UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q





(Mark One)



þQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009



 ̈TRANSITION 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 |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)



145 Almeria Ave., Coral Gables, Florida      33134

(Address of principal executive offices)     (Zip Code)

(305) 446-4800

(Registrants telephone area, including area code)

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.  Yes þ No  ̈

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 large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                          |                            
|------------------------- | ---------------------------
|Large accelerated filer  ̈ | Accelerated filer  ̈        
|Non-accelerated filer  ̈   | Smaller reporting company þ



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

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

The registrant had 13,833,378 shares of common stock issued and outstanding on May 14, 2009, excluding 4,500,000 unvested shares of common stock.

Introductory Note: The Registrant qualifies as a smaller reporting company and has elected to comply with the requirements applicable to smaller reporting companies set forth in Regulation S-K and Form 10-Q.







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INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I
Item 1.Consolidated Interim Financial Statements
1
Consolidated Statements of Financial Condition as of March 31, 2009 and December 31, 2008
1
Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008
2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
3
Consolidated Statements of Changes in Stockholders Equity (Deficit) 
and Comprehensive Loss
4
Notes to Consolidated Financial Statements
5
Item 2.Management's Discussion and Analysis
18
Item 3.Quantitative and Qualitative Disclosures About Market Risk
24
Item 4.Controls and Procedures.
24
PART II
Item 1.Legal Proceedings.
25
Item 1A.Risk Factors
26
Item 2.Unregistered Sales of Securities and Use of Proceeds
26
Item 3.Defaults Upon Senior Securities
26
Item 4.Submission of Matters to a Vote of Security Holders
26
Item 5.Other Information
26
Item 6.Exhibits
26
Signatures
27







---

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                                                                                                                              |  |                |             |   |                   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | - | ---------- | -
|                                                                                                                                              |  | March 31,
2009 |             |   | December 31,
2008 |  
|                                                                                                                                              |  | (Unaudited)    |             |   |                   |  
|ASSETS                                                                                                                                        |  |                |             |   |                   |  
|                                                                                                                                              |  |                |             |   |                   |  
|Cash and cash equivalents                                                                                                                     |  | $              | 46,307      |   |                   | $ | 652,783    |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Securities owned at fair value, including restricted securities of $400,000                                                                   |  |                | 2,037,749   |   |                   |   | 2,512,786  |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Investment in limited liability company,equity method                                                                                         |  |                | 240,662     |   |                   |   | 240,661    |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Due from clearing broker                                                                                                                      |  |                | 18,744      |   |                   |   | 7,669      |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Commissions receivable                                                                                                                        |  |                | 10,593      |   |                   |   | 7,569      |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Investment in AR Growth,net of impairment charge of $1,250,000                                                                                |  |                | 1,350,000   |   |                   |   | 1,350,000  |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Other assets                                                                                                                                  |  |                | 90,578      |   |                   |   | 68,890     |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Property and equipment,net                                                                                                                    |  |                | 2,539,201   |   |                   |   | 2,556,533  |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Total Assets                                                                                                                                  |  | $              | 6,333,834   |   |                   | $ | 7,396,891  |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                          |  |                |             |   |                   |   |            |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Liabilities                                                                                                                                   |  |                |             |   |                   |   |            |  
|Accounts payable and accrued expenses                                                                                                         |  | $              | 252,610     |   |                   | $ | 478,623    |  
|Obligations under capital lease                                                                                                               |  |                | 12,125      |   |                   |   | 12,911     |  
|Notes payable                                                                                                                                 |  |                | 1,178,907   |   |                   |   | 1,196,124  |  
|Total Liabilities                                                                                                                             |  |                | 1,443,642   |   |                   |   | 1,687,658  |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Commitments and contingencies                                                                                                                 |  |                |             |   |                   |   |            |  
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Stockholders' equity                                                                                                                          |  |                |             |   |                   |   |            |  
|Series C 8% convertible preferred stock, no par value,2.5 million shares
authorized, 520,000 and 430,000,respectively, issued and outstanding |  |                | 5,200,000   |   |                   |   | 5,200,000  |  
|Common stock, no par value, 100 million shares
 authorized,13,833,378 issued and outstanding                                                  |  |                | 8,752,986   |   |                   |   | 8,752,986  |  
|Additional paid-in-capital                                                                                                                    |  |                | 1,278,530   |   |                   |   | 1,158,758  |  
|Accumulated deficit                                                                                                                           |  |                | (10,432,597 | ) |                   |   | (9,503,831 | )
|Accumulated other comprehensive loss                                                                                                          |  |                | (13,449     | ) |                   |   | (631       | )
|                                                                                                                                              |  |                |             |   |                   |   |            |  
|Total Southern Trust Securities Holding Corp. 
and Subsidiaries stockholders' equity                                                          |  |                | 4,785,470   |   |                   |   | 5,607,282  |  
|Noncontrolling interest                                                                                                                       |  |                | 104,722     |   |                   |   | 101,951    |  
|Total Stockholders' Equity                                                                                                                    |  |                | 4,890,192   |   |                   |   | 5,709,233  |  
|Total Liabilities and Stockholders' Equity                                                                                                    |  | $              | 6,333,834   |   |                   | $ | 7,396,891  |  





See accompanying notes to consolidated interim financial statements.



1



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                  |  |                                   |            |   |                                   |   |            |  
|----------------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | - | ---------- | -
|                                                                  |  | Three Months
Ended
March 31,
2009 |            |   | Three Months
Ended
March 31,
2008 |  
|                                                                  |  | (Unaudited)                       |            |   | (Unaudited)                       |  
|Revenues                                                          |  |                                   |            |   |                                   |  
|Commissions                                                       |  | $                                 | 79,892     |   |                                   | $ | 119,674    |  
|Trading income                                                    |  |                                   | 147,313    |   |                                   |   | 102,073    |  
|Investment banking fees                                           |  |                                   | 2,778      |   |                                   |   | 150,000    |  
|Managed account fees                                              |  |                                   | 23,669     |   |                                   |   | 1,552      |  
|Interest and dividend income                                      |  |                                   | 9,462      |   |                                   |   | 86,642     |  
|Other miscellaneous income                                        |  |                                   | 1,205      |   |                                   |   | 1,954      |  
|                                                                  |  |                                   | 264,319    |   |                                   |   | 461,895    |  
|                                                                  |  |                                   |            |   |                                   |   |            |  
|Expenses                                                          |  |                                   |            |   |                                   |   |            |  
|Commissions and clearing fees                                     |  |                                   | 115,336    |   |                                   |   | (65,778    | )
|Employee compensation and benefits                                |  |                                   | 507,603    |   |                                   |   | 509,437    |  
|Occupancy                                                         |  |                                   | 20,966     |   |                                   |   | 18,898     |  
|Communications and market data                                    |  |                                   | 28,047     |   |                                   |   | 44,075     |  
|Professional fees                                                 |  |                                   | 251,265    |   |                                   |   | 192,537    |  
|Travel and entertainment                                          |  |                                   | 62,151     |   |                                   |   | 63,549     |  
|Depreciation                                                      |  |                                   | 18,856     |   |                                   |   | 18,676     |  
|Interest expense                                                  |  |                                   | 21,643     |   |                                   |   | 22,785     |  
|Other operational expenses                                        |  |                                   | 60,447     |   |                                   |   | 56,159     |  
|                                                                  |  |                                   | 1,086,314  |   |                                   |   | 860,338    |  
|Net loss                                                          |  |                                   | (821,995   | ) |                                   |   | (398,443   | )
|                                                                  |  |                                   |            |   |                                   |   |            |  
|Net income attributable to noncontrolling interest                |  |                                   | (2,771     | ) |                                   |   |          |  
|                                                                  |  |                                   |            |   |                                   |   |            |  
|Net loss attributable to Southern Trust 
Securities Holding Corp. |  |                                   | (824,766   | ) |                                   |   | (398,443   | )
|Preferred stock dividends                                         |  |                                   | (104,000   | ) |                                   |   | (86,000    | )
|                                                                  |  |                                   |            |   |                                   |   |            |  
|Loss applicable to common stockholders'                           |  | $                                 | (928,766   | ) |                                   | $ | (484,443   | )
|                                                                  |  |                                   |            |   |                                   |   |            |  
|Weighted average common shares outstanding                        |  |                                   |            |   |                                   |   |            |  
|Basic and diluted                                                 |  |                                   | 13,833,378 |   |                                   |   | 13,628,405 |  
|Loss per common share                                             |  |                                   |            |   |                                   |   |            |  
|Basic and diluted                                                 |  | $                                 | (0.07      | ) |                                   | $ | (0.04      | )





See accompanying notes to consolidated interim financial statements.



2



---

SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------- | -------- | - | --------------------------------- | - | ---------- | -
|                                                                                                                               |  | Three Months
Ended
March 31,
2009 |          |   | Three Months
Ended
March 31,
2008 |  
|                                                                                                                               |  | (Unaudited)                       |          |   | (Unaudited)                       |  
|Cash flows from operating activities                                                                                           |  |                                   |          |   |                                   |  
|Net loss                                                                                                                       |  | $                                 | (821,995 | ) |                                   | $ | (398,443   | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                                      |  |                                   |          |   |                                   |   |            |  
|Share-based compensation                                                                                                       |  |                                   | 119,772  |   |                                   |   | 186,646    |  
|Depreciation                                                                                                                   |  |                                   | 18,856   |   |                                   |   | 18,676     |  
|Changes in operating assets and liabilities:                                                                                   |  |                                   |          |   |                                   |   |            |  
|Securities owned                                                                                                               |  |                                   | 475,037  |   |                                   |   | 1,169,756  |  
|Due from clearing broker                                                                                                       |  |                                   | (11,075  | ) |                                   |   | 64,754     |  
|Commissions receivable                                                                                                         |  |                                   | (3,024   | ) |                                   |   | (105,990   | )
|Other assets                                                                                                                   |  |                                   | (21,688  | ) |                                   |   | (39,360    | )
|Accounts payable and accrued expenses                                                                                          |  |                                   | (226,013 | ) |                                   |   | (190,477   | )
|Net cash (used in) provided by operating activities                                                                            |  |                                   | (470,130 | ) |                                   |   | 705,562    |  
|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|Cash flows from investing activities                                                                                           |  |                                   |          |   |                                   |   |            |  
|Payments for purchases of property and equipment                                                                               |  |                                   | (1,525   | ) |                                   |   |          |  
|Investment in AR Growth                                                                                                        |  |                                   |        |   |                                   |   | (1,500,000 | )
|Earnings from investment in limited liability company                                                                          |  |                                   |        |   |                                   |   | 8,567      |  
|Net cash flows used in investing activities                                                                                    |  |                                   | (1,525   | ) |                                   |   | (1,491,433 | )
|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|Cash flows from financing activities                                                                                           |  |                                   |          |   |                                   |   |            |  
|Dividends paid to preferred stockholders                                                                                       |  |                                   | (104,000 | ) |                                   |   | (86,000    | )
|Principal payments on notes payable and capital lease obligations                                                              |  |                                   | (18,003  | ) |                                   |   | (16,555    |  
|Net cash flows used in financing activities                                                                                    |  |                                   | (122,003 | ) |                                   |   | (102,555   | )
|Effect of foreign exchange rate changes on cash and cash equivalents                                                           |  |                                   | (12,818) |   |                                   |   |          |  
|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|Net decrease in cash and cash equivalents                                                                                      |  |                                   | (606,476 | ) |                                   |   | (888,426   | )
|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|Cash and cash equivalents,beginning of period                                                                                  |  |                                   | 652,783  |   |                                   |   | 2,449,201  |  
|                                                                                                                               |  |                                   |          |   |                                   |   |            |  
|Cash and cash equivalents,end of period                                                                                        |  |                                   | 46,307   |   |                                   | $ | 1,560,775  |  
|Supplementary disclosure of cash flow information,Cash paid during the periods for interest                                    |  | $                                 | 21,643   |   |                                   | $ | 22,785     |  
|Supplementary disclosure of non-cash investing 
and financing activities 
Proceeds from sale of preferred stock held in escrow |  | $                                 |        |   |                                   | $ | 1,076,055  |  





See accompanying notes to consolidated interim financial statements.



3



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS 
EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|-------------------------------------------------- | --------------- |  | ------------ | --------- | ------- | ---------- | ----------- | - | --------- | ------------- | ---------- | --------- | ------ | ---- | ----------- | ----------- | --------- | ----------- | ------- | ------------- | ----- | - | ---------- | - |  | - | ------- | - |  | - | ---------- | -
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           | Accumulated |         |               | Total |   |            |   |  |   |         |   |  |  
|                                                   |                 |  |              |           |         |            |             |   |           |               | Additional |           |        |      |             |             | other     |             |         | Stockholders' |       |   | Non-       |   |  |   |        
|                                                   | Preferred Stock |  | Common Stock |           | Paid In |            | Accumulated |   |           | comprehensive |            |           | Equity |      |             | controlling |           |             | Total   |              
|                                                   | Shares          |  | Amount       |           | Shares  |            | Amount      |   | Capital   |               | Deficit    |           |        | loss |             |             | (Deficit) |             |         | Interest      |       |   | Equity     |  
|Balances,December 31, 2007                         | 430,000         |  | $            | 4,300,000 |         | 13,525,917 |             | $ | 8,599,254 |               | $          | 715,109   |        | $    | (5,536,084  | )           |           | $           |       |               |       | $ | 8,078,279  |   |  | $ |       |   |  | $ | 8,078,279  |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Issuance of Series C
 preferred stock              | 90,000          |  |              | 900,000   |         |          |             |   |         |               |            |         |        |      |           |             |           |             |         |               |       |   | 900,000    |   |  |   |         |   |  |   | 900,000    |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Capital contribution 
from noncontrolling 
nterest |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   | 106,523 |   |  |   | 106,523    |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Stock compensation                                 |               |  |              |         |         | 307,461    |             |   | 153,732   |               |            | 443,649   |        |      |           |             |           |             |         |               |       |   | 597,381    |   |  |   |         |   |  |   | 597,381    |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Dividends to 
preferred 
stockholders              |                 |  |              |           |         |            |             |   |           |               |            |           |        |      | (387,521    | )           |           |             |         |               |       |   | (387,521   | ) |  |   |         |   |  |   | (387,521   | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Comprehensive loss:                                |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Net loss                                           |                 |  |              |           |         |            |             |   |           |               |            |           |        |      | (3,580,226  | )           |           |             |         |               |       |   | (3,580,226 | ) |  |   | (4,572  | ) |  |   | (3,584,798 | )
|Foreign 
currency 
translation 
adjustment         |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             | (631    | )             |       |   | (631       | ) |  |   |         |   |  |   | (631       | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Total comprehensive loss                           |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   | (3,580,857 | ) |  |   | (4,572  | ) |  |   | (3,585,429 | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Balances,December 31, 2008                         | 520,000         |  |              | 5,200,000 |         | 13,833,378 |             |   | 8,752,986 |               |            | 1,158,758 |        | $    | (9,503,831  | )           |           |             | (631    | )             |       |   | 5,607,282  |   |  |   | 101,951 |   |  |   | 5,709,233  |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Stock compensation                                 |                 |  |              |           |         |            |             |   |           |               |            | 119,772   |        |      |             |             |           |             |         |               |       |   | 119,772    |   |  |   |         |   |  |   | 119,772    |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Dividends to 
preferred 
stockholders              |                 |  |              |           |         |            |             |   |           |               |            |           |        |      | (104,000    | )           |           |             |         |               |       |   | (104,000   | ) |  |   |         |   |  |   | (104,000   | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Comprehensive loss:                                |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Net income (loss)                                  |                 |  |              |           |         |            |             |   |           |               |            |           |        |      | (824,766    | )           |           |             |         |               |       |   | (824,766   | ) |  |   | 2,771   |   |  |   | (821,995   | )
|Foreign 
currency 
translation 
adjustment         |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             | (12,818 | )             |       |   | (12,818    | ) |  |   |         |   |  |   | (12,818    | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Total 
comprehensive income (loss)                 |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   | (837,584   | ) |  |   | 2,771   |   |  |   | (834,813   | )
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|                                                   |                 |  |              |           |         |            |             |   |           |               |            |           |        |      |             |             |           |             |         |               |       |   |            |   |  |   |         |   |  |   |            |  
|Balances,March 31, 2009                            | 520,000         |  | $            | 5,200,000 |         | 13,833,378 |             | $ | 8,752,986 |               | $          | 1,278,530 |        | $    | (10,432,597 | )           |           | $           | (13,449 | )             |       | $ | 4,785,470  |   |  | $ | 104,722 |   |  | $ | 4,890,192  |  







See accompanying notes to consolidated interim financial statements.



4



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.

Basis of Presentation

We are providing herein the consolidated interim statements of financial condition of Southern Trust Securities Holding Corp. (the "Company") and subsidiaries (collectively the "Company") as of March 31, 2009 and December 31, 2008, and the related consolidated interim statements of operations and cash flows for the three months ended March 31, 2009 and 2008. The consolidated interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The consolidated interim financial statements should be read in conjunction with the Company's consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the SEC.

The information furnished in this report reflects all adjustments consisting of only normal recurring adjustments, which are in the opinion of management necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of results that may be expected for the fiscal year ended December 31, 2009.

2.

Nature of operations

Southern Trust Securities Holding Corp. (the "Company) owns Southern Trust Securities, Inc. ("STS") and Southern Trust Securities Asset Management, Inc. ("STSAM").  Additionally, on October 23, 2006, the Company formed Kiernan Investment Corp. (KIC) as an international business company in Belize.  KIC had 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 has had limited operations since inception.

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 SEC.  STS is a member of the Financial Industry Regulatory Authority (FINRA), an entity created through the consolidation of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange and of the 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 service which offers its services to retail customers.

Liquidity

In response to the current economic environment, the Company has implemented changes to its capital management practices to ensure the Company will be able to continue to meet its obligations. Specifically during March 2009 certain employee salaries and payout percentages were reduced to match current business levels and recent employee resignations will not be immediately filled. Management has also undertaken the task of reviewing the other general expenses incurred with the objective of reducing the overall charges.

As the Company primarily financed its operations through cash flows generated by its brokerage operations and proceeds from private placements of preferred stock, management is currently exploring an additional offering of 12% series D preferred stock. There can be no assurance the Company will be able to complete this offering on terms acceptable to the Company, if at all.  Approximately $1.6 million is readily accessible from the securities owned at fair value at March 31, 2009.



5



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3.

Summary of significant accounting policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, STS, STSAM, 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 minority interest.  All intercompany balances and transactions have been eliminated in consolidation.

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 years
|Office equipment          | 5 years 
|Furniture and fixtures    | 10 years



Long-Lived Assets

In accordance with Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, 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.  There was no impairment charges during the three months ended March 31, 2009 or 2008.

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.

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.



6



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3.

Summary of significant accounting policies (continued)

Income Taxes

The Company files a consolidated income tax return with its subsidiaries.  The Company complies with SFAS No. 109, Accounting for Income Taxes.  Deferred taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts at year end, based on enacted tax laws and statutory tax rates applicable to periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company adopted FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109 (FIN 48). The adoption of FIN 48 had no impact on the Companys consolidated financial statements and did not result in unrecognized tax expenses being recorded. Accordingly, no corresponding interest and penalties have been accrued.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

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 SFAS No. 52, Foreign Currency Translation. 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 $7,053 for the three months ended March 31, 2009.

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

The Company complies with SFAS No. 130, Reporting Comprehensive Income.  SFAS No. 130 establishes rules for the reporting and display of comprehensive income (loss) and its components.  SFAS No. 130 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 SFAS No. 107, Disclosures about Fair Value of Financial Instruments, approximate their carrying amounts presented in the accompanying consolidated interim statements of financial condition at March 31, 2009 and December 31, 2008.

Loss Per Common Share

The Company complies with the accounting and disclosure requirements of SFAS No. 128, 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 26,000 warrants, 4,500,000 shares of common stock issuable to an officer upon expiration of the forfeiture period as of March 31, 2009 and March 31, 2008, and 2,080,000 and 1,720,000 of shares of common stock issuable upon the conversion of the Series C 8% convertible preferred stock as of March 31, 2009 and March 31, 2008, respectively, since their effect is anti-dilutive.



7



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3.

Summary of significant accounting policies (continued)

Investment

The Company classifies its common stock investment in AR Growth Finance Corp. (AR Growth) as available-for-sale in accordance with SFAS No. 115, Accounting for Certain Debt and Equity Securities. Available-for-sale investments are carried on the statement of financial condition at their fair value with the current period adjustments to carrying value recorded in accumulated other comprehensive income (loss). As of March 31, 2009 and December 31, 2008, there has been no adjustment to the carrying value of the Companys common stock investment in AR Growth.

Stock-Based Compensation

The Company complies with SFAS No. 123R Share-Based Payment. SFAS No. 123R 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.  SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  SFAS No. 123R 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 the three months ended March 31, 2009 and 2008, the Company recorded approximately $120,000 and $187,000, respectively, as additional compensation expense under SFAS No. 123R.

Use of Estimates

The preparation of consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America 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 and Securities at fair value  Definition and Hierarchy

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements.  This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. It applies to other accounting pronouncements where the Financial Accounting Standards Board (FASB) requires or permits fair value measurements but does not require any new fair value measurements. The Company has adopted FSP No. 157-2 which had deferred the effective date for the disclosure of fair value measurements related to nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The adoption of FSP No. 157-2 did not have any material impact on the Companys consolidated financial statements.  The adoption of SFAS No. 157 did not have any material impact on the Companys consolidated financial statements.



8



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3.

Summary of significant accounting policies (continued)

SFAS No. 157 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations. SFAS No. 157 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1  unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company at the measurement date.

Level 2  inputs that are observable in the marketplace other than those inputs classified as Level 1

Level 3  inputs that are unobservable in the marketplace and significant to the valuation

SFAS No. 157 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

Valuation Techniques

The Company values investment 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 March 31, 2009 and at December 31, 2008 all of the Companys investments classified as securities owned on the interim statement of financial condition are classified as Level 1 investments on the fair value hierarchy table in Note 4.

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 March 31, 2009 and December 31, 2008 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.

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 March 31, 2009 and at December 31, 2008, the Company offset cash collateral receivables of $142,103 and $131,059 against its net derivative positions.

Recently Adopted Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). SFAS 141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired.  SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination.  Acquisition costs associated with the business combination will generally be expensed as incurred.  SFAS 141R is effective for business combinations occurring in the fiscal years beginning on or after December 15, 2008. The adoption of SFAS 141R did not have a significant impact on our consolidated financial position, results of operations or cash flows.

In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, (SFAS 160), which changes the accounting and reporting for minority interests.  Minority interests will be re-characterized as noncontrolling interests and will be reported as a component of equity separate from the parents equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008



9



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3.

Summary of significant accounting policies (continued)

and will apply prospectively, except for the presentation and disclosure requirements, which will apply retroactively.  The adoption of SFAS No. 160 did not have a significant impact on our consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 (SFAS 161).  This new standard requires enhanced disclosures for derivative instruments, including those used in hedging activities.  SFAS No. 161 is effective for periods beginning after November 15, 2008 and interim periods within those fiscal years.  The adoption of SFAS No. 161 did not have a significant impact on our consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 provides guidance for determining when a transaction is not orderly and for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements (FAS 157), when there has been a significant decrease in the volume and level of activity for an asset or liability. FSP FAS 157-4 does not change the measurement objective of FAS 157 which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FSP FAS 157-4 shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. We will adopt FSP FAS 157-4 effective for our quarter ending June 30, 2009 and are currently evaluating the effect that the adoption will have on our financial position and results of operations.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2). FSP FAS 115-2 modifies the existing other-than-temporary impairment guidance to require the recognition of an other-than-temporary impairment when an entity has the intent to sell a debt security or when it is more likely than not an entity will be required to sell the debt security before its anticipated recovery. FSP FAS 115-2 shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We will adopt FSP FAS 115-2 effective for our quarter ending June 30, 2009 and are currently evaluating the effect that the adoption will have on our financial position and results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1). FSP FAS 107-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require fair value of financial instrument disclosures whenever a publicly traded company issues financial information in interim reporting periods in addition to the annual disclosures at year-end. The provisions of FSP FAS 107-1 are effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We will adopt FSP FAS 107-1 effective for our quarter ending June 30, 2009 and are currently evaluating the effect that the adoption will have on disclosures in our financial statements.

Reclassification

Certain amounts in the 2009 financial statements have been reclassified to conform to the 2008 financial statement presentation.



10



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





4.

Securities owned, at fair value

The balance of securities owned at fair value consisted of the following:

|                                |         |             |  |         |              | 
|------------------------------- | ------- | ----------- |  | ------- | ------------ | 
|                                |         |             |  |         |              | 
|                                |         | March 31,   |  |         | December 31,
|                                |         | 2009        |  |         | 2008         | 
|                                |         | (unaudited) |  |         |              | 
|Certificates of deposit         | $       | 725,000     |  | $       | 1,200,000    | 
|U.K. Government obligations     |         | 444,376     |  |         | 437,877      | 
|Offshore securities investments | 500,856 |             |  | 513,702 |             
|Money Market                    |         | 200,000     |  |         | 200,000      | 
|Options and futures             |         | 142,003     |  |         | 129,034      | 
|Equity securities               |         | 25,514      |  |         | 32,173       | 
|                                | $       | 2,037,749   |  | $       | 2,512,786    | 



At March 31, 2009 and December 31, 2008, a $200,000 certificate of deposit and a $200,000 money market served as collateral for a note payable to a bank.

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 SFAS No. 157.  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 3).

The following fair value hierarchy table presents information about the Company's assets and liabilities measured at fair value:

|                                      |  |                   |           |  |                    |   |    |                     |  |   |                 |  |  |               |         |  |  |   |           | 
|------------------------------------- |  | ----------------- | --------- |  | ------------------ | - | -- | ------------------- |  | - | --------------- |  |  | ------------- | ------- |  |  | - | --------- | 
|                                      |  | Quoted Prices     |           |  |                    |   |    |                     |  |   |                 |  |  |               |        
|                                      |  | in Active Markets |           |  | Significant        |   |    |                     |  |   |                 |  |  |               |        
|                                      |  | for               |           |  | Other              |   |    | Significant         |  |   |                 |  |  | Balance as of |        
|                                      |  | Identical Assets  |           |  | Observable 
Inputs |   |    | Unobservable
Inputs |  |   | Collateral Held |  |  | March 31,     |        
|Assets                                |  | (Level 1)         |           |  | (Level 2)          |   |    | (Level 3)           |  |   | at Broker       |  |  | 2009          |        
|Securities owned, at fair value       |  | $                 | 1,895,746 |  |                    | $ |  |                     |  | $ |               |  |  | $             | 142,003 |  |  | $ | 2,037,749 | 
|Investment in AR Growth 
common stock |  | $                 |         |  |                    | $ |  |                     |  | $ | 100,000         |  |  | $             |       |  |  | $ | 100,000   | 





11



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





6.

Income taxes

At March 31, 2009, the Company had net operating loss (NOL) carry-forwards for federal and state income purposes approximating $5.7 million. These losses are available for future years and expire through 2027.  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:

|                                 |  |             |            |   |              |   |            |  
|-------------------------------- |  | ----------- | ---------- | - | ------------ | - | ---------- | -
|                                 |  | March 31,   |            |   | December 31, |  
|                                 |  | 2009        |            |   | 2008         |  
|                                 |  | (unaudited) |            |   |              |  
|Deferred tax assets:             |  |             |            |   |              |  
|Net operating loss carryforwards |  | $           | 2,152,000  |   |              | $ | 1,882,000  |  
|Other temporary differences      |  |             | 661,000    |   |              |   | 663,000    |  
|                                 |  |             |            |   |              |   |            |  
|Deferred tax assets              |  |             | 2,813,000  |   |              |   | 2,545,000  |  
|                                 |  |             |            |   |              |   |            |  
|Less: Valuation allowance        |  |             | (2,813,000 | ) |              |   | (2,545,000 | )
|                                 |  |             |            |   |              |   |            |  
|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:

|                                                     |  |             |     |     |             |  |     |    
|---------------------------------------------------- |  | ----------- | --- | --- | ----------- |  | --- | ---
|                                                     |  | March 31,   |     |     | March 31,   | 
|                                                     |  | 2009        |     |     | 2008        | 
|                                                     |  | (unaudited) |     |     | (unaudited) | 
|Statutory federal income tax expense                 |  |             | (34 | ) % |             |  | (34 | ) %
|                                                     |  |             |     |     |             |  |     |    
|State and local income tax (net of federal benefits) |  |             | (4  | )   |             |  | (4  | )  
|                                                     |  |             |     |     |             |  |     |    
|Other temporary differences                          |  |             | 1   |     |             |  | 2   |    
|                                                     |  |             |     |     |             |  |     |    
|Valuation allowance                                  |  |             | 37  |     |             |  | 36  |    
|                                                     |  |             |   | %   |             |  |   | %  



The Company has taken a 100% valuation allowance against the other timing differences and the deferred tax asset attributable to the NOL carry-forwards of $2.8 million and $2.5 million at March 31, 2009 and at December 31, 2008, respectively, due to the uncertainty of realizing the future tax benefits.  The increase in valuation allowance of $268,000 is attributable to the Companys net operating loss incurred during the three month period ended March 31, 2009.

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 SFAS No. 109, 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.



12



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





7.

Convertible preferred stock

During the second and third quarters of 2007, the Company issued 430,000 shares of Series B 8% convertible preferred stock (Series B) and raised $4,300,000.  The preferred stock provides for non-cumulative dividends at the rate of 8% per year, payable quarterly, in cash or common stock at the Companys election.  Each share of the preferred stock is convertible into shares of the Companys common stock at any time six months after issuance of the preferred stock.  The rate of conversion is 2.31 shares of common stock per share of Series B (the Conversion Rate).  Certain circumstances will cause an automatic conversion, such as the sale of substantially all of the Companys assets, the consummation of a merger or consolidation where the Company is not the surviving company, or the sale or exchange of substantially all of the Companys common stock.  The holders of the preferred stock have liquidation preferences over the holders of the Companys common stock.  The preferred stock shall be redeemable, at the option of the Company, for cash in the amount of $11.00 per share or for shares of the Companys common stock in accordance with the Conversion Rate, in the event that the closing sale price of the Companys common stock, as reported on the OTC Bulletin Board (or such other market on which the Companys common stock is then traded), is greater than or equal to $5.28 for any consecutive five (5) trading days. Any redemption by the Company shall be subject to 15 days written notice.

As a result of the distressed economic conditions, during December 2007, the Company made a tender offer to all Series B holders to exchange all of their Series B shares for a new Series C (Series C) convertible preferred stock on a 1:1 basis.  The Series C shares have all of the Series B characteristics noted above, except they offer a more advantageous common stock conversion at a rate of 1:4 versus the Series B conversion rate of 1:2.31 and the closing sale price for any five (5) consecutive trading days is greater than or equal to $4.50.  Consequently, all Series B holders exchanged their shares to Series C and the conversion date was effective December 31, 2007.

During the second quarter of 2008, the Company sold an additional 90,000 shares of Series C and raised $900,000.

8.

Stock options and warrants

The Company accounts for its stock option awards under SFAS No. 123(R). The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.  Since there were no options granted during the three months ended March 31, 2009, the following weighted average assumptions were used for the year ended December 31, 2008: risk free interest rate between 4.01% and 5.03%, no dividend yield, expected lives of ten years and volatility between 134.06% and 151.24%. Options vest ratibly between one and five years and are excersiable over ten years. For the three months ended March 31, 2009 and 2008, the Company recognized approximately $26,000 and $16,000, respectively, of stock-based compensation expense related to the issuance of options.

The following is a summary of all option activity through March 31, 2009:

|                                                      |  |             |         |  |               |   |      |                 |          |  |            |           |  |   |         | 
|----------------------------------------------------- |  | ----------- | ------- |  | ------------- | - | ---- | --------------- | -------- |  | ---------- | --------- |  | - | ------- | 
|                                                      |  |             |         |  |               |   |      |                 | Weighted |  |            |           | 
|                                                      |  | Number of   |         |  |               |   |      |                 | Average  |  |            | Aggregate | 
|                                                      |  | Shares      |         |  | Weighted      |   |      | Remaining       |          |  | Instrinsic |          
|                                                      |  | Outstanding |         |  | Average Price |   |      | Term (in years) |          |  | Value      |          
|Options granted and outstanding at 
December 31, 2008 |  |             | 830,000 |  |               | $ | 0.87 |                 |          |  | 9.0        |           |  | $ | 850,000 | 
|Granted in 2009                                       |  |             |       |  |               |   |    |                 |          |  |            |           |  |   |         | 
|Options outstanding at March 31, 2009                 |  |             | 830,000 |  |               | $ | 0.87 |                 |          |  | 8.7        |           |  | $ |       | 
|                                                      |  |             |         |  |               |   |      |                 |          |  |            |           |  |   |         | 
|Exercisable at March 31, 2009                         |  |             | 534,167 |  |               | $ | 0.82 |                 |          |  | 8.7        |           |  | $ |       | 



The total compensation cost not yet recognized of approximately $162,000 (for non-vested awards) has a weighted average period of 2.5 years over which the compensation expense is expected to be recognized.



13



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





8.

Stock options and warrants (continued)

On January 4, 2007, the Company granted its Chief Executive Officer 4,500,000 shares vesting over five years (see Note 12).  For both of the three months ended March 31, 2009 and 2008, the Company recognized $93,750 of stock-based compensation expense related to the issuance of the shares.

The total compensation cost not yet recognized of $1,218,750 (for non-vested shares) has a weighted average period of approximately three years over which the compensation expense is expected to be recognized.

During 2008, the Board of Directors granted 30,000 and 100,000 options to two newly hired Financial Executives with a strike price of $1.50 and $1.00, respectively, vesting equally for three years and five years, with an expiration date of ten years.  Additionally, the Board granted 100,000 options to a member of the Board as compensation for services rendered during 2008.

For the three months ended March 31, 2009 and the year ended December 31, 2008, warrant activity is as follows:

|                         |      |                   |                  |                         |  |                 |  |                |       |              |  |                           |  |                 |        |                |  |              |  |                        |    |  |  |    |  |  |    |  |    |        | 
|------------------------ | ---- | ----------------- | ---------------- | ----------------------- |  | --------------- |  | -------------- | ----- | ------------ |  | ------------------------- |  | --------------- | ------ | -------------- |  | ------------ |  | ---------------------- | -- |  |  | -- |  |  | -- |  | -- | ------ | 
|Exercise
Price Per
Share |      | Warrants Expiring |                  | Balance
January
1,
2008 |  | Warrants
Issued |  | Exercised
2008 |       | Expired
2008 |  | Balance
December
31, 2008 |  | Warrants
Issued |        | Exercised
2009 |  | Expired
2009 |  | Balance
March 31,
2009 |   
|$                        | 1.00 |                   | March 1, 2008    |                         |  | 62,500          |  |                |     |              |  |                         |  |                 | 62,500 |                |  |            |  |                        |  |  |  |  |  |  |    |  |  |       
|$                        | 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        |  |                        |  |  |  |  |  |  |  |  |    | 4,000  | 
|                         |      |                   | Totals           |                         |  | 84,000          |  |                | 4,500 |              |  |                         |  |                 | 62,500 |                |  | 26,000       |  |                        |  |  |  |  |  |  |  |  |    | 26,000 | 



All warrants outstanding at March 31, 2009 are exercisable.

9.

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 March 31, 2009, STSs net capital was approximately $924,000 which was approximately $824,000 in excess of its minimum requirement of $100,000.

10.

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."

11.

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.



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





11.

Concentration of risk (continued)

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.

12.

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 March 31, 2009, 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 three 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:

ALISTAIR T. SNOWIE, individually as a shareholder on behalf of AMERICAN AMMUNITION, INC., Plaintiff/Counter defendant v. J.A. FERNANDEZ, SR., individually, ANDRES FERNANDEZ, individually, EMILIO JARA, individually, MARIA A. FERNANDEZ, individually, and AMERICAN AMMUNITION, INC., a Nevada corporation and nominal Defendant, Defendants/Counter plaintiffs/Third-Party Plaintiffs v. STRELLER UNIVERSAL, S.A., a foreign corporation, LA TERRAZA TRADING ASSET MANAGEMENT, LTD., a foreign corporation, GLENDA MALLOY, individually and WILLIAM MALLOY, individually, SOUTHERN TRUST SECURITIES, INC. f/k/a CAPITAL INVESTMENT SERVICES, INC., ROBERT J. ESCOBIO, individually and SUSAN ESCOBIO, individually, Third-Party Defendants - In the Circuit Court in and for the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, Case. No. 07-44328 CA 40.  The Third Party Complaint in this action was initially filed against STS on April 1, 2008.  It was further amended on July 14, 2008.  In the complaint, various causes of action are alleged relating to STSs role related to an escrow account holding shares of American Ammunition, Inc. stock. American Ammunition, Inc. filed for bankruptcy relief in the United States Bankruptcy Court in the Southern District of Florida on September 23, 2008. The Companys outside litigation counsel has advised that the filing of the bankruptcy has automatically stayed the third party action filed by the debtor against STS.

JORGE HABIB, individually, AIR TEMP DE MEXICO S.A. C.V., a Mexican corporation and AIR TEMP NORTH AMERICA, INC., a Florida corporation, v. ROBERT ESCOBIO, individually, KEVIN FITZGERALD, individually, ADOLFO PORRO, individually, SOUTHERN TRUST SECURITIES, INC. f/k/a CAPITAL INVESTMENT SERVICES, INC., a Florida corporation and SOUTHERN TRUST SECURITIES HOLDING CORP., a Florida corporation - In the Circuit Court in and for the Eleventh Judicial Circuit Court for Miami-Dade County, Florida - Case No. 08-39619 CA 40.  This complaint was filed on July 20, 2008.  The complaint alleges various causes of action against the defendants related to STSs role as a financial advisor to one of the plaintiffs and the sale by the Company of a controlling interest in a publicly-traded shell corporation to one of the plaintiffs.  The plaintiffs collectively seek a constructive trust and unspecified monetary damages. The Company is in the process of trying to negotiate a resolution of this dispute, but believe it to be 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 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 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 the Company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.  Based on events to date,



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





12.

Commitments and contingencies (continued)

management believes the case may likely be dismissed just as a prior case based on the same facts brought by the plaintiff several years ago.

In November 2008, 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.

Employment Agreements

On January 4, 2007, the Company entered into employment agreements with several of its key executives.  The agreements are for a 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 a two-year duration with total compensation of $247,000 per year. The third agreement is for a 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, 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 agreement 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.

13.

Related party transactions

During the three months ended March 31, 2008, STS acted as placement agent for AR Growth Finance Corp. (AR Growth), an entity that the Company has an equity investment in (see Note 15), for the issuance and sale of its stock. As compensation for services rendered, STS earned $150,000.

During 2008, the Company issued 4,500 warrants to STS as compensation for acting as the placement agent in the issuance of the Series C 8% convertible preferred stock.

14.

Investment in limited liability company

In October 2007, the Company entered into an operating agreement, with two other third parties and became a member in a limited liability company (the LLC) and made a capital contribution to the LLC of $250,000. The purpose of the LLC is to engage in proprietary trading of all forms of exchange-traded and over the counter financial instruments. Subsequent to the formation of the LLC and receipt of the capital contributions, the LLC became a member in an introducing broker-dealer, where the broker-dealer will trade the investment amount and the LLC will be allocated earnings and losses based solely on the investment of the LLC. The Company accounts for its investment in the LLC under the equity method.

During the month of February 2009, the Company and the two other parties decided to terminate the LLC, effective March 31, 2009.  Subsequently, the Company received $240,662 as final liquidation of the LLC, in April 2009.

15.

Investment in AR Growth Finance Corp.

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 accounts for its preferred stock investment in AR Growth, as discussed below, under the cost method of accounting.



16



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SOUTHERN TRUST SECURITIES HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





15.

Investment in AR Growth Finance Corp. (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.

As of April 2009, the Company had not received the fourth quarter 2008 and the first quarter 2009 dividend payment on its preferred stock investment in 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. The Company is currently evaluating the prospects of AR Growth and the operations of

ProBenefit. The Company and AR Growth are currently in preliminary negotiations with the former owners of ProBenefit to restructure the original transaction based on the recent Argentinean governments actions.

As a result of the changes in the operations of ProBenefit, the Company recorded an other-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 is the Companys only investment carried under the cost method. The Company has also reserved the dividends receivable due for the quarters ended March 31, 2009 and December 31, 2008.

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 any changes resulting from the possible restructure of the original transaction.

16.

Subsequent event

In April 2009, the Company entered into a confidential settlement agreement, through mediation, with JORGE HABIB, AIR TEMP DE MEXICO S.A. C.V., and AIR TEMP NORTH AMERICA, INC., (see Note 12) whereas the financial terms and conditions, which cannot be disclosed at this moment, will not have a material impact in the Companys business operations or financial condition.



17



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Item 2. Management's Discussion and Analysis

The following Managements Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements including statements about our beliefs and expectations. There are many risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements.

All forward-looking statements are based on information available to us on the date of this filing, and we assume no obligation to update such statements. The following discussion should be read in conjunction with the consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q.

Overview

We were formed as a Florida corporation on January 14, 1998. We are the holding company for Southern Trust Securities, Inc. (STS), which is registered as an introducing broker-dealer with the United States Securities Exchange Commission (SEC) and is a member of, or subject to regulations of, the SEC, the Financial Industry Regulatory Authority (FINRA), the National Futures Association (NFA), the Commodities and Futures Trading Commission (CFTC), Securities Investor Protection Corporation (SIPC) and the Municipal Securities Rulemaking Board (MSRB). We are also the holding company for Southern Trust Securities Asset Management, Inc. (STSAM) a fee-based investment advisory service registered with the State of Florida, which offers its services to retail customers.

Our principal business is the business of STS. We offer clients access to all major domestic and international securities and options exchanges, as well as trading in fixed income products, corporate, government, agencies, municipals, and emerging market debt. We also offer fixed and variable annuities and life insurance. We currently offer hundreds of domestic and international mutual funds, as well as retirement plans. We manage portfolios for individuals, pension funds, retirement plans, foundations, trusts and corporations. Our corporate services facilitate restricted stock dispositions and employee stock options exercises. Our offshore services give clients access to foreign trusts and corporations, which they can use to structure their financial planning.

Investment banking is a vital part of our business. We provide traditional as well as innovative securities transaction structures. Our focus is on merger and acquisition services, private placements convertible into publicly-traded shares, and private placements bridging to public offerings through reverse mergers into publicly-traded shell corporations.

Fiscal 2008 experienced one of the worst economic downturns since World War II. Major investment banks disappeared or were converted to bank holding companies, in order to accept customer deposits and thus access permanent liquidity and funding. Additionally, the largest insurance company and the largest savings and loan were both bailed out by the government.  As a result of these events, as well as turbulent market conditions and the various Ponzi scheme scandals, we have experienced and expect to continue to experience increased scrutiny from the various regulators with jurisdiction over our operations. There is also a certain lack of trust on the part of the investing public, which has had, and may continue to have, an adverse affect on brokerage and investment banking operations for the foreseeable future.

The US Government and the Federal Reserve (FED) have been actively pursuing initiatives to provide liquidity and stability to the financial markets and as such, on October 3, 2008, the Emergency Economic Stabilization Act of 2008 (initially introduced as the Troubled Asset Relief Program or TARP) was enacted. Although up to the close of February 2009, the major financial indices, DOW Jones, NASDAQ and Standard & Poors were down 20%, 13% and 19%, respectively, when compared to their December 31, 2008 levels, the month of March and up to April 21, 2009 have shown some positive trends and momentum and have increased 13%, 19% and 16%, respectively, from their February 2009 closing levels. This has been the first glimpse that would tend to indicate that the economy is shifting towards a recovery and that the government actions might be having a constructive impact. As far as the Fed Funds are concerned, the FED lowered its rate to a range of zero to 25 basis points during the end of 2008, the lowest rates in its history, and has maintained them at those historical lows.

The subprime mortgage crisis of 2007, which still lingers throughout the economy, coupled with the 2008 financial global markets meltdown, has had a direct impact on our business and the current economic outlook for 2009, although it has shown some recovery, is obscured by credit anxieties, slowing growth, expensive commodities, higher unemployment rates and the decreasing purchasing power of the U.S. dollar. All of which may adversely



18



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impact our capital markets activities and consequently, our ability to increase our trading and commission revenues will depend mostly on the future economic conditions and our ability to generate more customer accounts.

Critical Accounting Policies and Estimates

Our consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the valuation of securities owned and deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated interim financial statements.

Valuation of Investments in Securities and Securities at Fair Value - Definition and Hierarchy.We adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No. 157), effective January 1, 2008. Under SFAS No. 157, fair value is defined as the price that would be received to sell 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, we use various valuation approaches. SFAS No. 157 establishes a fair value hierarchy for inputs 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 us. Unobservable inputs reflect our assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have 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.

SFAS No. 157 requires us to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

Clearing Arrangements.STS does not carry accounts for customers or perform custodial functions related to customers securities. STS introduces all of its customer transactions, which are not reflected in these financial statements, to its primary clearing broker, which maintains the customers accounts and clears such transactions. These activities may expose us to off-balance-sheet risk in the event that customers do not fulfill their obligations with the primary clearing broker, as we have agreed to indemnify our primary clearing broker for any resulting losses. We continually assess risk associated with each customer who is on margin credit and record an estimated loss when we believe collection from the customer is unlikely. Our losses incurred from these arrangements were not significant for the three months ended March 31, 2009 and 2008.

Stock Based Compensation. We comply with Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Payment, issued in December 2004. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25 (APB No. 25). Among other items, SFAS No. 123R eliminates the use of APB No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant-date fair value of the award. The effective date of SFAS No. 123R for us was the first quarter of 2006. Prior to December 31, 2005, we complied with SFAS No. 123, which specified a fair value based method of accounting for all stock-based compensation.



19



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Revenue Recognition.Commissions revenue and related clearing expenses are recorded on a trade-date basis as security transactions occur. Riskless principal transactions in regular-way trades are recorded on the trade date, as if they had settled.

Investment banking revenue includes private placement agency fees earned through our participation in private placements of equity and convertible debt securities and fees earned as financial advisor in mergers and acquisitions and similar transactions. Merger and acquisition fees and other advisory service revenue are generally earned and recognized only upon successful completion of the engagement. Unreimbursed expenses associated with private placement and advisory transactions are recorded as expenses as incurred.

Asset management (or managed accounts) 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. We also offer fee-based investment advisory services to our customers and independent registered investment advisors through our wholly owned subsidiary, STSAM.

Deferred Tax Valuation Allowance.We account for income taxes in accordance with the provision of SFAS No. 109,Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities at tax rates expected to be in effect when these balances reverse. Future tax benefits attributable to temporary differences are recognized to the extent that the realization of such benefits is more likely than not. We have concluded that it is more likely than not that our deferred tax assets as of March 31, 2009 and 2008 will not be realized based on the scheduling of deferred tax liabilities and projected taxable income. The amount of the deferred tax assets actually realized, however, could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the actual amounts of future taxable income. Should we determine that we will be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset will be recorded in the period such determination is made.

Net Capital Requirement.Our broker-dealer subsidiary, 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 requires it to maintain 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 March 31, 2009 STSs net capital was approximately $924,000, which was approximately $824,000 in excess of its minimum requirement of $100,000.

Commissions and Clearing Costs.Commissions and clearing costs include commissions paid to our employee registered representatives, independent contractor arrangements and fees paid to clearing entities for certain clearance and settlement services. Commissions and clearing costs generally fluctuate based on revenues generated on trades and on the volume of transactions.

Accounting for Contingencies.We accrue for contingencies in accordance with Statement of Accounting Standards ("SFAS") No. 5, "Accounting for Contingencies," when it is probable that a liability or loss has been incurred and the amount can be reasonably estimated. Contingencies by their nature relate to uncertainties that require our exercise of judgment both in assessing whether or not a liability or loss has been incurred and estimated the amount of probable loss. There were none at either March 31, 2009 or December 31, 2008.



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Results of Operations for the three months ended 2009 and 2008

The following table sets forth a summary of financial highlights for the three months ended March 31:

|                                           |  |                   |           |   |             |                      |           |          |  |    |        |    |    |   |            |  
|------------------------------------------ |  | ----------------- | --------- | - | ----------- | -------------------- | --------- | -------- |  | -- | ------ | -- | -- | - | ---------- | -
|                                           |  | 2009              |           |   | 2008        |                      |           | % Change |  |    | Change |   
|                                           |  | (unaudited)       |           |   | (unaudited) |                      |           |          |  |    |        |   
|Statement of operations data:              |  |                   |           |   |             |                      |           |          |  |    |        |   
|Revenue                                    |  | $                 | 264,319   |   |             | $                    | 461,895   |          |  |    | (43    | %) |    | $ | (197,576   | )
|Expenses                                   |  |                   | 1,086,314 |   |             |                      | 860,338   |          |  |    | 26     | %  |    |   | 225,976    |  
|Net loss applicable to common stockholders |  |                   | (928,766  | ) |             |                      | (484,443  | )        |  |    | 92     | %  |    |   | 444,323    |  
|Loss per common share                      |  |                   | (0.07     | ) |             |                      | (0.04     | )        |  | NM |        |    | NM |  
|                                           |  |                   |           |   |             |                      |           |          |  |    |        |    |    |   |            |  
|                                           |  |                   |           |   |             |                      |           |          |  |    |        |    |    |   |            |  
|                                           |  | At March 31,
2009 |           |   |             | At December 31,
2008 |           |          |  |    |        |    |    |   |           
|                                           |  | (unaudited)       |           |   |             |                      |           |          |  |    |        |    |    |   |           
|Financial condition data:                  |  |                   |           |   |             |                      |           |          |  |    |        |    |    |   |            |  
|Cash and cash equivalents                  |  | $                 | 46,307    |   |             | $                    | 652,783   |          |  |    | (93    | %) |    | $ | (606,476   | )
|Marketable securities owned, at fair value |  |                   | 2,037,749 |   |             |                      | 2,512,786 |          |  |    | (19    | %) |    |   | (475,037   | )
|Total assets                               |  |                   | 6,333,834 |   |             |                      | 7,396,891 |          |  |    | (14    | %) |    |   | (1,063,057 | )
|Notes payable                              |  |                   | 1,178,907 |   |             |                      | 1,196,124 |          |  |    | (1     | %) |    |   | (17,217    | )
|Stockholders' equity                       |  |                   | 4,791,866 |   |             |                      | 5,607,282 |          |  |    | (15    | %) |    |   | (815,416   | )



For the three months ended March 31, 2009, we experienced a net loss before dividends to preferred stockholders of $824,766 as compared to a net loss before dividends to preferred stockholders of $398,443 for the three month ended March 31, 2008. The increase in net loss is primarily attributable to lower revenues for the three months ended March 31, 2009, due to the worsening of the economy, and a reversal of accrued commissions payable to a foreign finder during the three months ended March 31, 2008. The reversal was done since he refused to sign a foreign finders contract within a stipulated time.

Revenues

Our commissions for the three months ended March 31, 2009, decreased 33% to $79,892 down from $119,674 for the three months ended March 31, 2008. The decrease in commissions is mainly attributable to the current recession the economy is experiencing, which has adversely affected the major stock markets.

Our trading income for the three months ended March 31, 2009 increased $45,240 from $102,073 recognized for the three months ended March 31, 2008, or a 44% increase, to $147,313. Even though the markets and the economy have been struggling for last few quarters, we were able to acquire new customers who were interested in investing in some fixed income products  However, these results are not indicative of how we will do in 2009, and thus our ability to increase our trading revenues will depend mostly on the future economic conditions and our ability to generate more customer accounts.

Our investment banking revenue for the three months ended March 31, 2009 decreased $147,222 to $2,778 representing a decrease of 98% over the three months ended March 31, 2008. For the three months ended March 31, 2009, no major investment banking deals were closed while for the three months ended March 31, 2008, we recognized $150,000 as placement fees from a closing of a Private Placement of AR Growth Finance Corp. (ARGW). Investment banking fees are generally determined as a percentage of the size of the deal or contract and are recognized when the transaction is done and closed.

Managed account fees increased 1425% or $22,117 to $23,669 for the three months ended March 31, 2009 when compared to $1,552 for the same period in 2008. The main reason for the increase is related to a change in the recognition of revenues generated by the assets under management. Managed account fees are primarily earned based on a percentage of assets under management and are charged to the customer every quarter in advance. For 2008, we changed the recognition of the fees to be at the end of the quarter, thus when earned, and for the first quarter of 2008 only a minor fee adjustment, from previous quarters of existing customers, were recognized. Contractually, if a customer closes his account before the end of the quarter, any unearned revenue is reimbursed on a prorated basis.



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Our interest and dividend income decreased $77,180 to $9,462 for the three months ended March 31, 2009 from $86,642 for the three months ended March 31, 2008, mainly attributable to a decrease in our cash equivalents and investments. Additionally, the decrease is related also to a 100% reserve established for the interest income earned from the Series A 8% preferred shares issued by AR Growth Finance Corp. (ARGW), for which we recognized $31,452 for the three months ended March 31, 2008.

Expenses

Commissions and clearing fees expenses incurred during the three months ended March 31, 2009 increased $181,114 or 275% to $115,336 when compared to a credit balance of $65,778 incurred in the three months ended March 31, 2008. Commissions and clearing fees expenses incurred during the three months ended March 31, 2008 ended in a credit balance of $65,778, due to a reversal of commission payable accrued for a foreign finder, who refused to sign the foreign finders agreement in a stipulated time. The amount reversed amounted to $272,239 representing its share of revenues generated from July 2007 through February 2008. Excluding this adjustment, commissions and clearing fees expenses incurred during the three months ended March 31, 2009 decreased $91,125 or 44% when compared to $206,461 incurred in the three months ended March 31, 2008, due to the decrease in revenues and lower clearing fees due to lower transactional volumes. Commissions paid to registered representatives represent 40% and 51% of total compensable revenues for the three months ended March 31, 2009 and 2008, respectively. The decrease in the percentage of commissions paid to the registered representatives for the three months ended 2009 is in part due to a decrease in payout percentages made to better align commission compensation to the brokerage industry. Clearing fees paid for the three months ended March 31, 2009 and 2008 were $10,918 and $15,598, respectively.

Share based compensation expenses include the amortization of shares and options given to certain key employees during 2007 and 2008. These expenses decreased 36%, or $66,874 to $119,772 for the three months ended March 31, 2009, as compared to $186,646 for the same period ended March 31, 2008. As part of the employment agreements entered with several of our key executives on January 4, 2007, one executive was granted 922,389 shares of common stock vesting equally on a monthly basis over eighteen months, which became fully vested on June 2008. As a result, expenses recognized for share based compensation on stocks for the three months ended March 31, 2009 decreased by approximately $77,000, offset in part by stock options granted to officers and employees during 2008.

Employee compensation and benefits increased 20% to $387,831 for the three months ended March 31, 2009 as compared to $322,791 for the three months ended March 31, 2008. The increase of $65,040 is mostly due to the hiring of experienced financial advisors who have guaranteed draws for a short period of time, while they bring over their customers portfolios.

Occupancy costs increased 11% or $2,068 for the three months ended March 31, 2009, from $18,898 for the three months ended March 31, 2008. Major expenses included under occupancy costs are property taxes, utilities and common repair and maintenance of our office building. The increase is mainly due to the increase in property taxes and the repairs and maintenance expenses incurred in the upkeep of our main office building.

Communications and market data expenses represent mostly charges on our terminals used to monitor and analyze real-time financial market data movements, telephone expenses, licenses and registration expenses associated with our broker-dealer operations. Communications and market data expenses decreased $16,028 or 36% from $44,075 incurred in the three months ended March 31, 2008 to $28,047 for the three months ended March 31, 2008. The main reason for the decrease is due to the cancellation of several market data terminals, with the purpose of decreasing overall operational controllable expenses because of the current economic conditions.

Professional fees increased $58,728 or 31% for the three months ended March 31, 2009 to $251,265 from $192,537 for the three months ended March 31, 2008, mainly due to higher legal expenses incurred related to our current and ongoing legal matters incidental to our retail brokerage services business.  As of March 31, 2009, there are no material legal disputes that may have an adverse impact on our financial statements.

Our travel and entertainment expenses decreased 2% or $1,398 to $62,151 for the three months ended March 31, 2009, down from $63,549 for the three months ended March 31, 2008. The decrease is mainly due to less entertainment expenses incurred as part of our efforts in trying to reduce operational expenses for 2009 because of the current economic conditions.



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Our other operational expenses include miscellaneous expenses and our Directors and Officers (D&O) insurance premium. Other operational expenses increased 8% to $60,447 for the three months ended March 31, 2009 when compared to $56,159 incurred for the same time period in 2008. The increase of $4,288 is mostly attributable to higher expenses related to computer repairs and maintenance.

Dividends attributable to our preferred stockholders increased 21% or $18,000 to $104,000 for the three months ended March 31, 2009 when compared to $86,000 for the three months ended March 31, 2008, mainly due to the increase in the Series C preferred stock outstanding for 2009. For the first quarter of 2008, the Series C preferred stock average balance was approximately $4.3 million, whereas the average balance was approximately $5.2 million for the first quarter of 2009.

Liquidity and Capital Resources

As of March 31, 2009, liquid assets consisted primarily of cash and cash equivalents of approximately $46,000 and marketable securities of approximately $2,038,000 for a total of $2,084,000 which is $1,082,000 lower than the approximately $3,166,000 in liquid assets as of December 31, 2008. Historically, we have financed our business primarily through cash generated by our brokerage operations, as well as proceeds from our private placement of preferred stock and issuance of common stock.

Cash and cash equivalents decreased approximately $606,500 at March 31, 2009. Cash used in our operating activities for the three months ended March 31, 2009 was approximately $476,000, which consists of our net loss of approximately $825,000 adjusted for non-cash expenses of approximately $139,000 of share-based compensation and depreciation and amortization, and a net increase in operating assets and liabilities of approximately $213,000. Cash used in investing activities amounted to approximately $1,500, which represents our additional investment in office equipment. Cash used in our financing activities was approximately $123,000, which consisted mainly of debt service payments made on our notes payable and capital lease obligations of approximately $18,000 and dividends paid to our preferred stockholders of approximately $104,000.

STS, as a broker-dealer, is subject to Rule15c3-1 of the Securities Exchange Act of 1934, which specifies uniform minimum net capital requirements, as defined, for their registrants. As of March 31, 2009, STS had regulatory net capital of approximately $924,000, which exceeded the required amount by approximately $824,000.

In response to the current economic environment, we have implemented changes to our capital management practices to ensure we will be able to continue to meet our obligations. Specifically during March 2009 certain employee salaries and payout percentages were reduced to match current business levels and recent employee resignations will not be immediately filled. We have also undertaken the task of reviewing the other general expenses incurred with the objective of reducing the overall charges.

Since we have primarily financed our operations through cash flows generated by our brokerage operations and proceeds from private placements of preferred stock, we are currently exploring an additional offering of 12% series D preferred stock. There can be no assurance that we will be able to complete this offering on terms acceptable to us, if at all.

The following is a table summarizing our significant commitments as of March 31, 2009, consisting of debt payments related to our notes payable and employment agreements:

|                      |  |       |           |               |   |           |                       |   |         | 
|--------------------- |  | ----- | --------- | ------------- | - | --------- | --------------------- | - | ------- | 
|Year Ending March 31, |  | Total |           | Notes Payable |   |           | Employment
Agreements
|2010                  |  | $     | 184,000   |               | $ | 71,000    |                       | $ | 113,000 | 
|2011                  |  |       | 76,000    |               |   | 76,000    |                       |   |       | 
|2012                  |  |       | 81,000    |               |   | 81,000    |                       |   |       | 
|2013                  |  |       | 87,000    |               |   | 87,000    |                       |   |       | 
|2014                  |  |       | 93,000    |               |   | 93,000    |                       |   |       | 
|Thereafter            |  |       | 770,000   |               |   | 770,000   |                       |   |       | 
|Total commitments     |  | $     | 1,291,000 |               | $ | 1,178,000 |                       | $ | 113,000 | 





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Off-Balance Sheet Arrangements

We were not a party to any off-balance sheet arrangements during the period ended March 31, 2009, except for the one identified in Clearing Arrangements above. In particular, we do not have any interest in so-called limited purpose entities, which include special purpose entities and structured finance entities.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.

Controls and Procedures.

As of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 31, 2009. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.

In addition, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15 or Rule 15d-15 under the Securities Act of 1934, as amended) during the quarter ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





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Part II

Item 1.

Legal Proceedings.

In the ordinary course of business, incidental to our operations, we retain outside counsel to address claims with which we are involved. As of March 31, 2009, we are not aware of any legal proceedings, which management has determined to be material to our business operations; however, we have been named in the following three actions which we are vigorously defending and which actions, based on management's assessment in coordination with outside litigation counsel, we believe to be without merit:

·

ALISTAIR T. SNOWIE, individually as a shareholder on behalf of AMERICAN AMMUNITION, INC., Plaintiff/Counter defendant v. J.A. FERNANDEZ, SR., individually, ANDRES FERNANDEZ, individually, EMILIO JARA, individually, MARIA A. FERNANDEZ, individually, and AMERICAN AMMUNITION, INC., a Nevada corporation and nominal Defendant, Defendants/Counter plaintiffs/Third-Party Plaintiffs v. STRELLER UNIVERSAL, S.A., a foreign corporation, LA TERRAZA TRADING ASSET MANAGEMENT, LTD., a foreign corporation, GLENDA MALLOY, individually and WILLIAM MALLOY, individually, SOUTHERN TRUST SECURITIES, INC. f/k/a CAPITAL INVESTMENT SERVICES, INC., ROBERT J. ESCOBIO, individually and SUSAN ESCOBIO,individually, Third-Party Defendants-In the Circuit Court in and for the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, Case. No. 07-44328 CA 40. The Third Party Complaint in this action was initially filed against STS on April 1, 2008. It was further amended on July 14, 2008. In the complaint, various causes of action are alleged relating to STSs role related to an escrow account holding shares of American Ammunition, Inc. stock. American Ammunition, Inc. filed for bankruptcy relief in the United States Bankruptcy Court in the Southern District of Florida on September 23, 2008. Our outside litigation counsel has advised us that the filing of the bankruptcy has automatically stayed the third party action filed by the debtor against STS.

·

JORGE HABIB, individually, AIR TEMP DE MEXICO S.A. C.V., a Mexican corporation and AIR TEMP NORTH AMERICA, INC., a Florida corporation, v. ROBERT ESCOBIO, individually, KEVIN FITZGERALD, individually, ADOLFO PORRO, individually, SOUTHERN TRUST SECURITIES, INC. f/k/a CAPITAL INVESTMENT SERVICES, INC., a Florida corporation and SOUTHERN TRUST SECURITIES HOLDING CORP., a Florida corporation -In the Circuit Court in and for the Eleventh Judicial Circuit Court for Miami-Dade County, Florida - Case No. 08-39619 CA 40. This complaint was filed on July 20, 2008. The complaint alleges various causes of action against the defendants related to STSs role as a financial advisor to one of the plaintiffs and the sale by Southern Trust Securities Holding Corp. of a controlling interest in a publicly-traded shell corporation to one of the plaintiffs. The plaintiffs collectively seek a constructive trust and unspecified monetary damages. We are in the process of trying to negotiate a resolution of this dispute, but believe it to be 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 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 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 our stock in a private placement in 2005. The plaintiff seeks rescission of the transaction. We do not believe there is any merit to plaintiffs claims and the case is in an early stage. Based on events to date, management believes the case may likely be dismissed just as a prior case based on the same facts brought by the plaintiff several years ago.



In November 2008, we 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 us, as discussed in the preceding paragraph. Our actions seek to recover compensation owed to us for work performed in connection with extensive financial and investment advice work.





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In April 2009, we entered into a confidential settlement agreement, through mediation, with JORGE HABIB, AIR TEMP DE MEXICO S.A. C.V., and AIR TEMP NORTH AMERICA, INC. Management of the Corporation does not believe that the terms and conditions of the agreement will have a material impact on the Corporation's consolidated business operations or financial condition.

Item 1A.

Risk Factors

Not applicable.

Item 2.

Unregistered Sales of Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

|     |  |                                                                    
|---- |  | -------------------------------------------------------------------
|31.1 |  | Rule 13a-14(a) Certification of Chief Executive Officer            
|31.2 |  | Rule 13a-14(a) Certification of Chief Financial Officer            
|32   |  | Section 1350 Certification of President and Chief Financial Officer



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|             |  |                                         |                              
|------------ |  | --------------------------------------- | -----------------------------
|             |  | SOUTHERN TRUST SECURITIES HOLDING CORP.
|             |  |                                         |                              
|             |  | By:                                     | /s/ Robert Escobio           
|             |  |                                         | Robert Escobio               
|             |  |                                         | Chief Executive Officer      
|             |  |                                         | (Principal Executive Officer)
|May 15, 2009 |  |                                         |                              



|             |  |     |                                             
|------------ |  | --- | --------------------------------------------
|             |  | By: | /s/ Fernando Fussa                          
|             |  |     | Fernando Fussa                              
|             |  |     | Chief Financial Officer                     
|             |  |     | (Principal Accounting and Financial Officer)
|May 15, 2009 |  |     |                                             





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