** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

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**FORM 10-K**

| (Mark One)                                                                                                                                                                                                                                            | ** **                                                                                                                |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
| **x**                                                                                                                                                                                                                                                 | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                       |
|                                                                                                                                                                                                                                                  |                                                                                                                      |
| **For the  Fiscal Year Ended December 31, 2005**                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                  |                                                                                                                      |
| **or**                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                  |                                                                                                                      |
| **o**                                                                                                                                                                                                                                                 | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)** |
|                                                                                                                                                                                                                                                  |                                                                                                                      |
| **For the  transition period from                   to                  .** |

 

**Commissionfile number 0-08962**

**KENILWORTHSYSTEMS CORPORATION**(Exact name of registrant 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’s telephone number, including area code)

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

**NONE**

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

|                                         | **(TITLE OF CLASS)** | ** ** |
|-----------------------------------------|----------------------|------------|
| Common Stock,  par value $.01 per share |
|                                    |                 |       |

 

 

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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 check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K(Section 229.405 of this chapter) is not contained herein, and will not becontained, to the best of the registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. o

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act).Yes x No o

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, 2006 was $10,500,000.

As of January 3,2006, 200,036,246 Shares of the Registrant’s Common Stock, $0.01 par value,were outstanding.

Portions of theRegistrant’s Proxy Statement for its 2006 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 have not been issued.  (See Part III Item 12Beneficial Ownership (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 have notbeen issued (see Part III Item 12 Beneficial Ownership (1)).

On January 11, 2006Mr. Lindo requested to have the 45,000,000 shares owed to him issued asRestricted Securities. Upon the issuance of the shares, Kenilworth now has245,036,249 shares issued and outstanding.

This FORM 10-K for theFiscal Year ended 12/31/05 was filed on August 28, 2006 unaudited.

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TABLE OF CONTENTS
|         | ** ** | **PART 1**                                                                                                |
|---------|------------|----------------------------------------------------------------------------------------------------------------|
|    |       |                                                                                                           |
| ITEM 1  | —     | Description  of Business                                                                                       | 4 |
| ITEM  2 | —     | Properties                                                                                                     | 15 |
| ITEM  3 | —     | Legal  Proceedings                                                                                             | 15 |
| ITEM 4  | —     | Submission of  Matters to a Vote of Security Holders                                                           | 15 |
|    |       |                                                                                                           |   |
|    | ** ** | **PART II**                                                                                               |   |
|    |       |                                                                                                           |   |
| ITEM 5  | —     | Market Prices  of the Company’s Common Stock and Related Stock Holder Matters                             | 17 |
| ITEM 6  | —     | Selected Financial  Data                                                                                       | 18 |
| ITEM 7  | —     | Management  Discussions and Analysis of Financial Condition and Results of Operations  (Contains Risk Factors) | 18 |
| ITEM 8  | —     | Financial Statements and  Supplementary Data                                                                   | 22 |
| ITEM 9  | —     | Changes and  Disagreements with Accountants on Accounting and Financial Disclosure                             | 22 |
| ITEM 9A | —     | Controls and  Procedures                                                                                       | 22 |
|    |       |                                                                                                           |   |
|    | ** ** | **PART III**                                                                                              |   |
|    |       |                                                                                                           |   |
| ITEM 10 | —     | Directors and  Executive Officers of the Registrant                                                            | 23 |
| ITEM 11 | —     | Executive  Compensation                                                                                        | 25 |
| ITEM 12 | —     | Security  Ownership of Certain Beneficial Owner and Management and Related Stockholders  Matters               | 26 |
| ITEM 13 | —     | Certain  Relationships and Related Transactions                                                                | 27 |
| ITEM 14 | —     | Principal  Accountant Fees and Services                                                                        | 27 |
|    |       |                                                                                                           |   |
|    | ** ** | **PART IV**                                                                                               |   |
|    |       |                                                                                                           |   |
| ITEM 15 | —     | Exhibits,  Financial Statement Schedules and Reports on Form 8-K                                          | 28 |
|    |       | Subsequent Events                                                                                              | 45 |

 

FORWARD LOOKINGSTATEMENTS

In addition to historicalinformation, this Annual Report on Form 10-K contains certainforward-looking statements and Risk Factors. We expressly disclaim anyobligations on undertaking to release publicly any updates or revisions to anyforward-looking statements contained herein to reflect any change in ourexpectations with regard thereto or to reflect any change in events, conditionsor circumstances on which any such forward-looking statement is based in wholeor in part.

**Readersshould amongst the other statements contained herein and future filings withthe Securities 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**.

INTRODUCTORY NOTETO PART IV

The Amendment No. 1 onFORM 10-K/A  filed to restatecertain amounts which changed as the results of having been ordered by theSecurities and Exchange Commission to file the Company’s Financials as a “DevelopmentStage Company” from the period beginning November 24, 1998 to the presentat December 31, 2005, the elimination of $4,256,926, which was the amountthe Company disbursed on or about September 28, 1998 to be discharged fromChapter 7 Bankruptcy Proceedings, and certain  adjustments to losses sustained for theperiods ended December 31, 2002, 2003 and 2004 for having discountedConvertible Promissory Notes from between ten cents ($.10) per share and twelvecents ($.12) per share to five cents ($.05) per share.  The Company alsoadded in PART II Item 5- MARKET PRICES OF THE COMPANY’S COMMON STOCK ANDRELATED STOCKHOLDER MATTERS: d) The Company issued 110,731,660 shares of itsRestricted Common Stock since December 31, 2002.  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.

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PART I

ITEM 1—DESCRIPTIONOF BUSINESS

THE COMPANY

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

GENERAL

Since early in the year2000 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 permit Internetwagering) to television sets (“TV’s”), which become a platform for playingalong with the casino games wherever TV’s are located.

Kenilworth titled theoverall project “RoulabetteTM”.  There are 120 million TV subscribers inthe United States and more than 300 million subscribers throughout the rest ofthe world (“The Market”).  On average, households in the U.S. have 2 1⁄2 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 200 TV sets with a simple satellitereceiving dish, direct cable connections, or streamed via the Internet. With wagering possible in homes, hotel rooms, resort rooms, pubs, restaurants,race tracks and other public gathering places the Company believes it willbecome a more than $500 billion **net win**Marketwithin five (5) years throughout the industrialized world (by the yearended 2011).

To best market the casinogames, the Company is selecting lotteries throughout the world to manage andoperate 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 one (41)lotteries in the United States are owned and operated by County and Stateagencies.  Throughout the rest of the world lotteries are owned by governmentagencies or non profit charitable agencies that distribute the net earnings tobenefit social and charitable programs, or by private entities that pay apercentage of their net win to designated government agencies.

These foreign lotteriesalso have the same databases as lotteries in the United States, except mostlotteries throughout Europe pool their lotteries between countries, not unlikeMega Millions and PowerBall in the

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United States, whichmakes the distribution simpler and very cost effective for both Kenilworth andthe lotteries.

There are no technicalbreakthroughs required.  The equipment for the technology is readilyavailable.  What is needed is to get through the maze of Local, County,State and Federal regulations in each U.S. State and foreign countries. When the first State in the United States grants the Company permission totransmit the broadcast from one of its casinos to their residents and to Statesthat do not have any casinos, (the entire East coast of the United States), theother forty (40) States with lotteries will join expeditiously. The samewill occur in foreign countries.

Kenilworth will share the**net win** revenue with all participatingentities that provide RoulabetteTM gaming without **costs of anykind. **Lotteries will receivea minimum of forty percent (40%) of the total **net win**from their respective jurisdictions.

In States and foreigncountries that designate exclusively lottery proceeds to schools and theirteachers it is a welcome contribution.  It also will help close budgetgaps.

In addition, throughoutthe United States and most foreign countries there are hundreds of facilitiesthat simulcast live in-progress horse/dog races.  At most facilities thereare several large TV screens that show the races from the different tracks withgeneral theater type seating for patrons and at private cubicles withtelevision sets outfitted with touch screens.  The cubicles rent foradditional fees.  After players open an account and select pin numbers,they can watch, in privacy, each race offered on the different tracks on the TVand place wagers on the different races by simply changing channels.  Theplayers may also watch sporting events, the news, the Stock market reports, andin the near future RoulabetteTM, live, in-progress casino table games.  Thesimulcast centers have their own databases to manage the cash deposit and paywinnings on the horse/dog races and will be able to manage the casino games, onthe same methods as the lotteries will manage RoulabetteTM.  With privateTV’s, available in simulcast centers, especially at night, when fewer tracksare operating.

When playing along withlive table games from a highly regulated jurisdiction, players will be assuredthat the game results are exactly what they see; and, playing along with livecasino table games such as Roulette, Craps and Baccarat we believe will provideinteraction, fun and far more excitement than playing make believe animated(virtual) games. It is the next best thing, we believe, to actually being atthe table in the casino.

To conduct actual livetest broadcasts Kenilworth believes it will require a minimum of ten milliondollars ($10,000,000) and there are no assurances we will ever be able toobtain 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 expertiseapplied in 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.

We also propose for slotmachine manufacturers to develop “RoulabetteTM Slot Machines”.  The RoulabetteTM Slot will offer the regularslot or video lottery games and by the touch of a button, the live in-progresscasino table games.  Slot player areoffered a change of pace at the cost of a slot handle pull.  The games are transmitted to the RoulabetteTMSlot via satellite or the Internet (all broadcasts are encrypted to preventunauthorized use of the broadcasts).

Where authorized, hotels,resorts clubs and other public gathering places will be able to offer casino tablegame action in their establishments without incurring the costs to operate acasino. There are now believed to be more than ten (10) million slotmachines played throughout the world, outside of casino confines.

Project RoulabetteTM is aconcept intended to be built and there can be no assurances that it will everbe built.  The Patented microprocessors to be installed in the TV set topboxes have not been designed.

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**SUMMARY**:

(1.)         Kenilworth’s business presently is solely in the planning stage. We planto engage in the development, manufacturing, marketing of an operation entitledRoulabetteTM. RoulabetteTM would allow casino patrons and other players to playalong with live in-progress casino table games such as Roulette, Craps andBaccarat and more via digital satellite, digital cable television or Internetbroadcasts (simulcasts) emanating from strictly regulated casinos located inthe United States and other locations around the world, to self-sufficientcomputer terminals dubbed “RoulabetteTM Slots” and digital satellite, cable TVset top boxes or the Internet in countries that permit Internet gaming. TheRoulabetteTM terminal is a proposal intended to be built and there can be noassurances that it will ever be built.  The microprocessors to be installedin the TV set top boxes have not been designed. We have as at July 31, 2006, noother agreements, customers, except with the Philippines Amusement and GamingCorporation (PAGCOR), or proposals for any future business and there can be noassurances that we will ever have same. **Referenceis also made to each of the “Risk Factors” that are set forth in Item 7.**

(2.)         We believe the thousand virtual casino websites via the Internet obtainsixty percent (60%) of their annual revenue from customers in the U.S.

Although Internetgambling is outlawed, we believe it is presently not very well enforced by theU.S. Justice Department.  Much of the opposition in Congress againstInternet gambling stems from the fact that the websites are not legitimate, andmay even be used for money laundering.  Further, the websites do noteffectively prevent minors and underage college students from wagering. Approximately one hundred (100) entities control the thousand websites. Whenone site experiences losses, it is shut down and another site is created. We expect that a majority of these sites will shut down because of oursimulcasts, thus directly reducing the number of sites, which need to bepoliced.

Simulcast broadcasts ofdigital satellite and digital cable transmissions around the world must meet,and will be supervised by, the regulations by the gaming authorities of thebroadcasting casino and the jurisdiction, which receives the broadcast. We believe the supervision will not be difficult to enforce, because allsimulcast wagering is “cash only”, from regulated, supervised bettingsites.  There are no wire money transfers with banks and no credit ordebit 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).

We believe Kenilworth wasthe first to use color personal computers (PC’s) to replace electromechanicalslot machines (1988).  We provided the software for the first Tabaretlocated at the Menzie at the Rialto in Melbourne, Australia, which opened inNovember 1990.  This consisted of cashless, variable denomination andmultiple game virtual PAT’s (“Player Activated Terminals”).   Priorthereto Kenilworth sponsored, with the assistance of three Nevada casinooperators, legislation to permit cashless wagering in the state ofNevada.  The legislation, which is in the form of an amendment to existingcasino control statutes, permits the use of account cards (debit cards) and wassigned into law by Governor Richard H. Bryan on June 13, 1985.

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Kenilworth has been apublicly traded Company since 1968. Prior to commencing its endeavors into itsproposed business in 1988, it provided security systems to Nuclear ElectricGenerating Plants in the U.S. and foreign countries, as well as time/attendancesystems at a major department store chain.

THE STATUS WITH PAGCOR

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 theRepublic of the Philippines chartered government gaming monopoly.  PAGCOR partially owns and exclusivelyoperates all fourteen (14) Filipino casinos, some of which are located inexclusive 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 clipof the test broadcast which was made at a roulette table located in the newHyatt Hotel and Casino, Manila, is available for viewing on our websitewww.kenilworthsys.com (see Press Release: Monday, March 6, 2006).

In April 2006,Kenilworth guaranteed to pay PAGCOR monthly payments, for hosting thebroadcasts when they commence, for a contract period of ten (10) years; US $1million for year one (1); US $2 million for years two (2) and three (3); US $5million for years four (4) through seven (7) and US $10 million for every yearthereafter, totaling US $636,000,000 over the ten (10) year period.

The payments haveto be made regardless from where we broadcast. Kenilworth requires the flexibility to broadcast from other casinosbesides the Philippines.

In July 2006,PAGCOR granted us to commence the first live, in-progress casino table game broadcaststo emanate from the new (August 2005) Hyatt Hotel & Casino in Manila,Philippines.

We have acquiredthe broadcast site for RoulabetteTM.  Nowwe have to obtain agreements for locations that will permit us to receive thebroadcasts.  We are in an active searchin Europe, including Eastern Europe, South America, China, India and thePacific Rim nations.  We filed ourpatents in all of these destinations.

MARKETING STRATEGY/SALESPLAN

Our marketing strategyconsists of developing the RoulabetteTM Slot terminal and the RoulabetteTMbroadcasts. We estimate at this time, that we will need at least approximatelyten million dollars ($10,000,000) for promoting the RoulabetteTM concept. We donot have this money nor do we have any agreements or understanding to procurethis money. We may never get this money. If we do obtain this money, it may notbe sufficient. Further, should such monies be available it may not be availableon terms satisfactory to Kenilworth or it may be available on such terms thatsubstantially dilute the interest of existing shareholders. If we obtain thismoney, we will need substantial additional funds for the proposed marketingplan and there can be no assurances that such funds will ever be available toallow Kenilworth to engage in business on a profitable basis.

At the present time, wedo not engage technically oriented employees who will be able to assist in thedevelopment of RoulabetteTM (we have available three [3] former technicalKenilworth 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 noassurances of our being able to obtain any necessary personnel. There can be noassurances of the availability of any such employees and consultants.

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

In the United States,Kenilworth hopes to refrain from using the Worldwide Web (WWW) Internet tomanage wagers from individuals outside of the casino confines. Legislators havevoiced strong objections to having their constituents’ gamble one-on-oneagainst computers located in Europe, Russia and on Caribbean islands, totallyunregulated. In RoulabetteTM, the play-along broadcast emanates from casinosthat are regulated by strict and comprehensive rules and state andjurisdiction regulations, enforced by gaming control regulators and everybodyplays along with the same live table game. There is a world of differencebetween playing in a virtual make believe casino compared with an actualcasino.

For the reasons stated,Kenilworth will ask state lotteries, Off-Track Betting (OTB) corporations,pari-mutuel race tracks, and other state and federal regulated agencies tomanage the wagers from individuals playing along on their PC’s and theirtelevision 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 individuals wouldhave to pre-deposit funds into an account with the wager management company andthen place wagers with their credit balance. The wagers and running balanceswill be transmitted to the RoulabetteTM player’s PC and/or television sets withtelephone lines not crossing any state lines, similar in principle to telephoneaccounts wagering offered by the New York State Off-Track Betting Corporationand the state of Nevada casino sports book and recently with remote purchase oflottery 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 states with approvedlottery and/or other gambling legislation, we plan to introduce RoulabetteTMSlot terminals to hotels, clubs (similar to card clubs in California) andresorts, to provide upscale gathering places for tourists and local residents.Charitable organizations that are permitted to conduct “Nevada Nights” andBingo games may wish to offer RoulabetteTM gaming on a more permanent basis. Toreceive the broadcast signal, all that would be required is an eighteen (18)inch dish TV antenna and distribution equipment. The RoulabetteTM terminals areintended to be self-sufficient and accept dollar bills (or script, to controlthe amount an individual is allowed to wager in one day or other time period).We plan to lease all the equipment necessary to participants for a share of theprofits.

To gain approval for ourRoulabetteTM-style gambling in jurisdictions that have not approved any gamblinglegislation, Kenilworth proposes to engage lobbyists to introduce, promote, andobtain legislative approval to permit RoulabetteTM-style gambling. Our strategyis to find depressed resort areas and have the resort/hotel operators convincetheir local politicians of the benefits to their business and the localeconomies and request them to promote legislative approval, either state-wideor limited to their areas. Riverboat gambling started to rehabilitate decayingwaterfronts. RoulabetteTM can do the same in depressed economic areas.  Noassurances can be given that we can obtain any such approvals.

When the live casino TVbroadcasts are beamed for global viewing, Kenilworth will seek out similarorganizations, as proposed for the United States and betting shops and slotroute 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.

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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 payment to thewinner, via money wire transfer to the establishment which managed the wager withintwenty-four (24) hours.  Kenilworth will establish a worldwide cage forwinning payments; or, a guarantee payment by a well-recognized internationalbank.

COMPETITION

Many segments of thegaming industry are characterized by intense competition, with a large numberof companies offering the same type of wagering products and services. None ofthese companies at present are believed to offer the same or similar equipmentor systems as intended by RoulabetteTM. The most likely competition will comefrom slot machine manufacturers who could relatively quickly adapt slotmachines to play along with live casino table games. We believe there are three(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 plans are tobroadcast 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, TRADEMARKS ANDINTELLECTUAL PROPERTY

Our most important assetsare Patents we have acquired and RoulabetteTM related trademarks and servicemarks.  The Patent granted on June 10, 2003 titled “SYSTEM AND METHODFOR REMOTE ROULABETTE AND OTHER GAME PLAY USING GAME TABLE AT A CASINO” andPatent Application filed October 15, 2003, entitled “METHOD AND SYSTEM FORSUPPLYING FUNDS TO A TERMINAL FOR REMOTE WAGERING”, “MULTI-USE GAMING MACHINE”trademarks ROULABETTETM, as in pre-marked cards similar to lottery cards toselect number in each game, used with terminals “ROULABETTE SWIPE CARD” toactivate set-top boxes to play RoulabetteTM and “PLAY ALONG WITH ROULABETTETM,LIVE”.

GOVERNMENT REGULATIONS

Kenilworth has nolicenses from any casino regulating authorities and may not require any casinolicenses at the present time and may never become able to obtain any licensesthat may be required in the future. Each state has its own regulations, and instates where Kenilworth does business, Kenilworth will have to comply withthese regulations and there can be no assurances that it will be able to do soor obtain 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.

**Federal**

The Federal GamblingDevices Act of 1962 (the “Federal Act”) makes it unlawful for a person tomanufacture, deliver, or receive gaming machines, gaming machine type devicesand components thereof across interstate lines unless that person has firstregistered with the Attorney General of the United States.

In addition, variousrecord keeping and equipment identification requirements are imposed by theFederal Act. Violations of the Federal Act may result in seizure or forfeitureof equipment, as well as other penalties.

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**OtherRegulations**

The manufacture,distribution, sale, and use of slot machines is controlled by state and federallaw, which may also apply to our RoulabetteTM gaming terminals. Certain foreigncountries permit the importation, sale, or operation of slot machines. Whereimportation 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.

**Greenberg Traurig Opinion**

August 11, 2005

Kenilworth Systems Corporation185 Willis AvenueMineola, New York 11501Attn:  Herbert Lindo, Chairman and CEO

Re:  Legal Issues Relating to Roulabette(TM)

Dear Sir:

We are writing in response to your request for anopinion as to the legal issues relating to the implementation of theRoulabette(TM) concept of Kenilworth Systems Corporation (“KSC”).

Roulabette(TM) is a method and system for placingwagers on live, in-progress casino table games such as roulette, baccarat anddice from locations remote from the actual casino tables at which the games aretaking place. The system begins at the casino, where television cameras instrategic locations above the casino table games follow the games being playedat the casino tables, and microphones pick up the sounds of the table play. Thegame play is transmitted via digital satellite and cable transmissions tosubscribers who are able to wager by using set top boxes which receive thebroadcast of the game and record wagers and results.

LEGAL ANALYSIS

In making use of this opinion, Kenilworth SystemsCorporation (“KSC”) should be aware that this is a very complex area of law,involving U.S. federal gambling statutes, the gambling statutes of the fiftystates and the District of Columbia, and the gambling statutes of all thecountries of the world where you might want to operate a Roulabette(TM) casinoor offer Roulabette(TM) wagering. The gambling laws of these jurisdictions varywidely, ranging from the absolute prohibition of Utah, to the street-sidebetting shops of England, to the wide-open casinos of Las Vegas. Furtherconfusing matters is the fact that there is very little statutory lawspecifically addressing remote gambling, and the few statutes which do existrelate to Internet gambling, which is not the same as Roulabette(TM). So, forthe most part, we will be interpreting the provisions of gambling statuteswhich were enacted before the digital technology of today existed, and did notcontemplate the possibility of playing casino games from remote locations.Similarly, the case law relative to remote gambling is also very sparse and,once again, concerns Internet gambling, which is different from Roulabette(TM).Finally, there are the interpretations of the law relating to remote gamblingwhich have been publicly pronounced by the U.S. Department of Justice (“DOJ”),which in our opinion are clearly erroneous. Consequently, although the opinionsexpressed below are our best assessment of the situation after years ofresearch and active involvement in numerous cases, they are to a great extentprojections of what we believe the courts would hold if the issues were everadjudicated. They are not shared by the DOJ, they do not take into account lawswhich may be enacted in the future as the countries of the world continue toaddress the issues of remote gambling, and in time they may prove to beincorrect in one respect or another.

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In the United States, the prohibition and/orregulation of gambling is a matter of state law. Some states, such as Nevada,permit a wide range of gambling activities throughout the state. Other states,such as Mississippi and New Jersey, permit a wide range of gambling activities,but only at certain geographic locations, such as riverboats and Atlantic Citycasinos. Finally, other states, in fact most states, permit only very limitedgambling activities, such as thoroughbred racing, jai alai, bingo, etc.Superimposed on this tangle of state laws and regulations are the federalstatutes, which are designed to assist the states in combating illegal gamblingoperations which cross state and national borders. So, basically, the U.S.legal regime applicable to gambling is two-tiered. The individual statesdetermine the forms of gambling which are legal and illegal, and to what extentthey are banned or regulated, and the federal government assists the states indealing with illegal gambling activities which cross state or national borders.

Given the fact that Roulabette(TM) would be mostsuccessful if distributed on a national or international level, the federalissues must be addressed first to determine whether it is legally feasible todistribute the product across state and national borders. If there is nofederal prohibition, casino locations must be selected and the state and locallaws of the jurisdiction where the casino is located must be analyzed todetermine if it is legal and feasible to broadcast from the chosen locations.In view of the fact that casinos can be chosen from anywhere in the world,there is little doubt that locations can be identified from which to originatethe broadcasts. It is only a matter of identifying the best casino or casinosfrom a legal and business perspective. Finally, several U.S. and foreign courtshave concluded that remote gambling takes place both where the server islocated (or in this case, the casino), and where the player is located. So,once one or more casinos are identified, another analysis will be necessary todetermine the markets where it would be legal to offer the games being played.It is not a question of whether there are legal markets for one or more games,but a matter of the number of markets available and the types of games whichcan be offered in each market.

There are four federal statutes which are mostapplicable to remote gambling.(1) They are:

—             The Wire Act, which prohibits the use of interstate or foreigncommunications facilities to transmit wagering information on sportingevents or contests;(2)

—             The Illegal Gambling Businesses statute, which prohibits the operation of a gambling business in violation of the laws of the state  where it is conducted;(3)

—             The Travel Act, which prohibits the use of interstate or foreign travel and the use of the mail or any facility in interstate or foreigncommerce (such as the Internet or digital satellite services) tofacilitate illegal activities, including illegal gambling;(4) and

—             The Interstate Transportation of Wagering Paraphernalia statute, which prohibits transporting gambling-related items in interstate or foreign commerce.(5)

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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 and racketeering (18 U.S.C.section 1962) statutes which could apply if the gambling statutes areviolated.

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

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

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

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

1.  The Wire Act

This statute prohibits gambling businesses from usinginterstate or international telephone facilities to transmit gambling-relatedinformation, and states:

Whoever being engaged in the business of betting or wageringknowingly

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usesa wired communication facility for the transmission in interstate or foreigncommerce of bets or wagers or information assisting in the placing of bets orwagers on any 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 has been a formidable tool for the DOJin the prosecution of operators of Internet gaming sites. The DOJ merely has toestablish that a bet was transmitted or received over the Internet and it canobtain a conviction, without ever having to address such issues as the actuallocation of the betting (i.e., where the bettor is or where the bookmaker is),or the fact that the operator was licensed by a sovereign nation to providegambling services over the Internet.

In the Spring of 1998, when the United States JusticeDepartment proclaimed its opinion that the Wire Act prohibits Internetgambling, U.S. Attorney General Janet Reno announced charges against numerousoff-shore Internet gambling operators, stating:

The Internet is not an electronic sanctuary forillegal betting.  If a state outlawssoliciting or accepting bets, you can’t evade those requirements by goingonline. It’s a federal crime to use the Internet to conduct betting operations.And to Internet betting operators everywhere we have a simple message; you can’thide online and you can’t hide off-shore.

This assertion appears to be correct. “Wirecommunication facility” is broadly defined as an instrumentality or service “usedor useful in the transmission of writings, signs, pictures and sounds of allkinds by aid of wire, cable or other like connection.”(7) The courts have ruledthat even with satellite transmissions, there is still a wire connecting thegamblers computer to the Internet.(8) So, even though Roulabette(TM) utilizessatellite transmissions, it is likely that there will be a wire of some sortused for the transmission somewhere along the line, most likely at the casinoor at the player’s TV and set-top box. However, regardless of whether a wirewas used in the transmissions, the Wire Act still would not apply for tworeasons.

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(7)             18U.S.C. section 1081.

(8)             WorldInteractive Gaming, 1999 WL 591995, 6-8 (N.Y. S.Ct.)  (“Like a prohibited telephone call from agambling facility, the Internet is accessed by using a telephone wire”); UnitedStates v. Cohen, 260 F.3rd 68 (2nd Cir. 2001).

First, although the DOJ takes the position that theWire Act applies to all Internet gambling, sports and non-sports alike, thecourts have held otherwise. The DOJ reasons that the word “sports” in thephrase “sports events or contests” modifies only the word “events” therebyleading to a reading that the statute covers betting on sports events andbetting on [other] contests. However, the courts and virtually all legal scholarsand attorneys experienced in the field are of the opinion that it only appliesto sports betting.

The Supreme Court has established the rules ofstatutory construction, and if the statutory language is clear and unambiguous,then you look no further and follow the language of the statute. The Wire Actmakes it a crime to send or receive wagers on sporting events and contests.Sporting events and contests are football, baseball, basketball, hockey, golf,tennis prize fighting or whatever, but not poker, bingo and similar games.Although a card game or a poker tournament, may be a contest, is not assporting contest.

If there is some doubt as to the meaning of thestatute, the courts turn to case law and the legislative intent of Congress.There have been cases addressing the question of whether the Wire Act appliesto non-sports gambling and the case law is consistent — it does not. The mostrecent case dealing with

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the issue was In re: MasterCard International, acivil RICO case, which hinged on the applicability of the Wire Act tonon-sports Internet gambling.(9) In deciding the issue, the court stated thatthe wording of the Act, the case law and the legislative intent all lead to theconclusion that the Wire Act only covers sports gambling. The case was upheldon appeal by the Fifth Circuit Court of Appeals, which stated: “we agree withthe district court’s statutory interpretation, its reading of the relevant caselaw, its summary of the relevant legislative history, and its conclusion.”(10)

It should be noted that although the DOJ loudlyproclaims that the Wire Act applies to all Internet gambling, it is apparentlyconcerned that its interpretation may be wrong, and has never attempted to usethe statute against non-sports gambling business in the ten years that Internetgaming has existed. In our opinion, the Wire Act does not cover non-sportsgambling, such as Roulabette(TM) — that is the law, as enacted by Congress andinterpreted by the courts, the desires and opinion of the DOJ notwithstanding.

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

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

Second, there is an exemption to the Act, whichprovides that it is not illegal to transmit “information assisting in theplacing of bets or wagers on a sporting event or contest from a place wheresuch betting is legal to another place where such betting is legal.”(11) TheRoulabette(TM) broadcast would constitute “information assisting in the placingof bets or wagers” within the meaning of the statute, and it would be broadcastfrom a casino in a jurisdiction where such gaming activity is legal to ajurisdiction where the actual wagering activities would take place and wheresuch wagering would be legal. Consequently, even if one accepts, or accedes to,the expansive view of the U.S. Department of Justice, with which most people donot agree, that the Wire Act is not limited to sports betting but extends toother forms of wagering activities, Roulabette(TM) would be exempted from thestatute.

2. The Illegal Gambling Businesses Statute(12)

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

(a)            Whoeverconducts, finances, manages, supervises, directs, or owns all or part of anillegal gambling business shall be fined under this title or imprisoned notmore than five years or both.

(b)           Asused in this section — “illegal gambling business” means a gambling businesswhich (i) is a violation of the law of a State or political subdivision inwhich it is conducted; (ii) involves five or more persons who conduct, finance,manage, supervise, direct, or own all or part of such business; and (iii) hasbeen or remains in substantially continuous operation for a period in excess ofthirty days or has a gross revenue of $2,000 in any single day.(13)

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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) (affirming convictionof defendant who when living in Nevada provided gambling point spreadinformation to a Minnesota bookmaking business); United States v. Cohen, 260F.3rd 68 (2nd Cir. 2001) (cert. denied, 2002).

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

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

The statute applies to all forms of gambling, sportsand non-sports alike, and makes it a federal offense to conduct, finance,manage, supervise, direct or own all or part of an “illegal gambling business.”An illegal gambling business is defined as a gambling business, which “is aviolation of the law of a State or political subdivision in which it isconducted.” The application of this statute to Roulabette(TM) is obvious,because it applies to sports and non-sports gambling alike, and Roulabette(TM) wouldbe operated, managed, financed or owned by at least five people. Despite the

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language appearing to limit the statute to personswho conduct, finance, manage, etc., numerous cases have recognized that thestatute proscribes any degree of participation in an illegal gambling businessexcept participation as a bettor.(14) As one court recently put it, “conductsextends to those on lower echelons, but with a function at their levelnecessary to the illegal gambling operation.”(15)

However, unlike the Wire Act, under this statute, thelocation of the actual activity is of critical significance, because it must bea violation of the law of the state or political subdivision in which it isconducted. This should not be an issue for Roulabette(TM), because it intendsto broadcast from a casino in a jurisdiction where it would be legal. If it wasnot legal under the laws of the jurisdiction where the casino is located, andthe casino is in the United States, then there would be a violation not only ofstate law, but of this federal statute as well.

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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).

The statute could also apply if the player is locatedin a state where the gambling would be in violation of state law. I think thereis little question that offering services to players in a particular statewould constitute doing business in that state. So, it will be essential thatthe service not be offered to players located in states where such gamblingwould be illegal. Otherwise there would be a violation of this federal statute,as well as the laws of the player’s state.

3. The Travel Act

This statute prohibits the use of interstate orforeign travel, and the use of the mail or any facility in interstate orforeign commerce, to distribute the proceeds of illegal gambling, or otherwisepromote, manage or facilitate any illegal activity, including gambling, inviolation of federal or state law.(16)

Once again, the statute will not present a problem solong as Roulabette(TM) is legal in the state where the casino is located andthe states where any U.S. players are located.

4. The Transportation of Wagering ParaphernaliaStatute.

This statute prohibits persons from carrying orsending gambling paraphernalia in interstate or foreign commerce, and states:

Whoever ... knowingly carries or sends in interstateor 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 asporting event; or (c) in a numbers, policy, bolita, or similar game shall befined under this title or imprisoned for not more than 5 years or both.(17)

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

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

A New York state court declared that an Internetgambling web site located in Antigua violated the law by sending records ofgambling activity into the State of New York.(18) Moreover, the court also heldthat the defendant Internet gambling operator further violated the statute bysending computers to Antigua, which computers would ultimately be used forconducting gambling business between the United States and Antigua.(19) More onpoint, a California court has held that a computer disk containing a programfor recording and analyzing bets on sporting events is gamblingparaphernalia.(20) So, it is quite possible that the Roulabette(TM) data couldbe deemed to be paraphernalia. However, this statute should not apply becausethe data is not “used, or to be used, or adapted, devised, or designed for usein (a) bookmaking; or (b) wagering pools with respect to a sporting event; or(c) in a numbers, policy, bolita, or similar game.” It is to be used in casinogames, 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 the analysis above, in our opinionRoulabette(TM) would be entirely legal under U.S. federal law, so long as: (1)it is legal under the laws of the state where the casino is located if thecasino is in fact located in the United States, and (2) the service is notoffered to any player in the United States in violation of the laws of thestate where the player is located.

If KSC will select one or more casinos from which itintends to broadcast the games, we will research the jurisdiction where eachsuch casino is located to determine if there are any legal impediments toRoulabette(TM). I would suggest selecting a Native American casino operated bya tribe which is receptive to the Roulabette(TM) concept, and located in astate which would be amenable to amending its compact with the tribe ifresearch indicates that an amendment is necessary. I would also suggestselecting a casino in a foreign jurisdiction, which might be receptive to theRoulabette(TM) concept. A casino in a smaller country, perhaps in the Caribbeanwould probably be a good selection.

I hope this analysis is useful to KSC. If you haveany questions or wish to discuss the issues further, please do not hesitate tocontact me on my direct line at (954)768-8221.

Sincerely yours,Greenberg Traurig, LLP

By:  Patrick T. O’Brien

FABRICATION/ASSEMBLYOPERATION

When we start to marketthe RoulabetteTM Wagering System, of which there can be no assurances, we planto engage sub-contractors to assemble/manufacture the terminals from standardor specially manufactured (to our specifications) electronic, TV, and other componentspurchased from vendors or manufactured by subcontractors.

EMPLOYEES

Kenilworth at present hasfive (5) full time employees. Four (4) perform administrative workand one (1) other works on research related to casino wagering andmarketing around the world in addition to the officers that manage the affairsof the Company. The Company has engaged consultants to assist us in the Asianmarket and that may manage the proposed satellite transmission programs, andothers that may assist in the marketing of RoulabetteTM broadcasts throughoutthe industrialized world.

Kenilworth maintainsmedical insurance for its employees, who do not contribute to the costs of thePlan.

BACKLOG

We do not have anybacklog.

ITEM 2—PROPERTIES

Kenilworth leases twothousand (2,300) square feet in an office building paying ($2,500) per monthrent, fuel and electric cost adjustments from the date of the lease, pursuantto a three (3) year lease commenced in June 2003.

ITEM 3—LEGALPROCEEDINGS

Since emerging 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, ages andpositions held by each of Kenilworth’s directors and executive officers are asfollows:

 
| **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          |       | 70      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 1998                                      |
| KIT WONG             |       | 74      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 1999                                      |
| PATRICK J. MC DEVITT |       | 64      |       | VICE PRESIDENT AND DIRECTOR                                  |       | 2001                                      |
| DAVID SATTERFIELD    |       | 54      |       | DIRECTOR                                                     |       | 2005                                      |
| PAUL NUSBAUM         |       | 56      |       | DIRECTOR                                                     |       | 2005                                      |

 

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 2006.

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PART II

ITEM 5— MARKETPRICES OF THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) Kenilworthemerged from Bankruptcy Proceedings in September of 1998, its Common Stockwhich had been trading on the NASDAQ National Market, resumed trading on theOTC Pink Sheets under the old trading symbol “KENS”. The following table setsforth high and low closing sales prices for our Common Stock, as reported onthe OTC Pink Sheets.
| ** **                       | ** ** | **LOW** | ** ** | **HIGH** | ** ** |
|----------------------------------|------------|---------|------------|----------|------------|
| **2004**                         |       |    |       |     |       |
|                             |       |    |       |     |       |
| January 1,  2004            |       |    |       |     |       |
| Through  March 31, 2004     |       | $       | 0.450      |     | $          | 0071 |   |
|                             |       |    |       |     |       |
| April 1,  2004              |       |    |       |     |       |
| Through  June 30, 2004      |       | $       | 0.330      |     | $          | 0.125 |   |
|                             |       |    |       |     |       |
| July 1,  2004               |       |    |       |     |       |
| Through  September 30, 2004 |       | $       | 0.165      |     | $          | 0.065 |   |
|                             |       |    |       |     |       |
| October 1,  2004            |       |    |       |     |       |
| Through  December 31, 2004  |       | $       | 0.155      |     | $          | 0.080 |   |
| **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 15, 2006     |       | $       | 0.04       |     | $          | 0.10 |   |
|                             |       |    |       |     |       |
| April 1,  2006              |       |    |       |     |       |
| Through June 30,  2006      |       | $       | 0.05       |     | $          | 0.10 |   |

 

(b)  Holders. Therewere approximately seven thousand (7,000) holders of record of CommonStock of Kenilworth as of June 30, 2006.

(c)  Dividends.Kenilworth has not paid any dividends on its Common Stock. We plan to apply anyearnings it achieves to expansion of the business and does not expect to payany dividends in the foreseeable future.

(d)  No underwriterswere involved in the sale of the unregistered Convertible PromissoryNotes.  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 issued110,731,660 shares of its Restricted Common Stock since December 31,2002.  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.

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(e)  EquityCompensation Plan Information

The following tablesummarizes the equity compensation plans under which Kenilworth SystemsCorporation 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 |       | 5,500,000                                                                                                             |       | $                                                                                                                | 0.15       |                                                                                                                                                                                                              | 9,500,000  |   |
|                                                    |       |                                                                                                                  |       |                                                                                                             |       |                                                                                                                                                                                                              |       |
|                                                         |            |                                                                                                                       |            |                                                                                                                  |            |                                                                                                                                                                                                                   |            |  |

 

ITEM 6—SELECTEDFINANCIAL DATA

The following tablesummarizes certain selected financial data and is qualified by reference to,and should be read in conjunction with, the Consolidated Financial Statementsand related Notes thereto and with “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” included elsewhere herein.

Selected Financial Datafor the five (5) years ended December 31, 2005, are as Follows:

SUMMARY OFOPERATIONS

 
| ** **                                         | ** ** | **2005**   | ** ** | **2004**     | ** ** | **2003**     | ** ** | **2002**     | ** ** | **2001**   | ** ** | **PERIOD FROM  NOVEMBER 24,  1998 TO  DECEMBER 31,  2004** | ** ** |
|----------------------------------------------------|------------|------------|------------|--------------|------------|--------------|------------|--------------|------------|------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                         | ** ** | ** ** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated** | ** ** | ** ** | ** ** | **Restated**                                                                   | ** ** |
| Net sales from  operations                         |       | $          | —     |         | $          | —       |       | $            | —     |       | $          | —                                                                         |       | $ | — |   | $ | — |   |
| Other income                                       |       | $          | —     |         | $          | —       |       | $            | —     |       | $          | —                                                                         |       | $ | — |   | $ | — |   |
| Net loss  accumulated during the development stage |       | $          | 3,815,302  |         | $          | 1,860,296    |       | $            | 768,229    |       | $          | 384,889                                                                        |       | $ | 390,202 |   | $ | 3,559,947 |   |
| Loss per common  share                             |       | $          | 0.02       |         | $          | 0.010        |       | $            | 0.010      |       | $          | 0.007                                                                          |       | $ | 0.007 |   | $ | 0.040 |   |
| Loss per common  share - diluted                   |       | $          | 0.02       |         | $          | 0.010        |       | $            | 0.010      |       | $          | 0.007                                                                          |       | $ | 0.007 |   | $ | 0.040 |   |
| Consolidated  balance sheet data:                  |       |       |       |         |       |         |       |         |       |       |       |                                                                           |       |
| Total liabilities                                  |       | $          | 217,540    |         | $          | 313,414      |       | $            | 328,916    |       | $          | 231,029                                                                        |       | $ | 175,441 |   | $ | 873,359 |   |
| Stockholders’ Equity  (deficit)               |       | $          | 75,450     |         | $          | (109,783     | )          | $            | (263,624   | )          | $          | (208,512                                                                       | )          | $ | 158,888 |   | $ | 581,919 |   |

 

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

The discussion followingshould be read in conjunction with, and is qualified in its entirety by, theconsolidated financial statements and the notes thereto included elsewhere inthis Annual Report on Form 10-K.

(A) RESULTS OFOPERATIONS

Since we emerged frombankruptcy proceedings on September 28, 1998, we have had no revenues fromoperations, and therefore sustained losses from general administration expensesamounting to $3,815,302 in 2005, $1,860,296 in 2004 and $768,229 in 2003. Kenilworth has had no revenues from operations during the past fourteen (14)years and there can be no assurances that it will ever have revenues frompresent planned operations.

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(B) LIQUIDITY ANDCAPITAL RESOURCES

Kenilworth has notconducted any business and operations since 1991. At December 31, 2005,2004 and 2003 we had a deficiency in working capital of $239,745, $219,659, and$324,911, respectively. In

Kenilworth’s presentstate of operation to formulate a viable business plan, Kenilworth requireslittle funding to continue this planning. We have been dependant upon theresources of its President, who receives no compensation, and funds receivedfrom private investors, totaling $776,250 in 2005, $652,000 in 2004 and$305,000 in 2003.  In addition the Company issued restricted Common Stockfor services totaling $1,723,000 for 15,885,000 shares in 2005, $855,449 for17,072,651 shares in 2004 and $78,956 for 7,895,558 shares in 2003.

Our present plans are todevelop a wagering system titled “RoulabetteTM” that would allow patrons allover the industrialized world to view and wager on live casino table games onterminals placed in hotels, resorts, bars and other public gathering places andin homes and offices on personal computers (PC’s) or television sets connectedto set top boxes for Interactive TV via digital satellite and digital cablebroadcasts emanating from strictly regulated casinos.  At present we donot have sufficient liquidity and capital resources to develop our business orto remain in business and we may never have such resources.

CAUTIONARY STATEMENT FORPURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATIONREFORM ACT OF 1995 AND RISK FACTORS

The information containedin this Form 10-K and Kenilworth’s other filings with the SecuritiesExchange Commission contain “forward- looking” statements within the meaning ofsection 27A of the Securities Act of 1933, as amended, andSection 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 Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements. Certain information included in this Annual Report on thisForm 10-Kcontains statements that are forward-looking, including, but notlimited to, statements relating to our business strategy and developmentactivities as well as other capital spending, financing sources, the effects ofregulation (including gaming and tax regulations), expectations concerningfuture operations, margins, profitability and competition. Any statementscontained in this Form 10-K and 10-K/A that are not statements ofhistorical fact may be deemed to be forward-looking statements. Withoutlimiting the generality of the foregoing, in some cases, you can identifyforward-looking statements by terminology such as “may,” “will,” “should,” “would,”“could,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “continue”or the negative of these terms or other comparable terminology. Suchforward-looking information involves important risks and uncertainties thatcould significantly affect anticipated results in the future and, accordingly,such results may differ from those expressed in any forward-looking statementsmade by us. These risks and uncertainties include, but are not limited to, ourlack of recent operating history, our dependence on Herbert Lindo, our Chairmanand President who is eighty-one (81) years old and existing management, generaldomestic or international economic conditions, pending or future legalproceedings, changes in federal or state tax laws or the administration of suchlaws, changes in gaming laws or regulations (including the legalization ofgaming in certain jurisdictions), applications for licenses and approvals underapplicable jurisdictional laws and regulations (including gaming laws andregulations).  You should not place undue reliance on any forward-looking statements,which are based only on information currently available to us. We undertake noobligation to publicly release any revisions to such forward-looking statementsto reflect events or circumstances after the date of this 10-K report for theyear ended December 31, 2005.

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**RISKFACTORS**

**NOOPERATING HISTORY**

We have had no revenuesfrom operations since 1991. We emerged from bankruptcy proceedings in 1998without assets and liabilities. We have had no revenues from operations sincethen and we may never have any revenues from operations in the future, **which may result in the termination of our business**.

**WE HAVENO WORKING CAPITAL**

As of December 31,2005 the working capital deficiency of Kenilworth was $239,745. This will notenable Kenilworth to achieve any of its planned operations. There can be noassurances that Kenilworth will ever have sufficient working capital to engagein its planned operations.  Although we have been able to obtain workingcapital from investors that purchase Convertible Promissory Notes and byissuing restricted Common Shares for services rendered.

**OURBUSINESS IS ONLY IN THE PLANNING STAGE**

Kenilworth’s businessexcept for limited progress in the Philippines presently remains in theplanning stage. We plan to engage in the development, manufacturing bysubcontractors, and marketing of an operation entitled RoulabetteTM. RoulabetteTMwould allow casino patrons and other players to play along for remote locationswith live in-progress casino table games such as Roulette, Craps and Baccarat andmore via digital satellite and digital cable television broadcasts (simulcasts)emanating from strictly regulated casinos located in the United States or viathe Internet in other locations around the world, to self-sufficient computerterminals dubbed “RoulabetteTM” and digital satellite and cable TV set topboxes. The RoulabetteTM terminal is a proposal intended to be built and therecan be no assurances that it will ever be built.  The microprocessors tobe installed in the TV set top boxes have not been designed. We have as atDecember 31, 2005, no specific agreements, customers or proposals for anyfuture business and there can be no assurances that we will ever have same.

**WE NEEDAT LEAST TEN MILLION DOLLARS ($10,000,000)**

In order to commence todevelop the RoulabetteTM terminal and the RoulabetteTM broadcasts, we estimate atthis time, that we will need at least approximately ten million dollars($10,000,000). We do not have this money nor do we have any agreements orunderstanding 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 present time, wedo not have any employees who will be able to develop RoulabetteTM. It will benecessary for us to obtain personnel qualified and with the expertise todevelop 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.

**WE AREDEPENDANT UPON OUR PRESIDENT**

Kenilworth has beendependant upon the services of its president Herbert Lindo who is eighty-one(81) years old. Herbert Lindo has performed his services during the pastfourteen (14) 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.

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**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.

**WE AREENGAGED IN A HIGHLY COMPETITIVE INDUSTRY**

Our business is subjectto significant competition. Competition exists from larger companies thatpossess 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-progress casinotable 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 in September andOctober 2004 which Patents have been published to use lottery terminals toaccept deposits for wagers placed with the TV set top boxes and the use of PlayCards similar to lottery tickets, which have also been assigned to the Companyby Herbert Lindo.

**OUR ROULABETTETMTERMINALS ARE SUBJECT TO VARIOUS FEDERAL, STATE, LOCAL AND FOREIGN JURISDICTIONLAWS AND REGULATIONS**

The use of RoulabetteTMmay be subject to various federal, state and local laws and regulations both inthe United States and foreign countries. There can be no assurances that wewill ever be able to obtain licenses or permits necessary to conduct ourbusiness or that we will be able to comply with these applicable laws andregulations.

The RoulabetteTM system isplanned to allow casino patrons and other players to play along with live, in-progress casino table games such as Roulette, Craps and Baccarat and more viadigital satellite television and digital cable programming emanating fromregulated casinos.

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

Our executive officersand directors together with their affiliates beneficially own a significantpercentage of our outstanding common stock. These stockholders, if actingtogether, 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 our stockholders sellsubstantial amounts of our common stock in the public market, the market priceof our common stock could fall. As of March 15, 2006 we had 245,036,249shares of Common Stock outstanding of which approximately 110,000,000 areeligible for sale by our Shareholders under Rule 144 of the Securities Actof 1933 as amended or are otherwise registered for sale.

**WE DONOT INTEND TO PAY DIVIDENDS**

We are not able to payany dividends because we have no funds available to do so. Even if we had fundsavailable, we do not intend or declare to pay any dividends on our common stockin the near future.

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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

None

ITEM 9A—CONTROLSAND PROCEDURES

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 andFinancial Officer.  The Chief FinancialOfficer who is the President, 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 along with 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 no change inthe Company’s internal control over financial reporting that occurred duringthe annual period ending December 31, 2005, that has materially affected,or is reasonably likely to materially affect the Company’s internal controlover financial reporting.

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PART III

ITEM 10 -DIRECTORS AND EXECUTIVE 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          |       | 70      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Kit Wong             |       | 74      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Patrick J. Mc Devitt |       | 64      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| David C. Satterfield |       | 54      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Paul L. Nusbaum      |       | 56      |       | Director                                                                                                     |

 

Herbert Lindo has beenPresident, 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 resignedin November 2005,

Mr. Lindo resumed theposition of Chief Executive Officer. Mr. Lindo devotes his full time to the business of Kenilworth.

Kit Y. Wong has served asa Director of Kenilworth since 1999. He is part owner and operator of severalChinese restaurants in the New York metropolitan area.  Mr. Wongdevotes only a portion of his time to the business of Kenilworth.

Patrick J. McDevitt hasbeen a licensed representative for Securities firms for the past seven(7) years. He retired in 2003 from the Securities business and joined hiswife in the CPA business.  Mr. McDevitt devotes only a portion of histime to the business of Kenilworth at this time.

Joyce D. Clark has servedas a Director of Kenilworth since 1998. Since 1991 she has served as controllerof Long Island Wholesalers Inc., a wholesale door manufacturer and recentlystarted 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.

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 Wiseof West Virginia was elected, in November, 2000, Mr. Satterfield served asdirector of the transition team and Chief of Staff to the Governor until May2001.  Prior to joining the Governor’soffice Mr. Satterfield served as the Chief of Staff and Vice President forInstitutional Advancement at West Virginia University in Morgantown, WV.  He functioned as chief advisor to theUniversity’s president, as WVU’s primary government relations executive.

Paul L. Nusbaum served asthe Cabinet Secretary for the West Virginia Department of Health and HumanResources from January 17, 2001 until January 17, 2005 and was responsible forthe entire operation of that government agency with its $2.5 Billion Budget andover 5,700 employees. Mr. Nusbaum currently provides professional managementconsulting services to a small group of health care clients and manages his personalprivate real estate holdings. Mr. Nusbaum devotes only a limited portion of histime to the business of the Registrant.

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DIRECTORS IN OTHER PUBLICCOMPANIES

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 following Charter hasbeen adopted with respect to an Audit Committee.  **We have not, however, at this****time appointed an Audit Committee.**

The Audit Committee ofthe Board of Directors (the “Audit Committee”) shall have the responsibility toassist the Board of Directors in fulfilling its fiduciary and other obligationswith respect to accounting and

financial matters.Specifically, and without limiting the generality of the foregoing, the AuditCommittee shall:

The Audit Committee willbe comprised of at least three (3) Independent Directors.

1.)           Review the adequacy and effectiveness of the Company’s system ofinternal financial 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, reviewwith the 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 the report and recommendations of the independent auditors with theindependent auditors 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 officerand chief accounting officer and the performance by each of them of theirrespective duties.

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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 corporatecode of 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,in separate executive sessions, to discuss any matters that the committee orthese groups believe should be considered privately.

12.)         Take such other actions concerning the Company’s accounting andfinancial functions as the Committee deems appropriate with respect to thematters described above.

**Code ofEthics**

The Registrant has notyet adopted a written formal Code of Ethics. However, the Registrant’s Officersintend to comply with all honest and ethical requirements including the ethicalhandling of actual or apparent conflicts of interest between personal andprofessional relationships; full, fair, accurate, timely and understandabledisclosure in reports and documents that the Registrant files with or submitsto the Securities and Exchange Commission and in other public communicationsmade by the Registrant; compliance with applicable governmental laws,rules and regulations; prompt internal reporting of any violations of theforegoing to an appropriate person and accountability for adherence of theforegoing. A formal Code of Ethics is expected to be adopted shortly.  Itwill be filed with the Securities and Exchange Commission.

ITEM 11 —EXECUTIVE COMPENSATION

a.)  The following table sets forth the exercise of options and SARs duringthe fiscal year ended December 31, 2003.

Aggregated Option/SARExercises in Last Fiscal Year

And FY-End Option/SARValues 
| ** **       | ** ** | ** **                    | ** ** | ** **                 | ** ** | **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    |       | 0                             |       | 0                          |       | 5,000,000                             |       | 0                                   |       |
| Maureen Plovnick |       | 0                             |       | 0                          |       | 500,000                               |       | 0                                   |       |

 

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No options or SARs weregranted or exercised during the year ended December 31, 2005.

b.)          The Registrant has no employment agreements with any of its ExecutiveOfficers or Directors.

c.)           The Registrant has no compensation committee at this time.

d.)          Stock Performance Graph is not applicable.

**TOTALRETURN TO SHAREHOLDER’S**

**(DIVIDENDSREINVESTED MONTHLY)**

Kenilworth has notdeclared a dividend since its inception in 1968.

e.)           The following table sets forth the total compensation of the Presidentand each Executive Officer of Kenilworth whose total salary and bonus exceeds$100,000.

**SUMMARYCOMPENSATION TABLE**
| ** **                  | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long term compensation** | ** ** |
|-----------------------------|------------|------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** ** | ** ** | **Awards** | ** ** | **Payout** | ** ** |
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **Other** | ** ** | ** ** | ** ** | **Securities** | ** ** | ** ** | ** ** | **All** | ** ** |
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **annual** | ** ** | **Restricted** | ** ** | **underlying** | ** ** | **LTIP** | ** ** | **other** | ** ** |
| **Name and**           | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **compen-** | ** ** | **stock** | ** ** | **options/** | ** ** | **payouts** | ** ** | **compen-** | ** ** |
| **principal position** | ** ** | **Year**   | ** ** | **Salary ($)**          | ** ** | **Bonus ($)**                   | ** ** | **sation($)** | ** ** | **award(s)($)** | ** ** | **SARS (#)** | ** ** | **($)** | ** ** | **sation($)** | ** ** |
| Herbert Lindo               |       | 2005       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2004       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2003       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2002       |       | 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 following table setsforth as of March 15, 2005 the ownership with respect to each ExecutiveOfficer and Director and each person known to own beneficially more than fivepercent (5%) of the Company’s Common Stock.

The information providedin the table is based on Kenilworth’s records, information filed with theSecurities and Exchange Commission and information provided to Kenilworth,except where otherwise noted.

The number of sharesbeneficially owned by each person, Director or Executive Officer is determinedunder rules of the Securities and Exchange Commission, and the informationis 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, 2005 (60 daysafter March 31, 2005) through the exercise of any stock option or otherright.  Unless otherwise indicated, each person has sole voting andinvestment power (or shares such powers with his spouse) with respect to theshares set forth in the following table.

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**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             |       | 20.4                | %          |
| 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              |       | 5,000,000              |       | .02                 | %          |
|                                                                                   |       |                         |       | 55,000,000             |       | 20.6                | %          |

 

The percent of class hasbeen determined with 245,036,249 shares issued and outstanding on January 11,2006.

ITEM 13 — CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

NONE

ITEM 14 —PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company has appointedDemetrius & Company, LLC. as Independent Auditor’s for the fiscal yearending December 31, 2005 and to restate the Company’s financials as ADevelopment Stage Company as directed by the SEC.  Representatives ofDemetrius & Company, LLC. are expected to be present at the annualmeeting and will have the opportunity to make a statement if they desire to doso and are expected to be available to respond to appropriate questions.

 

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**FeesIncurred by Kenilworth**

Fees for professionalservices provided by the Company’s Independent Auditor, Demetrius &Company, LLC. are:

|            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
|            |       | Estimate |       |     |       |     |       |
| Audit Fees |       | $        | 35,000     |     | $          | 20,000   |       | $ | 9,000 |   |
|            |            |          |            |          |            |          |            |  |  |  |

 

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.

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, 2005 and 2004

Consolidated statement ofoperations and deficit for the periods ended December 31, 2005, 2004

and2003

 

Consolidatedstatement of cash flows for the periods ended December 31, 2005, 2004 and2003

 

Consolidated statement ofchanges in stockholders equity the years ended December 31, 2005, 2004

and2003

 

Notes toconsolidated financial statements

 

(b)          On July 12, 2002 Kenilworth filed an 8-K in which the Companyreported the following event:

Herbert Lindo, Chairmanand President of Kenilworth Systems Corporation (“Kenilworth”) since 1972,advised the Company’s Board of Directors that on June 26, 2002 the Sheriffof Nassau County (the “Sheriff”) sold at a purported Public Auction Sale (the “Sale”)10,333,450 restricted common shares of Kenilworth Systems Corporation (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. (“Tappan Zee”).  On thedate of the Sale the Shares had a market value of nine hundred thirty thousandten dollars and fifty cents ($930,010.50).  The Sheriff seized and soldthe Shares on behalf of Tappan Zee, as a result of a claim by Tappan Zee in adisputed civil suit brought in the New York Supreme Court for $128,062. Tappan Zee was both the foreclosing party and the purchaser.  HerbertLindo owned Real Estate at the time valued in excess of $128,062 which theSheriff could have seized instead of the Kenilworth Shares.

Kenilworth claims thatthe 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.

By the attorneys forTappan Zee’s failure to seize the Real Property owned by Herbert Lindo raisesthe question of complicity to take control of Kenilworth instead of satisfyinga disputed claim for $128,062.

Kenilworth or HerbertLindo, as an individual will seek in Federal or State Courts to cancel the10,333,450 shares, which were subject of the Sheriff Auctions Sale, and seektriple damages under RICO on behalf of the shareholders of Kenilworth, thedamaged parties.  Herbert Lindo and Kenilworth have not 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.

At the this time, theCompany does not wish to spend the substantial funds required to commence theaction nor does Mr. Lindo have the time, at present, to assist in any lawsuit Kenilworth may institute on behalf of its Shareholders.

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

In June 2003, theMadison Bank of Blue Bell, Pennsylvania returned two million (2,000,000) of thewrong fully distributed shares by Tappan Zee for cancellation to American StockTransfer and Trust Company, Kenilworth’s Stock Transfer Agents.  Since theMadison Bank was complicent with Tappan Zee in the fraudulent seizure andauction of the shares, neither Herbert Lindo nor Kenilworth issued generalreleases to the Madison Bank, although the subsequent Madison Bank andKenilworth Agreement provided for the releases.  The Company was desirousof having the two million (2,000,000) shares returned, reducing the claimagainst the Nassau County Sheriff’s Department and for future free distributionto Kenilworth’s shareholders on record on June 26, 2002 which were notmade aware by the Sheriff of the Auction Sale.

28

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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 ending June 30, 2006 for approximately two thousand three  hundred (2,300) square feet for two thousand five hundred dollars ($2,500)  per month. |
|   |                                                                                                                                                                                                                                                                                        |
| 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 Consulants, Inc. a |
|        |                                                                                                                                                                                                                                                                                        | Delaware Corporation |
|   |                                                                                                                                                                                                                                                                                        |
| 23.1   | Consent of Demetrius & Company, LLC. 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.                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                        |
| 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 theCompany reported on FORM 8-K:

ITEM 8.01**  **OTHER EVENTS

On June 27, 2005Kenilworth Systems Corporation entered into an exclusive one (1) yearConsulting Contract with Alfred J. Luciani, Esq. starting July 1, 2005. Mr. Luciani is an authority in Native American casino regulations and “MegaBingo”,a linked, multi-state on-reservation bingo game offered by Native Americancasinos.  He will head the Company’s planned project to bring livein-progress “casino table game tournaments” from and between Native Americanon-reservation casinos.

On July 13, 2005the Company reported on FORM 8-K:

ITEM4.02   NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On June 17, 2005,Officers of the Company determined that the Company should restate itspreviously issued consolidated balance sheets, statements of operations andstatements of cash flows for the fiscal years ended December 31, 2004, December31, 2003 and December 31, 2002, the three month period ended March 31, 2005,and each of the three quarters in the periods ending September 30, 2004,September 30, 2003 and September 30, 2002, and concluded that such previouslyissued financial statements should no longer be relied upon.

In order to addresscomments from the staff (the “Staff”) of the Securities and Exchange Commission(“SEC”) in connection with the Staff’s review of the Company’s periodicfilings, the Officers concluded that the Company should make these necessaryrestatements.

The financial statementswere changed in response to the comment from the SEC to file the Company’sfinancials as a “Development Stage Company” from the period beginning November24, 1998 to December 31, 2004.

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, there were anumber of transactions involving the day to day operations of the Company thatwere accounted for improperly.  These included the recognition of deferredand accrued expenses, the recording of loans to and from the Company and therecording of the patent related costs and other capitalized expenses.

29

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The Company has filed anamended Annual Report on Form 10-K for the year ended December 31, 2004 andwill file amended Annual Reports on Form 10-K for the years ended December 31,2003 and December 31, 2002 and amended Quarterly Reports on Form 10-Q for thequarter ended March 31, 2005, and each of the three quarters in the periodsending September 30, 2004, September 30, 2003 and September 30, 2002 with theSEC which will include the restated financial statements including relateddisclosures.

On June 17, 2005, theCompany’s Officers discussed with Demetrius & Company, L.L.C., the Company’sindependent registered public accounting firm, the matters disclosed in thisCurrent Report on Form 8-K.

On September 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.

At the Annual Meeting ofshareholders of Kenilworth Systems Corporation held on September 13, 2005 andthe submission to shareholders of a proxy statement filed, Herbert Lindo, GinoScotto, Maureen Plovnick, Patrick Mc Devitt, Joyce Clark, Kit Wong and PaulNusbaum were elected directors of the company.  Thereafter, the Board ofDirectors, as authorized by Article 2, Section 2 of the Company’s By-Laws,approved an increase in the Board of Directors from seven (7) to nine (9)directors.  Pursuant then to Article 2, Section 6 of the Company’sBy-Laws, the Board of Directors then elected Alfred J. Luciani and DavidSatterfield to fill the two (2) new seats.

In addition thereto, eachof the two (2) new directors will be issued one million (1,000,000) shares ofthe Company’s unregistered (restricted) stock.  Alfred J. Luciani, anattorney, entered into a Consulting Agreement with Kenilworth on July 1, 2005pursuant to which he is to be compensated at the rate of $5,000 per month, withan 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.

On November 22,2005 the Company reported on FORM 8-K:

ITEM5.02        DEPARTURE OF DIRECTORS ORPRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b)  On November 21, 2005 Kenilworth Systems Corporationreceived a notice of resignation dated November 20, 2005 from Gino Scotto,Chief Executive Officer and a Director pursuant to which he resigned any andall positions held by him with Kenilworth Systems Corporation.  OnNovember 21, 2005 Andrew Hirko resigned as Senior Vice President.

(c)  Herbert Lindo on November 21, 2005, assumed the positionof Chief Executive Officer.  Herbert Lindo, age 80, also holds theposition of President, Chairman, Chief Financial Officer and Treasurer ofKenilworth Systems Corporation.  He has served as an Officer, Director andPresident of the Company since 1972 during which period he has devoted his fulltime to the affairs of the Company.  The appointment still requires theapproval of the Board of Directors.  Herbert Lindo was previously marriedto Joyce Clark, a Director of the Company.  Mr. Lindo has no writtenagreements with the Company.

At the Company’s Annual Shareholder’s Meeting held onSeptember 13, 2005, the Shareholders ratified the issuance of 25,000,000shares of the Company’s Common Stock to Herbert Lindo, the Inventor of two(2) additional patents assigned to Kenilworth.

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

30

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**ITEM5.02**              DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b) On December 9, 2005, Mrs. MaureenPlovnick, a Director of the Company and Corporate Secretary of Kenilworth andall of its wholly owned subsidiaries has temporarily resigned pursuant toMrs. Plovnick’s letter of resignation which she discussed withMr. Lindo, Chairman, for several days before submitting same.  Mrs. Plovnick continues her employ with theCompany as Mr. Lindo’s personal secretary.

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

**ITEM5.02**              DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

(b) OnMonday, December 19, 2005, via email, Alfred J. Luciani, Esq. notified KenilworthSystems Corporation (“Kenilworth” or the “Company”) that he wishes to resignfrom the Board of Directors for the reason he stated in his email.

On December 21, 2005, the Company, via Certified Mail —Return Receipt Requested, responded to Mr. Luciani’s email by accepting hisresignation and advising Mr. Luciani, in a Letter Agreement, which based on thereason for his resignation, the Company must terminate his considerationpayable for his consulting services, proportionately, as at December 19, 2005.

On December 27, 2005, the Company received the Company’sLetter Agreement in which Mr. Luciani agreed to terminate his consultingservices with the Company.

Mr. Edward Vietmeier, a professional golfer who owns1,583,097 Common Shares of Kenilworth, has agreed to replace Mr. Luciani on theBoard of Directors, which will take place at a scheduled Board Meeting to beheld on or about January 10, 2006.  The majority of the Board Members mustfirst elect Mr. Vietmeier at the proposed Board meeting pursuant to Kenilworth’sBy-Laws.

The By-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.

31

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**THIS PAGE INTENTIONALLY LEFT BLANK**

32

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**KENILWORTH SYSTEMSCORPORATION AND SUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDBALANCE SHEETSAS OF DECEMBER 31,**
| ** **                                                                                                                                        | ** ** | **2005**      | ** ** | **2004**    | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|------------|-------------|------------|
| ** **                                                                                                                                        | ** ** | **Unaudited** | ** ** | **Audited** | ** ** |
| ASSETS                                                                                                                                            |       |          |       |        |       |
| CURRENT ASSETS                                                                                                                                    |       |          |       |        |       |
| Cash                                                                                                                                              |       | $             | 5,495      |        | $          | 5 |   |
| Prepaid expenses                                                                                                                                  |       | 280,000       |       | 93,750      |       |
| Loan receivable—including from stockholders                                                                                                  |       | 26,300        |       | —      |       |
|                                                                                                                                              |       |          |       |        |       |
| Total current assets                                                                                                                              |       | 311,795       |       | 93,755      |       |
|                                                                                                                                              |       |          |       |        |       |
| PROPERTY AND  EQUIPMENT—NET                                                                                                                  |       | 49,010        |       | 36,863      |       |
|                                                                                                                                              |       |          |       |        |       |
| PATENT COSTS—NET                                                                                                                             |       | 76,763        |       | 68,763      |       |
|                                                                                                                                              |       |          |       |        |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 9,422         |       | 4,250       |       |
|                                                                                                                                              |       |          |       |        |       |
| TOTAL ASSETS                                                                                                                                      |       | $             | 446,990    |        | $          | 203,631 |   |
|                                                                                                                                              |       |          |       |        |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                        |       |          |       |        |       |
| CURRENT  LIABILITIES                                                                                                                              |       |          |       |        |       |
| Accounts payable and accrued expenses                                                                                                             |       | $             | 224,842    |        | $          | 218,772 |   |
| Payroll taxes payable                                                                                                                             |       | 43,878        |       | 59,522      |       |
| Loans payable—stockholders                                                                                                                   |       | —        |       | 10,000      |       |
| Loans payable—automobile                                                                                                                     |       | 2,820         |       | 25,120      |       |
|                                                                                                                                              |       |          |       |        |       |
| Total current liabilities                                                                                                                         |       | 271,540       |       | 313,414     |       |
|                                                                                                                                              |       |          |       |        |       |
| 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 200,036,249 and 137,551,245  shares, respectively |       | 2,000,362     |       | 1,375,512   |       |
| Additional paid-in capital                                                                                                                        |       | 29,859,456    |       | 26,468,771  |       |
| Less: stock subscriptions receivable                                                                                                              |       | —        |       | (15,000     |       |
| Accumulated deficit                                                                                                                               |       | (31,894,818   | )          | (27,939,066 | )          |
|                                                                                                                                              |       |          |       |        |       |
| TOTAL EQUITY’ EQUITY                                                                                                                         |       | 175,450       |       | (109,783    | )          |
|                                                                                                                                              |       |          |       |        |       |
| TOTAL LIABILITIES  AND EQUITY’ EQUITY                                                                                                        |       | $             | 446,990    |        | $          | 203,631 |   |

 

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

33

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**KENILWORTH SYSTEMSCORPORATION AND SUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**
| ** **                                     | ** ** | ** **                      | ** ** | **Period from**            | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                     | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** ** | ** ** | **November 24, 1998** | ** ** |
| ** **                                     | ** ** | **Years ended**            | ** ** | **Years ended**            | ** ** | **Years ended** | ** ** | **to** | ** ** |
| ** **                                     | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** | **December 31, 2005** | ** ** |
| ** **                                     | ** ** | ** **                      | ** ** | **Restated**                    | ** ** | **Restated** | ** ** | **Restated** | ** ** |
| Expenses                                       |       |                            |       |                            |       |   |   |   |   |
| Selling, general and administrative            |       | $                               | 3,815,302  |                            | $          | 1,488,716 |   | $ | 474,193 |   | $ | 5,778,211 |   |
|                                           |       |                            |       |                            |       |   |   |   |   |
| Other income  (expenses)                       |       |                            |       |                            |       |   |   |   |   |
| Interest income                                |       | —                          |       | 121                             |       | 113 |   | 922 |   |
| Interest expense                               |       | —                          |       | (371,701                        | )          | (294,149 | ) | (757,250 | ) |
|                                           |       |                            |       |                            |       |   |   |   |   |
| Total other  income (expense)                  |       | 0                               |       | (371,580                        | )          | (294,036 | ) | (756,328 | ) |
|                                           |       |                            |       |                            |       |   |   |   |   |
| Net loss                                       |       | $                               | (3,815,302 | )                               | $          | (1,860,296 | ) | $ | (768,229 | ) | $ | (3,559,947 | ) |
|                                           |       |                            |       |                            |       |   |   |   |   |
| Basic and  diluted loss per share              |       | $                               | (0.02      | )                               | $          | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) |
|                                           |       |                            |       |                            |       |   |   |   |   |
| Weighted average number  of shares outstanding |       | 200,036,246                     |       | 124,364,335                     |       | 99,087,628 |   | 80,202,501 |   |

 

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

34

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

**STATEMENTSOF CASH FLOWS**
| ** **                                                                      | ** ** | ** **                      | ** ** | **Period from**            | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                                      | ** ** | ** **                      | ** ** | ** **                      | ** ** | ** ** | ** ** | **November 24, 1998** | ** ** |
| ** **                                                                      | ** ** | **Years ended**            | ** ** | **Years ended**            | ** ** | **Years ended** | ** ** | **to** | ** ** |
| ** **                                                                      | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** | **December 31, 2005** | ** ** |
| ** **                                                                      | ** ** | **Restated**                    | ** ** | **Restated**                    | ** ** | **Restated** | ** ** | ** ** | ** ** |
| Cash flows from operating activities                                            |       |                            |       |                            |       |   |   |   |   |
| Net loss                                                                        |       | $                               | (3,815,302 | )                               | $          | (1,860,296 | ) | $ | (768,229 | ) | $ | (5,780,380 | ) |
| Adjustments to reconcile net loss to net cash  provided by operating activities |       |                            |       |                            |       |   |   |   |   |
| Depreciation                                                                    |       | 13,205                          |       | 9,647                           |       | 1,588 |   | 29,809 |   |
| Amortization of patent                                                          |       | 7,552                           |       | 5,745                           |       | 2,131 |   | 22,980 |   |
| Accretion of convertible debt discount                                          |       | —                          |       | —                          |       | 41,533 |   | 72,656 |   |
| Beneficial conversion feature                                                   |       | 556,653                         |       | 368,640                         |       | 188,191 |   | 1,113,484 |   |
| Common stock issued for services                                                |       | 1,723,000                       |       | 855,449                         |       | 78,956 |   | 2,920,564 |   |
| Common stock issued to induce debt conversion                                   |       | 776,250                         |       | —                          |       | 63,276 |   | 839,526 |   |
| Common stock issued for interest due on notes payable                           |       | —                          |       | —                          |       | — |   | 8,501 |   |
| Accrued interest transferred to capital                                         |       | —                          |       | 3,048                           |       | 1,161 |   | 4,209 |   |
| Other                                                                           |       |                            |       | —                          |       | — |   | 21,100 |   |
| Increase (decrease) in cash attributable to changes  in assets and liabilities: |       |                            |       |                            |       |   |   |   |   |
| Prepaid expenses                                                                |       | (280,000                        | )          | (93,750                         | )          | — |   | (280,000 | ) |
| Accounts payable and accrued expenses                                           |       | 271,540                         |       | 87,458                          |       | 9,950 |   | 218,772 |   |
| Payroll taxes payable                                                           |       | 43,878                          |       | 24,056                          |       | 1,962 |   | 59,522 |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Net cash used in operating activities                                           |       | (1,289,446                      | )          | (600,003                        | )          | (379,481 | ) | (1,368,520 | ) |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Cash flows from investing activities                                            |       |                            |       |                            |       |   |   |   |   |
| Payment of loan receivable—stockholder                                     |       | —                          |       | —                          |       | (4,000 | ) | (4,000 | ) |
| Proceeds from loan receivable—stockholder                                  |       | 20,000                          |       | 4,000                           |       | — |   | 4,000 |   |
| Payment of patent costs                                                         |       | (8,000                          | )          | (17,602                         | )          | (42,490 | ) | (66,639 | ) |
| Purchase of property and equipment                                              |       | (12,147                         | )          | (42,128                         | )          | — |   | (58,567 | ) |
| Security deposit                                                                |       | (9,422                          |       | (4,250                          | )          | — |   | (9,422 | ) |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Net cash used in investing activities                                           |       | (9,569                          | )          | (59,980                         | )          | (46,490 | ) | (129,456 | ) |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Cash flows from financing activities                                            |       |                            |       |                            |       |   |   |   |   |
| Proceeds from loans payable—stockholders                                   |       | —                          |       | —                          |       | — |   | 60,000 |   |
| Repayment of loans payable-stockholders                                         |       | —                          |       | —                          |       | — |   | (10,000 | ) |
| Proceeds from loans payable—related parties                                |       | —                          |       | —                          |       | 70,976 |   | 141,137 |   |
| Repayment of loans payable—related parties                                 |       | —                          |       | (112,017                        | )          | — |   | (116,017 | ) |
| Proceeds from convertible notes payable                                         |       | 1,723,000                       |       | 652,000                         |       | 305,000 |   | 1,275,361 |   |
| Proceeds from sale of common stock                                              |       | —                          |       | 95,000                          |       | 10,000 |   | 122,500 |   |
| Proceeds from stock subscriptions receivable                                    |       | —                          |       | 25,000                          |       | — |   | 25,000 |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Net cash provided by financing activities                                       |       | 423,554                         |       | 659,983                         |       | 425,976 |   | 1,497,981 |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Net change in  cash                                                             |       |                            |       | —                          |       | 5 |   | 5 |   |
| Cash—beginning of  year                                                    |       | 5                               |       | 5                               |       | — |   | — |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Cash—end of year                                                           |       | $                               | 5,495      |                            | $          | 5 |   | $ | 5 |   | $ | 5,495 |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Supplemental  disclosure of non-cash activities:                                |       |                            |       |                            |       |   |   |   |   |
|                                                                            |       |                            |       |                            |       |   |   |   |   |
| Common stock  issued for patent costs                                           |       | $                               | —     |                            | $          | — |   | $ | — |   | $ | 10,000 |   |
| Exchange of loans  payable for convertible notes payable                        |       | $                               | —     |                            | $          | 15,000 |   | $ | 25,000 |   | $ | 50,000 |   |
| Conversion of  notes payable to common stock                                    |       | $                               | 1,723,000  |                            | $          | 682,000 |   | $ | 384,000 |   | $ | 2,986,500 |   |
| Cancellation of  stock subscriptions receivable                                 |       | $                               | —     |                            | $          | 29,000 |   | $ | — |   | $ | 29,000 |   |
| Common stock issued for  subscriptions receivable                               |       | $                               | —     |                            | $          | 15,000 |   | $ | 54,000 |   | $ | 71,500 |   |

 

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

35

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**CONSOLIDATEDSTATEMENTSOF CHANGES IN STOCKHOLDERS’ DEFICIT**
| ** **                                                                    | ** ** | ** **            | ** ** | ** **     | ** ** | ** **  | ** ** | ** **          | ** ** | ** **      | ** ** | ** **             | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|-------------|------------|---------------------|------------|-----------------|------------|------------------------|------------|
| ** **                                                                    | ** ** | ** **            | ** ** | ** **     | ** ** | ** **  | ** ** | ** **          | ** ** | **Deficit**     | ** ** | ** **             | ** ** |
| ** **                                                                    | ** ** | ** **            | ** ** | ** **     | ** ** | ** **  | ** ** | ** **          | ** ** | **Accumulated** | ** ** | ** **             | ** ** |
| ** **                                                                    | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | **Stock**   | ** ** | **During the** | ** ** | ** **      | ** ** |
| ** **                                                                    | ** ** | ** **            | ** ** | **Par**        | ** ** | **Paid-in** | ** ** | **Subscriptions**   | ** ** | **Development** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                    | ** ** | **Shares**            | ** ** | **Value**      | ** ** | **Capital** | ** ** | **Receivable**      | ** ** | **Stage**       | ** ** | **Deficit**            | ** ** |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Balances — January 1, 2003 Restated                                 |       | 89,304,589            |       | 893,046        |       | 24,208,983  |       | —              |       | (25,310,541     | )          | (208,512               | )          |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Common stock issued for services                                              |       | 7,895,558             |       | 78,956         |       | —      |       | —              |       | —          |       | 78,956                 |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Sale of common stock                                                          |       | 180,000               |       | 1,800          |       | 8,200       |       | —              |       | —          |       | 10,000                 |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Common stock issued in connection with convertible  notes                     |       | 465,000               |       | 4,650          |       | 36,883      |       | —              |       | —          |       | 41,533                 |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Accrued interest on convertible notes transferred to  capital upon conversion |       | —                |       | —         |       | 1,161       |       | —              |       | —          |       | 1,161                  |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Conversion of notes payable to common stock                                   |       | 6,081,447             |       | 60,814         |       | 323,186     |       | —              |       | —          |       | 384,000                |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Common stock issued as inducements to convert notes  payable                  |       | 462,000               |       | 4,620          |       | 58,656      |       | —              |       | —          |       | 63,276                 |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Value attributed to beneficial conversion feature of  convertible notes       |       | —                |       | —         |       | 188,191     |       | —              |       | —          |       | 188,191                |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Common stock issued for subscriptions receivable                              |       | —                |       | —         |       | —      |       | (54,000             | )          | —          |       | (54,000                | )          |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Net loss accumulated during the development stage                             |       | —                |       | —         |       | —      |       | —              |       | (768,229        | )          | (768,229               | )          |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| 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   |       | 2,114,825           |       |            |       |                   |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| 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              |       |            |       |                   |       |
|                                                                          |       |                  |       |           |       |        |       |                |       |            |       |                   |       |
| Net loss accumulated during the development stage                             |       | (5,675,598            | )          | (5,675,598     | )          |        |       |                |       |            |       |                   |       |
| Balances —  December 1, 2005                                        |       | 200,036,246           |       | $              | 2,000,362  |        | $          | 29,859,456          |       | $               | (15,000    | )                      | $          | (33,614,664 | ) | $ | (33,614,664 | ) |

 

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

36

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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 proposedbusiness is in the development stage and planned principal operations have notyet fully commenced.  Successful execution of its business plan isdependent up such factors as: the ability to raise substantial capital andassemble a skilled and experienced management team, obtaining regulatoryapproval from gaming authorities and other governmental bodies, customeracceptance of a new experience in casino gaming, and technological feasibility.

These challenges createuncertainty as to the Company’s ability to operate as a going concern and couldresult in the termination of its business.  Management plans to develop awagering system that allows casino patrons and individuals outside the casinoto play and wager along with live casino table games. The first step in theplan is to conduct testing. Unless the Company is able to obtain sufficientfunds, none of the tests and initial development work can commence. The Companywill attempt to obtain the necessary funding by offering its Common Stock orPreferred Stock to private investors**.**

If initial testing issuccessful, the second step is to obtain, as required, the appropriate licensesfrom gaming control regulators in the various venues the Company intends tooffer its system. Upon successful licensing, the Company intends to seekfinancing from banking sources for the manufacture of a microprocessor thatwill 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 SIGNIFICANTACCOUNTING 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.and Kenilworth Satellite Broadcasting Corporation, Satellite GamingConsultants, Inc., both Delaware Corporations. None of the subsidiaries has anysignificant assets or liabilities.

Use of estimates

Management uses estimatesand assumptions in preparing these financial statements in accordance withgenerally accepted accounting principles.  Those estimates and assumptionsaffect the reported amounts of assets and liabilities, the disclosure ofcontingent assets and liabilities, and the reported revenue and expenses.Actual results could vary from the estimates that were used.

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

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

Cash and cash equivalents

The Company considers allhighly liquid debt instruments with an original maturity of three months orless when purchased to be cash equivalents.  There were no cashequivalents at December 31, 2005 and 2004.

Property and equipment

Property and equipmentare stated at cost.  Equipment is depreciated over the estimated usefullives 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 of long-livedAssets

The Company regularlyreviews long-lived assets for indicators of impairment.  Management’sjudgments regarding the existence of impairment indicators are based onperformance.  Future events could cause management to conclude thatimpairment 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 costs areexpensed 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 carryforwards.  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 of financialinstruments

Financial instrumentsreported in the balance sheet consist of accounts payable and loans payable,the carrying value of which approximated fair value at December 31, 2005and 2004.  The fair value of the financial instruments disclosed are notnecessarily representative of the amount that could be realized or settled nordoes the fair value amount consider the tax consequences of realization orsettlement.

Stock-based compensation

The Company has adoptedSFAS No. 123 “Accounting for Stock Based Compensation” which requires itto 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.

38

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

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

Loss per share

Basic loss per share iscalculated by dividing net loss by the weighted-average number of common sharesoutstanding during the period. Diluted loss per share is calculated by dividingnet loss by the weighted-average number of common shares outstanding, plus theweighted average number of net shares that would be issued upon the exercise orconversion of dilutive securities, such as stock options and warrants, andconvertible debt.  There were no dilutive securities outstanding as ofDecember 31, 2005, 2004 and 2003.  Accordingly, diluted loss pershare for 2005, 2004 and 2003 is the same as basic loss per share.

New AuthoritativeAccounting Pronouncements

The Company does notanticipate the adoption of recently issued accounting pronouncements will havea significant impact on its results of operations, financial position or cashflows.

NOTE 3- BANKRUPTCY PROCEEDINGS

Throughout the 1980’s theCompany experienced working capital shortages that resulted in the Companyfiling a voluntary petition for reorganization under Chapter 11 of the UnitedStates bankruptcy Code. From August 28, 1982 to June 7, 1985 theCompany 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.

From February 1991through September 1998, the Company was inactive. In September 1998 aUnited States Bankruptcy Judge in the Eastern District of New York approved theFinal Report and Accounts submitted by the Chapter 7 Trustee of the Estate ofKenilworth and after obtaining approval from the U.S. Trustee, Kenilworth madea one hundred percent (100%) cash distribution to the creditors and paid infull all administrative fees and expenses. The Company emerged from Bankruptcyon September 28 1998 with no assets and no liabilities. For the periodSeptember 29, 1998 through November 23, 1998 the Company was in theprocess of monitoring the payments by check to the creditors. No other activityoccurred during that period.  Effective, November 24, 1998, theCompany commenced its present plans.

NOTE 4- PREPAID EXPENSES

Prepaid expenses consistof the unamortized value of stock issued to directors for the twelve-monthservice period ending September 30, 2006.  The balance will beamortized on a straight-line basis over the remaining term.

39

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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:
| ** **                          | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
|                                |       |     |       |     |       |
| Office equipment                    |       | $        | 18,800     |     | $          | 13,827 |   |
| Leasehold improvements              |       | 21,000   |       | 16,640   |       |
| Furniture and fixtures,  automobile |       | 35,620   |       | 19,601   |       |
|                                |       |     |       |     |       |
|                                |       | 75,420   |       | 50,068   |       |
| Less: Accumulated  amortization     |       | 26,410   |       | 13,205   |       |
|                                |       |     |       |     |       |
| Total property and equipment, net   |       | $        | 49,010     |     | $          | 36,863 |   |

NOTE 6 - PATENT

The Company owns a patentfor technology that will enable it to provide real-time transmission ofroulette and other game play from live tables at a casino facility.  Costsincurred in connection with the submission and approval of the patent applicationhave been capitalized.  A U.S. patent was awarded in June 2003. The Company is amortizing patent costs of $76,639 on a straight-line basis overa fifteen-year period.  Amortization expense for the years ended December 31,2005 and 2004 was $5,745, and $2,131, respectively.  The net for 2005 was increased for patentmaintenance costs.

NOTE 7- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| ** **                         | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
|                               |       |     |       |     |       |
| Legal and other  professional fees |       | $        | 22,137     |     | $          | 180,061 |   |
| Book overdraft                     |       | —   |       | 11,875   |       |
| Other                              |       | 481,940  |       | 26,836   |       |
|                               |       |     |       |     |       |
|                               |       | $        | 504,077    |     | $          | 218,772 |   |

 

At December 31, 2005and 2004, the Company also owed payroll tax liabilities of approximately$43,313 and $49,000, plus estimated statutory charges of $15,000 and $11,000,respectively.

NOTE 8- LOANS PAYABLE

2004:

Related parties

The Company’s CEO hasadvanced funds of $23,170 as of December 31, 2004.  A board directorhas also loaned the Company $1,950.  Both loans are due on demand,unsecured and noninterest-bearing.  Theloans were repaid by the Company in 2005.

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**KENILWORTH SYSTEMSCORPORATION AND SUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

NOTE 9- CONVERTIBLE PROMISSORY NOTES

During 2005, 2004 and2003, respectively, the Company sold to various private investors $776,250,$652,000 and $305,000 principal amount of Convertible Promissory Notes bearinginterest at rates ranging from 4.00% to 10.00% per annum.  The Notes had aone-year term and were immediately convertible at the option of the noteholderinto shares of restricted common stock based on conversion prices ranging from$.05 per share.  All Notes issued in 2005, 2004 and 2003 were convertedinto a total of 15,525,000, 13,740,000 and 6,081,447 common shares,respectively.  The issuance of the Notes gave rise to a beneficialconversion feature (BCF) in the amount of $368,640 in 2005, $188,191 in 2004and $10,617 in 2003, reflecting the benefit of conversion prices that werebelow the market price of the Company’s common stock.  The BCF was chargedin full 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.

During 2003 and 2002, theCompany issued a total of 465,000 and 446,646 restricted common shares toinvestors in connection with their purchase of Notes.  The value of theshares amounted to $41,533 and $15,492, respectively, which was accounted foras a note discount and amortized to interest expense during the year. Also in 2003, the Company issued 462,000 restricted common shares valued at$63,276 as an inducement to certain noteholders to convert their debt. The inducements were recorded as interest expense upon acceptance by thenoteholder.

NOTE 10- INCOME TAXES

The provision for incometaxes consists of the following:

|                             | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------|------------|---------------------------------------------|------------|
| ** **                  | ** ** | **2005**                                    | ** ** | **2004** | ** ** | **2003** | ** ** |
|                        |       |                                        |       |   |   |   |   |
| Current:                    |       |                                        |       |   |   |   |   |
| Federal                     |       | $                                           | —     |   | $ | — |   | $ | — |   |
| State                       |       | —                                      |       | — |   | — |   |
|                        |       | —                                      |       | — |   | — |   |
|                        |       |                                        |       |   |   |   |   |
| Deferred:                   |       |                                        |       |   |   |   |   |
| Federal                     |       | —                                      |       | —- |   | — |   |
| State                       |       | —                                      |       | — |   | — |   |
|                        |       | —                                      |       | — |   | — |   |
|                        |       |                                        |       |   |   |   |   |
| Provision for income  taxes |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

41

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

The effective income taxrate differed from the U. S. federal statutory rate as follows:
| ** **                                    | ** ** | ** Years ended December 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                    | ** ** | **2005**                                          | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                          |       |                                              |       |   |   |   |   |
| Federal income  tax benefit at statutory rate |       | $                                                 | N/A        |   | $ | (486,000 | ) | $ | (175,000 | ) |
| State income  taxes, net of federal benefit   |       | N/A                                               |       | (86,000 | ) | (31,000 | ) |
| Increase in  valuation allowance              |       | N/A                                               |       | 572,000 |   | 206,000 |   |
|                                          |       |                                              |       |   |   |   |   |
|                                          |       | $                                                 | —     |   | $ | — |   | $ | — |   |

 

The difference betweenthe U. S. federal tax rate and the Company’s effective tax rate in 2004, 2003and 2002 is due primarily to changes in the valuation allowance related to thenet deferred tax asset, offset by certain nondeductible expenses.

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

Deferred tax assets:
| ** **                 | ** ** | **2005** | ** ** | **2004**   | ** ** |
|----------------------------|------------|----------|------------|------------|------------|
|                       |       |     |       |       |       |
| Net operating  losses      |       | $        | 3,875,302  |       | $          | 1,142,000 |   |
| Less: Valuation  allowance |       | —   |       | (1,142,000 | )          |
|                       |       |     |       |       |       |
| Net deferred tax assets    |       | $        | 3,815,302  |       | $          | — |   |

 

The benefits of netoperating 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, 2005, the Companyhad net operating loss carryforwards of approximately $2,850,000, expiring through2024. Utilization of NOL carryforwards may be limited under various sections ofthe Internal Revenue Code depending on the nature of the Company’s operations.

NOTE 11- COMMITMENT

Operating lease

The Company rentsapproximately 2,300 square feet of office space in Mineola, NY under a leaseexpiring in May 2006.  Annual rent is approximately $30,000, payablemonthly.  The lease also requires the Company to pay its share ofincreases in real estate taxes, operating costs and repairs over the base yearamounts.  The lease expires in May 2006.  Following is aschedule of minimum lease payments required under the lease. 

| Year ending December 31, | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|
|                                    |       |       |       |
| 2006                                    |       | $          | 33,000     |       |
| 2007                                    |       | 35,000     |       |
|                                    |       |       |       |
| Total                                   |       | $          | 68,000     |       |

 

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

Rent expense for theyears ended December 31, 2005, 2004 and 2003 was $33,000, $27,000, and$37,000, respectively.

NOTE 12- RELATED PARTY TRANSACTIONS

2004:

The Company paid $3,500to an entity partially owned by its former CEO for services rendered during theyear.

2002:

In November 2002,the Company issued 1,000,000 shares valued at $.01 per share to a relative ofthe Company’s CEO in payment of an outstanding balance for services valued at$10,000.

NOTE 13- STOCKHOLDERS’ DEFICIT

Authorized shares

The Company is authorizedto issue up to 500,000,000 shares of Common Stock and up to 2,000,000 shares ofPreferred Stock.  Both classes have a par value of $.01 per share. The rights and preferences of the preferred shares will be designated by theBoard of Directors.

Sales of unregisteredcommon stock

In fiscal 2002, theCompany raised $10,000 from the sale of 236,355 shares of common stock to aprivate investor at a price of approximately $.04 per share. In fiscal 2003,the Company raised $10,000 from the sale of 180,000 shares of common stock to aprivate investor at a price of approximately $.06 per share.  In fiscal2004, the Company raised $95,000 from the sale of 2,350,000 shares of commonstock to various private investors at prices ranging from $.03 to $.05 pershare.

Stock subscriptionsreceivable

At December 31, 2003, twoprivate investors owed $50,000 and $4,000, respectively, for the purchase of commonstock.  The Company received $25,000 against one subscription in February2004 and canceled the balance due of $29,000.

Common shares issued forservices

2005: The Company issuedapproximately 110,000,000 restricted shares to investors and for servicesrendered for $1,859,300.

2004:

The Company issued500,000 shares each to five individuals as compensation for services renderedas corporate directors through September 30, 2004.  The services werevalued at $25,000 per director.  In December 2004, the same directorsreceived an additional 500,000 shares each valued at $25,000 for the annualservice period ending in September 2005.

43

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

During the year, theCompany issued 3,500,000 shares to various attorneys for legal services valuedat $175,000; 4,145,000 shares to various individuals in payment of finders feesvalued at $207,250 for referring Note investors; 2,864,327 shares to variousconsultants for services rendered at a value of $143,216**;** 1,140,000 shares to a director forreimbursement of expenses totaling $56,482; and 423,324 shares to vendors inpayment of outstanding balances totaling $23,500.

2003:

During the year, theCompany issued 2,500,000 shares to various attorneys for legal services valuedat $25,000; 297,779 shares to various individuals in payment of finders feesvalued at $2,978 for obtaining Note investors; 4,597,779 shares to variousconsultants, including 1,000,000 shares to a director, for services rendered ata value of $45,000; and 500,000 shares to a vendor in payment of an outstandingbalance for services rendered totaling $5,000.

Conversion of Notes andrelated transactions

During 2004, 2003 and2002, the Company issued 13,740,000, 6,081,447 and 2,603,355 shares,respectively, upon conversion of the Notes. In 2003 and 2002, the Company alsoissued 465,000 and 446,646 shares, respectively, in connection with the sale ofNotes.  In 2003, the Company issued 462,000 shares to induce existingnoteholders to convert their Notes.

Equity plan

In December 2000, theCompany adopted and in August 2001, stockholders approved the Performance andEquity Incentive Plan (the Plan).  The Board of Directors has reserved upto 10,000,000 shares of common stock for issuance under the plan as incentivestock options (ISOs), nonqualified stock options (NQSOs), restricted stockgrants, and stock appreciation rights.  The terms and conditions of eachgrant 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.

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 as discountsand inducements to convert.

In addition, there were anumber of transactions involving the day to day operations of the Company thatwere accounted for improperly.  These included the recognition of deferredand accrued expenses, the recording of loans to and from the Company and therecording of the patent related costs and other capitalized expenses.

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

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 June30, 2005 has issued 73,182,000 Restricted Shares for the conversion of Notesand issuance of shares for services rendered. The total includes the issuance of 45,000,000 shares owed to HerbertLindo, the Chairman and Chief Executive Officer.

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)**

In April 2005, theCompany entered into a consulting agreement for a one-year term.  Ascompensation, the consultants received 2,000,000 shares of restricted commonstock upon signing.

In June 2005, theCompany agreed to issue 770,588 shares of restricted common stock in settlementof an employment contract dispute.  The shares were valued by managementat approximately $38,500.  The liability was accrued in 2004.

PRIOR CONVICTION OFHERBERT 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, the holdingperiod 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. Lindoclaimed 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  |       | August 25, 2006 |
| Herbert Lindo           |       |      |       |            |
|                    |       |      |       |            |
| /s/ JOYCE CLARK         |       | Director  |       | August 25, 2006 |
| Joyce Clark             |       |      |       |            |
|                    |       |      |       |            |
| /s/ KIT WONG            |       | Director  |       | August 25, 2006 |
| Kit Wong                |       |      |       |            |
|                    |       |      |       |            |
| /s/ PAUL NUSBAUM        |       | Director  |       | August 25, 2006 |
| Paul Nusbaum            |       |      |       |            |
|                    |       |      |       |            |
| /s/ DAVID SATTERFIELD   |       | Director  |       | August 25, 2006 |
| David Satterfield       |       |      |       |            |
|                    |       |      |       |            |
| /s/ PATRICK J. MCDEVITT |       | Director  |       | August 25, 2006 |
| Patrick J. McDevitt     |       |      |       |            |
|                    |       |      |       |            |
| /s/ EDWARD VIETMEIER    |       | Director  |       | August 25, 2006 |
| Edward Vietmeier        |       |      |       |            |

 

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