UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 MARK
ONE:
 T
              Annual
      Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the
fiscal year ended December 31, 2008
 
 £
              Transition
      Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the
transition period from _________________ to _________________.
 
 Commission
file number 1-7986
 
 KENT
FINANCIAL SERVICES, INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                    
                    75-1695953(State
      or other jurisdiction of incorporation or organization)
                    
                    (I.R.S.
      Employer Identification No.)211 Pennbrook Road, P.O. Box 97, Far Hills, New
      Jersey
                    
                    07931(Address
      of principal executive offices)
                    
                    (Zip
      Code)
 
 Registrant's
telephone number   (908)
766-7221
 
 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
 
 Indicate
by check mark if the registrant is a well-known season issuer, as defined in
Rule 405 of the Securities Act. £
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. £
 
 Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act 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 TNo £
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K  is not contained herein, and will not 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-K or any
amendment to this Form 10-K. T
 
 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 T
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes £No T
 
 The
aggregate market value of the common stock held by non-affiliates of the
registrant, based upon the closing sale price on the NASDAQ Capital Markets as
of February 27, 2009, was approximately $1.33 million.  At February
27, 2009, there were 2,759,293 shares of common stock outstanding.
  
 
  PART I
 
 Item
      1.
              BUSINESS
 
 Kent
Financial Services, Inc.’s (“Kent” or the “Company”) business is comprised of
the management of Kent International Holdings, Inc. (“Kent International”) and
Kent Educational Services, Inc. (“Kent Educational”).  Kent was formed
in 1988 as a Delaware corporation and reincorporated in Nevada in 2006 by a
merger into a newly formed, wholly owned Nevada subsidiary with the same name
that was the surviving corporation of the merger.
 
 General
 
 Except
for the historical information contained herein, the matters discussed in this
Annual Report on Form 10-K are forward-looking statements that involve risks and
uncertainties.  For a discussion of certain factors that may affect
the outcome projected in such statements, see Item 7 (“Management’s Discussion
and Analysis of Financial Condition and Results of Operations”) of this Annual
Report, as well as factors noted in the balance of this Item 1 (“Description of
Business”).  Actual results may differ materially from those
projected.  These forward-looking statements represent the Company’s
judgment as of the date of the filing of this Annual Report.  However,
the Company disclaims any intent or obligation to update these forward-looking
statements.
 
 Kent
International
 
 Kent
International is a publicly traded company (stock symbol “KNTH.PK”) currently
seeking to redeploy its assets into an operating business.  The
Company owned approximately 53.44% of Kent International at December 31,
2008.  All of Kent International’s assets, excluding its portfolio of
pharmaceutical patents (which have a zero carrying value on the consolidated
financial statements), are invested in cash and United States Treasury
Bills.  Kent International’s current business plan is to serve as a
vehicle for the acquisition of or merger or consolidation with another
company.  Kent International may use its available working capital,
capital stock, debt or a combination of these to start a business or to effect a
business combination with a company seeking to establish a public trading market
for its securities while avoiding the time delays, significant expense, loss of
voting control and other burdens including significant professional fees of an
initial public offering.  A business combination may be with a
financially stable, mature company or a company that is in its early stages of
development or growth, which could include companies seeking to obtain capital
and to improve their financial stability.
 
 Additionally,
Kent International has developed a niche social networking website, www.ChinaUSPals.com,
designed to promote cultural exchange between the citizens of the United States
and those of the People’s Republic of China.  Membership to the site
is free, thus, any potential revenues will be derived from advertisements placed
on the site by third parties.  The site provides users with access to
other users’ personal profiles and enables the user to send messages to other
registered users of similar interests in order to develop lasting friendships or
simply attain a pen pal.  ChinaUSPals.com also features user generated
discussion forums and blogs as well as user submitted videos and
pictures.  In July, Kent International reached an agreement with
Wizart Studios, LLC, a New York based web design firm, to redesign and market
the site in return for a 19% equity interest in ChinaUSPals.com, Inc., the
site’s holding company.  As a part of the agreement, Kent
International will be responsible for the costs of marketing the site until
revenue is generated.  The redesigned site was launched on August 6,
2008.  Since then, site membership has grown to over 3,100 members
from the approximately 150 members prior to the redesign.
  2
  While
Kent International is encouraged by the membership and traffic growth since the
redesign, we cannot be certain that the growth rate will continue or that
existing members will continue using the site.  Kent International
also faces the risk that our website will not be viewable in China or will be
deliberately blocked by the government of the People’s Republic of
China.  Internet usage and content are heavily regulated in China and
compliance with these laws and regulations may cause us to change or limit our
business practices in a manner adverse to our business.
 
 Kent
International does not expect that these activities will generate any
significant revenues for an indefinite period as these efforts are in their
early stages.  As a result, these programs may produce significant
losses until such time as meaningful revenues are achieved.
 
 Kent
Educational
 
 Kent
Educational is a wholly owned subsidiary of Kent that has a 60% controlling
interest in The Academy for Teaching and Leadership, Inc., a Delaware
corporation (“The Academy”).  The Academy, headed by Dr. Saul
Cooperman, a former Commissioner of Education in the State of New Jersey, offers
educators high quality programs designed to dramatically improve themselves,
their students and their schools.  The Academy brings together
educators from school districts to engage in quality programs related to
curriculum, assessment, and instructional strategies that have the potential to
assist them in their own development as well as to enhance the learning of their
students.  Similarly, it offers administrators the latest programs in
leadership practices that can support their school district’s goals and give
them the skills to achieve their specific objectives.
 
 Academy
programs for school leaders include “Solutions for Superintendents”, “Strategies
for School Leaders”, “Effective Presentation Skills”, “Leading and Coaching in a
Complex Environment”.  Programs designed for educators include
“Coaching the Literacy Coach”, “Differentiating the Curriculum”, “Classroom
Management for the Elementary and Middle School Teacher” and “Designing and
Delivering Effective Instruction”.
 
 Item
      1a.
              RISK
      FACTORS
 
 Risk
Factors Related to the Company
 
 The
Company’s business success is wholly dependent on the success of Kent
International and Kent Educational.
 
 Kent’s
business is comprised entirely of the management of Kent International and Kent
Educational.  Accordingly, any risks affecting those companies
constitute risks to Kent at the same time.
 
 Risk
Factors Related to Kent International
 
 For a
discussion of Kent International’s risk factors, please refer to Kent
International’s annual report for the year ended December 31, 2008 filed on form
10-K under SEC file no. 000-20726.  All of the risk factors set forth
under Item 1A of that report are incorporated herein by
reference.
  3
  Risk
Factors Related to Kent Educational
 
 The
Academy is currently reviewing its strategic options.
 
 The
Academy’s sole full time executive officer resigned on December 15,
2007.  This individual was primarily responsible for business
development and coordinating services.  As a result, The Academy is
currently reviewing its strategic options including hiring a replacement for the
executive officer, partnering with a competitor, continuing to provide services
to existing clients through an outsourcing platform, or discontinuation of
services.
 
 The
educational services sector in New Jersey is highly competitive.
 
 The
Academy operates in a highly fragmented market with numerous small service
providers and no dominant competition.  There can be no assurance that
The Academy will maintain or improve its competitive position or that no single
competitor or group of competitors will dominate the market in the
future.
 
 The
resources allocated for educational purposes are unforeseeable.
 
 The
allocation of resources for educational purposes is currently under great
scrutiny in New Jersey.  Funding for public schools in New Jersey
comes from either State aid or local property taxes.  Although
property taxes have increased rapidly in New Jersey over the last eight years,
this has not resulted in additional educational expenditures, because the State
of New Jersey has at the same time reduced its aid allocated to public
schools.  It is impossible to foresee the future developments of
property taxes and educational State aids.  As public schools in New
Jersey are currently our primary customer, our revenue growth is restricted by
any limitation on these resources.
 
 Employees
 
 As of
February 27, 2009, the Company and its subsidiaries had two full-time employees
and one part-time employee.
 
 Item
      2.
              PROPERTIES
 
 None
 
 Item
      3.
              LEGAL
      PROCEEDINGS
 
 None
 
 Item
      4.
              SUBMISSION OF MATTERS
      TO A VOTE OF SECURITY
HOLDERS
 
 The
Company held its Annual Meeting of Stockholders on December 17,
2008.  Management's nominees, Paul O. Koether, William Mahomes, Jr.,
Casey K. Tjang, James L. Bicksler, and Bryan P. Healey were elected to the Board
of Directors.
  4
  The
following is the vote tabulation for all nominees:
 
 FOR
                                
                                AGAINST
                                
                                WITHHELD
                                
                                ABSTENTIONS
      AND
                                  BROKER
      NONVOTESPaul
      O. Koether
                                
                                1,489,094
                                
                                -
                                
                                -
                                
                                -William
      Mahomes, Jr.
                                
                                1,489,094
                                
                                -
                                
                                -
                                
                                -Casey
      K. Tjang
                                
                                1,489,094
                                
                                -
                                
                                -
                                
                                -James
      L. Bicksler
                                
                                1,489,094
                                
                                -
                                
                                -
                                
                                -Bryan
      P. Healey
                                
                                1,489,094
                                
                                -
                                
                                -
                                
                                -
 
 PART II
 
 Item
      5.
              MARKET FOR COMMON
      EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES
 
 Shareholders
of Record
 
 As of
February 27, 2009, the Company had 1,347 stockholders of record of its common
stock.  The closing price of the common stock was $1.27 on February
27, 2009.
 
 Market
Information
 
 The
Company's common stock trades on the NASDAQ Capital Market under the symbol
"KENT".  The table below sets forth the high and low sales price per
share of the Common Stock for the periods indicated as reported by NASDAQ for
the periods indicated.
 
 High
                        
                        
                        LowCalendar
      Quarter:2008First
      Quarter
                        
                        $
                        2.22
                        
                        
                        $
                        1.62Second
      Quarter
                        
                        
                        1.94
                        
                        
                        
                        1.60Third
      Quarter
                        
                        
                        1.68
                        
                        
                        
                        1.41Fourth
      Quarter
                        
                        
                        1.86
                        
                        
                        
                        1.402007First
      Quarter
                        
                        $
                        3.73
                        
                        
                        $
                        2.21Second
      Quarter
                        
                        
                        2.81
                        
                        
                        
                        1.94Third
      Quarter
                        
                        
                        2.40
                        
                        
                        
                        1.98Fourth
      Quarter
                        
                        
                        2.50
                        
                        
                        
                        2.01
 
 Dividends
 
 The
Company did not declare or pay any dividends in 2008 or 2007.
  5
  Equity
Compensation Plan Information
 
 On
November 25, 2005, shareholders of the Company approved the 2005 Stock Option
Plan making a total of 400,000 common stock options available for
issuance.  The Company did not record stock-based compensation expense
for the years ended December 31, 2008 or 2007 as no options were earned during
these periods.  At December 31, 2008, the Company had no common stock
options outstanding.
 
 The
following table provides a summary of the securities authorized for issuance
under equity compensation plans, the weighted average price and number of
securities remaining available for issuance, at December 31, 2008.
 
 Plan
      Category
                  
                  (a)
      Number of Securities to be Issued Upon Exercise of Outstanding Options,
      Warrants and Rights
                  
                  
                  (b)
      Weighted-Average Exercise Price of Outstanding Options, Warrants and
      Rights
                  
                  
                  (c)
      Number of Securities Remaining Available for Future Issuance Under Equity
      Compensation Plans Excluding Securities Reflected in Column
      (a)Equity
      Compensation Plans Approved by Security Holders2005
      Stock Option Plan
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  400,000Equity
      Compensation Plans not Approved by Security Holders
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/ATotal
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  400,000
  6
  Repurchase
Plans
 
 SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
 (COMMON
STOCK-AUGUST 2004 REPURCHASE PLAN) (1)
 
 Period
                                      
                                      Total
      Number of Shares Purchased
                                      
                                      
                                      Average
      Price Paid per Share
                                      
                                      
                                      Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
                                      
                                      
                                      Maximum
      Number of Shares that May Yet Be Purchased Under the Plans or
      ProgramsOctober
      1, 2008 - October 31, 2008
                                      
                                      
                                      27,190
                                      
                                      
                                      $
                                      1.43
                                      
                                      
                                      
                                      27,190
                                      
                                      
                                      
                                      64,919November
      1, 2008 - November 30, 2008
                                      
                                      
                                      -
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      64,919December
      1, 2008 - December 31, 2008
                                      
                                      
                                      -
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      64,919Total
                                      
                                      
                                      27,190
                                      
                                      
                                      $
                                      1.43
                                      
                                      
                                      
                                      27,190
                                      
                                      
                                      
                                      64,919
 
 
 (1)
              In
      August 2004, the Board of Directors approved a plan to repurchase up to
      200,000 shares of the Company’s common stock. This plan has no expiration
      date.
 
 Item
      6.
              SELECTED FINANCIAL
      DATA
 
 Not
Applicable.
 
 Item
      7.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 The
following discussion and analysis should be read in conjunction with the
Company’s Financial Statements and Notes thereto included elsewhere in this Form
10-K.  Statements in this report relating to future plans,
projections, events or conditions are forward-looking
statements.  Such statements are subject to risks and uncertainties
that could cause actual results to differ materially from those projected and
include, but are not limited to, the risks discussed below, the risks discussed
in the section of this Form 10-K entitled “Risk Factors” and risks discussed
elsewhere in this Form 10-K.  The Company expressly disclaims any
obligation or undertaking to update these statements in the future.
 
 The
Company's business is comprised of the management of Kent International
Holdings, Inc. (“Kent International”) and Kent Educational Services, Inc. (“Kent
Educational”).
 
 Kent
International
 
 Kent
International is a publicly traded company (stock symbol “KNTH.PK”) currently
seeking to redeploy its assets into an operating business.  The
Company owned approximately 53.44% of Kent International at December 31,
2008.  All of Kent International’s assets, excluding its portfolio of
pharmaceutical patents (which have a zero carrying value on the consolidated
financial statements), are invested in cash and United States Treasury
Bills.  Kent International’s current business plan is to serve as a
vehicle for the acquisition of or merger or consolidation with another
company.  Kent International may use its available working capital,
capital stock, debt or a combination of these to start a business or to effect a
business combination with a company seeking to establish a public trading market
for its securities while avoiding the time delays, significant expense, loss of
voting control and other burdens including significant professional fees of an
initial public offering.  A business combination may be with a
financially stable, mature company or a company that is in its early stages of
development or growth, which could include companies seeking to obtain capital
and to improve their financial stability.
  7
  Additionally,
Kent International has developed a niche social networking website, www.ChinaUSPals.com,
designed to promote cultural exchange between the citizens of the United States
and those of the People’s Republic of China.  Membership to the site
is free, thus, any potential revenues will be derived from advertisements placed
on the site by third parties.  The site provides users with access to
other users’ personal profiles and enables the user to send messages to other
registered users of similar interests in order to develop lasting friendships or
simply attain a pen pal.  ChinaUSPals.com also features user generated
discussion forums and blogs as well as user submitted videos and
pictures.  In July, Kent International reached an agreement with
Wizart Studios, LLC, a New York based web design firm, to redesign and market
the site in return for a 19% equity interest in ChinaUSPals.com, Inc., the
site’s holding company.  As a part of the agreement, Kent
International will be responsible for the costs of marketing the site until
revenue is generated.  The redesigned site was launched on August 6,
2008.  Since then, site membership has grown to over 3,100 members
from the approximately 150 members prior to the redesign.
 
 While
Kent International is encouraged by the membership and traffic growth since the
redesign, we cannot be certain that the growth rate will continue or that
existing members will continue using the site.  Kent International
also faces the risk that our website will not be viewable in China or will be
deliberately blocked by the government of the People’s Republic of
China.  Internet usage and content are heavily regulated in China and
compliance with these laws and regulations may cause us to change or limit our
business practices in a manner adverse to our business.
 
 Kent
International does not expect that these activities will generate any
significant revenues for an indefinite period as these efforts are in their
early stages.  As a result, these programs may produce significant
losses until such time as meaningful revenues are achieved.
 
 Kent
Educational
 
 Kent
Educational, a wholly owned subsidiary of Kent, has a 60% controlling interest
in The Academy for Teaching and Leadership, Inc., (“The
Academy”).  The Academy, headed by Dr. Saul Cooperman, a former
Commissioner of Education in the State of New Jersey, offers educators high
quality programs designed to dramatically improve themselves, their students and
their schools.  The Academy brings together educators from school
districts to engage in quality programs related to curriculum, assessment, and
instructional strategies that have the potential to assist them in their own
development as well as to enhance the learning of their
students.  Similarly, it offers administrators the latest programs in
leadership practices that can support their school district’s goals and give
them the skills to achieve their specific objectives.
  8
  The
Academy has also produced an innovative educational DVD entitled “Sex Over
Sixty”.  The Academy worked to produce this DVD based on
research that enables those people over 60 to learn about their changing bodies
and experience a healthier, happier sex life.  “Sex Over Sixty” provides
frank answers to sexual questions that mature adults face as they age,
experience health problems, or begin dating again after a loss or
divorce.  The DVD was released on October 16, 2007; however, sales
results have been disappointing.
 
 Kent
Educational and The Academy are consolidated in the accompanying financial
statements.  The Academy is currently reviewing its strategic options
including hiring an executive officer, partnering with a competitor, continuing
to provide services to existing clients through an outsourcing platform, or
discontinuation of services.
 
 Results
of Operations
 
 The
Company had a consolidated net loss of $296,281, ($.11 basic and fully diluted
loss per share) in 2008, compared to a consolidated net loss of $551,641 ($.20
basic and fully diluted loss per share) in 2007.  The decrease in the
net loss was mainly the result of decreased expenses offset by decreased
interest revenue, seminar fees and administrative fees paid by an un-affiliated
investment partnership during the period.
 
 Revenues
 
 Seminar
fees based on seminars held by The Academy decreased to $285,643 for the year
ended December 31, 2008, compared to $480,612 for the year ended December 31,
2007.  The decrease is the result of the departure of The Academy’s
executive director who was primarily responsible for business
development.  The Academy currently has approximately $160,667 under
contract for services to be rendered in 2009.  The Company recognizes
seminar revenue when the services are provided.
 
 Interest
income was $300,274 and $612,858 in 2008 and 2007, respectively, a decrease of
$312,584.  The decrease was primarily caused by lower yields on
invested balances.
 
 Net
unrealized losses on available for sale securities were $43,149, and realized
gains were $36,180 for the year ended December 31, 2008 as compared to net
unrealized losses on available for sale securities of $2,675, and realized gains
of $6,574 for the year ended December 31, 2007.  Since marketable
securities are classified as available for sale securities, unrealized losses
during the years ended December 31, 2008 and 2007 were recorded as an adjustment
to accumulated other comprehensive income in stockholder’s equity.
 
 For the
year ended December 31, 2008, other income decreased to $88,022 from $138,102
for the comparable period in 2007, caused by the decrease in administrative fees
paid by an un-affiliated investment partnership.  These administrative
fees fluctuate based on the performance of the investment partnership; as a
result, based upon current global financial market conditions we do not believe
that these fees will continue at the same level.
  9
  Expenses
 
 General
and administrative expenses decreased to $1,104,337 for the year ended December
31, 2008 from $1,804,717 for 2007.  The decrease in expenses of
$700,830 or 39% is primarily attributed to a $555,262 decrease in personnel
costs.  Other material decreases were accounting and legal fees of
$23,556, rental expenses of $17,550, expenses related to travel and
entertainment associated with our ongoing business development activities of
$18,993, Directors’ fees of $19,700 and the costs of providing seminars by The
Academy of $17,312.
 
 Other
 
 In 2008,
Kent International repurchased 12,468 shares of common stock in open market
transactions for $20,764.  The Company recorded an extraordinary gain
of approximately $8,838, as the amount paid for the shares was less than the
fair value of the net assets recorded.
 
 Liquidity
and Capital Resources
 
 At
December 31, 2008, the Company had cash and cash equivalents of
$1,990,753.  Cash and cash equivalents consist of cash held in banks
and brokerage firms.  The Company had short-term investments,
consisting of U.S. Treasury Bills with original maturities of six months, of
$10.09 million at December 31, 2008 with yields ranging from 0.12% to
0.20%.  Working capital at December 31, 2008 was approximately $11.93
million.  Management believes its cash and cash equivalents are
sufficient for its business activities for at least the next 12 months and for
the costs of seeking an acquisition of an operating business.
 
 Net cash
used in operations was $227,549 for the year ended December 31, 2008, compared
to net cash used in operations of $655,144 in 2007.  Cash used in
operations is a direct result of operating expenses offset by operating revenues
and adjusted for changes in operating assets and liabilities.  The
decrease in net cash used in operations was largely the result of the decrease
in general and administrative expenses offset by the decrease in interest earned
on invested balances.
 
 $2,152,213
was provided by investing activities during the year ended December 31, 2008 by
the sales and maturities of short-term investments of $23.776 million offset by
the purchase of short-term investments of $21.638 million and $24,954 for the
acquisition of a vehicle for The Academy.  $645,615 was provided by
investing activities during the year ended December 31, 2007 by the sales and
maturities of short-term investments of $25.582 million offset by the purchase
of short-term investments of $24.958 million and $14,266 for capital costs for
ChinaUSPals.com.  Net sales of marketable securities were $39,245 and
$36,419 in 2008 and 2007, respectively.
 
 The
Company used $48,074 for financing activities for the year ended December 31,
2008 to repurchase 32,729 shares of common stock compared to the $16,756 used
for financing activities for the year ended December 31, 2007 to repurchase
7,770 shares of common stock.  Kent International also used $20,764
and $5,343 to repurchase their stock in the years ended December 31, 2008 and
2007, respectively.
  10
  Other
Disclosures – Related Party Transactions
 
 The
Company receives a monthly management fee of $21,000 from Kent International for
management services.  These services include, among other things,
preparation of periodic and other filings with the Securities and Exchange
Commission, evaluating merger and acquisition proposals, providing internal
accounting services and shareholder relations.  Additionally, Kent
International’s executive offices are located in the premises provided by the
Company; however, no separate payment is made for use of the
premises.  This arrangement may be terminated at will by either
party.  The monthly management fee revenue and offsetting expense is
eliminated during consolidation.  The Company is the beneficial owner
of approximately 53.44% of Kent International’s outstanding Common Stock at
December 31, 2008.  Paul O. Koether, Chairman of the Company is also
the Chairman of Kent International and the beneficial owner of approximately
59.11% of the Company’s outstanding common stock.  Bryan P. Healey,
Chief Financial Officer and Director of the Company is also the Chief Financial
Officer and Director of Kent International and the son-in-law of Paul O.
Koether.
 
 The
Company and its consolidated subsidiaries reimburse an affiliate, Bedminster
Management Corp., for the allocated direct cost of group health insurance and
office supplies. These reimbursements were approximately $60,802 and $83,481 in
the years ended December 31, 2008 and 2007, respectively.  Bedminster
Management Corp. facilitates the allocation of certain central administrative
costs on a cost reimbursement basis and is owned equally by Kent, Kent
International and T.R. Winston & Company, LLC.
 
 Off-Balance
Sheet Arrangements
 
 The
Company has no off-balance sheet arrangements.
 
 Contractual
Commitments
 
 The
Company has no contractual commitments.
 
 Critical
Accounting Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.  In our preparation of the financial statements for 2008,
there were no estimates made which were (a) subject to a high degree of
uncertainty or (b) material to our results.
 
 We made
no material changes to our critical accounting policies in connection with the
preparation of financial statements for 2008.
 
 New
Accounting Pronouncements
 
 FASB
issued SFAS No. 157 ("SFAS 157") “Fair Value Measurements” on
September 15, 2006.  SFAS 157 enhances existing guidance for measuring
assets and liabilities using fair value.  Previously, guidance for
applying fair value was incorporated in several accounting
pronouncements.  The new statement provides a single definition of
fair value, together with a framework for measuring it, and requires additional
disclosure about the use of fair value to measure assets and
liabilities.  While the statement does not add any new fair value
measurements, it does change current practice.  One such change is a
requirement to adjust the value of nonvested stock for the effect of the
restriction even if the restriction lapses within one year.  SFAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.  The
adoption of SFAS 157 is not expected to have a material impact on the financial
statements of the Company.
  11
  In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 141 (R), Business Combinations, and
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements.  SFAS No. 141
(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No.160 clarifies that a
noncontrolling interest in a subsidiary should be reported as equity in the
consolidated financial statements.  The calculation of earnings per
share will continue to be based on income amounts attributable to the parent.
SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued
for fiscal years beginning after December 15, 2008.  Early adoption is
prohibited.  We have not yet determined the effect on our consolidated
financial statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No.
160.  SFAS 141 (R) will significantly affect the accounting for future
business combinations and we will determine the accounting as new combinations
are determined.
 
 Item
      7a.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 Not
Applicable.
 
 Item
      8.
              FINANCIAL STATEMENTS
      AND SUPPLEMENTARY DATA
 
 The
financial statements filed herein are listed below:
 
 Report of
Independent Registered Public Accounting Firm
 
 Financial
Statements:
 
 Consolidated
Balance Sheets as of December 31, 2008 and 2007
 
 Consolidated
Statements of Operations and Other Comprehensive Income for the Years
ended December 31, 2008 and 2007
 
 Consolidated
Statements of Cash Flows for the Years
ended December 31, 2008 and 2007
 
 Consolidated
Statements of Stockholders’ Equity for the Years
ended December 31, 2008 and 2007
 
 Notes to
Consolidated Financial Statements
  12
  Report
of Independent Registered Public Accounting Firm
 
 To the
Stockholders’ and Board of Directors of Kent Financial Services,
Inc.
 
 We have
audited the accompanying consolidated balance sheets of Kent Financial Services,
Inc. and subsidiaries as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for
the years ended December 31, 2008 and 2007. These consolidated financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provided a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Kent Financial Services,
Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and other comprehensive income and their cash flows for the years
ended December 31, 2008 and 2007, in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Paritz & Company, P.A.
 
 March 17,
2008
 Hackensack,
New Jersey
  13
  
 KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSAs
      of December 31, 2008 and 2007December
      31,ASSETS
                  
                  2008
                  
                  
                  2007Current
      Assets:Cash
      and cash equivalents
                  
                  $
                  1,990,753
                  
                  
                  $
                  134,927Short-term
      investments
                  
                  
                  10,090,292
                  
                  
                  
                  12,269,763Marketable
      securities
                  
                  
                  70,450
                  
                  
                  
                  116,665Accounts
      receivable
                  
                  
                  55,895
                  
                  
                  
                  97,668Prepaid
      expenses and other current assets
                  
                  
                  14,769
                  
                  
                  
                  18,393Total
      current assets
                  
                  
                  12,222,159
                  
                  
                  
                  12,637,416Property
      and equipment, net of accumulated depreciation of $10,728 and
      $1,474
                  
                  
                  21,618
                  
                  
                  
                  5,917Other
      assets
                  
                  
                  16,000
                  
                  
                  
                  62,335Total
      assets
                  
                  $
                  12,259,777
                  
                  
                  $
                  12,705,668LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                  
                  $
                  227,497
                  
                  
                  $
                  268,604Deferred
      revenue
                  
                  
                  64,817Total
      current liabilities
                  
                  
                  292,314
                  
                  
                  
                  268,604Noncurrent
      liabilities:Accrued
      post employment obligations
                  
                  
                  720,000
                  
                  
                  
                  684,529Total
      liabilities
                  
                  
                  1,012,314
                  
                  
                  
                  953,133Minority
      interest in subsidiaries
                  
                  
                  4,965,816
                  
                  
                  
                  5,083,384Stockholders'
      equity:Preferred
      stock without par value;500,000 shares authorized; none
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $.10 par value;8,000,000 shares authorized; 2,759,293 and 2,792,022
      shares issued and outstanding
                  
                  
                  275,929
                  
                  
                  
                  279,202Additional
      paid-in capital
                  
                  
                  12,344,949
                  
                  
                  
                  12,389,750Accumulated
      deficit
                  
                  
                  (6,293,407
                  )
                  
                  
                  (5,997,126
                  )Accumulated
      other comprehensive loss
                  
                  
                  (45,824
                  )
                  
                  
                  (2,675
                  )Total
      stockholders' equity
                  
                  
                  6,281,647
                  
                  
                  
                  6,669,151Total
      liabilities and stockholders' equity
                  
                  $
                  12,259,777
                  
                  
                  $
                  12,705,668
 
 See
accompanying notes to consolidated financial statements.
  14
  
 KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOMEYear
      Ended December 31,2008
                  
                  
                  2007Revenues:Seminar
      fees
                  
                  $
                  285,643
                  
                  
                  $
                  480,612Interest
      revenue
                  
                  
                  300,274
                  
                  
                  
                  612,858Investing
      gains
                  
                  
                  36,180
                  
                  
                  
                  6,574DVD
      sales
                  
                  
                  3,273
                  
                  
                  
                  922Other
      income
                  
                  
                  88,022
                  
                  
                  
                  138,102Total
      revenues
                  
                  
                  713,392
                  
                  
                  
                  1,239,068Expenses:General
      and administrative
                  
                  
                  1,104,337
                  
                  
                  
                  1,804,717Write
      off capitalized software costs
                  
                  
                  
                  
                  
                  
                  37,764Write
      off goodwill
                  
                  
                  
                  
                  
                  
                  90,055Total
      expenses
                  
                  
                  1,104,337
                  
                  
                  
                  1,932,536Loss
      before income taxes, minority interest and extraordinary
    gain
                  
                  
                  (390,945
                  )
                  
                  
                  (693,468
                  )Provision
      for income taxes
                  
                  
                  (2,140
                  )
                  
                  
                  (1,883
                  )Loss
      before minority interest and extraordinary gain
                  
                  
                  (393,085
                  )
                  
                  
                  (695,351
                  )Minority
      interest in subsidiaries losses
                  
                  
                  87,966
                  
                  
                  
                  143,710Loss
      before extraordinary gain
                  
                  
                  (305,119
                  )
                  
                  
                  (551,641
                  )Extraordinary
      gain due to purchase of subsidiary stock
                  
                  
                  8,838Net
      loss
                  
                  
                  (296,281
                  )
                  
                  
                  (551,641
                  )Other
      comprehensive income (loss):Unrealized
      loss on available for sale securities
                  
                  
                  (43,149
                  )
                  
                  
                  (2,675
                  )Comprehensive
      loss
                  
                  $
                  (339,430
                  )
                  
                  $
                  (554,316
                  )Basic
      and diluted net loss per common share:Loss
      per share before extraordinary gain
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.20
                  )Extraordinary
      gain
                  
                  
                  -Net
      loss per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.20
                  )Weighted
      average number of common shares outstanding
                  
                  
                  2,784,235
                  
                  
                  
                  2,794,146
 
 
 See
accompanying notes to consolidated financial statements.
  15
  
 KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSYear
      Ended December 31,2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (296,281
                  )
                  
                  $
                  (551,641
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                  
                  
                  9,254
                  
                  
                  
                  5,466Write
      off goodwill
                  
                  
                  
                  
                  
                  
                  90,055Write
      off capitalized software costs
                  
                  
                  
                  
                  
                  
                  37,764Gain
      on sale of marketable securities
                  
                  
                  (36,180
                  )
                  
                  
                  (6,574
                  )Extraordinary
      gain on purchase of stock of subsidiary
                  
                  
                  (8,838
                  )Minority
      interest in subsidiaries losses
                  
                  
                  (87,966
                  )
                  
                  
                  (143,710
                  )Changes
      to operating assets and liabilities:Interest
      receivable on short-term investments
                  
                  
                  41,549
                  
                  
                  
                  6,136Change
      in accounts receivable and other current assets
                  
                  
                  45,397
                  
                  
                  
                  (7,798
                  )Change
      in other assets
                  
                  
                  46,335
                  
                  
                  
                  (5,872
                  )Change
      in accounts payable and accrued expenses
                  
                  
                  (5,636
                  )
                  
                  
                  (55,978
                  )Change
      in deferred revenue
                  
                  
                  64,817
                  
                  
                  
                  (22,992
                  )Net
      cash used in operating activities
                  
                  
                  (227,549
                  )
                  
                  
                  (655,144
                  )Cash
      flows from investing activities:Sales
      of marketable securities
                  
                  
                  1,549,388
                  
                  
                  
                  36,419Purchases
      of marketable securities
                  
                  
                  (1,510,143
                  )Purchase
      of short-term investments
                  
                  
                  (21,638,410
                  )
                  
                  
                  (24,958,609
                  )Maturity
      and sales of short-term investments
                  
                  
                  23,776,332
                  
                  
                  
                  25,582,071Acquisition
      of property and equipment
                  
                  
                  (24,954
                  )
                  
                  
                  (14,266
                  )Net
      cash provided by investing activities
                  
                  
                  2,152,213
                  
                  
                  
                  645,615Cash
      flows from financing activities:Repurchase
      of common stock by subsidiary
                  
                  
                  (20,764
                  )
                  
                  
                  (5,343
                  )Repurchase
      of common stock
                  
                  
                  (48,074
                  )
                  
                  
                  (16,756
                  )Net
      cash used in financing activities
                  
                  
                  (68,838
                  )
                  
                  
                  (22,099
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  1,855,826
                  
                  
                  
                  (31,628
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  134,927
                  
                  
                  
                  166,555Cash
      and cash equivalents at end of period
                  
                  $
                  1,990,753
                  
                  
                  $
                  134,927Supplemental
      disclosure of cash flow information:Cash
      paid for:Taxes
                  
                  $
                  2,140
                  
                  
                  $
                  7,996
 
 
 See
accompanying notes to consolidated financial statements.
  16
  
 KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITYAccumulatedAdditional
                        
                        
                        
                        
                        
                        OtherCommon
      Stock
                        
                        
                        Paid
      in
                        
                        
                        Accumulated
                        
                        
                        ComprehensiveShares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        Income
                        
                        
                        TotalBalance
      December 31, 2006
                        
                        
                        2,799,792
                        
                        
                        $
                        279,979
                        
                        
                        $
                        12,405,729
                        
                        
                        $
                        (5,445,485
                        )
                        
                        
                        
                        
                        $
                        7,240,223Repurchase
      of common stock
                        
                        
                        (7,770
                        )
                        
                        
                        (777
                        )
                        
                        
                        (15,979
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (16,756
                        )Unrealized
      loss on available for sale securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        (2,675
                        )
                        
                        
                        (2,675
                        )Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (551,641
                        )
                        
                        
                        
                        
                        
                        
                        (551,641
                        )Balance
      December 31, 2007
                        
                        
                        2,792,022
                        
                        
                        
                        279,202
                        
                        
                        
                        12,389,750
                        
                        
                        
                        (5,997,126
                        )
                        
                        
                        (2,675
                        )
                        
                        
                        6,669,151Repurchase
      of common stock
                        
                        
                        (32,729
                        )
                        
                        
                        (3,273
                        )
                        
                        
                        (44,801
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (48,074
                        )Unrealized
      loss on available for sale securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (43,149
                        )
                        
                        
                        (43,149
                        )Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (296,281
                        )
                        
                        
                        
                        
                        
                        
                        (296,281
                        )Balance
      December 31, 2008
                        
                        
                        2,759,293
                        
                        
                        $
                        275,929
                        
                        
                        $
                        12,344,949
                        
                        
                        $
                        (6,293,407
                        )
                        
                        $
                        (45,824
                        )
                        
                        $
                        6,281,647
 
 
 See
accompanying notes to consolidated financial statements.
  17
  KENT
FINANCIAL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2008 and 2007
 
 NOTE
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 subsidiary, Kent
Educational Services, Inc. (“Kent Educational”) and Kent’s majority owned
subsidiary, Kent International Holdings, Inc., (“Kent International”) and Kent
Educational’s majority owned subsidiary, The Academy of Teaching and Leadership,
Inc. (“The Academy”).  Intercompany balances and transactions between
the Company and its subsidiaries have been eliminated.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with accounting principles
that are generally accepted in the United States of America 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 and the differences could be material.
 
 Cash
Equivalents
 
 The
Company considers as cash equivalents all short-term investments that are highly
liquid and readily exchangeable for cash at amounts equal to their stated
value.  Cash equivalents consist of U. S. Treasury Bills with an
original maturity of 90 days.  The Company also maintains interest
bearing balances in its brokerage accounts.  All cash and cash
equivalents are on deposit either with a major money center bank or with a
securities broker dealer.
 
 Short-Term
Investments
 
 Short-term
investments consist of U.S. Treasury Bills purchased with an original maturity
of six months and are valued at cost plus accrued interest, which approximates
the fair market value.  The Company currently intends to hold these
investments until maturity.
 
 Marketable
Securities
 
 Marketable
securities, consisting of equity securities, are stated at fair value and are
considered available for sale securities, with the corresponding unrealized gain
(loss) recorded as a component of other comprehensive income in stockholders’
equity.
  18
  Property
and Equipment
 
 Property
and equipment are stated at cost.  Depreciation, which is calculated
using the straight-line method, is provided by periodic charges to expense over
the estimated useful lives of the assets ranging from 3 to 5 years.
 
 Income
Taxes
 
 The
Company recognizes deferred tax assets and liabilities related to the expected
future tax consequences of events that have been recognized in the Company’s
financial statements and tax returns.  However, if it is more likely
than not that some portion or all of the net deferred tax assets will not be
realized, a valuation allowance is established and the tax benefit is not
recognized in the statements of operations.
 
 Revenue
Recognition
 
 Revenue
consists primarily of interest revenue on invested balances and educational
services provided by the Academy.  Interest revenue is recognized on
an accrual basis.  The Academy recognizes revenue when services are
provided to customers.  When the Academy collects payments from
customers before services are rendered, the advance payments are recorded as
deferred revenue and realized after services are rendered.
 
 Basic
and Diluted Net Loss Per Share
 
 Basic
loss per common share is computed by dividing the net loss by the
weighted-average number of common shares outstanding.  Diluted loss
per share is computed by dividing the net loss by the sum of the
weighted-average number of common shares outstanding plus the dilutive effect of
shares issuable through the exercise of stock options.  There were no
common stock options outstanding for either of the years ended December 31, 2008
and 2007; thus, there was no dilutive effect for either year.
 
 For more
information on stock options, see Note 8 of the Notes to Consolidated Financial
Statements.
 
 New
Accounting Pronouncements
 
 FASB
issued SFAS No. 157 ("SFAS 157") “Fair Value Measurements” on
September 15, 2006.  SFAS 157 enhances existing guidance for measuring
assets and liabilities using fair value. Previously, guidance for applying fair
value was incorporated in several accounting pronouncements.  The
statement provides a single definition of fair value, together with a framework
for measuring it, and requires additional disclosure about the use of fair value
to measure assets and liabilities.  While the statement does not add
any new fair value measurements, it does change current practice.  One
such change is a requirement to adjust the value of nonvested stock for the
effect of the restriction even if the restriction lapses within one
year.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  The adoption of SFAS 157 is not expected to have a
material impact on the financial statements of the Company.
 
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 141 (R), Business Combinations, and
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements.  SFAS No. 141
(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No.160 clarifies that a
noncontrolling interest in a subsidiary should be reported as equity in the
consolidated financial statements.  The calculation of earnings per
share will continue to be based on income amounts attributable to the parent.
SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued
for fiscal years beginning after December 15, 2008.  Early adoption is
prohibited.  We have not yet determined the effect on our consolidated
financial statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No.
160.  SFAS 141 (R) will significantly affect the accounting for future
business combinations and we will determine the accounting as new combinations
are determined.
  19
  NOTE 2 – BUSINESS AND SEGMENT
INFORMATION
 
 The
Company's business is comprised of the management of Kent International and Kent
Educational.  The Company has determined that its operations can be
segregated into two principal operating segments which are business development
activities and education services.  We define operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the Chairman in deciding how to
allocate resources and in assessing performance.
 
 Kent
International is a publicly traded company (stock symbol “KNTH.PK”) currently
seeking to redeploy its assets into an operating business.  The
Company owned approximately 53.44% of Kent International at December 31,
2008.  All of Kent International’s assets, excluding its portfolio of
pharmaceutical patents (which have a zero carrying value on the consolidated
financial statements), are invested in cash and United States Treasury
Bills.  Kent International’s activity is reported in the business
development activities segment.
 
 Additionally,
Kent International has developed a niche social networking website, www.ChinaUSPals.com,
designed to promote cultural exchange between the citizens of the United States
and those of the People’s Republic of China.  Membership to the site
is free, thus, any potential revenues will be derived from advertisements placed
on the site by third parties.  The site provides users with access to
other users’ personal profiles and enables the user to send messages to other
registered users of similar interests in order to develop lasting friendships or
simply attain a pen pal.  ChinaUSPals.com also features user generated
discussion forums and blogs as well as user submitted videos and
pictures.  In July, Kent International reached an agreement with
Wizart Studios, LLC, a New York based web design firm, to redesign and market
the site in return for a 19% equity interest in ChinaUSPals.com, Inc., the
site’s holding company.  As a part of the agreement, Kent
International will be responsible for the costs of marketing the site until
revenue is generated.  The redesigned site was launched on August 6,
2008.  Since then, site membership has grown to over 3,100 members
from the approximately 150 members prior to the redesign.
 
 While
Kent International is encouraged by the membership and traffic growth since the
redesign, we cannot be certain that the growth rate will continue or that
existing members will continue using the site.  Kent International
also faces the risk that our website will not be viewable in China or will be
deliberately blocked by the government of the People’s Republic of
China.  Internet usage and content are heavily regulated in China and
compliance with these laws and regulations may cause us to change or limit our
business practices in a manner adverse to our business.
  20
  The
Company does not expect that these activities will generate any significant
revenues for an indefinite period as these efforts are in their early
stages.  As a result, these programs may produce significant losses
until such time as meaningful revenues are achieved.
 
 The
education services segment represents the activity of Kent Educational; which is
a wholly owned subsidiary of the Company that has a 60% controlling interest in
the Academy for Teaching and Leadership Inc. (“The Academy”).  The
Academy, headed by Dr. Saul Cooperman, a former Commissioner of Education in the
State of New Jersey, provides educators various programs designed to improve
themselves, their students, and their schools.
 
 The
allocation of resources for educational purposes is currently under great
scrutiny in New Jersey.  Funding for public schools in New Jersey
comes from either State aid or local property taxes.  Although
property taxes have increased rapidly in New Jersey over the last eight years,
this has not resulted in additional educational expenditures, because the State
of New Jersey has at the same time reduced its aid allocated to public
schools.  It is impossible to foresee the future developments of
property taxes and educational State aids.  As public schools in New
Jersey are currently our primary customer, our revenue growth is restricted by
any limitation on these resources.
 
 The
following table summarizes the assets and operations of the Company’s segments
as of and for the years ended December 31, 2008 and 2007:
 
 BusinessDevelopment
                      
                      
                      Educational
                      
                      
                      All
      Other
                      
                      
                      
                      
                      
                      ConsolidatedActivities
                      
                      
                      Services
                      
                      
                      Operations
                      
                      
                      Eliminations
                      
                      
                      TotalsFor the year ended December 31,
      2008Revenues
      from external customers
                      
                      
                      
                      
                      $
                      285,643
                      
                      
                      $
                      86,772
                      
                      
                      
                      
                      
                      $
                      372,415Management
      fees
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      320,100
                      
                      
                      $
                      (320,100
                      )Interest
      revenue
                      
                      $
                      264,329
                      
                      
                      
                      5,412
                      
                      
                      
                      30,533
                      
                      
                      
                      
                      
                      
                      
                      300,274Investing
      gains
                      
                      
                      
                      
                      
                      
                      36,840
                      
                      
                      
                      (660
                      )
                      
                      
                      
                      
                      
                      
                      36,180Other
      Income
                      
                      
                      1,250
                      
                      
                      
                      3,273
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      4,523Total
      revenues
                      
                      
                      265,579
                      
                      
                      
                      331,168
                      
                      
                      
                      436,745
                      
                      
                      
                      (320,100
                      )
                      
                      
                      713,392General
      and administrative expenses
                      
                      
                      (456,007
                      )
                      
                      
                      (335,419
                      )
                      
                      
                      (633,011
                      )
                      
                      
                      320,100
                      
                      
                      
                      (1,104,337
                      )Income
      tax expense
                      
                      
                      (510
                      )
                      
                      
                      (1,110
                      )
                      
                      
                      (520
                      )
                      
                      
                      
                      
                      
                      
                      (2,140
                      )Extraordinary
      gain
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      8,838
                      
                      
                      
                      
                      
                      
                      
                      8,838Minority
      interest
                      
                      
                      86,317
                      
                      
                      
                      1,649
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      87,966Net
      loss by segment
                      
                      $
                      (104,621
                      )
                      
                      $
                      (3,712
                      )
                      
                      $
                      (187,948
                      )
                      
                      
                      -
                      
                      
                      $
                      (296,281
                      )As of December 31, 2008Total
      assets by segment
                      
                      $
                      10,391,442
                      
                      
                      $
                      430,317
                      
                      
                      $
                      1,438,018
                      
                      
                      
                      -
                      
                      
                      $
                      12,259,777
  21
 
 BusinessDevelopment
                      
                      
                      Educational
                      
                      
                      All
      Other
                      
                      
                      
                      
                      
                      ConsolidatedActivities
                      
                      
                      Services
                      
                      
                      Operations
                      
                      
                      Eliminations
                      
                      
                      TotalsFor the year ended December 31,
      2007Revenues
      from external customers
                      
                      
                      
                      
                      $
                      480,612
                      
                      
                      $
                      122,706
                      
                      
                      
                      
                      
                      $
                      603,318Management
      fees
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      296,400
                      
                      
                      $
                      (296,400
                      )Interest
      revenue
                      
                      $
                      517,843
                      
                      
                      
                      11,234
                      
                      
                      
                      83,781
                      
                      
                      
                      
                      
                      
                      
                      612,858Investing
      gains
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      6,574
                      
                      
                      
                      
                      
                      
                      
                      6,574Other
      Income
                      
                      
                      15,000
                      
                      
                      
                      922
                      
                      
                      
                      396
                      
                      
                      
                      
                      
                      
                      
                      16,318Total
      revenues
                      
                      
                      532,843
                      
                      
                      
                      492,768
                      
                      
                      
                      509,857
                      
                      
                      
                      (296,400
                      )
                      
                      
                      1,239,068General
      and administrative expenses
                      
                      
                      (795,306
                      )
                      
                      
                      (499,981
                      )
                      
                      
                      (805,830
                      )
                      
                      
                      296,400
                      
                      
                      
                      (1,804,717
                      )Write
      off capitalized software costs
                      
                      
                      (37,764
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (37,764
                      )Write
      off goodwill
                      
                      
                      
                      
                      
                      
                      (90,055
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (90,055
                      )Income
      tax expense
                      
                      
                      (1,134
                      )
                      
                      
                      (438
                      )
                      
                      
                      (311
                      )
                      
                      
                      
                      
                      
                      
                      (1,883
                      )Minority
      interest
                      
                      
                      140,907
                      
                      
                      
                      2,803
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      143,710Net
      loss by segment
                      
                      $
                      (160,454
                      )
                      
                      $
                      (94,903
                      )
                      
                      $
                      (296,284
                      )
                      
                      
                      -
                      
                      
                      $
                      (551,641
                      )As of December 31, 2007Total
      assets by segment
                      
                      $
                      10,597,675
                      
                      
                      $
                      372,012
                      
                      
                      $
                      1,735,981
                      
                      
                      
                      -
                      
                      
                      $
                      12,705,668
 
 Note
3 – MARKETABLE SECURITIES
 
 Marketable
securities owned as of December 31, 2008 and 2007, comprised mainly of portfolio
positions (equity securities) held for capital appreciation consisted of the
following:
 
 December
      31, 2008
                                                            
                                                            
                                                            December
      31, 2007Percent
      Owned
                                                            
                                                            
                                                            Estimated
      Fair Value
                                                            
                                                            
                                                            Losses
      in Accumulated Other Comprehensive Income
                                                            
                                                            
                                                            Estimated
      Fair Value
                                                            
                                                            
                                                            Gains
      in Accumulated Other Comprehensive Income
                                                            
                                                            
                                                            Losses
      in Accumulated Other Comprehensive IncomeGolfRounds.com,
      Inc.
                                                            
                                                            
                                                            4.35
                                                            %
                                                            
                                                            $
                                                            66,000
                                                            
                                                            
                                                            $
                                                            36,000
                                                            
                                                            
                                                            $
                                                            92,400
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            $
                                                            9,600All
      other equity securities
                                                            
                                                            
                                                            N/A
                                                            
                                                            
                                                            
                                                            4,450
                                                            
                                                            
                                                            
                                                            9,824
                                                            
                                                            
                                                            
                                                            24,265
                                                            
                                                            
                                                            $
                                                            6,925$
                                                            70,450
                                                            
                                                            
                                                            $
                                                            45,824
                                                            
                                                            
                                                            $
                                                            116,665
                                                            
                                                            
                                                            $
                                                            6,925
                                                            
                                                            
                                                            $
                                                            9,600
 
 During
the first quarter of 2007, the Company reclassified its marketable securities
from trading securities to available for sale securities.  The
Company’s securities are valued at fair value.  Fair value is
ordinarily the listed market price of the stock.  If listed market
prices are not indicative of fair value or if liquidating the Company’s position
would reasonably be expected to impact market prices, fair value is determined
based on other relevant factors.  Among the factors considered by
management in determining fair value of the portfolio positions are the
financial condition, asset composition and operating results of the issuer, the
long-term business potential of the issuer and other factors generally pertinent
to the valuation of investments, including the analysis of the valuation of
comparable companies.
  22
  NOTE 4 – PROPERTY, PLANT &
EQUIPMENT
 
 Net
property, plant and equipment as December 31 consisted of:
 
 2008
                    
                    
                    2007Office
      Furniture and Equipment
                    
                    $
                    7,391
                    
                    
                    $
                    7,391Vehicles
                    
                    
                    24,954Less:
      Accumulated Depreciation
                    
                    
                    (10,728
                    )
                    
                    
                    (1,474
                    )$
                    21,618
                    
                    
                    $
                    5,917
 
 NOTE 5 – KENT INTERNATIONAL HOLDINGS,
INC.
 
 In 2008,
Kent International repurchased 12,468 shares of common stock in open market
transactions for $20,764.  The Company recorded an extraordinary gain
of approximately $8,838, as the amount paid for the shares was less than the
fair value of the net assets recorded.  At December 31, 2008, the
Company owned 1,900,000 shares or 53.44% of Kent International’s issued
shares.
 
 Kent
International Stock Option Plans
 
 Kent
International has issued certain common stock options to its employees,
directors and consultants.  At December 31, 2008, Kent International
had 200,000 common stock options outstanding.
 
 Kent
International’s 1986 Stock Option Plan (“1986 Plan”) authorizes the grant of
stock options to officers and employees of Kent International to purchase an
aggregate of 300,000 shares of common stock.  On May 8, 2008, the Kent
International’s Board awarded a non-qualified stock option to Bryan P. Healey to
purchase 100,000 shares of Kent International’s common stock under the 1986
Plan.  The option has an exercise price of $3.20 and shall become
exercisable at a rate of 20,000 shares on each of the first five anniversaries
of the date of grant, provided that Mr. Healey remain in the continuous employ
of Kent International.  The option shall expire on May 8, 2018, unless
earlier terminated.
 
 The stock
options granted under the plan may be incentive stock options (“ISO”) or
nonstatutory stock options (“NSO”).  Kent International’s Board of
Directors may set the rate at which the options expire, subject to limitations
discussed below.  However, no options shall be exercisable after the
tenth anniversary of the date of grant or, in the case of ISOs, three months
following termination of employment, except in cases of death or disability, for
which the time or exercisability is extended.  In the event of
dissolution, liquidation or other corporate reorganization, all stock options
outstanding under the 1986 Plan would become exercisable in full.
 
 ISOs may
not be granted at an exercise price of less than the fair market value of the
common stock at the date of grant.  If an ISO is granted to an
employee who owns more than 10% of the Kent International’s total voting stock,
such exercise price shall be at least 110% of fair market value of the common
stock, and the ISO shall not be exercisable until after five years from the date
of grant.  The exercise price of each NSO may not be less than 85% of
the fair market value of the common stock at the date of grant.
  23
  The plan
also provides for stock appreciation rights, which may be granted with respect
to any stock option.  No stock appreciation rights have been granted
through December 31, 2008.
 
 A summary
of the status of Kent International’s 1986 Plan as of December 31, 2008 and 2007
and changes during the years ended on those dates is presented
below:
 2008
                    
                    
                    2007Weighted-
                    
                    
                    
                    
                    
                    
                    
                    
                    Weighted-Average
                    
                    
                    Range
      of
                    
                    
                    
                    
                    
                    Average
                    
                    
                    Range
      ofExercise
                    
                    
                    Exercise
                    
                    
                    
                    
                    
                    Exercise
                    
                    
                    ExerciseShares
                    
                    
                    Price
                    
                    
                    Price
                    
                    
                    Shares
                    
                    
                    Price
                    
                    
                    PriceOptions
      outstanding at the beginning of the year
                    
                    
                    120,000
                    
                    
                    $
                    3.50
                    
                    
                    $
                    3.50
                    
                    
                    
                    290,850
                    
                    
                    $
                    3.52
                    
                    
                    $
                    3.50
      - $7.34Awarded
                    
                    
                    100,000
                    
                    
                    $
                    3.20
                    
                    
                    $
                    3.20Expired
                    
                    
                    (20,000
                    )
                    
                    $
                    3.50
                    
                    
                    $
                    3.50
                    
                    
                    
                    (170,850
                    )
                    
                    $
                    3.54
                    
                    
                    $
                    3.50
      - $7.34Options
      outstanding at the end of the year
                    
                    
                    200,000
                    
                    
                    $
                    3.35
                    
                    
                    $
                    3.20-$3.50
                    
                    
                    
                    120,000
                    
                    
                    $
                    3.50
                    
                    
                    $
                    3.50Options
      exercisable at the end of the year
                    
                    
                    100,000
                    
                    
                    $
                    3.50
                    
                    
                    $
                    3.50
                    
                    
                    
                    120,000
                    
                    
                    $
                    3.50
                    
                    
                    $
                    3.50
  During
the year ended December 31, 2007, 300 common stock options with an exercise
price of $7.34 awarded to certain directors and consultants outside of the 1986
plan expired.
 
 For all
Kent International options outstanding and exercisable at December 31, 2008, the
exercise price ranges are:
  Options
      Outstanding
                      
                      
                      Options
      ExercisableRange
      of Exercise Prices
                      
                      Number
      Outstanding at December 31, 2008
                      
                      
                      Weighted
      Average Remaining Life (in Years)
                      
                      
                      Weighted
      Average Exercise Price
                      
                      
                      Number
      Outstanding at December 31, 2008
                      
                      
                      Weighted
      Average Remaining Life (in Years)
                      
                      
                      Weighted
      Average Exercise Price$3.20-$3.50
                      
                      
                      200,000
                      
                      
                      
                      5.45
                      
                      
                      $
                      3.35
                      
                      
                      
                      100,000
                      
                      
                      
                      1.54
                      
                      
                      $
                      3.50
  NOTE
6 - INCOME TAXES
 
 Income
tax expense was made up entirely of income taxes due to the State of New Jersey
in 2008 and 2007.  As a result, the income tax expense for the years
ended December 31, 2008 and 2007 is different from the amount computed by
multiplying earnings before income taxes by the statutory Federal income tax
rate of 35%.  The reasons for this difference and the related tax
effect are as follows:
  24
  
 2008
                          
                          
                          2007Expected
      tax benefit based on income before taxes
                          
                          $
                          (103,698
                          )
                          
                          $
                          (193,074
                          )Increase
      (decrease) in tax from:State
      income taxes
                          
                          
                          2,140
                          
                          
                          
                          1,883Post
      employment benefit obligations
                          
                          
                          12,415
                          
                          
                          
                          14,284Stock
      based compensation
                          
                          
                          
                          
                          
                          
                          12,421Change
      in valuation allowance
                          
                          
                          91,283
                          
                          
                          
                          166,369Provision
      for income tax
                          
                          $
                          2,140
                          
                          
                          $
                          1,883
 
 Temporary
differences and carryforwards that result in the Company’s net deferred tax
asset at December 31, 2008 are as follows:
 
 KentCompany
                                  
                                  
                                  International
                                  
                                  
                                  TotalNet
      operating loss carryforwards
                                  
                                  $
                                  2,559,335
                                  
                                  
                                  $
                                  63,368,181
                                  
                                  
                                  $
                                  65,927,516Mark-to-market
      valuation adjustments
                                  
                                  
                                  188,408
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  188,408Post
      employment benefit obligations
                                  
                                  
                                  720,000
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  720,000Stock
      based compensation deductions
                                  
                                  
                                  (35,488
                                  )
                                  
                                  
                                  (5,858
                                  )
                                  
                                  
                                  (41,346
                                  )3,432,255
                                  
                                  
                                  
                                  63,362,323
                                  
                                  
                                  
                                  66,794,578Statutory
      federal income tax rate
                                  
                                  
                                  35
                                  %
                                  
                                  
                                  35
                                  %
                                  
                                  
                                  35
                                  %Expected
      income tax benefit
                                  
                                  
                                  1,201,289
                                  
                                  
                                  
                                  22,176,813
                                  
                                  
                                  
                                  23,378,102Research
      and development and other credits
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,848,114
                                  
                                  
                                  
                                  1,848,1141,201,289
                                  
                                  
                                  
                                  24,024,927
                                  
                                  
                                  
                                  25,226,216Valuation
      Allowance
                                  
                                  
                                  (1,201,289
                                  )
                                  
                                  
                                  (24,024,927
                                  )
                                  
                                  
                                  (25,226,216
                                  )Net
      deferred tax asset December 31, 2008
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
 
 Temporary
differences and carryforwards that result in the Company’s net deferred tax
asset at December 31, 2007 were as follows:
  25
 
 KentCompany
                        
                        
                        International
                        
                        
                        TotalNet
      operating loss carryforwards
                        
                        $
                        2,559,335
                        
                        
                        $
                        77,603,669
                        
                        
                        $
                        80,163,004Mark-to-market
      valuation adjustments
                        
                        
                        187,318
                        
                        
                        
                        
                        
                        
                        
                        187,318Post
      employment benefit obligations
                        
                        
                        684,529
                        
                        
                        
                        
                        
                        
                        
                        684,529Stock
      based compensation deductions
                        
                        
                        (35,488
                        )
                        
                        
                        
                        
                        
                        
                        (35,488
                        )3,395,694
                        
                        
                        
                        77,603,669
                        
                        
                        
                        80,999,363Statutory
      federal income tax rate
                        
                        
                        35
                        %
                        
                        
                        35
                        %
                        
                        
                        35
                        %Expected
      income tax benefit
                        
                        
                        1,188,493
                        
                        
                        
                        27,161,284
                        
                        
                        
                        28,349,777Research
      and development and other credits
                        
                        
                        
                        
                        
                        
                        2,233,972
                        
                        
                        
                        2,233,9721,188,493
                        
                        
                        
                        29,395,256
                        
                        
                        
                        30,583,749Valuation
      Allowance
                        
                        
                        (1,188,493
                        )
                        
                        
                        (29,395,256
                        )
                        
                        
                        (30,583,749
                        )Net
      deferred tax asset December 31, 2007
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
 
 Deferred
tax assets 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.  Based upon Kent International’s and the
Company’s operating history, which includes continuous operating losses
(excluding extraordinary gains) in each of the last five years and the Company’s
assessment of Kent International’s and the Company’s ability to achieve future
taxable income, a 100% valuation allowance has been established for Kent
International’s and the Company’s deferred tax assets.  Approximately
$61.3 million of the $67 million operating loss carryforward expires between
2009 and 2014.
 
 The Tax
Reform Act of 1986 contained provisions that may limit the NOL and credit
carryforwards available to be used in any given year upon the occurrence of
certain events, including significant changes in ownership of a company of
greater than 50% within a three year period which results in an annual
limitation on the Company’s ability to utilize its NOLs and tax credit
carryforwards from tax periods prior to the ownership change.
 
 NOTE
7 – COMPENSATION CONTRACTS AND POST-EMPLOYMENT BENEFITS
 
 Paul O.
Koether’s employment agreement ("Agreement") pursuant to which Mr. Koether
serves as the Company's Chairman is for a three year term at an annual salary of
$240,000 ("Base Salary"); this term is automatically extended one day for each
day elapsed after May 12, 2008.  Mr. Koether may terminate his
employment after a change of control for good reason in accordance with certain
provisions of the Agreement, at which time he would be paid the greater of the
(i) Base Salary payable under the Agreement through the expiration date of the
Agreement or (ii) an amount equal to three times the average annual Base Salary
paid to him during the preceding five years.  In the event of Mr.
Koether's death during the term of the Agreement, his beneficiary shall be paid
a death benefit equal to three years Base Salary, payable in 36 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 80 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 80.
  26
  Bryan P.
Healey’s employment agreement (the “Healey Agreement”) pursuant to which Mr.
Healey serves as the Company’s Chief Financial Officer is for a two year term at
an annual salary of $140,000 (“Healey Base Salary”), this term is automatically
extended one day for each day elapsed after May 15, 2007.  The Healey
Base Salary was increased to $156,000 annually effective January 1,
2008.  In the event of Mr. Healey’s death during the term of the
Healey Agreement, his beneficiary shall be paid a death benefit equal to his
then current annual salary in equal monthly installments for the remainder of
the term of the Healey Agreement.  Should Mr. Healey become disabled
during the term of the Healey Agreement, Mr. Healey shall be paid such benefits
to which he is entitled under the terms of such long-term insurance as the
Company has provided him or 80% of his salary for the remainder of the two year
term of the Healey Agreement, whichever is greater, in accordance with his
regular payment schedule.
 
 The
Company has accrued approximately $720,000 and $684,529 as of December 31, 2008
and 2007, respectively, for post employment benefits related to Mr. Koether’s
contract.  The Company charged approximately $35,471 and $40,812 to
operations for post employment benefit accruals in 2008 and 2007,
respectively.
 
 NOTE
8 – STOCKHOLDERS’ EQUITY
 
 Preferred
Stock
 
 The
Company is authorized to issue 500,000 shares of preferred stock without par
value, which may be issued with various terms in one or more series, as the
Board of Directors may determine. No preferred stock has been issued as of
December 31, 2008.
 
 Common
Stock Repurchases
 
 In August
2004, the Board of Directors approved a plan to repurchase up to 200,000 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. As of December 31, 2008, 135,081
shares under this plan had been repurchased, canceled and returned to the status
of authorized but unissued shares.
 
 Stock
Options
 
 On
November 25, 2005, shareholders of the Company approved the 2005 Stock Option
Plan making a total of 400,000 common stock options available for
issuance.  Subsequently, 300,000 options were awarded to Dr. Qun Yi
Zheng, the former President of Kent, on the same date.  33,000 of
these options were immediately exercisable with an additional 33,000 becoming
exercisable on the first eight anniversaries of the grant date.  On
August 31, 2007, the effective date of Dr. Zheng’s resignation, the 66,000
common stock options that had become exercisable were forfeited as were the
234,000 options that were still unexercisable.  At December 31, 2008
and 2007, the Company had no common stock options outstanding.
  27
  NOTE 9 - RELATED PARTY
TRANSACTIONS
 
 The
Company receives a monthly management fee of $21,000 from Kent International for
management services.  These services include, among other things,
preparation of periodic and other filings with the Securities and Exchange
Commission, evaluating merger and acquisition proposals, providing internal
accounting services and shareholder relations.  Additionally, Kent
International’s executive offices are located in the premises provided by the
Company; however, no separate payment is made for use of the
premises.  This arrangement may be terminated at will by either
party.  The monthly management fee revenue and offsetting expense is
eliminated during consolidation.  The Company is the beneficial owner
of approximately 53.44% of Kent International’s outstanding Common Stock at
December 31, 2008.  Paul O. Koether, Chairman of the Company is also
the Chairman of Kent International and the beneficial owner of approximately
59.11% of the Company’s outstanding common stock.  Bryan P. Healey,
Chief Financial Officer and Director of the Company is also the Chief Financial
Officer and Director of Kent International and the son-in-law of Paul O.
Koether.
 
 The
Company and its consolidated subsidiaries reimburse an affiliate, Bedminster
Management Corp., for the allocated direct cost of group health insurance and
office supplies. These reimbursements were approximately $60,802 and $83,481 in
the years ended December 31, 2008 and 2007, respectively.  Bedminster
Management Corp. facilitates the allocation of certain central administrative
costs on a cost reimbursement basis and is owned equally by Kent, Kent
International and T.R. Winston & Company, LLC.
 
 NOTE 10 - LEGAL PROCEEDINGS
 
 Texas
American Petrochemicals, Inc. (“TAPI”)
 
 By letter datedMay 24, 2005, the Texas Commission on
Environmental Quality ("TCEQ") advised Texas American Petrochemicals, Inc.
(“TAPI”), that it was a person responsible for solid waste at a hazardous waste
site inTexas. TAPI is an inactive
subsidiary of the Company with no assets. The TCEQ determined that the amount
owed to the State ofTexasfor remediation is
$2,459,594and thatfailureto pay that amount would
result in the matter being referred to the TCEQ Litigation Division. The Company
has been advised by its environmental counsel that it has good legal arguments
to support its position that it should not be subject to liability for the
remediation costs of the site, however no assurances can be made as to the
outcome of this matter.
  28
  Item
      9.
              CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES
 
 None.
 
 Item
      9A.
              CONTROLS AND
      PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 As of the
end of the period covered by this report, the Company carried out, under the
supervision and with the participation of the Company’s management, including
its Chief Executive Officer and Chief Financial Officer, an evaluation of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) in ensuring that information required to be disclosed by
the Company in its reports is recorded, processed, summarized and reported
within the required time periods.  In carrying out that evaluation,
management identified a material weakness (as defined in Public Company
Accounting Oversight Board Standard No. 2) in our internal control over
financial reporting regarding a lack of adequate segregation of
duties.  Accordingly, based on their evaluation of our disclosure
controls and procedures as of December 31, 2008, the Company’s Chief Executive
Officer and its Chief Financial Officer have concluded that, as of that date,
the Company’s controls and procedures were not effective for the purposes
described above.
 
 There was
no change in the Company’s internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934)
during the quarter ended December 31, 2008 that has materially affected or is
reasonably likely to materially affect the Company’s internal control over
financial reporting.
 
 Management’s
Report on Internal Control over Financial Reporting
 
 Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934.  We have assessed the effectiveness
of those internal controls as of December 31, 2008, using the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Intergrated
Framework as a basis for our assessment.
 
 Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.  All internal
control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
 
 A
material weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material misstatement of the Company’s annual or interim financial statements
that is more than inconsequential will not be prevented or
detected.  In the course of making our assessment of the effectiveness
of internal controls over financial reporting, we identified a material weakness
in our internal control over financial reporting.  This material
weakness consisted of inadequate staffing and supervision within the bookkeeping
and accounting operations of our company.  The relatively small number
of employees who have bookkeeping and accounting functions prevents us from
segregating duties within our internal control system.  The inadequate
segregation of duties is a weakness because it could lead to the untimely
identification and resolution of accounting and disclosure matters or could lead
to a failure to perform timely and effective reviews.
  29
  As we are
not aware of any instance in which the company failed to identify or resolve a
disclosure matter or failed to perform a timely and effective review, we
determined that the addition of personnel to our bookkeeping and accounting
operations is not an efficient use of our resources at this time and not in the
interest of shareholders.
 
 Because
of the above condition, the Company’s internal controls over financial reporting
were not effective as of December 31, 2008.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
 
 Item
      9B.
              OTHER
      INFORMATION
 
 None.
 PART III
 
 Item
      10.
                DIRECTORS, EXECUTIVE
      OFFICERS, AND CORPORATE
GOVERNANCE
 
 M.
Michael Witte resigned as Director of the Company effective September 30,
2008.  Mr. Witte had served as a Director of the Company since
1986.  On October 6, 2008, Dr. James L. Bicksler was elected a
Director of the Company to fill the vacancy created by Mr. Witte’s
resignation.
 
 The
current members of the Board of Directors were elected at the 2008 Annual
Meeting and will serve until the next Annual Meeting or until their successors
have been duly elected and qualified.  The Company's officers are
elected by and serve at the leave of the Board.  The directors and
executive officers of the Company at February 29, 2008 were as
follows:
 
 Name
                    
                    Age
                    
                    Position HeldPaul
      O. Koether
                    
                    72
                    
                    Chairman,
      Chief Executive Officer and DirectorWilliam
      Mahomes, Jr.
                    
                    62
                    
                    DirectorCasey
      K. Tjang
                    
                    70
                    
                    DirectorJames
      L. Bicksler
                    
                    71
                    
                    DirectorBryan
      P. Healey
                    
                    38
                    
                    Chief
      Financial Officer and
Director
  30
  Paul O. Koetherhas been
Chairman, Director and Chief Executive Officer of the Company since July 1987
and President of the Company from October 1990 until November 2005, and until
December 31, 2003 when it was dissolved, the general partner of Shamrock
Associates, an investment partnership which was the principal stockholder of the
Company.  Mr. Koether was Chairman from April 1988 to July 2005,
President from April 1989 to February 1997 and director from March 1988 to July
2005 of Pure World, Inc., (“Pure World”) and from December 1994 until July 2005
a director and from January 1995 to July 2005 Chairman of Pure World’s wholly
owned subsidiary, Pure World Botanicals, Inc., a manufacturer and distributor of
natural products.  Mr. Koether was Chairman and a Director of Sun
Equities Corporation, (“Sun”) a private company until Sun was merged into Pure
World in December 2004.  Mr. Koether was Chairman from 1990 until
August 2003 and a registered representative since 1989 of T. R. Winston &
Company, LLC. (“Winston”).  Since September 1998, Mr. Koether has been
a director, Chairman and Chief Executive Officer as well as President from
October 2003 until November 2005, of Kent International Holdings, Inc., a
biopharmaceutical company formerly known as Cortech, Inc. that is seeking to
redeploy its assets.  Bryan P. Healey, Chief Financial Officer and
Director of the Company is the son-in-law of Paul O. Koether.
 
 William Mahomes, Jr.currently
is a senior shareholder in Simmons Mahomes P.C., a law firm emphasizing
commercial real estate transactions, public finance, business transactions and
mediation. From 1997 to May 2001, Mr. Mahomes was in the private practice of law
emphasizing mediation, real estate and commercial transactions. From 1994 to
March 1997, Mr. Mahomes was a senior shareholder with a major Texas law firm.
From 1989 to 1994, he was an international partner in the Dallas office of a
major international law firm. From 1993 to July 2005, Mr. Mahomes was a director
of Pure World. Mr. Mahomes currently serves on the Board of Directors of a
variety of organizations, including the Center for New Ventures and
Entrepreneurship (Texas A&M University), The Association of Former Students
at Texas A&M University and the Texas Affiliate Board of Healthcare Service
Corporation (HCSC), also known as Blue Cross and Blue Shield of
Texas.
 
 Casey K. Tjang.has been a
Director of the Company since 1992.  Since January 2004, he has been
chairman and chief executive officer of First Merchant Bankers, Inc., a private
merchant bank dealing with Asia-Pacific businesses. From September 2001 to
February 2002, he has been President and Chief Executive Officer and from August
2000 to September 2001 was Chief Financial Officer of Knowledgewindow, Inc., an
e-learning provider of Internet training. Since February 2002, Mr. Tjang has
been President and Chief Executive Officer of Princeton Accredited Services,
Inc. and Erudite Internet Systems, Inc. an e-learning custom courseware
developer and provider of an Internet based distance education
system.  Since 2005, he has been chairman and chief executive officer
of Princeton Business School, a provider of an online education towards
Entrepreneurial Master of Business Administration degree program.
 
 James L. Bicksler, Ph.D.,Director of the Company since October 2008 has been a Professor of
Finance and Economics, Rutgers Business School, Rutgers, the State University of
New Jersey, since 1969 as well as a Director of Kent International Holdings,
Inc. from 1998 through September 30, 2008.
 
 Bryan P. Healey, a certified
public accountant, has been Vice-President, Secretary and Chief Financial
Officer of the Company since May 2006 and a Director since November
2007.  Mr. Healey has also been Vice-President, Secretary and Chief
Financial Officer since May 2006 and a Director since November 2007 of Kent
International Holdings, Inc.  Since July 2006, Mr. Healey has been a
registered representative of T. R. Winston & Company, LLC.  From
September 1995 to April 2006, Mr. Healey was with Bowman & Company, L.L.P.,
the largest CPA firm in Southern New Jersey, in various positions including
audit manager from July 2001 to April 2006.
  31
  Compliance
with Section 16(a) of the Exchange Act
 
 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").  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.
 
 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 2008.
 
 Audit
Committee
 
 The Board
of Directors of the Company has determined that Casey K. Tjang is an audit
committee financial expert, as that term is defined under SEC rules and that Mr.
Tjang is independent, as the term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Exchange Act.  The Company has a separately designated
standing Audit Committee whose members are William Mahomes, Jr. Esq., Casey K.
Tjang and James L. Bicksler.
 
 Nominating
Committee; Compensation Committee
 
 The Board
of Directors has neither a nominating committee nor a compensation
committee.  The Board believes that its numbers are sufficiently small
that nominations and determinations of compensation can be addressed by the
entirety of the Board.
 
 Code
of Ethics
 
 The
Company has adopted a Code of Ethics that applies to its principal executive
officer and principal financial officer.  Stockholders may write to
Bryan P. Healey, the Secretary of the Company, at the Company’s principal
executive office: 211 Pennbrook Road, P.O. Box 97, Far Hills, New Jersey 07931,
to request a copy of the Code of Ethics, and the Company will provide it to any
person without charge upon such request.
 
 Item
      11.
              EXECUTIVE
      COMPENSATION
 
 Summary
Compensation Table
 
 The table
shown below includes information concerning the annual compensation for services
in all capacities to the Company for the fiscal years ended December 31, 2008
and 2007, for those persons who were, at December 31, 2008 and 2007, the chief
executive officer, the principal financial officer and the most highly paid
executive officer other than the chief executive officer and principal financial
officer (the "Named Officers").  The Company did not compensate any
officers over $100,000 other than the Named Officers.
  32
 
 Name
      and Principal Position
                                                
                                                Year
                                                
                                                Salary
                                                
                                                Bonus
                                                
                                                Option
      Awards
                                                
                                                All
      Other Compensation (2)
                                                
                                                TotalPaul
      O. Koether
                                                
                                                2008
                                                
                                                $
                                                240,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                44,604
                                                (3)
                                                
                                                $
                                                284,604Chief
      Executive Officer and
                                                
                                                2007
                                                
                                                
                                                240,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                50,942
                                                (3)
                                                
                                                
                                                290,942Chairman
      of the Board
                                                
                                                2006
                                                
                                                
                                                240,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                51,653
                                                (3)
                                                
                                                
                                                291,653Qun
      Yi Zheng (4)
                                                
                                                2008
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,541
                                                
                                                
                                                
                                                1,541President
                                                
                                                2007
                                                
                                                
                                                133,333
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                163,854
                                                (4)(5)
                                                
                                                
                                                297,1872006
                                                
                                                
                                                200,000
                                                
                                                
                                                
                                                
                                                
                                                $
                                                35,488
                                                
                                                
                                                
                                                33,495
                                                (5)
                                                
                                                
                                                268,983Bryan
      P. Healey
                                                
                                                2008
                                                
                                                
                                                156,000
                                                
                                                
                                                $
                                                10,000
                                                
                                                
                                                
                                                5,858
                                                (6)
                                                
                                                
                                                
                                                
                                                
                                                
                                                171,858Chief
      Financial Officer,
                                                
                                                2007
                                                
                                                
                                                140,000
                                                
                                                
                                                
                                                10,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                150,000Principal
      Financial and
                                                
                                                2006
                                                
                                                
                                                93,333
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                3,990
                                                (6)
                                                
                                                
                                                97,323Accounting
      Officer
 
 
 (1)
              The
      Company has no bonus or deferred compensation plans and pays bonuses at
      the discretion of the Board based on
  performance.
 
 (2)
              Omitted
      from this table are amounts paid for group life, health and
      hospitalization insurance provided to the Named Officers.  These
      benefits do not discriminate in scope, terms or operation in favor of
      executive officers or directors and are generally available to all
      salaried employees.
 
 (3)
              Amounts
      include $35,471, $40,812, and $38,142 accrued in 2008, 2007 and 2006,
      respectively, for post employment benefit obligations including change in
      control and death benefit provisions pursuant to Mr. Koether’s employment
      contract.  All Other Compensation also includes $9,133, $10,130,
      and $19,511 paid in 2008, 2007, and 2006, respectively, to lease an
      automobile used for business
purposes.
 
 (4)
              The
      salary and perquisites of Dr. Zheng were paid by Kent International, a
      subsidiary of the Company.  Dr. Zheng resigned effective August
      31, 2007.
 
 (5)
              Amount
      includes $13,518 and $13,159 paid by Kent International in 2007 and 2006,
      respectively for Dr. Zheng’s country club membership, $1,846 paid in 2007
      and 2006 for Dr. Zheng’s life insurance premiums and $1,541, $18,490, and
      $18,490 paid in 2008, 2007 and 2006, respectively, to lease an automobile
      used for business purposes.  All Other Compensation also
      includes $130,000 paid in accordance with the separation agreement with
      Dr. Zheng dated August 24, 2007.
 
 (6)
              Represents
      stock-based compensation expense imputed to Mr. Healey by Kent
      International in 2008.  Amounts in 2006 include relocation
      expenses in the amount of $3,990 paid to Mr.
  Healey.
  33
  Outstanding
Equity Awards at Fiscal Year End
 
 There
were no outstanding equity awards at December 31, 2008.
 
 Director
Compensation Table
 
 Directors
who are not employees of the Company receive a monthly fee of $1,000 plus $200
for each day of attendance at board and committee meetings.  During
2008, the Company paid directors' fees in the aggregate amount of
$38,800.  The table below includes information about compensation paid
to our non-employee directors:
 
 Name
                          
                          Fees
      Earned or Paid in Cash
                          
                          
                          TotalWilliam
      Mahomes, Jr.
                          
                          $
                          12,800
                          
                          
                          $
                          12,800Casey
      K. Tjang
                          
                          
                          13,000
                          
                          
                          
                          13,000M.
      Michael Witte
                          
                          
                          9,600
                          
                          
                          
                          9,600James.
      L. Bicksler
                          
                          
                          3,400
                          
                          
                          
                          3,400$
                          38,800
                          
                          
                          $
                          38,800
 
 Employment
Agreements
  Paul
O. Koether
 
 On May
12, 2008 (“Effective Date”) the Company and Paul O. Koether entered into an
employment agreement (“Koether Agreement”) pursuant to which Mr. Koether serves
as the Company’s Chairman for an initial three year term at an annual salary of
$240,000 (“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 Effective Date.
 
 Mr.
Koether may terminate his employment under the Koether 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 payable under the Koether
Agreement through the expiration date of the Koether Agreement or (ii) an amount
equal to three times the average annual Base Salary paid to him during the
preceding five years.
 
 A 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
May 12, 2008, 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 May 12, 2008 (“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 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.
  34
  Mr.
Koether may also terminate his employment if the Company fails to perform its
obligations under the Koether 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 Koether Agreement for
“cause” which is defined as (i) Mr. Koether’s continued failure to substantially
perform his duties under the Koether 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 80 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 Koether Agreement, his
beneficiary shall be paid a death benefit equal to $240,000 per year for three
years payable in equal monthly installments.  Should Mr. Koether
become “disabled” (as such term is defined in the Koether Agreement) during the
term of the Koether Agreement and either long-term disability insurance is not
provided by the Company or such policy does not provide an annual benefit to age
80 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 80.
 
 Bryan
P. Healey
 
 Effective
May 15, 2006 the Company and Bryan P. Healey, CPA entered into an employment
agreement (“Healey Agreement”) pursuant to which Mr. Healey serves as the
Company’s Chief Financial Officer for an initial two year term at an annual
salary of $140,000 (“Healey Base Salary”), which may be increased but not
decreased at the discretion of the Board of Directors.  The Healey
Base Salary increased to $156,000 annually effective January 1,
2008.  The Healey Agreement was automatically extended for one day for
each day elapsed after May 15, 2007, converting the term of the Healey Agreement
to a contract with a two year ‘evergreen’ term, commencing on May 15,
2007.
 
 Mr.
Healey may terminate his employment under the Healey Agreement at any time for
“good reason” (defined below) within 36 months after the date of a “Change in
Control” (defined below).  Upon his termination, Mr. Healey shall be
paid the Healey Base Salary payable under the Healey Agreement through the
expiration date of the Healey Agreement.
 
 A 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 50.1% or more of the Company’s stock outstanding as of
May 15, 2006, is or becomes the beneficial owner, directly or indirectly, of
50.1% or more of the Company’s outstanding stock or (ii) individuals
constituting the Board of Directors on May 15, 2006 (“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 of the Board.  “Good reason” means a determination made
solely by Mr. Healey, 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.
  35
  Mr.
Healey may also terminate his employment if the Company fails to make the
payments specified in the Healey Agreement, or if the Company fails to make such
payments for a period of five days after Mr. Healey has given notice of such
failure.
 
 The
Company may terminate Mr. Healey’s employment under the Healey Agreement for
“cause” which is defined as (i) Mr. Healey’s continued failure to substantially
perform his duties under the Healey Agreement (other than by reason of his
incapacity due to physical or mental illness) which is not cured within
specified time frames or (ii) Mr. Healey’s conviction of any criminal act of
fraud.  The Company may not terminate Mr. Healey’s employment except
by a vote of not less than 75% of the entire Board of Directors at a meeting at
which Mr. Healey is given the opportunity to be heard.
 
 In the
event of Mr. Healey’s death during the term of the Agreement, his beneficiary
shall be paid a death benefit equal to his then current annual salary in equal
monthly installments for the remainder of the term of the Healey
Agreement.  Should Mr. Healey become disabled during the term of the
Healey Agreement, Mr. Healey shall be paid such benefits to which he is entitled
under the terms of such long-term insurance as the Company has provided him or
80% of his salary for the remainder of the two year term of the Healey
Agreement, whichever is greater, in accordance with his regular payment
schedule.
  36
  Item
      12.
              SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS
 
 The
following table provides information with respect to the Company's common stock
beneficially owned as of February 27, 2009 by each director and executive
officer 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.
  Name
      and Addressof Beneficial
      Owner
                                                                        
                                                                        Amount
      and Nature of BeneficialOwnership(1)
                                                                        
                                                                        Percent
      ofClassPaul
      O. Koether
                                                                        
                                                                        1,630,915(2)
                                                                        
                                                                        59.11%211
      Pennbrook RoadFar
      Hills, NJ 07931William
      Mahomes, Jr.
                                                                        
                                                                        -
                                                                        
                                                                        -900
      Jackson StreetSuite
      540Dallas,
      TX 75202Casey
      K. Tjang
                                                                        
                                                                        -
                                                                        
                                                                        -510
      Tallwood LaneGreenbrook,
      NJ 08812James
      L. Bicksler
                                                                        
                                                                        -
                                                                        
                                                                        -96
      Inwood AvenueUpper
      Montclair, NJ 07043Jennifer
      S. Healeyc/o
      211 Pennbrook Road
                                                                        
                                                                        809,444(3)
                                                                        
                                                                        29.34%Far
      Hills, NJ 07931Bryan
      P. Healey
                                                                        
                                                                        830,044(4)
                                                                        
                                                                        30.08%c/o
      211 Pennbrook RoadFar
      Hills, NJ 07931Marital
      Trust u/w/o
                                                                        
                                                                        491,987
                                                                        
                                                                        17.83%Natalie
      I. Koether211
      Pennbrook RoadFar
      Hills, NJ 07931All
      Directors and Executive Officers as a Group (6 persons)
                                                                        
                                                                        1,710,959
                                                                        
                                                                        62.01%
 
 (1)
              The
      beneficial owner has both sole voting and sole investment powers with
      respect to these shares except as set forth in other footnotes
      below.  Included in such number of shares beneficially owned are
      shares subject to options currently exercisable or becoming exercisable
      within 60 days for all directors and executive officers as a
      group.
  37
  (2)
              Includes
      75,287 shares held in Mr. Koether’s IRA and 491,987 shares beneficially
      owned by the Marital Trust u/w/o Natalie I. Koether.  As
      trustee, Mr. Koether may be deemed to own these shares
      beneficially.  Also includes 750,000 shares owned by Ms. Healey
      that Paul O. Koether has been granted sole voting power over as proxy
      agent.
 
 (3)
              Includes
      25,800 shares owned in custodial accounts for the benefit of family
      members.  Also includes 750,000 shares owned by Ms. Healey that
      Paul O. Koether has been granted sole voting power over as proxy
      agent.
 
 (4)
              Includes
      12,000 shares held in Mr. Healey’s IRA, 783,644 shares beneficially owned
      by Mr. Healey’s spouse and 25,800 shares owned in custodial accounts for
      the benefit of family members.
 
 Stock
Option and Stock Appreciation Rights; Grants and Exercises
 
 In 2005,
stockholders holding approximately 54.69% of the outstanding common stock of the
Company approved the Kent Financial Services, Inc. 2005 Stock Option Plan (“2005
Stock Option Plan”), by written consent.  The Board of Directors also
approved the 2005 Stock Option Plan.  Under the 2005 Stock Option
Plan, a total of 400,000 shares of Common Stock were available for issuance to
key employees, including officers of the Company or any of its
subsidiaries.  At December 31, 2008, the Company had no common stock
options outstanding.
 
 Long-Term
Incentive Plan Awards Table and Defined Benefit or Actuarial Plan
Table
 
 The
Company does not maintain any long-term incentive plans or defined benefit or
actuarial plans.
 
 Item
      13.
              CERTAIN RELATIONSHIPS
      AND RELATED TRANSACTIONS AND DIRECTOR
  INDEPENDENCE
 
 Certain
Relationships and Related Transactions
 
 The
Company receives a monthly management fee of $21,000 from Kent International for
management services.  These services include, among other things,
preparation of periodic and other filings with the Securities and Exchange
Commission, evaluating merger and acquisition proposals, providing internal
accounting services and shareholder relations.  This arrangement may
be terminated at will by either party.  The monthly management fee
revenue and offsetting expense is eliminated during
consolidation.  The Company is the beneficial owner of approximately
53.44% of Kent International’s outstanding Common Stock at December 31,
2008.  Paul O. Koether, Chairman of the Company is also the Chairman
of Kent International and the beneficial owner of approximately 59.11% of the
Company’s outstanding common stock.  Bryan P. Healey, Chief Financial
Officer and Director of the Company is also the Chief Financial Officer and
Director of Kent International and the son-in-law of Paul O.
Koether.
 
 The
Company and its consolidated subsidiaries reimburse an affiliate, Bedminster
Management Corp., for the allocated direct cost of group health insurance and
office supplies. These reimbursements were approximately $60,802 and $83,481 in
the years ended December 31, 2008 and 2007, respectively.  Bedminster
Management Corp. facilitates the allocation of certain central administrative
costs on a cost reimbursement basis and is owned equally by Kent, Kent
International and T.R. Winston & Company, LLC.
  38
  Director
Independence
 
 The
following members of our Board of Directors are independent, as “independent” is
defined in the rules of the NASDAQ Stock Market:  William Mahomes,
Jr., Casey K. Tjang and James L. Bicksler.
 
 ITEM
      14.
              PRINCIPAL ACCOUNTANT
      FEES AND SERVICES
 
 The
Company’s Principal Accountant for 2008 and 2007 was Paritz and Company, P.A.
(“Paritz”).
 
 Year
ended December 31, 2008
 
 Audit
Fees:  The aggregate fees, including expenses, expected to be billed
by Paritz in connection with the audit of the Company’s consolidated financial
statements and for the review of the Company’s financial information included in
the Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
2008 are $21,500.  The aggregate fees, including expenses, billed by
Paritz in connection with the review of the Company’s financial information
included in the Company’s quarterly reports on Form 10-Q filed during the fiscal
year ending December 31, 2008 were $6,000.
 
 Audit
Related Fees: No audit related fees were billed to the Company by Paritz in
2008.
 
 Tax Fees:
The aggregate fees, including expenses, billed by Paritz in connection with the
preparation of income tax returns for the Company during fiscal year ended
December 31, 2008 were $2,500.
 
 All Other
Fees: There were no other fees billed to the Company by Paritz during
2008.
 
 Year
ended December 31, 2007
 
 Audit
Fees:  The aggregate fees, including expenses, expected to be billed
by Paritz in connection with the audit of the Company’s consolidated financial
statements and for the review of the Company’s financial information included in
the Company’s Annual Report on Form 10-KSB for the fiscal year ending December
31, 2007 are $21,500.  The aggregate fees, including expenses, billed
by Paritz in connection with the review of the Company’s financial information
included in the Company’s quarterly reports on Form 10-QSB filed during the
fiscal year ending December 31, 2007 were $6,000.
 
 Audit
Related Fees: The aggregate fees, including expenses, billed by Amper,
Politziner and Mattia, LLP (“APM”) in 2007, related to issuing a consent opinion
for the year ended December 31, 2005 included in the Company’s Annual Report on
Form 10-KSB for the fiscal year ending December 31, 2006 were
$5,000.
 
 Tax Fees:
The aggregate fees, including expenses, billed by Paritz in connection with the
preparation of income tax returns for the Company during fiscal year ended
December 31, 2007 were $2,500.
 
 All Other
Fees: There were no other fees billed to the Company by either APM or Paritz
during 2007.
  39
  Audit
Committee Pre-Approval Policies and Procedures
 
 The Audit
Committee pre-approved all non-audit work performed by the Company’s principal
accountant, specifically, the preparation of income tax returns for the
Company.
 
 Item
      15.
              EXHIBITS
 
 The
following exhibits are filed as part of this report:
 
 (a) Exhibits
 
 3.1
                Articles
      of Incorporation of Kent Financial Services, Inc. (1)
 
 3.2
                Bylaws
      of Kent Financial Services, Inc. (1)
 
 9
                Irrevocable
      proxy agreement between Jennifer S. Healey and Paul O. Koether. (2)
 
 10.1
                Employment
      Agreement, dated May 12, 2008 by and between Kent Financial Services, Inc.
      and Paul O. Koether. (3)**
 
 10.2
                Employment
      Agreement, dated May 15, 2006 by and between Kent Financial Services, Inc.
      and Bryan P. Healey. (4)**
 
 10.3
                Kent
      Financial Services 2005 Stock Option Plan, Form of Incentive Stock Option
      and Form of Non-Qualified Stock Option. (5)
 
 21
                Subsidiaries*
 
 31.1
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*
 
 31.2
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*
 
 32
                Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002*
 ___________________
 *
              Filed
      herewith.
 **
              Compensatory
      Plan
 
 (1)
              Filed
      as an exhibit to the Company’s Form 8-K filed on December 20, 2006, and
      incorporated herein by reference.
 (2)
              Filed
      as an exhibit to the Company’s Form 8-K filed on March 2, 2009, and
      incorporated herein by reference.
 (3)
              Incorporated
      by reference to Kent Financial Services, Inc. Form 10-Q for the period
      ended June 30, 2008.
 (4)
              Filed
      as an exhibit to the Company’s Form 8-K filed on May 1, 2006, and
      incorporated herein by reference.
 (5)
              Filed
      as an exhibit to the Company’s Form 8-K filed on December 2, 2005, and
      incorporated herein by
reference.
  40
  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, 2009
                
                BY
                /s/ Paul O. KoetherPaul
      O. KoetherChairman
      of the Board and Director(Principal
      Executive 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, 2009
                
                /s/ Paul O. KoetherPaul
      O. KoetherChairman
      of the Board and Director(Principal
      Executive Officer)Dated:  March
      26, 2009
                
                /s/ Bryan P. HealeyBryan
      P. HealeyChief
      Financial Officer, Secretaryand
      Director(Principal
      Financial andAccounting
      Officer)Dated:  March
      26, 2009
                
                /s/ William Mahomes, Jr.William
      Mahomes, Jr.DirectorDated:  March
      26, 2009
                
                /s/ Casey K. TjangCasey
      K. TjangDirectorDated:  March
      26, 2009
                
                /s/ James L. BickslerJames
      L. BickslerDirector






41