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:  June 30,
2008
 
 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.: 1-7986
 
 Kent
Financial Services, Inc.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
              
              75-1695953(State or other
      jurisdiction of incorporation
      or organization)
              
              (I.R.S. Employer
      Identification
      No.)
  211 Pennbrook Road, P.O. Box
97, Far Hills, New Jersey 07931
 (Address
of principal executive offices)
 
 (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 TNo £
 
 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 £Small
reporting company T
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes £No T
 
 
 State the
number of shares outstanding of each of the issuer's classes of common equity as
of the latest practicable date:  As of August 6, 2008, the issuer had
2,792,022 shares of its common stock, par value $.10 per share,
outstanding.
  
  KENT
FINANCIAL SERVICES, INC. AND SUBSIDIARIES
 FORM
10-Q
 For The
Quarterly Period Ended June 30, 2008
 Table Of Contents
 
 PageNumberPART
      I. FINANCIAL INFORMATIONItem
      1.
                
                Financial StatementsConsolidated Balance Sheets as of June 30, 2008 and December
      31, 2007
                
                3Consolidated Statements of Operations for the Three and Six
      Months Ended June 30, 2008 and 2007
                
                4Consolidated Statements of Cash Flows for the Six Months Ended
      June 30, 2008 and 2007
                
                5Notes to Consolidated Financial Statements
                
                6Item
      2.
                
                Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                
                12Item
      3.
                
                Quantitative and Qualitative Disclosure About Market
      Risk
                
                15Item
      4.
                
                Controls and Procedures
                
                16PART
      II. OTHER INFORMATIONItem
      1.
                
                Legal Proceedings
                
                17Item
      2.
                
                Unregistered Sales of Equity Securities and Use of
      Proceeds
                
                17Item
      3.
                
                Defaults Upon
      Senior Securities
                
                17Item
      4.
                
                Submission of Matters to a Vote of Security
      Holders
                
                17Item
      5.
                
                Other Information
                
                17Item
      6.
                
                Exhibits
                
                17Signatures
                
                19
  2
 Table of Contents




PART
I   -FINANCIAL
INFORMATION
 Item
      1.  -
              Financial
      Statements
 
 KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (In
thousands, except share and per share amounts)


ASSETS
              
              June
      30, 2008(Unaudited)
              
              
              December
      31,2007Current
      Assets:Cash
      and cash equivalents
              
              $
              760
              
              
              $
              135Short-term
      investments
              
              
              11,566
              
              
              
              12,270Marketable
      securities
              
              
              101
              
              
              
              117Accounts
      receivable
              
              
              33
              
              
              
              98Prepaid
      expenses and other current assets
              
              
              28
              
              
              
              18Total
      current assets
              
              
              12,488
              
              
              
              12,638Property
      and equipment, net of accumulated depreciation of $3 and
$1
              
              
              29
              
              
              
              6Other
      assets
              
              
              16
              
              
              
              62Total
      assets
              
              $
              12,533
              
              
              $
              12,706LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              240
              
              
              $
              269Noncurrent
      liabilities:Accrued
      post employment obligations
              
              
              711
              
              
              
              685Total
      liabilities
              
              
              951
              
              
              
              954Minority
      interest in subsidiaries
              
              
              5,058
              
              
              
              5,083Stockholders'
      equity:Preferred
      stock without par value;500,000 shares authorized;none
      outstanding
              
              
              -
              
              
              
              -Common
      stock, $.10 par value;8,000,000 shares authorized;2,792,022 shares issued
      and outstanding
              
              
              279
              
              
              
              279Additional
      paid-in capital
              
              
              12,390
              
              
              
              12,390Accumulated
      deficit
              
              
              (6,130
              )
              
              
              (5,997
              )Accumulated
      other comprehensive loss
              
              
              (15
              )
              
              
              (3
              )Total
      stockholders' equity
              
              
              6,524
              
              
              
              6,669Total
      liabilities and stockholders' equity
              
              $
              12,533
              
              
              $
              12,706





3
 Table of Contents





KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)


(In
thousands, except per share data)





Three
      Months Ended
            
            
            Six
      Months EndedJune 30,
            
            
            June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenues:Seminar
      fees
            
            $
            65
            
            
            $
            124
            
            
            $
            134
            
            
            $
            231Interest
            
            
            87
            
            
            
            157
            
            
            
            183
            
            
            
            316Investing
      gains (losses)
            
            
            
            
            
            
            7
            
            
            
            (1
            )
            
            
            7Other
      income
            
            
            9
            
            
            
            19
            
            
            
            80
            
            
            
            120Total
      revenues
            
            
            161
            
            
            
            307
            
            
            
            396
            
            
            
            674Expenses:General
      and administrative
            
            
            230
            
            
            
            482
            
            
            
            553
            
            
            
            909Write
      off capitalized software costs
            
            
            
            
            
            
            38
            
            
            
            
            
            
            
            38Total
      expenses
            
            
            230
            
            
            
            520
            
            
            
            553
            
            
            
            947Loss
      before income taxes and minority interest
            
            
            (69
            )
            
            
            (213
            )
            
            
            (157
            )
            
            
            (273
            )Provision
      for income tax benefit (expense)
            
            
            (1
            )
            
            
            10
            
            
            
            (2
            )Loss
      before minority interest
            
            
            (70
            )
            
            
            (203
            )
            
            
            (159
            )
            
            
            (273
            )Minority
      interest in subsidiaries losses
            
            
            2
            
            
            
            56
            
            
            
            26
            
            
            
            73Net
      loss
            
            
            (68
            )
            
            
            (147
            )
            
            
            (133
            )
            
            
            (200
            )Other
      comprehensive loss:Unrealized
      gain (loss) on available for sale securities
            
            
            (3
            )
            
            
            3
            
            
            
            (12
            )
            
            
            1Comprehensive
      loss
            
            $
            (71
            )
            
            $
            (144
            )
            
            $
            (145
            )
            
            $
            (199
            )Basic
      and diluted net loss per common share
            
            $
            (0.02
            )
            
            $
            (0.05
            )
            
            $
            (0.05
            )
            
            $
            (0.07
            )Weighted
      average number of common shares outstanding (in 000's)
            
            
            2,792
            
            
            
            2,794
            
            
            
            2,792
            
            
            
            2,796








See
accompanying notes to consolidated financial statements.


4
 Table of Contents


KENTFINANCIAL SERVICES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 (In
thousands)
 
 Six
      Months EndedJune 30,2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (133
              )
              
              $
              (200
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
              
              
              2
              
              
              
              4Write
      off capitalized software costs
              
              
              
              
              
              
              38Interest
      receivable on short-term investments
              
              
              26
              
              
              
              5Stock-based
      compensation expense
              
              
              
              
              
              
              18Minority
      interest in subsidiaries losses
              
              
              (26
              )
              
              
              (73
              )Change
      in accounts receivable
              
              
              65
              
              
              
              17Change
      in prepaid expenses and other assets
              
              
              39
              
              
              
              (26
              )Change
      in accounts payable and accrued expenses
              
              
              (3
              )
              
              
              (2
              )Change
      in deferred revenue
              
              
              
              
              
              
              (5
              )Net
      cash used in operating activities
              
              
              (30
              )
              
              
              (224
              )Cash
      flows from investing activities:Acquistion
      of property and equipment
              
              
              (25
              )
              
              
              (14
              )Sale
      of marketable securities
              
              
              2
              
              
              
              30Purchase
      of short-term investments
              
              
              (11,549
              )
              
              
              (12,594
              )Sales
      and maturities of short-term investments
              
              
              12,227
              
              
              
              12,948Net
      cash provided by investing activities
              
              
              655
              
              
              
              370Cash
      flows from financing activities:Repurchase
      of common stock by subsidiary
              
              
              
              
              
              
              (6
              )Repurchase
      of common stock
              
              
              
              
              
              
              (16
              )Net
      cash used in financing activities
              
              
              -
              
              
              
              (22
              )Net
      increase in cash and cash equivalents
              
              
              625
              
              
              
              124Cash
      and cash equivalents at beginning of period
              
              
              135
              
              
              
              167Cash
      and cash equivalents at end of period
              
              $
              760
              
              
              $
              291Supplemental
      disclosure of cash flow information:Cash
      paid for:Taxes
              
              $
              2
              
              
              $
              6
 
 
 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 June 30, 2008 and 2007


(UNAUDITED)





NOTE A - Basis of
Presentation





The
accompanying unaudited financial statements of Kent Financial Services, Inc. and
subsidiaries (the "Company") have been prepared in accordance with accounting
principles generally accepted for interim financial information and with the
instructions to Form 10-Q and Article 8 of Regulation S-X relating to smaller
reporting companies.  Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America (“GAAP”) for complete financial
statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.  The balance sheet at December 31, 2007 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by GAAP for complete financial
statements; as such, 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-KSB for the year ended December 31, 2007 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 and six months ended June 30, 2008 are not
necessarily indicative of the results to be expected for the entire year or for
any other period.





NOTE B – Business and Segment
Information





The
Company's business is comprised of the management of Kent International and Kent
Educational.  The Company has determined that its operations can be
segregated into two principal operating segments which are business development
activities and education services.  We define operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the Chairman in deciding how to
allocate resources and in assessing performance.





Kent
International is a publicly traded company (stock symbol “KNTH.PK”) currently
seeking to redeploy its assets into an operating business through an acquisition
or merger.  Kent Financial Services owned approximately 53.25% of Kent
International at June 30, 2008.  All of Kent International’s assets,
excluding its portfolio of pharmaceutical patents (which have a zero carrying
value on the consolidated financial statements), are invested in cash and United
States Treasury Bills.  Kent International’s activity is reported in
the business development activities segment.





Additionally,
Kent International has developed a niche social networking website, www.chinauspals.com,
designed to promote cultural exchange between the citizens of the United States
and those of the People’s Republic of China.  Membership to the site
is free, thus any potential revenues will be derived from advertisements placed
on the site by third parties.  The site provides users with access to
other users’ personal profiles and enables the user to send private 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.





6
 Table of Contents





We 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.





The
education services segment represents the activity of Kent Educational, which is
a wholly owned subsidiary of the Company that has a 60% controlling interest in
the Academy for Teaching and Leadership Inc. (“The Academy”).  The
Academy, headed by Dr. Saul Cooperman, a former Commissioner of Education in the
State of New Jersey, provides educators various programs designed to improve
themselves, their students, and their schools.





The
allocation of resources for educational purposes is currently under great
scrutiny in New Jersey.  Funding for public schools in New Jersey
comes from either State aid or local property taxes.  Although
property taxes have increased rapidly in New Jersey over the last seven years,
this has not resulted in additional educational expenditures, because the State
of New Jersey has at the same time reduced its aid allocated to public
schools.  It is impossible to foresee the future developments of
property taxes and educational State aids.  As public schools in New
Jersey are currently our primary customer, our revenue growth is restricted by
any limitation on these resources.





The
following table summarizes the assets and operations of the Company’s segments
as of and for the three and six months ended June 30, 2008 and
2007:





BusinessDevelopment
            
            
            Educational
            
            
            All
      Other
            
            
            
            
            
            ConsolidatedActivities
            
            
            Services
            
            
            Operations
            
            
            Eliminations
            
            
            TotalsThree Months Ended
      June 30, 2008Revenues
      from external customers
            
            
            
            
            $
            65
            
            
            $
            8
            
            
            
            
            
            $
            73Management
      fees
            
            
            
            
            
            
            
            
            
            63
            
            
            $
            (63
            )Interest
      revenue
            
            $
            77
            
            
            
            1
            
            
            
            9
            
            
            
            
            
            
            
            87Oher
      income
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1Total
      revenues
            
            
            78
            
            
            
            66
            
            
            
            80
            
            
            
            (63
            )
            
            
            161General
      and administrative expenses
            
            
            (101
            )
            
            
            (44
            )
            
            
            (148
            )
            
            
            63
            
            
            
            (230
            )Minority
      interest
            
            
            11
            
            
            
            (9
            )
            
            
            
            
            
            
            
            
            
            
            2Income
      tax expense
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1
            )Net
      income (loss) by segment
            
            $
            (13
            )
            
            $
            13
            
            
            $
            (68
            )
            
            
            -
            
            
            $
            (68
            )





7
 Table of Contents








BusinessDevelopment
            
            
            Educational
            
            
            All
      Other
            
            
            
            
            
            ConsolidatedActivities
            
            
            Services
            
            
            Operations
            
            
            Eliminations
            
            
            TotalsSix Months Ended June
      30, 2008Revenues
      from external customers
            
            
            
            
            $
            136
            
            
            $
            76
            
            
            
            
            
            $
            212Management
      fees
            
            
            
            
            
            
            
            
            
            126
            
            
            $
            (126
            )Interest
      revenue
            
            $
            161
            
            
            
            3
            
            
            
            19
            
            
            
            
            
            
            
            183Investing
      losses
            
            
            
            
            
            
            
            
            
            
            (1
            )
            
            
            
            
            
            
            (1
            )Other
      Income
            
            
            1
            
            
            
            
            
            
            
            1
            
            
            
            
            
            
            
            2Total
      revenues
            
            
            162
            
            
            
            139
            
            
            
            221
            
            
            
            (126
            )
            
            
            396General
      and administrative expenses
            
            
            (215
            )
            
            
            (142
            )
            
            
            (322
            )
            
            
            126
            
            
            
            (553
            )Minority
      interest
            
            
            25
            
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            26Income
      tax expense
            
            
            (1
            )
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            (2
            )Net
      loss by segment
            
            $
            (29
            )
            
            $
            (3
            )
            
            $
            (101
            )
            
            
            -
            
            
            $
            (133
            )As of June 30,
      2008Total
      assets by segment
            
            $
            10,544
            
            
            $
            369
            
            
            $
            1,620
            
            
            
            -
            
            
            $
            12,533Three Months Ended
      June 30, 2007Revenues
      from external customers
            
            $
            12
            
            
            $
            124
            
            
            $
            7
            
            
            
            
            
            
            $
            143Management
      fees
            
            
            
            
            
            
            
            
            
            
            107
            
            
            $
            (107
            )Interest
      revenue
            
            
            132
            
            
            
            3
            
            
            
            22
            
            
            
            
            
            
            
            157Investing
      gains
            
            
            
            
            
            
            
            
            
            
            7
            
            
            
            
            
            
            
            7Total
      revenues
            
            
            144
            
            
            
            127
            
            
            
            143
            
            
            
            (107
            )
            
            
            307General
      and administrative expenses
            
            
            (198
            )
            
            
            (170
            )
            
            
            (221
            )
            
            
            107
            
            
            
            (482
            )Income
      tax benefit
            
            
            
            
            
            
            10
            
            
            
            
            
            
            
            
            
            
            
            10Minority
      interest
            
            
            43
            
            
            
            13
            
            
            
            
            
            
            
            
            
            
            
            56Write
      off capitalized software costs
            
            
            (38
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (38
            )Net
      loss by segment
            
            $
            (49
            )
            
            $
            (20
            )
            
            $
            (78
            )
            
            
            -
            
            
            $
            (147
            )Six Months Ended June
      30, 2007Revenues
      from external customers
            
            $
            12
            
            
            $
            231
            
            
            $
            108
            
            
            
            
            
            
            $
            351Management
      fees
            
            
            
            
            
            
            
            
            
            
            170
            
            
            $
            (170
            )Interest
      revenue
            
            
            266
            
            
            
            7
            
            
            
            43
            
            
            
            
            
            
            
            316Investing
      gains
            
            
            
            
            
            
            
            
            
            
            7
            
            
            
            
            
            
            
            7Total
      revenues
            
            
            278
            
            
            
            238
            
            
            
            328
            
            
            
            (170
            )
            
            
            674General
      and administrative expenses
            
            
            (398
            )
            
            
            (236
            )
            
            
            (445
            )
            
            
            170
            
            
            
            (909
            )Minority
      interest
            
            
            74
            
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            73Write
      off capitalized software costs
            
            
            (38
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (38
            )Net
      income (loss) by segment
            
            $
            (84
            )
            
            $
            1
            
            
            $
            (117
            )
            
            
            -
            
            
            $
            (200
            )As of June 30,
      2007Total
      assets by segment
            
            $
            10,783
            
            
            $
            488
            
            
            $
            1,950
            
            
            
            -
            
            
            $
            13,221





8
 Table of Contents





NOTE C - Securities Owned





Marketable
securities owned as of June 30, 2008 and December 31, 2007, comprised mainly of
portfolio positions (equity securities) held for capital appreciation consisted
of the following (all numbers in thousands):





June 30, 2008
            
            
            December 31, 2007Percent Owned
            
            
            Estimated Fair Value
            
            
            Losses in Accumulated Other Comprehensive
      Income
            
            
            Estimated Fair Value
            
            
            Gains in Accumulated Other Comprehensive
      Income
            
            
            Losses in Accumulated Other Comprehensive
      IncomeGolfRounds.com,
      Inc.
            
            4.35%
            
            
            $
            90
            
            
            $
            (12
            )
            
            $
            92
            
            
            
            
            
            $
            (10
            )All
      other equity securities
            
            N/A
            
            
            
            11
            
            
            
            (3
            )
            
            
            24
            
            
            $
            7$
            101
            
            
            $
            (15
            )
            
            $
            116
            
            
            $
            7
            
            
            $
            (10
            )





During
the first quarter of 2007, the Company reclassified its marketable securities
from trading securities to available for sale securities.  The
Company’s securities are valued at fair value. The unrealized gains or losses
from marking available for sale securities to market are included in other
comprehensive income.   Fair value is ordinarily the listed
market price of the stock.  If listed market prices are not indicative
of fair value or if liquidating the Company’s position would reasonably be
expected to impact market prices, fair value is determined based on other
relevant factors.  Among the factors considered by management in
determining fair value of the portfolio positions are the financial condition,
asset composition and operating results of the issuer, the long-term business
potential of the issuer and other factors generally pertinent to the valuation
of investments, including the analysis of the valuation of comparable
companies.





NOTE D - Capital Stock
Activity





Dividends





No
dividends were declared or paid during the six months ended June 30,
2008.





Common
Stock Repurchases





In August
2004, the Board of Directors approved a plan to repurchase up to 200,000 shares
of the Company’s common stock at prices deemed favorable in the open market or
in privately negotiated transactions subject to market conditions, the Company’s
financial position and other considerations.  This program has no
expiration date.  No shares were acquired during the six months ended
June 30, 2008.  As of June 30, 2008, 102,352 shares under this plan
had been repurchased, canceled and returned to the status of authorized but
unissued shares.





NOTE E - Net Income (Loss) Per
Share





The
Company reports net 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 no common stock options outstanding at June 30, 2008 and 300,000
outstanding at June 30, 2007.  Because the Company had losses in the
three and six months ended June 30, 2008 and 2007, any stock options outstanding
would have an anti-dilutive effect on net loss per share and as such are not
included in the calculations.





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NOTE
F - Stock Option Plans





In
December 2004, the Financial Accounting Standards Board “FASB” issued Statement
of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment,”
(“SFAS 123(R)”), a revision of SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”)  SFAS 123(R) requires that the compensation
cost relating to share-based payment transactions be recognized in financial
statements.  The compensation cost is measured based on the fair value
of the equity or liability instruments issued. SFAS 123(R) was effective as of
the beginning of the first interim or annual period beginning after December 15,
2005.  The Company adopted SFAS 123(R) on January 1,
2006.





On
November 25, 2005, shareholders of the Company approved the 2005 Stock Option
Plan making a total of 400,000 common stock options available for
issuance.  Subsequently, 300,000 options were awarded to Dr. Qun Yi
Zheng as President of Kent on the same date.  33,000 of these options
were immediately exercisable with an additional 33,000 becoming exercisable on
the first eight anniversaries of the grant date.  On August 31, 2007,
the effective date of Dr. Zheng’s resignation, the 66,000 common stock options
that had become exercisable were forfeited as were the 234,000 options that were
still unexercisable.  The Company did not record stock-based
compensation expense for the six months ended June 30, 2008 as no options were
earned during this period; however, approximately $9,000 and $18,000 in
stock-based compensation expense was recorded for the three and six month
periods ending June 30, 2007, respectively.  At June 30, 2008, the
Company had no common stock options outstanding.





All
options granted had an exercise price equal to or more than the market price of
the Company’s stock on the grant date.  For purposes of calculating
the compensation cost consistent with SFAS 123, the fair value of each option
grant was estimated on the grant date using the Black-Scholes option-pricing
model with the following assumptions used: no dividend yield; expected
volatility of 29 percent; risk free interest rates of 4.37 percent; and weighted
average expected duration of 7 years.





Kent
International Stock Options Plans





Kent
International has issued certain common stock options to its employees,
directors and consultants.  At June 30, 2008 and December 31, 2007,
Kent International had 220,000 and 120,000 common stock options outstanding,
respectively.  Any exercises of these common stock options could have
a dilutive effect on the percentage of Kent International owned by the
Company.





On May 8,
2008, Kent International’s Board awarded a non-qualified stock option to Bryan
P. Healey to purchase 100,000 shares of Kent International’s common stock under
the Kent International’s 1986 Stock Option Plan.  The option has an
exercise price of $3.20 and shall become exercisable at a rate of 20,000 shares
on each of the first five anniversaries of the date of grant, provided that Mr.
Healey remains in the continuous employ of Kent International.  The
option shall expire on May 8, 2018, unless earlier terminated.





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NOTE G - 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 owner of approximately 53.25% of
Kent International’s outstanding Common Stock at June 30, 2008.  Paul
O. Koether, Chairman of the Company is also the Chairman of Kent International
and the beneficial owner of approximately 56.94% 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 $13,539 and $27,932 in the three and
six months ended June 30, 2008, respectively and $26,555 and $50,554 in the
three and six months ended June 30, 2007, respectively.  Bedminster
Management Corp. facilitates the allocation of certain central administrative
costs on a cost reimbursement basis resulting in no income or loss and is owned
equally by Kent, Kent International and T.R. Winston & Company,
LLC.





NOTE H - Legal Proceedings





Texas
American Petrochemicals, Inc. (“TAPI”)





By letter dated May 24, 2005,
the Texas Commission on Environmental Quality ("TCEQ") advised Texas American
Petrochemicals, Inc. (“TAPI”), that it was a person responsible for solid waste
at a hazardous waste site in Texas.TAPI is an inactive
subsidiary of the Company with no assets.The TCEQ determined that the
amount owed to the State of Texas for remediation is $2,459,594and thatfailure
to pay that amount
would result in the matter being referred to the TCEQ Litigation Division.The Company has been advised
by its environmental counsel that it has good legal arguments to support its
positionandthat it should
not be subject to liability for the remediation costs of the site.However no assurances can be
made as to the outcome of this matter.





NOTE
I – Net Operating Loss Carryforwards





As of
December 31, 2007, the Company had approximately $3.3 million of net operating
loss carryforwards (“NOL”) for income tax purposes.  In addition, Kent
International had approximately $77.6 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 2008 through 2027.  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 June 30, 2008 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.





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NOTEJ- New Accounting
Pronouncements





In
December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and
SFAS No. 160, Non-controlling
Interests in Consolidated Financial Statements.  SFAS No. 141
(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any non-controlling 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
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statement.  The calculation of earnings per
share will continue to be based on income amounts attributable to the
parent.  SFAS No. 141 (R) and SFAS No. 160 are effective for
financial statements issued for fiscal years beginning after December 15,
2008.  Early adoption is prohibited.  We have not yet
determined the effect on our financial statements, if any, upon adoption of SFAS
No. 141 (R) or SFAS No. 160.





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-KSB for the fiscal year ended December 31, 2007 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.





Kent‘s
business is comprised of the management of Kent International Holdings, Inc.
(“Kent International”) and Kent Educational Services, Inc. (“Kent
Educational”).  Kent was formed in 1988 as a Delaware corporation and
reincorporated in Nevada in 2006 by a merger into a newly formed, wholly owned
Nevada subsidiary with the same name that was the surviving corporation of the
merger.





Kent
International





Kent
International is a publicly traded company (stock symbol “KNTH.PK”) currently
seeking to redeploy its assets into an operating business.  The
Company owned approximately 53.25% of Kent International at June 30,
2008.  All of Kent International’s assets, excluding its portfolio of
pharmaceutical patents (which have a zero carrying value on the consolidated
financial statements), are invested in cash and United States Treasury
Bills.  Kent International’s current business plan is to serve as a
vehicle for the acquisition of or merger or consolidation with another
company.  Kent International may use its available working capital,
capital stock, debt or a combination of these to start a business or to effect a
business combination with a company seeking to establish a public trading market
for its securities while avoiding the time delays, significant expense, loss of
voting control and other burdens including significant professional fees of an
initial public offering.  A business combination may be with a
financially stable, mature company or a company that is in its early stages of
development or growth, which could include companies seeking to obtain capital
and to improve their financial stability.





Additionally,
Kent International has developed a niche social networking website, www.chinauspals.com,
designed to promote cultural exchange between the citizens of the United States
and those of the People’s Republic of China.  Membership to the site
is free, thus, any potential revenues will be derived from advertisements placed
on the site by third parties.  The site provides users with access to
other users’ personal profiles and enables the user to send private 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.





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Kent
International does not expect that these activities will generate any
significant revenues for an indefinite period as these efforts are in their
early stages.  As a result, these programs may produce significant
losses until such time as meaningful revenues are achieved.





Kent
Educational





Kent
Educational, a wholly owned subsidiary of Kent, has a 60% controlling interest
in The Academy for Teaching and Leadership, Inc., (“The
Academy”).  The Academy, headed by Dr. Saul Cooperman, a former
Commissioner of Education in the State of New Jersey, offers educators high
quality programs designed to dramatically improve themselves, their students and
their schools.  The Academy brings together educators from school
districts to engage in quality programs related to curriculum, assessment, and
instructional strategies that have the potential to assist them in their own
development as well as to enhance the learning of their
students.  Similarly, it offers administrators the latest programs in
leadership practices that can support their school district’s goals and give
them the skills to achieve their specific objectives.





The
Academy’s sole full time executive officer resigned on December 15,
2007.  This individual was primarily responsible for business
development and coordinating services.  As a result, The Academy is
currently reviewing its strategic options including hiring a replacement for the
executive officer, partnering with a competitor, continuing to provide services
to existing clients through an outsourcing platform, or discontinuation of
services.





The
Academy has also produced an innovative educational DVD entitled “Sex Over
Sixty”.  The Academy has produced this DVD based on research
that enables those people over 60 to learn about their changing bodies and
experience a healthier, happier sex life.  “Sex Over Sixty” provides
frank answers to sexual questions that mature adults face as they age,
experience health problems, or begin dating again after a loss or
divorce.  The DVD was released on October 16, 2007; however, as with
any new media release, the possible commercial success of this DVD is
uncertain.  Initial marketing will be constrained by a modest
advertising budget.  Initial sales results have been
disappointing.





Kent
Educational and The Academy are consolidated in the accompanying financial
statements.  The Company has determined that continued revenue growth
and profitability at The Academy are uncertain.  As a result, losses
may be incurred.





Results
of Operations





The
Company had a net loss of $68,000, or $.02 basic and diluted loss per share, for
the quarter ended June 30, 2008 compared to a net loss of $147,000, or $.05
basic and diluted loss per share, for the comparable quarter in
2007.  For the six months ended June 30, 2008, the Company had a net
loss of $133,000, or $0.05 basic and fully diluted loss per share, compared to a
net loss of $200,000, or $0.07 basic and fully diluted loss per share, for the
same period in 2007.  The decreases in net losses were mainly the
result of decreased expenses offset by decreased interest revenue, seminar fees
and administrative fees paid by an un-affiliated investment partnership during
the period.





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Revenue





Seminar
fees based on seminars held by The Academy decreased to $65,000 and $134,000 for
the three and six months ended June 30, 2008, respectively, compared to $124,000
and $231,000 for the three and six months ended June 30, 2007.  These
decreases are the result of the departure of The Academy’s executive director
who was primarily responsible for business development.  The Academy
has approximately $121,000 under contract for services to be rendered during the
2008-2009 school year.  The Company recognizes seminar revenue when
the services are provided.





Interest
income decreased to $87,000 and $183,000 for the three and six months ending
June 30, 2008, respectively, from $157,000 and $316,000, respectively, for the
same periods in 2007.  The decreases of $70,000 and $133,000,
respectively, are due to lower yields on invested balances.





Although,
the Company did not realize any gains or losses on securities transactions
during the three months ending June 30, 2008, during the six months ended June
30, 2008, $1,000 in losses on securities transactions were
realized.  Realized gains on securities transactions were
approximately $7,000 for the three and six months ending June 30,
2007.





Other
income for the three months ended June 30 2008 and 2007 was reasonably
consistent at $9,000 and $19,000, respectively.  For the six months
ended June 30, 2008, other income decreased to $80,000 from $120,000 for the six
months ended June 30, 2007 caused primarily by the decrease in administrative
fees paid by an un-affiliated investment partnership.  As these
administrative fees fluctuate based on the performance of the investment
partnership, we cannot be certain they will recur.





Expenses





General
and administrative expenses decreased to $230,000 and $553,000 for the three and
six months ended June 30, 2008, respectively, from $482,000 and $909,000 for the
same periods in 2007.  The decreases of $252,000 and $356,000 for the
three and six months respectively, can be primarily attributed to reductions of
$150,000 and $271,000 in personnel expenses as a result of the resignation of
several employees, including our former President in August of 2007 and the
Executive Director of The Academy in December of 2007.  Other
significant reductions in expenses included legal fees which decreased $15,000
and rental expense which decreased $13,000.  The decreases were
partially offset by increases in expenses at the Academy related to production,
marketing and fulfillment costs for the Sex Over Sixty DVD of
approximately $57,000.





Our
consolidated subsidiary, Kent International recorded a charge of approximately
$38,000 in June 2007 to write off certain website development costs related to
our social networking website, ChinaUSPals.com.  These costs were
associated with a beta version of the website that the Company is no longer
utilizing.





Liquidity
and Capital Resources





At June
30, 2008, the Company had cash and cash equivalents of approximately
$760,000.  Cash and cash equivalents consist of cash held in banks and
brokerage firms and U.S. Treasury Bills with original maturities of three
months.  The Company had short-term investments, consisting of U.S.
Treasury Bills with original maturities of six months, of $11.566 million at
June 30, 2008 with yields ranging from 1.98% to 2.33%.  Working
capital at June 30, 2008 was approximately $12.248
million.  Management believes its cash and cash equivalents are
sufficient for its business activities for at least the next 12 months and for
the costs of seeking an acquisition of an operating business.





14
 Table of Contents





Net cash
used in operations was $30,000 in the six months ended June 30, 2008, compared
to net cash used in operations of $224,000 in the comparable period of
2007.  Cash used in operations is a direct result of operating
expenses offset by operating revenues and adjusted for changes in operating
assets and liabilities.  The decrease in net cash used in operations
was largely the result of the decrease in expenses as described
above.





Net cash
of approximately $655,000 was provided by investing activities during the six
months ended June 30, 2008 by the sales and maturities of short-term investments
of $12.2 million offset by the purchase of short-term investments of
approximately $11.549 million and acquisition of property and equipment of
$25,000.  Net cash of $370,000 was provided by investing activities
during the period ended June 30, 2007 by the sales and maturities of short-term
investments and marketable securities of $12.624 million offset by the purchase
of short-term investments of $1.174 million and capitalized costs for the
development of www.chinauspals.com.





Nil cash
was used for financing activities in the period ending June 30,
2008.  In the period ended June 30, 2007, net cash used in financing
activities for the repurchase of the Company’s common stock was approximately
$16,000.  Kent International also used approximately $6,000 to
repurchase its stock in the six months ended June 30, 2007.





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 owner of approximately 53.25% of
Kent International’s outstanding Common Stock at June 30, 2008.  Paul
O. Koether, Chairman of the Company is also the Chairman of Kent International
and the beneficial owner of approximately 56.94% 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 approximately $13,539 and $27,932 in
the three and six months ended June 30, 2008, respectively and $26,555 and
$50,554 in the three and six months ended June 30, 2007,
respectively.  Bedminster Management Corp. facilitates the allocation
of certain central administrative costs on a cost reimbursement basis resulting
in no income or loss and is owned equally by Kent, Kent International and T.R.
Winston & Company, LLC.





Off-Balance
Sheet Arrangements





The
Company has no off-balance sheet arrangements.





ITEM3.
            Quantitative and
      Qualitative Disclosure About Market
Risk.





Not
Applicable.





15
 Table of Contents





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, 2008, the Company’s Chief Executive Officer and its Chief Financial Officer
have concluded that, as of that date, the Company’s controls and procedures were
not effective for the purposes described above.





There was
no change in the Company’s internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934)
during the quarter ended June 30, 2008 that has materially affected or is
reasonably likely to materially affect the Company’s internal control over
financial reporting.





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 Table of Contents




PART II
      -
              
              OTHER
      INFORMATIONITEM1.
      -
              
              Legal
      ProceedingsNone.ITEM 2.
      -
              
              Unregistered Sales of
      Equity Securities and Use of ProceedsNone.ITEM3. -
              
              Defaults Upon Senior
      SecuritiesNone.ITEM 4.
      -
              
              Submission of Matters
      to a Vote of Security HoldersNone.ITEM5.
      -
              
              Other
      InformationNone.ITEM 6.
      -
              
              Exhibits(a)
              
              Exhibits3.1
              
              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)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.




17
 Table of Contents




(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)
            
            Filed
      herewith.(6)
            
            Incorporated
      by reference to Kent Financial Services, Inc. Form 8-K filed on May 1,
      2006.**
            
            Compensatory
      Plan




18
 Table of Contents





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:
      August 11, 2008
            
            By:
            /s/ Bryan P. HealeyBryan
      P. HealeyChief
      Financial Officer(Principal
      Financial and Accounting Officer)




19