UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 10-Q





x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended: June 30, 2009





OR





 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ____________ to ___________.





Commission File No.: 0-20726





Kent International Holdings, Inc.


(Exact name of registrant as specified in its charter)





Nevada
20-4888864(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)





211 Pennbrook Road, P.O. Box 97, Far Hills, New Jersey 07931


(Address of principal executive offices)





(908) 766-7221


(Registrant's telephone number)





Indicate by check mark whether the registrant (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   ̈





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files.)  Yes   ̈  No  x





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check One)


Large accelerated filer   ̈  Accelerated filer   ̈  Non-accelerated filer   ̈  Smaller reporting company  x





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


Yes  x  No   ̈





Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:  As of July 31, 2009, the issuer had 3,555,488 shares of its common stock, par value $.002 per share, outstanding.










KENT INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES


FORM 10-Q


For The Quarterly Period Ended June 30, 2009




Table of Contents





PageNumberPART I. FINANCIAL INFORMATIONItem 1.  Financial StatementsConsolidated Balance Sheets as of June 30, 2009 and December 31, 2008
3Consolidated Statements of Operations Three and Six Months Ended June 30, 2009 and 2008
4Consolidated Statements of Cash FlowsSix Months Ended June 30, 2009 and 2008
5Notes to Consolidated Financial Statements
6Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
8Item 3.Quantitative and Qualitative Disclosure About Market Risk
11Item 4.  Controls and Procedures
11PART II. OTHER INFORMATIONItem 1.  Legal Proceedings
11Item 1a.  Risk Factors
12Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
12Item 3.  Defaults Upon Senior Securities
12Item 4.  Submission of Matters to a Vote of Security Holders
12Item 5.  Other Information
12Item 6.  Exhibits
12Signatures
13


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 Table of Contents


PART I.
FINANCIAL INFORMATION




ITEM1.
Financial Statements





KENT INTERNATIONALHOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS







ASSETS

June 30, 2009(Unaudited)


December 31, 2008Current Assets:Cash and cash equivalents

$
10,188,726


$
290,880Short-term investments






10,090,292Prepaid expenses and other current assets


7,802



4,769Total current assets


10,196,528



10,385,941Other assets


5,500



5,500Total assets

$
10,202,028


$
10,391,441LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
29,159


$
30,087Stockholders' equity:Preferred stock, $.002 par value; 2,000,000 shares authorized; none outstanding


-



-Common stock, $.002 par value;10,000,000 shares authorized;3,555,488 shares issued and outstanding


7,111



7,111Additional paid-in capital


99,358,045



99,353,651Accumulated deficit


(89,192,287
)


(88,999,408
)Total stockholders' equity


10,172,869



10,361,354Total liabilities and stockholders' equity

$
10,202,028


$
10,391,441








See accompanying notes to consolidated financial statements.


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KENT INTERNATIONALHOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)








Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008Revenues:Interest

$
4,692


$
77,279


$
10,455


$
160,795Other income






625







625Total revenues


4,692



77,904



10,455



161,420Expenses:General and administrative


90,984



100,135



203,334



213,296Loss before income taxes


(86,292
)


(22,231
)


(192,879
)


(51,876
)Provision for income taxes


-



510



-



510Net loss

$
(86,292
)

$
(22,741
)

$
(192,879
)

$
(52,386
)Basic and diluted net loss per common share

$
(0.03
)

$
(0.01
)

$
(0.06
)

$
(0.02
)Basic and diluted weighted average number of common shares outstanding


3,555,488



3,567,956



3,555,488



3,567,956








See accompanying notes to consolidated financial statements.


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KENT INTERNATIONALHOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)







Six Months EndedJune 30,2009


2008Cash flows from operating activities:Net loss

$
(192,879
)

$
(52,386
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation






612Stock-based compensation expense


4,394



1,465Changes in operating assets and liabilities:Interest receivable on short-term investments


1,125



5,918Change in prepaid expenses and other current assets


(3,033
)


3,301Change in accounts payable and accrued expenses


(928
)


(1,341
)Net cash used in operating activities


(191,321
)


(42,431
)Cash flows from investing activities:Purchase of short-term investments






(10,485,417
)Sales and maturities of short-term investments


10,089,167



10,532,410Net cash provided by investing activities


10,089,167



46,993Net increase in cash and cash equivalents


9,897,846



4,562Cash and cash equivalents at beginning of period


290,880



28,340Cash and cash equivalents at end of period

$
10,188,726


$
32,902Supplemental disclosure of cash flow information:Cash paid for:Taxes

$
-


$
510








See accompanying notes to consolidated financial statements.


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 Table of Contents


KENT INTERNATIONALHOLDINGS, INC. AND SUBSIDIARIES


Notes To Consolidated Financial Statements


(Unaudited)





NOTE A - Basis of Presentation





The accompanying unaudited financial statements of Kent International Holdings, Inc. and its subsidiaries (“Kent International” or the “Company”) reflect all material adjustments consisting of only normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of results for
the interim periods.  Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading.  These financial statements should be read in conjunction with the financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission.





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 results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the entire year or for any other period.





NOTE B - Related Party Transactions





A monthly management fee of $21,000 is paid to Kent Financial Services, Inc. (“Kent”), a Nevada corporation, for management services.  These services include, among other things, periodic and other filings with the Securities and Exchange Commission, evaluating merger and acquisition proposals, internal accounting
and shareholder relations.  This arrangement may be terminated at will by either party.  Kent was the beneficial owner of approximately 53.44% of the Company’s outstanding common stock at June 30, 2009.  Paul O. Koether, Chairman of the Company is also the Chairman of Kent and the beneficial owner of or authorized proxy for approximately 59.54% of Kent’s outstanding common stock.  Bryan P. Healey, Chief Financial Officer and Director of the Company is also the
Chief Financial Officer and a Director of Kent as well as the son-in-law of Paul O. Koether.





NOTE C - Common Stock





In October 2000, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 320,000 shares of its Common Stock at prices deemed favorable from time to time in the open market or in privately negotiated transactions subject to market conditions, the Company’s financial position and other
considerations.  This program has no expiration date.  No shares were repurchased during the quarters ended June 30, 2009 and 2008.  At June 30, 2009, there were 121,068 shares remaining authorized for repurchase under the program.  All shares repurchased were returned to the status of authorized but unissued shares.


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NOTE D - Basic and Diluted Net Loss Per Share





The Company reports income (loss) per share under the requirements of Statement of Financial Accounting Standards No. 128, “Earnings per Share”.  Basic income (loss) per share includes the weighted average number of common shares outstanding during the year.  Diluted
income (loss) per share includes the weighted average number of shares outstanding and dilutive potential common shares, such as warrants and options.  The Company had 200,000 and 120,000 common stock options outstanding at June 30, 2009 and 2008, respectively.  Since the Company had losses in the three and six months ended June 30, 2009, the stock options outstanding would have an anti-dilutive effect on net loss per share and as such are not included in the calculation.





NOTE E - Stock Options Plans





Kent International has issued certain common stock options to its employees, directors and consultants.  At June 30, 2009 and December 31, 2008, Kent International had 200,000 common stock options outstanding, and none were issued during the three months ended June 30, 2009.





NOTE F – Net Operating Loss Carryforwards





As of December 31, 2008, Kent International had approximately $63.4 million of net operating loss carryforwards (“NOL”) for income tax purposes.  In addition, Kent International has approximately $1.85 million of research and development and foreign tax credit carryforwards available to offset future federal income
tax, subject to limitations for alternative minimum tax.  The NOL’s and tax credit carryforwards expire in various years from 2009 through 2027.  Kent International’s use of operating loss carryforwards and tax credit carryforwards is subject to limitations imposed by the Internal Revenue Code.  Management believes that the deferred tax assets as of June 30, 2009 do not satisfy the realization criteria set forth in SFAS No. 109 and has recorded a valuation allowance for
the entire net tax asset.  By recording a valuation allowance for the entire amount of future tax benefits, the Company has not recognized a deferred tax benefit for income taxes in its statements of operations.





NOTE G - Stock Based Compensation Expense





The Company follows 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.





NOTE H - New Accounting Pronouncements





In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired.  SFAS No.160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements.  The calculation of
earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008.  SFAS 141 (R) and SFAS No. 160 will significantly affect the accounting for future business combinations and we will determine the accounting impact as new combinations are determined.


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 Table of Contents


In May 2009, the FASB issued SFAS No. 165 “Subsequent Events.”  This statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  This statement is effective for interim or
annual financial periods ending after June 15, 2009.  The Company believes that the adoption of the above recent pronouncement will not have a material effect on the Company’s results of operations, financial position, or cash flows.





ITEM 2.
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 Annual Report on Form 10-K for the fiscal year ended December 31, 2008 as well as the Company’s financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.  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 described.  The Company expressly disclaims any obligation or undertaking to update these statements in the future.





Business Activities





Our current business plan is to serve as a vehicle for the acquisition of or merger or consolidation with another company (a ‘‘target business’’).  We intend to use our available working capital, capital stock, debt or a combination of these to effect a business combination with a target business which
we believe has significant growth potential.  The business combination may be with a financially stable, mature company or a company that is in its early stages of development or growth, which could include companies seeking to obtain capital and to improve their financial stability.  We will not restrict our search to any particular industry.  Rather, we may investigate businesses of essentially any kind or nature and participate in any type of business that may, in our management’s
opinion, meet our business objectives as described in this report.  We emphasize that the description in this report of our business objectives is extremely general and is not meant to restrict the discretion of our management to search for and enter into potential business opportunities.  We have not chosen the particular business in which we will engage and have not conducted any market studies with respect to any business or industry for you to evaluate the possible merits or risks of the
target business or the particular industry in which we may ultimately operate.  To the extent we enter into a business combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies.  In addition, to the extent that we effect
a business combination with an entity in an industry characterized by a high level of risk, we will become subject to the currently unascertainable risks of that industry.  An extremely high level of risk frequently characterizes certain industries that experience rapid growth.  In addition, although we will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.


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Additionally, Kent International has developed a niche social networking website, www.ChinaUSPals.com, designed to promote cultural exchange between the citizens of the United States and those of the People’s Republic of China.  Membership to the site is free, thus, any potential
revenues will be derived from advertisements placed on the site by third parties.  The site provides users with access to other users’ personal profiles and enables the user to send messages to other registered users of similar interests in order to develop lasting friendships or simply attain a pen pal.  ChinaUSPals.com also features user generated discussion forums and blogs as well as user submitted videos and pictures.  The site was redesigned in preparation for the 2008
Olympics and re-launched on August 6, 2008.  Since then, site membership has grown to over 4,900 members from the approximately 150 members prior to the redesign.





While we are encouraged by the membership and traffic growth since the redesign, we cannot be certain that the growth rate will continue or that existing members will continue using the site.  We also face the risk that our website will not be viewable in China or will be deliberately blocked by the government of the People’s
Republic of China.  Internet usage and content are heavily regulated in China and compliance with these laws and regulations may cause us to change or limit our business practices in a manner adverse to our business.





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.





Results of Operations





Kent International had a net loss of $86,292, or $.03 basic and fully diluted loss per share, for the quarter ended June 30, 2009, compared to a net loss of $22,741, or $0.01 basic and fully diluted loss per share, for the quarter ended June 30, 2008.  Kent International had a net loss of $192,879, or $.06 basic and fully diluted
loss per share, for the six months ended June 30, 2009 compared to a net loss of $52,386, or $0.02 basic and fully diluted loss per share, for the same period of 2008.  The increases in net losses were a result of decreases in interest revenue on short-term investments and cash on deposit.





Revenues





Interest revenue decreased to $4,692 for the three months ended June 30, 2009, from $77,279 for the three months ended June 30, 2008.  For the six months ended June 30, 2009, interest revenue decreased to $10,455 from $160,795 for the six months ended June 30, 2008.  A decrease in the yield on short-term investments
and cash equivalents from 3.2% to 0.2% was the primary reason for the decreases.





Expenses





General and administrative expenses were $90,984 and $203,334 in the three and six months ended June 30, 2009 compared to $100,135 and $213,296 in the three and six months ended June 30, 2008, decreases of $9,151 and $9,962, respectively.  These decreases were the result of net immaterial decreases in general and administrative
expense categories.


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Liquidity and Capital Resources





At June 30, 2009, the Company had cash and cash equivalents of $10,188,726.  Cash and cash equivalents consist of cash held in banks and brokerage firms as well as U.S. Treasury Bills with original maturities of three months.  Working capital at June 30, 2009 was approximately $10.167 million.  Management believes
its cash, cash equivalents and short-term investments are sufficient for its operations for at least the next twelve months and for the costs of seeking an acquisition of or starting an operating business.





Net cash of $191,321 was used in operations for the six months ended June 30, 2009, an increase of $148,890 from the $42,431 used in operations for the six months ended June 30, 2008.  Net cash used in operations for the periods was the result of the net losses for the periods coupled with the changes in operating assets and liabilities.  The
increase in net cash used for operations was primarily the result of the decrease in interest revenue.





Net cash of $10,089,167 was provided by investing activities during the six months ended June 30, 2009 by the sales and maturities of short-term investments.  Net cash of $46,993 was provided by investing activities during the six months ended June 30, 2008 by the sales and maturities of short-term investments offset by the purchase
of short-term investments.





There were no cash flows from financing activities reported during the six month periods ending June 30, 2009 and 2008.





Factors That May Affect Future Results





Future earnings of the Company are dependent on interest rates earned on the Company’s invested balances and expenses incurred.  Kent International expects to incur significant expenses in connection with its objective of redeploying its assets into an operating business and with the operation of the website.





Other Disclosures – Related Party Transactions





A monthly management fee of $21,000 is paid to Kent Financial Services, Inc. (“Kent”), a Nevada corporation, for management services.  These services include, among other things, periodic and other filings with the Securities and Exchange Commission, evaluating merger and acquisition proposals, internal accounting
and shareholder relations.  This arrangement may be terminated at will by either party.  Kent was the beneficial owner of approximately 53.44% of the Company’s outstanding common stock at June 30, 2009.  Paul O. Koether, Chairman of the Company is also the Chairman of Kent and the beneficial owner of or authorized proxy for approximately 59.54% of Kent’s outstanding common stock.  Bryan P. Healey, Chief Financial Officer and Director of the Company is also the
Chief Financial Officer and Director of Kent as well as the son-in-law of Paul O. Koether.





Contractual Obligations





The Company has no material contractual obligations.


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Other Disclosures





None





Off-Balance Sheet Arrangements





The Company has no off-balance sheet arrangements.





ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk.





Not Applicable.





ITEM4.
Controls and Procedures





As of the end of the period covered by this report, the Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) in ensuring that information required to be disclosed by the Company in its reports is recorded, processed, summarized and reported within the required time periods.  In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting.





The material weakness identified by Management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company.  The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system.  The
inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.  However, as there has been no instance in which the company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, management determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use
of our resources at this time.





Accordingly, based on their evaluation of our disclosure controls and procedures as of June 30, 2009, the Company’s Chief Executive Officer and its Chief Financial Officer have concluded that, as of that date, the Company’s controls and procedures were not effective for the purposes described above.





There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended June 30, 2009 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.





PART II.
OTHER INFORMATION




ITEM 1.
Legal Proceedings





None.





ITEM1A.
Risk Factors








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 Table of Contents




ITEM2.
Unregistered Sale of Equity Securities and Use of Proceeds





None.





ITEM 3.
Defaults Upon Senior Securities





None.





ITEM4.
Submission of Matters to a Vote of Security Holders





None.





ITEM5.
Other Information





None.





ITEM 6.
Exhibits





3.1
Articles of Incorporation of Kent International Holdings, Inc. (1)





3.2
Bylaws of Kent International Holdings, Inc. (1)





3.3
Certificate of Designation for Series A Junior Participating Preferred Stock. (2)





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*




(1)
Filed as an exhibit to the Company’s Definitive Information Statement on Form DEF 14C filed April 21, 2006, film number 06771307, and incorporated herein by reference.
 
 (2)
Filed as an exhibit to the Company’s annual report on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.




*
Filed Herewith


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SIGNATURES





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





KENT INTERNATIONAL HOLDINGS, INC.Date: July 31, 2009
By:
/s/ Bryan P. HealeyBryan P. HealeyChief Financial Officer(Principal Accounting and Financial Officer)






13