SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


MARK ONE:
[X]      Annual Report  under Section 13 or 15(d) of the Securities Exchange Act
         of 1934 [Fee Required]
         For the fiscal year ended December 31, 1996

[ ]      Transition  Report  under  Section  13 or  15(d)  of the  Securities
         Exchange Act of 1934 [No Fee Required] 
         For the transition  period from _________________ to _________________.

                          Commission file number 1-7986

                          KENT FINANCIAL SERVICES, INC.
                 (Name of small business issuer in its charter)

        Delaware                                                 75-1695953
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

           376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921
             (Address of principal executive offices with Zip Code)

         Issuer's telephone number, including area code (908) 234-0078

         Securities registered under Section 12(b) of the Exchange Act:

                                      NONE

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.10 per share

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the issuer was required to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes X   No______

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained  to  the  best  of  registrant's  knowledge  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]

     Issuer's  revenues  for the  fiscal  year  ended  December  31,  1996  were
approximately $7,125,000.

     At  February  28,  1997,  there  were  1,041,908  shares  of  common  stock
outstanding.   The  aggregate   market  value  of  the  voting  shares  held  by
non-affiliates  of the registrant,  based on the closing bid price of such stock
on such date as reported by NASDAQ, was approximately $4,760,000.

     Transitional Small Business Disclosure Format   Yes______      No X


<PAGE>



                                     PART I


Item 1.     DESCRIPTION OF BUSINESS
            -----------------------

General
-------

     The principal business of Kent Financial  Services,  Inc. (the "Company" or
"Kent") is the operation of its wholly-owned subsidiary, T.R. Winston & Company,
Inc.  ("Winston"),  a securities  broker-dealer  licensed in all states  (except
Alaska) and Washington D.C.  Winston is a member of the National  Association of
Securities Dealers, Inc. and the Securities Investor Protection Corporation. All
clearing arrangements for Winston are conducted pursuant to an agreement with an
unrelated major  broker-dealer which is a member of the New York Stock Exchange,
Inc.  Winston  conducts  various  activities  customary  for  broker-dealers  of
comparable size including buying and selling  securities for customer  accounts,
trading  securities  in  the  over-the-counter   market  and  providing  various
corporate finance services including underwritings, private placements, mergers,
acquisitions  and  similar  transactions.  Winston  has  offices in New  Jersey,
California,  Texas and New Hampshire.  As of December 31, 1996, Winston's equity
capital  was  $980,000,  all of  which  was  advanced  by Kent or  generated  by
Winston's earnings.

     The Company also  provides,  through its direct and indirect  subsidiaries,
investment  advisory and  management  services.  To date,  fees from  investment
advisory  services have not been material.  The subsidiaries were funded with an
initial  capital  contribution of $5.0 million in February 1991. At December 31,
1996, the combined equity capital of the  subsidiaries was  approximately  $13.2
million. These subsidiaries have no debt.

Employees
---------

     As of February  28,  1997,  the Company  and its  subsidiaries  employed 24
people of whom 18 are registered securities brokers.


Item 2.     DESCRIPTION OF PROPERTY
            -----------------------

Corporate and Branch Offices
----------------------------

     The Company and certain of its  affiliates  occupy the Company's  corporate
office  building  and share  direct  occupancy  costs.  The office  building  is
collateral  for a mortgage  loan with a balance  of  approximately  $549,000  at
December 31, 1996, bearing interest on that date at the rate of 7.05% per annum.
The loan matures in March, 1999.

     Effective  February 1, 1994,  an affiliate  entered into a lease  agreement
with the  Company  for  office  space  for a  five-year  period.  The  Company's
aggregate  rental income from this  arrangement  was $43,000 in each of 1996 and
1995.  Winston  leases  space  for its Los  Angeles  office  from  Bear  Stearns
Securities Corporation, its clearing broker-dealer.

Idle Refinery Properties
------------------------

     A  discontinued  crude oil refinery site  comprised of 79 acres is owned by
Texas American  Petrochemicals,  Inc. ("TAPI"), a wholly-owned subsidiary of the
Company, and


<PAGE>

is located  near West  Branch,  Michigan.  The site has been idle since 1983 and
substantially  all of the processing  units and equipment  have been sold.  TAPI
also owns  approximately 9 acres near Midlothian,  Texas,  that was, until 1976,
the site of a waste oil  recycling  facility.  The value of these  locations  is
negligible.


Item 3.     LEGAL PROCEEDINGS
            -----------------

Environmental Matters - Texas American Petrochemicals, Inc.
-----------------------------------------------------------

Texas Water Commission
----------------------

     In January 1988,  pursuant to Section 13 of the Texas Solid Waste  Disposal
Act,  the Texas Water  Commission  ("TWC")  listed on the TEXAS  REGISTER a site
identified by the TWC as the "Texas  American Oil Site"  located in  Midlothian,
Ellis County,  Texas as a hazardous waste facility.  The site was owned by Texas
American Oil  Corporation,  a formerly  wholly-owned  subsidiary of the Company,
prior to ownership being  transferred to TAPI. TAPI has been notified by the TWC
that TAPI is a  potentially  responsible  party  ("PRP") for the site.  Early in
1990, TAPI declined a request by the TWC to perform a remedial  investigation at
the site. The TWC has not issued an Administrative  Order or instituted a formal
proceeding. TAPI has notified the TWC that TAPI has limited financial resources.

Other Environmental Matters
---------------------------

     TAPI has been  identified as a PRP at another waste  disposal site operated
by an  unrelated  party.  In the past,  TAPI had  participated  in the PRP group
investigating the site, but is not doing so at the current time.

     The Company  believes that it should have no liability in  connection  with
TAPI's environmental matters.

Other
-----

     The  Company may be involved  from time to time in various  lawsuits  which
arise in the ordinary  course of business and the outcome of which,  if adverse,
would not have a material impact on the business of the Company.


Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            ---------------------------------------------------

     The Company held its Annual  Meeting of  Stockholders  on November 4, 1996.
Management's  nominees,  Messrs.  Paul O. Koether,  Mathew E. Hoffman,  Casey K.
Tjang and M. Michael Witte, were elected to the Board of Directors.


<TABLE>
<CAPTION>

         The following is a vote tabulation for all nominees:

                                                       FOR             WITHHELD
                                                     -------           --------
                  <S>                                <C>                <C>
                  Paul O. Koether                    819,579            7,993
                  Mathew E. Hoffman                  819,440            8,132
                  Casey K. Tjang                     819,634            7,938
                  M. Michael Witte                   819,588            7,984


</TABLE>

<PAGE>



                                     PART II


Item 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            --------------------------------------------------------

     The Company's common stock trades on the National Association of Securities
Dealers,  Inc. Automated Quotations System ("NASDAQ") Small Cap Market under the
symbol "KENT".

     The table below  lists the high and low bid prices for the common  stock as
reported by NASDAQ for the periods indicated.  These prices represent quotations
between dealers and do not include retail markups, markdowns or commissions, and
may not represent actual transactions.

<TABLE>
<CAPTION>
                                                         High           Low
                                                       --------        -------
Calendar Quarter:
         <S>                                            <C>            <C> 
         1996
         First Quarter                                  $ 6 1/2        $ 4 3/4
         Second Quarter                                 $ 7 1/2        $ 6 5/8
         Third Quarter                                  $ 8            $ 7 1/8
         Fourth Quarter                                 $ 7 7/8        $ 7 1/2

         1995

         First Quarter                                  $ 4 1/2        $ 3 1/2
         Second Quarter                                 $ 6            $ 3 1/2
         Third Quarter                                  $ 7            $ 5 1/4
         Fourth Quarter                                 $ 7 1/2        $ 5 5/8

---------------
</TABLE>



     As of February 28, 1997, the Company had approximately  1,500  stockholders
of record of its common stock.  The closing price of the common stock was $8 1/2
on February 28, 1997.

     The Company did not pay  dividends in 1996 or 1995 and does not  anticipate
paying dividends in the foreseeable future.


<PAGE>


Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS
            ------------------------------------

Liquidity and Capital Resources
-------------------------------

     At  December  31,  1996,  the  Company  had  consolidated   cash  and  cash
equivalents  of  approximately  $7.1  million.  The cash  equivalents  were U.S.
Treasury bills with maturities of three months or less, with yields ranging from
4.96% to 5.18%.  The Company had securities owned with values of $7.6 million at
December  31,  1996.  See  Notes  1 and 3 of  Notes  to  Consolidated  Financial
Statements for additional  information on the valuation of securities  owned. At
that same date the Company's  long-term debt consisted of a mortgage note on the
Company's   headquarters   facility  with  a  remaining   principal   amount  of
approximately  $549,000.  The loan currently bears interest at the rate of 7.05%
with principal  payments amortized over twenty years. The loan matures in March,
1999. A principal  reduction  of $146,000  was made in March 1995 in  connection
with a refinancing of the mortgage note in 1994 to obtain the current terms. See
Note 6 of Notes to Consolidated Financial Statements.  The Company believes that
its liquidity is adequate for future operations.

     Net cash of  approximately  $1.2  million was used by  operations  in 1996,
compared to net cash  provided by operations  of  approximately  $5.0 million in
1995.  There  were  three  major  reasons  for the  change  in cash  flows  from
operations in 1996 as compared to 1995.  The  principal  reason for the decrease
was the change in securities owned in 1996 compared to 1995. In 1996, the change
in securities  owned used cash of $2.1  million,  compared to cash provided from
operations of $2.9 million in 1995.  Secondly,  net earnings were  approximately
$671,000 in 1996, compared to $1.8 million in 1995.  Finally,  the settlement of
the Internal Revenue Service ("IRS")  examination  described below resulted in a
payment of alternative  minimum taxes and interest of approximately  $347,000 in
1996.

     During 1996, the Company  repurchased  6,342 shares of its common stock for
an aggregate cost of $40,925. In 1995, the Company repurchased 24,468 shares for
an aggregate cost of approximately  $165,000. All shares acquired were purchased
at market prices and have been canceled and returned to the status of authorized
and unissued shares.

Environmental Matters
---------------------

     In January 1988,  pursuant to Section 13 of the Texas Solid Waste  Disposal
Act,  the Texas Water  Commission  ("TWC")  listed on the Texas  Register a site
identified by the TWC as the "Texas  American Oil Site"  located in  Midlothian,
Ellis County,  Texas as a hazardous waste facility.  The site was owned by Texas
American Oil  Corporation,  a formerly  wholly-owned  subsidiary of the Company,
prior to ownership being  transferred to TAPI. TAPI was notified by the TWC that
TAPI was a potentially  responsible  party ("PRP") for the site.  Early in 1990,
TAPI  declined a request by the TWC to perform a remedial  investigation  at the
site.  The TWC has not issued an  Administrative  Order or  instituted  a formal
proceeding. TAPI has notified the TWC that TAPI has limited financial resources.

     In April 1989, TAPI was formally  notified that the Michigan  Department of
Natural  Resources  deemed TAPI a responsible  party in connection  with alleged
environmental  problems at a site owned by TAPI.  In the fourth  quarter of 1994
TAPI entered  into a consent  judgment  with the State of Michigan.  The consent
judgment  provided for the payment by TAPI of approximately  $450,000 to satisfy
TAPI's alleged liability for past


<PAGE>

and  future  costs  incurred  and to be  incurred  by the State of  Michigan  in
undertaking remedial environmental  activities at TAPI's former refinery site in
Michigan.  Under the terms of the  settlement,  TAPI paid  $90,000 in the fourth
quarter of 1994 and $45,000  per year in 1995 and 1996.  The Company is required
to pay $45,000 in annual  installments  through the year 2002 without  interest.
The  Company  joined the  consent  judgment  for the sole  purpose  of  assuring
payments by TAPI.  Neither  TAPI nor the Company  admitted  any  liability.  The
remaining  liability  for  this  settlement  has  been  accrued  as  a  part  of
discontinued operations in the consolidated balance sheet.

     TAPI has been  identified as a PRP at another waste  disposal site operated
by an unrelated  party. The Company believes that it should have no liability in
connection with TAPI's environmental matters.

Results of Operations
---------------------

     The  Company  had net  earnings  in 1996 of  $671,000,  or $.64 per  share,
compared  to net  earnings of  $1,841,000,  or $1.73 per share,  in 1995.  Total
brokerage revenue,  which consisted of commissions,  fees, and principal trading
transactions, was approximately $5.0 million in 1996, a decrease of $3.6 million
or 42% from 1995 total  brokerage revenue of $8.6  million.  Brokerage  expenses
(including all fixed and variable  expenses)  decreased by $2.3 million,  or 40%
from $5.8 million in 1995 to $3.5 million in 1996. Net brokerage  income of $1.5
million  in 1996  represented  a  decrease  of $1.3  million,  or 46%,  from net
brokerage  income of $2.8  million in 1995.  The  overall  decrease in the total
brokerage  revenue,   total  brokerage  expense  and  net  brokerage  income  is
attributable to the closing of the New York office of Winston on March 31, 1996.
The Company expects  brokerage  revenue and net brokerage  income to decrease in
the future as it has de-emphasized its retail brokerage business.

     Net  investing  gains were  approximately  $772,000 in 1996,  a decrease of
approximately  $1.6 million from the net gains recorded in 1995 of $2.4 million.
The decrease in net investing gains reflect  variations in investment  portfolio
composition.

     Interest,  dividends and other income  totaled $1.3 million in each of 1996
and 1995. Net investment  banking  revenue of $195,000 and a gain on the sale of
Winston's  Pacific  Stock  Exchange  Seat of  $100,000  in 1996  was  offset  by
decreased  interest income on customer  account  balances at Winston's  clearing
broker-dealer.

     General and  administrative  expenses were $2.4 million in 1996, a decrease
of approximately $1.6 million or 40% from the $4.0 million recorded in 1995. The
decrease was a direct  result of decreased  administrative  costs related to the
closing of  Winston's  New York  office,  as well as a  reduction  in  operating
expense due to a lower headcount, which reduced personnel expense.

Income Taxes
------------

     The Company  reached an agreement in 1996 with the IRS which  concluded the
tax  examinations  for the years 1988 through 1991.  The agreement  required the
Company to make a final payment of $346,693,  including interest of $217,357. As
a  consequence  of the  agreement,  the Company was required to pay  alternative
minimum  tax ("AMT")  for 1995 of  approximately  $200,000.  The  Company's  net
operating loss  carryforwards  for federal income tax purposes were also reduced
by  approximately  $5.8 million as a result of the  examination.  For additional
information  on the  IRS  examination,  see  Note  5 of  Notes  to  Consolidated
Financial  Statements.  The AMT expense will be a credit  against future regular
federal income tax.


<PAGE>


Item 7.     FINANCIAL STATEMENTS
            --------------------

The financial statements filed herein are listed below:

     Independent Auditors' Reports                                      
     Financial Statements:
          Consolidated Balance Sheet - December 31, 1996              
          Consolidated Statements of Operations - 
             Years ended December 31, 1996 and 1995                      
          Consolidated Statements of Cash Flows -
             Years ended December 31, 1996 and 1995                     
          Consolidated Statements of Stockholders' Equity -
             Years ended December 31, 1996 and 1995                     
          Notes to Consolidated Financial Statements
             Years ended December 31, 1996 and 1995


<PAGE>



                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders of
Kent Financial Services, Inc.

We have audited the  accompanying  consolidated  balance sheet of Kent Financial
Services,  Inc.  and  Subsidiaries  as of  December  31,  1996,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the consolidated  financial position of Kent Financial Services,  Inc.
and  Subsidiaries  at December 31, 1996, and the  consolidated  results of their
operations  and their  cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.




/s/ Deloitte & Touche LLP

March 17, 1997
New York, New York

<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of
Kent Financial Services, Inc.

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity  and  cash  flows of Kent  Financial  Services,  Inc.  and
Subsidiaries for the year ended December 31, 1995. These consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated results of operations and cash flows of
Kent Financial  Services,  Inc. and Subsidiaries for the year ended December 31,
1995 in conformity with generally accepted accounting principles.



/s/ Coopers & Lybrand L.L.P.


March 26, 1996
Princeton, New Jersey


<PAGE>

<TABLE>
                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                     ASSETS

                                 ($000 Omitted)

<CAPTION>
                                                              December 31,
                                                                 1996
                                                              ------------
<S>                                                            <C>
Cash and cash equivalents                                       $  7,109
Securities owned                                                   7,639
Receivable from clearing broker                                      379

Property and equipment:
  Land and building                                                1,440
  Office furniture and equipment                                     406
                                                                --------
                                                                   1,846
  Accumulated depreciation                                     (     576)
                                                                --------
  Net property and equipment                                       1,270
                                                                --------

Other assets                                                         117
                                                                --------
     Total assets                                                $16,514
                                                                ========


          See accompanying notes to consolidated financial statements.



</TABLE>



<PAGE>
<TABLE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                 ($000 Omitted)

<CAPTION>


                                                                December 31,
                                                                    1996
                                                                ------------
                                                            
<S>                                                              <C>
Liabilities:
  Accounts payable                                                $   126
  Income taxes payable                                                458
  Accrued expenses                                                  1,543
  Long-term debt                                                      549
  Discontinued operations                                             355
                                                                  -------
    Total liabilities                                               3,031
                                                                  -------

Contingent liabilities (Note 9)                                         -

Stockholders' equity:
  Preferred stock without par value,
    500,000 shares authorized;
    none outstanding                                                    -
  Common stock, $.10 par value,
    4,000,000 shares authorized;
    1,046,523 outstanding                                             105
  Additional paid-in capital                                       15,433
  Accumulated deficit                                            (  2,055)
                                                                  -------
    Total stockholders' equity                                     13,483
                                                                  -------
    Total liabilities and stockholders' equity                    $16,514
                                                                  =======



          See accompanying notes to consolidated financial statements.


</TABLE>



<PAGE>
<TABLE>

                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>


                                                      ($000 Omitted, except per
                                                             share data)
                                                       Year ended December  31,
                                                       -------------------------
                                                        1996               1995
                                                       ------             ------
<S>                                                    <C>                <C>
Revenues:
     Brokerage commissions and fees                    $ 2,953            $ 4,008
     Principal transactions:
       Trading                                           2,086              4,586
       Investing                                           772              2,408
     Interest, dividends and other                       1,314              1,343
                                                       -------            -------
          Total revenues                                 7,125             12,345
                                                       -------            -------

Expenses:
     Brokerage                                           3,484              5,770
     General, administrative and other                   2,437              4,020
     Interest                                              198                406
                                                       -------            -------
           Total expenses                                6,119             10,196
                                                       -------            -------

Earnings before income taxes                             1,006              2,149
Income taxes                                               335                308
                                                       -------            -------
Net earnings                                           $   671            $ 1,841
                                                       =======            =======

Net earnings per common share                          $   .64            $  1.73
                                                       =======            =======

Weighted average number of common shares
  outstanding (in 000's)                                 1,050              1,064
                                                       =======            =======




          See accompanying notes to consolidated financial statements.

</TABLE>



<PAGE>
<TABLE>
                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 ($000 Omitted)
<CAPTION>

                                                                 Year Ended December 31,
                                                                ------------------------
                                                                  1996             1995
                                                                -------          -------
<S>                                                            <C>              <C>
Cash flows from operating activities:
  Net earnings                                                  $    671         $  1,841
  Adjustments:
      Depreciation and amortization                                  127              200
      Unrealized gains on securities owned                     (     364)       (     233)
      Change in securities owned                               (   2,116)           2,853
      Change in net receivable from clearing broker                  819        (     347)
      Change in interest receivable                                   62        (       1)
      Change in accounts payable and accrued expenses          (     404)             317
      Change in income taxes payable                           (     130)             229
      Other, net                                                     150               91
                                                                --------         --------
      Net cash provided by (used in) operating
        activities                                             (   1,185)           4,950
                                                                --------         --------

Cash flows from investing activities:
  Purchase of property and equipment                           (       3)       (      31)
  Sale of property and equipment                                      32                -
  Loans to employees                                                  50        (     103)
  Other, net                                                          47                1
                                                                --------         --------
      Net cash provided by (used in)
        investing activities                                         126        (     133)
                                                                --------         --------

Cash flows from financing activities:
  Purchase of common stock and stock options                   (      41)       (     165)
  Payments on debt                                             (      50)       (     184)
                                                                --------         --------
      Net cash used in financing activities                    (      91)       (     349)
                                                                --------         --------

Net (decrease) increase in cash and cash equivalents           (   1,150)           4,468
Cash and cash equivalents at beginning of period                   8,259            3,791
                                                                --------         --------
Cash and cash equivalents at end of period                      $  7,109         $  8,259
                                                                ========         ========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for:
      Interest expense                                          $    198         $    406
                                                                ========         ========
      Taxes                                                     $    419         $     38
                                                                ========         ========



                       See accompanying notes to consolidated financial statements.


</TABLE>



<PAGE>
<TABLE>

                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES


                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                 ($000 Omitted)


<CAPTION>
                                                                          Additional                              Total
                                                           Common           Paid-In        Accumulated        Stockholders'
                                                            Stock           Capital          Deficit             Equity
                                                           -------       -------------     -----------        -------------
<S>                                                        <C>             <C>              <C>                 <C>
Balance, December 31, 1994                                  $ 108           $15,636         ($ 4,567)            $11,177

Repurchase and cancellation of
 common stock and stock options                            (    3)         (    162)               -            (    165)

Net earnings                                                    -                 -            1,841               1,841
                                                            -----           -------          -------             -------

Balance, December 31, 1995                                    105            15,474         (  2,726)             12,853

Repurchase and cancellation
  of common stock                                               -          (     41)               -            (     41)

Net earnings                                                    -                 -              671                 671
                                                            -----           -------          -------             -------

Balance, December 31, 1996                                  $ 105           $15,433         ($ 2,055)            $13,483
                                                            =====           =======          =======             =======




          See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     Years Ended December 31, 1996 and 1995



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

     Principles of Consolidation
     ---------------------------

     The  consolidated   financial  statements  include  the  accounts  of  Kent
Financial  Services,  Inc.  (the  "Company"  or  "Kent")  and  its  wholly-owned
subsidiaries,   T.R.  Winston  &  Company,  Inc.  ("Winston"),   Texas  American
Petrochemicals,   Inc.  ("TAPI")  and  Asset  Value  Management,  Inc.  and  its
respective subsidiaries, Asset Value Fund Limited Partnership ("AVF"), a limited
partnership, and Asset Value Holdings, Inc. TAPI is inactive.

     Cash Equivalents
     ----------------

     The Company considers as cash equivalents all short-term investments with a
maturity of three months or less when purchased, which are highly liquid and are
readily  exchangeable  for cash at amounts  equal to their  stated  value.  Cash
equivalents at December 31, 1996 consisted of U.S. Treasury Bills.

     Securities Owned
     ----------------

     All  securities  transactions  and the related  revenues  and  expenses are
accounted for on a trade-date  basis.  The effect of all unsettled  transactions
for the period is accrued in the consolidated financial statements.

     The  estimated  fair  value of  non-marketable  securities  owned  has been
determined in good faith under consistently applied principles by the management
of  the  Company,   using  available  market  information  and  other  valuation
considerations.  Considerable  judgment is required to develop the  estimates of
fair value, thus, the estimates  provided herein are not necessarily  indicative
of the amounts that could be realized in a current market exchange.

     Property and Equipment
     ----------------------
       
     The Company  records all property and  equipment at cost.  Depreciation  is
computed using the  straight-line  method over the estimated useful lives of the
individual  assets  ranging from five to thirty-four  years.  Gains or losses on
dispositions of property and equipment are included in operating results.


<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



     Investment Banking Revenues
     ---------------------------

     Investment  banking  revenues  include  gains,  losses,  and  fees  net  of
syndicate  expenses arising from securities  offerings in which the Company acts
as an underwriter or agent.  Investment  banking management fees are recorded on
the offering date, sales  concessions on settlement date, and underwriting  fees
at the  time  the  underwriting  is  completed  and  the  income  is  reasonably
determinable.

     Income Tax
     ----------

     The Company  utilizes  the asset and  liability  method of  accounting  for
income taxes.  Under the asset and liability  method,  deferred income taxes are
recognized  for the tax  consequences  of  "temporary  differences"  by applying
enacted  statutory tax rates  applicable to future years to differences  between
the financial  statement  carrying  amounts and the tax bases of existing assets
and liabilities.  The Company and its subsidiaries  file a consolidated  federal
income tax return.

     Net Earnings Per Common Share
     -----------------------------

     Net earnings per common  share is based on the weighted  average  number of
shares  outstanding  adjusted for the assumed conversion of shares issuable upon
exercise of options where appropriate.

     Estimates
     ---------

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.


2.   SECURITIES BROKERAGE BUSINESS
     -----------------------------

     The  Company's  business  is  comprised  principally  of the  operation  of
Winston,  and the  management  of AVF, an investment  partnership.  Winston is a
licensed  securities  broker-dealer in all states (except Alaska) and Washington
D.C. and is a member of the National  Association of Securities  Dealers,  Inc.,
and the Securities  Investor  Protection  Corporation.  Winston  conducts retail
securities   brokerage,   trading  and  investment   banking   activities.   All
safekeeping,   cashiering,  and  customer  account  maintenance  activities  are
provided by an unrelated  broker-dealer,  Bear Stearns  Securities  Corporation,
under a clearing agreement.

     Pursuant to the net capital  provisions of Rule 15c3-1 under the Securities
Exchange Act of 1934, Winston is required to maintain a minimum net capital,  as
defined, of $129,000. At December 31, 1996, Winston had net capital, as defined,
of $651,297  which was  $522,297 in excess of the  required  minimum.  Winston's
ratio of aggregate indebtedness to net capital, as defined, was .81 to 1.


<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



3.   SECURITIES OWNED
     ----------------
         
     Securities owned consist of the following ($000's omitted):

<TABLE>
<CAPTION>
                                                       Non-
                               Marketable, at     Marketable, at
                                Market Value        Fair Value        Total
                               --------------     --------------    ---------
<S>                               <C>                <C>             <C>
Equity Securities                 $5,807             $1,706          $7,513
Mutual funds                         126                  -             126
                                  ------             ------          ------
Total                             $5,933             $1,706          $7,639
                                  ======             ======          ======

</TABLE>



4.   LEASE COMMITMENTS
     -----------------

     Winston  subleases  part  of  its  premises  at  one  location  to  several
subtenants  under sublease  terms  substantially  equivalent to Winston's  lease
agreement.   Rental  income  under  these   agreements  in  1996  and  1995  was
approximately $91,000 and $61,000, respectively.

     Future   minimum   rental   requirements   under  terms  of  the  Company's
noncancellable leases are approximately:

<TABLE>
                              <S>                            <C>
                              1997                           $120,000
                              1998                             30,000
                                                             --------
                              Total                          $150,000
                                                             ========

</TABLE>

     Aggregate  net rent expense for the years ended  December 31, 1996 and 1995
was approximately $138,000 and $195,000, respectively.


5.   INCOME TAXES
     ------------

     The components of income tax expense are as follows:

<TABLE>
<CAPTION>

                                                          ($000 Omitted)
                                                       Year Ended December 31,
                                                     -------------------------
                                                       1996             1995
                                                     --------         --------
                  <S>                                 <C>               <C>
                  Federal-current                     $259              $132
                  State-current                         76               176
                  Deferred                               -                 -
                                                      ----              ----
                    Total                             $335              $308
                                                      ====              ====

</TABLE>


<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



     Total income tax expense for the years ended  December 31, 1996 and 1995 is
different from the amount  computed by multiplying  total earnings before income
taxes by the  statutory  Federal  income tax rate of 34%.  The reasons for these
differences and the related tax effects are:

<TABLE>
<CAPTION>

                                                             ($000 Omitted)
                                                          Year Ended December 31,
                                                       ---------------------------
                                                         1996               1995
                                                       --------           --------
<S>                                                   <C>                <C>
Income tax expense computed at the
     statutory federal rate on earnings
     before income taxes                               $    342           $    731

Increase (decrease) in tax from:
     Net operating loss carryforward                  (     314)         (      73)
     Utilization of capital loss carryforward                 -          (     595)
     State income tax, net of Federal benefit                50                116
     Alternative minimum tax                                259                132
     Other, net                                       (       2)         (       3)
                                                       --------           --------
          Total income tax expense                     $    335           $    308
                                                       ========           ========

</TABLE>

     The tax effects of significant  items comprising the Company's net deferred
tax asset as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                         ($000
                                                        Omitted)
                                                        -------
         <S>                                           <C>
         Deferred tax assets:
           Operating loss carryforwards                 $2,034
           Alternative minimum tax credit
             carryforward                                  972
           General business credit
            carryforwards                                  921
           State, net of federal benefit                   795
           Other                                           200
                                                        ------
                                                        $4,922
                                                        ======

         Valuation allowance                           ($4,922)
                                                        ======

         Net deferred tax asset                         $    -
                                                        ======

</TABLE>


     Deferred  income taxes  reflect the net effects of  operating  loss and tax
credit carryforwards and the temporary  differences between the carrying amounts
of assets and liabilities for financial  statement purposes and the amounts used
for income tax purposes.  Due to the  uncertainty  of realizing its deferred tax
asset,  a valuation  allowance  of an equal amount is  maintained.  For the year
ended  December 31, 1996,  the valuation  allowance  decreased by  approximately
$2,663,000.


<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



     Significant  carryforward  balances  for Federal  income tax purposes as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>

                                                                      Expiration
                                              ($000 Omitted)            Years
                                              --------------          ---------- 
<S>                                              <C>                  <C>
Net operating loss                               $ 5,984              2006-2009
General business tax credit                      $   921              1997-2000
Alternative minimum tax credit                   $   972                      -

</TABLE>


     An examination of the Company's consolidated federal income tax returns for
the years 1988  through  1991 was  completed  by the  Internal  Revenue  Service
("IRS") in 1994. In the written examination report dated January 10, 1994, which
was enclosed with a thirty-day  letter dated January 13, 1994,  the IRS proposed
tax deficiencies  and penalties for the years under audit of approximately  $8.2
million.  The Company filed a written protest of the IRS examination report with
the  Appeals  Office  within the IRS on March 18,  1994.  After the  protest was
filed,  the  Appeals  Office  sent the case  back to the  Examining  Agent for a
further review of certain of the issues involved. On January 30, 1995, a request
was made by the Company to move the case back to the IRS Appeals  Office.  On or
about  September 26, 1995,  the Company  received a revised  examination  report
which increased the proposed tax  deficiencies and penalties for the years under
audit to $10.7  million.  The Company  reached an agreement with the IRS in 1996
which concluded the examination.  The Company made a final payment to the IRS of
$346,693 including interest of $217,357. As a consequence of the Agreement,  the
Company was  required to pay  alternative  minimum tax and  interest for 1995 of
approximately  $200,000.  The  Company's net operating  loss  carryforwards  for
federal income tax purposes were also reduced by approximately $5.8 million as a
result of the examination.


6.   LONG-TERM DEBT
     --------------

     The mortgage loan  collateralized  by the Company's  headquarters  facility
bears  interest at the rate of 7.05%.  Under the terms of the loan,  the Company
will make monthly payments of approximately $6,000, including interest,  through
March 1999, at which time the remaining balance is due.


7.   CAPITAL STOCK
     -------------

     Common Stock Repurchases
     ------------------------

     From time to time since April 1988,  the  Company's  Board of Directors has
authorized the repurchase of the Company's common stock in the open market or in
privately  negotiated  transactions.  On March 26, 1996,  the Board of Directors
approved a plan to repurchase up to 150,000 shares of the Company's common stock
at  prices  deemed  favorable  in the open  market  or in  privately  negotiated
transactions subject to market conditions,  the Company's financial position and
other  considerations.  All shares acquired  through December 31, 1996 have been
canceled and returned to the status of authorized but unissued shares.



<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



     Common Stock Options
     --------------------

     The  Non-Qualified  Stock  Option Plan adopted by the  stockholders  of the
Company in 1987  provides for a maximum of 66,666  shares of common stock of the
Company to be issued to key executives,  including officers and directors of the
Company,  at the  discretion of the Board of Directors.  Options under this plan
expire five years from the date of grant and are  exercisable  as to one-half of
the  shares  on the date of grant  and,  as to the other  half,  after the first
anniversary  of the date of  grant,  or at such  other  time,  or in such  other
installments  as may be  determined  by the  Board of  Directors  at the time of
grant.

     The following table summarizes option transactions under this plan for 1996
and 1995:

<TABLE>
<CAPTION>
                                                                             Average
                                                             Shares           Price
                                                            -------         ---------
         <S>                                                 <C>             <C>
         Options outstanding at December 31, 1994             9,000          $3.875
         Options granted in 1995                             21,000          $4.50
         Options exercised in 1995                                -                -
                                                             ------          -------
         Options outstanding at December 31, 1995
           and 1996                                          30,000          $4.3125
                                                             ======          =======

</TABLE>

     In August 1993, pursuant to a litigation  settlement the Company granted to
a  stockholder a  non-qualified  stock option to purchase up to 15,000 shares of
the common stock of the Company at $4.50 per share.  This option was exercisable
in whole or in part for a period of five years.  In connection with the grant of
the  option,  the  Company  recorded a charge to earnings in 1993 of $37,500 and
increased  additional  paid-in  capital  accordingly.  On December 5, 1995,  the
Company  bought back the options for $54,900,  and charged  paid-in  capital for
$37,500 and miscellaneous expense for $17,400.

     Pursuant to terms of employment with the Company,  an executive officer was
granted a non-statutory stock option to purchase an aggregate of 5,000 shares of
the Company's stock in 1994.  These options were not issued pursuant to the 1987
Non-Qualified  Stock Option Plan.   At December 31, 1996,  4,000 options with an
exercise price of $4.50 remain outstanding.

     The Company does not accrue compensation  expense for the issuance of stock
options. If it had, pro-forma net earnings and net earnings per share would have
been  $667,000  and  $.63,  respectively  in  1996  and  $1,840,000  and  $1.73,
respectively in 1995.


8.   COMPENSATION ARRANGEMENTS
     -------------------------

     In April 1990,  the  Company  entered  into an  employment  agreement  (the
"Agreement") with the Company's Chairman for a three-year term commencing April,
1990 (the  "Effective  Date")  at an annual  salary  of  $175,000  (adjusted  to
$200,000 in December  1993),  which may be  increased  but not  decreased at the
discretion of the Board of Directors. The


<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



term is to be  automatically  extended  one day for each day  elapsed  after the
Effective  Date. The Chairman may terminate his  employment  under the Agreement
under  certain  conditions  specified  in the  Agreement  and  the  Company  may
terminate the Chairman's  employment under the Agreement for cause. In the event
of the Chairman's death during the term of the Agreement,  his beneficiary shall
be paid a death  benefit  equal to $200,000 per year for three years  payable in
equal monthly installments.  Should the Chairman become "disabled" (as such term
is defined in the  Agreement)  during the term of the Agreement he shall be paid
an annual  disability  payment  equal to 80% of his base salary in effect at the
time of the  disability.  The Company has  accrued for the  contingent  payments
under this Agreement.


9.   CONTINGENCIES
     -------------

     Environmental Matters
     ---------------------

     In January 1988,  pursuant to Section 13 of the Texas Solid Waste  Disposal
Act,  the Texas Water  Commission  ("TWC")  listed on the Texas  Register a site
identified by the TWC as the "Texas  American Oil site"  located in  Midlothian,
Ellis County,  Texas as a hazardous waste facility.  The site was owned by Texas
American Oil  Corporation,  a formerly  wholly-owned  subsidiary of the Company,
prior to ownership being  transferred to TAPI. TAPI has been notified by the TWC
that TAPI is a potentially responsible party ("PRP") for the site. Early in 1990
the TWC requested that TAPI perform a remedial  investigation at the site, which
TAPI has declined.  The TWC has not issued an Administrative Order or instituted
a formal  proceeding.  TAPI has notified the TWC that TAPI has limited financial
resources.


     In April 1989, TAPI was formally  notified that the Michigan  Department of
Natural  Resources  deemed TAPI a responsible  party in connection  with alleged
environmental  problems at a site owned by TAPI. In the fourth  quarter of 1994,
TAPI entered  into a consent  judgment  with the State of Michigan.  The consent
judgment  provides for the payment by TAPI of approximately  $450,000 to satisfy
TAPI's  alleged  liability for past and future costs incurred and to be incurred
by the State of Michigan in  undertaking  remedial  environmental  activities at
TAPI's former refinery site in Michigan. Under the terms of the settlement, TAPI
paid  $90,000 in the fourth  quarter  of 1994 and  $45,000  per year in 1995 and
1996. The Company is required to pay $45,000 in annual installments  through the
year 2002 without interest. The Company joined the consent judgment for the sole
purpose of assuring payments by TAPI.  Neither TAPI nor the Company admitted any
liability.  The  liability  had  been  accrued  for in  prior  years  as part of
discontinued operations.

     TAPI has been  identified  as a PRP at another  Texas waste  disposal  site
operated by an  unrelated  party.  The Company  believes  that it should have no
liability in connection with TAPI's environmental matters.

                                                  

<PAGE>


                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



     Receivable from Clearing Broker
     -------------------------------

     Winston  conducts its business on a fully disclosed basis with one clearing
broker, Bear Stearns Securities Corporation,  on behalf of its customers and for
its own proprietary  accounts.  The clearing  operations for Winston's  customer
accounts and  proprietary  transactions  are  performed  by its clearing  broker
pursuant to a clearance agreement.

     At December 31, 1996,  substantially all the securities owned and the total
receivable  from clearing  broker are  positions  with and amounts due from this
clearing  broker.  The  Company is subject to credit  risk  should the  clearing
broker be unable to pay this balance.


10.  TRANSACTIONS WITH RELATED PARTIES
     ----------------------------------

     Rosenman & Colin LLP ("R&C") has  performed  legal work for the Company and
its  affiliates in 1996 and 1995.  Natalie I. Koether,  wife of the Chairman and
President of the Company is of counsel to R&C and also  employed by the Company.
Aggregate fees and expenses billed by R&C to the Company and its subsidiaries in
1996 and 1995 were  approximately  $194,000  and  $273,000,  respectively.  Mrs.
Koether  received  $142,500  and $60,000 in 1996 and 1995,  respectively,  as an
employee.

     Since March 1990 certain non-subsidiary affiliates have rented office space
from the Company.  The Company's aggregate rental income from these arrangements
was approximately $43,000 in 1996 and 1995.

     The Company  reimburses  an affiliate  for the direct cost of certain group
medical insurance, 401(k) benefits and office supplies. Such reimbursements were
approximately $170,000 and $225,000 during 1996 and 1995, respectively.

     Affiliates of the Company maintain brokerage  accounts with Winston,  which
received commissions from those affiliates totaling  approximately  $121,000 and
$152,000 during 1996 and 1995, respectively.


11.  OFF-BALANCE SHEET RISK
     ----------------------

     The Company is engaged in various trading and brokerage  activities,  on an
agency and principal basis. The Company's  exposure to off-balance  sheet credit
risk occurs in the event a customer,  clearing  agent or  counterparty  does not
fulfill their obligations arising from a transaction.

     The Company is also engaged in various  investment  banking  activities  in
which  counterparties  include  broker-dealers,  banks, and other  institutional
customers.  In the event  counterparties do not fulfill their  obligations,  the
Company  may  be  exposed  to  risk.   The  risk  of  default   depends  on  the
creditworthiness  of the  counterparty  or issuer of the  instrument.  It is the
Company's  policy  to  review,  as  necessary,   the  credit  standing  of  each
counterparty or issuer prior to consumation of such transactions.


<PAGE>



Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE
          ---------------------------------------------

     On  December  9, 1996,  the  Company  engaged  Deloitte & Touche LLP as its
certified public accountant for the 1996 fiscal year,  thereby replacing Coopers
& Lybrand  L.L.P.  ("C&L").  The change was approved by the  Company's  Board of
Directors.

     No report on the financial  statements of the Company  issued by C&L during
the last two fiscal years contained an adverse opinion or disclaimer of opinion,
or was  qualified  or modified  as to  uncertainty,  audit  scope or  accounting
principles,  nor were there any  disagreements  during the last two fiscal years
and through December 9, 1996,  between C&L and the Company concerning any matter
of accounting  principles  or  practices,  financial  statement  disclosure,  or
auditing  scope or procedure,  which  disagreements  if not resolved  would have
required C&L to make reference to the subject matter thereof in connection  with
its report.  During the last two fiscal years and through December 9, 1996, none
of  the  events  listed  in  items (1)  through  (3) of Item 304(a)(1)(iv)(B) of
Regulation S-B have  occurred;  during such period the Company has not consulted
with Deloitte & Touche LLP regarding any matter referred to under paragraphs (i)
and (ii) of Item 304(a)(2) of Regulation S-B.


<PAGE>



                                    PART III



Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
          -------------------------------------------------------------

     All of the members of the current  Board of  Directors  were elected at the
1996 Annual  Meeting  and all will serve until the next Annual  Meeting or until
their successors have been elected and shall qualify. The Company's officers are
elected by and serve at the leave of the Board.

     None of the  executive  officers  of the  Company  is related to any other.
There is no arrangement or understanding  between any executive  officer and any
other person pursuant to which such officer was selected.

     The directors  and  executive  officers of the Company at February 28, 1997
are as follows:

<TABLE>
<CAPTION>


              Name                       Age                       Position Held
            --------                   --------                  ------------------
         <S>                              <C>                    <C>
         Paul O. Koether                  60                     Chairman, Director and
                                                                   President

         Mathew E. Hoffman                43                     Director

         Casey K. Tjang                   58                     Director

         M. Michael Witte                 71                     Director

         John W. Galuchie, Jr.            44                     Vice President and
                                                                   Treasurer

         Mark Koscinski                   39                     Vice President
------------------------------------
</TABLE>

     Paul O. Koether is principally engaged in the following businesses:  (i) as
Chairman and director  since July 1987 and  President  since October 1990 of the
Company and the general partner since 1990 of Shamrock Associates,  ("Shamrock")
an investment  partnership which is the principal stockholder of the Company and
(ii) various positions with affiliates of the Company,  including Chairman since
1990 and a registered representative since 1989 of T. R. Winston & Company, Inc.
("Winston") and since July 1992, a director of American  Metals  Service,  Inc.,
("AMS") which was an indirect,  majority-owned  subsidiary of the Company before
its shares were  distributed  to the  Company's  shareholders.  AMS currently is
seeking to acquire an operating  business.  Mr.  Koether also has been  Chairman
since April 1988,  President from April 1989 to February 1997 and director since
March 1988 of Pure World, Inc., formerly American Holdings, Inc., ("Pure World")
and since  December  1994 has been a director  and since  January  1995 has been
Chairman of Pure World's  majority-owned  subsidiary,  Madis  Botanicals,  Inc.,
("Madis")  a  manufacturer  and  distributor  of  natural  products.  He is also
Chairman  and a director of Pure  World's  principal  stockholder,  Sun Equities
Corporation,  ("Sun") a private  company.  Mr.  Koether served as Chairman and a
director of  NorthCorp  Realty  Advisors,  Inc.,  an asset  management  company,
("NorthCorp")  from June 1992 when it was  acquired by Pure World until  August,
1994 when it was merged and renamed Crown NorthCorp, Inc.



<PAGE>



     Mathew E. Hoffman.  Since January 1997, he has been head of the  litigation
department of Todtman, Young, Nachamie, Hendler & Spizz P.C. From May 1994 until
January,  1997 Mr. Hoffman was a partner of the law firm of Rosen & Reade.  From
February 1989 to May 1994, he was a partner of Keck, Mahin & Cate.

     Casey K. Tjang.  Since  December 1995, he has been a director and secretary
and since  September 1996,  Chief  Financial  Officer of Leading Edge Packaging,
Inc., a  marketing,  wholesaler  and  distribution  company of consumer  product
packagings. From 1991 to 1995, Mr. Tjang served as President and Chief Executive
Officer of First Merchant Bankers,  Inc., a privately-owned  investment company,
whose business is focused in the Asia Pacific rim, and from 1993 to 1995, he was
an Executive  Director of Starlite Holdings Limited,  a printer and manufacturer
of packaging  materials.  From March 1991 until  February  1995, Mr. Tjang was a
director of Concord Camera Corp.,  which  manufactures  and  distributes  camera
equipment.  Prior to March 1991, he was managing  director and Vice President of
the Trade and Merchant  Banking  Group of Midlantic  National  Bank where he was
employed for twelve years.

     M. Michael Witte. Since August 1980, he has been President of M. M. Witte &
Associates,  Inc.,  a  private  corporation  which  is  engaged  in oil  and gas
consulting and investment  management.  In November,  1995 Mr. Witte was elected
Co-Chairman of The American  Drilling  Company,  L.L.C. and on August 1, 1996 he
was  elected   President  and  Chief  Executive   Officer  of  South  Coast  Oil
Corporation,  positions he still  holds.  From April 1991 to June 1995 Mr. Witte
was a director of Search Exploration, Inc., a publicly held corporation until it
was  acquired by Harken  Energy  Corporation,  which,  through its  wholly-owned
subsidiary, McCulloch Energy, Inc. ("McCulloch") was engaged in the acquisition,
exploration, development and production of oil and natural gas properties in the
United States.  Mr. Witte was Chairman of McCulloch from April 1991 through June
1995.

     John W. Galuchie,  Jr., a certified  public  accountant,  is engaged in the
following  businesses:  (i) the Company,  as Vice President and Treasurer  since
September  1986 and a director from June 1989 to August 1993;  (ii) Winston,  as
President and Treasurer  since  September  1989;  (iii) Pure World, as Executive
Vice  President  since April 1988 and director  from January 1990 until  October
1994;  and (iv)  NorthCorp as a director from June 1992 until August 1996 and as
Secretary, from November 1992 to August 1994.

     Mark Koscinski,  a certified public accountant,  is principally  engaged in
the following businesses:  since August 1993 (i) the Company and Winston as Vice
President;  (ii) Pure World, as Senior Vice President;  and (iii) since December
1994, Madis, as director, Vice President,  Secretary and Treasurer.  Previously,
Mr.  Koscinski  had  served as Vice  President  of  Accounting  Operations  with
Chemical  Bank of New York from October 1992 to August 1993.  From February 1986
to October  1992,  Mr.  Koscinski  was employed by the Howard  Savings Bank (the
"Howard")  in New  Jersey in  various  positions,  concluding  as its  Corporate
Controller.  The Howard was placed  into  receivership  by the  Federal  Deposit
Insurance Corporation on October 2, 1992.

     Section  16(a)  of the  Securities  Exchange  Act  requires  the  Company's
officers and directors and persons who own more than ten percent of a registered
class of the  Company's  equity  securities,  to file reports of  ownership  and
changes  in  ownership  on  Forms 3, 4 and 5 with the  Securities  and  Exchange
Commission ("SEC") and the National  Association of Securities Dealers ("NASD").
Officers and directors and greater than ten percent stockholders are required by
SEC  regulation to furnish the Company with copies of all Forms 3, 4 and 5 which
they file.



<PAGE>



     Based  solely on the  Company's  review of the  copies of such forms it has
received, the Company believes that all its officers, directors and greater than
ten percent beneficial owners complied with all filing  requirements  applicable
to them with respect to transactions during fiscal 1995.


Item 10.  EXECUTIVE COMPENSATION
          ----------------------

     There is shown below  information  concerning the annual  compensation  for
services in all  capacities  to the Company for the fiscal years ended  December
31, 1996,  1995 and 1994,  for those  persons who were, at December 31, 1996 (i)
the chief executive officer and (ii) the other most highly compensated  officers
of  the  Company,   whose  annual  compensation  exceeds  $100,000  (the  "Named
Officers").

<TABLE>
<CAPTION>

                                      Summary Compensation Table
                                      ---------------------------

                                                                                     Long-Term
                                                 Annual Compensation<F1><F2>        Compensation           Other
Name and Principal                      ----------------------------------------  -----------------      ---------     
Officer                       Year      Salary        Bonus            Other<F3>      Options(#)

<S>                           <C>      <C>            <C>              <C>                     <C>              <C>
Paul O. Koether               1996     $200,000       $65,000          $142,366
Chairman, Presi-              1995     $200,000       $90,000          $141,956                -                -
dent and Chief                1994     $200,000       $     -          $132,917                -                -
Executive Officer


John W. Galuchie, Jr.         1996     $160,000       $15,000          $    892
Vice President                1995     $160,000       $21,000          $    259                -                -
and Treasurer                 1994     $160,000       $     -          $     62                -                -

----------------------------------------------------

<FN>

<F1> The Company has no bonus or deferred compensation plans and pays bonuses at
the discretion of the Board based on performance.

<F2> The individuals  named in the  table  above  received  incidental  personal
benefits  during the  fiscal  years  covered  by the  table.  The value of these
incidental  benefits  did not exceed the lesser of either  $50,000 or 10% of the
total  annual  salary and bonus  reported  for any of the Named  Officers.  Such
amounts are excluded from the table.

<F3>  Represents  commissions  paid by  Winston  to these  individuals  in their
capacity as  registered  representatives  for  securities  trades made for their
respective customers.

</FN>
</TABLE>

     There  were  no  stock  options  granted  pursuant  to the  Company's  1987
Non-Qualified  Stock  Option  Plan (the  "Plan")  during the fiscal  years ended
December 31, 1995 or 1996 to the Named Officers.

     Options may be granted by the Board of Directors to officers, directors and
employees of the Company or its subsidiaries.  The exercise price for the shares
shall not be less than the fair market  value of the Common Stock on the date of
grant. Options will expire five years from date of grant and will be exercisable
as to  one-half  of the  shares on the date of grant  and as to the other  half,
after the first  anniversary of the date of grant,  or at such other time, or in
such other  installments  as may be  determined  by the Board of  Directors or a
committee thereof at the time of grant. The


<PAGE>



options are non-transferable  (other than by will or by operation of the laws of
descent) and are exercisable  generally only while the holder is employed by the
Company or by a subsidiary of the Company or, in the event of the holder's death
or permanent  disability  while  employed by the Company,  within one year after
such death or disability.

     The table below contains information  concerning the exercise of options by
the Named  Officers  during 1996 and the fiscal  year-end  value of  unexercised
options held by the Named Officers.

<TABLE>
<CAPTION>


                                Aggregated Option Exercises in Last Fiscal Year and
                                           Fiscal Year-End Option Values

                     Number of                                                        Value of Unexercised
                  Shares Acquired       Value           Number of Unexercised         In-the-Money Options
                    on Exercise        Realized      Options at December 31, 1996     at December 31, 1996
                 -----------------    ----------   -------------------------------  -------------------------
                                                     Exercisable   Unexercisable    Exercisable   Unexercisable
                                                   --------------  ---------------  -----------   -------------
<S>                         <C>         <C>               <C>                 <C>     <C>                   <C>
Paul O.
Koether                     -           $  -                  -               -       $     -               -

John W.
Galuchie, Jr.               -           $  -              5,000               -       $25,625               -

</TABLE>

Remuneration of Directors
-------------------------

     Directors  who are not  employees  of the Company  receive a monthly fee of
$750  plus $200 for each day of  attendance  at board  and  committee  meetings.
During  1996,  the  Company  paid  directors'  fees in the  aggregate  amount of
approximately $30,000.

Compensation Arrangements
-------------------------

     In April,  1990, the Company and Paul O. Koether entered into an employment
agreement  ("Agreement")  pursuant to which Mr.  Koether serves as the Company's
Chairman  for an  initial  three-year  term  ("Commencement  Date") at an annual
salary of $175,000 (changed to $200,000 in December 1993) ("Base Salary"), which
may be increased but not decreased at the  discretion of the Board of Directors.
The term is to be automatically  extended one day for each day elapsed after the
Commencement Date.

     Mr.  Koether may terminate his  employment  under the Agreement at any time
for "good reason" (defined below) within 36 months after the date of a Change in
Control (defined below) of the Company.  Upon his termination,  he shall be paid
the greater of the (i) Base Salary and any bonuses  payable  under the Agreement
through the  expiration  date of the  Agreement or (ii) an amount equal to three
times the  average  annual  Base  Salary  and  bonuses  paid to him  during  the
preceding five years.

     Change in  Control  is deemed to have  occurred  if (i) any  individual  or
entity,  other than  individuals  beneficially  owning,  directly or indirectly,
common  stock of the Company  representing  30% or more of the  Company's  stock
outstanding as of April,  1990, is or becomes the beneficial owner,  directly or
indirectly,  of  30%  or  more  of  the  Company's  outstanding  stock  or  (ii)
individuals  constituting  the Board of  Directors  on April,  1990  ("Incumbent
Board"),  including any person subsequently  elected to the Board whose election
or nomination  for election was approved by a vote of at least a majority of the
Directors  comprising  the  Incumbent  Board,  cease  to  constitute  at least a
majority


<PAGE>


of the Board. "Good reason" means a determination made solely by Mr. Koether, in
good faith, that as a result of a Change in Control he may be adversely affected
(i) in carrying out his duties and powers in the fashion he  previously  enjoyed
or (ii) in his future prospects with the Company.

     Mr.  Koether may also  terminate  his  employment  if the Company  fails to
perform its  obligations  under the Agreement  (including any material change in
Mr. Koether's duties,  responsibilities  and powers or the removal of his office
to a location more than five miles from its current  location)  which failure is
not cured within specified time periods.

     The Company may terminate Mr. Koether's  employment under the Agreement for
"cause" which is defined as (i) Mr. Koether's continued failure to substantially
perform his duties  under the  Agreement  (other than by reason of his mental or
physical  incapacity  or the removal of his office to a location  more than five
miles  from its  current  location)  which is not cured  within  specified  time
periods,  or (ii) Mr.  Koether's  conviction  of any  criminal act or fraud with
respect to the Company.  The Company may not terminate Mr. Koether's  employment
except by a vote of not less than 75 percent of the entire Board of Directors at
a meeting at which Mr. Koether is given the opportunity to be heard.

     In the event of Mr.  Koether's death during the term of the Agreement,  his
beneficiary  shall be paid a death  benefit equal to $200,000 per year for three
years  payable  in  equal  monthly  installments.   Should  Mr.  Koether  become
"disabled"  (as such term is  defined in the  Agreement)  during the term of the
Agreement  and either  long-term  disability  insurance  is not  provided by the
Company or such policy does not provide an annual benefit to age 70 equal to 80%
or more of Mr.  Koether's  base  salary,  he shall be paid an annual  disability
payment equal to 80% of his base salary in effect at the time of the disability.
Such payments shall continue until Mr. Koether attains the age of 70.


<PAGE>


Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

     The  following  table  provides  information  with respect to the Company's
common stock  beneficially owned as of February 28, 1997 by each director of the
Company,  by each person having beneficial  ownership of five percent or more of
the Company's common stock and by all directors and officers of the Company as a
group.

<TABLE>
<CAPTION>

                                   Amount and Nature
 Name and Address                    of Beneficial                  Percent of
of Beneficial Owner                  Ownership<F1>                    Class
-------------------               -------------------             --------------
<S>                                      <C>                          <C>

Paul O. Koether                          468,177<F2>                  43.68%
 211 Pennbrook Road
 Far Hills, NJ 07931

Shamrock Associates                      417,470                      38.95%
 211 Pennbrook Road
 Far Hills, NJ 07931

M. Michael Witte                          12,000                      1.12%
 1120 Granville Avenue
 Suite 102
 Los Angeles, CA 90049

Casey K. Tjang                            10,000                      <F4>
 56 Hall Drive
 Clark, NJ 07066

Mathew E. Hoffman                          7,000                      <F4>
 62 Rosehill Avenue
 New Rochelle, NY  10804

John W. Galuchie, Jr.                     24,166<F3>                   2.25%
 376 Main Street
 Bedminster, NJ 07921

Mark Koscinski                             5,000                      <F4>
 376 Main Street
 Bedminster, NJ 07921

All Directors and Officers               512,177                      47.88%
 as a Group (6 persons)
-----------------------------------------

<FN>
<F1> The beneficial  owner has both sole voting and sole investment  powers with
     respect to these  shares  except as set forth in this  footnote or in other
     footnotes below.  Included in such number of Shares  beneficially owned are
     shares subject to options  currently  exercisable  or becoming  exercisable
     within sixty days: Mr. Witte (7,000 shares);  Mr. Tjang (7,000 shares); Mr.
     Hoffman (7,000 shares);  Mr. Galuchie (5,000 shares);  Mr. Koscinski (4,000
     shares); and all directors and officers as a group (30,000 shares).


<PAGE>



<F2> Includes the 417,470 Shares  beneficially  owned by Shamrock.  As a general
     partner  of  Shamrock,  Mr.  Koether  may be  deemed  to own  these  shares
     beneficially. Includes 14,166 shares owned by Sun, a private corporation of
     which Mr.  Koether is the  Chairman and a principal  stockholder.  Includes
     1,666  shares  held by Mr.  Koether's  Keogh Plan and 875 shares  held in a
     trust for the benefit of Mr. Koether's  daughter for which Mr. Koether acts
     as the sole trustee.  Mr. Koether is also a limited partner of Shamrock and
     may be deemed to own  beneficially  that  percentage of the shares owned by
     Shamrock represented by his partnership  percentage.  Mr. Koether disclaims
     beneficial ownership of such shares.

<F3> Includes  14,166  Shares owned by Sun, a private  corporation  of which Mr.
     Galuchie is a director  and  officer.  Mr.  Galuchie  disclaims  beneficial
     ownership of such shares.

<F4> Less than 1 percent.

</FN>
</TABLE>


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

     Rosenman & Colin LLP ("R&C")  performed  legal work for the Company and its
affiliates  in 1996 and 1995.  Natalie  I.  Koether,  wife of the  Chairman  and
President of the Company, is of counsel to R&C and also employed by the Company.
Aggregate fees and expenses billed by R&C to the Company and its subsidiaries in
1996 and 1995 were  approximately  $194,000  and  $273,000,  respectively.  Mrs.
Koether  received  $142,500  and $60,000 in 1996 and 1995,  respectively,  as an
employee.

     The Company  reimburses  an affiliate  for the direct cost of certain group
medical insurance, 401(k) benefits and office supplies. Such reimbursements were
approximately $170,000 and $225,000 during 1996 and 1995, respectively.

     Affiliates of the Company maintain brokerage  accounts with Winston,  which
received commissions from these affiliates totaling  approximately  $121,000 and
$152,000 during 1996 and 1995, respectively.


<PAGE>



                                     PART IV


Item 13.  EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     The following exhibits are filed as part of this report:

<TABLE>

<CAPTION>

(a)  Exhibits
     --------
          
    <S>           <C>
     3.1          Bylaws of the Registrant, as amended. <F1>

     3.2(a)       Articles of Incorporation of Registrant, as amended (including
                  certificate of stock designation for $2.575 Cumulative
                  Convertible Exchangeable Preferred Stock). <F2>

     3.2(b)       Certificate of Amendment to Certificate of Incorporation.<F3>

     3.2(c)       Certificate of Amendment to Certificate of Incorporation dated
                  September 26, 1991. <F4>

    10.1          1987 Non-Qualified Executive Stock Option Plan. <F6>

    10.2          Employment Agreement, dated as of April 6, 1990 by and between
                  Texas American Energy Corporation and Paul 0. Koether. <F7>

    10.3          Notice of Proposed Settlement. <F8>

    10.4          Consent Judgment referred to in "Part I - Item 3 - LEGAL  
                  PROCEEDINGS." <F9>

    21            Subsidiaries<F10>

    27            Financial Data Schedule<F10>

(b)  Reports on Form 8-K.
     --------------------

      On  December  9, 1996 the  Company  filed an 8-K  reporting  a
      change  in  accountants  from  Coopers  &  Lybrand  L.L.P.  to
      Deloitte & Touche LLP.

-------------------



<PAGE>

<FN>

<F1> Incorporated by reference to Texas American Energy Corporation Registration
     Statement, as amended, on Form S-l, No. 33-11109.
<F2> Incorporated by reference to Texas American Energy  Corporation  Form 10-K,
     for the fiscal year ended December 31, 1984.
<F3> Incorporated  by reference to Texas American Energy  Corporation  Form 10-K
     for the fiscal year ended December 31, 1987.
<F4> Incorporated by reference to Kent Financial  Services,  Inc. Form 10-Q
     for the quarter ended September 30, 1991.
<F6> Incorporated  by  reference  to Texas  American  Energy  Corporation  Proxy
     Statement dated November 11, 1987.
<F7> Incorporated  by reference to Kent Financial  Services,  Inc. Form 10-Q for
     the quarter ended June 30, 1990.
<F8> Incorporated by reference to Kent Financial Services,  Inc. Form 10-QSB for
     the quarter ended June 30, 1993.
<F9> Incorporated by reference to Kent Financial Services,  Inc. Form 10-QSB for
     the quarter ended September 30, 1994.
<F10>Filed herewith.

</FN>
</TABLE>

<PAGE>

                                   SIGNATURES

In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                            KENT FINANCIAL SERVICES, INC.


Dated:  March 26, 1997                      BY  /s/ Paul O. Koether
                                                -------------------
                                                Paul 0. Koether
                                                Chairman of the Board, President
                                                and Director
                                                (Principal Executive Officer)



                                            BY   /s/ Mark Koscinski
                                                 -------------------
                                                 Mark Koscinski
                                                 Vice President
                                                (Principal Financial and
                                                 Accounting Officer)

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.


Dated:  March 26, 1997                           /s/ Paul O. Koether
                                                 -------------------
                                                 Paul 0. Koether
                                                 Chairman of the Board,
                                                 President and Director
                                                (Principal Executive Officer)


Dated:  March 26, 1997                           /s/ Mathew E. Hoffman
                                                 ---------------------
                                                 Mathew E. Hoffman
                                                 Director


Dated:  March 26, 1997                           /s/ M. Michael Witte
                                                 --------------------
                                                 M. Michael Witte
                                                 Director

Dated:  March 26, 1997                           /s/ Casey K. Tjang
                                                 ------------------
                                                 Casey K. Tjang
                                                 Director