UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 
 T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended:  March 31, 2010
  OR
 
 o
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.: 1-7986
 
 Kent Financial Services, Inc.
 (Exact name of registrant as specified in its charter)
 
 Nevada

75-1695953(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
 
 10911 Raven Ridge Road, Suite 103-45, Raleigh, North Carolina 27614
 (Address of principal executive offices)
 
 (919) 847-8710
 (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  T    No  o
 
 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 o     No o
 
 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 o Accelerated filer o Non-accelerated filer o Smaller reporting company T
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes  o    No  T
 
 
 State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:  As of April 30, 2010, the issuer had 2,759,076 shares of its common stock, par value $.10 per share, outstanding.
  
 
  KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 FORM 10-Q
 For The Quarterly Period Ended March 31, 2010
 Table of Contents
 
 PageNumberPART I. FINANCIAL INFORMATIONItem 1.  Financial StatementsConsolidated Balance Sheets as of March 31, 2010 and December 31, 2009

3Consolidated Statements of Operations for theThree Months Ended March 31, 2010 and 2009

4Consolidated Statements of Cash FlowsThree Months Ended March 31, 2010 and 2009

5Notes to Consolidated Financial Statements

6Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

10Item 3.  Quantitative and Qualitative Disclosure About Market Risk

13Item 4.  Controls and Procedures

14PART II. OTHER INFORMATIONItem 1.  Legal Proceedings

14Item 1a.  Risk Factors

14Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

14Item 3.  Defaults Upon Senior Securities

15Item 4.  Submission of Matters to a Vote of Security Holders

15Item 5.  Other Information

15Item 6.  Exhibits

15Signatures

17
  2
 Table of Contents
  PART I  -
FINANCIAL INFORMATION
 Item1.  -
Financial Statements
 
 KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 
 ASSETS

March 31, 2010 (Unaudited)


December 31, 2009Current Assets:Cash and cash equivalents

$
10,951,543


$
11,156,027Marketable securities


42,119



53,604Accounts receivable


4,875



5,086Prepaid expenses and other current assets


29,722



13,318Assets of discontinued operationsCash and cash equivalents


3,069



4,121Other assets






219Total current assets


11,031,328



11,232,375Other assets


16,000



16,000Total assets

$
11,047,328


$
11,248,375LIABILITIESCurrent liabilities:Accounts payable and accrued expenses

$
190,294


$
184,658Liabilities of discontinued operations


392



758Total current liabilities


190,686



185,416Noncurrent liabilities:Accrued post employment obligations


720,000



720,000Total liabilities


910,686



905,416EQUITYKent Financial Services shareholders' equityPreferred stock without par value; 500,000 shares authorized; none outstanding


-



-Common stock, $.10 par value; 8,000,000 shares authorized; 2,759,076 and 2,759,145 shares issued and outstanding


275,908



275,915Additional paid-in capital


12,344,622



12,344,709Accumulated deficit


(6,979,747
)


(6,824,000
)Accumulated other comprehensive loss


(64,690
)


(62,669
)Total Kent Financial Services shareholders' equity


5,576,093



5,733,955Noncontrolling interest in subsidiaries


4,560,549



4,609,004Total equity


10,136,642



10,342,959Total liabilities and equity

$
11,047,328


$
11,248,375
 
 See accompanying notes to consolidated financial statements.
  3
 Table of Contents
  KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 Three Months EndedMarch 31,Revenues:

2010


2009Interest and dividend revenue

$
859


$
7,557Investing gains (losses)


(2,088
)Other income


4,875



2,409Total revenues


3,646



9,966Expenses:General and administrative


204,611



213,418Loss from continuing operations before income taxes


(200,965
)


(203,452
)Provision for income tax expense


(1,812
)Loss from continuing operations


(202,777
)


(203,452
)Discontinued operations (Note 9):Income (loss) from discontinued operations before income taxes


(884
)


81,972Income tax expense


(541
)


(1,613
)Income from discontinued operations


(1,425
)


80,359Net loss


(204,202
)


(123,093
)Add: net loss attributable to noncontrolling interest


48,455



16,365Net loss attributable to Kent Financial Services shareholders'


(155,747
)


(106,728
)Other comprehensive income (loss):Unrealized loss on available for sale securities


(2,021
)


(19,433
)Comprehensive loss

$
(157,768
)

$
(126,161
)Basic and diluted net loss per common share:Loss from continuing operations

$
(0.06
)

$
(0.07
)Income from discontinued operations, net


(0.00
)


0.03Net loss per share

$
(0.06
)

$
(0.04
)Weighted average number of common shares outstanding


2,759,085



2,759,293
 
 See accompanying notes to consolidated financial statements.
  4
 Table of Contents
  KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Three Months EndedMarch 31,2010


2009Cash flows from operating activities:Net loss

$
(155,747
)

$
(106,728
)Adjustments to reconcile net loss to netcash used in operating activities:(Gain) loss on sale of marketable securities


2,088



(10,034
)Depreciation






1,231Minority interest in subsidiaries losses


(48,455
)


(16,365
)Changes to operating assets and liabilities:Interest receivable on short-term investments






(5,328
)Change in accounts receivable


430



(47,638
)Change in prepaid expenses and other current assets


(16,404
)


(22,889
)Change in accounts payable and accrued expenses


5,270



33,158Change in deferred revenue






(37,284
)Net cash used in operating activities


(212,818
)


(211,877
)Cash flows from investing activities:Sales of marketable securities


7,376



629,031Purchases of marketable securities






(618,997
)Net cash provided by investing activities


7,376



10,034Cash flows from financing activities:Repurchase of common stock


(94
)Net cash used in financing activities


(94
)


-Net increase in cash and cash equivalents


(205,536
)


(201,843
)Cash and cash equivalents at beginning of period


11,160,148



1,990,753Cash and cash equivalents at end of period

$
10,954,612


$
1,788,910Supplemental disclosure of cash flow information:Cash paid for:Taxes

$
2,878


$
1,613
 
 See accompanying notes to consolidated financial statements.
  5
 Table of Contents
  KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the Periods Ending March 31, 2010 and 2009
 (UNAUDITED)
 
 NOTE 1 - Basis of Presentation
 
 The accompanying unaudited consolidated financial statements of Kent Financial Services, Inc. and subsidiaries (the "Company") reflect all material adjustments consisting of only normal recurring adjustments which, 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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 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.  Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned and non-readily marketable securities.
 
 The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the entire year or for any other period.
 
 NOTE 2 – Business
 
 The Company's business is comprised of the management of Kent International Holdings, Inc. (“Kent International”).  Kent International is a publicly traded company (stock symbol “KNTH.PK”) that operates a social networking website and whose wholly owned subsidiary is a licensed securities broker-dealer.  The Company owned approximately 53.44% of Kent International at March 31, 2010.
 
 One aspect of Kent International’s business plan is to serve as a vehicle for the acquisition of or merger or consolidation with another company (a ‘‘target business’’).  Kent International intends to use its available working capital, capital stock, debt or a combination of these to effect a business combination with a target business which we believe has 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 Kent International effects a business combination with an entity in an industry characterized by a high level of risk, it 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.
  6
 Table of Contents
  Additionally, Kent International’s wholly owned subsidiary, Kent Capital, Inc. (“Kent Capital”), is a securities broker-dealer.  Kent Capital’s membership agreement with the Financial Industry Regulatory Authority (FINRA) allows it to operate under three business lines; Private Placements, Real Estate Syndication and Trading Securities for Our Own Account.  The Company intends to operate the broker dealer in an attempt to generate revenue and earnings.  However, management will continue to pursue merger or acquisition opportunities that offer potentially profitable uses for the Company’s available capital as discussed below. The Company’s initial investment in Kent Capital was $350,000, with the potential to increase the investment to $2,500,000 or more within the next year, depending on the prospects for potential return on the investment.
 
 Kent International also operates 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 6,200 members from the approximately 150 members prior to the redesign.
 
 Kent International faces the risk that the 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.  While management had been encouraged by the membership and traffic growth since the redesign, membership growth has dramatically declined in the past few months.  Accordingly, the Company is reviewing strategic options available to ChinaUSPals.com including selling the site or shutting down the site’s operations.  The Company has ceased all paid advertising for the site in order to minimize operational costs.
 
 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.
 
 NOTE 3 - Securities Owned
 
 Marketable securities owned as of March 31, 2010 and December 31, 2009, comprised mainly of portfolio positions (equity securities) held for capital appreciation consisted of the following:
  7
 Table of Contents
 
 March 31, 2010


December 31, 2009Percent Owned


Estimated Fair Value


Losses in Accumulated Other Comprehensive Income


Estimated Fair Value


Losses in Accumulated Other Comprehensive IncomeGolfRounds.com, Inc.


4.35
%

$
42,000


$
60,000


$
46,800


$
55,200All other equity securities


N/A



119



4,690



6,804



7,469$
42,119


$
64,690


$
53,604


$
62,669
 
 The Company follows FASB accounting guidance for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis.  It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The guidance establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The valuation techniques required are based upon observable and unobservable inputs.  Observable input reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.  These two types of inputs create the following fair value hierarchy:
 
 Level 1 - Quoted prices for identical instruments in active markets.
 
 Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
 
 Level 3 - Significant inputs to the valuation model are unobservable.
 
 All of the Company’s marketable securities are Level 2 type assets.  Among the observable inputs considered by management in determining fair value of thinly traded portfolio positions are the financial condition, asset composition and operating results of the issuer, the long-term business potential of the issuer and other factors generally pertinent to the valuation of investments, including the analysis of the valuation of comparable companies.
 
 NOTE 4 - Capital Stock Activity
 
 Dividends
 
 No dividends were declared or paid during the three months ended March 31, 2010.
 
 Common Stock Repurchases
 
 In August 2004, the Board of Directors approved a plan to repurchase up to 200,000 shares of the Company’s common stock at prices deemed favorable in the open market or in privately negotiated transactions subject to market conditions, the Company’s financial position and other considerations.  This program has no expiration date.  During the three months ended March 31, 2010, 69 shares were repurchased for approximately $94.  No shares were repurchased during the three months ended March 31, 2009.  As of March 31, 2010, 64,702 shares remained authorized for repurchase under the program.
  8
 Table of Contents
  NOTE 5 - Net Income (Loss) 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 no common stock options or warrants outstanding at March 31, 2010 and 2009.
 
 NOTE 6 - Stock Option Plans
 
 On November 25, 2005, shareholders of the Company approved the 2005 Stock Option Plan making a total of 400,000 common stock options available for issuance.  The Company did not record stock-based compensation expense for the three month periods ending March 31, 2010 and 2009, respectively, as no options were earned during these periods.  At March 31, 2010, the Company had no common stock options outstanding.
 
 Kent International Stock Options Plans
 
 Kent International has issued certain common stock options to its employees, directors and consultants.  At March 31, 2010 and December 31, 2009, Kent International had 200,000 common stock options outstanding.  Any exercises of these common stock options could have a dilutive effect on the percentage of Kent International owned by the Company.
 
 NOTE 7 - Related Party Transactions
 
 The Company receives a monthly management fee of $21,000 from Kent International for management services.  These services include, among other things, preparation of periodic and other filings with the Securities and Exchange Commission, evaluating merger and acquisition proposals, providing internal accounting services and shareholder relations.  This arrangement may be terminated at will by either party.  The monthly management fee revenue and offsetting expense is eliminated during consolidation.  The Company is the beneficial owner of approximately 53.44% of Kent International’s outstanding Common Stock at March 31, 2010.  Paul O. Koether, Chairman of the Company is also the Chairman of Kent International and the beneficial owner of or authorized proxy for approximately 59.54% of the Company’s outstanding common stock.  Bryan P. Healey, Chief Financial Officer and Director of the Company is also the Chief Financial Officer and Director of Kent International as well as the son-in-law of Paul O. Koether.
 
 The Company and its consolidated subsidiaries reimburse an affiliate, Bedminster Management Corp., for the allocated direct cost of group health insurance and office supplies.  These reimbursements were $18,203 and $18,407 in the three month periods ended March 31, 2010 and 2009, respectively.
 
 NOTE 8 – Net Operating Loss Carryforwards
 
 As of December 31, 2009, the Company had approximately $2.8 million of net operating loss carryforwards (“NOL”) for income tax purposes.  In addition, Kent International had approximately $39.7 million of NOL and $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 2010 through 2028.  The Company’s and 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 March 31, 2010 do not satisfy the realization criteria 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.
  9
 Table of Contents
  NOTE 9 – Discontinued Operations
 
 Kent Educational is a wholly owned subsidiary of the Company that has a 60% controlling interest in The Academy.  The Academy, headed by Dr. Saul Cooperman, a former Commissioner of Education in the State of New Jersey, provided educators various programs designed to improve themselves, their students, and their schools.  Despite ongoing business development activities, The Academy was unable to secure any contracts for services to be rendered during the 2009-2010 school year.  Accordingly, management decided to cease operations of the Academy effective December 31, 2009 and to distribute the majority of the assets in the Academy on December 31 to the shareholders, i.e. Kent Educational (60%) and Dr. Saul Cooperman (40%), save a small reserve for closing and miscellaneous expenses.  We do not expect any significant future expenses or liabilities related to the termination of operations.
 
 At March 31, 2010, The Academy held $2,678 in equity.  The net results of operations in 2010 and 2009 related to The Academy are reported as discontinued operations on the Statements of Operations.  Amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation.
 
 NOTE 10 – Subsequent Events
 
 Subsequent events were evaluated as of the day the financial statements were issued.
 
 Item2.  -
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2009, of Kent Financial Services, Inc. (“Kent” or the “Company”) 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
 
 The Company's business is comprised of the management of Kent International Holdings, Inc. (“Kent International”).  Kent International is a publicly traded company (stock symbol “KNTH.PK”) that operates a social networking website and whose wholly owned subsidiary is a licensed securities broker-dealer.  The Company owned approximately 53.44% of Kent International at March, 31, 2010.
 
 One aspect of Kent International’s business plan is to serve as a vehicle for the acquisition of or merger or consolidation with another company (a ‘‘target business’’).  Kent International intends to use its 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 Kent International effects a business combination with an entity in an industry characterized by a high level of risk, it 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.
  10
 Table of Contents
  Additionally, Kent International’s wholly owned subsidiary, Kent Capital, Inc. (“Kent Capital”), is a securities broker-dealer.  Kent Capital’s membership agreement with the Financial Industry Regulatory Authority (FINRA) allows it to operate under three business lines; Private Placements, Real Estate Syndication and Trading Securities for Our Own Account.  The Company intends to operate the broker dealer in an attempt to generate revenue and earnings.  However, management will continue to pursue merger or acquisition opportunities that offer potentially profitable uses for the Company’s available capital as discussed above. The Company’s initial investment in Kent Capital was $350,000, with the potential to increase the investment to $2,500,000 or more within the next year, depending on the prospects for potential return on the investment.
 
 Kent International also operates 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 6,200 members from the approximately 150 members prior to the redesign.
 
 Kent International faces the risk that the 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.  While management had been encouraged by the membership and traffic growth since the redesign, membership growth has substantially declined in the past few months.  Accordingly, the Company is reviewing strategic options available to ChinaUSPals.com including selling the site or shutting down the site’s operations.  The Company has ceased all paid advertising for the site in order to minimize operational costs.
  11
 Table of Contents
  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.
 
 Discontinued Operations
 
 Kent Educational Services, Inc. (“Kent Educational”) is a wholly owned subsidiary of the Company that has a 60% controlling interest in the Academy for Teaching and Leadership Inc. (“The Academy”).  The Academy, headed by Dr. Saul Cooperman, a former Commissioner of Education in the State of New Jersey, provided educators various programs designed to improve themselves, their students, and their schools.  Despite ongoing business development activities, The Academy was unable to secure any contracts for services to be rendered during the 2009-2010 school year.  Accordingly, management decided to cease operations of the Academy effective December 31, 2009 and to distribute the majority of the assets in the Academy on December 31 to the shareholders, i.e. Kent Educational (60%) and Dr. Saul Cooperman (40%), save a small reserve for closing and miscellaneous expenses.  We do not expect any significant future expenses or liabilities related to the termination of operations.
 
 Results of Operations
 
 The Company had a net loss of $155,747 or $.06 basic and diluted loss per share, for the three months ended March 31, 2010 compared to a net loss of $106,728, or $.04 basic and diluted loss per share for the comparable quarter in 2009.  The increase in the net loss was primarily the result of a decrease in the income from discontinued operations. .
 
 Revenue
 
 Interest and dividend revenue decreased to $859 for the three months ended March 31, 2010, from $7,557 for the three months ended March 31, 2009.  A decrease in the yield on short-term investments and cash equivalents from 0.2% to 0.05% was the primary reason for the decreases.
 
 The Company realized losses on securities transactions of $2,088 for the three months ended March 31, 2010 as compared to the realized gains on securities transactions of $10,034 for the three months ended March 31, 2009.
 
 For the three months ended March 31, 2010, other income increased to $4,875 from $2,409 for the three months ended March 31, 2009, caused primarily by the increase in administrative fees paid by an un-affiliated investment partnership.  These administrative fees fluctuate based on the performance of the investment partnership and; therefore, are unpredictable
 
 Expenses
 
 General and administrative expenses were $204,611 in the three months ended March 31, 2010 compared to $213,418 in the three months ended March 31, 2009, a decrease of $8,807.  This decrease was primarily caused by activity in subsidiaries of Kent International. Specifically a decrease in marketing expenses related to ChinaUSPals.com of $6,877 and a decrease in consulting fees related to Kent Capital of $6,000.  These decreases were partially offset by an increase in auditing expenses related to the audit of Kent Capital in the amount of $5,000. There were also other immaterial increases and decreases in administrative expenses at both the Company and Kent International.
  12
 Table of Contents
  Liquidity and Capital Resources
 
 At March 31, 2010, the Company had cash and cash equivalents of $10,951,543.  Cash and cash equivalents consist of cash held in banks and brokerage firms and U.S. Treasury Bills with original maturities of three months.  Working capital at March 31, 2010 was approximately $10.840 million.  Management believes its cash and cash equivalents are sufficient for its business activities for at least the next 12 months and for the costs of starting of seeking an acquisition or an operating business.
 
 Net cash used in operations was $212,818 in the three months ended March 31, 2010, compared to net cash used in operations of $211,877 in the comparable period of 2009.  Cash used in operations is a direct result of operating expenses offset by operating revenues and adjusted for changes in operating assets and liabilities.  The increase in net cash used in operations was largely the result of the decrease in revenues as described above.
 
 Net cash of $7,376 was provided by investing activities during the three months ended March 31, 2010 by the sale of marketable securities.  Net cash of $10,034 was provided by investing activities during the period ended March 31, 2009 by the gain generated by the net purchases and sales of marketable securities.
 
 $94 was used for financing activities to repurchase 69 shares of common stock in the three months ending March 31, 2010 while no shares were repurchased during the comparable period in 2009.
 
 Other Disclosures – Related Party Transactions
 
 The Company receives a monthly management fee of $21,000 from Kent International for management services.  These services include, among other things, preparation of periodic and other filings with the Securities and Exchange Commission, evaluating merger and acquisition proposals, providing internal accounting services and shareholder relations.  This arrangement may be terminated at will by either party.  The monthly management fee revenue and offsetting expense is eliminated during consolidation.  The Company is the beneficial owner of approximately 53.44% of Kent International’s outstanding Common Stock at March 31, 2010.  Paul O. Koether, Chairman of the Company is also the Chairman of Kent International and the beneficial owner of or authorized proxy for approximately 59.54% of the Company’s outstanding common stock.  Bryan P. Healey, Chief Financial Officer and Director of the Company is also the Chief Financial Officer and Director of Kent International as well as the son-in-law of Paul O. Koether.
 
 The Company and its consolidated subsidiaries reimburse an affiliate, Bedminster Management Corp., for the allocated direct cost of group health insurance and office supplies.  These reimbursements were $18,203 and $18,407 in the three month periods ended March 31, 2010 and 2009, respectively.
 
 Off-Balance Sheet Arrangements
 
 The Company has no off-balance sheet arrangementsthat have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
 
 ITEM3.
Quantitative and Qualitative Disclosure About Market Risk.
 
 Not Applicable.
  13
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  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 March 31, 2010, 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 March 31, 2010 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
 
 PART II  -
OTHER INFORMATION
 ITEM1. -
Legal Proceedings
 
 None.
 
 ITEM1A.
Risk Factors
 
 Not Applicable
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  ITEM2. -
Unregistered Sales of Equity Securities and Use of Proceeds
 
 Period

Total Number of Shares Purchased


Average Price Paid per Share


Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs


Maximum Number of Shares that May Yet Be Purchased Under the Plans or ProgramsJanuary 1, 2010 -January 31, 2010


69


$
1.36



69



64,702February 1, 2010 -February 28, 2010














64,702March 1, 2010 -March 31, 2010














64,702Total


69


$
1.36



69



64,702
 
 1)           In August 2004, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 200,000 shares of its common stock.  This program has no expiration date.
 
 ITEM3. -
Defaults Upon Senior Securities
 
 None.
 
 ITEM4. -
Submission of Matters to a Vote of Security Holders
 
 None.
 
 ITEM5. -
Other Information
 
 None.
 
 ITEM6. -
Exhibits
 
 (a)
Exhibits
 
 3.1
Bylaws of the Registrant, as amended. (l)
 
 3.2(a)
Articles of Incorporation of Registrant, as amended (including certificate of stock designation for $2.575 Cumulative Convertible Exchangeable Preferred Stock). (2)
 
 3.2(b)
Certificate of Amendment to Certificate of Incorpora­tion. (3)
 
 3.2(c)
Certificate of Amendment to Certificate of Incorporation dated September 26, 1991. (4)
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  10.1
Employment Agreement dated May 12, 2008 by and between Kent Financial Services, Inc. and Paul O. Koether. (5) **
 
 10.2
Employment Agreement dated May 1, 2006 by and between Kent Financial Services, Inc. and Bryan P. Healey. (6) **
 
 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)
Incorporated by reference to Texas American Energy Corporation Registration Statement, as amended, on Form S-l, No. 33-11109.
 (2)
Incorporated by reference to Texas American Energy Corporation Form 10-K, for the fiscal year ended December 31, 1984.
 (3)
Incorporated by reference to Texas American Energy Corporation Form 10-K for the fiscal year ended December 31, 1987.
 (4)
Incorporated by reference to Kent Financial Services, Inc. Form 10-Q for the quarter ended September 30, 1991.
 (5)
Incorporated by reference to Kent Financial Services, Inc., Form 10-Q for the quarter ended June 30, 2008.
 (6)
Incorporated by reference to Kent Financial Services, Inc. Form 8-K filed on May 1, 2006.
 
 **
Compensatory Plan
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  SIGNATURES
 
 In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 KENT FINANCIAL SERVICES, INC.Dated: May 11, 2010

By:
/s/ Bryan P. HealeyBryan P. HealeyChief Financial Officer(Principal Financial and Accounting Officer)







17