------------------
Notary Public, State of Florida
Commission expires: MAR. 15, 1994
Bonded thru Notary Public Underwriters
6
<PAGE>
ACCEPTANCE OF APPOINTMENT AS REGISTERED AGENT
The undersigned, having been named in Article VII to accept service of
process upon SUMMIT BROKERAGE SERVICE, INC., at the place designated in the
foregoing Articles of Incorporation, does hereby accept to act in this capacity
and agree to comply with the provisions of Chapter 48.091, Florida Statutes,
relative to keeping open said business.
The location of the registered office of said corporation is 200 South
Harbor City Boulevard, Melbourne, Brevard County, Florida 32901.
IN WITNESS WHEREOF, the name and seal of said resident agent is hereby
affixed at Melbourne, Brevard County, Florida, this 30 day of August 1993.
/s/ Richard Parker
----------------------------- (L.S.)
Richard Parker
Resident Agent for
Summit Brokerage Services, Inc.
Subscribed and sworn to before me this 30 of August 1993.
/s/ Denise S. MacTaggart
- -----------------------------------------------
Notary Public, State of Florida
Commission expires: MAR. 15, 1994
Bonded thru Notary Public Underwriters
EXHIBIT 3(ii)
BY-LAWS
OF
SUMMIT BROKERAGE SERVICES, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of this
corporation shall be held on the second Monday of January each year or at any
other time and place designated by the board of directors of the corporation.
Business transacted at the annual meeting shall include the election of
directors of the corporation. If the designated day shall fall on a Sunday or
legal holiday, the meeting shall be held on the first business day thereafter.
Section 2. Special Meetings. Special meetings of the shareholders shall be
held when directed by the president of the board of directors, or when requested
in writing by the holders of not less than 10% of all the shares entitled to
vote at the meeting. A meeting requested by shareholders shall be called for a
date not less than 10 nor more than 60 days after the request is made, unless
the shareholders requesting the meeting designate a later date. The call for the
meeting shall be issued by the secretary, unless the president, board of
directors, or shareholders requesting the meeting shall designate another person
to do so.
Section 3. Place. Meetings of shareholders shall be held at the principal
place of business of the corporation or at any other place designated by the
board of directors.
Section 4. Notice. Written notice stating the place, day, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the meeting, either personally or by first class mail, by or at
the direction of the president, the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at the meeting. If
mailed, the notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at (his)(her) address as it appears on
the stock transfer books of the corporation, with postage prepaid.
Section 5. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If however, after the adjournment the board of
directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this article to each shareholder
of record on the new record date entitled to vote at the meeting.
Section 6. Shareholder Quorum and Voting. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders.
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless otherwise provided by law.
Section 7. Voting of Shares. Each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Section 8. Proxies. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or (his)(her) attorney in fact. No proxy
shall be valid 11 months from the date thereof, unless otherwise provided in the
proxy.
Section 9. Action by Shareholders Without a Meeting. Any action required
by law, these bylaws, or the articles of incorporation of this corporation to be
taken at any annual or special meeting of shareholders, or any action that may
be taken at any annual or special meeting of shareholders, may be taken without
a meeting, without prior notice, and without a vote, if consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled
<PAGE>
to vote were present and voted, as is provided by law.
ARTICLE H. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under
the authority of the board of directors. The business and affairs of the
corporation shall be managed under the direction of the board of directors.
Section 2. Qualification. Directors are not required to be residents of
this state or shareholders of this corporation.
Section 3. Compensation. The board of directors shall have authority to
fix the compensation of directors.
Section 4. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
(he)(she) votes against the action or abstains from voting in respect to it
because of an asserted conflict of interest.
Section 5. Number. This corporation shall have One director.
Section 6. Election and Term. Each person named in the articles of
incorporation as a member of the initial board of directors shall hold office
until the first annual meeting of shareholders, and until (his)(her) successor
has been elected and qualified or until (his)(her) earlier resignation, removal
from office, or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for a term for which
(he)(she) is elected and until (his)(her) successor shall have been elected and
qualified, or until (his)(her) earlier resignation, removal from office, or
death.
Section 7. Vacancies. Any vacancy occurring in the board of directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum of the board of directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders or (his)(her) earlier resignation, removal from
office, or death.
Section 8. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director or the entire board of directors may be
removed, with or without cause, by a vote of the holders of the majority of the
shares then entitled to vote at an election of directors.
Section 9. Quorum and Voting. A majority of the number of directors fixed
by these bylaws shall constitute a quorum for the transaction of business. The
act of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the board of directors.
Section 10. Executive and Other Committees. The board of directors, by
resolution adopted by a majority of the full board of directors, may designate
from among its members an executive committee and one or more other committees,
each of which, to the extent provided in the resolution, shall have and may
exercise all the authority of the board of directors, except as is provided by
law.
Section 11. Place of Meeting. Regular and special meetings of the board of
directors shall be held at 200 S. Harbor City Blvd. Melbourne, FL 32901.
Section 12. Time, Notice, and Call of Meetings. Regular meetings of the
board of directors shall be held without notice on the second Monday of January.
Written notice of the time and place of special meetings of the board of
directors shall be given to each director by either personal delivery, telegram,
or cablegram at least 10 days before the meeting or by notice mailed to the
director at least ten (10) days before the meeting.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
that meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of that meeting.
<PAGE>
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the board of directors to another time and place. Notice
of any adjourned meeting shall be given to the directors who were not present at
the time of the adjournment and, unless the time and place of the adjourned
meeting are announced at the time of the adjournment, to the other directors.
Meetings of the board of directors may be called by the chairman of the
board, by the president of the corporation, or by any authorized directors.
Members of the board of directors may participate in a meeting of the
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by this means shall constitute presence in person
at a meeting.
Section 13. Action Without a Meeting. Any action required to be taken at a
meeting of the board of directors, or any action that may be taken at a meeting
of the board of directors or of one of its committees, may be taken without a
meeting if a consent in writing, setting forth the action to be taken and signed
by all the directors, or all the members of the committee, as the case may be,
is filed in the minutes of the proceedings of the board or of the committee. The
consent shall have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this corporation shall consist of a
president, a secretary, (and a treasurer), each of whom shall be elected by the
board of directors. Other officers and assistant officers and agents deemed
necessary may be elected or appointed by the board of directors from time to
time. Any two or more offices may be held by the same person.
Section 2. Duties. The officers of this corporation shall have the
following duties:
The president shall be the chief executive officer of the corporation and
shall have general and active management of the business and affairs of the
corporation subject to the directions of the board of directors. The president
shall preside at all meetings of the shareholders and of the board of directors.
The secretary shall have custody of, and maintain, all of the corporate
records (except the financial records). The secretary shall record the minutes
of all meetings of the shareholders and of the board of directors, send all
notices of all meetings, and perform other duties prescribed by the board of
directors or the president.
(The treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the board of directors or the president, and shall perform other
duties prescribed by the board of directors or the president.)
Section 3. Removal of Officers. An officer or agent elected or appointed
by the board of directors may be removed by the board whenever in its judgment
the best interests of the corporation will be served.
Any vacancy in any office may be filed by the board of directors.
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of shares in this corporation shall be
entitled to have a certificate representing all shares to which (he)(she) is
entitled. No certificate shall be issued for any share until that share is fully
paid.
Section 2. Form. Certificates representing shares in this corporation
shall be signed by the president or a vice-president and by the secretary or an
assistant secretary and may be sealed with the seal of this corporation or a
facsimile.
<PAGE>
Section 3. Transfer of Shares. The corporation shall register a
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by (his)(her) duly authorized attorney.
Section 4. Lost, Stolen, or Destroyed Certificates. If a shareholder shall
claim that a certificate is lost, stolen, or destroyed, a new certificate shall
be issued if that shareholder makes an affidavit of that fact, and at the
discretion of the board of directors, upon the deposit of a bond or other
indemnity in the amount and with the sureties, if any, that the board of
directors reasonably requires.
ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, board of directors, and committees of directors.
This corporation shall keep at its registered office or principal place of
business a record of its shareholders, giving the names and addresses of all
shareholders and the number of the shares held by each.
Any books, records, and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. For any proper purpose any
person who shall have been a holder of record of at least one quarter of one
percent of shares of the corporation at least six months immediately preceding
the demand shall have the right to examine its relevant books and records of
accounts, minutes, and records of shareholders and to make extracts from those
records. A holder of record of at least five percent of shares or of voting
trust certificates of shares of the corporation shall also have the right to
examine and make extracts of those records. A written demand stating its purpose
must be made. The examination shall be allowed at any reasonable time. The
examination may be in person or by agent.
Section 3. Financial Information. Not later than four months after the
close of each fiscal year, the corporation shall prepare a balance sheet showing
in reasonable detail the financial condition of the corporation as of the close
of its fiscal year and a profit and loss statement showing the results of the
operations of the corporation during its fiscal year.
On the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
balance sheet and profit and loss statement.
The balance sheets and profit and loss statement shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five years, and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The board of directors of this corporation from time to time may declare,
and the corporation may pay dividends on its shares in cash, property, or its
own shares, except when the corporation is insolvent or when the payment would
render the corporation insolvent, subject to the provisions of the Florida
Statutes.
ARTICLE VII. CORPORATE SEAL
The board of directors shall provide a corporate seal, which shall be in
circular form. and shall say Summit Brokerage Services, Inc.
<PAGE>
ARTICLE VIII. INDEMNIFICATION
Each director or officer of the corporation shall be indemnified as of
right to the fullest extent permitted by current or future legislation or by
current or future judicial or administrative decisions against any fine,
liability, cost, or expense, including attorneys' fees, asserted against or
incurred by the director or officer. The corporation can agree to grant the same
right of indemnification to other agents or employees of the corporation and to
persons serving at the request of the corporation as its representative in the
position of a director, officer, agent, or employee of another enterprise. The
right of indemnification shall extend to the heirs, personal representatives,
and estate of each person granted the right pursuant to the preceding sentences.
The right of indemnification shall not be exclusive of other rights to which
those seeking an indemnification may be entitled. The corporation may maintain
insurance at its expense to protect itself and any such person against any fine,
liability, cost, or expense, whether or not the corporation would have the legal
power to directly indemnify the person against that liability.
ARTICLE IX. AMENDMENT
These bylaws may be altered, amended, or repealed, and new bylaws may be
adopted by the board of directors at any meeting by majority vote of the
directors if notice of the proposed action was included in the notice of the
meeting or is waived in writing by all of the directors.
/s/ Richard Parker Date: 8/30/93
- ----------------------------------------
Richard Parker - President
STATE OF FLORIDA, COUNTY OF BREVARD.
The foregoing Agreement was acknowledged before me this 14th day of March,
1994, by Richard Parker , who is personally known to me or who has produced
Florida Drivers Lic. as identification.
WITNESS my hand and official seal in the County and State last aforesaid
this 14 day of March, 1994.
/s/ Denise S. Mac Taggart
- -----------------------------------------
Notary Signature (SEAL)
DENISE S. MAC TAGGART
MY COMMISSION # CC354324 EXPIRES
March 15, 1998
BONDED THRU TROY FAIN INSURANCE, INC.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries of Summit Brokerage Services, Inc. are as follows:
1. Summit Holding Group, Inc.
2. Summit Financial Group, Inc.
3. Summit Insurance Agency Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Consolidated
Financial Statements of Summit Brokerage Services, Inc. and Subsidiaries for the
Year Ended December 31, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 434,089
<SECURITIES> 0
<RECEIVABLES> 645,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,118,425
<PP&E> 150,237
<DEPRECIATION> 70,970
<TOTAL-ASSETS> 1,490,380
<CURRENT-LIABILITIES> 734,488
<BONDS> 0
0
0
<COMMON> 454
<OTHER-SE> 755,438
<TOTAL-LIABILITY-AND-EQUITY> 1,490,380
<SALES> 4,712,651
<TOTAL-REVENUES> 4,756,619
<CGS> 0
<TOTAL-COSTS> 5,450,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (694,142)
<INCOME-TAX> (555,142)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (555,142)
<EPS-BASIC> (0.133)
<EPS-DILUTED> (0.133)
</TABLE>
