UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K/A
 AMENDMENT NO. 1
 
 (Mark One)
 
 þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the fiscal year ended December 31, 2010
 
 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from _______ to __________
 
 Commission File Number: 000-52618
 
 SOUTHERN TRUST SECURITIES HOLDING CORP.
 (Exact name of registrant as specified in its charter)
  Florida

651001593(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employee

Identification Number)
  145 Almeria Ave., Coral Gables, Florida 33134
 (Address of principal executive offices)
 
 Registrant’s telephone number, including area code: (305) 446-4800
 
 Securities registered pursuant to Section 12(b) of the Act: None
 
 Securities registered pursuant to Section 12(g) of the Act: Common Stock
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act  o Yes    þ   No
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes    þ   No
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes    o  No
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. þ
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “larger accelerated filer, “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
  o
Large accelerated filero
Accelerated Filero
Non-accelerated filerþ
Smaller reporting company
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  o Yes    þ   No
 
 The aggregate market value of the 3,461,012 shares of voting common stock of the registrant held by non-affiliates computed as of September 20, 2010, on which date the price of the registrant’s common stock was $0.30 per share, was $1,038,304.
 
 The registrant had 14,333,378 shares of common stock issued and outstanding on March 25, 2011.
 
 
  
 
 
 Table of Contents
  PART IIItem 8.
Financial Statements and Supplementary Data


1PART IVItem 15.
Exhibits, Financial Statement Schedules


2
  Item 8 is being amended herein because the audit report included in the original filing lacked an electronic signature of our independent auditor due to a filing error. The signed audit report and financial statements are included with this amendment.
  
  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 INDEX TO FINANCIAL STATEMENTS
  Report of Independent Registered Public Accounting Firm


F-1Financial StatementsConsolidated Statements of Financial Condition at December 31, 2010 and 2009


F-2Consolidated Statements of Operations for the years ended December 31, 2010 and 2009


F-3Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and Comprehensive loss for the years ended December 31, 2010 and 2009


F-4Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009


F-5Notes to Consolidated Financial Statements


F-6
 
 In accordance with the Form 10-K instructions, as a smaller reporting company, we are not required to provide supplementary data pursuant to Item 302 of Regulation S-K.
  1
   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and
 Stockholders of Southern Trust Securities Holding Corp. and Subsidiaries
  We have audited the accompanying consolidated statements of financial condition of Southern Trust Securities Holding Corp. and Subsidiaries (collectively, the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive loss, and cash flows for each of the years in the two-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southern Trust Securities Holding Corp. and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
    Roseland, New Jersey
 April 15, 2011
  F-1
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  December 31,2010


2009ASSETSCash and cash equivalents

$
281,878


$
130,631Securities owned at fair value, including restricted securitiesof $400,000 as of December 31, 2009


968,161



1,288,654Due from clearing broker


529,773



193,809Commissions receivable


90,348



13,947Investment in AR Growth


22,370



52,170Investment in Nexo Emprendimientos, S.A. (see Note 14)


1,250,000



1,250,000Other assets


20,931



13,239Property and equipment,net


1,612,986



1,682,471Total assets

$
4,776,448


$
4,624,921LIABILITIES AND STOCKHOLDERS' EQUITYLiabilitiesAccounts payable and accrued expenses

$
244,475


$
251,425Payable to customers


782,640



177,810Obligations under capital lease


6,509



9,609Notes payable


757,188



1,126,557Total liabilities


1,790,812



1,565,401Commitments and contingenciesStockholders' equitySeries C 8% convertible preferred stock, no par value, 2.5 million shares authorized,520,000 issued and outstanding


5,200,000



5,200,000Common stock, no par value, 100 million shares authorized; 14,333,378 sharesissued and outstanding at December 31, 2010 and December 31, 2009, respectively


9,002,986



9,002,986Additional paid-in-capital


1,536,991



1,357,612Accumulated deficit


(12,854,535
)


(12,608,316
)Accumulated other comprehensive income (loss)


(11,002
)


2,918Total Southern Trust Securities Holding Corp. and Subsidiaries stockholders' equity


2,874,440



2,955,200Noncontrolling interest


111,196



104,320Total stockholders' equity


2,985,636



3,059,520Total Liabilities and Stockholders' Equity

$
4,776,448


$
4,624,921
  F-2
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
 2010


2009RevenuesTrading income

$
1,915,415


$
717,916Commissions


870,968



445,490Investment banking fees






47,770Managed account fees


63,794



68,844Interest and dividend income


83,892



35,265Other miscellaneous income


33,478



13,7132,967,547



1,328,998ExpensesCommissions and clearing fees


1,482,761



581,564Employee compensation and benefits


695,469



1,376,897Impairment charge on building


-



800,000Impairment charge on investment in AR Growth


29,800



-Occupancy


90,158



69,963Communications and market data


122,967



116,183Professional fees


356,583



686,415Travel and entertainment


47,859



99,641Depreciation


69,486



75,522Interest expense


63,616



88,258Other operational expenses


248,191



224,5813,206,890



4,119,024Net loss before noncontrolling interest


(239,343
)


(2,790,026
)Net income (loss) attributable to noncontrolling interest


6,876



2,369Net loss attributable to Southern Trust Securities Holding Corp.and Subsidiares


(246,219
)


(2,792,395
)Preferred stock dividends


-



312,000Net loss applicable to common stockholders

$
(246,219
)

$
(3,104,395
)Weighted average common shares outstandingBasic and diluted


14,333,378



13,856,727Income (loss) per common shareBasic and diluted

$
(0.02
)

$
(0.22
)
  F-3
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS)
 Preferred Stock


Common Stock


Additional

Paid-In


Accumulated


Accumulated

Other

Comprehensive


Total

Stockholders'


Noncontrolling


TotalShares


Amount


Shares


Amount


Capital


Deficit


Income (loss)


Equity


Interest


EquityBalances,January 1, 2009


520,000


$
5,200,000



13,833,378


$
8,752,986


$
1,158,758


$
(9,503,831
)


(631
)

$
5,607,282


$
101,951


$
5,709,233Stock-based compensation










500,000



250,000



198,854











448,854







448,854Dividends to preferred stockholders






















(312,000
)






(312,000
)






(312,000
)Comprehensive loss:Net loss






















(2,792,485
)






(2,792,485
)


2,369



(2,790,116
)Foreign currencytranslation adjustment


























3,549



3,549







3,549Total comprehensive loss






























(2,788,936
)


2,369



(2,786,567
)Balances, December 31, 2009


520,000



5,200,000



14,333,378



9,002,986



1,357,612



(12,608,316
)


2,918



2,955,200



104,320



3,059,520Stock-based compensation


















179,379











179,379







179,379Comprehensive loss:Net income






















(246,219
)






(246,219
)


6,876



(239,343
)Foreign currencycurrency adjustment


























(13,920
)


(13,920
)






(13,920
)Total comprehensive loss






























(260,139
)


6,876



(253,263
)Balances, December 31, 2010


520,000


$
5,200,000



14,333,378


$
9,002,986


$
1,536,991


$
(12,854,535
)

$
(11,002
)

$
2,874,440


$
111,196


$
2,985,636
 F-4
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
 2010


2009Cash flows from operating activitiesNet loss

$
(239,343
)

$
(2,790,116
)Adjustments to reconcile net loss to net cash provided by(used in) operating activities:Stock-based compensation


179,379



448,854Impairment charge on building


-



800,000Impairment charge on investment in AR Growth


29,800



-Depreciation and amortization


69,486



75,522Changes in operating assets and liabilities:Securities owned


320,492



1,224,132Due from clearing broker


(335,964
)


(186,140
)Commissions receivable


(76,401
)


(6,378
)Other assets


(7,692
)


55,651Accounts payable and accrued expenses


(6,950
)


(49,323
)Payable to custormers


604,829



-Net cash provided by (used in) operating activities


537,636



(427,798
)Cash flows from investing activitiesPurchases of property and equipment


-



(1,525
)Investment in AR Growth


-



47,830Redemption of investment in limited liability company


-



240,661Net cash flows provided by investing activities


-



286,966Cash flows from financing activitiesDividends paid to preferred stockholders


-



(312,000
)Principal payments on notes payable and capital lease obligations


(372,469
)


(72,869
)Net cash flows used in financing activities


(372,469
)


(384,869
)Effect of foreign exchange rate changeson cash and cash equivalents


(13,920
)


3,549Net increase (decrease) in cash and cash equivalents


151,247



(522,152
)Cash and cash equivalents,beginning of period


130,631



652,783Cash and cash equivalents,end of period

$
281,878


$
130,631Supplementary disclosure of cash flow information:Cash paid during the periods for interest

$
63,616


$
88,258Exchange of AR Growth preferred stock for Nexo Emprendiminto S.A.common stock

$
-


$
1,250,000
 F-5
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1. Nature of operations
 
 Southern Trust Securities Holding Corp. (the "Company”) owns Southern Trust Securities, Inc. ("STS"), Southern Trust Metals, Inc. (“STM”), Southern Trust Securities Asset Management, Inc. ("STSAM"), and Loreley Overseas Corporation (“LOR”). Additionally, on October 23, 2006, the Company formed Kiernan Investment Corp. (“KIC”) as an international business company in Belize.  KIC has had very limited operations since inception.
 
 The Company contributed $105,653 in cash to form a new company, IPWM, España S.A. ("IPWM Spain") under a partnership agreement with a Swiss Financial Group, International Private Wealth Management, SA (“IPWM, SA”), in exchange for a 50.01% interest and control of the newly created company.  During July 2008, IPWM Spain commenced operations and opened offices in the cities of Barcelona, Spain, San Sebastian, Spain and Marbella, Spain.  IPWM Spain had limited operations for the years ended December 31, 2010 and 2009.
 
 The Company is a Florida corporation and was organized on January 25, 2000.  STS, a Florida corporation, was organized on June 10, 1999 and is registered as an introducing broker/dealer with the Securities and Exchange Commission (“SEC”).  STS is a member of the Financial Industry Regulatory Authority (“FINRA”) and National Futures Association (“NFA”). STS operates as an introducing broker clearing customer trades on a fully disclosed basis through a clearing firm.  Under this basis, it forwards all customers transactions to another broker who carries all customers’ accounts and maintains and preserves books and records.  Pershing, LLC currently performs the transaction clearing functions and related services for STS.   STSAM, a Florida corporation formed on November 22, 2005, is a fee-based investment advisory company which offers its services to retail customers. STM, a Florida corporation formed on October 29, 2009, to capitalize on investor interest in the trading of precious metals such as gold, silver, platinum, and palladium.  LOR, a British Virgin Islands corporation, was formed on May 19, 2004, and acts as an international intermediary for STM’s international trading transactions; the corporation had been inactive until 2010.
 
 2. Liquidity
 
 During the year ended December 31, 2010 and 2009, the Company incurred net loss applicable to common shareholders of approximately $216,000 and $2,304,000, exclusive of the impairment charges of $29,800 and $800,000, respectively, while cash provided by operations was approximately $538,000 and cash utilized in operations was approximately $428,000, respectively. The Company has not attained a level of revenues sufficient to support recurring expenses.
 
 Should the Company revenues decline from their current levels the Company will need to seek alternative sources of funding to continue its operations.
 
 3. Summary of significant accounting policies
  Basis of Presentation and Principles of Consolidation
  The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
 
 The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, STS, STM, STSAM, LOR, and KIC.  IPWM Spain’s assets and liabilities are consolidated with those of the Company and the outside investor’s 49.99% interest in IPWM Spain is included in the accompanying consolidated financial statements as a noncontrolling interest.  All intercompany balances and transactions have been eliminated in consolidation.
  F-6
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 3. Summary of significant accounting policies (continued)
 
 Cash and Cash Equivalents
 
 The Company considers short-term interest bearing investments with initial maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash in banks, free credit on investment accounts and money market accounts.
 
 Securities Owned
 
 All securities owned are valued at market and unrealized gains and losses are reflected in revenues.
 
 Property and Equipment
 
 Property and equipment is stated at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance are expensed as incurred while betterments and improvements are capitalized.
 
 The Company provides for depreciation and amortization over the following estimated useful lives:
  Building and improvements
40 yearsOffice equipment
5 yearsFurniture and fixtures
10 years
 
 Long-Lived Assets
 
 In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 “Property, Plant, and Equipment,” the Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.  During December 2009, the Company took a impairment charge on their building in the amount of $800,000. There was no impairment charges during the year ended December 31, 2010.
 
 Revenue and Expense Recognition from Securities Transactions
 
 The Company records all securities transactions, including commission revenue and related expenses, on a trade-date basis.
 
 Investment Banking Fees
 
 Investment banking fees include fees, net of syndication expenses, arising from securities offerings in which the Company acts as an underwriter or agent.  Investment banking revenues also include fees earned in providing financial advisory services.  These revenues are recorded in accordance with the terms of the investment banking agreements.
 
 F-7
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 3. Summary of significant accounting policies (continued)
 
 Managed Account Fees
  Managed account fees are primarily earned based on a percentage of assets under management.  Fees are computed and due at specified intervals, generally quarterly and recorded when earned.
  Income Taxes
 
 The Company files a consolidated income tax return with its subsidiaries.  The Company accounts for income taxes in accordance with FASB ASC Topic 740 “Income Taxes”,which requires accounting for deferred income taxes under the asset and liability method.  Deferred income tax asset and liabilities are computed for difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.
 
 The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws.  Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions.  The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities.  When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate.
  In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.  De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce stockholders equity.  This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities.  Management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. Generally, the tax filings are no longer subject to income tax examinations by major taxing authorities for years before 2007. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state and local tax laws.  The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
 
 Interest and Penalty Recognition on Unrecognized Tax Benefits
 
 The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No interest expense or penalties have been recognized as of and for the period ended December 31, 2010.
 
 F-8
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Summary of significant accounting policies (continued)
 
 Foreign Currency Adjustments
 
 The financial position and results of operations of the Company’s foreign subsidiary is measured using the foreign subsidiary’s local currency as the functional currency in accordance with FASB ASC Topic 830, “Foreign Currency Matters.” Revenues and expenses of such subsidiary have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange as of the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity.  Foreign currency translation adjustments resulted in losses of $13,920 and gains of $3,549 in 2010 and 2009, respectively.
 
 Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
 
 Comprehensive Income (Loss)
 
 The Company complies with FASB ASC Topic 220, “Comprehensive Income,” which establishes rules for the reporting and display of comprehensive income (loss) and its components.  FASB ASC Topic 220 requires the Company’s change in foreign currency translation adjustments to be included in other comprehensive loss, and is reflected as a separate component of stockholders’ equity.
  Fair Value of Financial Instruments
  The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their carrying amounts presented in the accompanying consolidated statements of financial condition at December 31, 2010 and 2009.
  Loss Per Common Share
  The Company complies with the accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period.  The calculation of diluted net loss per share excludes 4,500 and 26,000 warrants and 2,080,000 shares of common stock issuable upon the conversion of the Series C 8% convertible preferred stock as of December 31, 2010 and 2009, respectively, since their effect is anti-dilutive.
 
 Investment
 
 The Company classifies its common stock investment in AR Growth Finance Corp. (“AR Growth”) and Nexo Emprendimientos S.A. (“Nexo”) as available-for-sale in accordance with FASB ASC Topic 320, “Investments-Debt and Equity securities.” Available-for-sale investments are carried on the consolidated statements of financial condition at their fair value with the current period adjustments to the carrying value recorded in accumulated other comprehensive income (loss). As of December 31, 2010, there has been no adjustment to the carrying value of the Company’s common stock investment Nexo.  During the year ended December 31, 2010, the Company recognized an impairment loss of approximately $30,000 on its investment in AR Growth based on excess carrying value over the fair value of the investment. (See Note 19)
 
 F-9
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Summary of significant accounting policies (continued)
 
 Stock-Based Compensation
 
 The Company complies with FASB ASC Topic 718 “Compensation – Stock Compensation,” which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions).  That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period).  No compensation costs are recognized for equity instruments for which employees do not render the requisite service.  The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available).  If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.  Based on stock options and stock awards that vested during 2010 and 2009, the Company recorded approximately
 $179,000 and $449,000, respectively, as compensation expense under FASB ASC 718.
 
 Use of Estimates
 
 The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities at the date of the financial statements, as well as their related disclosures.  Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
 Valuation of Investments in Securities at Fair Value—Definition and Hierarchy
 
 FASB ASC Topic 820 “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles in the United States and requires expanded disclosures regarding fair value measurements.  ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
 
 In determining fair value, the Company uses various valuation approaches.  In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations, as follows:
 
 F-10
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Summary of significant accounting policies (continued)
 
 Valuation of Investments in Securities at Fair Value – Definition and Hierarchy (continued)
 
 Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Valuation adjustments and block discounts are not applied to Level 1 securities.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
  Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
  Level 3 -Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
  The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.
  Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.
  Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.  Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.  The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation.  In periods of market dislocation, the observability of prices and inputs may be reduced for many securities.  This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
 
 Valuation Techniques
 
 The Company values investments in securities that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the year.  At December 31, 2010, all of the Company’s investments classified as securities owned on the consolidated statements of financial condition are classified as Level 1 investments on the fair value hierarchy table in Note 5.
 
 F-11
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Summary of significant accounting policies (continued)
 
 Government Bonds
 
 The fair value of sovereign government bonds is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issuer, maturity and seniority. At December 31, 2010 and 2009 all government bonds are categorized as level 1.
 
 Certificate of Deposits
 
 The fair values of the bank certificate of deposits are based on the face value of the certificate of deposits.
 
 Derivative Contracts
 
 The Company records its derivative activities at fair value. Gains and losses from derivative contracts are included in trading income in the consolidated statement of operations.  Derivative contracts include future and option contracts related to foreign currencies, government bonds and other securities.
 
 The fair value of the derivate contacts traded by the Company is generally based on quoted prices in active markets on national exchanges. The derivative contracts, such as options and futures, which are listed on a national securities exchange or reported on the NASDAQ national market, are generally categorized in Level 1 of the fair value hierarchy.
 
 Offsetting of Amounts Related to Certain Contracts
 
 The Company has elected to offset fair value amounts recognized for cash collateral receivables and payables against fair value amounts recognized for net derivative positions executed with the same counterparty under the same master netting arrangement. At December 31, 2010 and 2009, the Company offset cash collateral receivables of $44,223 and $132,481, respectively against its net derivative positions.
 
 Recently Adopted Accounting Pronouncements
 
 In January 2010, the FASB issued Accounting Standards Update 2010-06,“Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements” (ASU 2010-06), to require new disclosures related to transfers into and out of Levels 1 and 2 of the fair value hierarchy and additional disclosure requirements related to Level 3 measurements.  The guidance also clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009, except for the additional disclosure requirements related to Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010.  The adoption of the additional requirements is not expected to have any financial impact on the Company’s consolidated financial statements.
 
 F-12
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Summary of significant accounting policies (continued)
 
 Recently Adopted Accounting Pronouncements (continued)
 
 In December 2009, the FASB issued ASU No. 2009-17, Consolidations (Topic 810)-Improvements to Financial Reporting By Enterprises Involved with Variable Interest Entities (ASU No. 2009-17). ASU No. 2009-17 requires a qualitative approach for determining the primary beneficiary of a variable interest entity and replaces the quantitative evaluation previously set forth under FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities . This approach is focused on identifying the reporting entity that has the ability to direct the activities of a variable interest entity that most significantly affects the entity's economic performance and has the obligation to absorb the entity's losses or has the right to receive benefits from the entity. ASU No. 2009-17, among other things, will require enhanced disclosures about a reporting entity's involvement in variable interest entities.  The Company adopted the pronouncement on January 1, 2010 resulting in no impact to the Company’s consolidated financial statements.
 
 In February 2010, the FASB issued an amendment which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s consolidated financial statements.
 
 Recently Issued Accounting Pronouncements
  In April 2010, the FASB issued ASU No. 2010-13, “Compensation - Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades ,” which addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. ASU No. 2010-13 is effective for interim and annual periods beginning on or after December 15, 2010 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations.
  In December 2010, FASB issued ASC ASU 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350) — Intangibles — Goodwill and Other.” ASU 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2, if qualitative factors indicate that it is more likely than not that goodwill impairment exists. The amendments to this update are effective for us in the first quarter of 2011. Any impairment to be recorded upon adoption will be recognized as an adjustment to our beginning retained earnings. We are currently evaluating the impact of the pending adoption of ASU 2010-28 on our consolidated financial statements and don’t expect ASU 2010-28 to have a material impact on our consolidated financial statements.
 
 F-13
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. Securities owned, at fair value
 
 The balance of securities owned at fair value consisted of the following at December 31:
  December 31,


December 31,2010


2009Certificates of deposits

$
-


$
200,000Money Market


706,156



200,000U.S. Government obligations


-



562,878Options and futures


47,362



150,543Corporate bonds


180,803



149,381Equity securities


33,840



25,852$
968,161


$
1,288,654
 At December 31, 2009, a $200,000 certificate of deposit and a $200,000 money market served as collateral for a note payable to a bank (see Note 8).
 
 F-14
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 5. Fair value measurements
  The Company's assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with GAAP guidance for fair value measurement.  See Note 3 for a discussion of the Company's policies regarding this hierarchy.  The Company’s financial assets and liabilities measured at fair value on a recurring basis include those securities classified as securities owned on the consolidated statements of financial condition (see Note 4).
 
 The following table presents information about the Company’s assets and liabilities measured at fair value as of December 31, 2010 and 2009:
 
 Markets


Other


Significant





Balancefor Identical


Observable


Unobservable


Collateral


as ofAssets


Inputs


Inputs


Held


December 31,(Level 1)


(Level 2)


(Level 3)


at Broker


2010Money market

$
706,156


$
-


$
-


$
-


$
706,156Corporate bonds


180,803















180,803Options and futures


3,139











44,223



47,362Equity securities


33,840















33,840$
923,938


$
-


$
-


$
44,223


$
968,161Investment in AR Growthcommon stock

$
-


$
-


$
22,370


$
-


$
22,370
 
 During the year ended December 31, 2010, the Company recognized an impairment loss on its investment in AR Growth based on the excess of the carrying value over the fair value of the investment.  The Company estimated the fair value of the investment to be approximately $ 23,000 based on an analysis of its ownership of outstanding shares, trading volume, and trading prices of A/R Growth.  The fair value measurement of the investment in A/R Growth is categorized as a Level 3 in the fair value hierarchy.
  F-15
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 5.  Fair value measurements (continued)
 
 Markets


Other


Significant





Balancefor Identical


Observable


Unobservable


Collateral


as ofAssets


Inputs


Inputs


Held


December 31,(Level 1)


(Level 2)


(Level 3)


at Broker


2009AssetsSecurities owned, at fair value:Certificates of deposits

$
200,000


$
-


$
-


$
-


$
200,000Offshore securities investments


-















-U.S. Government obligations


562,878















562,878Money market


200,000















200,000Corporate bonds


149,381















149,381Options and futures


18,062











132,481



150,543Equity securities


25,852















25,852$
1,156,173


$
-


$
-


$
132,481


$
1,288,654Investment in AR Growthcommon stock

$
-


$
52,170


$
-


$
-


$
52,170
 During the year ended December 31, 2009, the Company recognized an impairment loss on its building based on the excess of the carrying amount over the fair value of the building.  The Company estimated the fair value of the building to be approximately $1,076,000 based on an analysis of real estate transactions of comparable properties in the Coral Gables, Florida area, resulting in an impairment loss of $800,000.  The fair value measurement of the building is categorized as a Level 3 in the fair value hierarchy.
 
 6. Derivative contracts
 
 In the normal course of business, the Company utilizes derivative contracts in connection with its proprietary trading activities.  Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment.  The Company’s derivative activities and exposure to derivative contracts are classified by the following primary underlying risks: interest rate, credit, foreign currency exchange rate, commodity price, and equity price risks.  In addition to its primary underlying risks, the Company is also subject to additional counterparty risk due to the potential inability of  its counterparties to meet the terms of their contracts.
 
 Options
 
 The Company is subject to equity price risk in the normal course of pursuing its investment objectives.  Option contracts give the Company the right, but not the obligation, to buy or sell within a limited time, a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices.
 
 F-16
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 6. Derivative contracts (continued)
 
 The Company is exposed to counterparty risk from the potential that a seller of an option contract does not sell or purchase the underlying asset as agreed under the terms of the option contract.  The maximum risk of loss from counterparty risk to the Company is the fair value of the contracts and the premiums paid to purchase its open option contracts.  The Company considers the credit risk of the intermediary counterparty to its option transactions in evaluating potential credit risk.
 
 Futures Contracts
 
 The Company is subject to equity price risk in the normal course of pursuing its investment objectives. The Company may use futures contracts to gain exposure to, or hedge against, changes in the value of equities. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.   At December 31, 2010, there is one futures contract held and is classified by commodity price risk.
 
 Impact of Derivatives on the Consolidated Statement of Financial Condition and Consolidated Statement of Operations
 
 The following table identifies the fair value amounts of derivative instruments included in the consolidated statement of financial condition as securities owned, categorized by primary underlying risk, at December 31, 2010. The following table also identifies the net gain and loss amounts included in the consolidated statement of operations as trading income, categorized by primary underlying risk, for the year ended December 31, 2010.
  Derivative


Amount ofPrimary underlying risk

assets


gain (loss)Equity priceCommodity and futures

$
3,139


$
33,674Total

$
3,139


$
33,674
 7. Property and equipment
 
 Property and equipment consisted of the following at December 31:
 
 December 31,


December 31,2010


2009Building and improvements

$
1,075,942


$
1,075,942Land


725,000



725,000Office equipment


135,010



135,010Captialized leases


17,543



17,5431,953,495



1,953,495Less:  accumulated depreciation


(340,509
)


(271,024
)$
1,612,986


$
1,682,471
  F-17
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  7.   Property and equipment (continued)
 Depreciation expense was $69,486 and $75,522 for the years ended December 31, 2010 and 2009, respectively.
 
 During 2009, the Company took an impairment on the building and improvements in the amount of $800,000.
  8. Notes payable  
 Notes payable consisted of the following at December 31:
 December 31,


December 31,2010


2009Note payable to bank, secured by money marketand certificate of deposit accounts totaling$400,000, monthly payments of $3,379, includinginterest at 5.93% per annum, due July 20, 2020.

$
-


$
316,900Mortgage payable to a bank, secured by thebuilding, monthly payments of $9,207, includinginterest at 7.28% per annum, due July 20, 2020.


757,188



809,657$
757,188


$
1,126,557
  Maturities of notes payable are approximately as follows at December 31:
 2011

$
56,0002012


61,0002013


65,0002014


70,0002015


76,000Thereafer


429,000$
757,000
 
 In February 2010, the Company paid off the remaining balance of the note payable with the bank. As a result of the payoff, the remaining balance of the restricted certificate of deposit and money market after the payoff, approximately $80,000, became unrestricted cash investments for the Company.
 F-18
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  9.Income taxes
 
 At December 31, 2010, the Company had approximately $7.4 million of net operating losses (“NOL”) carry-forwards for federal and state income purposes.  These losses are available for future years and expire through 2030.  Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.
 
 The deferred tax asset is summarized as follows:
  December 31,


December 31,2010


2009Deferred tax asset:Net operating loss carryforwards

$
2,777,000


$
2,717,000Other temporary differences


958,000



955,000Deferred tax assets


3,735,000



3,672,000Less:  Valuation allowance


(3,735,000
)


(3,672,000
)Net deferred tax asset

$
-


$
-
 A reconciliation of income tax expense computed at the U.S. federal, state, and local statutory rates and the Company’s effective tax rate is as follows:
 
 December 31,


December 31,2010


2009Statutory federal income tax expense


(34
) %


(34
) %State and local income tax


(4
)


(4
)(net of federal benefits)Other temporary differences


8



8Valuation allowance


30



30-
%


-
%
 The Company has taken a 100% valuation allowance against the other timing differences and the deferred asset attributable to the NOL carry-forwards of $3.735 million and $3.672 million at December 31, 2010 and 2009, respectively,  due to the uncertainty of realizing the future tax benefits.  The increase in valuation allowance of $63,000 is primarily attributable to the Company’s net operating loss during the year ended December 31, 2010.
  F-19
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 9. Income taxes
 The Company files a consolidated income tax return with its subsidiaries.  Income taxes are charged by the Company based on the amount of income taxes the subsidiaries would have paid had they filed their own income tax returns.  In accordance with FASB ASC Topic 740, “Accounting for Income Taxes,” allocation of the consolidated income tax expense is necessary when separate financial statements are prepared for the affiliates.  As a result, the Company uses a method that allocates current and deferred taxes to members of the consolidated group by applying the liability method to each member as if it were a separate taxpayer.
 
 10. Common stock
 
 The Company is authorized to issue 100 million shares of common stock, no par value and 10 million shares of preferred stock of which 2.5 million shares have been designated as Series C 8% convertible preferred stock, no par value.
 
 During December 2009, the Company issued an officer of the Company 500,000 shares at $0.50 per share of its no par value common stock in connection with an employment agreement dated January 4, 2007, amended July 31, 2007.
 
 11. Preferred stock
 
 No Series C preferred stock was sold during 2010 or 2009.
 
 12. Stock options and warrants
 
 The Company accounts for its stock option awards under FASB ASC Topic 718 “Compensation—Stock compensation.” The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for each grant for the years ended December 31, 2010 and 2009: risk free interest rate between 2.25% and 4.65%, no dividend yield, expected lives of ten years and volatility between 129.73% and 185.76%. Options vest ratably between one and ten years and are excerciable over ten years. For the years ended December 31, 2010 and 2009, the Company recognized approximately $48,000 and $90,000, respectively, of stock-based compensation expense related to the issuance of options.
  Options Outstanding


Options ExercisableNumber


Weighted





NumberOutstanding


Average


Weighted


Exercisable


Weightedat


Remaining


Average


at


AverageExercise


December 31,


Contractual


Exercise


December 31,


ExercisePrice


2010


Life


Price


2010


Price$
0.25



4,250,000



9.8


$
0.25



118,539


$
0.25$
0.50



200,000



6.0



0.50



200,000



0.50$
0.75



100,000



8.0



0.75



40,000



0.75$
1.00



400,000



6.2



1.00



400,000



1.00$
1.50



60,000



7.8



1.50



36,500



1.505,010,000






$
0.34



795,039


$
0.77
  F-20
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 12. Stock options and warrants (continued)
 
 The following is a summary of all option activity through December 31, 2010:
 
 Number of


Weighted


Remaining


AggregateShares


Average


Term


InstrinsicOutstanding


Price


(in years)


ValueOptions outstanding at December 31, 2008


830,000



0.87



8.9



-Granted in 2009


30,000



1.50Cancelled in 2009


(100,000
)


1.00Options outstanding at December 31, 2009


760,000


$
0.88



8.0


$
-Granted in 2010


4,250,000



0.25Cancelled in 2010


-



-Options outstanding at December 31, 2010

$
5,010,000



0.34



7.6


$
-Excercisable at December 31, 2009


640,500


$
0.85



8.0


$
-Exercisable at December 31, 2010


795,039


$
0.77



7.6


$
-
 The total compensation cost not yet recognized of approximately $1,068,600 (for non-vested awards) has a weighted average period of 3.6 years over which the compensation expense is expected to be recognized.
 
 On January 4, 2007, the Company granted its chief executive officer 4,500,000 shares, in accordance with the executive’s employment agreement, reduced to 3,500,000 shares pursuant to a stock waiver agreement entered into on November 18, 2009 (see Note 18). The issuances of the shares were subject to a forfeiture period which ended in July 2009, at which point the shares would vest over a three year period. Since January 2007, the Company has been recognizing stock compensation expense over the service period of the employment contract of 5 1⁄2 years.  For the four month period ended November 4, 2009, 500,000 shares of the 3,500,000 share grant vested; these shares were issued in December 2009.  On August 4, 2010, the chief executive officer waived his right, title, and interest to vest in the remaining 3,000,000 shares of restricted common stock.  For the years ended December 31, 2010 and 2009, the Company recognized $131,700 and $358,871, respectively, of stock-based compensation expense related to the issuance of the shares.
 
 During 2010, the Board of Directors granted 3,350,000 options to its chief executive officer with a strike price of $0.25, vesting equally over ten years, 300,000 options to its president, with a strike price of $0.25, vesting equally over two years, 300,000 options each to two financial executives with a strike price of $0.25, vesting equally over two years and five years, respectively.
 
 During 2009, the Board of Directors granted 30,000 options to a financial executive with a strike price of $1.50, vesting equally for five years, with an expiration date of ten years.  During 2008, the board of directors granted 100,000 options to a newly hired financial executive with a strike price of $1.00, vesting equally for five years, with an expiration date of ten years.  The 100,000 option grant was cancelled in 2009.
  F-21
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 12. Stock options and warrants (continued)
 For the years ended December 31, 2010 and 2009, warrant activity was as follows:
  Exercise

Price Per

Share

Warrants

Expiring

Balance

January 1,

2009


Warrants

Issued


Exercised

2009


Expired

2009


Balance

December

31, 2009


Warrants

Issued


Exercised

2010


Expired

2010


Balance

Deember 31,

2010$
2.16

May 29, 2010


15,500



-



-



-



15,500



-



-



15,500



-$
2.16

August 17, 2010


1,000



-



-



-



1,000



-



-



1,000



-$
2.16

October 29, 2010


5,000



-



-



-



5,000



-



-



5,000



-$
1.25

April 11, 2011


500



-



-



-



500



-



-



-



500$
1.25

May 30, 2011


4,000



-



-



-



4,000



-



-



-



4,000Totals


26,000



-



-



-



26,000



-



-



21,500



4,500
 
 All warrants outstanding at December 31, 2010 and 2009 are exercisable.
 
 13. Employee benefit plan
 
 The Company has established a retirement and savings plan for the benefit of employees who have at least one hour of service and have attained the age of 21 years. Under the provisions of the plan, participants may contribute up to 25 percent of their compensation. The Company has the option of matching a percentage of employee contributions. The Company did not make any contributions to the plan in 2010 and 2009.
 
 14. Net capital requirement
 
 STS is a member of FINRA and is subject to the SEC Uniform Net Capital Rule 15c3-1. This Rule requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn or dividends paid if the resulting net capital ratio would exceed 10 to 1. STS is also subject to the Commodity Futures Trading Commission’s minimum financial requirements which require that it maintains net capital, as defined for securities brokers and dealers, equal to or in excess of the greater of $45,000 or the amount of net capital required by the SEC Rule 15c3-1. At December 31, 2010, STS’s net capital was approximately $799,000 which was approximately $699,000 in excess of its minimum requirement of $100,000.
 
 15. Exemption from Rule 15c3-3
 
 STS is exempt from the SEC Rule 15c3-3 pursuant to the exemptive provision under sub-paragraph (k)(2)(ii) and, therefore, is not required to maintain a "Special Reserve Bank Account for the Exclusive Benefit of Customers."
 F-22
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 16. Concentration of risk
 
 Off-balance Sheet Risk
 
 Pursuant to a clearance agreement, STS introduces all of its securities transactions to a clearing broker on a fully-disclosed basis.  All of the customers' money balances and long and short security positions are carried on the books of the clearing broker.  In accordance with the clearance agreement, STS has agreed to indemnify the clearing broker for losses, if any, which the clearing broker may sustain from carrying securities transactions introduced by STS.  In accordance with industry practice and regulatory requirements, STS and the clearing broker monitor collateral on the customers' accounts. In addition, the receivable from clearing broker is pursuant to the clearance agreement.
 
 In the normal course of business, STS’s customer activities involve the execution, settlement and financing of various customer securities transactions.  These activities may expose STS to off-balance sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and STS has to purchase or sell the financial instrument underlying the contract at a loss.
 
 Credit Risk
 
 The Company maintains its cash in financial institutions, which at times, may exceed federally insured limits.  The Company has not experienced any losses in such accounts and believes it is not subject to any significant credit risk on cash.
  17. Commitments and contingencies
 
 Legal Claims
 
 In the ordinary course of business, incidental to the Company’s operations, the Company retains outside counsel to address claims with which the Company is involved. As of December 31, 2010, the Company was not aware of any legal proceedings, which management has determined to be material to its business operations; however, the Company has been named in the following thre actions which it is vigorously defending and which actions, based on management's assessment in coordination with outside litigation counsel, the Company believes to be frivolous and without merit:
 
 Salvatore Frieri, individually and as beneficiary of the Robert J. Escobio and Salvador Frieri-Gallo Trust, Plaintiff v. Robert Escobio, individually and as trustee of the Robert J. Escobio and Salvador Frieri-Gallo Trust, Southern Trust Securities Holding Corporation and Southern Trust Securities, Inc f/k/a Capital Investment Services, Inc., Defendants, in the Circuit Court of the Eleventh Judicial Circuit In and For Miami-Dade County, Florida, Case No. 08-07586 CA 08. The initial complaint in this action was filed on February 12, 2008. An amended complaint
  F-23
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  17. Commitments and contingencies (continued)
 
 Legal Claims (continued)
 
 was filed on October 14, 2008. The amended complaint attempts to plead various causes of action related to the purchase and sale by the Salvador Frieri-Gallo Trust of STSHC’s stock in a private placement in 2005. The plaintiff seeks rescission of the transaction. Management does not believe there is any merit to plaintiff’s claims and the case is in an early stage.
 
 In November 2008, the STS initiated legal action against two individuals and their related company. One of the individuals named in the suit is also an individual who has brought legal action against STS, as discussed in the preceding paragraph. STS’s actions seek to recover compensation owed to it for work performed in connection with extensive financial and investment advice work, and services provided in preparation of a bid for Defendants regarding the restructuring, financing, investing, and acquisition of an interest in Aerovias Nacionales de Colombia S.A. Avianca (“Avianca S.A.”) and its subsidiaries (“Avianca”) in connection with Avianca’s bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Code. After serving one of the individuals and the related company, STS moved for and obtained defaults against these two Defendants on September 17, 2009.  These two Defendants moved to set aside the defaults against them, which the Court set aside on November 2, 2009. On December 11, 2009, these two Defendants filed a Motion to Dismiss based on alleged failure to join an indispensable party, the ACDAC (Pilot Association).  We do not believe that motion has any merit.  We have served process on the second individual defendant. Based on information that is now available, STS claims the Defendants owe it approximately $8.35 million dollars plus prejudgment interest from on or about January 2005. In the opinion of outside counsel, it is too early to predict the ultimate recovery from Defendants.
 
 On December 7, 2010, STS filed a FINRA arbitration against Joseph Meuse, Rosewood Securities, LLC, BP Capital, LLC, and China Values Technology, Inc.  The FINRA filing was amended on January 18, 2011, before FINRA commenced serving the Respondents.  STS seeks to recover compensation it was entitled to receive for acting as placement agent under an agreement involving an offering of securities in a reverse merger into a publicly traded company, Respondent China Valves, which closed on May 18, 2009. The Agreement provided that STS would receive 23,490 warrant shares of China Valves, but it only received 5,739 warrant shares.  Thus, STS has sued the Respondents to recover the additional 17,751 warrant shares that it should have received on May 18, 2009, their valued, lost profits, and lost opportunity costs caused by the failure to timely deliver the shares as required. The Respondents, in response to STS’s pre-filing demands for payment, each blamed the other for the claimed failures to timely deliver the missing warrant shares.
 
 Outside counsel, believes that it is likely that STS will obtain an award against one or more of the Respondents, but it still has not been determined who is telling the truth as to when and where the missing warrant shares are, because arbitration proceedings have just begun.  Respondents have not filed their answers and no discovery has yet commenced.
 
 On or about December 28, 2010, plaintiffs attempted to serve process on STSCH by serving STS, with an Amended Complaint filed in the United States Federal District Court for the Southern District Court of New York.  The trust of the Amended Complaint seems to be that Plaintiffs invested about $12.5 million in a company named Aamaxen Transport Group, Inc. (“AAXT”), pursuant to a Securities Purchase Agreement, dated April 14, 2008, in exchange for AAXT’s Series A Convertible Preferred Stock.  AAXT, a publicly traded company, shares are listed on the OTC Bulletin Board.  AAXT, a Delaware Company, has its principal place of business in Shanghai, China.  AAXT was to ultimately invest in and own a significant beneficial interest in Shanghai Atrip Medical Technology, Co., Ltd. (“SMT”), another Chinese company.  Plaintiffs claim the transaction did not take
  F-24
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 17. Commitments and contingencies (continued)
 
 Legal Claims (continued)
 
 place as agreed and that the Chinese principals in certain of the entities involved continued to maintain control over some entities, when they should not have and AAXT and other Plaintiffs’ invested funds were ultimately embezzled.  The investors sued those allegedly involved in the embezzlement, the attorneys involved in the transactions, and those who allegedly provided investment banking advice.  The Amended Complaint includes STSHC along with certain entities controlled by Joseph Meuse and used to provide investment, business, and
 structuring advice under the names Belmont Partners, LLC (“Belmont”) and Rosewood Securities, LLC (“Rosewood”).  The Amended Complaint defines Belmont to include Belmont Partners, Rosewood, or Meuse.  STSHC had nothing to do with this matter.  STS, which was not named a defendant, had a branch office agreement, whereby Rosewood operated as a branch office of STS managed by Meuse during part of the period involved.  As determined so far, STS had no involvement in the transaction and whose only possible
 connection the parties was through the Rosewood branch office agreement, which was terminated in December 2009. STSHC retained New York counsel to represent it in this case.  Counsel received an order from the Court extending the date for STSHC to respond to the Amended Complaint until March 11, 2011.  STSHC responded to the Amended Complaint as required and filed its motion to dismiss.  On March 18, 2011, the Court issued an order requiring that opposing affidavits to motions to dismiss be filed by May 16, 2011.
 
 Based on what is known, management does not believe that STSHC had any involvement whatsoever and is not a proper defendant, and it also does not believe STS had any involvement, other than the possibility that the Rosewood branch office having some as yet unknown involvement without STS’s knowledge or participation. At this point, little is known about the facts, since the case was only recently filed against STSHC.
 
 Capital Lease - Future Minimum Lease Payments
 
 The Company leases certain office equipment under an agreement that is classified as a capital lease. At December 31, 2010 office equipment with a cost basis of $17,543 and accumulated depreciation of $13,157 is recorded under a capital lease.
 
 The future minimum lease payments required under the capital lease and the present value of the net minimum lease payments as of December 31, 2010, are as follows:
  For the year ending December 31,2011

$
7,6302012


2,180Total minimum lease payments


9,810Less: Amount representing supplies andmaintenance included in total amounts above


(2,610
)Net minimum lease payments


7,200Less: Amount representing interest


(691
)Present value of net minimum lease payments

$
6,509
 
 F-25
 
 SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 17. Commitments and contingencies (continued)
 
 Employment Agreements
 
 On January 4, 2007, the Company entered into employment agreements with several of its key executives.  The agreements are for two to three-year duration and renew automatically for one year unless either party provides notice of non-renewal 30 days prior to the anniversary date of the agreement or the agreement is earlier terminated in accordance with its terms.  Two of the agreements are for two-year duration with total compensation of $247,000 per year. The third agreement is for three-year duration with total compensation of $150,000 per year.
 
 As part of the agreements, the Company granted 4,500,000 shares of common stock vesting over five years to one of the executives, reduced to 3,500,000 shares pursuant to a stock waiver agreement entered into on November 18, 2009; on August 4, 2010, the executive waived his right, title, and interest to vest the remaining 3,000,000 shares, the balance after 500,000 were vested and issued in December 2009. Also, as part of the employment agreements, the Company  granted 922,389 shares vesting equally over eighteen months to another executive, and 200,000 options to the third executive exercisable on December 31, 2007 and for a period of ten years.
 
 One of the key executive’s agreements provides for a lump-sum payment of $5 million and the repurchase of all shares based on their fair market value, if his employment is terminated as a result of a change of control.  Should the executive’s employment be terminated for any other reason, the Company would have to pay him $2 million and repurchase all of his shares based on their fair market value.  Lastly, another agreement provides for a lump-sum payment of $1 million to one of the executives if his employment is terminated due to change of control.
  18. Investment in AR Growth Finance Corp. and Nexo Emprendimientos S.A.
 
 During the first quarter of 2007, the Company entered into an agreement to work in concert with two Argentine companies, Inversora Castellanos, S.A. (“ICSA”), a company comprised of executives from SanCor, the largest dairy cooperative in Argentina, and Administración de Carteras S.A. (“ACSA”), whereas we purchased a controlling interest in AR Growth Finance Corp. (“AR Growth”). The common stock of AR Growth trades on the Pink Sheets under the symbol “ARGW.PK.” The Company, together with ICSA and ACSA, intend to implement an acquisition plan to acquire finance related companies in Argentina through AR Growth. The Company previously accounted for its preferred stock investment in AR Growth, as discussed below, under the cost method of accounting.
  F-26
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. Investment in AR Growth Finance Corp. and Nexo Emprendimientos S.A. (continued)
  In November 2007, the Company invested $1 million for 100,000 shares of the Series A 8% convertible preferred stock (“Series A ARGW”) of AR Growth. The Series A ARGW provides for cumulative dividends at the rate of 8% per year, payable quarterly, in cash or shares of AR Growth’s common stock at AR Growth’s election. Each share of Series A ARGW shall be convertible into 3.9 shares of AR Growth’s common stock at any time after six (6) months from date of issuance of the preferred stock and prior to notice of redemption at the option of the holder, subject to adjustment for customary anti-dilution events (Conversion Rate). Subject to certain restrictions, the Series A ARGW shall automatically convert into shares of AR Growth’s common stock upon any of the following events: (i) the sale by AR Growth of all, or substantially all, of its assets; (ii) the consummation of a merger or a consolidation; or (iii) the sale or exchange of all, or substantially all, of the outstanding shares of AR Growth’s common stock.
 
 On February 25, 2008, the Company invested an additional $1.5 million for 150,000 shares of Series A ARGW. Simultaneously on that date, AR Growth acquired ProBenefit, S.A. (“ProBenefit”), a privately owned Argentine based holding company comprised of pension, insurance and annuity companies as well as a consumer credit card company, through the following transactions: A) AR Growth acquired the originally issued shares of ProBenefit representing a 37.76% ownership interest for an aggregate purchase price of $7.5 million dollars, of which $2.5 million was paid in cash and $5.0 million (plus interest) shall be paid before February 18, 2010 through the issuance of an 8% Senior Promissory Note by AR Growth to ProBenefit and B) on the same date, AR Growth acquired a 57.34% ownership interest in ProBenefit through the issuance of 11,521,055 shares of common stock of AR Growth and a $12.0 million 8% Junior Subordinated Convertible Debenture due December 15, 2010 to SFN Santafesina de Negocios, S.A., an Argentine company created to consolidate existing ProBenefit investors.
 
 Following all of these transactions, the Company has a 4.3% ownership interest in the common stock of AR Growth and 250,000 non-voting shares of Series A 8% Convertible Preferred Stock of AR Growth convertible into common at 3.9:1. Robert Escobio is the CEO and a director of STSHC and also the President and a director of AR Growth, and Kevin Fitzgerald is the President and a director of STSHC and also the CEO and a director of AR Growth.
 
 The Company determined that the business of ProBenefit, AR Growth’s primary operating entity, has been adversely affected by recent law changes in Argentina. During October 2008, the Argentinean government proposed a law to nationalize approximately $26 billion in private pensions, stating that the current pension system had failed. In December 2008, the government’s proposed law was passed and the government took control of the country’s pension assets. While ProBenefit still has the insurance, annuity and consumer credit card businesses, the takeover of the pension business had a detrimental effect on ProBenefit’s operations and earnings.  Further, the Argentinean government has indicated that it will compensate those companies affected by the takeover of their pension business, however the amount of the compensation, if any, and the timing and form of such compensation has yet to be determined by the Argentinean government.
 
 As a result of the changes in the operations of ProBenefit, the Company recorded an another-than-temporary impairment charge of $1,250,000 against its preferred stock investment in AR Growth of $2,500,000 in December 2008. The preferred stock was the Company’s only investment carried under the cost method. The Company has also reserved the dividends receivable for the full year 2009 and the fourth quarter ended December 31, 2008.
  F-27
  SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 18. Investment in AR Growth Finance Corp. and Nexo Emprendimientos S.A. (continued)
  Any future recovery relative to the value in preferred stock will not be recognized until realized as the impairment has effectively reduced the cost of the preferred stock to $1,250,000. Additionally, future charges may be required pending further deterioration in ProBenefit’s operations, lack of compensation from the Argentinean government and the changes resulting from the restructure of the original transaction, as summarized below.
 
 On August 4, 2009, the Company restructured its investment in AR Growth. In summary, the Company exchanged its $2.5 million Preferred Stock investment in AR Growth for a 22% common stock interest in Nexo Emprendimientos S.A. (“Nexo”). Nexo is a fast growing consumer credit card company based in Sunchales, Argentina.
 
 ProBenefit S.A., a financial services holding corporation (“ProBenefit”), the Company and AR Growth will be the major shareholders of Nexo. As part of the terms of the restructuring, the Company has a put option on the shares of Nexo it now owns whereby ProBenefit will be required to buy back from the Company its Nexo shares at the request of the Company at any time either (i) commencing one year from the date of the agreement and for a period of two years thereafter; or (ii) upon a change of control of Nexo by any person other than the Company. The payment under the put option will commence in September 2012 and continue quarterly for 10 quarters and provides for interest at 8% per annum. Should the Company exercise the put option for 100% of its Nexo shares, ProBenefit will be obligated to pay the Company $2.5 million plus accrued interest.
 
 The Company accounts for its investment in Nexo under the cost method of accounting.
  F-28
  PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
  23.1
Consent of Rothstein, Kass & Company, P.C.31.1
Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer32
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
 
 2
  SIGNATURES
 
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant had duly caused this amendment to the report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on April 26, 2011.
  SOUTHERN TRUST SECURITIES HOLDING CORP.By:
/s/Robert EscobioRobert EscobioChief Executive Officer andChief Financial Officer