**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K**

**(MarkOne)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe Fiscal Year Ended December 31, 2006**

**or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 (NO FEE REQUIRED)

**Forthe transition period from                  to                ..**

**Commissionfile number 0-08962**

**KENILWORTH SYSTEMS CORPORATION**

(Exact name ofregistrant as specified in its charter)

| **NEW YORK**                              |   | **84-1641415**                     |
|-------------------------------------------|--------|------------------------------------|
| (State of  incorporation)                 |   | (IRS Employer  Identification No.) |
|                                      |   |                               |
| **185  WILLIS AVENUE,**                   |   | ** **                         |
| **MINEOLA,  NEW YORK**                    |   | **11501**                          |
| (Address of  principal executive offices) |   | (zip code)                         |

 

**(516)741-1352**

(Registrant’stelephone number, including area code)

SECURITIESREGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

**NONE**

SECURITIESREGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

**(TITLEOF CLASS)**

Common Stock, parvalue $.01 per share

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes xNo o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (Section 229.405 of this chapter) is not containedherein, and will not be contained, to the best of the registrant’s knowledge,in definitive proxy or information statements incorporated by reference inPart III of this Form 10-K or any amendment to thisForm 10-K. o

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act).

Yes o No x

The aggregate marketvalue of the registrant’s Common Stock held by non-affiliates of theregistration based on the closing price as reported on the Pink Sheet Market onMarch 15, 2007 was $6,451,074.

As of January 3,2007, 278,508,293 Shares of the Registrant’s Common Stock, $0.01 par value,were outstanding.

Portions of theRegistrant’s Proxy Statement for its 2007 Annual Meeting of Stockholders to befiled are incorporated by reference into Part III of this Form 10-K.

At the Annual Meeting ofShareholders held on July 17, 2002 the Shareholders approved the issuanceof 20,000,000 Shares of restricted Common Stock to Herbert Lindo, the Presidentof the Company for having assigned to the Company the Patent that was grantedon June 10, 2003.  Titled “SYSTEM AND METHOD FOR REMOTE ROULETTE ANDOTHER GAME PLAY USING GAME TABLE AT A CASINO”.  Upon Mr. Lindo’srequest, the Shares were not issued until January 11, 2006, as restrictedsecurities.  (See Part III Item 12 BeneficialOwnership (1).)

At the regular meeting ofthe Board of Directors of the Company held on December 1, 2004 at whichall six (6) members of the Board of Directors were present, the Directors (withHerbert Lindo, the Chairman and President abstaining) unanimously voted toissue 25,000,000 shares of restricted Common Stock to Herbert Lindo for havingassigned in October 2003 to the Company, the Patent which is pendingtitled “METHOD AND SYSTEM FOR SUPPLYING FUNDS TO A TERMINAL FOR REMOTE WAGERING”(lottery terminals).  Upon Mr. Lindo’s request, the shares were notissued until January 11, 2006, as restricted securities (see Part IIIItem 12 Beneficial Ownership (1)).

On November 27, 2006Herbert Lindo, the Chairman and Chief Executive Officer exercised a five million(5,000,000) share option for seven hundred fifty thousand dollars ($750,000) atfifteen cents ($0.15) per share pursuant to the Company’s Performance andEquity Plan.  The price per share was theprice for the Option which would have expired on the following date.  Mr. Lindo does not own any other Optionspursuant to the Plan.  The average marketprice of the Common Stock for the thirty (30) days prior to November 27, 2006was high: $0.05, low: $0.03.  As providedin the Plan, Herbert Lindo borrowed the seven hundred fifty thousand dollars($750,000) from the Company and pledged the five million (5,000,000) and othershares he owns, as collateral for the loan. The five million (5,000,000) shares have not been issued.  After Herbert Lindo pays for the five million(5,000,000) shares, the shares will be issued as restricted shares.

 

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**TABLE OF CONTENTS**
| **PART I**   |
|-------------------|
|              |   |   |   |   |   |
| ITEM 1            |   | — |   | Description of Business |   5 |
| ITEM 2            |   | — |   | Properties | 17 |
| ITEM 3            |   | — |   | Legal Proceedings | 17 |
| ITEM 4            |   | — |   | Submission of Matters to a Vote of Security Holders | 17 |
|              |   |   |   |   |   |
| **PART II**  |
|              |   |   |   |   |   |
| ITEM 5            |   | — |   | Market Prices of the Company’s Common Stock and  Related Stock Holder Matters | 18 |
| ITEM 6            |   | — |   | Selected Financial Data | 19 |
| ITEM 7            |   | — |   | Management Discussions and Analysis of Financial  Condition and Results of Operations (Contains Risk Factors) | 20 |
| ITEM 8            |   | — |   | Financial Statements and Supplementary Data | 23 |
| ITEM 9            |   | — |   | Changes and Disagreements with Accountants on  Accounting and Financial Disclosure | 23 |
| ITEM 9A           |   | — |   | Controls and Procedures | 24 |
|              |   |   |   |   |   |
| **PART III** |
|              |   |   |   |   |   |
| ITEM 10           |   | — |   | Directors and Executive Officers of the Registrant | 24 |
| ITEM 11           |   | — |   | Executive Compensation | 27 |
| ITEM 12           |   | — |   | Security Ownership of Certain Beneficial Owner and  Management and Related Stockholders Matters | 27 |
| ITEM 13           |   | — |   | Certain Relationships and Related Transactions | 28 |
| ITEM 14           |   | — |   | Principal Accountant Fees and Services | 28 |
|              |   |   |   |   |   |
| **PART IV**  |
|              |   |   |   |   |   |
| ITEM 15           |   | — |   | Exhibits, Financial Statement Schedules and Reports  on Form 8-K | 29 |
|              |   |   |   | Subsequent Events | 50 |

 

**FORWARDLOOKING STATEMENTS**

In addition to historical information, this AnnualReport on Form 10-K contains certain forward-looking statements and RiskFactors. We expressly disclaim any obligations on undertaking to releasepublicly any updates or revisions to any forward-looking statements containedherein to reflect any change in our expectations with regard thereto or toreflect any change in events, conditions or circumstances on which any suchforward-looking statement is based in whole or in part.

**Readers shouldamongst the other statements contained herein and future filings with theSecurities and Exchange Commission, including the Quarterly Reports onForm 10-Q to be filed, carefully review in Item 7 the following: “CautionaryStatements for Purposes of the “Safe Harbor” Provisions of the PrivateSecurities Litigation Reform Act of 1995 and Risk Factors”. All of the RiskFactors contained therein should be carefully read.**

 

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INTRODUCTORY NOTETO PART IV

The Amendment No.1 on FORM 10-K filed to restate certain amounts which changed as theresults of having been ordered by the Securities and Exchange Commission tofile the Company’s Financials as a “Development Stage Company” from the periodbeginning November 24, 1998 to the present at December 31, 2005, theelimination of $4,256,926, which was the amount the Company disbursed on orabout September 28, 1998 to exit from Chapter 7 Bankruptcy Proceedings,and certain  adjustments to losses sustained for the periods endedDecember 31, 2002, 2003 and 2004 for having discounted ConvertiblePromissory Notes from between ten cents ($0.10) per share and twelve cents($0.12) per share to five cents ($0.05) per share.  The Company also addedin PART II Item 5 - MARKET PRICES OF THE COMPANY’S COMMON STOCK ANDRELATED STOCKHOLDER MATTERS: d) The Company issued 140,957,048 shares of itsRestricted Common Stock since December 31, 2004.  All of the sharesmay have the restrictions lifted pursuant to Rule 144 and 144K within one(1) or two (2) years which may substantially depress the tradingprice of the Company’s Stock in the future.

***Remainderof page intentionally left blank***

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PART I

ITEM 1—DESCRIPTIONOF BUSINESS

THE COMPANY

Kenilworth SystemsCorporation hereinafter referred to as “Kenilworth”, the “Company” or “we”, wasincorporated on April 25, 1968 under the laws of the State of NewYork.  Kenilworth has been a publicly traded Company since August 1968formerly on the National NASDAQ Market, presently on the OTC Pink Sheet Marketsince emerging from Bankruptcy Proceedings in September 1998. Kenilworth is now being presented as a Development Stage Company.

GENERAL

Since early in theyear 2000 we have been solely engaged in developing patents, markets andinvestigating how best to obtain Governmental approvals, by engaging lobbyistsand consultants that would allow television satellite and cable subscribersthroughout the industrialized world to play and wager along from remotelocations with live, in-progress casino table games (Roulette, Craps, Baccaratand more) from strictly regulated casinos located in the United States andother locations around the world.

Employing the latestencrypted satellite, cable and Internet technology and placing televisioncameras in strategic locations above the casino table games, without disruptingthe normal game-monitoring activities, (a separate control room would directthe various camera angles), and transmitting the table games over the digitalsatellite, digital cable and Internet networks (in countries that permitInternet wagering) to television sets (“TV’s”), which become a platform forplaying along with the casino games wherever TV’s are located.

Kenilworth titledthe overall project “RoulabetteTM”.  There are thirty-eight million(38,000,000) satellite and seventy-three million (73,000,000) cable TVsubscribers in the United States and more than five hundred million(500,000,000) subscribers throughout the rest of the industrialized world (“TheMarket”).  On average, households in the U.S. have three (3) TV’s. (It is important since the satellite and cable companies will charge a separatefee for transmitting the table games).  Public gathering places canaccommodate (be able to network) up to one thousand (1,000) or more TV setswith a single satellite receiving dish, direct cable connections, or streamedvia the Internet.  With wagering possible in homes, hotel rooms, resort rooms,pubs, restaurants, race tracks and other public gathering places the Companybelieves it will become a more than $500 billion **net win**Market within five (5) years throughout theindustrialized world (by the year ended 2012).

To best market thecasino games, the Company is selecting lotteries throughout the world to manageand operate the distribution and cash handling (deposits to play and payingwinnings) using the lotteries’ existing databases for the sale of lotterytickets, and paying winnings at regular lottery licensed terminal locations.

All forty-three(43) lotteries in the United States are owned and operated by County and Stateagencies.  Since the beginning of year2007, Texas, Illinois and Indiana are engaged in privatizing their lotteries byselling or leasing (on long term leases) their lotteries.  Maryland, Michigan, Iowa and New Jersey arealso exploring the privatization of their lotteries. This could greatly enhanceour efforts to broadcast the live casino table games to these lottery locationsand could result in having Cafés that offer terminals and TV sets to playalong.  Internet Cafés that offerwagering on various events have been a huge success in the Asian Market. WithInternet wagering outlawed in the United States, our patented satellite,one-way broadcasts offer the best possibility to establish satellite Cafés.

Throughout therest of the world, lotteries are owned by government agencies or non profitcharitable agencies that distribute the net earnings to benefit social andcharitable programs, or by private entities that pay a percentage of their netwin to designated government agencies.

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These foreignlotteries also have the same databases as lotteries in the United States,except most lotteries throughout Europe pool their lotteries between countries,not unlike Mega Millions and PowerBall in the United States, which makes thedistribution simpler and very cost effective for both Kenilworth and thelotteries.

There are notechnical breakthroughs required.  The equipment for the technology isreadily available.  What is needed is to get through the maze of Local,County, State and Federal regulations in each U.S. State and foreigncountries.  When the first State in the United States grants the Companypermission to transmit the broadcast from one of its casinos to their residentsand to States that do not have any casinos, (the entire East coast of theUnited States), the other forty-three (43) States with lotteries will joinexpeditiously. The same will occur in foreign countries.

Kenilworth willshare the **net win** revenue with allparticipating entities that provide RoulabetteTM gaming without **costs of any kind. **State lotteries or their privateoperators will receive a minimum of forty percent (40%) of the total **net win** from their respectivejurisdictions.

In States andforeign countries that designate exclusively lottery proceeds to schools andtheir teachers it is a welcome contribution.  It also will help closebudget gaps.

In addition,throughout the United States and most foreign countries there are hundreds offacilities that simulcast live in-progress horse/dog races.  At mostfacilities there are several large TV screens that show the races from thedifferent tracks with general theater-type seating for patrons and at privatecubicles with television sets outfitted with touch screens.  The cubiclesrent for additional fees.  After players open an account and select pinnumbers, they can watch, in privacy, each race offered on the different trackson the TV and place wagers on the different races by simply changingchannels.  The players may also watch sporting events, the news, the stockmarket reports, and in the near future RoulabetteTM, live, in-progress casinotable games.  The simulcast centers have their own databases to manage thecash deposit and pay winnings on the horse/dog races and will be able to managethe casino games, on the same methods as the lotteries will manageRoulabetteTM.  With private TV’s, available in simulcast centers,especially at night, when fewer tracks are operating.

When playing alongwith live table games from a highly regulated jurisdiction, players will beassured that the game results are exactly what they see; and, playing alongwith live casino table games such as Roulette, Craps and Baccarat, we believe,will provide interaction, fun and far more excitement than playing make believeanimated (virtual) games. It is the next best thing, we believe, to actuallybeing at the table in the casino.

To conduct actuallive test broadcasts Kenilworth believes it will require a minimum of tenmillion dollars ($10,000,000) and there are no assurances we will ever be ableto obtain any of such money. At present, the Company does not have the fundsreadily available but hopes to obtain same, from investors, as soon asKenilworth can commence broadcasting from a casino in the United States orother casinos throughout the world.

In prior years,Kenilworth completed a prototype system that allowed casino patrons to playalong with live in-progress casino table games **only within the confines of a casino,** via closed circuittelevision. Also in 1990, we developed and delivered for the TAB (TotalizatorAgency Board) a quasy government agency of the State of Victoria, Australia, acashless slot machine system. Both systems required debit cards and centralmainframe computers to manage the wagers. By making use of the expertise appliedin the development of the aforementioned systems we plan to develop asecond-generation system that will manage the wagers by the microprocessorinstalled in TV set-top boxes or an attachment directly connected to the TV setto receive satellite and/or Internet broadcasts. This as planned would allow aplayer in an interactive manner, at a remote location (outside the casinoconfines), to experience the actual play and excitement at the casino tablegame and to make wagers on the various games, without having to be physicallypresent at the casino or casino table.  There are no assurances we will beable to successfully develop any system.

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We also proposefor slot machine manufacturers to develop “RoulabetteTM Slot Machines”. The RoulabetteTM Slot will offer the regular slot or video lottery games and bythe touch of a button, the live in-progress casino table games.  Slotplayers are offered a change of pace at the cost of a slot handle pull. The games are transmitted to the RoulabetteTM Slot via satellite or the Internet(all broadcasts are encrypted to prevent unauthorized use of the broadcasts).

Where authorized,hotels, resorts, clubs and other public gathering places will be able to offercasino table game action in their establishments without incurring the costs tooperate a casino. There are now believed to be more than ten million(10,000,000) slot machines played throughout the world, outside of casinoconfines.

ProjectRoulabetteTM is a concept intended to be built and there can be no assurancesthat it will ever be built.  The Patented microprocessors to be installedin the TV set top boxes have not been designed.

**SUMMARY**:

(1.)         Kenilworth continues to fine tune its patented technology dubbedRoulabetteTM.  It now plans to “outsource”the manufacturing of all the components instead as formerly manufacture some ofthe equipment in its 26,000,000 square foot facility located in Melville,NY.  RoulabetteTM would allow casinopatrons and other players to play along with live in-progress casino tablegames such as Roulette, Craps and Baccarat and more via digital satellite,digital cable television or Internet broadcasts (simulcasts) emanating fromstrictly regulated casinos located in the United States and other locationsaround the world, to self-sufficient computer terminals dubbed “RoulabetteTMSlots” and digital satellite, cable TV set top boxes or the Internet incountries that permit Internet gaming. The RoulabetteTM terminal is a proposalintended to be built and there can be no assurances that it will ever bebuilt.  The microprocessors to be installed in the TV set top boxes havenot been designed. We have as at July 31, 2006, no firm agreements, customers,or proposals for any future business and there can be no assurances that wewill ever have same. **Reference is also madeto each of the “Risk Factors” that are set forth in Item 7.**

(2.)         We believe the thousand virtual casino websites via the Internet obtain sixtypercent (60%) of their annual revenue from customers in the U.S.  These website have been shut down when PresidentBush signed the Internet Enforcement Act of 2006.

Simulcastbroadcasts of digital satellite and digital cable transmissions around theworld must meet, and will be supervised by, the regulations by the gamingauthorities of the broadcasting casino and the jurisdiction, which receives thebroadcast.  We believe the supervision will not be difficult to enforce,because all simulcast wagering is “cash only”, from regulated, supervisedbetting sites.  There are no wire money transfers with banks and no creditor debit cards permitted.  We believe this fact should ease any oppositionfrom concerned citizens and anti-gambling groups, as regulation and enforcementresponsibility will be vested in each individual state (or foreignjurisdiction).

Kenilworth was thefirst to use color personal computers (PC’s) to replace electromechanical slotmachines (1988).  We provided the software for the first Tabaret locatedat the Menzie at the Rialto in Melbourne, Australia, which opened in November1990.  This consisted of cashless, variable denomination and multiplegame, virtual PAT’s (“Player Activated Terminals”).   Prior theretoKenilworth sponsored, with the assistance of three (3) Nevada casino operators,legislation to permit cashless wagering in the state of Nevada.  Thelegislation, which is in the form of an amendment to existing casino controlstatutes, permits the use of account cards (debit cards) and was signed intolaw by Governor Richard H. Bryan on June 13, 1985.

Kenilworth hasbeen a publicly traded Company since 1968. Prior to commencing its endeavorsinto its present business in 1988, it also provided security systems to NuclearElectric Generating Plants in the U.S. and foreign countries, as well astime/attendance systems at a major department store chain.

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THE STATUS WITHPAGCOR

During January2006, the Company reestablished negotiations with the Philippines Amusement andGaming Corporation (“PAGCOR”) for permission to broadcast live, in-progresscasino table games from their casinos.

PAGCOR is the Republicof the Philippines chartered government gaming monopoly.  PAGCOR partiallyowns and exclusively operates all fourteen (14) Filipino casinos, some of whichare located in exclusive resort facilities frequented by Asian patrons(tourists).

In March 2006,Kenilworth conducted a live, in-progress casino table game test to demonstratethe ability to broadcast the table games, for around the world viewing, withoutdisrupting the normal security monitoring and protecting the privacy of playersat adjoining table games.  The film clip of the test broadcast which wasmade at a roulette table located in the new Hyatt Hotel and Casino, Manila, isavailable for viewing on our website www.kenilworthsys.com (see Press Release:Monday, March 6, 2006).

In April 2006,Kenilworth offered to pay PAGCOR monthly payments, for hosting the broadcastswhen they commence, for a period of ten (10) years; US $1 million for year one(1); US $2 million for years two (2) and three (3); US $5 million for yearsfour (4) through seven (7) and US $10 million for every year thereafter,totaling US $636,000,000 over the ten (10) year period. The payments have to bemade regardless from where we broadcast.  Kenilworth requires theflexibility to broadcast from other casinos besides the Philippines.

In July 2006,PAGCOR board of Directors approved to commence the first live, in-progresscasino table game broadcasts to emanate from the new (August 2005) Hyatt Hotel& Casino in Manila, Philippines.

We, thus, haveacquired a broadcast site for RoulabetteTM.  Now we have to obtainagreements for locations that will permit us to receive the broadcasts. We are in an active search in Europe, including Eastern Europe, South America,China, India and the Pacific Rim nations.  We filed our patents in all ofthese destinations.  Our status withPAGCOR since then is in serious doubt.

In 2002, thePhilippines Government permitted the establishment of two (2) Internet Cafés inthe Manila area and allowed the operators, for a fee to PAGCOR, to provide life-likeaction on virtual baccarat, accept sports bets and video broadcast of actualin-progress cock fights with wagering on the outcome.  By year end 2004, the number of Cafésoperating in the Manila area increased to sixty (60) Cafés.  At the end of 2006 there are now six hundred(600) Cafés in Manila with an additional thirty four hundred (3,400) throughoutthe country.

Kenilworth neverattempted to provide live in-progress real time casino table games to the Caféssince President Gloria Macapagal-Arroyostated, at all times, that our broadcast should not expand gambling throughoutthe Philippines.  The Cafés now representa huge profit base for PAGCOR which provides the income from its overalloperation entirely for **socio-civic endeavors**.  PAGCOR is the most profitable corporation inthe Philippines.

The phenomenal success by the Internet Cafés may not require ourbroadcasts to improve PAGCOR’s income stream.  Kenilworth planned to broadcast to the Pacific Rim countries to maintainthe tourist’s trade to the Philippines resorts, all of which have casinos, andnow have to compete with Macau.  Webelieve PAGCOR will require our broadcasts to maintain the tourist trade.

MARKETINGSTRATEGY/SALES PLAN

Our marketingstrategy consists of developing the RoulabetteTM Slot terminal and theRoulabetteTM broadcasts. We estimate at this time, that we will need at leastapproximately ten million dollars ($10,000,000) for promoting the RoulabetteTMconcept. We do not have this money nor do we have any agreements or understandingto procure this money. We may never get this money. If we do obtain this money,it may not be sufficient. Further, should such monies be available it may notbe available on terms

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satisfactory toKenilworth or it may be available on such terms that substantially dilute theinterest of existing shareholders. If we obtain this money, we will needsubstantial additional funds for the proposed marketing plan and there can beno assurances that such funds will ever be available to allow Kenilworth to engagein business on a profitable basis.

At the presenttime, we do not engage technically oriented employees who will be able toassist in the development of RoulabetteTM (we have available three [3] formertechnical Kenilworth employees that have indicated to rejoin Kenilworth at theappropriate time). It will be necessary for us to obtain additional personnelqualified and with the expertise to develop RoulabetteTM. We would requireadditional employees and several more consultants and there can be no assurancesof our being able to obtain any necessary personnel. There can be no assurancesof the availability of any such employees and consultants.

The Company willoutsource the development of RoulabetteTM and the microprocessors for the TV settop boxes.

In the UnitedStates, Kenilworth must refrain from using the Worldwide Web (WWW) Internet tomanage wagers from individuals outside of the casino confines. It is againstthe law. In RoulabetteTM, the play-along broadcast emanates from casinos thatare regulated by strict and comprehensive rules and state and jurisdictionregulations, enforced by gaming control regulators and everybody plays alongwith the same live table game. There is a world of difference between playingin a virtual make believe casino compared with an actual casino.

For the reasonsstated, Kenilworth will ask state lotteries, Off-Track Betting (OTB)corporations, pari-mutuel race tracks, and other state and federal regulatedagencies to manage the wagers from individuals playing along on their PC’s andtheir television sets using interactive TV set top boxes that convert regulartelevision sets into minicomputers within their state or jurisdiction. Therecan be no assurances that we will be able to obtain any arrangement with any ofthese entities or that they would be on suitable terms.

The individualswould have to pre-deposit funds into an account with the wager managementcompany and then place wagers with their credit balance. The wagers and runningbalances will be transmitted to the RoulabetteTM player’s PC and/or televisionsets with telephone lines not crossing any state lines, similar in principle totelephone accounts wagering offered by the New York State Off-Track BettingCorporation and the state of Nevada casino sports book and recently with remotepurchase of lottery tickets in many states within the United States.

After we obtainpermission to play RoulabetteTM, of which there can be no assurances, in agiven state and engages a wager management organization in order to promotedigital satellite and interactive television to the state’s residents,Kenilworth would install the eighteen (18) inch dish antenna and converter boxrequired to receive digital TV programming and interactive TV at its own cost,if the subscriber opens a RoulabetteTM wagering account for two hundred dollars($200). In addition, Kenilworth would pay the monthly subscription fees to viewall digital TV programming offered and the Internet service provider (ISP)subscription fee if the customer wagers at least one hundred twenty dollars($120) each month — win, lose, or draw — makes no difference.  In the U.S. the contracts would be financedby the satellite carrier such as EchoStar and DirecTV.

In states withapproved lottery and/or other gambling legislation, we plan to introduceRoulabetteTM Slot terminals to hotels, clubs (similar to card clubs inCalifornia) and resorts, to provide upscale gathering places for tourists andlocal residents. Charitable organizations that are permitted to conduct “NevadaNights” and Bingo games may wish to offer RoulabetteTM gaming on a morepermanent basis. To receive the broadcast signal, all that would be required isan eighteen (18) inch dish TV antenna and distribution equipment. TheRoulabetteTM terminals are intended to be self-sufficient and accept dollarbills (or script, to control the amount an individual is allowed to wager inone day or other time period). We plan to lease all the equipment necessary toparticipants for a share of the profits.

To gain approvalfor our RoulabetteTM-style gambling in jurisdictions that have not approved anygambling legislation, Kenilworth proposes to engage lobbyists to introduce,promote, and obtain legislative approval to permit RoulabetteTM-style gambling.Our strategy is to find depressed resort areas and have the

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resort/hoteloperators convince their local politicians of the benefits to their businessand the local economies and request them to promote legislative approval,either state-wide or limited to their areas. Riverboat gambling started torehabilitate decaying waterfronts. RoulabetteTM can do the same in depressedeconomic areas.  No assurances can be given that we can obtain any suchapprovals.

When the livecasino TV broadcasts are beamed for global viewing, Kenilworth will seek outsimilar organizations, as proposed for the United States and betting shops andslot route operators that can provide the servicing of individual accounts andplacement of RoulabetteTM terminals in hotels, clubs, pubs, racetracks, etc. Inall instances, we plan to offer only profit sharing arrangements tofranchisees, which will require leasing all the equipment necessary to thefranchisee, to discourage competition.

In overseasinstallations, wherever permitted, Kenilworth will make use of the WWW Internetonly to manage the wagers, and only in jurisdictions that permit the datacollection of the gambler, not for the live broadcast.

In the event asubstantial amount is won by a player, Kenilworth will make the payment to thewinner, via money wire transfer, to the establishment which managed the wager,within twenty-four (24) hours.  Kenilworth will establish a worldwide cagefor winning payments; or, a guarantee payment by a well-recognizedinternational bank.

COMPETITION

Many segments ofthe gaming industry are characterized by intense competition, with a largenumber of companies offering the same type of wagering products and services.None of these companies, at present, are believed to offer the same or similarequipment or systems as intended by RoulabetteTM. The most likely competitionwill come from slot machine manufacturers who could relatively quickly adaptslot machines to play along with live casino table games. We believe there arethree (3) major slot machine manufacturers in the world, all of which havevastly greater capital resources and substantially more personnel than theCompany and may have under development systems that directly compete withRoulabetteTM.

Our present plansare to broadcast the live casino table games from companies that own casinosthroughout the industrialized world. Other casino owners may start their ownbroadcasts and have their own terminals manufactured that compete withKenilworth after Kenilworth has done all its pioneering for play-alongwagering.

PATENTS, TRADEMARKSAND INTELLECTUAL PROPERTY

Our most importantassets are Patents we have acquired and RoulabetteTM related trademarks andservice marks.  The Patent granted on June 10, 2003 titled “SYSTEMAND METHOD FOR REMOTE ROULABETTE AND OTHER GAME PLAY USING GAME TABLE AT ACASINO” and Patent Application filed October 15, 2003, entitled “METHODAND SYSTEM FOR SUPPLYING FUNDS TO A TERMINAL FOR REMOTE WAGERING”, “MULTI-USEGAMING MACHINE” trademarks ROULABETTETM, as in pre-marked cards similar tolottery cards to select number in each game, used with terminals “ROULABETTETMSWIPE CARD” to activate set-top boxes to play RoulabetteTM and “PLAY ALONG WITHROULABETTETM, LIVE” and MULTI-USE GAMING MACHINE.

GOVERNMENTREGULATIONS

Kenilworth has nolicenses from any casino regulating authorities and may not require any casino licensesat the present time and may never become able to obtain any licenses that maybe required in the future. Each state has its own regulations, and in stateswhere Kenilworth does business, Kenilworth will have to comply with theseregulations and there can be no assurances that it will be able to do so orobtain the necessary license in an applicable jurisdiction. The followingdiscussion is not necessarily complete, or current regarding laws andregulations that may be applicable to us.  Any present laws are alsosubject to future change, amendment or cancellation.

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**Federal**

The FederalGambling Devices Act of 1962 (the “Federal Act”) makes it unlawful for a personto manufacture, deliver, or receive gaming machines, gaming machine typedevices and components thereof across interstate lines unless that person hasfirst registered with the Attorney General of the United States.

In addition,various record keeping and equipment identification requirements are imposed bythe Federal Act. Violations of the Federal Act may result in seizure orforfeiture of equipment, as well as other penalties.

**OtherRegulations**

The manufacture,distribution, sale, and use of slot machines are controlled by state andfederal law, which may also apply to our RoulabetteTM gaming terminals. Certainforeign countries permit the importation, sale, or operation of slot machines.Where importation is permitted, some countries prohibit or restrict the payoutfeature of the traditional slot machine or limit the operation of slot machinesto a controlled number of casinos or casino-like locations. Certain of thesejurisdictions also require the licensing of gaming devices. Our RoulabetteTMterminals may be considered similar to slot machines and may have to meet theseregulations.

**GreenbergTraurig Opinion**

August 11, 2005

Kenilworth SystemsCorporation185 Willis AvenueMineola, New York 11501Attn:  Herbert Lindo, Chairman and CEO

Re:  LegalIssues Relating to Roulabette(TM)

Dear Sir:

We are writing inresponse to your request for an opinion as to the legal issues relating to theimplementation of the Roulabette(TM) concept of Kenilworth Systems Corporation(“KSC”).

Roulabette(TM) isa method and system for placing wagers on live, in-progress casino table gamessuch as roulette, baccarat and dice from locations remote from the actualcasino tables at which the games are taking place. The system begins at thecasino, where television cameras in strategic locations above the casino tablegames follow the games being played at the casino tables, and microphones pickup the sounds of the table play. The game play is transmitted via digitalsatellite and cable transmissions to subscribers who are able to wager by usingset top boxes which receive the broadcast of the game and record wagers and results.

LEGAL ANALYSIS

In making use ofthis opinion, Kenilworth Systems Corporation (“KSC”) should be aware that thisis a very complex area of law, involving U.S. federal gambling statutes, thegambling statutes of the fifty states and the District of Columbia, and thegambling statutes of all the countries of the world where you might want tooperate a Roulabette(TM) casino or offer Roulabette(TM) wagering. The gamblinglaws of these jurisdictions vary widely, ranging from the absolute prohibitionof Utah, to the street-side betting shops of England, to the wide-open casinosof Las Vegas. Further confusing matters is the fact that there is very littlestatutory law specifically addressing remote gambling, and the few statuteswhich do exist relate to Internet gambling, which is not the same asRoulabette(TM). So, for the most part, we will be interpreting the provisionsof gambling statutes which were enacted before the digital technology of todayexisted, and did not contemplate the possibility of playing casino games fromremote locations. Similarly, the case law

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relative to remotegambling is also very sparse and, once again, concerns Internet gambling, whichis different from Roulabette(TM). Finally, there are the interpretations of thelaw relating to remote gambling which have been publicly pronounced by the U.S.Department of Justice (“DOJ”), which in our opinion are clearly erroneous.Consequently, although the opinions expressed below are our best assessment ofthe situation after years of research and active involvement in numerous cases,they are to a great extent projections of what we believe the courts would holdif the issues were ever adjudicated. They are not shared by the DOJ, they donot take into account laws which may be enacted in the future as the countriesof the world continue to address the issues of remote gambling, and in timethey may prove to be incorrect in one respect or another.

In the UnitedStates, the prohibition and/or regulation of gambling is a matter of state law.Some states, such as Nevada, permit a wide range of gambling activitiesthroughout the state. Other states, such as Mississippi and New Jersey, permita wide range of gambling activities, but only at certain geographic locations,such as riverboats and Atlantic City casinos. Finally, other states, in factmost states, permit only very limited gambling activities, such as thoroughbredracing, jai alai, bingo, etc. Superimposed on this tangle of state laws andregulations are the federal statutes, which are designed to assist the statesin combating illegal gambling operations which cross state and nationalborders. So, basically, the U.S. legal regime applicable to gambling istwo-tiered. The individual states determine the forms of gambling which arelegal and illegal, and to what extent they are banned or regulated, and thefederal government assists the states in dealing with illegal gamblingactivities which cross state or national borders.

Given the factthat Roulabette(TM) would be most successful if distributed on a national orinternational level, the federal issues must be addressed first to determinewhether it is legally feasible to distribute the product across state andnational borders. If there is no federal prohibition, casino locations must beselected and the state and local laws of the jurisdiction where the casino islocated must be analyzed to determine if it is legal and feasible to broadcastfrom the chosen locations. In view of the fact that casinos can be chosen fromanywhere in the world, there is little doubt that locations can be identifiedfrom which to originate the broadcasts. It is only a matter of identifying thebest casino or casinos from a legal and business perspective. Finally, severalU.S. and foreign courts have concluded that remote gambling takes place bothwhere the server is located (or in this case, the casino), and where the playeris located. So, once one or more casinos are identified, another analysis willbe necessary to determine the markets where it would be legal to offer thegames being played. It is not a question of whether there are legal markets forone or more games, but a matter of the number of markets available and thetypes of games which can be offered in each market.

There are fourfederal statutes which are most applicable to remote gambling.(1) They are:

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(1)             Thereare also additional statutes, such as conspiracy (18 U.S.C.section 371), money laundering (18 U.S.C. section 1956 andracketeering (18 U.S.C. section 1962) statutes which could apply ifthe gambling statutes are violated.

—             The Wire Act, whichprohibits the use of interstate or foreign communications facilities totransmit wagering information on sporting events or contests; (2)

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(2)             18U.S.C. section 1084.

—             The Illegal GamblingBusinesses statute, which prohibits the operation of a gambling business inviolation of the laws of the state where it is conducted; (3)

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(3)             18U.S.C. section 1955.

—             The Travel Act, whichprohibits the use of interstate or foreign travel and the use of the mail orany facility in interstate or foreign commerce (such as the Internet or digitalsatellite services) to facilitate illegal activities, including illegalgambling; (4) and

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(4)             18U.S.C. section 1952.

—             The InterstateTransportation of Wagering Paraphernalia statute, which prohibits transportinggambling-related items in interstate or foreign commerce. (5)

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(5)             18U.S.C. section 1953.

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1.  The WireAct

This statuteprohibits gambling businesses from using interstate or international telephonefacilities to transmit gambling-related information, and states:

Whoeverbeing engaged in the business of betting or wagering knowingly uses a wiredcommunication facility for the transmission in interstate or foreign commerceof bets or wagers or information assisting in the placing of bets or wagers onany sporting event or contest, or for the transmission of a wire communicationwhich entitles the recipient to receive money or credit as a result of bets orwagers, or for information assisting in the placing of bets or wagers, shall befined under this title or imprisoned not more than two years, or both.(6)

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(6)             18U.S.C. section 1084(a).

The Wire Act hasbeen a formidable tool for the DOJ in the prosecution of operators of Internetgaming sites. The DOJ merely has to establish that a bet was transmitted orreceived over the Internet and it can obtain a conviction, without ever havingto address such issues as the actual location of the betting (i.e., where thebettor is or where the bookmaker is), or the fact that the operator waslicensed by a sovereign nation to provide gambling services over the Internet.

In the Spring of1998, when the United States Justice Department proclaimed its opinion that theWire Act prohibits Internet gambling, U.S. Attorney General Janet Renoannounced charges against numerous off-shore Internet gambling operators,stating:

The Internet is not anelectronic sanctuary for illegal betting.  If a state outlaws solicitingor accepting bets, you can’t evade those requirements by going online. It’s afederal crime to use the Internet to conduct betting operations. And toInternet betting operators everywhere we have a simple message; you can’t hideonline and you can’t hide off-shore.

This assertionappears to be correct. “Wire communication facility” is broadly defined as aninstrumentality or service “used or useful in the transmission of writings,signs, pictures and sounds of all kinds by aid of wire, cable or other likeconnection.”(7) The courts have ruled that even with satellite transmissions,there is still a wire connecting the gamblers computer to the Internet.(8) So,even though Roulabette(TM) utilizes satellite transmissions, it is likely thatthere will be a wire of some sort used for the transmission somewhere along theline, most likely at the casino or at the player’s TV and set-top box. However,regardless of whether a wire was used in the transmissions, the Wire Act stillwould not apply for two reasons.

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(7)             18 U.S.C. section1081.

(8)             World InteractiveGaming, 1999 WL 591995, 6-8 (N.Y. S.Ct.)  (“Like a prohibited telephonecall from a gambling facility, the Internet is accessed by using a telephonewire”); United States v. Cohen, 260 F.3rd 68 (2nd Cir. 2001).

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First, althoughthe DOJ takes the position that the Wire Act applies to all Internet gambling,sports and non-sports alike, the courts have held otherwise. The DOJ reasonsthat the word “sports” in the phrase “sports events or contests” modifies onlythe word “events” thereby leading to a reading that the statute covers bettingon sports events and betting on [other] contests. However, the courts andvirtually all legal scholars and attorneys experienced in the field are of theopinion that it only applies to sports betting.

The Supreme Courthas established the rules of statutory construction, and if the statutorylanguage is clear and unambiguous, then you look no further and follow thelanguage of the statute. The Wire Act makes it a crime to send or receivewagers on sporting events and contests. Sporting events and contests arefootball, baseball, basketball, hockey, golf, tennis prize fighting orwhatever, but not poker, bingo and similar games. Although a card game or apoker tournament, may be a contest, is not as sporting contest.

If there is somedoubt as to the meaning of the statute, the courts turn to case law and thelegislative intent of Congress. There have been cases addressing the questionof whether the Wire Act applies to non-sports gambling and the case law isconsistent — it does not. The most recent case dealing with the issue was Inre: MasterCard International, a civil RICO case, which hinged on theapplicability of the Wire Act to non-sports Internet gambling.(9) In decidingthe issue, the court stated that the wording of the Act, the case law and thelegislative intent all lead to the conclusion that the Wire Act only coverssports gambling. The case was upheld on appeal by the Fifth Circuit Court ofAppeals, which stated: “we agree with the district court’s statutoryinterpretation, its reading of the relevant case law, its summary of therelevant legislative history, and its conclusion.”(10)

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(9)             2001WL 197834 (E.D.LA.).

(10)       InRe: MasterCard Int’l., 313 F.3d 257, 262 5th Cir. 2002).

It should be notedthat although the DOJ loudly proclaims that the Wire Act applies to allInternet gambling, it is apparently concerned that its interpretation may bewrong, and has never attempted to use the statute against non-sports gamblingbusiness in the ten years that Internet gaming has existed. In our opinion, theWire Act does not cover non-sports gambling, such as Roulabette(TM) — that isthe law, as enacted by Congress and interpreted by the courts, the desires andopinion of the DOJ notwithstanding.

Second, there isan exemption to the Act, which provides that it is not illegal to transmit “informationassisting in the placing of bets or wagers on a sporting event or contest froma place where such betting is legal to another place where such betting islegal.”(11) The Roulabette(TM) broadcast would constitute “informationassisting in the placing of bets or wagers” within the meaning of the statute,and it would be broadcast from a casino in a jurisdiction where such gamingactivity is legal to a jurisdiction where the actual wagering activities wouldtake place and where such wagering would be legal. Consequently, even if oneaccepts, or accedes to, the expansive view of the U.S. Department of Justice,with which most people do not agree, that the Wire Act is not limited to sportsbetting but extends to other forms of wagering activities, Roulabette(TM) wouldbe exempted from the statute.

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(11)       18U.S.C. section 1084(b); United States v. Ross; Martin v. United States, 389F.2d 895, 898 (5th Cir. 1968); See also e.g. United States v. Miller, 22 F.3d1075 (11th Cir. 1994) (affirming conviction under Section 1084 “for aiding andabetting the telephonic transmission of wagering information between Georgiaand Nevada”); United States v. Scavo, 593 F.2d 837 (8th Cir. 1978) (affirmingconviction of defendant who when living in Nevada provided gambling pointspread information to a Minnesota bookmaking business); United States v. Cohen,260 F.3rd 68 (2nd Cir. 2001) (cert. denied, 2002).

2. The Illegal GamblingBusinesses Statute(12)

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(12)       Thisstatue is also knows s the Organized Crime Control Act or OCCA, because it wasincluded as part of that omnibus crime bill.

This statute prohibitspersons from operating an illegal gambling business, and states:

(a)            Whoever conducts,finances, manages, supervises, directs, or owns all or part of an illegalgambling business shall be fined under this title or imprisoned not more thanfive years or both.

(b)           As used in this section— “illegal gambling business” means a gambling business which (i) is aviolation of the law of a State or political subdivision in which it isconducted; (ii) involves five or more persons who conduct, finance, manage,supervise, direct, or own all or part of such

14

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                          business;and (iii) has been or remains in substantially continuous operation for aperiod in excess of thirty days or has a gross revenue of $2,000 in any singleday.(13)

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(13)       18U.S.C. section 1955.

The statuteapplies to all forms of gambling, sports and non-sports alike, and makes it afederal offense to conduct, finance, manage, supervise, direct or own all orpart of an “illegal gambling business.” An illegal gambling business is definedas a gambling business, which “is a violation of the law of a State orpolitical subdivision in which it is conducted.” The application of thisstatute to Roulabette(TM) is obvious, because it applies to sports andnon-sports gambling alike, and Roulabette(TM) would be operated, managed,financed or owned by at least five people. Despite the language appearing tolimit the statute to persons who conduct, finance, manage, etc., numerous caseshave recognized that the statute proscribes any degree of participation in anillegal gambling business except participation as a bettor.(14) As one courtrecently put it, “conducts extends to those on lower echelons, but with afunction at their level necessary to the illegal gambling operation.”(15)

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(14)       Sanabriav. United States, 437 U.S. 54, 70-1 n.26 (1978).

(15)       UnitedStates v. O’Brien, 131 F.3d 1428 (10th Cir. 1997).

However, unlikethe Wire Act, under this statute, the location of the actual activity is ofcritical significance, because it must be a violation of the law of the stateor political subdivision in which it is conducted. This should not be an issuefor Roulabette(TM), because it intends to broadcast from a casino in ajurisdiction where it would be legal. If it was not legal under the laws of thejurisdiction where the casino is located, and the casino is in the UnitedStates, then there would be a violation not only of state law, but of thisfederal statute as well.

The statute couldalso apply if the player is located in a state where the gambling would be inviolation of state law. I think there is little question that offering servicesto players in a particular state would constitute doing business in that state.So, it will be essential that the service not be offered to players located instates where such gambling would be illegal. Otherwise there would be aviolation of this federal statute, as well as the laws of the player’s state.

3. The Travel Act

This statuteprohibits the use of interstate or foreign travel, and the use of the mail orany facility in interstate or foreign commerce, to distribute the proceeds ofillegal gambling, or otherwise promote, manage or facilitate any illegalactivity, including gambling, in violation of federal or state law.(16)

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(16)       18U.S.C. section 1952.

15

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Once again, thestatute will not present a problem so long as Roulabette(TM) is legal in thestate where the casino is located and the states where any U.S. players arelocated.

4. The Transportation ofWagering Paraphernalia Statute.

This statuteprohibits persons from carrying or sending gambling paraphernalia in interstateor foreign commerce, and states:

Whoever ... knowinglycarries or sends in interstate or foreign commerce any record, paraphernalia,ticket, certificate, bills, slip, token, paper, writing, or other device used,or to be used, or adapted, devised, or designed for use in (a) bookmaking; or (b)wagering pools with respect to a sporting event; or (c) in a numbers, policy,bolita, or similar game shall be fined under this title or imprisoned for notmore than 5 years or both.(17)

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(17)       18U.S.C. section 1953

A New York statecourt declared that an Internet gambling web site located in Antigua violatedthe law by sending records of gambling activity into the State of New York.(18)Moreover, the court also held that the defendant Internet gambling operatorfurther violated the statute by sending computers to Antigua, which computerswould ultimately be used for conducting gambling business between the UnitedStates and Antigua.(19) More on point, a California court has held that acomputer disk containing a program for recording and analyzing bets on sportingevents is gambling paraphernalia.(20) So, it is quite possible that theRoulabette(TM) data could be deemed to be paraphernalia. However, this statuteshould not apply because the data is not “used, or to be used, or adapted,devised, or designed for use in (a) bookmaking; or (b) wagering pools withrespect to a sporting event; or (c) in a numbers, policy, bolita, or similargame.” It is to be used in casino games, which are not covered by the statute.

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(18)       Peoplev. World Gaming, 714 N.Y.S.2d 844, 852 (N.Y.S.C. 1999).

(19)       Id.at 853.

(20)       UnitedStates v. Mendelsohn, 896 F.2d 1183 (9th Cir. 1990).

OPINION AND SUMMARY

Based on theanalysis above, in our opinion Roulabette(TM) would be entirely legal underU.S. federal law, so long as: (1) it is legal under the laws of the state wherethe casino is located if the casino is in fact located in the United States,and (2) the service is not offered to any player in the United States inviolation of the laws of the state where the player is located.

If KSC will selectone or more casinos from which it intends to broadcast the games, we willresearch the jurisdiction where each such casino is located to determine ifthere are any legal impediments to Roulabette(TM). I would suggest selecting aNative American casino operated by a tribe which is receptive to theRoulabette(TM) concept, and located in a state which would be amenable toamending its compact with the tribe if research indicates that an amendment isnecessary. I would also suggest selecting a casino in a foreign jurisdiction,which might be receptive to the Roulabette(TM) concept. A casino in a smallercountry, perhaps in the Caribbean would probably be a good selection.

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I hope thisanalysis is useful to KSC. If you have any questions or wish to discuss theissues further, please do not hesitate to contact me on my direct line at(954)768-8221.

Sincerely yours,Greenberg Traurig, LLP

By:  Patrick T. O’Brien

 

 

 

FABRICATION/ASSEMBLYOPERATION

When we start tomarket the RoulabetteTM Wagering System, of which there can be no assurances, weplan to engage sub-contractors to assemble/manufacture the terminals fromstandard or specially manufactured (to our specifications) electronic, TV, andother components purchased from vendors or manufactured by subcontractors.

EMPLOYEES

Kenilworth, atpresent, has three (3) full time employees to perform administrativework and research related to casino wagering and marketing around the world, inaddition to the officers that manage the affairs of the Company. The Companyhas engaged consultants to assist us in the Asian market and that may managethe proposed satellite transmission programs, and others that may assist in themarketing of RoulabetteTM broadcasts throughout the industrialized world.

Kenilworthmaintains medical insurance for its employees, who do not contribute to thecosts of the Plan.

BACKLOG

We do not have anybacklog.

ITEM2—PROPERTIES

Kenilworth leasestwo thousand three hundred (2,300) square feet in an office building paying twothousand six hundred dollars ($2,600) per month rent, fuel and electric costadjustments from the date of the lease, renewed for a three (3) year term inJune 2006.

ITEM3—LEGAL PROCEEDINGS

Since exiting fromChapter 7 Bankruptcy Proceedings on September 23, 1998, Kenilworth has notbeen involved in any significant legal proceedings.

ITEM 4—SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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EXECUTIVE OFFICERSOF THE REGISTRANT

The names, agesand positions held by each of Kenilworth’s directors and executive officers areas follows:
| **NAME**             | ** ** | **AGE** | ** ** | **OFFICES AND  POSITIONS HELD**                              | ** ** | **FIRST ELECTED  OFFICER OF  KENILWORTH** |
|----------------------|------------|---------|------------|--------------------------------------------------------------|------------|-------------------------------------------|
| HERBERT LINDO        |       | 81      |       | PRESIDENT,CHAIRMAN OF THE BOARD AND CHIEF FINANCIAL  OFFICER |       | 1972                                      |
| JOYCE CLARK          |       | 71      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 1998                                      |
| KIT WONG             |       | 75      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 1999                                      |
| PATRICK J. MC DEVITT |       | 65      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 2001                                      |
| EDWARD VIETMEIER     |       | 45      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 2006                                      |

 

All of the aboveExecutive Officers and Directors have been elected to serve until the nextAnnual Meeting of Shareholders or until their respective successors are electedand qualified. The Board presently anticipates that the next ShareholdersMeeting will be held in the latter part September 2007.

PART II

ITEM 5— MARKET PRICES OFTHE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) Kenilworthexited from Bankruptcy Proceedings in September of 1998, its Common Stockwhich had been trading on the NASDAQ National Market, is now trading on the OTCPink Sheets under the old trading symbol “KENS”. The following table sets forthhigh and low closing sales prices for our Common Stock, as reported on the OTCPink Sheets.
| ** **                       | ** ** | **LOW** | ** ** | **HIGH** | ** ** |
|----------------------------------|------------|---------|------------|----------|------------|
| **2005**                         |       |    |       |     |       |
|                             |       |    |       |     |       |
| January 1, 2005             |       |    |       |     |       |
| Through March 31,  2005     |       | $       | 0.09       |     | $          | 0.28 |   |
|                             |       |    |       |     |       |
| April 1, 2005               |       |    |       |     |       |
| Through June 30,  2005      |       | $       | 0.09       |     | $          | 0.19 |   |
|                             |       |    |       |     |       |
| July 1, 2005                |       |    |       |     |       |
| Through  September 30, 2005 |       | $       | 0.15       |     | $          | 0.21 |   |
|                             |       |    |       |     |       |
| October 1, 2005             |       |    |       |     |       |
| Through December 31,  2005  |       | $       | 0.04       |     | $          | 0.15 |   |
| **2006**                         |       |    |       |     |       |
|                             |       |    |       |     |       |
| January 1, 2006             |       |    |       |     |       |
| Through March 31,  2006     |       | $       | 0.04       |     | $          | 0.10 |   |
|                             |       |    |       |     |       |
| April 1, 2006               |       |    |       |     |       |
| Through June 30,  2006      |       | $       | 0.05       |     | $          | 0.10 |   |
|                             |       |    |       |     |       |
| July 1, 2006                |       |    |       |     |       |
| Through  September 30, 2006 |       | $       | 0.08       |     | $          | 0.04 |   |
|                             |       |    |       |     |       |
| October 1, 2006             |       |    |       |     |       |
| Through  December 31, 2006  |       | $       | 0.05       |     | $          | 0.02 |   |
| **2007**                         |       |    |       |     |       |
|                             |       |    |       |     |       |
| January 1, 2007             |       |    |       |     |       |
| Through March 30, 2007      |       | $       | 0.05       |     | $          | 0.02 |   |

 

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(b)  Holders.There were approximately seven thousand (7,000) holders of record ofCommon Stock of Kenilworth as of June 30, 2006.

(c) Dividends. Kenilworth has not paid any dividends on its Common Stock. We planto apply any earnings it achieves to expansion of the business and does notexpect to pay any dividends in the foreseeable future.

(d)  Nounderwriters were involved in the sale of the unregistered ConvertiblePromissory Notes.  Exemption from registration is claimed underSection 4(2) of the SEC Act of 1933 as amended.  The proceedsfrom the sale of all unregistered securities have all been used for workingcapital.

The Company issued78,472,044 shares of its Restricted Common Stock since December 31,2005.  All of the shares may have the restrictions lifted pursuant toRule 144 and Rule 144K within one (1) or two (2) years,which may substantially depress the trading price of the Company’s Stock in thefuture.

(e)  EquityCompensation Plan Information

Thefollowing table summarizes the equity compensation plans under which KenilworthSystems Corporation common stock may be issued as of December 31, 2005.
| ** **                                              | ** ** | **(a)  Number of securities  to be issued upon  exercise of outstanding  options** | ** ** | **(b)  Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **(c)  Number of securities  remaining available  for future issuance  under equity  compensation plans  (excluding securities  reflected in column (a))** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Plan  Category**                                      |       |                                                                                                                  |       |                                                                                                             |       |                                                                                                                                                                                                              |       |
|                                                    |       |                                                                                                                  |       |                                                                                                             |       |                                                                                                                                                                                                              |       |
| Equity compensation  plans approved by security holders |       | 0                                                                                                                     |       | $                                                                                                                | 0          |                                                                                                                                                                                                              | 9,500,000  |   |
|                                                         |            |                                                                                                                       |            |                                                                                                                  |            |                                                                                                                                                                                                                   |            |  |

 

ITEM 6—SELECTED FINANCIALDATA

The followingtable summarizes certain selected financial data and is qualified by referenceto, and should be read in conjunction with, the Consolidated FinancialStatements and related Notes thereto and with “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” included elsewhere herein.

Selected Financial Datafor the five (5) years ended December 31, 2006, are as Follows:

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SUMMARY OFOPERATIONS 
| ** **                                         | ** ** | **2006**   | ** ** | **2005**     | ** ** | **2004**     | ** ** | **2003**     | ** ** | **2002**     | ** ** | **PERIOD FROM  NOVEMBER 24,  1998 TO  DECEMBER 31,  2004** | ** ** |
|----------------------------------------------------|------------|------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                         | ** ** | ** ** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated**                                                                   | ** ** |
| Net sales from  operations                         |       | $          | —     |         | $          | —       |       | $            | —     |         | $          | —                                                                         |       | $ | — |   | $ | — |   |
| Other income                                       |       | $          | —     |         | $          | —       |       | $            | —     |         | $          | —                                                                         |       | $ | — |   | $ | — |   |
| Net loss  accumulated during the development stage |       | $          | 850,079    |         | $          | 3,815,302    |       | $            | 1,860,296  |         | $          | 768,229                                                                        |       | $ | 384,889 |   | $ | 3,559,947 |   |
| Loss per common  share                             |       | $          | 0.003      |         | $          | 0.02         |       | $            | 0.010      |         | $          | 0.010                                                                          |       | $ | 0.007 |   | $ | 0.040 |   |
| Loss per common  share - diluted                   |       | $          | 0.003      |         | $          | 0.02         |       | $            | 0.010      |         | $          | 0.010                                                                          |       | $ | 0.007 |   | $ | 0.040 |   |
| Consolidated  balance sheet data:                  |       |       |       |         |       |         |       |         |       |         |       |                                                                           |       |
| Total  liabilities                                 |       | $          | 486,895    |         | $          | 217,540      |       | $            | 313,414    |         | $          | 328,916                                                                        |       | $ | 231,029 |   | $ | 873,359 |   |
| Stockholders’ Equity  (deficit)               |       | $          | 459,400    |         | $          | 75,450       |       | $            | (109,783   | )            | $          | (263,624                                                                       | )          | $ | (208,512 | ) | $ | 581,919 |   |

 

ITEM 7— MANAGEMENTDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussionfollowing should be read in conjunction with, and is qualified in its entiretyby, the consolidated financial statements and the notes thereto includedelsewhere in this Annual Report on Form 10-K.

(A) RESULTSOF OPERATIONS

Since we exitedfrom bankruptcy proceedings on September 28, 1998, we have had no revenuesfrom operations, and therefore sustained losses from general administrationexpenses amounting to $850,079 in 2006, $3,815,302 in 2005 and $1,860,296 in2004.  Kenilworth has had no revenues from operations since exiting fromBankruptcy Proceedings in September 1998.

(B) LIQUIDITY ANDCAPITAL RESOURCES

Kenilworth has notconducted any new business operations since 1991. At December 31, 2006,2005 and 2004 we had a deficiency in working capital of $436,910, $239,745 and$219,659 respectively. In Kenilworth’s present state of operation to continue aviable business plan, Kenilworth requires little funding. We have beendependant upon the resources of its President, who receives no compensation,and funds received from private investors, totaling $765400 in 2006, $776,250in 2005 and $652,000 in 2004.  In addition the Company issued restrictedCommon Stock for services totaling $1,829,000 for 58,116,044 shares in 2006,$1,723,000 for 15,885,000 shares in 2005 and $855,449 for 17,072,651 shares in2004.

Our present plansare to continue to develop a wagering system titled “RoulabetteTM” that wouldallow patrons all over the industrialized world to view and wager on livecasino table games on terminals placed in hotels, resorts, bars and otherpublic gathering places and in homes and offices on personal computers (PC’s)or television sets connected to set top boxes for Interactive TV via digitalsatellite and digital cable broadcasts emanating from strictly regulatedcasinos.  At present we do not have sufficient liquidity and capitalresources to develop our business or to remain in business and we may neverhave such resources.

CAUTIONARYSTATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATESECURITIES LITIGATION REFORM ACT OF 1995 AND RISK FACTORS

The informationcontained in this Form 10-K and Kenilworth’s other filings with theSecurities Exchange Commission contain “forward- looking” statements within themeaning of section 27A of the Securities

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Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended, and issubject to the safe harbors created thereby. Such information involvesimportant risks and uncertainties.

Forward-LookingStatements

The PrivateSecurities Litigation Reform Act of 1995 provides a “safe harbor” forforward-looking statements. Certain information included in this Annual Reporton this Form 10-Kcontains statements that are forward-looking, including,but not limited to, statements relating to our business strategy anddevelopment activities as well as other capital spending, financing sources,the effects of regulation (including gaming and tax regulations), expectationsconcerning future operations, margins, profitability and competition. Anystatements contained in this Form 10-K that are not statements of historicalfact may be deemed to be forward-looking statements. Without limiting thegenerality of the foregoing, in some cases, you can identify forward-lookingstatements by terminology such as “may,” “will,” “should,” “would,” “could,” “believe,”“expect,” “anticipate,” “estimate,” “intend,” “plan,” “continue” or thenegative of these terms or other comparable terminology. Such forward-lookinginformation involves important risks and uncertainties that could significantlyaffect anticipated results in the future and, accordingly, such results maydiffer from those expressed in any forward-looking statements made by us. Theserisks and uncertainties include, but are not limited to, our lack of recentoperating history, our dependence on Herbert Lindo, our Chairman and Presidentwho is eighty-one (81) years old and existing management, general domestic orinternational economic conditions, pending or future legal proceedings, changesin federal or state tax laws or the administration of such laws, changes ingaming laws or regulations (including the legalization of gaming in certainjurisdictions), applications for licenses and approvals under applicablejurisdictional laws and regulations (including gaming laws andregulations).  You should not place undue reliance on any forward-lookingstatements, which are based only on information currently available to us. Weundertake no obligation to publicly release any revisions to suchforward-looking statements to reflect events or circumstances after the date ofthis 10-K report for the year ended December 31, 2006.

**RISKFACTORS**

**NOOPERATING HISTORY**

We have had no newrevenues from operations since 1991. We exited from bankruptcy proceedings in1998 without assets and liabilities. We have had no revenues from operationssince then and we may never have any revenues from operations in the future, **which may result in the termination of our business**.

**WEHAVE NO WORKING CAPITAL**

As ofDecember 31, 2006 the working capital deficiency of Kenilworth was$436,910. This will not enable Kenilworth to achieve any of its plannedoperations. There can be no assurances that Kenilworth will again havesufficient working capital to engage in its planned operations.  Althoughwe have been able to obtain working capital from investors that purchaseConvertible Promissory Notes and by issuing restricted Common Shares forservices rendered.

**OURBUSINESS IS ONLY IN THE PLANNING STAGE**

Kenilworth’sbusiness except for the completion of the $9,000,000 contract with theTotalizator Agency Board of Victoria, Australia, limited progress in thePhilippines remains in the planning stage. We plan to engage in thedevelopment, manufacturing by subcontractors, and marketing of an operationentitled RoulabetteTM. RoulabetteTM would allow casino patrons and other playersto play along for remote locations with live in-progress casino table gamessuch as Roulette, Craps and Baccarat and more via digital satellite and digitalcable television broadcasts (simulcasts) emanating from strictly regulatedcasinos located in the United States or via the Internet in other locationsaround the world, to self-sufficient computer terminals dubbed “RoulabetteTM”and digital satellite and cable TV set top boxes. The RoulabetteTM terminal is aproposal intended to be built and there can be no assurances that it will everbe built.  The microprocessors to be installed in the TV set top boxeshave not been designed. We have, as at

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December 31,2006, no specific agreements, customers or proposals for any future businessand there can be no assurances that we will ever have same.

**WENEED AT LEAST TEN MILLION DOLLARS ($10,000,000)**

In order tocommence to develop the RoulabetteTM terminal and the RoulabetteTM broadcasts, weestimate at this time, that we will need at least approximately ten milliondollars ($10,000,000). We do not have this money nor do we have any agreementsor understanding to procure this money. We may never get this money. If we doobtain this money, it may not be sufficient. Further, should such monies beavailable it may not be available on terms satisfactory to Kenilworth or it maybe available on such terms that substantially dilute the interest of existingshareholders. If we obtain this money, we will need substantial additionalfunds for the proposed marketing plan and there can be no assurances that suchfunds will ever be available to allow Kenilworth to engage in business on aprofitable basis.

**OURBUSINESS IS SUBJECT TO OUR ABILITY TO OBTAIN AND RETAIN KEY PERSONNEL**

At the presenttime, we do not have any employees who will be able to develop RoulabetteTM. Itwill be necessary for us to obtain personnel qualified and with the expertiseto develop RoulabetteTM. We believe at this time we would require additionalemployees and several consultants. There can be no assurances of theavailability of any such employees and consultants.  The Company expectsto outsource the development of RoulabetteTM and the microprocessors for the TVset top boxes.  No assurances can be given that the Company will be ableto do this successfully.

**WEARE DEPENDANT UPON OUR PRESIDENT**

Kenilworth hasbeen dependant upon the services of its president Herbert Lindo who iseighty-one (81) years old. Herbert Lindo has performed his services during thepast fifteen (15) years without compensation. Should Kenilworth procure workingcapital, there can be no assurances that he will continue to work withoutreceiving compensation. There also can be no assurances of Herbert Lindo’scontinued availability.  We believe without assurances that presentmanagement is capable to continue our present plans in the event that HerbertLindo is not available.

**RAPIDCHANGES IN TECHNOLOGY**

The technology andRoulabetteTM in general is subject to rapid change. Kenilworth will need tomaintain an ongoing research and development effort of which there can be noassurances of success or availability of funds.  Additionally, there canbe no assurances that the development of technologies and products bycompetitors will not render the Kenilworth’s products or technologiesnon-competitive or obsolete.

**WEARE ENGAGED IN A HIGHLY COMPETITIVE INDUSTRY**

Our business issubject to significant competition. Competition exists from larger companiesthat possess substantially greater technical, financial, sales and marketingresources that Kenilworth presently possesses. Such competition is expected toincrease. Such increased competition may have a material adverse effect onKenilworth’s ability to successfully market its products.

**WE WEREGRANTED A PATENT FOR THE VARIOUS ASPECTS OF SIMULCAST WAGERING**

On June 10,2003, the U.S. Patent for the various aspects of wagering on live in-progresscasino table games was granted by the U.S. Patent Office to Herbert Lindo, theInventor and which Patent was assigned by Herbert Lindo to the Company inAugust 2000.  We filed the Patent for approval in forty-nine (49)countries in the industrialized world including Russia and China. There can beno assurances that foreign patents will be issued and the challenges will notbe instituted against the validity or enforceability of our patent. Herbert Lindo also filed two (2) Patents in the U.S. Patent Offices inSeptember and October 2004 which Patents have been published to uselottery terminals to accept deposits for wagers placed with the TV set topboxes and the use of Play Cards similar to lottery tickets, which have alsobeen assigned to the

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Company by HerbertLindo.  A Patent Application forMulti-Use Gaming Machines invented by Herbert Lindo and Gordon Coplein, Esq.was published on February 1, 2007 and assigned, by the inventors, toKenilworth.

**OURROULABETTETM TERMINALS ARE SUBJECT TO VARIOUS FEDERAL, STATE, LOCAL AND FOREIGNJURISDICTION LAWS AND REGULATIONS**

The use ofRoulabetteTM may be subject to various federal, state and local laws andregulations both in the United States and foreign countries. There can be noassurances that we will ever be able to obtain licenses or permits necessary toconduct our business or that we will be able to comply with these applicablelaws and regulations.

The RoulabetteTMsystem is planned to allow casino patrons and other players to play along withlive, in-progress casino table games such as Roulette, Craps and Baccarat andmore via digital satellite television and digital cable programming emanatingfrom regulated casinos.

**OUROFFICERS AND DIRECTORS WILL HAVE SIGNIFICANT CONTROL OVER US ANDMAY APPROVE OR REJECT MATTERS CONTRARY TO A VOTE OF OUR SHAREHOLDERS**

Our executiveofficers and directors together with their affiliates beneficially own asignificant percentage of our outstanding common stock. These stockholders, ifacting together, will be able to significantly influence all matters requiringapproval by our stockholders including the election of directors and theapproval of mergers or similar transactions even if the stockholders disagree.

**SHARESELIGIBLE FOR FUTURE SALE COULD CAUSE OUR STOCK PRICE TO FALL**

If ourstockholders sell substantial amounts of our common stock in the public market,the market price of our common stock could fall. As of January 15, 2007 weadded 78,472,044 shares of Common Stock outstanding, which are eligible forsale by our Shareholders under Rule 144 of the Securities Act of 1933 asamended or are otherwise registered for sale.

**WEDO NOT INTEND TO PAY DIVIDENDS**

We are not able topay any dividends because we have no funds available to do so. Even if we hadfunds available, we do not intend or declare to pay any dividends on our commonstock in the near future.

ITEM 8—FINANCIALSTATEMENTS

The financial statements,the accompanying notes are filed as part of this Report annexed at the end ofthis report.  See ITEM 15.

ITEM 9—CHANGES ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On October 2, 2006, Demetrius & Company, L.L.C. (“Demetrius”)resigned as independent registered public accountants of Kenilworth SystemsCorporation (the “Company”).  The Company’s Board of Directors acceptedthe resignation of Demetrius.

The report of Demetrius on the Company’s financialstatements as of December 31, 2004 and for the year then ended neither containsan adverse opinion or a disclaimer of opinion nor is modified as touncertainty, audit scope or accounting principles, except that the opinionincludes an explanatory paragraph that the Company has incurred operatinglosses since its inception as a development stage company for the periodbeginning November 24, 1998, which raises substantial doubt about the Company’sability to continue as a going concern.  Demetrius did not issue a reporton the Company’s financial statements as of December 31, 2005 or for the yearthen ended.

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During the fiscal years ended December 31, 2004 and2005 and the period from January 1, 2006 to October 2, 2006, there were nodisagreements with Demetrius on any matter of accounting principles orpractices, financial statement disclosure, or auditing scope or procedure,which, if not resolved to the satisfaction of Demetrius, would have caused itto make reference to the subject matter of the disagreement in connection withits report.

Effective February 5, 2007, the Company engaged KGS,LLP as its independent certified public accountants with respect to the fiscalyears ended December 31, 2005 and 2006.  The Company’s Board of Directorsapproved the engagement of KGS, LLP.

ITEM 9A—CONTROLS ANDPROCEDURES

a.)           Disclosure Controls and Procedures

The Company hasevaluated, under the supervision and with the participation of the Company’smanagement including the Company’s Chairman, Chief Executive Officer who isalso its Financial Officer.  The effectiveness of the Company’s disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”) as of the end of the period covered by this Report.  Because of theinherent limitations in all control systems evaluation of controls can provideonly reasonable assurance that all control issues and instances of fraud, ifany, within the Company have been detected.  However, based on thatevaluation, the Company’s Chairman and Chief Executive Officer who is also theCompany’s Chief Financial Officer have concluded that the Company’s disclosurecontrols and procedures were effective as of the end of the period covered bythis Report at a reasonable assurance level.

b.)          Changes in Internal Control over Financial Reporting

There was nochange in the Company’s internal control over financial reporting that occurredduring the annual period ending December 31, 2006, that has materiallyaffected, or is reasonably likely to materially affect the Company’s internalcontrol over financial reporting.

PART III

ITEM 10—DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT
| **Name**             | ** ** | **Age** | ** ** | **Position**                                                                                                |
|----------------------|------------|---------|------------|-------------------------------------------------------------------------------------------------------------|
|                 |       |    |       |                                                                                                        |
| Herbert Lindo        |       | 81      |       | Director, Chairman of the Board, President,  Treasurer, Chief Executive Officer and Chief Financial Officer |
|                 |       |    |       |                                                                                                        |
| Joyce Clark          |       | 71      |       | Director                                                                                                    |
|                 |       |    |       |                                                                                                        |
| Kit Wong             |       | 75      |       | Director                                                                                                    |
|                 |       |    |       |                                                                                                        |
| Patrick J. Mc Devitt |       | 65      |       | Director                                                                                                    |
|                 |       |    |       |                                                                                                        |
| Edward Vietmeier     |       | 45      |       | Director                                                                                                    |

 

Herbert Lindo hasbeen President, Treasurer and Chief Financial Officer of Kenilworth since 1972.Since Kenilworth’s emergence from bankruptcy, he has also served as ChiefExecutive Officer until July 17, 2002 when Gino Scotto was elected to thatoffice.   When Mr. Scotto resigned in November 2005, Mr. Lindoresumed the position of Chief Executive Officer.  Mr. Lindo devoteshis full time to the business of Kenilworth.

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Kit Y. Wong hasserved as a Director of Kenilworth since 1999. He is part owner and operator ofseveral Chinese restaurants in the New York metropolitan area. Mr. Wong devotes only a portion of his time to the business of Kenilworth.

Patrick J. McDevitt has been a licensed representative for Securities firms for the pastseven (7) years. He retired in 2003 from the Securities business andjoined his wife in the CPA business.  Mr. Mc Devitt devotes only aportion of his time to the business of Kenilworth.

Joyce D. Clark hasserved as a Director of Kenilworth since 1998. Since 1991 she has served ascontroller of Long Island Wholesalers Inc., a wholesale door manufacturer andrecently started her own tax filing entity. She is also the sister of Betty S.Svandrlik, the former Corporate Secretary, who is engaged in business as amedical transcriber. Joyce D. Clark is the ex-wife of Herbert Lindo, theydivorced in 1980.   Mrs. Clark devotes only a portion of hertime to the business of Kenilworth.

Edward Vietmeieris a professional golfer and participates in major golf tournaments throughoutthe United States.  The immediate membersof his family are substantial shareholders of our Company’s stock. Mr.Vietemeier devotes only a portion of his time to the business of Kenilworth.

David C.Satterfield was the former Chairman of the Board of Directors of the WestVirginia Economic Development Authority with considerable operational oversightresponsibility.  When Governor Bob Wise of West Virginia was elected, inNovember, 2000, Mr. Satterfield served as director of the transition team andChief of Staff to the Governor until May 2001.  Prior to joining theGovernor’s office Mr. Satterfield served as the Chief of Staff and VicePresident for Institutional Advancement at West Virginia University inMorgantown, WV.  He functioned as chief advisor to the University’spresident, as WVU’s primary government relations executive.  Mr. Satterfield resigned on September 6, 2006when Kenilworth did not renew its Director’s Insurance.

Paul L. Nusbaumserved as the Cabinet Secretary for the West Virginia Department of Health andHuman Resources from January 17, 2001 until January 17, 2005 and wasresponsible for the entire operation of that government agency with its $2.5 BillionBudget and over 5,700 employees. Mr. Nusbaum currently provides professionalmanagement consulting services to a small group of health care clients andmanages his personal private real estate holdings. Mr. Nusbaum devotes only alimited portion of his time to the business of the Registrant.  Mr. Nusbaum resigned on September 1, 2006when Kenilworth did not renew its Director’s Insurance.

DIRECTORS IN OTHERPUBLIC COMPANIES

NONE

CRIMINAL/BANKRUPTCY/SECVIOLATIONS WITHIN THE LAST FIVE (5) YEARS 

NONE

SECTION 16(a) BENEFICIALOWNERSHIP REPORTING COMPLIANCE

Section 16(a) ofthe Securities Exchange Act of 1934 requires Kenilworth’s Executive Officersand Directors, and persons who beneficially own more than ten percent (10%) ofour Common Stock, to file initial reports of ownership and reports of changesin ownership with the Securities and Exchange Commission. Executive Officers,Directors and greater than ten percent (10%) beneficial owners are required bySEC regulations to furnish us with copies of all Section 16(a) formsthey file.  The Company is presently reviewing the compliance for theforegoing.

AUDIT COMMITTEE ANDCHARTER

The followingCharter has been adopted with respect to an Audit Committee.  **We have not, however, at this****time appointed an Audit Committee.**

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The AuditCommittee of the Board of Directors (the “Audit Committee”) shall have theresponsibility to assist the Board of Directors in fulfilling its fiduciary andother obligations with respect to accounting and financial matters. Specifically,and without limiting the generality of the foregoing, the Audit Committeeshall:

The AuditCommittee will be comprised of at least three (3) Independent Directors.

1.)           Review the adequacy and effectiveness of the Company’s system of internalfinancial controls and accounting practices to achieve reliability andintegrity in the Company’s financial statements, and initiate such examinationsof such controls and practices as the Audit Committee deems advisable.

2.)           Review the qualification, performance and independence of the Company’sindependent auditors and recommend independent auditors for appointmentannually by the Board of Directors.

3.)           Prior to the commencement of the Company’s annual external audit, review withthe Company’s independent auditors the scope of their audit function andestimated audit fees.

4.)           Subsequent to the completion of the Company’s annual external audit, review thereport and recommendations of the independent auditors with the independentauditors and the Company’s management.

5.)           Review the annual and quarterly consolidated financial statements of thecompany and other financial disclosures of the Company and the accountingprinciples being applied in such statements and disclosures.

6.)           Review the authority and duties of the Company’s chief financial officer andchief accounting officer and the performance by each of them of theirrespective duties.

7.)           Review the insurance programs for the Company including professionalmalpractice, general liability, director and officer liability and propertyinsurance, and the insurers carrying the Company’s insurance.

8.)           Oversee the establishment and thereafter periodically review a corporate codeof conduct and the Company’s policies on ethical business practices.

9.)           Prior to public release, review with management and the IndependentAccountants, the financial results for the prior year including the Company’sannual report on Form 10-K/A.

10.)         Review the committee’s charter annually and revise as appropriate.

11.)         Meet with the Chief Financial Officer and the Independent Accountants, inseparate executive sessions, to discuss any matters that the committee or thesegroups believe should be considered privately.

12.)         Take such other actions concerning the Company’s accounting and financialfunctions as the Committee deems appropriate with respect to the mattersdescribed above.

**Codeof Ethics**

The Registrant hasnot yet adopted a written formal Code of Ethics. However, the Registrant’sOfficers intend to comply with all honest and ethical requirements includingthe ethical handling of actual or apparent conflicts of interest betweenpersonal and professional relationships; full, fair, accurate, timely andunderstandable disclosure in reports and documents that the Registrant fileswith or submits to the Securities and Exchange Commission and in other publiccommunications made by the Registrant; compliance with applicable governmentallaws, rules and regulations; prompt internal reporting of any violationsof the foregoing to an appropriate person and accountability for adherence ofthe foregoing. A formal Code of Ethics is expected to be adopted shortly andwill be filed with the Securities and Exchange Commission.

 

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ITEM 11 — EXECUTIVECOMPENSATION

a.)   The following table sets forth theexercise of options and SARs during the fiscal year ended December 31,2006.

AggregatedOption/SAR Exercises in Last Fiscal YearAnd FY-End Option/SAR Values 
| ** **    | ** ** | ** **                    | ** ** | ** **                 | ** ** | **Number of**                    | ** ** | ** **                          | ** ** |
|---------------|------------|-------------------------------|------------|----------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| ** **    | ** ** | ** **                    | ** ** | ** **                 | ** ** | **securities underlying**        | ** ** | **Value of unexercised**  | ** ** |
| ** **    | ** ** | ** **                    | ** ** | ** **                 | ** ** | **unexercised options/**         | ** ** | **in- the-money options** | ** ** |
| ** **    | ** ** | ** **                    | ** ** | ** **                 | ** ** | **SARS at FY-end (#)** | ** ** | **SARS at FY-end($)**     | ** ** |
| ** **    | ** ** | **Shares acquired**      | ** ** | ** **                 | ** ** | **exercisable /**                | ** ** | **exercisable /**              | ** ** |
| **Name**      | ** ** | **on exercise (#)** | ** ** | **Value realized($)** | ** ** | **unexercisable**                     | ** ** | **unexercisable**                   | ** ** |
| Herbert Lindo |       | 5,000,000                     |       | $                          | 20,000     |                                  | 0          |                                | 0          |   |
|               |            |                               |            |                            |            |                                       |            |                                     |            |  |

 

No options or SARs weregranted during the year ended December 31, 2006.  Herbert Lindo exercised his five million(5,000,000) share Option on November 27, 2006.

b.)   The Registrant has no employment agreementswith any of its Executive Officers or Directors.

c.)   The Registrant has no compensation committeeat this time.

d.)   StockPerformance Graph is not applicable.

**TOTALRETURN TO SHAREHOLDER’S(DIVIDENDS REINVESTED MONTHLY)**

Kenilworth has notdeclared a dividend since its inception in 1968.

e.)   Thefollowing table sets forth the total compensation of the President and eachExecutive Officer of Kenilworth whose total salary and bonus exceeds $100,000.

**SUMMARYCOMPENSATION TABLE**
| ** **                  | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long term compensation** | ** ** |
|-----------------------------|------------|------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** ** | ** ** | **Awards** | ** ** | **Payout** | ** ** |
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **Other** | ** ** | **Restricted** | ** ** | **Securities** | ** ** | **LTIP** | ** ** | **All** | ** ** |
| **Name and**           | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **annual** | ** ** | **stock** | ** ** | **underlying** | ** ** | **payouts** | ** ** | **other** | ** ** |
| **principal position** | ** ** | **Year**   | ** ** | **Salary ($)**          | ** ** | **Bonus ($)**                   | ** ** | **compensation($)** | ** ** | **award(s)($)** | ** ** | **options/SARS (#)** | ** ** | **($)** | ** ** | **compensation($)** | ** ** |
| Herbert Lindo               |       | 2006       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2005       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2004       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2003       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |

 

Herbert Lindo received nocompensation during the past four (4) years and no Executive Officerreceived any compensation in excess of $100,000 during the past three(3) fiscal years.

ITEM 12 — SECURITYOWNERSHIP OF CETAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

The followingtable sets forth as of March 15, 2006 the ownership with respect to eachExecutive Officer and Director and each person known to own beneficially morethan five percent (5%) of the Company’s Common Stock.

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The informationprovided in the table is based on Kenilworth’s records, information filed withthe Securities and Exchange Commission and information provided to Kenilworth,except where otherwise noted.

The number ofshares beneficially owned by each person, Director or Executive Officer isdetermined under rules of the Securities and Exchange Commission, and theinformation is not necessarily indicative of beneficial ownership for any otherpurpose.  Under such rules, beneficial ownership includes any shares as towhich the individual has the right to acquire as of May 31, 2006 throughthe exercise of any stock option or other right.  Unless otherwiseindicated, each person has sole voting and investment power (or shares suchpowers with his spouse) with respect to the shares set forth in the followingtable:

**BENEFICIALOWNERSHIP TABLE**
|                                                                                               | ** ** | ** **                   | ** **     | **AMOUNT AND**    | ** ** | ** **          | ** ** |
|-----------------------------------------------------------------------------------------------|------------|------------------------------|----------------|------------------------|------------|---------------------|------------|
| ** **                                                                                    | ** ** | ** **                   | ** **     | **NATURE OF**     | ** ** | ** **          | ** ** |
| **NAME AND ADDRESS OF**                                                        | ** ** | ** **                   | ** **     | **BENEFICIAL**         | ** ** | **PERCENT OF** | ** ** |
| **BENEFICIAL OWNER**                                                                     | ** ** | **TITLE OF CLASS** | ** **     | **OWNERSHIP (1)** | ** ** | **CLASS (1)**  | ** ** |
| Herbert Lindo (1)                                                                             |       | Common Stock                 |           | 50,000,000             |       | 17.9                | %          |
| 185 Willis Avenue                                                                             |       | $                            | 0.01 par value |                   |       |                |       |   |
| Mineola, NY 11501                                                                             |       |                         |           |                   |       |                |       |
|                                                                                          |       |                         |           |                   |       |                |       |
| The total number of   shares beneficially   owned by all   Directors and   Executive Officers |       | Common Stock                 |           |                   |       |                |       |
|                                                                                          |       | $                            | 0.01 par value |                   | 13,472,465 |                | 4.8        | % |
|                                                                                               |       |                         |           | 63,472,465             |       | 22.7                | %          |

 

The percent ofclass has been determined with 278,508,293 shares issued and outstanding onJanuary 2, 2007.

ITEM 13 — CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

NONE

ITEM 14 — PRINCIPALACCOUNTANT FEES AND SERVICES

The Company hasappointed KGS, LLP. as Independent Auditor’s for the fiscal year endingDecember 31, 2005 and 2006 and to restate the Company’s financials as ADevelopment Stage Company as directed by the SEC.  Representatives of KGS,LLP. are expected to be present at the annual meeting and will have theopportunity to make a statement if they desire to do so and are expected to beavailable to respond to appropriate questions.

**FeesIncurred by Kenilworth**

Fees for professionalservices provided by the Company’s Independent Auditor, Demetrius &Company, LLC.  and KGS, LLP. are:
| ** ** | ** ** | **2006**     | ** ** | **2005**   | ** ** | **2004/3** | ** ** |
|------------|------------|--------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | **Estimate** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audit Fees |       | $            | 35,000     |       | $          | 75,000     |       | $ | 82,000 |   |
|            |            |              |            |            |            |            |            |  |  |  |

 

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Audit fees are forprofessional services rendered in connection with the audit of the Company’sannual financial statements, the review of its quarterly financial statementsand the restatements of the years 2003 and 2004 as A Development Stage Company.No other services were provided by Demetrius & Company, LLC. and KGS, LLP.

The Company has no AuditCommittee.

PART IV

ITEM 15—EXHIBITS,FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  (1) Financial Statements

Consolidated balancesheets as of December 31, 2006 and 2005

Consolidated statement ofoperations and deficit for the periods ended December 31, 2006, 2005 and2004

Consolidated statement ofcash flows for the periods ended December 31, 2006, 2005 and 2004

Consolidated statement ofchanges in stockholders equity the years ended December 31, 2006, 2005

and 2004

Notes to consolidatedfinancial statements

(b)   On July 12, 2002 Kenilworth filed an 8-Kin which the Company reported the following event:

HerbertLindo, Chairman and President of Kenilworth Systems Corporation (“Kenilworth”)since 1972, advised the Company’s Board of Directors that on June 26, 2002the Sheriff of Nassau County (the “Sheriff”) sold at a purported Public AuctionSale (the “Sale”) 10,333,450 restricted common shares of Kenilworth SystemsCorporation (the “Shares”) that he had owned and which represented control (14%of the outstanding shares) of Kenilworth, for one thousand dollars ($1,000) or$0.000095 per share.  The Shares were sold to Tappan Zee Capital Corp. (“TappanZee”).  On the date of the Sale the Shares had a market value of ninehundred thirty thousand ten dollars and fifty cents ($930,010.50).  TheSheriff seized and sold the Shares on behalf of Tappan Zee, as a result of aclaim by Tappan Zee in a disputed civil suit brought in the New York SupremeCourt for $128,062.  Tappan Zee was both the foreclosing party and thepurchaser.  Herbert Lindo owned Real Estate at the time valued in excessof $128,062 which the Sheriff could have seized instead of the KenilworthShares.

Kenilworthclaims that the Sheriff’s Auction Sale was conducted in a fraudulent manner by(1) failing to comply with the rules and regulations set forth underthe Securities and Exchange Commission Act of 1933 and 1934, as amended (The “Acts”)the New York State Securities Laws, and (2) by failing to properlyadvertise the Sale, failing to notify any or all Kenilworth shareholder’s(numbering approximately 5,500), and (3) failing to register theRestricted Shares with the Securities and Exchange Commission before conductingthe Sale or in the absence of registering the Shares, obtain a No-Action letterfrom the Commission permitting the Public Sale, and (4) by making animmediate distribution of the Restricted Shares, and (5) by concluding theauction sale despite only one (1) bidder that appeared and bid only onethousand dollars ($1,000) for all the shares when the market value of the10,333,450 shares was nine hundred thirty thousand ten dollars and fifty cents($930,010.50).  He should have adjourned the auction and then advertisethe auction sale in appropriate newspapers that quoted Kenilworth SystemsCorporation shares which has traded since 1968 under the trading symbol “KENS”on organized exchanges NASDAQ and OTC, and (6) by failing to file requirednotices of 13 D-G as provided under the Acts.  Tappan Zee and its Counseland the Sheriff’s department were advised in court documents and correspondencethat their acts violated Federal and State Securities Laws and of the existenceof the Real Property, prior to the Sale.

Bythe attorneys for Tappan Zee’s failure to seize the Real Property owned byHerbert Lindo raises the question of complicity to take control of Kenilworthinstead of satisfying a disputed claim for $128,062.

Kenilworthor Herbert Lindo, as an individual will seek in Federal or State Courts tocancel the 10,333,450 shares, which were subject of the Sheriff Auctions Sale,and seek triple damages under RICO on behalf of the shareholders of Kenilworth,the damaged parties.  Herbert Lindo and Kenilworth have not 

29

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commenced anyproceedings against the Sheriff’s Office of Nassau County and Tappan Zee andthe attorney’s representations Tappan Zee since we believe that the Statue forSecurity Fraud does not expire until June 26, 2007 or possibly 2009.

Atthe this time, the Company does not wish to spend the substantial fundsrequired to commence the action nor does Mr. Lindo have the time, atpresent, to assist in any law suit Kenilworth may institute on behalf of itsShareholders.

Kenilworthwill distribute the proceeds, if any, from any settlement or court award to theShareholders that owned Kenilworth Common Stock on or before June 26,2002.

InJune 2003, the Madison Bank of Blue Bell, Pennsylvania returned twomillion (2,000,000) of the wrong fully distributed shares by Tappan Zee forcancellation to American Stock Transfer and Trust Company, Kenilworth’s StockTransfer Agents.  Since the Madison Bank was complacent with Tappan Zee inthe fraudulent seizure and auction of the shares, neither Herbert Lindonor Kenilworth issued general releases to the Madison Bank, although thesubsequent Madison Bank and Kenilworth Agreement provided for thereleases.  The Company was desirous of having the two million (2,000,000)shares returned, reducing the claim against the Nassau County Sheriff’sDepartment and for future free distribution to Kenilworth’s shareholders onrecord on June 26, 2002 which were not made aware by the Sheriff of theAuction Sale.

ITEM 15—EXHIBITS,FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
| 3.1    | Certificate of Incorporation and prior Amendments thereto  are incorporated by reference to Exhibit 3.1.                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 3.2    | Certificate of Amendment to the Certificate of  Incorporation dated May 25, 2004 Annexed hereto.                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 3.3    | The Bylaws are Annexed in Exhibit 3 (2) to the  Registrant’s Annual Report on FORM 10-K for the fiscal year ended December  31, 2001.                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.1   | Sample Convertible Promissory Note                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.2   | Kenilworth Systems Corporation Performance and  Equity Incentive Plan incorporated by reference to the exhibit 10.2 to the  Registrant’s Annual Report on form 10-K for the fiscal year ended  December 31, 2001.                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.3   | Three (3) year lease with Police Benevolent  Association (PBA) of Nassau County for office space at 185 Willis Avenue,  Mineola, NY 11501 renewed to June 30, 2009 for approximately two thousand  three hundred (2,300) square feet for two thousand six hundred dollars  ($2,600) per month, plus adjustments for electricity and real estate taxes. |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 21.1   | Subsidiaries of the Registrant:                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                   | Video Wagering Systems Corporation |
|   |                                                                                                                                                                                                                                                                                                                                                   | RoulabetteTM Nevada Corporation |
|   |                                                                                                                                                                                                                                                                                                                                                   | Kenilworth Systems Nevada Corporation |
|   |                                                                                                                                                                                                                                                                                                                                                   | Kenilworth U.K. Ltd. |
|   |                                                                                                                                                                                                                                                                                                                                                   | Kenilworth Satellite Broadcasting Corporation, a  Delaware Corporation |
|   |                                                                                                                                                                                                                                                                                                                                                   | Satellite Gaming Consultants, Inc., a Delaware  Corporation |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 23.1   | Consent of KGS, LLP. Independent Auditor, when  provided.                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a) of the Securities Exchange Act of 1934.                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.2   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a) of the Securities Exchange Act of 1934.                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                   |

 

30

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| 32.1.1 | Certification of the Chief Executive Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|----------------------------------------------------------------------------------------------------------|
|   |                                                                                                     |
| 32.2   | Certification of the Chief Financial Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

REPORT ON FORM 8-K

**On June 29, 2005 the Companyreported on FORM 8-K**:

ITEM 8.01**  **OTHER EVENTS

OnJune 27, 2005 Kenilworth Systems Corporation entered into an exclusive one (1)year Consulting Contract with Alfred J. Luciani, Esq. starting July 1,2005.  Mr. Luciani is an authority in Native American casino regulationsand “MegaBingo”, a linked, multi-state on-reservation bingo game offered byNative American casinos.  He will head the Company’s planned project tobring live in-progress “casino table game tournaments” from and between NativeAmerican on-reservation casinos.  Mr.Luciani resigned his position in December 2005.

**On July13, 2005 the Company reported on FORM 8-K**:

ITEM4.02   NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS

OnJune 17, 2005, Officers of the Company determined that the Company shouldrestate its previously issued consolidated balance sheets, statements ofoperations and statements of cash flows for the fiscal years ended December 31,2004, December 31, 2003 and December 31, 2002, the three month period endedMarch 31, 2005, and each of the three quarters in the periods ending September30, 2004, September 30, 2003 and September 30, 2002, and concluded that suchpreviously issued financial statements should no longer be relied upon.  The requirement was requested by theSecurities and Exchange Commission in their comment letter dated April 17,2003.

Inorder to address comments from the staff (the “Staff”) of the Securities andExchange Commission (“SEC”) in connection with the Staff’s review of theCompany’s periodic filings, the Officers concluded that the Company should makethese necessary restatements.

Thefinancial statements were changed in response to the comment from the SEC tofile the Company’s financials as a “Development Stage Company” from the periodbeginning November 24, 1998 to December 31, 2004.

Therewere certain transactions that were entered into in fiscal years 2001 through2004 that were accounted for improperly.  The transactions involved the beneficialconversion features accompanying the issuance of the convertible notes, as wellas additional shares issued in connection with the convertible notes asdiscounts and inducements to convert.

Inaddition, there were a number of transactions involving the day to dayoperations of the Company that were accounted for improperly.  Theseincluded the recognition of deferred and accrued expenses, the recording ofloans to and from the Company and the recording of the patent related costs andother capitalized expenses.

TheCompany has filed an amended Annual Report on Form 10-K for the year endedDecember 31, 2004 and will file amended Annual Reports on Form 10-K for theyears ended December 31, 2003 and December 31, 2002 and amended QuarterlyReports on Form 10-Q for the quarter ended March 31, 2005, and each of thethree quarters in the periods ending September 30, 2004, September 30, 2003 andSeptember 30, 2002 with the SEC which will include the restated financialstatements including related disclosures.

OnJune 17, 2005, the Company’s Officers discussed with Demetrius & Company,L.L.C., the Company’s independent registered public accounting firm, thematters disclosed in this Current Report on Form 8-K.

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**OnSeptember 13, 2005 the Company reported on FORM 8-K:**

ITEM 5.02(d)     DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.

Atthe Annual Meeting of shareholders of Kenilworth Systems Corporation held onSeptember 13, 2005 and the submission to shareholders of a proxy statementfiled, Herbert Lindo, Gino Scotto, Maureen Plovnick, Patrick Mc Devitt, JoyceClark, Kit Wong and Paul Nusbaum were elected directors of the company. Thereafter, the Board of Directors, as authorized by Article 2, Section 2 ofthe Company’s By-Laws, approved an increase in the Board of Directors fromseven (7) to nine (9) directors.  Pursuant then to Article 2, Section 6 ofthe Company’s By-Laws, the Board of Directors then elected Alfred J. Lucianiand David Satterfield to fill the two (2) new seats.

Inaddition thereto, each of the two (2) new directors will be issued one million(1,000,000) shares of the Company’s unregistered (restricted) stock. Alfred J. Luciani, an attorney, entered into a Consulting Agreement with Kenilworthon July 1, 2005 pursuant to which he is to be compensated at the rate of $5,000per month, with an additional $5,000 per month accrued and issued one million(1,000,000) shares of the Company’s unregistered (restricted) stock every six(6) months.

**OnNovember 22, 2005 the Company reported on FORM 8-K:**

ITEM 5.02   DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b) On November 21, 2005 Kenilworth Systems Corporation received a noticeof resignation dated November 20, 2005 from Gino Scotto, Chief ExecutiveOfficer and a Director pursuant to which he resigned any and all positions heldby him with Kenilworth Systems Corporation.  On November 21, 2005Andrew Hirko resigned as Senior Vice President.

(c) Herbert Lindo on November 21, 2005, assumed the position of ChiefExecutive Officer.  Herbert Lindo also holds the position of President,Chairman, Chief Financial Officer and Treasurer of Kenilworth SystemsCorporation.  He has served as an Officer, Director and President of theCompany since 1972 during which period he has devoted his full time to theaffairs of the Company.  The appointment still requires the approval ofthe Board of Directors.  Herbert Lindo was previously married to JoyceClark, a Director of the Company.  Mr. Lindo has no writtenagreements with the Company.

Atthe Company’s Annual Shareholder’s Meeting held on September 13, 2005, theShareholders ratified the issuance of 25,000,000 shares of the Company’s CommonStock to Herbert Lindo, the Inventor of two (2) additional patentsassigned to Kenilworth.

On December 9,2005 the Company reported on FORM 8-K:

ITEM 5.02   DEPARTURE OF DIRECTORS OR PRINCIPALOFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b) OnDecember 9, 2005, Mrs. Maureen Plovnick, a Director of the Companyand Corporate Secretary of Kenilworth and all of its wholly owned subsidiarieshas temporarily resigned pursuant to Mrs. Plovnick’s letter of resignationwhich she discussed with Mr. Lindo, Chairman, for several days beforesubmitting same.  Mrs. Plovnick continues her employ with the Company asMr. Lindo’s personal secretary.

**OnDecember 27, 2005 the Company reported on FORM 8-K:**

ITEM 5.02   DEPARTUREOF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OFPRINCIPAL OFFICERS

(b) OnMonday, December 19, 2005, via email, Alfred J. Luciani, Esq. notifiedKenilworth Systems Corporation (“Kenilworth” or the “Company”) that he wishesto resign from the Board of Directors for the reason he stated in his email.

OnDecember 21, 2005, the Company, via Certified Mail — Return Receipt Requested,responded to Mr. Luciani’s email by accepting his resignation and advising Mr.Luciani, in a Letter Agreement, which 

32

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based on thereason for his resignation, the Company must terminate his considerationpayable for his consulting services, proportionately, as at December 19, 2005.

OnDecember 27, 2005, the Company received the Company’s Letter Agreement in whichMr. Luciani agreed to terminate his consulting services with the Company.

Mr.Edward Vietmeier, a professional golfer who owns 1,583,097 Common Shares ofKenilworth, has agreed to replace Mr. Luciani on the Board of Directors, whichwill take place at a scheduled Board Meeting to be held on or about January 10,2006.  The majority of the Board Members must first elect Mr. Vietmeier atthe proposed Board meeting pursuant to Kenilworth’s By-Laws.

TheBy-Laws of Kenilworth, a New York Corporation, requires a minimum of three (3)and a maximum of fifteen (15) Directors.  With the election of Mr.Vietmeier, if approved, the Company will have seven (7) Directors.

**On April18, 2006 the Company reported on FORM 8-K:**

SECTION 8.01— OTHER EVENTS

ITEM 9.01   FINANCIAL STATEMENTS AND EXHIBITS

(c)  Exhibits

The following exhibits are annexed hereto:

99.1   Press Release dated April 18, 2006

**ANNUAL REPORT FURTHER DELAYED**

**MINEOLA, N.Y., April 18, 2006 —Kenilworth Systems Corporation (OTC Pink Sheets: KENS)**........KenilworthSystems Corporation (“Kenilworth”) in an 8-K filing today reported that theCompany’s Annual Report for the period ended December 31, 2005, afterhaving filed an extension until April 17, 2006, will be further delayedfor approximately two (2) weeks.

Herbert Lindo, Chairman and CEO stated the delay iscaused by the extensive expenses incurred in continuing negotiations takingplace in the Philippines with a Philippine government authorized agency, theacquisition of Lighthouse Supply and Services, Inc. in the Philippines,all of which require Independent Auditors confirmation and the lack ofqualified staff personnel that left the Company in November 2005, whichhave not as yet been replaced.

As previously reported, the Company sustained a lossof $3,267,912 for the nine (9) month period ended September 30, 2005which included a non-operating loss of $1,250,000. The Company expects theselosses will continue until its “Roulabette® System” becomes acceptable to theworldwide Casino and Lottery Industry.

**Roulabette®**is thebrand name, coined by the Company, for a method and system for placing wagerson live, in-progress casino table games broadcast to digital satellite anddigital cable subscribers, such as Roulette, Dice, Baccarat and more, at sitesremote from the actual casino table at which the game is taking place.

With the patented Roulabette® System, the actualwagering takes place at the receiving television set managed by themicroprocessor installed in the set-top boxes (both cable and satellite) or asan attachment to the TV set. The wagering is not managed by the casino thatbroadcasts Roulabette®. It is a one-way transmission requiring only the consentof the receiving jurisdictions. The Roulabette® casino is next door, doesn’thave the costly bricks and mortar, and can be managed to prevent the under agedfrom participating and shut out the compulsive gamblers by using lotteries tomanage the cash handlings.

33

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**OnSeptember 20, 2006 the Company reported on FORM 8-K:**

ITEM 5.02  DEPARTURE OF DIRECTORS ORPRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b)  Between September 1 and 6, 2006 KenilworthSystems Corporation received notices from Paul Nusbaum and David Satterfieldthat they wished to resign as Directors of the Company as of August 28, 2006,when the Company did not renew the annual Director’s Insurance.  Duringthe week ending September 25, 2006 we polled our remaining five (5) Directorswho agreed to continue to serve the Company and approved the resignations ofMr. Nusbaum and Mr. Satterfield.

ITEM  9.01   FINANCIAL STATEMENTS AND EXHIBITS

(c)   Exhibits

The following exhibits are annexed hereto:

17.  Letters of Resignation from PaulNusbaum dated September 1, 2006 and David Satterfield dated September 6, 2006

**OnNovember 27, 2006 the Company reported on FORM 8-K:**

ITEM 5.01 OTHER EVENTS AND REGULATIONS:

Herbert Lindo, Chairman and Chief Executive Officertoday exercised his Incentive Stock Options granted on November 27, 2001 andacquired five million (5,000,000) shares at the exercise price of $0.15 pershare.

Mr. Lindo borrowed the $750,000 to exercise theOptions from the Company, as provided in the Plan and pledged the shares assecurity for the loan.

Mr. Lindo stated that he exercised the Option toprovide additional working capital of $750,000 for the Company, when he is ableto sell the shares in expected private transactions, most likely to obtainsubstantially larger investments into the Company, at more acceptable per shareprices than the present market price of Kenilworth shares at $0.035 per share. Mr. Lindo has performed his services during the past fifteen (15) years withoutcompensation and with the acquisition of the five million (5,000,000) shares,he now owns fifty million (50,000,000) shares of the Company’s Common Stock,par value one cent ($0.01) per share, which represents nineteen percent (19%)of the presently 262,588,579 shares issued and outstanding.  Mr. Lindo isbelieved to be the largest shareholder of Kenilworth stock.

***Remainder of page intentionallyleft blank***

34

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To the Board of DirectorsofKenilworth Systems Corporation:

Effective February5, 2007 the Company engaged KGS, LLP. as its independent Certified PublicAccountants to Audit the Company’s financials for the years ended December 31,2005 and 2006.

The Company hascompleted the financials but the Audit is not, as yet, completed.  After filing an automatic extension on March27, 2007, we feel obligated to our shareholders to file the 2005/2006Financials absent of the Auditor’s Opinion.

When the Audit iscompleted, which we expect to be within thirty (30) days, the Company will filea FORM 10K/A, explicitly pointing out any significant changes in our unauditedfinancials, if any, for ease of review.

Respectfully submitted,Herbert Lindo, Chairman and CEOApril 25, 2007

The IndependentAuditor’s Report will appear on this page when the Company will file theAmended FORM 10-K/A

35

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**KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDBALANCE SHEETSAS OF DECEMBER 31,**
| ** **                                                                                                                                        | ** ** | **2006**    | ** ** | **2005**     | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|--------------|------------|
| ** **                                                                                                                                        | ** ** | ** **  | ** ** | **Unudited** | ** ** |
| ASSETS                                                                                                                                            |       |        |       |         |       |
| CURRENT ASSETS                                                                                                                                    |       |        |       |         |       |
| Cash                                                                                                                                              |       | $           | 49,995     |         | $          | 5,495 |   |
| Prepaid expenses                                                                                                                                  |       | 75,000      |       | 280,000      |       |
| Loan receivable                                                                                                                                   |       | 30,000      |       | 26,300       |       |
| Receivable from  Herbert Lindo                                                                                                                    |       | 750,000     |       |         |       |
|                                                                                                                                              |       |        |       |         |       |
| Total current  assets                                                                                                                             |       | 904,995     |       | 331,795      |       |
|                                                                                                                                              |       |        |       |         |       |
| PROPERTY AND  EQUIPMENT—NET                                                                                                                  |       | 31,878      |       | 49,010       |       |
|                                                                                                                                              |       |        |       |         |       |
| PATENT COSTS—NET (Note  6)                                                                                                                   |       | 0           |       | 76,763       |       |
|                                                                                                                                              |       |        |       |         |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 9,422       |       | 9,422        |       |
|                                                                                                                                              |       |        |       |         |       |
| TOTAL ASSETS                                                                                                                                      |       | $           | 946,295    |         | $          | 446,990 |   |
|                                                                                                                                              |       |        |       |         |       |
| LIABILITIES AND  STOCKHOLDERS’ DEFICIT                                                                                                       |       |        |       |         |       |
| CURRENT LIABILITIES                                                                                                                               |       |        |       |         |       |
| Accounts payable  and accrued expenses                                                                                                            |       | $           | 311,358    |         | $          | 224,842 |   |
| Payroll taxes  payable                                                                                                                            |       | 141,000     |       | 43,878       |       |
| Loans  payable—including accrued interest                                                                                                    |       | 33,787      |       | —       |       |
| Loans  payable—automobile                                                                                                                    |       | 750         |       | 2,820        |       |
|                                                                                                                                              |       |        |       |         |       |
| Total current  liabilities                                                                                                                        |       | 486,895     |       | 271,540      |       |
|                                                                                                                                              |       |        |       |         |       |
| COMMITMENTS AND  CONTINGENCY- see notes                                                                                                           |       |        |       |         |       |
|                                                                                                                                              |       |        |       |         |       |
| STOCKHOLDERS’ EQUITY  (DEFICIT)                                                                                                              |       |        |       |         |       |
| Preferred stock  - par value $.01 per share; authorized 2,000,000 shares; no shares issued and  outstanding                                       |       |        |       | —       |       |
| Common stock -  par value $.01 per share; authorized 500,000,000 shares; issued and  outstanding 278,508,293 and 200,036,249 shares, respectively |       | 2,785,082   |       | 2,000,362    |       |
| Additional  paid-in capital                                                                                                                       |       | 30,419,215  |       | 29,859,456   |       |
| Accumulated  deficit                                                                                                                              |       | (32,744,897 | )          | (31,894,818  | )          |
|                                                                                                                                              |       |        |       |         |       |
| TOTAL  STOCKHOLDER’S EQUITY                                                                                                                  |       | 459,400     |       | 175,450      |       |
|                                                                                                                                              |       |        |       |         |       |
| TOTAL STOCKHOLDER’S  LIABILITIES AND EQUITY                                                                                                  |       | $           | 946,295    |         | $          | 446,990 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

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**KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**
| ** **                                     | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | **PERIOD FROM**            | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                     | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | **NOVEMBER 24, 1998** | ** ** |
| ** **                                     | ** ** | **YEARS ENDED**            | ** ** | **YEARS ENDED**            | ** ** | **YEARS ENDED**            | ** ** | **TO**                          | ** ** |
| ** **                                     | ** ** | **DECEMBER 31, 2006** | ** ** | **DECEMBER 31, 2005** | ** ** | **DECEMBER 31, 2004** | ** ** | **DECEMBER 31, 2005** | ** ** |
| ** **                                     | ** ** | ** **                      | ** ** | **Restated**                    | ** ** | **Restated**                    | ** ** | **Restated**                    | ** ** |
| Expenses                                       |       |                            |       |                            |       |                            |       |                            |       |
| Selling, general and administrative            |       | $                               | 850,079    |                            | $          | 3,815,302                       |       | $                               | 1,488,716  |   | $ | 5,778,211 |   |
|                                           |       |                            |       |                            |       |                            |       |                            |       |
| Other income  (expenses)                       |       |                            |       |                            |       |                            |       |                            |       |
| Interest income                                |       | —                          |       | —                          |       | 121                             |       | 922                             |       |
| Interest expense                               |       | —                          |       | —                          |       | (371,701                        | )          | (757,250                        | )          |
|                                           |       |                            |       |                            |       |                            |       |                            |       |
| Total other  income (expense)                  |       | 0                               |       | 0                               |       | (371,580                        | )          | (756,328                        | )          |
|                                           |       |                            |       |                            |       |                            |       |                            |       |
| Net loss                                       |       | $                               | (850,079   | )                               | $          | (3,815,302                      | )          | $                               | (1,860,296 | ) | $ | (3,559,947 | ) |
|                                           |       |                            |       |                            |       |                            |       |                            |       |
| Basic and  diluted loss per share              |       | $                               | (0.003     | )                               | $          | (0.02                           | )          | $                               | (0.01      | ) | $ | (0.04 | ) |
|                                           |       |                            |       |                            |       |                            |       |                            |       |
| Weighted average number  of shares outstanding |       | 278,508,293                     |       | 200,036,246                     |       | 124,364,335                     |       | 80,202,501                      |       |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

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**KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTSOF CASH FLOWS**
| ** **                                                                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | **PERIOD FROM**            | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | **NOVEMBER 24, 1998** | ** ** |
| ** **                                                                      | ** ** | **YEARS ENDED**            | ** ** | **YEARS ENDED**            | ** ** | **YEARS ENDED**            | ** ** | **TO**                          | ** ** |
| ** **                                                                      | ** ** | **DECEMBER 31, 2006** | ** ** | **DECEMBER 31, 2005** | ** ** | **DECEMBER 31, 2004** | ** ** | **DECEMBER 31, 2005** | ** ** |
| ** **                                                                      | ** ** | ** **                      | ** ** | **Restated**                    | ** ** | **Restated**                    | ** ** | ** **                      | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES                                           |       |                            |       |                            |       |                            |       |                            |       |
| Net loss                                                                        |       | $                               | (850,079   | )                               | $          | (3,815,302                      | )          | $                               | (1,860,296 | ) | $ | (5,780,380 | ) |
| Adjustments to reconcile net loss to net cash  provided by operating activities |       |                            |       |                            |       |                            |       |                            |       |
| Depreciation                                                                    |       | 17,132                          |       | 13,205                          |       | 9,647                           |       | 29,809                          |       |
| Amortization of patent (Note 6)                                                 |       | —                          |       | 7,552                           |       | 5,745                           |       | 22,980                          |       |
| Accretion of convertible debt discount                                          |       | —                          |       | —                          |       | —                          |       | 72,656                          |       |
| Beneficial conversion feature                                                   |       |                            |       | 556,653                         |       | 368,640                         |       | 1,113,484                       |       |
| Common stock issued for services                                                |       | 1,024,205                       |       | 1,723,000                       |       | 855,449                         |       | 2,920,564                       |       |
| Common stock issued to induce debt conversion                                   |       | —                          |       | 776,250                         |       | —                          |       | 839,526                         |       |
| Common stock issued for interest due on notes payable                           |       | —                          |       | —                          |       | —                          |       | 8,501                           |       |
| Accrued interest transferred to capital                                         |       | —                          |       | —                          |       | 3,048                           |       | 4,209                           |       |
| Other                                                                           |       | —                          |       | —                          |       | —                          |       | 21,100                          |       |
| Increase (decrease) in cash attributable to changes  in assets and liabilities: |       | —                          |       |                            |       |                            |       |                            |       |
| Prepaid expenses                                                                |       | (75,000                         | )          | (280,000                        | )          | (93,750                         | )          | (280,000                        | )          |
| Accounts payable and accrued expenses                                           |       | 345,895                         |       | 271,540                         |       | 87,458                          |       | 218,772                         |       |
| Payroll taxes payable                                                           |       | 141,000                         |       | 43,878                          |       | 24,056                          |       | 59,522                          |       |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Net cash used in operating activities                                           |       | 603,153                         |       | (703,224                        | )          | (600,003                        | )          | (1,368,520                      | )          |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES                                           |       |                            |       |                            |       |                            |       |                            |       |
| Payment of loan receivable—stockholder                                     |       | —                          |       | —                          |       | —                          |       | (4,000                          | )          |
| Proceeds from loan receivable—stockholder                                  |       | —                          |       | 20,000                          |       | 4,000                           |       | 4,000                           |       |
| Payment of patent costs (Note 6)                                                |       | —                          |       | (8,000                          | )          | (17,602                         | )          | (66,639                         | )          |
| Purchase of property and equipment                                              |       | 0                               |       | (12,147                         | )          | (42,128                         | )          | (58,567                         | )          |
| Security deposit                                                                |       | 9,422                           |       | (9,422                          | )          | (4,250                          | )          | (9,422                          | )          |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Net cash used in investing activities                                           |       |                            |       | (9,569                          | )          | (59,980                         | )          | (129,456                        | )          |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES                                           |       |                            |       |                            |       |                            |       |                            |       |
| Proceeds from loans payable—stockholders                                   |       | (3,700                          | )          | —                          |       | —                          |       | 60,000                          |       |
| Repayment of loans payable—stockholders                                    |       |                            |       | —                          |       | —                          |       | (10,000                         | )          |
| Proceeds from loans payable—related parties                                |       | 16,000                          |       | —                          |       | —                          |       | 141,137                         |       |
| Repayment of loans payable—related parties                                 |       | 17,787                          |       | —                          |       | (112,017                        | )          | (116,017                        | )          |
| Proceeds from convertible notes                                                 |       | 623,000                         |       | 922,500                         |       | 652,000                         |       | 1,275,361                       |       |
| Proceeds from sale of common stock                                              |       | 10,000                          |       | —                          |       | 95,000                          |       | 122,500                         |       |
| Proceeds from stock subscriptions receivable                                    |       | —                          |       | —                          |       | 25,000                          |       | 25,000                          |       |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Net cash provided by financing activities                                       |       | 663,087                         |       | 423,554                         |       | 659,983                         |       | 1,497,981                       |       |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Net change in cash                                                              |       |                            |       | —                          |       | —                          |       | 5                               |       |
| Cash—beginning of year                                                     |       | 44,500                          |       | 5                               |       | 5                               |       | —                          |       |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Cash—end of year                                                           |       | $                               | 49,995     |                            | $          | 5,495                           |       | $                               | 5          |   | $ | 5,495 |   |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Supplemental disclosure of non-cash activities:                                 |       |                            |       |                            |       |                            |       |                            |       |
|                                                                            |       |                            |       |                            |       |                            |       |                            |       |
| Common stock issued for patent costs                                            |       | $                               | 0          |                            | $          | —                          |       | $                               | —     |   | $ | 10,000 |   |
| Exchange of loans payable for convertible notes  payable                        |       | $                               | 18,000     |                            | $          | —                          |       | $                               | 15,000     |   | $ | 50,000 |   |
| Conversion of notes payable to common stock                                     |       | $                               | 623,000    |                            | $          | 1,723,000                       |       | $                               | 682,000    |   | $ | 2,986,500 |   |
| Cancellation of stock subscriptions receivable                                  |       | $                               |       |                            | $          | 29,000                          |       | $                               | 29,000     |   | $ | 29,000 |   |
| Common stock  issued for subscriptions receivable                               |       | $                               |       |                            | $          | —                          |       | $                               | 15,000     |   | $ | 71,500 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

38

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDSTATEMENTSOF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)**
| ** **                                                                    | ** ** | **COMMON STOCK** | ** ** | **ADDITIONAL** | ** ** | **STOCK**            | ** ** | **DEFICIT  ACCUMULATED  DURING THE** | ** ** | ** **             | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|----------------------|------------|-------------------------------------------|------------|------------------------|------------|
| ** **                                                                    | ** ** | **SHARES**            | ** ** | **PAR  VALUE** | ** ** | **PAID-IN  CAPITAL** | ** ** | **SUBSCRIPTIONS  RECEIVABLE**             | ** ** | **DEVELOPMENT  STAGE** | ** ** | **STOCKHOLDERS’  DEFICIT** | ** ** |
| Balances — December 31,  2003 Restated                              |       | 104,388,594           |       | 1,043,886      |       | 24,825,260           |       | (54,000                                   | )          | (26,078,770            | )          | (263,624 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Common stock issued for  stock subscription receivable                        |       | (15,000               | )          | (15,000        | )          |                 |       |                                      |       |                   |       |   |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Receipt of stock  subscription receivable                                     |       | —                |       | —         |       | —               |       | 25,000                                    |       | —                 |       | 25,000 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Cancellation of stock  subscription receivable                                |       | —                |       | —         |       | (29,000              | )          | 29,000                                    |       | —                 |       | — |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Common stock issued for  services                                             |       | 17,072,651            |       | 170,726        |       | 684,723              |       | —                                    |       | —                 |       | 855,449 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Sale of common stock                                                          |       | 2,350,000             |       | 23,500         |       | 71,500               |       | —                                    |       | —                 |       | 95,000 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Accrued interest on  convertible notes transferred to capital upon conversion |       | —                |       | —         |       | 3,048                |       | —                                    |       | —                 |       | 3,048 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Conversion of notes  payable to common stock                                  |       | 13,740,000            |       | 137,400        |       | 544,600              |       | —                                    |       | —                 |       | 682,000 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Value attributed to  beneficial conversion feature of convertible notes       |       | —                |       | —         |       | 368,640              |       | —                                    |       | —                 |       | 368,640 |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Net loss accumulated  during the development stage                            |       | —                |       | —         |       | —               |       | —                                    |       | (1,860,296             | )          | (1,860,296 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Balances — December 31,  2004                                       |       | 137,551,245           |       | $              | 1,375,512  |                 | $          | 26,468,771                                |       | $                      | (15,000    | ) | $ | (27,939,066 | ) | $ | (109,783 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Common stock issued for  services                                             |       | 45,885,000            |       | 458,850        |       | 2,808,825            |       |                                      |       |                   |       |   |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Common stock issued in  connection with convertible notes                     |       | 15,428,000            |       | 154,280        |       | 539,980              |       | 694,260                                   |       |                   |       |   |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Sale of common stock                                                          |       | 1,172,001             |       | 11,720         |       | 41,880               |       | 52,724                                    |       |                   |       |   |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Write-Off                                                                     |       |                  |       |           |       |                 |       |                                      |       | (140,450               | )          | (140,450 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Net loss accumulated  during the development stage                            |       |                  |       |           |       |                 |       |                                      |       | (3,815,302             | )          | (3,815,302 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Balances — December 31,  2005                                       |       | 200,036,246           |       | $              | 2,000,362  |                 | $          | 29,859,456                                |       | $                      | (15,000    | ) | $ | (31,894,818 | ) | $ | (31,894,818 | ) |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |
| Common stock issued for  services                                             |       | 60,426,047            |       | 604,426        |       | 419,779              |       |                                      |       |                   |       |   |   |
|                                                                          |       |                  |       |           |       |                 |       |                                      |       |                   |       |   |   |

 

40

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| Common stock issued in  connection with convertible notes |   | 17,646,000  |   | 176,646   |   | 139,940 |       |   |   |     |        |     |        |
|-----------------------------------------------------------|--------|-------------|--------|-----------|--------|---------|------------|--------|--------|----------|-------------|----------|-------------|
|                                                      |   |        |   |      |   |    |       |   |   |     |        |     |        |
| Sale of common stock                                      |   | 400,000     |   | 400       |   | 40      |       |   |   |     |        |     |        |
|                                                      |   |        |   |      |   |    |       |   |   |     |        |     |        |
| Net loss accumulated  during the development stage        |   |        |   |      |   |    |       |   |   | (850,079 | )           | (850,079 | )           |
|                                                      |   |        |   |      |   |    |       |   |   |     |        |     |        |
| Balances — December 31, 2006                         |   | 278,508,293 |   | 2,785,082 |   | $       | 30,419,215 |   | 0      |     | (32,744,897 | )        | (32,744,897 | ) |
|                                                           |        |             |        |           |        |         |            |        |        |          |             |          |             |  |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

NOTE 1- THE COMPANY AND NATURE OF BUSINESS

Kenilworth SystemsCorporation (the “Company”) was incorporated in New York in April 1968 andis currently engaged in the development and eventual by outsourcing themanufacture the terminals that will permit individuals to play along with livein-progress casino table games at locations outside the casino confines (remotelocations).  Games will be available via TV simulcast of digital satelliteand digital cable broadcasts to individuals at homes and offices and wherevertelevision sets are located around the world.  The Company’s businessremains in continuous development stage although it completed a nine milliondollar ($9,000,000) contract with the Totalizator Agency Board (“TAB”), a stategovernment agency of Victoria, Australia, while being in voluntary bankruptcyreorganization under Chapter 11, of the United States Bankruptcy Code.Successful execution of its business plan is dependent up such factors as: theability to raise substantial capital and assemble a skilled and experiencedmanagement team, obtaining regulatory approval from gaming authorities andother governmental bodies, customer acceptance of a new experience in casinogaming, and technological feasibility.

These challengescreate uncertainty as to the Company’s ability to operate as a going concernand could result in the termination of its business.  Management continuesto develop a wagering system that allows casino patrons and individuals outsidethe casino to play and wager along with live casino table games. The first stepin the plan is to conduct testing. Unless the Company is able to obtainsufficient funds, none of the tests and initial development work can commence.The Company will attempt to obtain the necessary funding by offering its CommonStock or Preferred Stock to private investors**.**

If initial testingis successful, the second step is to obtain, if required, the appropriatelicenses from gaming control regulators in the various venues the Companyintends to offer its system. Upon successful testing, the Company intends toseek financing from banking sources for the manufacture of a microprocessorthat will be installed in digital set top boxes and digital cable boxes, whennecessary.  These appliances will then be able to convert an ordinarytelevision set into a computer terminal using the TV set as the monitor forremote casino game play and wagering. This technology is protected by theCompany’s recently issued patents (see Note 6).

The accompanyingfinancial statements have been prepared assuming the Company is a going concernand do not reflect adjustments, if any that would be necessary if the Companywere not a going concern.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles ofconsolidation

The consolidatedfinancial statements include the accounts of Kenilworth Systems Corporation andits wholly owned subsidiaries: Video Wagering Systems Corporation, RoulabetteTMNevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth U.K.Ltd., Kenilworth Satellite Broadcasting Corporation and Satellite GamingConsultants, Inc., both Delaware Corporations. None of the subsidiaries has anysignificant assets or liabilities.

Use of estimates

Management usesestimates and assumptions in preparing these financial statements in accordancewith generally accepted accounting principles.  Those estimates andassumptions affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities, and the reported revenue andexpenses. Actual results could vary from the estimates that were used.

42

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

Cash and cash equivalents

The Companyconsiders all highly liquid debt instruments with an original maturity of threemonths or less when purchased to be cash equivalents.  There were cashequivalents at December 31, 2006 and 2005.

Property andequipment

Property andequipment are stated at cost.  Equipment is depreciated over the estimateduseful lives of the respective assets, ranging from five to seven years. Leasehold improvements are amortized over the shorter of either the asset’suseful life or the related lease term.  Depreciation is computed on thestraight-line method for financial reporting purposes.

Impairment oflong-lived Assets

The Companyregularly reviews long-lived assets for indicators of impairment. Management’s judgments regarding the existence of impairment indicators arebased on performance.  Future events could cause management to concludethat impairment indicators exist and that the value of long-lived assets isimpaired.  When events or circumstances indicate that the carrying amountof an asset may not be recoverable, the fair value of the asset is compared toits carrying value.  Impairment losses are measured as the amount by whichthe carrying value of an asset exceeds its estimated fair value.

Advertising costs

Advertising costsare expensed as incurred.  There were no advertising costs for any periodpresented.

Income taxes

Income taxes areaccounted for under the asset and liability method specified by SFASNo. 109, “Accounting for Income Taxes.”  Deferred tax assets andliabilities are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand liabilities, and their respective tax bases and operating loss and taxcredit carry forwards.  Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the year inwhich those temporary differences are expected to be recovered or settled.

Fair value offinancial instruments

Financialinstruments reported in the balance sheet consist of accounts payable and loanspayable, the carrying value of which approximated fair value atDecember 31, 2006 and 2005.  The fair value of the financialinstruments disclosed are not necessarily representative of the amount thatcould be realized or settled nor does the fair value amount consider the taxconsequences of realization or settlement.

Stock-basedcompensation

The Company hasadopted SFAS No. 123 “Accounting for Stock Based Compensation” whichrequires it to recognize stock awards granted to employees and non-employees ascompensation expense based on the fair market value of the stock award or fairmarket value of the goods or services received, whichever is more reliablymeasurable.

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

Loss per share

Basic loss pershare is calculated by dividing net loss by the weighted-average number ofcommon shares outstanding during the period. Diluted loss per share iscalculated by dividing net loss by the weighted-average number of common sharesoutstanding, plus the weighted average number of net shares that would beissued upon the exercise or conversion of dilutive securities, such as stockoptions and warrants, and convertible debt.  There were no dilutivesecurities outstanding as of December 31, 2006, 2005 and 2004. Accordingly, diluted loss per share for 2006, 2005 and 2004 is the same asbasic loss per share.

New AuthoritativeAccounting Pronouncements

The Company doesnot anticipate the adoption of recently issued accounting pronouncements willhave a significant impact on its results of operations, financial position orcash flows.

NOTE 3- BANKRUPTCY PROCEEDINGS

Throughout the1980’s the Company experienced working capital shortages that resulted in theCompany filing a voluntary petition for reorganization under Chapter 11 of theUnited States bankruptcy Code. From August 28, 1982 to June 7, 1985the Company operated during reorganization proceedings. On June 7, 1985, aUnited States Bankruptcy Judge confirmed the Company’s Plan of Reorganization.On April 27, 1988, the Bankruptcy Court entered a final decree in thecase. On October 27, 1988, the case was re-opened on grounds the Debtorfailed to consummate its plan of reorganization and on February 25, 1991the case was converted to a case under Chapter 7 of the Bankruptcy Code. Byorder of the Court dated June 19, 1991 the Chapter 7 was reconverted to acase under Chapter 11 of the Bankruptcy Code. A second plan of reorganizationwas approved and a second order of confirmation was entered in connection withthe Chapter 11 case on October 2, 1991. However, the Debtor was unable toconsummate its second plan of reorganization, and by order datedNovember 25, 1991, the case was reconverted to a case under Chapter 7 ofthe Bankruptcy Code.

FromFebruary 1991 through September 1998, the Company was inactive. InSeptember 1998 a United States Bankruptcy Judge in the Eastern District ofNew York approved the Final Report and Accounts submitted by the Chapter 7Trustee of the Estate of Kenilworth and after obtaining approval from the U.S.Trustee, Kenilworth made a one hundred percent (100%) cash distribution to thecreditors and paid in full all administrative fees and expenses. The Companyexited from Bankruptcy on September 28 1998 with no assets and noliabilities. For the period September 29, 1998 through November 23,1998 the Company was in the process of monitoring the payments by check to thecreditors. No other activity occurred during that period.  Effective,November 24, 1998, the Company commenced its present plans.

NOTE 4- PREPAID EXPENSES

Prepaid expensesconsist of the unamortized value of stock issued to directors for thetwelve-month service period ending September 30, 2007.  The balancewill be amortized on a straight-line basis over the remaining term.

44

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

NOTE 5- PROPERTY AND EQUIPMENT

Property and equipmentconsist of the following:
| ** **                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
|                                |       |     |       |     |       |
| Office equipment                    |       | $        | 18,800     |     | $          | 18,800 |   |
| Leasehold improvements              |       | 21,000   |       | 21,000   |       |
| Furniture and  fixtures, automobile |       | 35,620   |       | 35,620   |       |
|                                |       |     |       |     |       |
|                                |       | 75,420   |       | 75,420   |       |
| Less:  Accumulated amortization     |       | 43,542   |       | 26,410   |       |
| Total property and  equipment, net  |       | $        | 31,878     |     | $          | 49,010 |   |

NOTE 6 - PATENT

The Company owns apatent for technology that will enable it to provide real-time transmission ofroulette and other game play from live tables at a casino facility.  Prior to December 31, 2006, the costsincurred in connection with the submission and approval of the patent applicationhas been capitalized.  A U.S. patent was awarded in June 2003. The Company previously amortized patent costs. On December 31, 2006, the Company elected to write-off all patent coststo meet generally accepted accounting principles (GAAP).  The $81,604 of accrued costs was chargedagainst capital.

NOTE 7- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| ** **                                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------------------|------------|----------|------------|----------|------------|
|                                                |       |     |       |     |       |
| Legal and other  professional fees                  |       | $        | 46,152     |     | $          | 22,137 |   |
| Payroll Taxes  (approximately, including penalties) |       | 141,000  |       | 43,878   |       |
| Other                                               |       | 299,743  |       | 205,525  |       |
|                                                |       |     |       |     |       |
|                                                |       | $        | 486,895    |     | $          | 271,540 |   |

 

NOTE 8- LOANS PAYABLE

2006:

During the year,the Company borrowed from two (2) shareholders, $30,000 and $16,000 with annualinterest payments of eight percent (8%) and twelve percent (12%), respectively.  The $30,000 loans were reduced on January 16,2007 to $17,745, including interest, and the $16,000 loan the Company paid allaccrued interest to December 16, 2006.

45

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NOTE 9- CONVERTIBLE PROMISSORY NOTES

During 2006, 2005and 2004, respectively, the Company sold to various private investors $765,400,$776,250 and $652,000 principal amount of Convertible Promissory Notes bearinginterest at rates ranging from 4.00% to 10.00% per annum.  The Notes had aone-year term and were immediately convertible at the option of the note holderinto shares of restricted common stock based on conversion prices ranging from$.05 per share.  All Notes issued in 2006, 2005 and 2004 were convertedinto a total of 20,356,000, 15,525,000 and 13,740,000 common shares,respectively.  The issuance of the Notes gave rise to a beneficialconversion feature (BCF) in the amount of: none in 2006, $368,640 in 2005 and$188,191 in 2004, reflecting the benefit of conversion prices that were belowthe market price of the Company’s common stock.  The BCF was charged infull to operations on the respective issuance dates of the Notes with anoffsetting credit to additional paid-in capital.  The Company accounts forBCF under the recognition and measurement principles of Emerging Issues TaskForce (EITF) 98-5, “Accounting for Convertible Securities with BeneficialConversion Features or Contingently Adjustable Conversion Ratios to CertainConvertible Instruments” and EITF-00-27, “Application of EITF Issue 98-5.

NOTE 10- INCOME TAXES

The provision for incometaxes consists of the following:
| ** **                 | ** ** | **Years ended December 31,** | ** ** |
|----------------------------|------------|---------------------------------------------|------------|
| ** **                 | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                       |       |                                        |       |   |   |   |   |
| Current:                   |       |                                        |       |   |   |   |   |
| Federal                    |       | $                                           | —     |   | $ | — |   | $ | — |   |
| State                      |       | —                                      |       | — |   | — |   |
|                       |       | —                                      |       | — |   | — |   |
|                       |       |                                        |       |   |   |   |   |
| Deferred:                  |       |                                        |       |   |   |   |   |
| Federal                    |       | —                                      |       | —- |   | — |   |
| State                      |       | —                                      |       | — |   | — |   |
|                       |       | —                                      |       | — |   | — |   |
|                       |       |                                        |       |   |   |   |   |
| Provision for income taxes |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

The Company didnot have any revenue from operations since exiting Bankruptcy Proceedings inSeptember 1998.

***Remainderof page intentionally left blank***

46

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The effectiveincome tax rate differed from the U. S. federal statutory rate as follows:
| ** **                                    | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                          |       |                                        |       |   |   |   |   |
| Federal income tax  benefit at statutory rate |       | $                                           | N/A        |   | $ | N/A |   | $ | (486,000 | ) |
| State income taxes, net  of federal benefit   |       | N/A                                         |       | N/A |   | (86,000 | ) |
| Increase in valuation  allowance              |       | N/A                                         |       | N/A |   | 572,000 |   |
|                                          |       |                                        |       |   |   |   |   |
|                                          |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

The differencebetween the U. S. federal tax rate and the Company’s effective tax rate in2004, 2003 and 2002 is due primarily to changes in the valuation allowancerelated to the net deferred tax asset, offset by certain nondeductibleexpenses.

The major sources oftemporary differences and their deferred tax effect are as follows:

Deferred tax assets:
| ** **                 | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|----------------------------|------------|------------|------------|------------|------------|
| ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net operating  losses      |       | $          | 850,079    |       | $          | 3,875,302 |   |
| Less: Valuation  allowance |       | —     |       | —     |       |
|                       |       |       |       |       |       |
| Net deferred tax assets    |       | $          | 850,079    |       | $          | 3,815,302 |   |

 

The benefits ofnet operating losses will not be recognized until management determines thatrealization is more likely than not to occur.  Accordingly, management hasestablished a valuation allowance to offset the tax benefits of net operatinglosses for all periods presented.  At December 31, 2006, the Companyhad net operating loss carry-forwards of approximately $20,000,000, expiringthrough 2024. Utilization of NOL carry-forwards may be limited under varioussections of the Internal Revenue Code depending on the nature of the Company’soperations.

NOTE 11- COMMITMENT

Operating lease

The Company rents approximately2,300 square feet of office space in Mineola, NY under a lease expiring inMay 2009.  Annual rent is approximately $35,000, payablemonthly.  The lease also requires the Company to pay its share ofincreases in real estate taxes, operating costs and repairs over the base yearamounts.  Following is a schedule of minimum lease payments requiredunder the lease. 
| **Year ending December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|------------|------------|
|                                        |       |       |       |
| 2006                                        |       | $          | 33,000     |       |
| 2007                                        |       | 35,000     |       |
| 2008                                        |       | 38,000     |       |
| Total                                       |       | $          | 106,000    |       |

** **

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Rent expense forthe years ended December 31, 2006, 2005 and 2004 was $33,000, $31,000, and$30,000, respectively.

NOTE 12- RELATED PARTY TRANSACTIONS

On November 27,2006 Herbert Lindo, the Chairman and Chief Executive Officer exercised a fivemillion (5,000,000) share option for seven hundred fifty thousand dollars($750,000) at fifteen cents ($0.15) per share pursuant to the Company’sPerformance and Equity Plan.  The priceper share was the price for the Option which would have expired on thefollowing date.  The average market priceof the Common Stock for the thirty (30) days prior to November 27, 2006 washigh: $0.05, low: $0.03.

NOTE 13- STOCKHOLDERS’ DEFICIT

Authorized shares

The Company isauthorized to issue up to 500,000,000 shares of Common Stock and up to2,000,000 shares of Preferred Stock.  Both classes have a par value of$.01 per share.  The rights and preferences of the preferred shares willbe designated by the Board of Directors.

Sales ofunregistered common stock

In fiscal 2006,the Company raised $765,400 from the sale of 20,356,000 shares of common stockto a group of private investors at a price of approximately $0.037 per share.

Loan receivable

At December 31,2006, shareholders owed $14,000 and $4,000, respectively, on balances due forthe purchase of common stock and a consultant owes $12,000 on a Promissory Noteguaranteed by Herbert Lindo, the Chairman and Chief Executive of the Company.

Common sharesissued for services

2006: The Companyissued approximately 58,116,044 restricted shares to investors and for servicesrendered for $1,829,000.

2005: The Companyissued approximately 110,000,000 restricted shares to investors and forservices rendered for $1,859,300.

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Conversion ofNotes and related transactions

During 2006, 2005and 2004, the Company issued 20,356,000, 13,740,000 and 6,081,447 shares,respectively, upon conversion of the Notes.

Equity plan

In December 2000,the Company adopted and in August 2001, stockholders approved the Performanceand Equity Incentive Plan (the Plan).  The Board of Directors has reservedup to 10,000,000 shares of common stock for issuance under the plan asincentive stock options (ISOs), nonqualified stock options (NQSOs), restrictedstock grants, and stock appreciation rights.  The terms and conditions ofeach grant are determined by a committee composed of two or more non-employeedirectors.  Grants to non-employee directors are subject to approval ofthe entire board.  All employees, directors and non-employee consultantsare eligible to receive grants under the Plan.  ISOs may not be granted toany owner of 10% or more of the combined voting power of the Company, unlessthe exercise price is at least 110% of the fair market value of the commonstock on the grant date and the option term does not exceed five years.

In August 2001,administrators of the Plan granted 5,000,000 NQSOs to Herbert Lindo, theCompany’s President, and 500,000 NQSOs to Maureen Plovnick, an employee. The options have a five-year term, an exercise price of $.15 per share andimmediate vesting.  There have been no other Plan transactions since thesegrants.  Mr. Lindo exercised his5,000,000 share option on November 27, 2006. A remaining option for 500,000 shares expired.  No new options have been granted.

NOTE 14- RESTATEMENT

There were certaintransactions that were entered into in fiscal years 2001 through 2004 that wereaccounted for improperly.  The transactions involved the beneficialconversion features accompanying the issuance of the convertible notes, as wellas additional shares issued in connection with the convertible notes asdiscounts and inducements to convert.

In addition, therewere a number of transactions involving the day to day operations of theCompany that were accounted for improperly.  These included therecognition of deferred and accrued expenses, the recording of loans to andfrom the Company and the recording of the patent related costs and othercapitalized expenses.

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The cumulative impact ofthese restatements increases the deficit accumulated during the developmentstage by $55,308, and increases the total stockholders’ deficit by $719,471.

The following tablesummarizes the annual consolidated statements of operations and balance sheetdata for the periods indicated, giving effect to the restatement describedabove:
| ** **                           | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|
| ** **                           | ** ** | **2004**                                   | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                           | ** ** | **Previously  Reported**                   | ** ** | **Restated** | ** ** | **Previously  Reported** | ** ** | **Restated** | ** ** | **Previously  Reported** | ** ** | **Restated** | ** ** |
| **STATEMENT  OF OPERATIONS DATA**    |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Selling, general  and administrative |       | $                                          | 1,434,361  |   | $ | 1,488,716 |   | $ | 832,168 |   | $ | 474,193 |   | $ | 660,289 |   | $ | 361,400 |   |
| Interest income                      |       | —                                     |       | 121 |   | — |   | 113 |   | — |   | 81 |   |
| Interest expense                     |       | —                                     |       | (371,701 | ) | — |   | (294,149 | ) | — |   | (23,570 | ) |
| Net loss                             |       | (1,434,361                                 | )          | (1,860,296 | ) | (832,168 | ) | (768,229 | ) | (660,289 | ) | (384,889 | ) |
| Basic and diluted loss  per share    |       | $                                          | (0.01      | ) | $ | (0.01 | ) | $ | (0.008 | ) | $ | (0.01 | ) | $ | (0.007 | ) | $ | (0.01 | ) |

 
| ** **                                        | ** ** | **Year Ended December 31,** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                        | ** ** | **2004**                                   | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                        | ** ** | **Previously  Reported**                   | ** ** | **Restated** | ** ** | **Previously  Reported** | ** ** | **Restated** | ** ** | **Previously  Reported** | ** ** | **Restated** | ** ** |
| **BALANCE  SHEET DATA**                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Prepaid expenses                                  |       | $                                          | 198,300    |   | $ | 93,750 |   | $ | 187,500 |   | $ | — |   | $ | 232,544 |   | $ | — |   |
| Loan  receivable—stockholders                |       | 142,000                                    |       | — |   | 50,000 |   | 4,000 |   | — |   | — |   |
| Total current  assets                             |       | 409,458                                    |       | 93,755 |   | 244,636 |   | 4,005 |   | 242,615 |   | — |   |
| Patent—net                                   |       | 329,917                                    |       | 68,763 |   | 336,100 |   | 56,905 |   | — |   | 16,547 |   |
| Total assets                                      |       | 789,795                                    |       | 203,631 |   | 593,038 |   | 65,292 |   | 255,878 |   | 22,517 |   |
| Loans  payable—related parties               |       | —                                     |       | 25,120 |   | — |   | 137,137 |   | — |   | 66,161 |   |
| Total current  liabilities                        |       | 180,107                                    |       | 313,414 |   | 274,346 |   | 328,916 |   | 107,458 |   | 231,029 |   |
| Deficit  accumulated during the development stage |       | (27,883,758                                | )          | (27,939,066 | ) | (26,449,397 | ) | (26,078,770 | ) | (25,617,229 | ) | (25,310,541 |   |
| Total  stockholders’ equity (deficit)        |       | 609,688                                    |       | (109,783 | ) | 318,692 |   | (263,624 | ) | 148,420 |   | (208,512 |   |
|                                                   |            |                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

NOTE 15- SUBSEQUENT EVENTS

The Company, through April15, 2007 has issued 37,817,715 Restricted Shares for conversion of Notes andissuance of services rendered.  The totalincludes the issuance of 5,000,000 shares to Herbert Lindo, the Chairman and ChiefExecutive Officer, in connection with exercising his stock option on November27, 2006.

The Companythrough June 30, 2005 has issued 73,182,000 Restricted Shares for theconversion of Notes and issuance of shares for services rendered.  Thetotal includes the issuance of 45,000,000 shares owed to Herbert Lindo, theChairman and Chief Executive Officer.

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On February 14, 2007, the Company issued 2,500,000 shares to a consultantfor services rendered through the year from February 14, 2006 to February 14,2007.

In October 2006, the Company entered into two (2) consulting agreementsfor a two (2) year term as compensation, the consultants each received2,000,000 shares of restricted common stock upon signing.

InApril 2005, the Company entered into a consulting agreement for a one-yearterm.  As compensation, the consultants received 2,000,000 shares ofrestricted common stock upon signing.

In June 2005,the Company agreed to issue 770,588 shares of restricted common stock insettlement of an employment contract dispute.  The shares were valued bymanagement at approximately $38,500.  The liability was accrued in 2004.

PRIOR CONVICTIONOF HERBERT LINDO

Herbert Lindo, theChairman and CEO of Kenilworth, was convicted in 1993 on three (3) countsof having permitted three (3) banks located in the Upper Peninsula ofMichigan to sell unregistered, legended, restricted Kenilworth shares pursuantto SEC Rule 144 prior to the bank having the then required two(2) year holding period. The sales took place in 1987 and 1988.Mr. Lindo was found not guilty of conspiring to sell unregisteredsecurities which was not met, pursuant to SEC Rule 144. The Securities andExchange Commission did not enter into the case. The indictments were broughtby the U.S. Attorney of the Western District of Michigan. Mr. Lindo wassentenced to one thousand (1,000) hours of community service, fifteen (15)months house arrest, and fined six hundred thousand dollars ($600,000).

In 1992, theholding period for exemption pursuant to Rule 144 was reduced to one(1) year. The changed Rule did not apply to the 1987-88 sales. No onelost any money and Kenilworth had received fair value for the pledgedsecurities. The government never charged Mr. Lindo with fraud.Mr. Lindo claimed he had no knowledge of the sales by the banks.

Because of thisconviction, Herbert Lindo is likely not to be found suitable by any CasinoControl Commission or other regulatory body to hold licenses. When the time toapply for licensing RoulabetteTM arrives, Mr. Lindo will resign totallyfrom Kenilworth and place his Kenilworth shares into a voting trust. Until thattime, Herbert Lindo believes that he is best suited to manage the postbankruptcy reorganization and to transform Kenilworth into a viable business.

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
| KENILWORTH SYSTEMS                   |              |
|--------------------------------------|-------------------|
| CORPORATION                          |              |
|                                 |              |
| By:                                  | /s/ HERBERT LINDO |   |
|                                 | Herbert Lindo     |   |
|                                 |              |
| CHAIRMAN AND CHIEF FINANCIAL OFFICER |              |
|                                      |                   |  |  |

 

Pursuant to therequirements of Securities Exchange Act of 1934, this report has been signedbelow by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.
| NAME                    | ** ** | **TITLE** | ** ** | **DATE**       |
|-------------------------|------------|-----------|------------|----------------|
|                    |       |      |       |           |
| /s/ HERBERT LINDO       |       | Director  |       | April 25, 2007 |
| Herbert Lindo           |       |      |       |           |
|                    |       |      |       |           |
| /s/ JOYCE CLARK         |       | Director  |       | April 25, 2007 |
| Joyce Clark             |       |      |       |           |
|                    |       |      |       |           |
| /s/ KIT WONG            |       | Director  |       | April 25, 2007 |
| Kit Wong                |       |      |       |           |
|                    |       |      |       |           |
| /s/ PATRICK J. MCDEVITT |       | Director  |       | April 25, 2007 |
| Patrick J. McDevitt     |       |      |       |           |
|                    |       |      |       |           |
| /s/ EDWARD VIETMEIER    |       | Director  |       | April 25, 2007 |
| Edward Vietmeier        |       |      |       |           |

 

 

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