**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**


MARK
      ONE:


x
            Annual
                Report under Section 13 or 15(d) of the Securities Exchange Act of
                1934


For
      the
      fiscal year ended December 31, 2006





 ̈
            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 small business issuer as specified in its charter)




Nevada
            
            75-1695953(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)376
                Main Street, P.O. Box 74, Bedminster, New Jersey
            
            07921(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer's
      telephone number (908)
      234-0078





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


None





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


None





Common
      Stock, par value $.10 per share


(Title
      of
      Class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act  ̈





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x  No  ̈





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No x





The
      issuer's revenues for the fiscal year ended December 31, 2006 were approximately
      $1,135,000.





The
      aggregate market value of the common stock held by non-affiliates of the issuer,
      based upon the closing sale price on the Nasdaq SmallCap Market as of February
      28, 2007, was approximately $3.2 million. At February 28, 2007, there were
      2,799,680 shares of common stock outstanding.





Transitional
      Small Business Disclosure Format Yes  ̈ No x












**PART
      I**





**Item
                1.**
            **DESCRIPTION
                OF 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 1980 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-KSB 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 6 (“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 53.22% of Kent International at December 31, 2006. 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.





In
      November 2005, Kent International hired Dr. Qun Yi Zheng as its President.
      Dr.
      Zheng also became the President of the Company at the same time. Under Dr.
      Zheng, Kent International intends to pursue business opportunities in China
      and
      the United States. Kent International may consider potential opportunities
      in a
      number of areas including, but not limited to, outsourcing for U.S. companies,
      consulting for U.S. and non U.S. companies interested in cross-border business
      relationships, surveys of small businesses for sale in China and the United
      States and import/export distribution contracts.





Additionally,
      Kent International is developing 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 will be
      free, thus, any potential revenues will be derived from advertisements placed
      on
      the site by third parties. The site will provide users with access to other
      users’ personal profiles and enable the user to send private messages to other
      registered users of similar interests in order to develop lasting friendships
      or
      simply attain a pen pal. Chinauspals.com will also feature user generated
      discussion forums and the ability to view content in both English and Simplified
      Chinese. A beta version of the site was launched in February 2007 and a fully
      operational version is expected to be launched by July 2007; however, possible
      technical, political and personnel issues may lead to delays beyond July
      2007.


2


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.





**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”.





**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.





*The
      Company could be exposed to environmental liabilities of a
      subsidiary.*





As
      described in Item 3 (“Legal Proceedings”), a wholly owned subsidiary of Kent
      without assets is subject to a potential significant environmental claim of
      approximately $2.5 million. Due to the corporate separateness, Kent should
      not
      be exposed to its subsidiary’s environmental liabilities. However, no assurance
      can be given that a court would not pierce the corporate veil and declare Kent
      liable jointly with the subsidiary.





**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, 2006 filed on form
      10-KSB under SEC file no. 000-20726.





**Risk
      Factors Related to Kent Educational**





*The
      Academy is in its early stages of operations.*


3


In
      2006,
      its second year of operations, The Academy had revenues of approximately
      $388,000 and net income of approximately $74,000. The Company anticipates
      continued revenue growth at The Academy; however, there can be no assurance
      of
      its growth or profitability.





*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 seven 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 28, 2007, the Company and its subsidiaries had six employees. These
      employees devote such time to the Company as required; however, they are not
      full-time employees of the Company.





**Item
                2.**
            **DESCRIPTION
                OF PROPERTY**





None.





**Item
                3.**
            **LEGAL
                PROCEEDINGS**





**Texas
      American Petrochemicals, Inc. (“TAPI”)**





By
      letter dated May 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 in Texas. TAPI
      is
      an inactive subsidiary of the Company with no assets. The TCEQ determined that
      the amount owed to the State of Texas for remediation is $2,459,593.92 and
      that
      failure to 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.


4


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





The
      Company held its Annual Meeting of Stockholders on December 4, 2006.
      Management's nominees, Paul O. Koether, William Mahomes, Jr., Casey K. Tjang
      and
      M. Michael Witte, were elected to the Board of Directors.





The
      following is the vote tabulation for all nominees:





FOR
            
            AGAINST
            
            WITHHELD
            
            ABSTENTIONS
                AND BROKER NONVOTESPaul
                O. Koether
            
            
            1,552,484
            
            
            -
            
            
            -
            
            
            -William
                Mahomes, Jr.
            
            
            1,552,484
            
            
            -
            
            
            -
            
            
            -Casey
                K. Tjang
            
            
            1,552,484
            
            
            -
            
            
            -
            
            
            -M.
                Michael Witte
            
            
            1,552,484
            
            
            -
            
            
            -
            
            
            -





The
      shareholders also voted to approve the reincorporation by merger into a newly
      formed, wholly owned Nevada subsidiary that would survive the merger. The merger
      changed the state of incorporation from Delaware to Nevada. The following is
      the
      vote tabulation for the approval:





FOR
            
            AGAINST
            
            WITHHELD1,552,484
            
            
            -
            
            
            -





Additionally,
      the shareholders voted to approve the appointment of Paritz & Company, P.A.
      as the Corporation’s independent registered public accounting firm for the
      fiscal year ending December 31, 2006. The following is the vote tabulation
      for
      the approval:





FOR
            
            AGAINST
            
            WITHHELD1,552,484
            
            
            -
            
            
            -





**PART
      II**





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





**Shareholders
      of Record**





As
      of
      February 28, 2007, the Company had 1,533 stockholders of record of its common
      stock. The closing price of the common stock was $2.61 on February 28,
      2007.





**Market
      Information**





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


5


The
      table
      below lists the high and low bid prices for the common stock as reported by
      Nasdaq for the periods indicated. These prices represent inter-dealer quotations
      without retail markups, markdowns or commissions, and may not represent actual
      transactions.





High
            
            LowCalendar
                Quarter:2006First
                Quarter
            
            $
            2.67
            
            $
            2.32Second
                Quarter
            
            
            2.64
            
            
            2.25Third
                Quarter
            
            
            2.29
            
            
            2.16Fourth
                Quarter
            
            
            2.49
            
            
            2.182005First
                Quarter
            
            $
            3.57
            
            $
            2.45Second
                Quarter
            
            
            2.85
            
            
            2.17Third
                Quarter
            
            
            2.73
            
            
            2.21Fourth
                Quarter
            
            
            2.47
            
            
            2.17





**Dividends**





On
      March
      10, 2005 the Company declared a special dividend of $.30 per share. The record
      date for the special dividend was March 21, 2005 and the distribution date
      was
      April 5, 2005. The Company did not pay any dividends in 2006.





**Equity
      Compensation Plan Information**





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 are available for issuance to key employees, including
      officers of the Company or any of its subsidiaries. In November 2005, 300,000
      common stock options were issued to Dr. Qun Yi Zheng, the Company’s
      President.





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,
      2006.


6





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 Holders**2005
                Stock Option Plan
            
            
            300,000
            
            $
            3.00
            
            
            100,000**Equity
                Compensation Plans not Approved by Security
                Holders**
            
            
            N/A
            
            
            N/A
            
            
            N/ATotal
            
            
            300,000
            
            $
            3.00
            
            
            100,000





**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, 2006 - October 31, 2006
            112
            $     
                2.24
            112
            105,514November
                1, 2006 - November 30, 2006
            4
            2.27
            4
            105,510December
                1, 2006 - December 31, 2006
            92
            2.30
            92
            105,418Total
            208
            $     
                2.27
            208
            105,418




(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.


7


**Item
                6.**
            **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-KSB. 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-KSB entitled
“Description of Business” and risks discussed elsewhere in this Form 10-KSB. 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
      owns
      approximately 53.22% of Kent International. Kent International is included
      in
      the Company’s consolidated results. In November 2005, Kent International hired
      Dr. Qun Yi Zheng as its President. Under Dr. Zheng, Kent International intends
      to pursue business opportunities in China and the United States. Kent
      International may consider potential opportunities in a number of areas
      including, but not limited to, outsourcing for U.S. companies, consulting for
      U.S. and non U.S. companies interested in cross-border business relationships,
      surveys of small businesses for sale in China and the United States and
      import/export distribution contracts.





Additionally,
      Kent International is developing 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 will be
      free, thus, any potential revenues will be derived from advertisements placed
      on
      the site by third parties. The site will provide users with access to other
      users’ personal profiles and enable the user to send private messages to other
      registered users of similar interests in order to develop lasting friendships
      or
      simply attain a pen pal. Chinauspals.com will also feature user generated
      discussion forums and the ability to view content in both English and Simplified
      Chinese. A beta version of the site was launched in February 2007 and a fully
      operational version is expected to be launched by July 2007; however, possible
      technical, political and personnel issues may lead to delays beyond July
      2007.





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.





**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. Kent Educational and
      The
      Academy are consolidated in the accompanying financial statements. In 2006,
      its
      second year of operations, The Academy had revenues of approximately $388,000
      and net income of approximately $74,000. The Company anticipates continued
      revenue growth at The Academy; however, there can be no assurance of its growth
      or profitability.


8


**Results
      of Operations**





The
      Company had a consolidated net loss of $546,000, ($.19 basic and fully diluted
      loss per share) in 2006, compared to a consolidated net loss of $181,000 ($.06
      basic and fully diluted loss per share) in 2005. The increased net loss is
      due
      primarily to increased business development and personnel expenses at the Kent
      International subsidiary. Also, the Company had a one-time gain of $301,000
      from
      the sale of its interest in General Devices, Inc. in 2005. Accordingly, results
      for 2006 and 2005 may not be comparable nor are they necessarily indicative
      of
      future results.





**Revenues**





Seminar
      fees based on seminars held by The Academy increased to $378,000 for the year
      ended December 31, 2006, compared to $61,000 for the year ended December 31,
      2005. This increase is a result of an increase in marketing efforts and name
      recognition during The Academy’s second year of operations. The Company
      recognizes seminar revenue when the services are provided.





Interest
      income was $619,000 and $403,000 in 2006 and 2005, respectively, an increase
      of
      $216,000 due to higher yields on invested balances.





Net
      investing gains were $28,000 in 2006, compared to net investing losses of
      $148,000 in 2005. Realized gains decreased from $104,000 in 2005 to $24,000
      in
      2006; however, unrealized portfolio losses of approximately $252,000 in 2005
      reversed by approximately $4,000 for the net investing gain. The Company also
      recorded a gain on the sale of General Devices of $301,000 during 2005 with
      no
      comparable transaction in 2006.





For
      the
      year ended December 31, 2006, other income decreased to $110,000 from $265,000
      for the year ended December 31, 2005 caused primarily by the termination of
      the
      consulting and advisory agreement requiring the payment of $10,000 a month
      in
      fees to the Company entered into in connection with the sale of our previously
      wholly owned subsidiary T.R. Winston & Company, Inc. in 2003 and 2004, and
      the decrease in administrative fees paid to us by an un-affiliated investment
      company, which fluctuate based on performance. The largest concentration of
      other income for the year ended December 31, 2006 was related to the one time
      sale of certain of Kent International’s pharmaceutical patent rights to
      Accuthera, Inc., a Colorado corporation, for $50,000 in September 2006. These
      patents were previously recorded on the Company’s books at a zero carrying
      value.





**Expenses**





General
      and administrative expenses increased to approximately $1,766,000 for the year
      ended December 31, 2006, from approximately $1,169,000 for 2005, due principally
      to an increase of $175,000 in personnel expenses at Kent International as a
      result of the inclusion of the President’s salary and an increase in business
      development activities at Kent International. Additionally, The Academy’s
      expenses increased from $127,000 in 2005 to $306,000 for 2006 in line with
      its
      increased revenue production.


9


**Other**





In
      2006,
      the Company acquired 69,834 additional shares of Kent International (then known
      as Cortech, Inc.) in open market transactions for approximately $192,000
      recording an extraordinary gain of approximately $28,000, as the amount paid
      for
      the shares was less than the fair value of the net assets recorded. The Company
      purchased 30,166 shares of Cortech in 2005, in open market transactions, for
      a
      total purchase price of $81,000, and recorded an extraordinary gain in
      connection with these purchases of approximately $13,000.





**Liquidity
      and Capital Resources**





At
      December 31, 2006, the Company had cash and cash equivalents of $167,000. 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 $12.9 million at December 31, 2006 with
      yields ranging from 5.04% to 5.17%. Working capital at December 31, 2006 was
      approximately $12.9 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 $757,000 for the year ended December 31, 2006, compared
      to net cash provided by operations of $526,000 for 2005. 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 change in net
      cash
      used in operations for the year ended December 31, 2006 from net cash provided
      by operations for the comparable period in 2005 resulted from increased expenses
      in 2006 for personnel expenses and business development activities as discussed
      above combined with the sale of marketable securities in 2005 that offset
      operating expenses. If the sale of marketable securities were deducted from
      net
      cash provided by operations for the year ended December 31, 2005, the net result
      would be $199,000 net cash used in operations.





The
      Company used $886,000 for investing activities during the year ended December
      31, 2006 for the purchase of short-term investments of $24.3 million and the
      purchase of additional shares of Kent International of $192,000 offset by the
      sales and maturities of short-term investments of $23.6 million. During the
      year
      ended December 31, 2005, cash used for investing activities of $11.8 million
      was
      a result of the purchase of short-term investments of $12.2 million offset
      by
      cash acquired through the initial consolidation of The Academy of $50,000 and
      proceeds from the sale of General Devices of $343,000.





Net
      cash
      used in financing activities for the repurchase of the Company’s common stock,
      was $80,000 and $110,000 in the years ended December 31, 2006 and 2005,
      respectively. In the year ended December 31, 2005, $852,000 was used for the
      payment of a cash dividend that was declared in March 2005 and paid in April
      2005.





**Off-Balance
      Sheet Arrangements**





The
      Company has no off-balance sheet arrangements.


10


**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.
      The Company has identified revenue recognition and the valuation of securities
      owned and non-readily marketable securities as critical accounting estimates.
      These estimates, which are particularly susceptible to change, include the
      assumptions used in determining the fair value of these securities.





**New
      Accounting Pronouncements**





In
      June
      2006, the FASB issued Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
      109* .”
This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes.* This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition.





The
      evaluation of a tax position in accordance with this Interpretation is a
      two-step process. The first step is recognition: The enterprise determines
      whether it is more likely than not that a tax position will be sustained upon
      examination, including resolution of any related appeals or litigation
      processes, based on the technical merits of the position. In evaluating whether
      a tax position has met the more-likely-than-not recognition threshold, the
      enterprise should presume that the position will be examined by the appropriate
      taxing authority that has full knowledge of all relevant information. The second
      step is measurement: A tax position that meets the more-likely-than-not
      recognition threshold is measured to determine the amount of benefit to
      recognize in the financial statements. The tax position is measured at the
      largest amount of benefit that is greater than 50 percent likely of being
      realized upon ultimate settlement.





Tax
      positions that previously failed to meet the more-likely-than-not recognition
      threshold should be recognized in the first subsequent financial reporting
      period in which that threshold is met. Previously recognized tax positions
      that
      no longer meet the more-likely-than-not recognition threshold should be
      derecognized in the first subsequent financial reporting period in which that
      threshold is no longer met. Use of a valuation allowance as described in
      Statement 109 is not an appropriate substitute for the derecognition of a tax
      position. The requirement to assess the need for a valuation allowance for
      deferred tax assets based on the sufficiency of future taxable income is
      unchanged by this Interpretation.





The
      standard is effective for fiscal years beginning after December 15, 2006,
      although earlier implementation is encouraged. Implementation of this standard
      is not expected to have an impact on the Company’s financial statements until
      such time as Kent International develops or acquires a profitable operating
      business.


11


There
      were no other recently issued accounting pronouncements with delayed effective
      dates that would currently have a material impact on the consolidated financial
      statements of the Company.





**Market
      Risk**





Market
      risk represents the potential loss as a result of absolute and relative price
      movements in financial instruments due to changes in interest rates, foreign
      exchange rates, equity prices, and other factors. The Company’s exposure to
      market risk is directly related to price movements of its securities holdings.





The
      fair
      value of securities owned at December 31, 2006 was approximately $149,000.
      The
      potential change in fair value, using a hypothetical 10% decline in prices,
      is
      estimated to be a $14,900 loss as of December 31, 2006. For working capital
      purposes, the Company invests in U.S. Treasury Bills or maintains interest
      bearing balances in its brokerage accounts which are classified as cash
      equivalents in the consolidated financial statements.





**Item
                7.**
            **FINANCIAL
                STATEMENTS**





The
      financial statements filed herein are listed below:





Reports
      of Independent Registered Public Accounting Firms





Financial
      Statements:





Consolidated
      Balance Sheet as of December 31, 2006





Consolidated
      Statements of Operations for the Years ended December 31, 2006 and
      2005





Consolidated
      Statements of Cash Flows for the Years ended December 31, 2006 and
      2005





Consolidated
      Statements of Stockholders’ Equity for the Years ended December 31, 2006 and
      2005





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 sheet of Kent Financial Services,
      Inc. and subsidiaries as of December 31, 2006, and the related consolidated
      statements of operations, stockholders’ equity, and cash flows for the year
      ended December 31, 2006. 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, 2006, and the results of their
      operations and their cash flows for the year ended December 31, 2006, in
      conformity with U.S. generally accepted accounting principles.








/s/
      Paritz & Company, P.A.





March
      27,
      2007


Hackensack,
      New Jersey


13


**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 statements of operations, stockholders’
equity, and cash flows of Kent Financial Services, Inc. and subsidiaries for
      the
      year ended December 31, 2005. These consolidated financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audit.





We
      conducted our audit in accordance with 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 provides a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the results of operations and cash flows of Kent
      Financial Services, Inc. and subsidiaries for the year ended December 31, 2005,
      in conformity with U.S. generally accepted accounting principles.








/s/
      Amper, Politziner & Mattia, P.C.





March
      9,
      2006


Edison,
      New Jersey


14


**KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIES**


CONSOLIDATED
      BALANCE SHEET


As
      of December 31, 2006


(in
      thousands, except share and per share amounts)





ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            167Short-term
                investments
            
            
            12,900Marketable
                securities
            
            
            149Accounts
                receivable
            
            
            75Prepaid
                expenses
            
            
            26Other
                current assets
            
            
            7Total
                current assets
            
            
            13,324Property
                and equipment, net of accumulated depreciation of $6
            
            
            35Goodwill
            
            
            90Other
                assets
            
            
            56Total
                assets
            
            $
            13,505LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            365Deferred
                revenue
            
            
            23Total
                current liabilities
            
            
            388Noncurrent
                liabilities:Accrued
                post employment obligations
            
            
            644Minority
                interest in subsidiaries
            
            
            5,233Stockholders'
                equity:Preferred
                stock without par value; 500,000 shares authorized; none outstanding
            
            
            -Common
                stock, $.10 par value; 8,000,000 shares authorized; 2,799,792 shares
                issued and outstanding
            
            
            280Additional
                paid-in capital
            
            
            12,406Accumulated
                deficit
            
            
            (5,446
            )Total
                stockholders' equity
            
            
            7,240Total
                liabilities and stockholders' equity
            
            $
            13,505




See
      accompanying notes to consolidated financial statements.


15





**KENT
                FINANCIAL SERVICES, INC. AND SUBSIDIARIES**CONSOLIDATED
                STATEMENTS OF OPERATIONS(in
                thousands, except per share amounts)Year
                Ended December 31,2006
            
            2005Revenues:Seminar
                fees
            
            $
            378
            
            $
            61Management
                fee income
            
            
            
            
            
            12Interest
                and dividends
            
            
            619
            
            
            403Investing
                gains (losses)
            
            
            28
            
            
            (148
            )Sale
                of patent rights
            
            
            50Gain
                on sale of General Devices, Inc.
            
            
            
            
            
            301Other
                income
            
            
            60
            
            
            265Total
                revenues
            
            
            1,135
            
            
            894Expenses:General
                and administrative
            
            
            1,766
            
            
            1,169Loss
                before income taxes, minority interest and extraordinary
                gain
            
            
            (631
            )
            
            (275
            )Provision
                for income taxes
            
            
            14
            
            
            22Loss
                before minority interest and extraordinary gain
            
            
            (645
            )
            
            (297
            )Minority
                interest in subsidiaries losses
            
            
            71
            
            
            103Loss
                before extraordinary gain
            
            
            (574
            )
            
            (194
            )Extraordinary
                gain due to purchase of subsidiary stock
            
            
            28
            
            
            13Net
                loss
            
            $
            (546
            )
            $
            (181
            )Basic
                and diluted net loss per common share:Loss
                per share before extraordinary item
            
            $
            (0.20
            )
            $
            (0.07
            )Extraordinary
                gain
            
            
            0.01
            
            
            0.01Net
                loss per share
            
            $
            (0.19
            )
            $
            (0.06
            )Weighted
                average number of common shares outstanding (in 000's)
            
            
            2,802
            
            
            2,826





See
      accompanying notes to consolidated financial statements.


16





**KENT
                FINANCIAL SERVICES, INC. AND SUBSIDIARIES**CONSOLIDATED
                STATEMENTS OF CASH FLOWS(in
                thousands)Year
                Ended December 31,2006
            
            2005Cash
                flows from operating activities:Net
                loss
            
            $
            (546
            )
            $
            (181
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities:Depreciation
            
            
            2
            
            
            2Stock-based
                compensation expense
            
            
            36Gain
                on sale of General Devices, Inc.
            
            
            
            
            
            (301
            )Unrealized
                gains on securities owned
            
            
            5
            
            
            253Extraordinary
                gain on purchase of stock of subsidiary
            
            
            (28
            )
            
            (13
            )Minority
                interest in subsidiaries losses
            
            
            (71
            )
            
            (103
            )Interest
                receivable on short-term investments
            
            
            (28
            )Change
                in securities owned
            
            
            
            
            
            725Change
                in accounts receivable and other current assets
            
            
            (76
            )
            
            203Change
                in other assets
            
            
            (56
            )Change
                in accounts payable and accrued expenses
            
            
            (18
            )
            
            (58
            )Change
                in deferred revenue
            
            
            23Other,
                net
            
            
            
            
            
            (1
            )Net
                cash provided by (used in) operating activities
            
            
            (757
            )
            
            526Cash
                flows from investing activities:Purchase
                of stock of subsidiary
            
            
            (192
            )Purchase
                of short-term investments
            
            
            (24,267
            )
            
            (12,223
            )Maturity
                and sales of short-term investments
            
            
            23,607Acquisition
                of property and equipment
            
            
            (34
            )Proceeds
                from the sale of General Devices, Inc.
            
            
            
            
            
            343Cash
                acquired through consolidation ofThe
                Academy for Teaching and Leadership, Inc.
            
            
            
            
            
            50Net
                cash used in investing activities
            
            
            (886
            )
            
            (11,830
            )Cash
                flows from financing activities:Payment
                of cash dividends
            
            
            
            
            
            (852
            )Repurchase
                of common stock
            
            
            (12
            )
            
            (110
            )Repurchase
                of common stock by subsidiary
            
            
            (68
            )Net
                cash used in financing activities
            
            
            (80
            )
            
            (962
            )Net
                decrease in cash and cash equivalents
            
            
            (1,723
            )
            
            (12,266
            )Cash
                and cash equivalents at beginning of year
            
            
            1,890
            
            
            14,156Cash
                and cash equivalents at end of year
            
            $
            167
            
            $
            1,890Supplemental
                disclosure of cash flow information:Cash
                paid for taxes
            
            $
            25
            
            $
            11





See
      accompanying notes to consolidated financial statements.


17





**KENT
                FINANCIAL SERVICES, INC. AND SUBSIDIARIES**CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY(in
                thousands)




AdditionalCommon
                Stock
            
            Paid
                in
            
            AccumulatedShares
            
            Amount
            
            Capital
            
            Deficit
            
            TotalBalance
                December 31, 2004
            
            
            2,851
            
            $
            285
            
            $
            12,487
            
            $
            (3,867
            )
            $
            8,905Repurchase
                of common stock
            
            
            (46
            )
            
            (5
            )
            
            (105
            )
            
            
            
            
            (110
            )Cash
                dividends paid
            
            
            
            
            
            
            
            
            
            
            
            (852
            )
            
            (852
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (181
            )
            
            (181
            )Balance
                December 31, 2005
            
            
            2,805
            
            
            280
            
            
            12,382
            
            
            (4,900
            )
            
            7,762Repurchase
                of common stock
            
            
            (5
            )
            
            
            
            
            (12
            )
            
            
            
            
            (12
            )Stock
                based compensation
            
            
            
            
            
            
            
            
            36
            
            
            
            
            
            36Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (546
            )
            
            (546
            )Balance
                December 31, 2006
            
            
            2,800
            
            $
            280
            
            $
            12,406
            
            $
            (5,446
            )
            $
            7,240





See
      accompanying notes to consolidated financial statements.


18


**KENT
      FINANCIAL SERVICES, INC. AND SUBSIDIARIES**


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      Years Ended December 31, 2006 and 2005





**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 subsidiaries, Kent
      Educational Services, Inc. (“Kent Educational”) and Texas American
      Petrochemicals, Inc. (“TAPI”) 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. ****





**Reclassifications
      of a General Nature**





Certain
      amounts in the prior periods presented related to seminar fee revenue have
      been
      reclassified to conform to the current period financial statement presentation.
      These reclassifications have no effect on previously reported net
      income.





**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 trading securities.


19


**Property
      and Equipment**





Property
      and equipment are stated at cost and includes the capitalization of certain
      computer software costs by Kent International. 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.





**Other
      Assets**





Other
      assets consist primarily of capitalized film costs expended by The Academy
      for
      the production of a documentary on DVD for direct sale to consumers for which
      marketing has not yet begun. These costs will be amortized to cost of goods
      sold
      utilizing the individual-film-forecast method pursuant to the AICPA’s Statement
      of Position 00-2, *Accounting
      by Producers and Distributors of Motion Picture Films* .
      This
      method amortizes film costs using the ratio of current period actual revenue
      to
      estimated remaining unrecognized ultimate revenue.





**Goodwill**





In
      accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      we do
      not amortize goodwill or intangibles with indefinite lives resulting from
      acquisitions. We review these assets annually for potential impairment issues.
      Separable intangible assets that are not deemed to have an indefinite life
      are
      amortized over their estimated useful lives. The Company recorded goodwill
      of
      approximately $90,000 when it acquired the 60% interest of the Academy which
      is
      reviewed annually for potential impairment issues. Management does not believe
      such impairment exists at December 31, 2006.





**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. We have excluded 300,000 Common Stock options
      from the calculation of diluted loss per share for the years ended December
      31,
      2006 and 2005, which, if included, would have an antidilutive
      effect.


20


For
      more
      information on stock options, see Note 9 of Notes to Consolidated Financial
      Statements.





**Accounting
      for Stock Based Compensation**





Until
      December 31, 2005, the Company applied Accounting Principles Board Opinion
      No.
      25 and related interpretations in accounting for its common stock options.
      Accordingly, no compensation cost had been recognized for the common stock
      options issued. In December 2004, the FASB issued SFAS No. 123(R), " *Share-Based
      Payment* ,"
      (“SFAS
      123(R)”), a revision of SFAS 123, " *Accounting
      for Stock-Based Compensation* .”
SFAS
      123(R) requires that the compensation cost relating to share-based payment
      transactions be recognized in financial statements. The compensation cost is
      measured based on the fair value of the equity or liability instruments issued.
      SFAS 123(R) was effective as of the beginning of the first interim or annual
      period beginning after December 15, 2005. The Company adopted SFAS 123(R) on
      January 1, 2006.





**New
      Accounting Pronouncements**





In
      May
      2005, the FASB issued Statement 154, “ *Accounting
      Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB
      Statement No. 3* .”
The
      standard requires retrospective application to prior periods’ financial
      statements of a voluntary change in accounting principle unless it is deemed
      impracticable. The standard states that a change in method of depreciation,
      amortization or depletion for long-lived, non-financial assets be accounted
      for
      as a change in accounting estimate that is affected by a change in accounting
      principle. The standard was effective for accounting changes and corrections
      of
      errors made occurring in fiscal years beginning after December 15, 2005.





In
      June
      2006, the FASB issued Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
      109* .”
This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes.* This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition.





The
      evaluation of a tax position in accordance with this Interpretation is a
      two-step process. The first step is recognition: The enterprise determines
      whether it is more likely than not that a tax position will be sustained upon
      examination, including resolution of any related appeals or litigation
      processes, based on the technical merits of the position. In evaluating whether
      a tax position has met the more-likely-than-not recognition threshold, the
      enterprise should presume that the position will be examined by the appropriate
      taxing authority that has full knowledge of all relevant information. The second
      step is measurement: A tax position that meets the more-likely-than-not
      recognition threshold is measured to determine the amount of benefit to
      recognize in the financial statements. The tax position is measured at the
      largest amount of benefit that is greater than 50 percent likely of being
      realized upon ultimate settlement.





Tax
      positions that previously failed to meet the more-likely-than-not recognition
      threshold should be recognized in the first subsequent financial reporting
      period in which that threshold is met. Previously recognized tax positions
      that
      no longer meet the more-likely-than-not recognition threshold should be
      derecognized in the first subsequent financial reporting period in which that
      threshold is no longer met. Use of a valuation allowance as described in
      Statement 109 is not an appropriate substitute for the derecognition of a tax
      position. The requirement to assess the need for a valuation allowance for
      deferred tax assets based on the sufficiency of future taxable income is
      unchanged by this Interpretation. The standard is effective for fiscal years
      beginning after December 15, 2006, although earlier implementation is
      encouraged. Implementation of this standard is not expected to have an impact
      on
      the Company’s financial statements.


21


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.





**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 53.22% of Kent International at December 31, 2006. 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.





In
      November 2005, Dr. Qun Yi Zheng was named President of the Company and of Kent
      International. Under Dr. Zheng’s operational leadership, Kent International
      intends to pursue business opportunities in China and the United States.
      Additionally, Kent International is developing 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. A beta version of the site was
      launched in February 2007 and a fully operational version is expected to be
      launched by July 2007; however, possible technical, political and personnel
      issues may lead to delays beyond July 2007.





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.


22


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 seven 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, 2006 and 2005:





Business
              Development
              Activities
            
            Educational
              Services
            
            All
                Other
              Operations
            
            Eliminations
            
            Consolidated
              TotalsFor
                the year ended December 31, 2006Revenues
                from external customers
            
            
            
            
            $
            378
            
            $
            37
            
            
            
            
            $
            415Management
                fees
            
            
            
            
            
            
            
            
            252
            
            $
            (252
            )Interest
                revenue
            
            $
            512
            
            
            10
            
            
            97
            
            
            
            
            
            619Investing
                gains
            
            
            
            
            
            
            
            
            28
            
            
            
            
            
            28Sale
                of patent rights
            
            
            50
            
            
            
            
            
            
            
            
            
            
            
            50Other
                Income
            
            
            2
            
            
            
            
            
            21
            
            
            
            
            
            23Total
                revenues
            
            
            564
            
            
            388
            
            
            435
            
            
            (252
            )
            
            1,135General
                and administrative expenses
            
            
            (775
            )
            
            (306
            )
            
            (937
            )
            
            252
            
            
            (1,766
            )Income
                tax expense
            
            
            (1
            )
            
            (8
            )
            
            (5
            )
            
            
            
            
            (14
            )Minority
                interest
            
            
            101
            
            
            (30
            )
            
            
            
            
            
            
            
            71Extraordinary
                gain
            
            
            
            
            
            
            
            
            28
            
            
            
            
            
            28Net
                income (loss) by segment
            
            $
            (111
            )
            $
            44
            
            $
            (479
            )
            
            -
            
            $
            (546
            )As
                of December 31, 2006Total
                assets by segment
            
            $
            10,948
            
            $
            515
            
            $
            2,042
            
            
            -
            
            $
            13,505


23





Business
              Development
              Activities
            
            Educational
              Services
            
            All
                Other
              Operations
            
            Eliminations
            
            Consolidated
              TotalsFor
                the year ended December 31, 2005Revenues
                from external customers
            $
            61
            
            $
            248
            
            
            
            
            $
            309Management
                fees
            
            
            
            
            
            
            
            
            244
            
            $
            (232
            )
            
            12Interest
                revenue
            
            $
            326
            
            
            6
            
            
            71
            
            
            
            
            
            403Investing
                losses
            
            
            
            
            
            
            
            
            (148
            )
            
            
            
            
            (148
            )Gain
                on sale of General Devices, inc.
            
            
            
            
            301
            
            
            
            
            
            301Other
                income
            
            
            11
            
            
            
            
            
            6
            
            
            
            
            
            17Total
                revenues
            
            
            337
            
            
            67
            
            
            722
            
            
            (232
            )
            
            894General
                and administrative expenses
            
            
            (420
            )
            
            (127
            )
            
            (854
            )
            
            232
            
            
            (1,169
            )Income
                tax expense
            
            
            (1
            )
            
            (1
            )
            
            (20
            )
            
            
            
            
            (22
            )Minority
                interest
            
            
            79
            
            
            24
            
            
            
            
            
            
            
            
            103Extraordinary
                gain
            
            
            
            
            
            
            
            
            13
            
            
            
            
            
            13Net
                loss by segment
            
            $
            (5
            )
            $
            (37
            )
            $
            (139
            )
            
            -
            
            $
            (181
            )As
                of December 31, 2005Total
                assets by segment
            
            $
            11,283
            
            $
            381
            
            $
            2,717
            
            
            -
            
            $
            14,381





**Note
      3 - MARKETABLE SECURITIES**





Marketable
      securities owned as of December 31, 2006, comprised mainly of portfolio
      positions (equity securities) held for capital appreciation consisted of the
      following (all numbers in thousands):





December
                31, 2006Percent
                Owned
            
            Cost
            
            Fair
                Value
            
            Unrealized
                LossesGolfRounds.com,
                Inc.
            
            
            5.62
            %
            $
            172
            
            $
            132
            
            $
            (40
            )All
                other equity securities
            
            
            N/A
            
            
            173
            
            
            17
            
            
            (156
            )$
            345
            
            $
            149
            
            $
            (196
            )





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. Based on the criteria
      described above, securities owned at December 31, 2006 were valued at listed
      market prices for all but two positions; securities owned of GolfRounds.com,
      Inc. and Gaiam, Inc. were discounted 20% or approximately $35,000 from listed
      market prices.


24


Net
      investing gains were $28,000 for the year ended December 31, 2006. Net
      unrealized gains on securities owned were approximately $5,000 and realized
      gains on securities transactions were approximately $23,000 during 2006.





Net
      investing losses were $148,000 for the year ended December 31, 2005. Net
      unrealized losses on securities owned were approximately $252,000 and realized
      gains on securities transactions were approximately $104,000 during 2005.





**NOTE
      4**  **-
      PROPERTY, PLANT & EQUIPMENT**





Net
      property, plant and equipment as December 31 consisted of (numbers in
      thousands):





2006Office
                Furniture and Equipment
            
            $
            15Capitalized
                Web Design Costs
            
            
            2641Less:
                Accumulated Depreciation
            
            
            (6
            )$
            35





**NOTE
      5** - **KENT
      INTERNATIONAL HOLDINGS, INC.**





In
      2006,
      the Company acquired 69,834 additional shares of Kent International (then known
      as Cortech, Inc.) in open market transactions for $191,979 recording, in
      accordance with SFAS No. 141, “Business Combinations”, an extraordinary gain of
      approximately $28,000, as the amount paid for the shares was less than the
      fair
      value of the net assets recorded. At December 31, 2006, the Company owned
      1,900,000 shares or 53.22% of Kent International’s issued shares.





In
      2005,
      the Company acquired 30,166 additional shares of Kent International (then known
      as Cortech, Inc.) in open market transactions for $81,045 recording an
      extraordinary gain of approximately $13,000. At December 31, 2005, the Company
      owned 50.91% of Kent International.





On
      May
      25, 2006, Cortech was reincorporated in Nevada by a merger with its wholly
      owned
      subsidiary, Kent International Holdings, Inc. The reincorporation effected
      a
      change in Cortech’s legal domicile from Delaware to Nevada and a change in the
      name from Cortech, Inc. to Kent International Holdings, Inc.





**Kent
      International Stock Option Plans**





Kent
      International has issued certain common stock options to its employees,
      directors and consultants. At December 31, 2006, Kent International had 291,150
      common stock options outstanding.




Until
      December 31, 2005, Kent International applied Accounting Principles Board
      Opinion No. 25 and related interpretations in accounting for its common stock
      options. Accordingly, no compensation cost had been recognized for the common
      stock options issued. In December 2004, the FASB issued SFAS No. 123(R),
      " *Share-Based
      Payment* ,"
      (“SFAS
      123(R)”), a revision of SFAS 123, " *Accounting
      for Stock-Based Compensation* .”
SFAS
      123(R) requires that the compensation cost relating to share-based payment
      transactions be recognized in financial statements. The compensation cost is
      measured based on the fair value of the equity or liability instruments issued.
      SFAS 123(R) was effective as of the beginning of the first interim or annual
      period beginning after December 15, 2005. Kent International adopted SFAS 123(R)
      on January 1, 2006. The adoption did not have an impact on the Kent
      International’s financial position or results of operations as all stock options
      granted to date were fully vested prior to January 1, 2006.


25


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. In 2000, 230,000 stock options
      were
      issued under the 1986 Plan at prices ranging from $3.50 to $3.6875, the
      approximate fair market values at the time of grant. No options were granted
      in
      2006 or 2005.





Kent
      International’s 1993 Equity Incentive Plan (“1993 Plan”), approved by the
      stockholders on May 10, 1994, authorizes the issuance of 340,000 shares through
      the grant of options to purchase common stock, stock bonuses, and rights to
      purchase restricted stock. In 2000, 150,000 stock options were issued under
      this
      plan at $3.50 per share, the approximate fair market value at the time of grant.
      The 1993 Plan was terminated on December 9, 2003 and no further options may
      be
      awarded under this plan.





The
      stock
      options granted under either 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
      and
      the 1993 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
      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.





Each
      of
      these plans 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, 2006.





Kent
      International’s 1992 Non-employee Directors’ Stock Option Plan (“1992 Plan”)
      authorizes the granting of options to purchase up to 80,000 shares of common
      stock to the non-employee directors of Kent International. The 1992 Plan was
      terminated on December 31, 1997 and no further options may be awarded under
      this
      plan.





A
      summary
      of the status of Kent International’s 1986 Plan, 1993 Plan and non-employee
      directors’ stock option plans as of December 31, 2006 and 2005 and changes
      during the years ended on those dates is presented below:


26




2006
            
            2005Shares
            
            Weighted-
              Average
              Exercise
              Price
            
            Range
                of
              Exercise
              Price
            
            Shares
            
            Weighted-
              Average
              Exercise
              Price
            
            Range
                of
              Exercise
              PriceOptions
                outstanding at the beginning of the year
            
            
            350,880
            
            $
            4.27
            
            $
            3.50
                - $12.80
            
            
            376,485
            
            $
            4.80
            
            $
            3.50
                - $13.59Expired
            
            
            (60,030
            )
            $
            7.90
            
            $
            5.00
                - $12.80
            
            
            (25,605
            )
            $
            11.96
            
            $
            9.69
                - $13.59Options
                outstanding at the end of the year
            
            
            290,850
            
            $
            3.52
            
            $
            3.50
                - $7.34
            
            
            350,880
            
            $
            4.27
            
            $
            3.50
                - $12.80Options
                exercisable at the end of the year
            
            
            290,850
            
            $
            3.52
            
            $
            3.50
                - $7.34
            
            
            350,880
            
            $
            4.27
            
            $
            3.50
                - $12.80





The
      status of other Kent International options awarded to certain directors and
      consultants is summarized below:





2006
            
            2005Shares
            
            Weighted-
              Average
              Exercise
              Price
            
            Range
                of
              Exercise
              Price
            
            Shares
            
            Weighted-
              Average
              Exercise
              Price
            
            Range
                of
              Exercise
              PriceOptions
                outstanding at the beginning of the year
            
            
            6,250
            
            $
            5.92
            
            $
            5.00
                - $7.58
            
            
            6,250
            
            $
            5.92
            
            $
            5.00
                - $7.58Expired
            
            
            (5,950
            )
            $
            5.85
            
            $
            5.00
                - $7.58
            
            
            -
            
            
            -
            
            
            -Options
                outstanding at the end of the year
            
            
            300
            
            $
            7.34
            
            $
            7.34
            
            
            6,250
            
            $
            5.92
            
            $
            5.00
                - $7.58Options
                exercisable at the end of the year
            
            
            300
            
            $
            7.34
            
            $
            7.34
            
            
            6,250
            
            $
            5.92
            
            $
            5.00
                - $7.58





For
      all
      Kent International options outstanding and exercisable at December 31, 2006,
      the
      exercise price ranges are:





Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Prices
            
            Number
                Outstanding at December 31, 2006
            
            Weighted
                Average Remaining Life (in Years)
            
            Weighted
                Average Exercise Price
            
            Number
                Outstanding at December 31, 2006
            
            Weighted
                Average Remaining Life (in Years)
            
            Weighted
                Average Exercise Price$3.50
                - 7.34
            
            
            291,150
            
            
            2.09
            
            $
            3.53
            
            
            291,150
            
            
            2.09
            
            $
            3.53


27


**NOTE
      6 - INCOME TAXES**





The
      components of income tax expense are as follows ($000 Omitted):





Year
                Ended December 31,2006
            
            2005Federal
                - Current
            
            $
            4
            
            $
            1State
                - Current
            
            
            10
            
            
            21Total
            
            $
            14
            
            $
            22





The
      income tax expense for the years ended December 31, 2006 and 2005 is different
      from the amount computed by multiplying earnings before income taxes by the
      statutory Federal income tax rate of 34%. The reasons for this difference and
      the related tax effect are as follows (in 000's):





**2006**
            
            **2005**Expected
                tax expense computed on income before taxes
            
            $
            (181
            )
            $
            (54
            )Increase
                (decrease) in tax from:Federal
                alternative minimum taxes
            
            
            
            
            
            1State
                income taxes
            
            
            10
            
            
            25Expiration
                of state nol carryforwards
            
            
            
            
            
            940Post
                employment benefit obligations
            
            
            13Stock
                based compensation
            
            
            12Change
                in estimate of net operating losses
            
            
            
            
            
            99Other,
                net
            
            
            
            
            
            130Taxable
                income of subsidiary
            
            
            4Change
                in valuation allowance
            
            
            156
            
            
            (1,119
            )Provision
                for income tax
            
            $
            14
            
            $
            22





Temporary
      differences and carryforwards that result in the Company’s net deferred tax
      asset at December 31, 2006 are as follows (in 000’s):





**Company**
            
            **Kent**
              **International**
            
            **Total**Net
                operating loss carryforwards
            
            $
            3,430
            
            $
            80,920
            
            $
            84,350Mark-to-market
                valuation adjustments
            
            
            196
            
            
            
            
            
            196Post
                employment benefit obligations
            
            
            644
            
            
            
            
            
            644Stock
                based compensation deductions
            
            
            36
            
            
            
            
            
            364,306
            
            
            80,920
            
            
            85,226Statutory
                federal income tax rate
            
            
            34
            %
            
            34
            %
            
            34
            %Expected
                income tax benefit
            
            
            1,464
            
            
            27,513
            
            
            28,977Research
                and development and other credits
            
            
            
            
            
            2,234
            
            
            2,2341,464
            
            
            29,747
            
            
            31,211Valuation
                Allowance
            
            
            (1,464
            )
            
            (29,747
            )
            
            (31,211
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -
            
            $
            -




28


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 $81 million of the $84 million
      operating loss carryforward expires between 2007 and 2023.





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 - OPERATING LEASES**





The
      Company leases automobiles under operating lease agreements that expire in
      2008.
      The automobile lease expense totaled $38,001 and $26,979 during 2006 and 2005,
      respectively. The following is a schedule by year of future minimum rental
      payments required under the operating lease agreements:





2007
            
            $
            29,8712008
            
            
            1,541$
            31,412





The
      Company and its subsidiaries also lease administrative offices on a
      month-to-month basis. The Company may terminate these leases upon giving written
      notice at least three months in advance. Total rent paid in each of the years
      ended December 31, 2006 and 2005 was $43,200.





**NOTE
      8 - 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 December 1, 2002. 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 75
      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
      75.


29


Qun
      Yi
      Zheng entered into an employment agreement (“Zheng Agreement”) pursuant to which
      Dr. Zheng serves as the Company’s and Kent International’s President for an
      initial three year term at an annual salary of $200,000 (“Zheng Base Salary”),
      which is paid by Kent International. Unless Kent International gives notice
      30
      days written notice to Dr. Zheng prior to November 1, 2007, the three year
      term
      of the Zheng Agreement shall be automatically extended for one day for each
      day
      elapsed after November 1, 2007. In the event of Dr. Zheng’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 Zheng Agreement. Should Dr. Zheng become disabled (as such
      term is defined in the Zheng Agreement) during the term of the Zheng Agreement,
      Dr. Zheng shall be paid such benefits to which he is entitled under the terms
      of
      such long-term insurance as Kent International has provided him or 80% of his
      salary for the remainder of the three year term of the Zheng Agreement,
      whichever is greater, in accordance with his regular payment
      schedule.





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. Unless the Company gives
      30 days written notice to Mr. Healey prior to May 15, 2007, the two year term
      of
      the Healey Agreement shall be automatically extended for one day for each day
      elapsed after May 15, 2007, it being the intention to convert the term of the
      Healey Agreement to a contract with a two year ‘evergreen’ term, commencing on
      May 15, 2007.  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.





The
      Company has accrued approximately $644,000 as of December 31, 2006 for post
      employment benefits related to Mr. Koether’s contract. The Company charged
      approximately $38,000 and $52,000 to operations for post employment benefit
      accruals in 2006 and 2005, respectively.





**401(K)
      Plan**





Eligible
      employees can elect to participate in the Company’s qualified 401(k) Retirement
      Plan (the “Plan”). Employees may voluntarily contribute up to 15% of their
      compensation, not to exceed the Internal Revenue Service limit ($15,000 in
      2006
      and $14,000 in 2005). The employees’ contributions are 100% vested and the
      Company’s contribution, if any, vests over a six-year period in accordance with
      the vesting schedule in the Plan. There were no employer matching contributions
      in 2006 or 2005.





**NOTE
      9 - 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, 2006.


30


**Dividends**





On
      March
      10, 2005, the Company declared a dividend of $.30 per share to stockholders
      of
      record on March 21, 2005. The distribution date was April 5, 2005. No dividends
      were declared or paid in 2006.





**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, 2006, 94,582
      shares under this plan had been repurchased, canceled and returned to the status
      of authorized but unissued shares.





**Stock
      Options**





In
      2005,
      stockholders holding approximately 54.69% of the outstanding common stock of
      the
      Company and the Board of Directors approved the Kent Financial Services, Inc.
      2005 Stock Option Plan (“2005 Stock Option Plan”). Under the 2005 Stock Option
      Plan, a total of 400,000 shares of common stock are available for issuance
      to
      key employees, including officers of the Company or any of its subsidiaries.
      In
      November 2005, 300,000 common stock options were issued to Dr. Qun Yi Zheng,
      the
      Company’s President.





A
      summary
      of the status of the 2005 Stock Option Plan and changes during the years ended
      December 31, 2006 and 2005 is presented below:





2006
            
            2005Shares
            
            Weighted-
              Average
              Exercise
              Price
            
            Range
                of
              Exercise
              Price
            
            Shares
            
            Weighted-Average
                Exercise Price
            
            Range
                of
              Exercise
              PriceOptions
                outstanding at the beginning of the year
            
            
            300,000
            
            $
            3.00
            
            $
            3.00
            
            
            -
            
            $
            -
            
            $
            -Granted
            
            
            -
            
            
            -
            
            
            -
            
            
            300,000
            
            $
            3.00
            
            $
            3.00Options
                outstanding at the end of the year
            
            
            300,000
            
            $
            3.00
            
            $
            3.00
            
            
            300,000
            
            $
            3.00
            
            $
            3.00Options
                exercisable at the end of the year
            
            
            66,000
            
            $
            3.00
            
            $
            3.00
            
            
            33,000
            
            $
            3.00
            
            $
            3.00





For
      options outstanding and exercisable at December 31, 2006, the exercise price
      ranges are:


31





Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Prices
            
            Number
                Outstanding at December 31, 2006
            
            Weighted
                Average Remaining Life (in Years)
            
            Weighted
                Average Exercise Price
            
            Number
                Outstanding at December 31, 2006
            
            Weighted
                Average Remaining Life (in Years)
            
            Weighted
                Average Exercise Price$
                3.00
            
            
            300,000
            
            
            8.90
            
            $
            3.00
            
            
            66,000
            
            
            8.90
            
            $
            3.00





**Stock
      Based Compensation**





The
      Company recorded stock based compensation expense during 2006 for the options
      granted to an employee in December 2005. The options granted have an exercise
      price greater than the market price of the Company’s stock on the grant date.
      For purposes of calculating the compensation cost consistent with SFAS No.
      123(R), " *Share-Based
      Payment* ,",
      the
      fair value of the option grant was estimated on the grant date using the
      Black-Scholes option-pricing model with the following assumptions used: no
      dividend yield; expected volatility of 29 percent; risk free interest rate
      of
      4.37 percent; and weighted average expected life of 7 years. The Company
      recognized approximately $36,000 in stock based compensation expense for 2006.
      For the year ended December 31, 2005, the Company disclosed a pro forma
      compensation cost of approximately $35,000, as a result, pro forma net loss
      for
      the year ended December 31, 2005 would have been $216,000 as compared to the
      reported net loss of $181,000 and pro forma net loss per share for the year
      ended December 31, 2005 would have been $.08 as compared to the reported net
      loss per share of $.06. As of December 31, 2006 there was approximately $177,000
      of total unrecognized compensation cost related to nonvested awards granted
      under this plan, which is expected to be recognized over the remaining 5 years
      of expected life.





**NOTE
      10 -**  **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. 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 53.22% of Kent International’s outstanding Common Stock at
      December 31, 2006. Paul O. Koether, Chairman of the Company is also the Chairman
      of Kent International and the beneficial owner of approximately 55.60% of the
      Company’s outstanding common stock. Qun Yi Zheng, President of the Company is
      also the President of Kent International and Bryan P. Healey, Chief Financial
      Officer of the Company is also the Chief Financial Officer of Kent
      International.





On
      May 1,
      2006, the Company entered into an employment agreement with Bryan P. Healey,
      CPA, to be Vice President and Chief Financial Officer of the Company and Kent
      International for an initial two year term at an annual salary of $140,000.
      Mr.
      Healey is the son-in-law of Paul O. Koether, Chairman of the Board and Chief
      Executive Officer of the Company and Kent International.





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 $78,000 and $55,000
      in
      the years ended December 31, 2006 and 2005, 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.


32


Until
      October of 2005, General Devices, Inc. (“General Devices”), a publicly traded
      company, paid an administrative fee of $4,000 per month for management services
      performed by the Company. These services included corporate governance,
      financial management and internal accounting services. The management fee was
      recorded as revenue until the second quarter of 2005 when the Company began
      consolidating General Devices in the financial statements. From April of 2005
      to
      October of 2005, the monthly management fee was eliminated during consolidation.
      The Company sold its interest in General Devices in October 2005 and no longer
      collects any fees from it.





**NOTE
      11 - TRANSFER OF PATENT RIGHTS**





On
      September 15, 2006, Kent International entered into an asset purchase option
      agreement to transfer certain patent rights to Accuthera, Inc., a Colorado
      corporation, for $50,000 paid on September 15, 2006, and an additional $300,000
      payable within the following thirty-six (36) months. These patents were
      previously recorded on the Kent International’s books at a zero carrying value.
      The agreement stipulates that Accuthera, Inc. can terminate the agreement at
      any
      time within the thirty-six (36) month period at which time the patent rights
      would revert back to the Company without any additional payment. Kent
      International has not recorded revenue or a corresponding receivable for the
      additional payment as its receipt is believed to be uncertain.





**NOTE
      12 - DISSOLUTION OF SUBSIDIARIES**





In
      August
      2006, the Company effectuated the dissolution of four wholly owned subsidiaries,
      Asset Value Fund Limited Partnership, Asset Value Management, Inc., Asset Value
      Holdings, Inc., and Kent Advisors Corp. in order to reduce state income tax
      liabilities. Ownership of the assets of these subsidiaries, specifically cash
      and equivalents, short term investments and marketable securities, was
      transferred to the Company.





**NOTE
      13 -**  **LEGAL
      PROCEEDINGS**





**Texas
      American Petrochemicals, Inc. (“TAPI”)**





By
      letter dated May 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 in Texas. TAPI
      is
      an inactive subsidiary of the Company with no assets. The TCEQ determined that
      the amount owed to the State of Texas for remediation is $2,459,594 and that failure to 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.


33


**Item
                8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURES**





Amper,
      Politziner & Mattia, P.C. (“APM”) served as the Company’s independent
      registered public accounting firm for the fiscal years ended December 31, 2005
      and 2004. On November 2, 2006, the Company dismissed APM as the Company’s
      independent registered public accounting firm and engaged Paritz & Company,
      P.A. (“Paritz”) as its new independent registered public accounting firm. As
      described below, the change in independent public accounting firms was not
      the
      result of any disagreement with APM.





The
      reports of APM on the financial statements for the Company’s two most recent
      fiscal years ended December 31, 2005 and December 31, 2004, did not contain
      an
      adverse opinion or disclaimer of opinion and were not qualified or modified
      as
      to uncertainty, audit scope, or accounting principles. In connection with its
      audits for the years ended December 31, 2005 and December 31, 2004 and in the
      subsequent interim period through November 2, 2006 there were (1) no
      disagreements with APM on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to the satisfaction of APM, would have caused
      them to make reference thereto in connection with its reports on the financial
      statements for such years or (2) reportable events.





On
      November 2, 2006, the Board of Directors engaged Paritz as the Company’s
      independent registered public accounting firm for the fiscal year ending
      December 31, 2006, and to perform procedures related to the financial statements
      to be included in the Company’s quarterly report on Form 10-QSB, beginning with,
      and including, the quarter ending March 31, 2007. The Company had not consulted
      with Paritz during its two most recent fiscal years ended December 31, 2005
      and
      December 31, 2004, or during any subsequent interim period prior to its
      appointment as the Company’s auditor regarding (i) the application of accounting
      principles to a specified transaction, either completed or proposed or the
      type
      of audit opinion that might be rendered on the Company’s consolidated financial
      statements, and neither a written report was provided to the Company nor oral
      advice was provided that Paritz concluded was an important factor considered
      by
      the Company in reaching a decision as to the accounting, auditing or financial
      reporting issue; or (ii) any matter that was either the subject of disagreement
      (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
      instructions) or a reportable event (within the meaning of Item 304(a)(1)(v)
      of
      Regulation S-K).





**Item
                8A.**
            **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). Based upon that evaluation, the Chief Executive Officer
      and Chief Financial Officer concluded that the design and operation of these
      disclosure controls and procedures are effective. 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, 2006 that has materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.




34


**Compliance
      with Section 404 of Sarbanes-Oxley Act**





In
      order
      to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (the
      “Act”) by December 31, 2007, the Company expects to begin, in fiscal 2007, the
      system and process documentation and evaluation needed to comply with Section
      404.





**Item
                8B.**
            **OTHER
                INFORMATION**





None.


**PART
      III**





**Item
                9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE
                ACT**





The
      current members of the Board of Directors were elected at the 2006 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 28, 2007 were as
      follows:





Name
            
            Age
            
            Position
                HeldPaul
                O. Koether
            
            70
            
            Chairman,
                Chief Executive Officer and DirectorWilliam
                Mahomes, Jr.
            
            60
            
            DirectorCasey
                K. Tjang
            
            68
            
            DirectorM.
                Michael Witte
            
            80
            
            DirectorQun
                Yi Zheng
            
            49
            
            PresidentBryan
                P. Healey
            
            36
            
            Chief
                Financial Officer





**Paul
      O. Koether** has
      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. (“Kent International”), a
      biopharmaceutical company formerly known as Cortech, Inc. that is seeking to
      redeploy its assets. From November 2003 to December 2003, Mr. Koether was
      General Partner of Emerald Partners, an investment partnership. Bryan P. Healey,
      the Chief Financial Officer of the Company is the son-in-law of Paul O.
      Koether.


35


**William
      Mahomes, Jr.** Mr.
      Mahomes has been a director of the Company since November 2005. Mr. Mahomes
      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
      at
      the law firm of Locke Purnell Rain Harrell. From 1989 to 1994 he was an
      international partner in the Dallas office of Baker & McKenzie 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.




**M.
      Michael Witte.** Mr.
      Witte
      has been a director of the Company since 1986. Since August 1980, he has been
      President of M. M. Witte & Associates, Inc., a private corporation that is
      engaged in oil and gas consulting and investment management. In November 1995,
      Mr. Witte was elected Co-Chairman of The American Drilling Company, L.L.C.,
      a
      position he subsequently relinquished after his election on August 1, 1996
      as
      Chief Executive Officer and Director of South Coast Oil Corporation, a Los
      Angeles-based oil company founded in 1921.





**Qun
      Yi Zheng, Ph.D.** Dr
      Zheng
      has been President of the Company since November 2005, and had been a director
      from November 2000 until November 2003. Since August 2000, Dr. Zheng has been
      a
      director and since November 2005, President of Kent International Holdings,
      Inc.
      (formerly Cortech, Inc.). Dr. Zheng was with Pure World and PWBI in various
      positions, including President, from 1996 until 2005. From 1995 until 1996,
      Dr.
      Zheng was Technical Manager at Hauser Nutraceuticals, a division of Hauser
      Chemicals, Inc., a manufacturer and distributor of nutraceuticals.





**Bryan
      P. Healey,** a
      certified public accountant, has been Vice-President, Secretary and Chief
      Financial Officer of the Company since May 2006. Mr. Healey has also been
      Vice-President, Secretary and Chief Financial Officer of Kent International
      since May 2006. 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.


36


**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 2006.





**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 M.
      Michael Witte.





**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: 376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921, to request
      a
      copy of the Code of Ethics, and the Company will provide it to any person
      without charge upon such request.





**Item
                10.**
            **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, 2006
      and 2005, for those persons who were, at December 31, 2006 and 2005, 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.


37




Name
                  and Principal Position
              
              Year
              
              Salary
              
              Bonus
              
              Option
                  Awards
              
              All
                  Other Compensation(2)
              
              TotalPaul
                  O. Koether
              
              
              2006
              
              $
              240,000
              
              $
              -
              
              $
              -
              
              $
              57,653
              
              
              (3)
              
              $
              297,653Chief
                  Executive Officer and
              
              
              2005
              
              
              240,000
              
              
              -
              
              
              -
              
              
              71,267
              
              
              (3)
              
              
              311,267Chairman
                  of the BoardQun
                  Yi Zheng(4)
              
              
              2006
              
              
              200,000
              
              
              -
              
              
              35,488
              
              
              33,495
              
              
              (4)
                  (5)
              
              
              268,983President
              
              
              2005
              
              
              33,333
              
              
              -
              
              
              35,488
              
              
              9,314
              
              
              (4)
                  (5)
              
              
              78,135Bryan
                  P. Healey
              
              
              2006
              
              
              93,333
              
              
              -
              
              
              -
              
              
              3,990
              
              
              (6)
              
              
              97,323Chief
                  Financial Officer,
              
              
              2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -Principal
                  Financial andAccounting
                  OfficerSue
                  Ann Merrill
              
              
              2006
              
              
              46,909
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              46,909Chief
                  Financial Officer,
              
              
              2005
              
              
              88,333
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              88,333Principal
                  Financial andAccounting
                  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 $38,142 and $51,756 accrued in 2006 and 2005, 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 $19,511 paid in 2006 and 2005 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.





(5)
            Amounts
                include $13,159 paid by Kent International in 2006 for Dr. Zheng’s country
                club membership and $1,846 paid in 2006 and 2005 for Dr. Zheng’s life
                insurance premiums. All Other Compensation also includes $18,490
                and
                $7,468 paid in 2006 and 2005, respectively, to lease an automobile
                used
                for business purposes.





(6)
            Represents
                relocation expenses in the amount of $3,990 paid to Mr.
                Healey.





**Outstanding
      Equity Awards at Fiscal Year End**





Under
      the
      Company’s 2005 Stock Option Plan, 400,000 shares of the Company’s Common Stock
      may be granted to officers and employees of the Company or its subsidiaries.
      In
      November 2005, 300,000 common stock options were issued to Dr. Qun Yi Zheng,
      the
      Company’s President. The following table includes the status of all outstanding
      equity awards at December 31, 2006:


38





Name
            
            Number
                of Securities Underlying Unexercised Options (#)
                Exercisable
            
            Number
                of Securities Underlying Unexercised Options (#)
                Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options (#)
            
            Option
                Exercise Price
            
            Option
                Expiration DateQun
                Yi Zheng
            
            
            -
            
            
            66,000
            
            
            234,000
            
            $
            3.00
            
            
            11/24/15





Dr
      Zheng’s unearned options are subject to time-based vesting according to the
      following schedule:





11/25/2007
            
            
            33,00011/25/2008
            
            
            33,00011/25/2009
            
            
            33,00011/25/2010
            
            
            33,00011/25/2011
            
            
            33,00011/25/2012
            
            
            33,00011/25/2013
            
            
            33,00011/25/2014
            
            
            3,000234,000





**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 2006, the
      Company paid directors' fees in the aggregate amount of $42,400. The table
      below
      includes information about compensation paid to our non-employee
      directors:





Name
            
            Fees
                Earned or Paid in Cash
            
            TotalWilliam
                Mahomes, Jr.
            
            $
            14,400
            
            $
            14,400Casey
                K. Tjang
            
            
            14,400
            
            
            14,400M.
                Michael Witte
            
            
            13,600
            
            
            13,600$
            42,400
            
            $
            42,400





**Employment
      Agreements**




**Paul
      O. Koether**





On
      December 1, 2002 (“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.


39


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
      December 1, 2002, 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 December 1, 2002 (“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.





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 75
      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
      75.





**Qun
      Yi Zheng**





Qun
      Yi
      Zheng serves as the President of the Company and of Kent International, a
      subsidiary of the Company. Effective November 1, 2005 (“Zheng Effective Date”)
      Kent International and Qun Yi Zheng entered into an employment agreement (“Zheng
      Agreement”) pursuant to which Dr. Zheng serves as Kent International’s President
      for an initial three year term at an annual salary of $200,000 (“Zheng Base
      Salary”), which may be increased but not decreased at the discretion of the
      Board of Directors of Kent International. Unless Kent International gives 30
      days written notice to Dr. Zheng prior to November 1, 2007, the three year
      term
      of the Zheng Agreement shall be automatically extended for one day for each
      day
      elapsed after November 1, 2007, it being the intention to convert the term
      of
      the Zheng Agreement to a contract with a three year ‘evergreen’ term, commencing
      on November 1, 2007.


40


Dr.
      Zheng
      may terminate his employment under the Zheng Agreement at any time for “Good
      Reason” (defined below) within 36 months after the date of a “Kent International
      Change in Control” (defined below). Upon his termination, Dr. Zheng shall be
      paid the Zheng Base Salary payable under the Zheng Agreement through the
      expiration date of the Zheng Agreement.





A
      Kent
      International Change in Control is deemed to have occurred if (i) any individual
      or entity, other than individuals or entities beneficially owning, directly
      or
      indirectly, common stock of Kent International representing 50.1% or more of
      Kent International’s issued and outstanding common stock as of the Zheng
      Effective Date, is or becomes the beneficial owner, directly or indirectly,
      of
      the common stock of Kent International representing 50.1% or more of Kent
      International’s outstanding common stock or (ii) individuals constituting the
      Kent International Board of Directors on the Zheng Effective Date (“Kent
      International Incumbent Board”), including any person subsequently elected to
      the Kent International Board of Directors comprising the Kent International
      Incumbent Board, cease for any reason to constitute at least a majority of
      the
      Kent International Board of Directors. Good Reason means a determination made
      solely by Dr. Zheng, in good faith, that as a result of a Kent International
      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 Kent International.





Dr.
      Zheng
      may also terminate his employment if Kent International fails to make the
      payments specified in the Zheng Agreement, or if Kent International fails to
      make such payments for a period of five days after Dr. Zheng has given notice
      of
      such failure.





Kent
      International may terminate Dr. Zheng’s employment under the Zheng Agreement for
“cause” which is defined as (i) Dr. Zheng’s continued failure to substantially
      perform his duties under the Zheng Agreement (other than by reason of his
      incapacity due to physical or mental illness) which is not cured within
      specified time frames or (ii) Dr. Zheng’s conviction of any criminal act of
      fraud. The Company may not terminate Dr. Zheng’s employment except by a vote of
      not less than 75% of the entire Kent International Board of Directors at a
      meeting at which Dr. Zheng is given the opportunity to be heard.





In
      the
      event of Dr. Zheng’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 Zheng Agreement.
      Should Dr. Zheng become disabled (as such term is defined in the Zheng
      Agreement) during the term of the Zheng Agreement, Dr. Zheng shall be paid
      such
      benefits to which he is entitled under the terms of such long-term insurance
      as
      Kent International has provided him or 80% of his salary for the remainder
      of
      the three year term of the Zheng Agreement, whichever is greater, in accordance
      with his regular payment schedule.


41


**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. Unless the Company gives
      30 days written notice to Mr. Healey prior to May 15, 2007, the two year term
      of
      the Healey Agreement shall be automatically extended for one day for each day
      elapsed after May 15, 2007, it being the intention to convert 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.





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.


42


**Item
                11.**
            **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 28, 2007 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 Address
              of
                Beneficial Owner
            
            Amount
                and Nature
              of
                Beneficial
              Ownership(1)
            
            Percent
                of
              ClassPaul
                O. Koether
            
            
            1,538,689(2)
            
            
            54.96
            %211
                Pennbrook RoadFar
                Hills, NJ 07931William
                Mahomes, Jr.
            
            
            -
            
            
            -900
                Jackson StreetSuite
                540Dallas,
                TX 75202Casey
                K. Tjang
            
            
            -
            
            
            -510
                Tallwood LaneGreenbrook,
                NJ 08812M.
                Michael Witte
            
            
            2,000
            
            
            *1120
                Granville AvenueSuite
                102Los
                Angeles, CA 90049Qun
                Yi Zheng
            
            
            76,000
            
            
            2.66
            %376
                Main StreetBedminster,
                NJ 07921Bryan
                P. Healey
            
            
            22,744(3)
            
            
            *376
                Main StreetBedminster,
                NJ 07921Marital
                Trust u/w/o
            
            
            451,434
            
            
            16.19
            %Natalie
                I. Koether211
                Pennbrook RoadFar
                Hills, NJ 07931All
                Directors and Executive
            
            
            1,639,433
            
            
            54.91
            %Officers
                as a Group (6 persons)


_________________________________________


*Less
      than 1 percent.


43


(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 66,000 shares
                subject to options currently exercisable or becoming exercisable
                within 60
                days for Qun Yi Zheng and all directors and executive officers as
                a
                group.





(2)
            Includes
                53,106 shares held in Mr. Koether’s IRA. Also includes 451,434 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.





(3)
            Includes
                700 shares held in Mr. Healey’s IRA. Also includes 22,044 shares
                beneficially owned by Mr. Healey’s spouse.





**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. In November 2005, 300,000
      Common Stock options were issued to Dr. Qun Yi Zheng, the Company’s President.





**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
                12.**
            **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 53.22% of Kent International’s outstanding Common Stock at
      December 31, 2006. Paul O. Koether, Chairman of the Company is also the Chairman
      of Kent International and the beneficial owner of approximately 55.60% of the
      Company’s outstanding common stock. Qun Yi Zheng, President of the Company is
      also the President of Kent International and Bryan P. Healey, Chief Financial
      Officer of the Company is also the Chief Financial Officer of Kent
      International.





On
      May 1,
      2006, the Company entered into an employment agreement with Bryan P. Healey,
      CPA, to be Vice President and Chief Financial Officer of the Company and Kent
      International for an initial two year term at an annual salary of $140,000.
      Mr.
      Healey is the son-in-law of Paul O. Koether, Chairman of the Board and Chief
      Executive Officer of the Company and Kent International.





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 $78,000 and $55,000
      in
      the years ended December 31, 2006 and 2005, 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.




44




Until
      October of 2005, General Devices, Inc. (“General Devices”), a publicly traded
      company, paid an administrative fee of $4,000 per month for management services
      performed by the Company. These services included corporate governance,
      financial management and internal accounting services. The management fee was
      recorded as revenue until the second quarter of 2005 when the Company began
      consolidating General Devices in the financial statements. From April of 2005
      to
      October of 2005, the monthly management fee was eliminated during consolidation.
      The Company sold its interest in General Devices in October 2005 and no longer
      collects any fees from it.




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





The
      following exhibits are filed as part of this report:





(a) Exhibits





2.1
            Agreement
                and Plan of Merger dated as of December 4, 2006 by and between Kent
                Financial Services, Inc., a Delaware Corporation and Kent Financial
                Services, Inc., a Nevada Corporation.(1)2.2
            Certificate
                of Ownership and Kent Financial Services, Inc. and Kent Financial
                Services, Inc., as filed with the Delaware Secretary of State on
                December
                8, 2006.(2)2.3
            Articles
                of Merger of Kent Financial Services, Inc. and Kent Financial Services,
                Inc., as filed with the Nevada Secretary of State on December 13,
                2006.(2)3.1
            Articles
                of Incorporation of Kent Financial Services, Inc.(1)3.2
            Bylaws
                of Kent Financial Services, Inc.(1)10.1
            Employment
                Agreement, dated December 1, 2002 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


45


(1)
            Filed
                as an exhibit to the Company’s Definitive Information Statement on Form
                DEF 14C filed November 13, 2006, film number 061288318, and incorporated
                herein by reference.


(2)
            Filed
                as an exhibit to the Company’s Form 8-K filed on December 20, 2006, and
                incorporated herein by reference.


(3)
            Incorporated
                by reference to Kent Financial Services, Inc., Form 10-KSB for the
                fiscal
                year ended December 31, 2002.


(4)
            Incorporated
                by reference to Kent Financial Services, Inc., Form 8-K filed on
                May 1,
                2006.


(5)
            Incorporated
                by reference to Kent Financial Services, Inc., Form 8-K filed on
                December
                2, 2005.





**ITEM
                14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





**Year
      ended December 31, 2006**





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, 2006 are
      $21,500. The aggregate fees, including expenses, billed by APM 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, 2006 were $11,577.





Audit
      Related Fees: The aggregate fees, including expenses, billed by APM in 2006,
      related to auditing restated financial statements for the years ended December
      31, 2004 and 2003 were $5,000.





Tax
      Fees:
      The aggregate fees, including expenses, billed by APM in connection with the
      preparation of income tax returns for the Company during fiscal year ended
      December 31, 2006 were $11,546.





All
      Other
      Fees: There were no other fees billed to the Company by either APM or Paritz
      during 2006.





**Year
      ended December 31, 2005**





Audit
      Fees: The aggregate fees, including expenses, billed by APM 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, 2005; and its quarterly
      reports on Form 10-QSB filed during the fiscal year ending December 31, 2005
      were $39,525.





Audit
      Related Fees: The aggregate fees, including expenses, billed by APM in 2005,
      related to auditing restated financial statements for the years ended December
      31, 2004 and 2003 were $30,067.





Tax
      Fees:
      The aggregate fees, including expenses, billed by APM in connection with the
      preparation of income tax returns for the Company during the fiscal year ended
      December 31, 2005 were $7,875.





All
      Other
      Fees: There were no other fees billed to the Company by APM during
      2005.





**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.


46


**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 30, 2007
            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 30, 2007
            /s/
                Paul O. KoetherPaul
                O. KoetherChairman
                of the Board and Director(Principal
                Executive Officer)Dated:
                March 30, 2007
            /s/
                Bryan P. HealeyBryan
                P. HealeyChief
                Financial Officer and Secretary(Principal
                Financial and Accounting Officer)Dated:
                March 30, 2007
            /s/
                Qun Yi ZhengQun
                Yi ZhengPresidentDated:
                March 30, 2007
            /s/
                William Mahomes, Jr.William
                Mahomes, Jr.DirectorDated:
                March 30, 2007
            /s/
                Casey K. TjangCasey
                K. TjangDirectorDated:
                March 30, 2007
            /s/
                M. Michael WitteM.
                Michael WitteDirector






47