SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


MARK ONE:
[X]  Annual Report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934 [Fee Required] For the fiscal year ended December 31, 1997

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

                          Commission file number 1-7986

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

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

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

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

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

                                      NONE

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

                     Common Stock, par value $.10 per share

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

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

     Issuer's  revenues  for the  fiscal  year  ended  December  31,  1997  were
approximately $3,200,000.

     At  February  28,  1998,  there  were  1,010,760  shares  of  common  stock
outstanding.   The  aggregate   market  value  of  the  voting  shares  held  by
non-affiliates  of the registrant,  based on the closing bid price of such stock
on such date as reported by NASDAQ, was approximately $2,770,000.

          Transitional Small Business Disclosure Format Yes____  No X


<PAGE>



                                     PART I


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

General
-------

     The principal business of Kent Financial  Services,  Inc. (the "Company" or
"Kent") is the operation of its wholly-owned subsidiary, T.R. Winston & Company,
Inc.  ("Winston"),  a securities  broker-dealer  licensed in all states  (except
Alaska) and Washington D.C.  Winston is a member of the National  Association of
Securities Dealers, Inc. and the Securities Investor Protection Corporation. All
clearing arrangements for Winston are conducted pursuant to an agreement with an
unrelated major  broker-dealer which is a member of the New York Stock Exchange,
Inc.  Winston  conducts  various  activities  customary  for  broker-dealers  of
comparable size including buying and selling  securities for customer  accounts,
trading  securities  in  the  over-the-counter   market  and  providing  various
corporate finance services including underwritings, private placements, mergers,
acquisitions  and  similar  transactions.  Winston  has  offices in New  Jersey,
California,  Texas and New Hampshire.  As of December 31, 1997, Winston's equity
capital  was  $1,026,000,  all of which was  advanced  by Kent or  generated  by
Winston's  earnings.  Winston  had  regulatory  net  capital  at that same date,
pursuant to the provisions of Rule 15c3-1 under the  Securities  Exchange Act of
1934, of $668,000 which was $568,000 in excess of the required net capital.

     The Company also  provides,  through  Asset Value Fund Limited  Partnership
("AVF"),  investment  advisory and  management  services.  AVF is an  investment
partnership  whose primary purpose is to make investments in a limited number of
portfolio  companies,   whose  securities  are  considered  undervalued  by  the
partnership's  management.  To date, fees from investment advisory services have
not been material.  AVF was funded with an initial capital  contribution of $5.0
million in February 1991. At December 31, 1997,  the combined  equity capital of
the subsidiaries was approximately $11.5 million. AVF has no debt.

     The  securities  business  is, by its  nature,  subject to  various  risks,
particularly  in  volatile  or illiquid  markets,  including  the risk of losses
resulting  from the  underwriting  or ownership of securities,  customer  fraud,
employee  errors and  misconduct,  failures in connection with the processing of
securities   transactions  and  litigation.   The  Company's  business  and  its
profitability  are affected by many factors,  including the volatility and price
level of the  securities  markets,  the  volume,  size and timing of  securities
transactions,  the  demand  for  investment  banking  services,  the  level  and
volatility of interest rates, the availability of credit,  legislation affecting
the  business and  financial  communities,  and the economy in general.  Markets
characterized  by low trading volumes and depressed  prices  generally result in
reduced  commissions  and  investment  banking  revenues  as well as losses from
declines in the market value of securities positions.  Moreover,  Kent is likely
to be adversely  affected by negative economic  developments in New Jersey,  the
mid-Atlantic  region or the  financial  services  industry in  general.  Reduced
volume and prices  generally  result in lower  investment  banking  revenues and
commissions  and may  result in losses  from  declines  in the  market  value of
securities held in trading, investment and underwriting positions. In periods of
relatively low business activity for the Company,  profitability  will likely be
adversely  affected because a significant  portion of the Company's expenses are
fixed.


<PAGE>



Competition
-----------

     The Company is engaged in an extremely  competitive  business.  Competitors
include, with respect to one or more aspects of its business,  all of the member
organizations  of the New York Stock  Exchange and other  registered  securities
exchanges,  all members of the NASD,  commercial banks,  thrift institutions and
financial  consultants.  Many of these  organizations  have  substantially  more
employees and greater  financial  resources  than the Company.  The Company also
competes for  investment  funds with banks,  insurance  companies and investment
companies.  Discount  brokerage  firms oriented to the retail market,  including
firms  affiliated with commercial  banks and thrift  institutions,  are devoting
substantial  funds to advertising and direct  solicitation of customers in order
to increase  their  share of  commission  dollars  and other  securities-related
income. The Company typically has not engaged in extensive  advertising programs
for this type of business.

     The securities  industry has become considerably more concentrated and more
competitive  in recent  years as numerous  securities  firms have either  ceased
operation  or have been  acquired by or merged into other  firms.  In  addition,
companies  not  engaging  primarily  in  the  securities  business,  but  having
substantial  financial resources,  have acquired leading securities firms. These
developments  have  increased   competition  from  firms  with  greater  capital
resources than those of the Company.  Furthermore,  many commercial  banks offer
various  securities  related  activities  and investment  vehicles.  While it is
presently  not possible to predict the type and extent of  competitive  services
which  other   financial   institutions   may  offer  or  the  extent  to  which
administrative  or legal  barriers are repealed or  modified,  ultimately  these
developments  may lead to the creation of integrated  financial  services  firms
that may be able to compete  more  effectively  than the Company for  investment
funds by offering a greater range of financial services.

Employees
---------

     As of December  31,  1997,  the Company  and its  subsidiaries  employed 24
people of whom 18 are registered securities brokers.


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

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

     The Company and certain of its  affiliates  occupy the Company's  corporate
office  building  and share  direct  occupancy  costs.  The office  building  is
collateral  for a mortgage  loan with a balance  of  approximately  $518,000  at
December 31, 1997, bearing interest on that date at the rate of 7.05% per annum.
The loan matures in May, 1999.

     Effective  February 1, 1994,  an affiliate  entered into a lease  agreement
with the  Company  for  office  space  for a  five-year  period.  The  Company's
aggregate  rental income from this  arrangement  was $43,000 in each of 1997 and
1996.  Winston  leases  space  for its Los  Angeles  office  from  Bear  Stearns
Securities Corporation, its clearing broker-dealer.



<PAGE>


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

     A  discontinued  crude oil refinery site  comprised of 79 acres is owned by
Texas American Petrochemicals, Inc. ("TAPI"), a wholly-owned inactive subsidiary
of the Company,  and is located near West  Branch,  Michigan.  The site has been
idle since 1983 and substantially all of the processing units and equipment have
been sold. TAPI also owns  approximately 9 acres near  Midlothian,  Texas,  that
was, until 1976, the site of a waste oil recycling facility.  The value of these
locations is negligible.


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


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

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

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

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

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

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

Other
-----

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


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

     The Company held its Annual  Meeting of  Stockholders  on October 20, 1997.
Management's  nominees,  Messrs.  Paul O. Koether,  Mathew E. Hoffman,  Casey K.
Tjang and M. Michael Witte, were elected to the Board of Directors.

         The following is a vote tabulation for all nominees:

<TABLE>


                                                     FOR             WITHHELD
                                                   --------         ----------
                  <S>                              <C>               <C>
                  Paul O. Koether                  700,489           21,155
                  Mathew E. Hoffman                703,210           18,434
                  Casey K. Tjang                   703,210           18,434
                  M. Michael Witte                 703,187           18,457

</TABLE>


<PAGE>



                                     PART II


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

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

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


<TABLE>
<CAPTION>

                                                       High              Low
                                                     --------          --------
Calendar Quarter:
         <S>                                         <C>                 <C>
         1997
         First Quarter                               $ 8 1/2             $ 7
         Second Quarter                              $ 6 1/2             $ 6
         Third Quarter                               $ 5 3/4             $ 5 1/2
         Fourth Quarter                              $ 6                 $ 5 3/8

         1996

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

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



     As of February 28, 1998, the Company had approximately  5,500  stockholders
of record of its common stock.  The closing price of the common stock was $5 3/4
on February 28, 1998.

     The Company did not pay  dividends in 1997 or 1996 and does not  anticipate
paying dividends in the foreseeable future.


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


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

     At  December  31,  1997,  the  Company  had  consolidated   cash  and  cash
equivalents  of  approximately  $6.8  million.  The cash  equivalents  were U.S.
Treasury bills with maturities of three months or less, with yields ranging from
5.06% to 5.32%.  The Company had securities owned with values of $5.7 million at
December  31,  1997.  See  Notes  1 and 3 of  Notes  to  Consolidated  Financial
Statements for additional  information on the valuation of securities  owned. At
that same date the Company's  long-term debt consisted of a mortgage note on the
Company's   headquarters   facility  with  a  remaining   principal   amount  of
approximately  $518,000.  The loan currently bears interest at the rate of 7.05%
with principal  payments  amortized over twenty years.  The loan matures in May,
1999. The Company believes that its liquidity is adequate for future operations.



<PAGE>



     Net cash of approximately  $62,000 was used by operations in 1997, compared
to net cash used by  operations  of  approximately  $1.2  million  in 1996.  The
principal  reason for the  decrease was the change in  securities  owned in 1997
compared to 1996. In 1997,  the change in  securities  owned  generated  cash of
$680,000, compared to cash used in operations of $2.1 million in 1996. Operating
cash flow impact of the net loss of $1,150,000 in 1997 was offset in part by the
change in  unrealized  gains  (losses) on  securities  owned.  Unrealized  gains
(losses) are included in consolidated operations, but do not utilize or generate
cash  flows.  Depreciation  and  amortization  expense  was  $45,000 in 1997,  a
decrease of $82,000 from 1996.  This  decrease was due to the closing of the New
York office of Winston in early 1996.

     During 1997, the Company  repurchased 33,686 shares of its common stock for
an aggregate cost of $219,000. In 1996, the Company repurchased 6,342 shares for
an aggregate cost of approximately  $40,925.  All shares acquired were purchased
at market prices and have been canceled and returned to the status of authorized
and unissued shares.

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

     The Company had a net loss in 1997 of $1,150,000, or $1.12 per share (basic
earnings per share), compared to net earnings of $671,000, or $.64 per share, in
1996.  Total  brokerage  revenue,  which  consisted of  commissions,  fees,  and
principal  trading  transactions,  was  approximately  $3.3  million in 1997,  a
decrease  of $1.7  million  or 34% from 1996  total  brokerage  revenue  of $5.0
million.   Brokerage  expenses  (including  all  fixed  and  variable  expenses)
decreased by $1.3  million,  or 37% from $3.5 million in 1996 to $2.2 million in
1997.  Net  brokerage  income of $1.1 million in 1997  represented a decrease of
$400,000, or 27%, from net brokerage income of $1.5 million in 1996. The overall
decrease  in the  total  brokerage  revenue,  total  brokerage  expense  and net
brokerage  income  is  attributable  to the  closing  of the New York  office of
Winston  on March 31,  1996 and an  overall  decrease  in the  number of brokers
employed at other offices of Winston in 1997 compared to 1996.

     Net  investing  losses were  approximately  $987,000 in 1997, a decrease of
approximately  $1,759,000  from the net gains recorded in 1996 of $772,000.  The
decrease in net investing  gains was due to the decline in valuation of selected
investments  in  the  investment  portfolio.  See  Notes  1  and 3 of  Notes  to
Consolidated  Financial  Statements for additional  information on the valuation
and  composition  of  securities  owned.  Subsequent  to December 31, 1997,  the
Company sold investments with a carrying value of $2,463,000  resulting in a net
gain of approximately $700,000 from where the securities were valued at December
31, 1997.

     Interest,   dividends  and  other  income  totaled  $876,000  in  1997  and
$1,314,000  in 1996.  The decrease was  primarily  the result of lower  interest
income on balances at the clearing  broker in 1997 compared to 1996 and the sale
of Winston's  Pacific Stock  Exchange seat in 1996,  which resulted in a gain of
$100,000.

     General and  administrative  expenses were $2.2 million in 1997, a decrease
of  approximately  $200,000 or 8.3% from the $2.4 million  recorded in 1996. The
decrease was a direct  result of decreased  administrative  costs related to the
closing of  Winston's  New York  office,  as well as lower  overall  transaction
levels.  Personnel,  occupancy and all other expenses decreased in 1997 compared
to 1996.

<PAGE>

New Accounting Standards
------------------------

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise  and Related  Information,"  which will be effective  for the Company
beginning  January 1, 1998.  SFAS No. 131 redefines  how operating  segments are
determined  and  requires  expanded  quantitative  and  qualitative  disclosures
relating to a company's operating segments.  The Company is still evaluating the
disclosure requirements, if any, upon implementation of SFAS No. 131.

Year 2000 Matters
-----------------

     The Year 2000 Issue is the result of computer  programs being written using
two digits rather than four to define the applicable  year. Any of the Company's
computer programs that have  time-sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary inability to process transactions or engage in similar
normal business activities.

     Management  has  determined   that  the  year  2000  issue  will  not  pose
significant  operational  problems for its internal computer systems.  All costs
associated  with this  conversion  are being  expensed as  incurred.  Due to the
critical  relationship  with the  Company's  clearing  broker,  the Company will
develop a plan to test the  transaction  and other data provided by the clearing
broker after any required  revisions to its software.  However,  there can be no
guarantee that the systems of the clearing  broker and other  companies on which
the  Company's  systems  rely  will be  timely  converted  and would not have an
adverse effect on the Company's systems.

     The Company will utilize external resources to reprogram,  or replace,  and
test  the  software  for  Year  2000  modifications.   The  Company  anticipates
completing the Year 2000 project not later than October 31, 1999, which is prior
to any anticipated impact on its operating  systems.  The total cost of the Year
2000 project is not expected to be material and will be funded through operating
cash flows, which will be expensed as incurred.

     The costs of the project and the date on which the Company believes it will
complete the Year 2000  modifications  are based on management's  best estimate,
which were derived utilizing  numerous  assumptions of future events,  including
the continued availability of certain resources, third party modifications plans
and other factors.  However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.


<PAGE>


Item 7.   FINANCIAL STATEMENTS

         The financial statements filed herein are listed below:

         Independent Auditors' Report
         Financial Statements:
                  Consolidated Balance Sheet - December 31, 1997
                  Consolidated Statements of Operations -
                           Years ended December 31, 1997 and 1996
                  Consolidated Statements of Stockholders' Equity -
                           Years ended December 31, 1997 and 1996
                  Consolidated Statements of Cash Flows -
                           Years ended December 31, 1997 and 1996
                  Notes to Consolidated Financial Statements
                           Years ended December 31, 1997 and 1996



<PAGE>


INDEPENDENT AUDITORS' REPORT




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

We have audited the  accompanying  consolidated  balance sheet of Kent Financial
Services,  Inc.  and  Subsidiaries  as of  December  31,  1997,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows  for each of the two  years in the  period  then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the consolidated  financial position of Kent Financial Services,  Inc.
and  Subsidiaries  at December 31, 1997, and the  consolidated  results of their
operations  and their cash  flows for each of the two years in the  period  then
ended in conformity with generally accepted accounting principles.




/s/ Deloitte & Touche LLP

March 17, 1998
New York, New York




<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                     ASSETS

                                 ($000 Omitted)

<TABLE>
<CAPTION>
                                                              December 31,
                                                                 1997
                                                             -------------

<S>                                                           <C>
Cash and cash equivalents                                      $ 6,768
Securities owned                                                 5,691
Receivable from clearing broker                                    216

Property and equipment:
  Land and building                                              1,440
  Office furniture and equipment                                   237
                                                               -------
                                                                 1,677
  Accumulated depreciation                                    (    422)
                                                               -------
  Net property and equipment                                     1,255

Other assets                                                       273
                                                               -------
         Total assets                                          $14,203
                                                               =======




          See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                 ($000 Omitted)
<TABLE>
<CAPTION>



                                                              December 31,
                                                                 1997
                                                             -------------
<S>                                                           <C>
Liabilities:
  Accounts payable                                             $   118
  Income taxes payable                                             258
  Accrued expenses                                                 787
  Long-term debt                                                   518
  Discontinued operations                                          408
                                                               -------
     Total liabilities                                           2,089
                                                               -------

Contingent liabilities (Note 9)

Stockholders' equity:
Preferred stock without par value,
  500,000 shares authorized;
  none outstanding                                                   -
Common stock, $.10 par value,
  4,000,000 shares authorized;
  1,012,837 outstanding                                            101
Additional paid-in capital                                      15,218
Accumulated deficit                                           (  3,205)
                                                               -------
     Total stockholders' equity                                 12,114
                                                               -------
     Total liabilities and stockholders' equity                $14,203
                                                               =======





          See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                    ($000 Omitted, except per
                                                           share data)
                                                      Year ended December 31,
                                                    ---------------------------
                                                      1997               1996
                                                    -------             -------


<S>
Revenues:                                          <C>                  <C>
     Brokerage commissions and fees                 $ 1,688             $ 2,953
     Principal transactions:
       Trading                                        1,610               2,086
       Investing gains (losses)                    (    987)                772
     Interest, dividends and other                      876               1,314
                                                    -------             -------
          Total revenues                              3,187               7,125
                                                    -------             -------

Expenses:
     Brokerage                                        2,242               3,484
     General, administrative and other                2,153               2,437
     Interest                                            45                 198
                                                    -------             -------
          Total expenses                              4,440               6,119
                                                    -------             -------

Earnings (loss) before income taxes                (  1,253)              1,006
Income taxes (benefit)                             (    103)                335
                                                    -------             -------
Net earnings (loss)                                ($ 1,150)            $   671
                                                    =======             =======

Basic net earnings (loss) per common share         (   1.12)            $   .64
                                                    =======             =======

Diluted earnings (loss) per common share           ($  1.12)            $   .64
                                                    =======             =======

Weighted average number of common shares
  outstanding (in 000's)                              1,029              1,050
                                                    =======             =======



          See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>




                          KENT FINANCIAL SERVICES, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                 ($000 Omitted)

<TABLE>
<CAPTION>


                                                                  Additional                              Total
                                                  Common           Paid-In        Accumulated         Stockholders'
                                                   Stock           Capital          Deficit              Equity
                                                  -------        -----------     -------------       --------------

<S>                                              <C>              <C>              <C>                 <C>
Balance, December 31, 1995                        $  105           $15,474         ($ 2,726)            $12,853

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

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

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

Repurchase and cancellation
  of common stock                                (     4)         (    215)               -            (    219)

Net loss                                               -                 -         (  1,150)           (  1,150)
                                                  ------           -------          -------             -------

Balance, December 31, 1997                        $  101           $15,218         ($ 3,205)            $12,114
                                                  ======           =======          =======             =======



                                   See accompanying notes to consolidated financial statements.


</TABLE>

<PAGE>





                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 ($000 Omitted)

<TABLE>
<CAPTION>


                                                           Year Ended December 31,
                                                         --------------------------
                                                           1997              1996
                                                         --------          --------
<S>                                                     <C>               <C>
Cash flows from operating activities:
  Net earnings (loss)                                   ($ 1,150)          $   671
  Adjustments:
    Depreciation and amortization                             45               127
    Unrealized (gains) losses on securities owned          1,269          (    364)
    Change in securities owned                               680          (  2,116)
    Change in net receivable from clearing broker            163               819
    Change in accounts payable and accrued expenses     (    711)         (    404)
    Change in income taxes payable                      (    200)         (    130)
    Other, net                                          (    158)              212
                                                         -------           -------
    Net cash used in operating
      activities                                        (     62)         (  1,185)
                                                         -------           -------

Cash flows from investing activities:
  Purchase of property and equipment                    (     29)         (      3)
  Sale of property and equipment                               -                32
  Loans to employees                                           -                50
  Other, net                                            (      -)               47
                                                         -------           -------
    Net cash provided by (used in)
      investing activities                              (     29)              126
                                                         -------           -------

Cash flows from financing activities:
  Repurchase of common stock                            (    219)         (     41)
  Payments on debt                                      (     31)         (     50)
                                                         -------           -------
    Net cash used in financing activities               (    250)         (     91)
                                                         -------           -------

Net decrease in cash and cash equivalents               (    341)         (  1,150)
Cash and cash equivalents at beginning of period           7,109             8,259
                                                         -------           -------
Cash and cash equivalents at end of period               $ 6,768           $ 7,109
                                                         =======           =======

Supplemental Disclosures of Cash Flow Information:
  Cash paid for:
    Interest expense                                     $    45           $    198
                                                         =======           ========
    Taxes                                                $   109           $    419
                                                         =======           ========



             See accompanying notes to consolidated financial statements.

</TABLE>




<PAGE>




                          KENT FINANCIAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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

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

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

     The Company considers as cash equivalents all short-term investments with a
maturity of three months or less when purchased, which are highly liquid and are
readily  exchangeable  for cash at amounts  equal to their  stated  value.  Cash
equivalents at December 31, 1997 consisted of U.S. Treasury Bills.

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

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

     The Company  takes  proprietary  trading  securities  positions  to satisfy
customer demand for Nasdaq market and over-the-counter securities.  Realized and
unrealized  gains and losses from  holding  proprietary  trading  positions  for
resale to customers are included in principal transaction trading revenues.  The
Company also holds principal investment  securities which are recorded at quoted
market  prices  or at fair  value as  determined  by  management  based on other
relevant  factors.  The net  change  in  market  or  fair  value  of  investment
securities owned is included in principal transactions investing revenues.

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

     Property and Equipment
     ----------------------

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

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

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


<PAGE>


                          KENT FINANCIAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Interest Income and Expenses
     ----------------------------

     Winston  receives  interest  income on its credit  balances at the clearing
broker and is charged  interest  expense  on its debit  balance at the  clearing
broker.

     Income Taxes (Benefit)
     ----------------------

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

     Earnings (Loss) Per Common Share
     --------------------------------

     Earnings (loss) per common share is calculated in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128")
and is based on the  weighted  average  number  of shares  outstanding.  Diluted
earnings  per share  includes the assumed  conversion  of shares  issuable  upon
exercise  of  options  where  appropriate.   Prior  years'  earnings  per  share
information has been restated to comply with the requirements of SFAS No. 128.

     Estimates
     ---------

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


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

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

     Pursuant to the net capital  provisions of Rule 15c3-1 under the Securities
Exchange Act of 1934 ("1934 Act"), Winston is required to maintain a minimum net
capital, as defined, of $100,000. At December 31, 1997, Winston had net capital,
as defined, of $668,000 which was $568,000 in excess of the required minimum.

     Winston is exempt from the  provisions of Rule 15c3-3 under the 1934 Act as
its  activities  are limited to those set forth in the  conditions  appearing in
paragraphs (k)(2)(ii).


<PAGE>
                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     AVF  is  an  investment  partnership  whose  primary  purpose  is  to  make
investments in a limited  number of portfolio  companies,  whose  securities are
considered undervalued by the partnership's management.


3.   SECURITIES OWNED
     ----------------

     Securities owned consist of the following ($000's omitted):


<TABLE>
<CAPTION>

                                  Marketable, at      Marketable, at
                                   Market Value         Fair Value       Total
                                 ----------------    ---------------    -------
<S>                                  <C>                 <C>            <C>
Equity securities                    $3,653              $1,923         $5,576
Mutual funds                            115                   -            115
                                     ------              ------         ------
Total                                $3,768              $1,923         $5,691
                                     ======              ======         ======

</TABLE>


     Subsequent  to year-end,  the Company sold  securities  owned with a market
value of $675,000 and a fair value of $1,788,000 at December 31, 1997 for a gain
of approximately $700,000.


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

     Winston  subleases  part  of  its  premises  at  one  location  to  several
subtenants  under sublease  terms  substantially  equivalent to Winston's  lease
agreement.   Rental  income  under  these   agreements  in  1997  and  1996  was
approximately $110,000 and $91,000, respectively.

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

<TABLE>
                                        <S>                          <C>
                                        1998                         $ 97,000
                                        1999                            6,000
                                                                     --------
                                        Total                        $103,000
                                                                     ========

</TABLE>


     Aggregate  net rent expense for the years ended  December 31, 1997 and 1996
was approximately $10,000 and $138,000, respectively.


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

     The components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>

                                                        ($000 Omitted)
                                                    Year Ended December 31,
                                                 ----------------------------
                                                   1997                1996
                                                 --------            --------
         <S>                                     <C>                   <C>
         Federal-current                         ($ 97)                $259
         State-current                           (   6)                  76
         Deferred                                    -                    -
                                                  ----                 ----
               Total                             ($103)                $335
                                                  ====                 ====

</TABLE>
<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Total income tax expense  (benefit)  for the years ended  December 31, 1997
and 1996 is different  from the amount  computed by  multiplying  total earnings
before income taxes by the statutory Federal income tax rate of 34%. The reasons
for these differences and the related tax effects are:

<TABLE>
<CAPTION>


                                                           ($000 Omitted)
                                                       Year Ended December 31,
                                                     --------------------------
                                                      1997               1996
                                                     ------             -------
<S>                                                 <C>                <C>
Income tax expense (benefit) computed at the
     statutory federal rate on earnings
       before income taxes                          ($  426)            $  342

Increase (decrease) in tax from:
     Valuation allowance on net operating
       loss carryforward                                430            (   314)
     State income tax, net of federal benefit       (     4)                50
     Alternative minimum tax
       carryback benefit                            (    52)               259
     Other, net                                     (    51)           (     2)
                                                     ------             ------
          Total income tax expense (benefit)        ($  103)            $  335
                                                     ======             ======

</TABLE>



     The tax effects of significant  items comprising the Company's net deferred
tax asset as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>


                                                         ($000
                                                        Omitted)
                                                      -----------
     <S>                                               <C>
     Deferred tax assets:
       Operating loss carryforwards                     $2,153
       Alternative minimum tax credit
         carryforward                                      906
       General business credit
         carryforwards                                     990
       State, net operating loss
         carryforwards, net of federal benefit             905
       Other                                               356
                                                        ------
                                                        $5,310
                                                        ======
       Valuation allowance                             ($5,310)
                                                        ======
       Net deferred tax asset                           $    -
                                                        ======

</TABLE>

     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.  Due to the  uncertainty  of realizing its deferred tax
asset,  a valuation  allowance  of an equal amount is  maintained.  For the year
ended  December 31, 1997,  the valuation  allowance  increased by  approximately
$430,000.




<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Significant  carryforward  balances  for Federal  income tax purposes as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>

                                                                     Expiration
                                              ($000 Omitted)           Years
                                             ----------------       ------------
<S>                                              <C>                 <C>
Net operating loss (Federal)                     $6,333              2006-2009
General business tax credit                      $  990              1997-2000
Alternative minimum tax credit                   $  906                      -

</TABLE>



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

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


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

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

     From time to time since April 1988,  the  Company's  Board of Directors has
authorized the repurchase of the Company's common stock in the open market or in
privately  negotiated  transactions.  On March 26, 1996,  the Board of Directors
approved a plan to repurchase up to 150,000 shares of the Company's common stock
at  prices  deemed  favorable  in the open  market  or in  privately  negotiated
transactions subject to market conditions,  the Company's financial position and
other  considerations.  All shares acquired  through December 31, 1997 have been
canceled and returned to the status of  authorized  but unissued  shares.  As of
December 31, 1997 40,028 shares have been acquired under this repurchase plan.

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

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



<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     The following  table  summarizes  option  transactions  under this plan for
1997:

<TABLE>
<CAPTION>


                                                                      Average
                                                      Shares           Price
                                                     --------        ---------
     <S>                                              <C>             <C>
     Options outstanding at December 31, 1995
       and 1996                                       30,000          $4.1625
     Options granted in 1997                               -                -
     Options exercised in 1997                             -                -
                                                      ------          -------
     Options outstanding at December 31, 1997         30,000          $4.1625
                                                      ======          =======

</TABLE>


     The Company does not accrue compensation  expense for the issuance of stock
options under its  accounting  policy,  which is based on Accounting  Principles
Board  Opinion  No.  25,   "Accounting   for  Stock  Issued  to  Employees."  If
compensation  expense for granted stock options had been determined based on the
fair value at grant date, the effect on basic and diluted  earnings per share in
1997 and 1996 would be immaterial.



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

     In April 1990,  the  Company  entered  into an  employment  agreement  (the
"Agreement") with the Company's Chairman for a three-year term commencing April,
1990 (the  "Effective  Date")  at an annual  salary  of  $175,000  (adjusted  to
$200,000 in December  1993),  which may be  increased  but not  decreased at the
discretion of the Board of Directors.  The term is to be automatically  extended
one day for  each day  elapsed  after  the  Effective  Date.  The  Chairman  may
terminate his employment under the Agreement under certain conditions  specified
in the Agreement and the Company may terminate the Chairman's  employment  under
the Agreement for cause. In the event of the Chairman's death during the term of
the Agreement,  his beneficiary  shall be paid a death benefit equal to $200,000
per year for three  years  payable  in equal  monthly  installments.  Should the
Chairman become "disabled" (as such term is defined in the Agreement) during the
term of the Agreement he shall be paid an annual disability payment equal to 80%
of his base  salary in effect at the time of the  disability.  The  Company  has
accrued for the contingent payments under this Agreement.


9.   DISCONTINUED OPERATIONS
     -----------------------

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



<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     In April 1989, TAPI was formally  notified that the Michigan  Department of
Natural  Resources  deemed TAPI a responsible  party in connection  with alleged
environmental  problems at a site owned by TAPI. In the fourth  quarter of 1994,
TAPI entered  into a consent  judgment  with the State of Michigan.  The consent
judgment  provides for the payment by TAPI of approximately  $450,000 to satisfy
TAPI's  alleged  liability for past and future costs incurred and to be incurred
by the State of Michigan in  undertaking  remedial  environmental  activities at
TAPI's former refinery site in Michigan. Under the terms of the settlement, TAPI
paid $90,000 in the fourth  quarter of 1994 and $45,000 per year in 1995 through
1997. The Company is required to pay $45,000 in annual installments  through the
year 2002 without interest. The Company joined the consent judgment for the sole
purpose of assuring payments by TAPI.  Neither TAPI nor the Company admitted any
liability.  The  liability  had  been  accrued  for in  prior  years  as part of
discontinued operations.

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


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

     Rosenman & Colin LLP ("R&C") has  performed  legal work for the Company and
its  affiliates in 1997 and 1996.  Natalie I. Koether,  wife of the Chairman and
President of the Company is of counsel to R&C and also  employed by the Company.
Aggregate fees and expenses billed by R&C to the Company and its subsidiaries in
1997 and 1996 were  approximately  $128,000  and  $194,000,  respectively.  Mrs.
Koether  received  $150,000 and $142,500 in 1997 and 1996,  respectively,  as an
employee.  She received no compensation  from R&C related to fees charged to the
Company for her time.

     Since March 1990 certain non-subsidiary affiliates have rented office space
from the Company.  The Company's aggregate rental income from these arrangements
was approximately $43,000 in 1997 and 1996.

     The Company  reimburses  an affiliate  for the direct cost of certain group
medical insurance, 401(k) benefits and office supplies. Such reimbursements were
approximately $171,000 and $170,000 during 1997 and 1996, respectively.

     Affiliates of the Company maintain brokerage  accounts with Winston,  which
received commissions from those affiliates totaling  approximately  $129,000 and
$121,000 during 1997 and 1996, respectively.


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

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


<PAGE>



                 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

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

     At December 31, 1997,  substantially  all of the  securities  owned and the
total  receivable  from clearing  broker are positions with and amounts due from
this clearing broker. The Company is subject to credit risk should the clearing
broker be unable to pay this balance.



<PAGE>



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

          None.









<PAGE>



                                    PART III


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

     All of the members of the current  Board of  Directors  were elected at the
1997 Annual  Meeting  and all will serve until the next Annual  Meeting or until
their successors have been elected and shall qualify. The Company's officers are
elected by and serve at the leave of the Board.

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

     The directors  and  executive  officers of the Company at February 28, 1998
are as follows:

<TABLE>
<CAPTION>


          Name                        Age                  Position Held
        --------                    -------              -------------------
     <S>                              <C>                <C>
     Paul O. Koether                  61                 Chairman, Director and
                                                           President

     Mathew E. Hoffman                44                 Director

     Casey K. Tjang                   59                 Director

     M. Michael Witte                 72                 Director

     John W. Galuchie, Jr.            45                 Vice President and
                                                           Treasurer

     Mark Koscinski                   40                 Vice President

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

</TABLE>


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

     Mathew E. Hoffman.  Since January 1997, he has been head of the  litigation
department  of  Todtman,  Nachamie,  Hendler & Spizz  P.C.  From May 1994  until
January  1997 Mr.  Hoffman was a partner of the law firm of Rosen & Reade.  From
February 1989 to May 1994, he was a partner of Keck,  Mahin & Cate. His articles
have been published in the United States, Europe and Japan.



<PAGE>



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

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

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

     Mark Koscinski,  a certified public accountant,  is principally  engaged in
the following  businesses since August 1993: (i) the Company and Winston as Vice
President;  (ii) Pure World, as Senior Vice President;  and (iii) since December
1994,  Madis,  as director,  Senior Vice  President,  Secretary  and  Treasurer.
Previously,  Mr. Koscinski had served as Vice President of Accounting Operations
with Chemical Bank of New York from October 1992 to August 1993.

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

     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 1997.


<PAGE>



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

     There is shown below  information  concerning the annual  compensation  for
services in all  capacities  to the Company for the fiscal years ended  December
31, 1997,  1996 and 1995,  for those  persons who were, at December 31, 1997 (i)
the chief executive officer and (ii) the other most highly compensated  officers
of  the  Company,   whose  annual  compensation  exceeds  $100,000  (the  "Named
Officers").

<TABLE>
<CAPTION>



                                              Summary Compensation Table

                                                                                    Long-Term
Name and Principal                            Annual Compensation<F1><F2>          Compensation        Other
                                       ----------------------------------------   --------------      -------
Officer                       Year      Salary          Bonus          Other<F3>     Options(#)
--------                      ----      ------         --------       ----------    -----------
<S>                           <C>      <C>             <C>            <C>                <C>             <C>
Paul O. Koether               1997     $200,000        $     -        $124,484
Chairman, Presi-              1996     $200,000        $65,000        $142,366           -               -
dent and Chief                1995     $200,000        $90,000        $141,956           -               -
Executive Officer


John W. Galuchie, Jr.         1997     $160,000        $ 8,000        $    386
Vice President                1996     $160,000        $15,000        $    892           -               -
and Treasurer                 1995     $160,000        $21,000        $    259           -               -

----------------------------------------------------
<FN>

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

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

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

</FN>
</TABLE>

     There  were  no  stock  options  granted  pursuant  to the  Company's  1987
Non-Qualified  Stock  Option  Plan (the  "Plan")  during the fiscal  years ended
December 31, 1997, 1996 and 1995 to the Named Officers.

     Options may be granted by the Board of Directors to officers, directors and
employees of the Company or its subsidiaries.  The exercise price for the shares
shall not be less than the fair market  value of the Common Stock on the date of
grant. Options will expire five years from date of grant and will be exercisable
as to  one-half  of the  shares on the date of grant  and as to the other  half,
after the first  anniversary of the date of grant,  or at such other time, or in
such other  installments  as may be  determined  by the Board of  Directors or a
committee thereof at the time of grant. The options are non-transferable  (other
than  by will or by  operation  of the  laws  of  descent)  and are  exercisable
generally only while the holder is employed by the Company or by a subsidiary of
the Company or, in the event of the holder's death or permanent disability while
employed by the Company, within one year after such death or disability.


<PAGE>



     The table below contains information  concerning the exercise of options by
the Named  Officers  during 1997 and the fiscal  year-end  value of  unexercised
options held by the Named Officers.

<TABLE>
<CAPTION>



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

                     Number of                                                               Value of Unexercised
                  Shares Acquired       Value             Number of Unexercised              In-the-Money Options
                    on Exercise        Realized        Options at December 31, 1997          at December 31, 1997
                ------------------   ------------     ------------------------------     ------------------------------
                                                        Exercisable    Unexercisable      Exercisable    Unexercisable
                                                      --------------  --------------     -------------  ---------------
<S>                          <C>              <C>               <C>              <C>       <C>                     <C>
Paul O.
Koether                      -                -                 -                -         $     -                 -

John W.
Galuchie, Jr.                -                -             5,000                -         $11,875                 -


</TABLE>



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

     Directors  who are not  employees  of the Company  receive a monthly fee of
$750  plus $200 for each day of  attendance  at board  and  committee  meetings.
During  1997,  the  Company  paid  directors'  fees in the  aggregate  amount of
approximately $37,000.

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

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

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

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



<PAGE>



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

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

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



<PAGE>



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

     The  following  table  provides  information  with respect to the Company's
common stock  beneficially owned as of February 28, 1998 by each director of the
Company,  by each person having beneficial  ownership of five percent or more of
the Company's common stock and by all directors and officers of the Company as a
group.

<TABLE>
<CAPTION>


                                    Amount and Nature
 Name and Address                    of Beneficial                  Percent of
of Beneficial Owner                   Ownership<F1>                   Class
-------------------                -------------------             ------------
<S>                                     <C>                           <C>
Paul O. Koether                         468,177<F2>                   44.98%
 211 Pennbrook Road
 Far Hills, NJ 07931

Shamrock Associates                     417,470                       40.11%
 211 Pennbrook Road
 Far Hills, NJ 07931

M. Michael Witte                         12,000                        1.15%
 1120 Granville Avenue
 Suite 102
 Los Angeles, CA 90049

Casey K. Tjang                           10,000                          *
 56 Hall Drive
 Clark, NJ 07066

Mathew E. Hoffman                         7,000                          *
 62 Rosehill Avenue
 New Rochelle, NY 10804

John W. Galuchie, Jr.                    24,166<F3>                    2.32%
 376 Main Street
 Bedminster, NJ 07921

Mark Koscinski                            5,000                          *
 376 Main Street
 Bedminster, NJ 07921

All Directors and Officers              512,177                       49.21%
 as a Group (6 persons)
-----------------------------------------
*Less than 1 percent.


<FN>

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



<PAGE>



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

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


</FN>
</TABLE>


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

     Rosenman & Colin LLP ("R&C")  performed  legal work for the Company and its
affiliates  in 1997 and 1996.  Natalie  I.  Koether,  wife of the  Chairman  and
President of the Company, is of counsel to R&C and also employed by the Company.
Aggregate fees and expenses billed by R&C to the Company and its subsidiaries in
1997 and 1996 were  approximately  $128,000  and  $194,000,  respectively.  Mrs.
Koether  received  $150,000 and $142,500 in 1997 and 1996,  respectively,  as an
employee.  She received no compensation  from R&C related to her fees charged to
the Company for her time.

     The Company  reimburses  an affiliate  for the direct cost of certain group
medical insurance, 401(k) benefits and office supplies. Such reimbursements were
approximately $171,000 and $170,000 during 1997 and 1996, respectively.

         Affiliates  of the Company  maintain  brokerage  accounts with Winston,
which received commissions from these affiliates totaling approximately $129,000
and $121,000 during 1997 and 1996, respectively.





<PAGE>



                                     PART IV


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

     The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>


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

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

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

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

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

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

         21       Subsidiaries<F8>

         27       Financial Data Schedule<F8>


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

          There were no reports filed on Form 8-K for the year ended December
          31,1997.

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


<PAGE>

<FN>

<F1> Incorporated by reference to Texas American Energy Corporation Registration
     Statement, as amended, on Form S-l, No. 33-11109.
<F2> Incorporated  by  reference  to  Texas  American  Energy  Corporation  Form
     10-K, for the fiscal year ended December 31, 1984.
<F3> Incorporated  by reference to Texas American  Energy  Corporation  Form
     10-K for the fiscal year ended December 31, 1987.
<F4> Incorporated by reference to Kent Financial Services, Inc. Form 10-Q for
     the quarter ended September 30, 1991.
<F5> Intentionally left blank.
<F6> Incorporated by reference to Texas American Energy Corporation Proxy
     Statement dated November 11, 1987.
<F7> Incorporated by reference to Kent Financial Services, Inc. Form 10-Q for
     the quarter ended June 30, 1990.
<F8> Filed herewith.

</FN>
</TABLE>

<PAGE>



                                   SIGNATURES

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

                                            KENT FINANCIAL SERVICES, INC.


Dated:  March 30, 1998                    BY    /s/ Paul O. Koether
                                                ----------------------
                                                Paul 0. Koether
                                                Chairman of the Board, President
                                                and Director
                                               (Principal Executive Officer)



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

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


Dated:  March 30, 1998                          /s/ Paul O. Koether
                                                ----------------------
                                                Paul 0. Koether
                                                Chairman of the Board,
                                                President and Director
                                               (Principal Executive Officer)


Dated:  March 30, 1998                          /s/ Mathew E. Hoffman
                                                ---------------------
                                                Mathew E. Hoffman
                                                Director

Dated:  March 30, 1998                          /s/ M. Michael Witte
                                                --------------------
                                                M. Michael Witte
                                                Director

Dated:  March 30, 1998                          /s/ Casey K. Tjang
                                                ------------------
                                                Casey K. Tjang
                                                Director