**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-K/A**

 

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| **ý****     ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                                                                                                            |
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| **FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002**                                                                                                                                                                                                                                                                                                                          |
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| **o****     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)**                                                                                                                                                                                                                            |
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| **FOR THE TRANSITION PERIOD FROM                               TO                            ** |
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| **COMMISSION  FILE NUMBER: 0-08962**                                                                                                                                                                                                                                                                                                                                          |

 

| **KENILWORTH SYSTEMS CORPORATION**                         |
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| (Exact name of registrant  as specified in its charter)    |
|                                                       |   |   |
| **NEW YORK**                                               |   | **13-2610105** |
| (State of Incorporation)                                   |   | (I.R.S. 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) |

 
| SECURITIES REGISTERED  PURSUANT TO SECTION 12(B) OF THE ACT: |
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| **NONE**                                                          |
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| SECURITIES REGISTERED  PURSUANT TO SECTION 12(G) OF THE ACT: |
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| **(TITLE OF  CLASS)**                                             |
| Common Stock, par value  $.01 per share                           |

 

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 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 ý No o

 

 

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Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (Section 229.405 of this chapter) is not contained herein,and will not be contained, to the best of the registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. o

 

Indicateby check mark whether the Registrant has filed all documents and reportsrequired to be filed by Section 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmedby court. Yes ý No o

 

Thenumber of shares outstanding of the company’s common stock as ofDecember 31, 2002 totaled 89,304,589 shares.

 

Theaggregate market value of the voting stock held by non-affiliates (73,571,589shares) of the Company on March 22, 2003 was $13,242,886. The price atwhich the common stock sold on the aforesaid date was $0.18.

 

DOCUMENTS INCORPORATED BYREFERENCE

 

PartIII which includes Item 10 (Directors and Executive Officers of theRegistrant), Item 11 (Executive Compensation), Item 12 (Security Ownership ofCertain Beneficial Owners and Management) and Item 13 (Certain Relationshipsand Related Transactions) will be incorporated in the registrant’s proxystatement to be filed within one hundred twenty (120) days of December 31,2002, and are incorporated herein by reference thereto.

 

Inaddition to historical information, This Annual Report on Form 10-K containscertain forward-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. Readers should amongst the other statements contained herein andfuture filings with the Securities and Exchange Commission, including theQuarterly Reports on Form 10-Q to be filed, carefully review in Item 7“Cautionary Statements for Purposes of the “Safe Harbor” Provisions of thePrivate Securities Litigation Reform Act of 1995 and Risk Factors”. All of theRisk Factors contained therein should be carefully read.

 

INTRODUCTORY NOTE

 

AmendmentNo. 3 of FORM 10-K/A to the Annual Report on FORM 10-K for the year endedDecember 31, 2002.

 

ThisAmendment No. 3 on FORM 10-K/A is being filed to restate certain amounts whichwere reported, but appeared in wrong columns including $37,500 of PrepaidExpenses omitted in year 2001but included in the overall presentation. Torevise disclosure and presentation of the Company’s Consolidated Statements forthe years ended December 31, 2002 and 2001.

 

Theitem amended are as follows:

 

Part IV            The Company’s financial are not audited.

 

The financials are presented as a Development StageCorporation.

 

Throughout the Financial Reports all references tofinancial data now indicate that the Company sustained only Losses and Deficitssince emerging from Bankruptcy Proceedings in September 1998.

 

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PART I

 

ITEM 1—DESCRIPTION OF BUSINESS

 

THECOMPANY

 

KenilworthSystems Corporation hereinafter referred to as “Kenilworth” or “we” wasincorporated on April 25, 1968 under the laws of the State of New York.

 

PLANNEDBUSINESS

 

Ourpresent plans are to develop a wagering system that would allow patrons allover the industrialized world to play and wager on live casino table games onterminals called “Roulabette”Ô placed in hotels, resorts, bars and otherpublic gathering places and in homes and offices on personal computers (PC’s)or television sets connected to set top boxes for Interactive TV via digitalsatellite broadcasts emanating from strictly regulated U.S. casinos.

 

OnMarch 28, 2002, the Company entered into a contract with ArchonCorporation for a thirty (30) day test to simulcast live in-progress roulettetable game action that eventually could allow players worldwide to wager alongwith table players at Archon’s Pioneer Casino in Laughlin, Nevada. The test, aworld first, was to demonstrate to the Nevada Gaming Control Board, and otherU.S. and foreign Gaming Regulators that have regulated gaming forums, such aslotteries, racing, OTB, etc., the benefits of the Kenilworth “Play Along withNevada Live” concept.

 

TheNevada Gaming Authorities must approve any contracts between Kenilworth, acasino operator and the simulcast test proposal before any test can take place.

 

Theproposed live test was cancelled by mutual consent.  It was determinedthat the proposed simulcasts of live in-progress casino table games, had firstto be approved by the Nevada State Legislature in the form of a legislativebill, permitting the “Live Game Broadcasts” from Nevada.

 

TheNevada State Legislature meets for four months once every two years.  Thecurrent session began on February 3, 2003.   We have retainedlobbyists and legislative advisors to introduce legislation that, if approved,will establish the regulatory framework for worldwide simulcasts, via digitalsatellite transmission of live, in-progress, casino table game play.

 

Ifthe proposed legislative bill is passed and signed by the State of Nevada’sgovernor, Kenilworth will initially broadcast Roulette, Craps and Baccaratgames to jurisdictions around the industrialized world.

 

Itmay be that in order for hotels not to be required to obtain casino licenses intheir jurisdictions to offer “Roulabette”Ô, they may have to limit the wagering tominimal amounts, so as to qualify the games as entertainment for registeredhotel guests.  Resort gaming will establish a trend for the entire hotelindustry worldwide.

 

Inthe event a substantial amount is won by a player, Kenilworth will make paymentto the winner, via money wire transfer to the establishment within twenty-four(24) hours.  Kenilworth will establish a worldwide cage for winningpayments; or, a guarantee of payment by a well-recognized international bank.

 

Whenplaying along with live table games from a highly regulated jurisdiction,players are assured that the game results are exactly what they see; and,playing along with casino table games such as

 

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roulette,craps and baccarat provides interaction, fun and far more excitement thanplaying make believe animated (virtual) games. It is the next best thing toactually being at the table.

 

Duringa proposed thirty (30) day test, live table game play will only be simulcastwithin the state of Nevada, and wagering will only be allowed at the actualroulette table. Players around the world may eventually “Play Along with NevadaLive” via several different wagering methods, including INTERACTIVE TV serviceslike by satellite broadcast providers. Satellite broadcasters in the U.S.,Europe, and Asia would be subject to regulatory requirements in the variousjurisdictions in which the broadcasts are directed.

 

Toconduct the initial broadcast Kenilworth believes it will require five milliondollars ($5,000,000). At present, the Company does not have the funds availablebut expects to obtain same, from investors, as soon as the legislation ispassed, the test is approved by the Nevada Gaming Regulatory Authorities, andis poised to commence.

 

Inprior years, Kenilworth completed a prototype system that allowed casinopatrons to play along with live in-progress casino table games only within theconfines of a casino, via closed circuit television. Also in 1990, we developedand delivered for the TAB in Australia, a cashless slot machine system. Bothsystems required debit cards and central mainframe computers to manage thewagers. By making use of the expertise applied in the development of theaforementioned systems we plan to develop a second-generation terminal thatwill manage the wagers. This as planned would allow a player in an interactivemanner, at a remote location (outside the casino confines), to experience theactual play and excitement at the casino table game and to make wagers on thevarious games, without having to be physically present at the casino or casinotable.

 

Theproposed terminal dubbed “Roulabette”Ô consists of a personal computer (PC) withtwo (2) monitors.  One monitor displays the live in-progress casino tablegame play as well as advertising.  The second, which is outfitted with atouch screen, allows a player to place wagers directly over the games displayedon the first monitor.  It also has a variable denomination bill acceptorand a bar code ticket dispenser.  Both monitors are housed in anattractive enclosure. The RoulabetteÔ terminal is the size of a typical “low boy”slot machine (desk top height).  Each terminal is self-sufficient, manageswagers from $0.25 to $100.00 or the equivalent in most any currency, andreceives the table game play via simulcast satellite TV transmissions (withdish antennas) or local cable connection.

 

Whereauthorized, hotels, resorts clubs and other public gathering places will beable to offer casino table game action in their establishments withoutincurring the costs to operate a casino. The RoulabetteÔ terminal is expected to offer an alternativeto slot machine players. There are now believed to be more than ten (10)million slot machines played throughout the world.

 

Kenilworthwill seek to promote to state lotteries, and other state regulated entities,the ability to operate websites that will manage the wagers. The program willask state legislatures to amend their lottery horse/dog racing and OTBlegislation to include RoulabetteÔ

 

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wageringor promulgate new legislation. There are no assurances that the necessaryapprovals will be granted.

 

Thereare powerful arguments for state legislatures to amend their Lottery Acts toinclude “Play Along with Nevada Live”. Lottery revenue is gradually decreasingin every state. Thirty-eight (38) states and the District of Columbia arepooling their lottery prizes with the “Power Ball” and “Big Game” nationallotteries. In most of these states, the state lottery finds it difficult toobtain sufficient numbers of players to make up a minimum weekly lottery prizeof one million dollars ($1,000,000). In most states, the revenue from lotteryplay benefits education. States need something more attractive to restorerevenue. With “Play Along with Nevada Live”, there is interaction, excitementand fun. All at much better odds than may be offered by the lotteries. Thelotteries can establish maximum wagers daily, weekly and monthly limits, andmonitor compulsive gamblers.

 

Onceplay along in homes and other public gathering places has started, we intend tointroduce casino games such as “limited tournament play”. For twenty-five dollars($25.00), players can sign up with their respective website operators and makeup to thirty (30) wagers on any table game. The individual that wins the mostmoney during a specific tournament game period may win as much as a milliondollars ($1,000,000) in addition to their game play win. As more interactiveplay along with casino games develops, the prizes can be increased andmultiplied. The limited tournament play games can be scheduled more than once aday, during specific hours of the day, on specific days or nights of the weekor once or twice a month. Actual live experience will determine scheduling.

 

NATUREOF PLANNED BUSINESS

 

Thegaming industry is comprised primarily of five (5) service industries: (1)traditional pari-mutuel wagering on horse and dog racing; (2) casino, IndianReservations, and riverboat gambling; (3) lotteries; (4) charitableorganization gambling (Bingo and Las Vegas Nights); and (5) Sports book.

 

Kenilworthintends to operate primarily in the casino segment.

 

KENILWORTH MANIFEST

 

(The Manifest contains forward-lookingstatements)

 

Casinogambling throughout the world, in every form, is on the increase.  Mostjurisdictions need the revenue from gambling to balance their budgets orincrease their tax collection.

 

KenilworthSystems Corporation can provide simulcast gaming worldwide, giving everyone theopportunity of playing a casino table game as if they were on the floor of amajor casino in Las Vegas, Nevada.  This project provides all of thebenefits and actual excitement of playing in a casino, without the need of thebricks and mortar.   Gaming enthusiasts will welcome the chance toplace wagers on live in-progress casino table games, whether they are at alocal tavern, hotel, resort, racetrack or other public gathering place, or athome.  Kenilworth is leading the industry in this area, and its technologyallows all of this to happen.

 

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Oursystem has the potential to replace the existing two thousand (2,000) foreignvirtual gambling websites now in play, which garnished more than three (3)billion dollars from U.S. citizens in 2001 without paying any U.S. taxes.

 

TheNevada State Legislature meets for four months once every two years.  Thecurrent session began on February 3, 2003.   We have retainedlobbyists and legislative advisors to introduce legislation that, if approved,will establish the regulatory framework for worldwide simulcasts, via digitalsatellite transmission of live, in-progress, casino table game play.

 

Initially,the broadcast will be of Roulette, Craps and Baccarat games.

 

Franchisingof the simulcast will allow broadcasts to jurisdictions that have approvedgaming regulations, except in Nevada where the broadcasts will be “blackedout”.

 

Kenilworthwill offer a percentage of its worldwide net winnings to the State of Nevada,other jurisdictions (states), and the appropriate sponsoring Nevada casinos.

 

Allfranchisees will be required to make the broadcasts available to satellite dishand cable subscribers in their jurisdictions.   Kenilworth, as partof its marketing plan, will supply the appropriate TV, cable, and interactiveequipment (for betting terminals) to the franchisee.

 

TheNevada Regulatory Authorities will monitor all franchisees of the KenilworthSystem.  A violation of the Nevada regulations by a franchisee will resultin a termination of the franchise.

 

Kenilworthplans to broadcast the simulcast in rotation from five major Las Vegas casinos,so that there will be a casino available on every day.  Kenilworth willinstall in each participating casino a communication room, which will be mannedby licensed employees who will be paid by Kenilworth for their services. The casino broadcast will be permanently linked to the Nevada satellite uplinksite (RCN), and sent by satellite to the downlink/uplink internationalsatellite site in Maryland, for distribution to the satellite footprints aroundthe world.  The Maryland uplink site is operated by a consortium ofsatellite providers covering ninety percent (90%) of the industrialized world.

 

For“Play Along With Las Vegas, Live” a franchisee will be required to provide theat home player with the ability to deposit funds into their pre-paid gamblingaccounts anytime, and on the spur of the moment.

 

Wewill provide Licensed Betting Offices (bookmakers) in Europe, and OTB officesin the U.S., to manage the wagering accounts for at home players.  Theywill be able to accept last minute deposits.  In jurisdictions, which havelottery terminals in place, arrangements will be made with the lottery toaccept instant deposits and pay winners, using the lottery terminals as themanaging device.

 

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Aplayer will simply mark a ticket with his/her Set Top Box or TV setIdentification Number, together with the amount to be deposited.  Fromthat point on, the procedure is the same as selecting lottery numbers.  Awinner can be paid using the reverse procedure.

 

Bettingoffices and lottery terminal providers will either share in the net win managedby each, or be paid a fixed commission for the amount deposited.

 

Whereauthorized, hotels, resorts, clubs, pubs, racetracks and other public gatheringplaces (the “site”) will be able to offer casino table game action in theirestablishments without incurring casino operating costs.  At our expense,we will place RoulabetteÔ terminals and/or advanced PDA’s at the site,enabling wagering via the site’s television set.

 

ARoulabetteÔ terminal consists of a personal computer (PC)with two (2) monitors.  One monitor displays the live in-progress casinotable game play as well as advertising.  The second, which is outfittedwith a touch screen, allows a player to place wagers directly over the gamesdisplayed on the first monitor.  It also has a variable denomination billacceptor and a bar code ticket dispenser.  Both monitors are housed in anattractive enclosure. The RoulabetteÔ terminal is the size of a typical “low boy”slot machine (desk top height).  Each terminal is self-sufficient, manageswagers from $0.25 to $100.00 or the equivalent in most any currency, andreceives the table game play via simulcast satellite TV transmissions (withdish antennas) or local cable connection.

 

Itmay be that in order for hotels not to be required to obtain casino licenses tooffer “Roulabette”Ô, they may have to limit the wagering tominimal amounts, so as to qualify the games as entertainment for registeredhotel guests.  Resort gaming will establish a trend for the entire hotelindustry.

 

Inthe event a substantial amount is won by a player, Kenilworth will make paymentto the winner, via money wire transfer to the establishment within twenty-four(24) hours.  Kenilworth will establish a worldwide cage for winningpayments; or, a guarantee of payment by a well-recognized international bank.

 

InAugust 2002, the Attorney General of the United States (John Ashcroft)informed the Nevada Gaming Control Board (Chairman and Commissioner DennisNeilander, Esq.) that Internet wagering information is in violation of the 1961Wire Act and, therefore, cannot be permitted in the United States ortransmitted from the United States to other countries in the world. Previously, the Nevada State Legislature had approved Internet gambling(February 2001) subject to the approval by the U.S. Attorney General’soffice.  Nevada is the only state that approved Internet gambling. Most states have outlawed Internet gambling. Others have taken no action. Our system will replace the present Internet sites, thus eliminating the needand cost of enforcing the Internet ban.

 

Ourproposed simulcast, via digital satellites, does not use a wire transmissionand communication facility.  A recent Louisiana decision (lower court)ruled that the Wire Act does not apply to broadcasts.  We

 

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arenot within the constraints of the Internet gambling interdiction.  Ourbroadcast is similar to horseracing and sporting events, where the simulcast istransmitted via satellites to the various satellite dish subscribers, and thendownloaded to cable companies.  Licensed Betting Offices, OTB offices andracetracks that offer out of state horse racing will pick up the satellitebroadcasts with their own dish antennas, or in overseas locations via theInternet.  Wire transmission within state boundaries does not violate theFederal 1961 Wire Act.

 

LastSeptember, the House of Representatives voted and passed the Internet GamblingEnforcement Act, which bans credit and debit cards, checks, “Western Uniontype” wire transmission and all other means of transferring money for use inconnection with Internet Wagering. Since the Senate did not approve a companionBill by the end of the year, the House and Senate must pass the legislationagain in 2003.  There appears to be an anti-Internet gambling sentiment inCongress and passage by both houses appears certain.  Our method isdistinct, as players using our system, unlike the Internet, will be subject tostate casino regulations and will not be permitted to use credit or debitcards.

 

Inour worldwide plans, wagers can be placed with Licensed Betting Offices andlottery terminal operators.  They are only permitted to accept cash attheir offices or lottery terminal locations.  Currently, they are obligedto make sure that no one underage places or collects wagers on horseracing,sporting events or the lottery.  The same will apply when they acceptwagers or pay winnings on our live simulcast broadcasts.  It is simple and100% foolproof.

 

Sincegambling for tax revenue in twenty-three (23) states passed overwhelmingly, atthe last election (Nov. 5, 2002), we will make plans to offer simulcasts oflive, in-progress, casino table game play across the United States. Initially our simulcast will be for entertainment purposes only.

 

Theproposed broadcast does not require any sophisticated electronics; only theacceptance by the satellite and cable operators and the approval of the FederalCommunications Commission.  We have been unofficially advised that, forentertainment only (no wagering), our broadcasts will be classified the same asany program now being broadcast via the networks.  For gambling, we willrequire an FCC license, which we do not believe will be difficult to obtain(simulcasting of horse racing requires an FCC license).

 

Asthe Justice Department has prevented the EchoStar and DirecTV merger, we doubtthat we will have any problem in exclusively franchising either company. Initially, they may broadcast our simulcasts for advertising revenue. Later, with live games, they will share in the net win, which is what we expectto negotiate in Europe and Asia.

 

BSkyB(NewsCorp.) and Vivendi (France) are both leaders in the bettingbusiness.  They presently control satellite broadcasts in Europe for turfand sport wagering (soccer).

 

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LOGICAL QUESTIONS:

 

(1.)                               Why aren’t major casinos in Nevada that havesubstantial resources, and the casino table games, competing with us?

 

Theanswer is simple.  They are casino operators.  If they, even byaccident, have a minor playing along with their broadcasts, or commit any otherviolation, they lose their Nevada and other state Casino licenses. Establishing a subsidiary for their transmissions does not absolve them fromthe violation.  Kenilworth is not a licensed casino operator. Kenilworth holds the U.S. patent and they would have to operate under ourlicense.

 

Further,we plan to broadcast from five (5) strip casinos in rotation, in order thateach casino will have the opportunity, on certain days, to broadcast duringprime time.  When we manage the broadcast in their casino, we will havethe same crew in the communication room (4 technicians, 24 hours a day, 7 daysa week).  For example, on Monday at Caesar’s, Tuesday at the Venetian,Wednesday at MGM, and so on.  If another casino attempts to compete withus, they will violate our patent.  They would also have to engage theirown crews (24 hours a day, 7 days a week), hire the same satellite provider fortheir broadcast to Europe or Asia, and pay a percentage of their net win toother franchisees (at least the same percentage of our net win or more, as weall will compete to have them manage the wagering).

 

TheNevada Casinos fare better in accepting a percentage of our net win, which theywill receive without any operating costs.  They will probably be exemptfrom Nevada taxes, as we are paying five percent (5%) on their simulcasts tothe state (no double taxation).

 

Netwin is determined before deduction of expenses.  It’s a term used tocollect taxes on gambling revenue (table drop) before operating expenses. In Europe, and now in some states in the U.S., this tax amounts to an averageof twenty percent (20%), with minimum annual taxes of up to one hundred milliondollars.

 

Wepropose to offer two percent (2%) of our net win to the Nevada school system,and another three percent (3%) to the state of Nevada.  On a worldwidebasis revenue could reach, in the not too distant future, in the one hundredbillion dollar range.  That could earn Nevada five billion dollarsannually; more than twice their present budget needs.  Law enforcementagencies estimate that Americans wagered $380 billion in 2001 on sportingevents (mostly illegally).  Our system can be regulated and tested (unlikeInternet sites).

 

Presently,Nevada’s school system spends $1,200 less, per child, than the average stateschool system nationwide.  Nevada should welcome our contribution, as itwill supplement its education budget.

 

(2.)                               Why wouldn’t the U.S. Congress also preventsimulcasting of live casino table games, like it has with Internet gambling?

 

TheInterstate Horse Racing Act of 1978 permits simulcasts of races via satellitetransmission between states, which are then downloaded to cable systems. Horse and sporting club owners are traditional and

 

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substantialcontributors to House and Senate campaigns.  It is big business that wouldhave to be abolished if our proposed simulcasts are outlawed.  Theprobability of its abolition is remote.

 

(3.)                               What happens if the Nevada State Legislaturedoes not, or cannot, authorize the live game broadcasts?

 

Wewill proceed.  We will introduce our proposed legislation to other statessuch as New Jersey, Michigan, New Orleans and Connecticut.

 

(4.)                               What will happen if non-casino or casinooperators attempt to compete with us?

 

Ifthey do, they run the risk of an injunction and incurring triple damages. A patent that covers the proposed remote live in-progress casino playthroughout the industrialized world was recently issued to Kenilworth.

 

(5.)                               Will there be opposition by Nevada casinooperators?

 

Thepast has proven to the Nevada casino industry that as more casinos are built inthe United States (there are now seven hundred fifty [750] casinos outside ofNevada), more visitors come to Nevada. Our worldwide broadcasts willsubstantially enhance the overall demand to visit Las Vegas or any other statethat permits our broadcasts.

 

SUMMARY:

 

(1.)                               In order not to endanger the viability of thetheir local casinos, the Legislature should allow our proposed simulcasts, asthere are too many other prominent and well-regulated casinos in the U.S. fromwhich our simulcasts can be transmitted around the world.  For example,Atlantic City, N.J., Connecticut, (Foxwood and Mohegan Sun, the two mostprofitable casinos in the world), Detroit, New Orleans, etc. Most casinos areowned by the very same casino operators we plan to solicit in Las Vegas. Nevada is the leader of the casino industry.  As such, it cannot afford topass up our new innovation.

 

(2.)                               Our RoulabetteÔ terminals, wherever they are placed (bars,resorts, hotels, racetracks, etc.) will only be leased to the operators by thefinance company, which we will engage for that purpose.  If a terminalcannot meet the minimum revenue necessary to pay the monthly leasing charges,it will be moved to another location.  By placing RoulabetteÔ terminals at horse race tracks, which alsooffer slot machines, we will be transforming them into complete casinos,without the inherent start up and operating costs.

 

(3.)                               If Nevada approves the simulcasts, it willlikely spell the end of most of the existing two (2) thousand Internet Virtualcasino websites around the world.  It will be likely that no one willwager with a make believe casino game when they know that they can play alongwith a live game from Las Vegas.

 

Thetwo (2) thousand virtual casino websites via the Internet obtain sixty percent(60%) of their annual revenue from customers in the U.S.

 

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AlthoughInternet gambling is outlawed, 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 two (2) thousand websites.When one site experiences losses, it is shut down and another site iscreated.  We expect that a majority of these sites will shut down becauseof our simulcasts, thus directly reducing the number of sites, which need to bepoliced.

 

Simulcastbroadcasts around the world must meet, and will be supervised by, theregulations of the Nevada Gaming Authorities and the jurisdiction, whichreceives the broadcast.  The supervision will not be difficult to enforce,because all simulcast wagering is “cash only”, from regulated, supervisedbetting sites.  There are no wire money transfers with banks and no creditor debit cards permitted.  This fact should ease any opposition fromCongress, as regulation and enforcement responsibility will be vested in eachindividual state (or jurisdiction).

 

Kenilworthwas the first to use color personal computers (PC’s) to replaceelectromechanical slot machines (1988).  We provided the software for thefirst Tabaret located at the Menzie 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.

 

Kenilworthhas been a publicly traded Company since 1968. Prior to entering into thecasino arena, it provided security systems to Nuclear Electric GeneratingPlants in the U.S. and foreign countries, as well as time/attendance systems ata major department store chain.

 

MARKETINGSTRATEGY/SALES PLAN

 

Inthe United States Kenilworth expects to refrain from using the Worldwide Web(WWW) Internet to manage wagers from individuals outside of the casinoconfines. Legislators have voiced strong objections to having theirconstituents’ gamble one-on-one against computers located on Caribbean islands,totally unregulated. In RoulabetteÔ, the play-along broadcast emanates fromcasinos that are regulated by strict and comprehensive rules and state regulations,enforced by gaming control regulators and everybody plays along with the samelive table game. There is a world of difference between playing in a virtualmake believe casino compared with an actual casino.

 

Forthe reasons stated, Kenilworth will ask state lotteries, Off-Track Betting(OTB) corporations, pari-mutuel race tracks, and other state and federalregulated agencies to manage the wagers from individuals playing along on theirPC’s and their television sets using interactive

 

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TVset top boxes that convert regular television sets into minicomputers withintheir state.

 

Theindividuals would have to pre-deposit funds into an account with the wagermanagement company and then place wagers with their credit balance. The wagersand running balances will be transmitted to the RoulabetteÔ 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.

 

Afterwe obtain permission to play RoulabetteÔ in a given state and engages a wagermanagement organization in order to promote digital satellite and interactivetelevision to the state’s residents, Kenilworth would install the eighteen (18)inch dish antenna and converter box required to receive digital TV programmingand interactive TV at its own cost, if the subscriber opens a RoulabetteÔ 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.

 

Instates with approved lottery and/or other gambling legislation, we plan tointroduce RoulabetteÔ terminals to hotels, clubs (similar to cardclubs in California) and resorts, to provide upscale gathering places for touristsand local residents. Charitable organizations that are permitted to conduct“Nevada Nights” and Bingo games may wish to offer RoulabetteÔ gaming on a more permanent basis. To receivethe broadcast signal, all that would be required is an eighteen (18) inch dishTV antenna and distribution equipment. The RoulabetteÔ terminals are intended to be self-sufficientand accept dollar bills (or script, to control the amount an individual isallowed to wager in one day or other time period). We plan to lease all theequipment necessary to participants for a share of the profits.

 

Togain approval for our RoulabetteÔ-style gambling in jurisdictions that havenot approved any gambling legislation, Kenilworth proposes to engage lobbyiststo introduce, promote, and obtain legislative approval to permit RoulabetteÔ-style gambling. Our strategy is to finddepressed resort areas an have the resort/hotel operators convince their localpoliticians of the benefits to their business and the local economies andrequest them to promote legislative approval, either state-wide or limited totheir areas. Riverboat gambling started to rehabilitate decaying waterfronts.RoulabetteÔ can do the same in depressed economic areas.

 

Whenthe live casino TV broadcasts are beamed for global viewing, Kenilworth willseek out similar organizations, as proposed for the United States and bettingshops and slot route operators, that can provide the servicing of individualaccounts and placement of RoulabetteÔ terminals in hotels, clubs, pubs,racetracks, etc. In all instances, we plan to offer only profit sharingarrangements to franchisees, which will require leasing all the equipmentnecessary to the franchisee, to discourage competition.

 

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Inoverseas installations, wherever permitted, Kenilworth will make use of the WWWInternet to manage the wagers.

 

COMPETITION

 

Manysegments of the gaming industry are characterized by intense competition, witha large number of companies offering the same type of wagering products andservices. None of these companies at present are believed to offer the same orsimilar equipment or systems as intended by RoulabetteÔ. The most likely competition will come fromslot machine manufacturers who could relatively quickly adapt slot machines toplay along with live casino table games. There are three (3) major slot machinemanufacturers in the United States, all of which have vastly greater resourcesthan the Company and may have under development systems that directly competewith RoulabetteÔ.

 

Weimmediately plan only to broadcast the live casino table games from five (5)companies that own casinos. Other casino owners may start their own broadcastsand have their own terminals manufactured that compete with Kenilworth afterKenilworth has done all its pioneering for play-along wagering.

 

PATENTS

 

OnFebruary 25, 2003, our U.S. patent for the various aspects of wagering onlive in-progress casino table games via digital satellite transmission waspreliminarily approved subject to the final approval by the U.S. PatentOffice’s Review Board and we have taken the steps to protect our interests inother areas of the industrialized world. There can be no assurances thatforeign patents will be issued and challenges will not be instituted againstthe validity or enforceability of our patent.

 

GOVERNMENTREGULATIONS

 

Kenilworthhas no licenses from any casino regulating authorities and may not require anycasino licenses at the present time and may never become able to obtain anylicenses that we will require in the future. Each state has its ownregulations, and in states where Kenilworth does business, Kenilworth will haveto comply with these regulations. The following discussion is not necessarilycomplete, or current regarding laws and regulations that may be applicable tous.

 

NEWJERSEY

 

Inorder to sell its RoulabetteÔ wagering systems to casinos in New Jersey,Kenilworth must be licensed by the New Jersey Casino Control Commission (CCC)in accordance with the New Jersey Casino Control Act as a manufacturer anddistributor of gaming equipment. We will have to make arrangements to apply forlicensing in New Jersey. The New Jersey Commission may require that personsholding in excess of five percent (5%) of the publicly traded equity securitiesof Kenilworth qualify under the Casino Control Act. Any beneficial holder ofthe voting securities owned may be required to file an application, beinvestigated, and have his qualifications determined if the CCC has reason to believethat such ownership may be inconsistent with the declared policies of theCasino Control Act.

 

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NEVADA

 

Themanufacture and distribution of gaming devices in Nevada are subject to theNevada Gaming Control Act (the “Nevada Act”), and to licensing and regulatorycontrol by the State Gaming Control Board and various local, city and countyregulatory agencies (collectively, the “Nevada Gaming Regulators”). The laws,regulations and supervisory procedures of the Nevada Gaming Regulators arebased upon declarations of public policy which are concerned with, among otherthings, (i) the character of persons having any direct or indirect involvementwith gaming, (ii) application of appropriate accounting practices andprocedures, (iii) maintenance of internal fiscal affairs and the safeguardingof assets and revenues, (iv) record keeping and reporting to the Nevada GamingRegulators, (v) fair operations of games, and (vi) the raising of revenuesthrough taxation and licensing fees.

 

Nopublicly traded corporation is eligible to apply for, or hold gaming licensesin Nevada. A publicly traded corporation may be registered and found suitableto acquire or to hold an interest in a corporate subsidiary, which holds suchgaming licenses. Before Kenilworth may do business in Nevada, it will have toregister with the Nevada Gaming Regulators as a publicly traded holding companyand found suitable to hold an interest in a licensed subsidiary. After aninvestigation is completed, licensing may take approximately ninety (90) days.No proceeds from the public sale of securities by a registered holding companymay be used to acquire, construct, operate, or finance gaming facilities inNevada or to retire or extend obligations incurred for such purposes unless thepublic offering of those securities has been approved by the Nevada GamingRegulators.

 

TheNevada Gaming Regulators may require any individual who has a Materialrelationship with us to be investigated and licensed or found suitable. Anyperson who acquired five percent (5%) or more of Kenilworth’s securities mustreport the acquisition to the Nevada Gaming Regulators. Any person who becomesa beneficial owner of ten percent (10%) or more of Kenilworth’s securities mustapply for a finding of suitability. The Nevada Regulators have the power toinvestigate any security holder of Kenilworth.

 

IfKenilworth registers as a publicly traded holding company, the Nevada GamingRegulators would have the power, at any time, to require the Company’s stockcertificates to bear a legend indicating that the stock is subject to theNevada Gaming Control Act and the regulations of the Nevada Gaming Regulators.The Nevada Gaming Regulators, through the power to regulate licensees and otherwiseunder Nevada law, would have the power to impose additional restrictions on theholders of Kenilworth’s securities at any time.

 

FEDERAL

 

TheFederal Gambling Devices Act of 1962 (the “Federal Act”) makes it unlawful fora person to manufacture, deliver, or receive gaming machines, gaming machinetype devices and components thereof across interstate lines unless that personhas first registered with the Attorney General of the United States. Inaddition, various record keeping and equipment identification requirements areimposed by the

 

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FederalAct. Violations of the Federal Act may result in seizure or forfeiture ofequipment, as well as other penalties.

 

OTHERREGULATIONS

 

Themanufacture, distribution, sale, and use of slot machines is controlled bystate and federal law, which may also apply to our RoulabetteÔ gaming terminals. Certain foreign countriespermit the importation, sale, or operation of slot machines. Where importationis permitted, some countries prohibit or restrict the payout feature of thetraditional slot machine or limit the operation of slot machines to acontrolled number of casinos or casino-like locations. Certain of thesejurisdictions also require the licensing of gaming devices. Our RoulabetteÔ terminals may be considered similar to slotmachines and may have to meet these regulations.

 

FABRICATION/ASSEMBLYOPERATION

 

Whenwe start to market the RoulabetteÔ Wagering System, we plan to engagesub-contractors to assemble/manufacture the terminals from standard orspecially manufactured (to our specifications) electronic, TV, and othercomponents purchased from vendors or manufactured by subcontractors.

 

EMPLOYEES

 

Kenilworthat present has five (5) employees. Three (3) perform administration work andthe other two (2) work on research related to casino wagering and marketingaround the world. The Company has engaged Consultants that will manage theproposed satellite transmission programs.

 

BACKLOG

 

Wedo not have any backlog.

 

ITEM 2—PROPERTIES

 

Kenilworthleases month-to-month approximately fifteen hundred (1,500) square feet in anoffice building paying fifteen hundred dollars ($1,500) per month rent. The Company plans to move to larger office space (5,000 square feet) inMineola, NY with annual rent of approximately one hundred fifty thousanddollars ($150,000).

 

ITEM 3—LEGAL PROCEEDINGS

 

Sinceemerging from Chapter 7 Bankruptcy Proceedings on September 23, 1998,Kenilworth has not been involved in any significant legal proceedings.

 

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ITEM 4—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

NotApplicable.

 

EXECUTIVE OFFICERS OF THEREGISTRANT

 

Thenames, ages and positions held by each of Kenilworth’s directors and executiveofficers are as follows:

 
| **NAME**             |   | **AGE** |   | **OFFICES AND  POSITIONS HELD**                   |   | **FIRST ELECTED  OFFICER OF  KENILWORTH** |
|----------------------|--------|---------|--------|---------------------------------------------------|--------|-------------------------------------------|
|                 |   |    |   |                                              |   |                                      |
| HERBERT LINDO        |   | 77      |   | PRESIDENT AND CHAIRMAN OF  THE BOARD              |   | 1972                                      |
|                 |   |    |   |                                              |   |                                      |
| GINO SCOTTO          |   | 33      |   | DIRECTOR AND CHIEF  EXECUTIVE OFFICER             |   | 2001                                      |
|                 |   |    |   |                                              |   |                                      |
| MAUREEN PLOVNICK     |   | 36      |   | DIRECTOR, CORPORATE  SECRETARY AND VICE PRESIDENT |   | 2000                                      |
|                 |   |    |   |                                              |   |                                      |
| JOYCE CLARK          |   | 66      |   | DIRECTOR AND VICE  PRESIDENT                      |   | 1998                                      |
|                 |   |    |   |                                              |   |                                      |
| KIT WONG             |   | 73      |   | DIRECTOR AND VICE  PRESIDENT                      |   | 1999                                      |
|                 |   |    |   |                                              |   |                                      |
| BETTY SUE SVANDRLIK  |   | 62      |   | VICE PRESIDENT AND ASSISTANT  CORPORATE SECRETARY |   | 1998                                      |
|                 |   |    |   |                                              |   |                                      |
| PATRICK J. MC DEVITT |   | 61      |   | DIRECTOR AND VICE  PRESIDENT                      |   | 2001                                      |

 

Allof the above executive officers and directors have been elected to serve untilthe next Annual Meeting of Shareholders or until their respective successorsare elected and qualified. The Board presently anticipates that theShareholders Meeting will be held in late May 2003.

 

PART II

 

ITEM 5— MARKET PRICES OF THE COMPANY’S COMMON STOCK AND RELATEDSTOCKHOLDER MATTERS

 

(a)After Kenilworth emerged from Bankruptcy Proceedings in September of 1998,its Common Stock resumed trading on the OTC Pink Sheets under the old tradingsymbol “KENS”. The following table sets forth high and low closing sales pricesfor our Common Stock, as reported on the OTC Pink Sheets.

 

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|                             |   | **LOW** |   | **HIGH** |   |
|----------------------------------|--------|---------|--------|----------|--------|
| **2001**                         |   |    |   |     |   |
|                             |   |    |   |     |   |
| January 1, 2001             |   |    |   |     |   |
| Through March 31,  2001     |   | $       | .08    |     | $      | .10 |   |
|                             |   |    |   |     |   |
| April 1, 2001               |   |    |   |     |   |
| Through June 30, 2001       |   | $       | .08    |     | $      | .22 |   |
|                             |   |    |   |     |   |
| July 1, 2001                |   |    |   |     |   |
| Through September 30,  2001 |   | $       | .08    |     | $      | .17 |   |
|                             |   |    |   |     |   |
| October 1, 2001             |   |    |   |     |   |
| Through December 31,  2001  |   | $       | .05    |     | $      | .07 |   |
|                             |   |    |   |     |   |
| **2002**                         |   |    |   |     |   |
|                             |   |    |   |     |   |
| January 1, 2002             |   |    |   |     |   |
| Through March 31,  2002     |   | $       | .02    |     | $      | .25 |   |
|                             |   |    |   |     |   |
| April 1, 2002               |   |    |   |     |   |
| Through June 30, 2002       |   | $       | .08    |     | $      | .25 |   |
|                             |   |    |   |     |   |
| July 1, 2002                |   |    |   |     |   |
| Through September 30,  2002 |   | $       | .05    |     | $      | .13 |   |
|                             |   |    |   |     |   |
| October 1, 2002             |   |    |   |     |   |
| Through December 31,  2002  |   | $       | .02    |     | $      | .08 |   |

 

(b)Holders. There were approximately six thousand (6,000) holders of   record of Common Stock of Kenilworth as of December 31, 2002.

 

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

 

ITEM 6—SELECTED FINANCIAL DATA

 

Thefollowing table summarizes certain selected financial data and is qualified byreference to, and should be read in conjunction with, the ConsolidatedFinancial Statements and related Notes thereto and with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”included elsewhere herein.

 

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SelectedFinancial Data for the five (5) years ended December 31, 2002, are asFollows:

 

SUMMARY OF OPERATIONS

 
|                              |   | **2002** |    | **2001** |    | **2000** |   | **1999** |    | **1998** |      |
|-----------------------------------|--------|----------|---------|----------|---------|----------|--------|----------|---------|----------|-----------|
| Net sales from operations         |   | $        | 0       |     | $       | 0        |   | $        | 0       |     | $         | 0 |   | $ | 0 |   |
| Other income                      |   |     |    |     |    |     |   |     |    | $        | 4,300,403 |   |
| Net Loss                          |   | $        | 660,289 |     | $       | 421,491  |   | $        | 136,589 |     | $         | 11,830 |   | $ | 4,475,430 |   |
| Loss per common share             |   | $        | .007    |     | $       | .005     |   | $        | .002    |     | $         | .01 |   | $ | .07 |   |
| Loss per common  share-diluted    |   | $        | .007    |     | $       | .005     |   | $        | .002    |     | $         | .01 |   | $ | .02 |   |
| Consolidated Balance Sheet  Data: |   |     |    |     |    |     |   |     |    |     |      |
| Total assets                      |   | 255,878  |    | $        | 120,811 |     | $      | 47,859   |    | $        | —    |   | $ | 0 |   |
| Current liabilities               |   | 107,458  |    | $        | 100,730 |     | $      | 28,365   |    | $        | 242       |   | $ | 7,912 |   |
| Stockholders’ equity         |   | 148,420  |    | $        | 20,081  |     | $      | 19,494   |    | $        | 8,792     |   | $ |   |   |

 

ITEM 7— MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

 

(A)RESULTS OF OPERATIONS

 

Sincewe emerged from bankruptcy proceedings on September 23, 1998, we had norevenues from operations, and therefore sustained losses from generaladministration expenses amounting to $660,289 in 2002 and $421,491 in 2001.Kenilworth has had no revenues from operations during the past eleven (11)years and there can be no assurances that it will ever have revenue frompresent planned operations.

 

(B)LIQUIDITY AND CAPITAL RESOURCES

 

Kenilworthhas not conducted any business and operations since 1991. At December 31,2002 our working capital was $10,071. In Kenilworth’s present state ofoperation to formulate a viable business plan, Kenilworth requires very littlefunding to continue this planning. We have been dependant upon the resources ofits President who receives no compensation and funds received in 2002 fromprivate investors of five hundred twenty thousand dollars ($520,000) and sinceDecember 31, 2002 two hundred fifty thousand dollars ($250,000) throughMarch 15, 2003.

 

Ourpresent plans are to develop a wagering system dubbed “RoulabetteÔ” that would allow patrons all over theindustrialized world to play and wager on live casino table games on terminalsplaced in hotels, resorts, bars and other public gathering places and in homesand offices on personal computers (PC’s) or television sets connected to settop boxes for Interactive TV via digital satellite broadcasts emanating fromstrictly regulated U.S. casinos.

 

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

 

Theinformation contained in this Form 10-K and Kenilworth’s other filings with theSecurities Exchange Commission may contain “forward- looking” statements withinthe meaning of section 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 that could significantly affect results inthe future and, accordingly, such results may differ from those expressed inany forward looking statements herein. Future operating results may beadversely affected as a result of a number of factors. Set forth below arecertain important factors that could cause actual results to differ materiallyfrom those in such “forward-looking” statements that are directed to eachshareholder and potential shareholder of Kenilworth.

 

YOUSHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLYUNCERTAIN

 

Youshould not rely on forward-looking statements in this Form 10-K. This Form 10-Kcontains forward-looking statements that involved risks and uncertainties. Weuse words such as “anticipates”, “believes”, “plans”, “expects”, “future”,“intends” and similar expressions to identify such forward- looking statements.You should not place undue reliance on these forward-looking statements, whichapply only as of the date of this Form 10-K. Our actual results could differmaterially from those anticipated in these forward-looking statements for manyreasons, including the risks faced by Kenilworth as described below andelsewhere in this Form 10-K.

 

NOOPERATING HISTORY

 

Wehave had no revenues from operations since 1991. We emerged from our bankruptcyproceedings in 1998 without assets. We have had no revenue from operationssince then and we may never have any revenues from operations in the future,which may result in the termination of the business.

 

WEHAVE NO WORKING CAPITAL

 

Asof December 31, 2002 the working capital of Kenilworth is $10,071. Thiswill not enable Kenilworth to achieve any of its planned operations. There canbe no assurances that Kenilworth would ever have sufficient working capital toengage in its planned operations.

 

OURBUSINESS IS ONLY IN THE PLANNING STAGE

 

Kenilworth’sbusiness presently is solely in the planning stage. We plan to engage in thedevelopment, manufacturing, marketing of an operation entitled RoulabetteÔ. RoulabetteÔ would allow casino patrons and other playersto play along with live in-progress casino table games such as Roulette, Crapsand Baccarat via digital satellite television broadcasts (simulcasts) emanatingfrom strictly state regulated casinos located in the United States and otherlocations around the world, to self-sufficient computer terminals dubbed“RoulabetteÔ“. The RoulabetteÔ terminal is a proposal intended to be

 

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builtand there can be no assurances that it will ever be built. We have noagreements, customers or proposals for any future business.

 

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

 

Inorder to develop the RoulabetteÔ terminal, we estimate at this time, that wewill need at least approximately ten million dollars ($10,000,000). We do nothave this money nor do we have any agreements or understanding to procure thismoney. We may never get this money. If we do obtain this money, it may not besufficient. Further, should such monies be available it may not be available onterms 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 marketing planand there can be no assurances that such funds will ever be available to allowKenilworth to engage in business on a profitable basis.

 

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

 

Atthe present time, we do not have any employees who will be able to developRoulabetteÔ. It will be necessary for us to obtainpersonnel qualified and with the expertise to develop RoulabetteÔ. We believe at this time we would requireinitially six (6) employees and several consultants. There can be no assurancesof the availability of any such employees and consultants.

 

WEARE DEPENDANT UPON OUR PRESIDENT

 

Kenilworthhas been dependant upon the services of its president Herbert Lindo who isseventy-seven (77) years old. Herbert Lindo has performed his services duringthe past recent 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’s continuedavailability.

 

RAPIDCHANGES IN TECHNOLOGY

 

Thetechnology and RoulabetteÔ in general is subject to rapid change.Kenilworth will need to maintain an ongoing research and development effort ofwhich there can be no assurances of success or availability of funds. Additionally, there can be no assurances that the development of technologiesand products by competitors will not render the Kenilworth’s products ortechnologies non-competitive or obsolete.

 

WEARE ENGAGED IN A HIGHLY COMPETITIVE INDUSTRY

 

Ourbusiness is subject to significant competition. Competition exists from largercompanies that possess substantially greater technical, financial, sales andmarketing resources that Kenilworth presently possesses. Such competition isexpected to increase. Such increased competition may have a material adverseeffect on Kenilworth’s ability to successfully market its products.

 

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WEWERE GRANTED A PATENT FOR THE VARIOUS ASPECTS OF SIMULCAST WAGERING

 

OnFebruary 25, 2003, our U.S. patent for the various aspects of wagering onlive in-progress casino table games, was preliminarily approved subject to thefinal approval by the U.S. Patent Office’s Review Board. We have taken thesteps to protect our interests in other areas of the industrialized world.There can be no assurances that the U.S. Patent Office’s Review Board willconfirm the preliminary finding that foreign patents will be issued and thechallenges will not be instituted against the validity or enforceability of ourpatent.

 

OURROULABETTEÔ TERMINAL IS SUBJECT TO VARIOUS FEDERAL,STATE AND LOCAL LAWS AND REGULATIONS

 

Theuse of RoulabetteÔ is subject to various federal, state andlocal laws and regulations both in the United States and foreign countries.There can be no assurances that we will ever be able to obtain licenses orpermits necessary to conduct our business or that we will be able to complywith these applicable laws and regulations.

 

TheRoulabetteÔ system is planned to allow casino patronsand other players to play along with live in progress casino table games suchas Roulette, Craps and Baccarat via digital satellite television programmingemanating from state regulated casinos. There can be no assurances that casinooperators will ever participate in Kenilworth’s business.

 

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

 

Ourexecutive officers and directors together with their affiliates beneficiallyown a significant percentage of our outstanding common stock. Thesestockholders, if acting together, will be able to significantly influence allmatters requiring approval by our stockholders including the election ofdirectors and the approval of mergers or similar transactions even if thestockholders disagree.

 

SHARESELIGIBLE FOR FUTURE SALE COULD CAUSE OUR STOCK PRICE TO FALL

 

Ifour stockholders sell substantial amounts of our common stock in the publicmarket, the market price of our common stock could fall. As of March 15,2003 we had ninety seven million six hundred eighty-five thousand nine hundredforty-four (97,685,944) shares of common stock outstanding of which seventy twomillion nine hundred forty thousand three hundred thirty (72,940,330) areeligible for sale by our shareholders.

 

WEDO NOT INTEND TO PAY DIVIDENDS

 

Weare not able to pay any dividends because we have no funds available to do so.Even if we had funds available, we do not intend or declare to pay anydividends on our common stock.

 

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Thefinancial statements, the accompanying notes are filed as part of this Reportannexed at the end of this report.

 

ITEM 9—CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE

 

TheCompany’s former Independent Auditors ended their business in the early part of2002.

 

PART III

 

Item10, Item 11, Item 12, and Item 13 (DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT, and CERTAIN RELATIONSHIPS AND RELATED TRANACTIONS, respectively),will be incorporated in the registrant’s Proxy Statement to be filed within onehundred twenty (120) days of December 31, 2002, and will be incorporatedherein by reference.

 

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PART IV

 

Item 13-OTHER EVENTS

 

TheBoard of Directors met four (4) times during the year 2002.

 

Atthe Annual Meeting of the Shareholders of Kenilworth held on July 17,2002, Herbert Lindo, Kit Wong and Joyce Clark, the incumbent and four (4) newmanagement endorsed directors: Gino Scotto, Patrick J. McDevitt, Steve Donnerand Preston Smart were unanimously elected by the shareholders.

 

Therewere no other proposals presented at the meeting.  Mr. Lindo noted thatthe Company would have to engage a new Independent Auditor as its prior yearsAuditor discontinued their business.

 

Immediatelyafter the shareholders meeting, the Board of Directors authorized the issuanceof five million (5,000,000) shares of authorized but unissued Common Stock ofthe Corporation to the Directors in lieu of compensation and liabilityinsurance for the ensuing year.

 

OnOctober 11, 2002, the Board of Directors unanimously agreed to ask PrestonSmart to resign from the Corporation’s Board of Directors.  As a member ofthe Board, Preston Smart and the Corporation may be faced with a possibleconflict of interest in future planned objectives by the Corporation.

 

OnOctober 11, 2002, the Board of Directors unanimously elected MaureenPlovnick to the Board of Directors.  Mrs. Plovnick is the CorporateSecretary and Vice President of the Company, Corporate Secretary and Directorof the Kenilworth Nevada Corporation and a Director of Kenilworth Systems (UK)Limited.

 

ITEM 14—EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM8-K

 

(a)          (1)Financial Statements

 
| Consolidated balance sheets  as of December 31, 2002 and 2001                                                                                                          |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                        |   |
| Consolidated  statement of operations and deficit for the periods ended December 31,  2002, 2001 and 2000                                                              |   |
|                                                                                                                                                                        |   |
| Consolidated  statement of cash flows for the periods ended December 31, 2002, 2001  and 2000                                                                          |   |
|                                                                                                                                                                        |   |
| Consolidated  statement of changes in stockholders equity for the periods beginning  December 31, 1999, and for the years ended December 31, 2002, 2001  and 2000 |   |
|                                                                                                                                                                        |   |
| Notes to  consolidated financial statements                                                                                                                                 |   |

 

(b)         OnJuly 12, 2002 Kenilworth filed an 8-K in which the Company reported thefollowing event:

 

Herbert Lindo, Chairman and President of KenilworthSystems Corporation (“Kenilworth”) since 1972, advised the Company’s board ofDirectors that on June 26, 2002 the Sheriff of Nassau County (the“Sheriff”) sold at a purported Public Auction Sale (the “Sale”) 10,333,450restricted common shares of Kenilworth Systems Corporation (the “Shares”) thathe had owned and which represented control (14% of the outstanding shares) ofKenilworth, for one thousand dollars ($1,000) or $0.000095 per share.  TheShares were sold to Tappan Zee Capital Corp. (“Tappan Zee”).  On the dateof the Sale the Shares had a market value in excess of nine hundred thousanddollars ($900,000).  The Sheriff seized and sold the Shares on behalf ofTappan Zee, as a result of a claim by Tappan Zee in a disputed civil suit broughtin the New York Supreme Court for $128,062.  Tappan Zee was both theforeclosing party and the purchaser.

 

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Kenilworth claims that the Sheriff’s Auction Salewas conducted in a fraudulent manner by (1) failing to comply with the rulesand regulations set forth under the Securities and Exchange Commission Act of1933 and 1934, as amended (The “Acts”), 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 the Shares withthe Securities and Exchange Commission before conducting the Sale or in theabsence of registering the Shares, or obtain a No-Action letter from theCommission permitting the Public Sale, and (4) by making an immediate distributionof the Shares, and (5) by failing to file required notices of 13 D-G asprovided under the Acts.  Tappan Zee and its Counsel and the Sheriff’sdepartment were advised in court documents and correspondence that their actsviolated Federal and State Securities Laws, prior to the Sale.

 

Kenilworth will seek in Federal 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.

 

(c) Exhibits

 

3(1) Certificate of Incorporation and Amendments

 

3(2) By-Laws

 

21  Subsidiaries of the Registrant

 

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THE FINANCIALSARE NOT AUDITED

 

Tothe Board of Directors of

KenilworthSystems Corporation:

 

Theaccompanying consolidated balance sheets of Kenilworth Systems Corporation andsubsidiaries as of December 31, 2002 and the related consolidatedstatements of operations and stockholder’s equity and cash flow for the yearended December 31, 2002. The financial statements are the responsibilityof the Company’s management.

 

Inaccordance with generally accepted accounting standards, require thatreasonable assurance about whether the financial statements are free ofmaterial misstatement, including examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. Assessingthe accounting principals used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.

 

Theconsolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Kenilworth SystemsCorporation as of December 31, 2002 and the results of its operations andits cash flow for the year then ended in conformity with generally acceptedaccounting principals.

 

Theaccompanying consolidated financial statements have been prepared assuming thatthe Company will continue as a going concern. As discussed in Note 7 to theconsolidated financial statements, the Company emerged from bankruptcy in 1998and has not yet commenced operations. Future operations are contingent onobtaining funding. These conditions raise substantial doubt about its abilityto continue as a going concern. Management’s plans regarding those matters arealso described in Note 7. The consolidated financial statements do not includeany adjustments that might result from the outcome of this uncertainty.

 

Kenilworth Systems CorporationManagement.Herbert Lindo, PresidentNovember 24, 2003

 

23

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KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS,AS OF DECEMBER 31, 2002 AND 2001

 
|                                                                                                                                                                |   | **2002**    |    | **2001**    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|---------|-------------|--------|
| ASSETS                                                                                                                                                              |   |        |    |        |   |
|                                                                                                                                                                |   |        |    |        |   |
| Cash                                                                                                                                                                |   | $           | 10,071  |        | $      | 15,266 |   |
| Due from Shareholders (subscriptions)                                                                                                                               |   | —      |    | 17,577      |   |
| Due from related party                                                                                                                                              |   | —      |    | 42,461      |   |
| Prepaid Expenses                                                                                                                                                    |   | 232,544     |    | 37,500      |   |
| Property, Plant and  Equipment, Net                                                                                                                                 |   | 13,263      |    | 8,007       |   |
| TOTAL ASSETS                                                                                                                                                        |   | $           | 255,878 |        | $      | 120,811 |   |
|                                                                                                                                                                |   |        |    |        |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                |   |        |    |        |   |
|                                                                                                                                                                |   |        |    |        |   |
| Accrued Liabilities                                                                                                                                                 |   | $           | 93,883  |        | 94,182 |   |
| Payroll Taxes Payable                                                                                                                                               |   | 13,575      |    | 6,548       |   |
| TOTAL LIABILITIES                                                                                                                                                   |   | $           | 107,458 |        | $      | 100,730 |   |
|                                                                                                                                                                |   |        |    |        |   |
| Common Stock, $.01 par  value, authorized 200,000,000 shares; issued and outstanding 73,115,484 in  December 31, 2001 and 89,304,589 in December 31, 2002 |   | $           | 893,045 |        | $      | 731,154 |   |
| Paid in capital                                                                                                                                                     |   | 24,872,604  |    | 24,245,867  |   |
| Deficit                                                                                                                                                             |   | (25,617,229 | )       | (24,956,940 | )      |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                     |   | $           | 148,420 |        | $      | 20,081 |   |
| TOTAL LIABILITIES AND  STOCKHOLDERS’ EQUIY                                                                                                                     |   | $           | 255,878 |        | $      | 120,811 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

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KENILWORTH SYSTEMSCORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                          |   | **YEAR ENDED  DEC. 31, 2002** |        | **YEAR ENDED  DEC. 31, 2001** |   | **YEAR ENDED  DEC. 31, 2000** |   |
|-----------------------------------------------|--------|-------------------------------|-------------|-------------------------------|--------|-------------------------------|--------|
| Revenues:                                     |   |                          |        |                          |   |                          |   |
| Sales                                         |   | $                             | 0           |                          | $      | -0-                           |   | $ | -0- |   |
| Costs and Expenses:                           |   |                          |        |                          |   |                          |   |
| Selling, general and  administrative expenses |   | 660,289                       |        | 421,491                       |   | 133,964                       |   |
| Interest expense                              |   |                          |        |                          |   | 3,216                         |   |
| Total Costs and Expenses                      |   | 660,289                       |        | 421,491                       |   | 137,180                       |   |
| Net loss before other  income                 |   | 660,289                       |        | 421,491                       |   | 137,180                       |   |
| Interest Income                               |   |                          |        |                          |   | 591                           |   |
| Total                                         |   |                          |        |                          |   | 591                           |   |
| Net loss                                      |   | 660,289                       |        | 421,491                       |   | 136,589                       |   |
| Deficit — Beginning Of  year             |   | (24,956,940                   | )           | (24,535,450                   | )      | (24,398,861                   | )      |
| Deficit — End Of year                    |   | $                             | (25,617,229 | )                             | $      | (24,956,940                   | )      | $ | (24,535,450 | ) |
|                                          |   |                          |        |                          |   |                          |   |
| Loss per Share of common  stock               |   | $                             | .007        |                          | $      | .005                          |   | $ | .002 |   |
| Average number of shares outstanding          |   | 89,304,589                    |        | 73,115,484                    |   | 64,264,323                    |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

KENILWORTH SYSTEMSCORPORATION AND SUBSIDIARIESSTATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                                                                       |   | **YEAR ENDED  DEC. 31, 2002** |    | **YEAR  ENDED  DEC. 31, 2001** |   | **YEAR  ENDED  DEC.  31,2000** |   |
|--------------------------------------------------------------------------------------------|--------|-------------------------------|---------|--------------------------------|--------|--------------------------------|--------|
| CASH FLOWS USED IN  OPERATING ACTIVITIES                                                   |   |                          |    |                           |   |                           |   |
| Net Loss                                                                                   |   | $                             | 660,289 |                           | $      | 421,491                        |   | $ | 136,589 |   |
| Adjustments to reconcile  net loss to net cash provided by (used in) operating activities: |   |                          |    |                           |   |                           |   |
| Stock issuance for  services rendered                                                      |   | 268,628                       |    | 128,348                        |   | 26,624                         |   |
| Depreciation                                                                               |   | 588                           |    | 3,432                          |   | 1,144                          |   |
| Changes in operating  assets and liabilities:                                              |   |                          |    |                           |   |                           |   |
| Due from shareholder                                                                       |   |                          |    | (17,577                        | )      | (19,950                        | )      |
| Prepaid expenses                                                                           |   | (232,544                      | )       | (42,461                        | )      |                           |   |
| Accrued expenses and taxes                                                                 |   | 107,458                       |    | 100,730                        |   | 18,123                         |   |
|                                                                                       |   |                          |    |                           |   |                           |   |
| Total adjustments                                                                          |   | 144,130                       |    | 134,972                        |   | 25,941                         |   |
| Net cash used in operating  activities                                                     |   | (516,159                      | )       | (286,519                       | )      | (110,648                       | )      |
|                                                                                       |   |                          |    |                           |   |                           |   |
| CASH FLOWS FROM INVESTING  ACTIVITIES                                                      |   |                          |    |                           |   |                           |   |
| Purchases of Property and  Equipment                                                       |   | (13,263                       | )       | -0-                            |   | (11,439                        | )      |
| Net cash used in investing  activities                                                     |   | (13,263                       | )       | -0-                            |   | (11,439                        | )      |
|                                                                                       |   |                          |    |                           |   |                           |   |
| CASH FLOWS FROM FINANCING  ACTIVITIES                                                      |   |                          |    |                           |   |                           |   |
| Proceeds from loans  payable                                                               |   |                          |    |                           |   | 123,167                        |   |
| Proceeds from stock  issuances                                                             |   | 520,000                       |    | 293,729                        |   | 7,500                          |   |
|                                                                                       |   |                          |    |                           |   |                           |   |
| Net cash provided by  financing activities                                                 |   | 520,000                       |    | 293,729                        |   | 130,667                        |   |
| Cash paid  during period for: Interest                                                     |   | (4,227                        | )       | (526                           | )      |                           |   |
| Net increase (decrease) in  cash                                                           |   | (5,195                        | )       | 6,684                          |   | 8,580                          |   |
| Cash beginning of period                                                                   |   | 15,266                        |    | 8,582                          |   | 2                              |   |
| Cash-end of period                                                                         |   | $                             | 10,071  |                           | $      | 15,266                         |   | $ | 8,582 |   |

 

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NON-CASHTRANSACTIONS

 

Duringthe year ended December 31, 2002 the Company issued shares of Common Stockfor conversion of Convertible Promissory Notes totaling five hundred twentythousand dollars ($520,000). (See Note 6).

 

TheCompany issued common stock in lieu of payment for services rendered in theamounts of two hundred seventy three thousand six hundred twenty eight dollars($273,628) and one hundred twenty eight thousand three hundred forty eightdollars ($128,348) during the years ended December 31, 2002 andDecember 31, 2001 respectively (See Note 11) for $250,000 which amount isincluded for services rendered by Directors of the Company and in settlement ofdebt for services in the amount of $23,628 for 168,500 shares at a price of$.14 per share.

 

Inconnection with the emergence from bankruptcy in September 1998 thetrustee distributed four million three hundred thousand four hundred and threedollars ($4,300,403) to pay one hundred percent (100%) of all approved claims.

 

The accompanying notes are an integral partof these consolidated financial statements.

 

KENILWORTH SYSTEMS CORPORATIONAND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICITFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                                     |   | **COMMON SHARES** |   | **ADDITIONAL  PAID-IN  CAPITAL** |    | **RETAINED  DEFICIT** |   |
|----------------------------------------------------------|--------|-------------------|--------|----------------------------------|---------|-----------------------|--------|
|                                                     |   | **SHARES**        |   | **AMOUNT**                       |    |                  |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Balances,  December 31, 1999                        |   | 62,289,018        |   | $                                | 622,890 |                  | $      | 23,784,76 |   | $ | (24,398,861 | ) |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Issuance of Stock in  connection with conversion of debt |   | 944,028           |   | 9,440                            |    | 111,227               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| For services                                             |   | 1,699,456         |   | $                                | 16,995  |                  | $      | 9,629 |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Net Loss                                                 |   |              |   |                             |    | 136,589               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Balances,  December 31, 2000                        |   | 64,932,502        |   | $                                | 649,325 |                  | $      | 23,905,619 |   | $ | (24,535,450 | ) |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Issuance of Stock in  connection with conversion of debt |   | 6,582,982         |   | 65,829                           |    | 227,900               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| For services                                             |   | 1,600,000         |   | 16,000                           |    | 112,348               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Net Loss                                                 |   |              |   |                             |    | 421,491               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Balances,  December 31, 2001                        |   | 73,115,484        |   | $                                | 731,154 |                  | $      | 24,245,867 |   | $ | (24,956,940 | ) |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Issuance of Stock in  connection with Conversion of debt |   | 11,020,605        |   | 110,206                          |    | 404,794               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| For services                                             |   | 5,168,500         |   | 51,685                           |    | 221,943               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Net Loss                                                 |   |              |   |                             |    | 660,289               |   |   |   |
|                                                     |   |              |   |                             |    |                  |   |   |   |
| Balances,  December 31, 2002                        |   | 89,304,589        |   | $                                | 893,045 |                  | $      | 24,872,604 |   | $ | (25,617,229 | ) |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

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KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTS

 

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

THECOMPANY AND NATURE OF BUSINESS

 

KenilworthSystems Corporation (the “Company”) was incorporated in New York inApril 1968 and now plans to be engaged in the business of developing andmanufacturing terminals that permit individuals from remote locations, to playalong with live in progress casino table games located outside the casinoconfines via TV simulcast satellite broadcast around the world.

 

TheCompany was in bankruptcy proceedings under Chapter 7 and 11 of the BankruptcyCode for the period from August 28, 1982 through September 23, 1998the Company ceased all operations from February 1990 to September 23,1998.

 

ADVERTISINGCOSTS

 

Advertisingcosts are expensed as incurred.

 

PRINCIPLESOF CONSOLIDATION

 

Theconsolidated financial statements include the accounts of Kenilworth SystemsCorporation and its wholly owned subsidiaries: Video Wagering SystemsCorporation, RoulabetteÔ Nevada Corporation and Kenilworth SystemsNevada Corporation. None of the subsidiary has any assets or liabilities.

 

EARNINGSPER SHARE

 

TheCompany computes and presents earnings (loss) per share in accordance with therequirements of Statement of Financial Accounting Standards (“SFAS”) No. 128“Earnings Per Share”.

 

Basicloss per share is based on the weighted-average number of shares of commonstock outstanding for the period, which were ($.007), ($.005), and ($.002) forthe year ended December 31, 2002, 2001 and 2000 respectively.

 

Dilutedearnings per share has not been presented in the accompanying financialstatements because the effect of assumed conversion of convertible promissorynotes was anti-dilutive.

 

INCOMETAXES

 

TheCompany uses the liability method to account for income taxes in accordancewith requirements of SFAS No. 109.

 

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USEOF ESTIMATES IN THE FINANCIAL STATEMENTS

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.Actual results could differ from these estimates.

 

TheCompany’s financial statements include cash, receivables and accounts payable.Due to the short-term nature of these instruments, the fair value of theseinstruments approximates their recorded values.

 

PROPERTYAND EQUIPMENT

 

Propertyand Equipment are stated at cost. For financial reporting purposes, propertyand equipment are depreciated utilizing the Straight-Line Method over theestimated useful lives of the related assets as follows:

 
|             |   | **YEARS** |   |
|------------------|--------|-----------|--------|
| Office Equipment |   | 5         |   |
| Vehicles         |   | 5         |   |

 

NOTE 2 —DUEFROM RELATED PARTIES AT DECEMBER 31, 2001

 

Duefrom related parties at December 31, 2001 represents advances made to astockholder of the Company in the normal course of business. Such amounts arenon-interest bearing and have no definite repayment terms.

 

NOTE 3—PROPERTY AND EQUIPMENT

 

Propertyand Equipment consist of the following as of December 31, 2002 andDecember 31, 2001.

 
|                               |   | **2002** |   | **2001** |   |
|------------------------------------|--------|----------|--------|----------|--------|
| Office Equipment                   |   | $        | 2,351  |     | $      | 2,939 |   |
| Vehicles                           |   | 11,500   |   | 8,500    |   |
|                               |   | $        | 13,851 |     | $      | 11,439 |   |
| Less-Accumulated Amortization      |   | 588      |   | 3,432    |   |
| Total Property and  Equipment, Net |   | $        | 13,263 |     | $      | 8,007 |   |

 

Depreciationexpense for the years ended December 31, 2002 and December 31, 2001was $588 and $3,432, respectively.

 

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NOTE 4 —BANKRUPTCYPROCEEDINGS

 

Throughoutthe 1980’s the Company experienced working capital shortages that resulted inthe Company filing a voluntary petition for reorganization under Chapter 11 ofthe United States bankruptcy Code. From August 28, 1982 to June 7,1985 the Company operated during reorganization proceedings. On June 7,1985, a United States Bankruptcy Judge confirmed the Company’s Plan ofReorganization. On April 27, 1988, the Bankruptcy Court entered a finaldecree in the case. On October 27, 1988, the case was re-opened on groundsthe Debtor failed to consummate its plan of reorganization and onFebruary 25, 1991 the case was converted to a case under Chapter 7 of theBankruptcy Code. By order of the Court dated June 19, 1991 the Chapter 7was reconverted to a case under Chapter 11 of the Bankruptcy Code. A secondplan of reorganization was approved and a second order of confirmation wasentered in connection with the Chapter 11 case on October 2, 1991.However, the Debtor was unable to consummate its second plan of reorganization,and by order dated November 25, 1991, the case was reconverted to a caseunder Chapter 7 of the bankruptcy Code.

 

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

 

NOTE 5—INCOME TAXES

 

TheCompany is a “C” Corporation for tax purposes.

 

TheCompany estimates that it has available approximately ten million dollars($10,000,000) in net operating loss carry-forwards, which expire at variousdates through 2020. Utilization of the NOL carry-forward may be limited undervarious sections of the Internal Revenue Code depending on the nature of theCompany’s operations.

 

TheCompany has a deferred tax asset of approximately two million eight hundredthousand dollars ($2,800,000) arising from its net operating losscarry-forwards. The deferred tax asset has been fully reserved due to theuncertainty of future realization.

 

NOTE 6—CONVERTIBLEPROMISSORY NOTES

 

During the year 2002, the Company sold one (1) year ConvertiblePromissory Notes totaling five hundred twenty thousand dollars ($520,000).  At the option of the Note holders, the Noteswere convertible into Common Stock of the Company at the rate of between one(1) share for each $.10 to $.25 of face value of the indebtedness representedby the Notes, together with interest at the annual rate of two percent (2%)above the prime rate quoted by Citibank of N.A., since management believed itwas unable to repay the Notes when they became due.  In order to induce the Note Holders to convert the Notes by yearend 2002 when the quoted price per Common Share, as traded on the Pink SheetMarket was between $.02 and $.08 per share, the Company offered to convert theNotes at the rate of one (1) share for each $.05 of indebtedness represented byeach Note, together with accrued interest. As a result of the Company’s offer, all Note Holders converted theirNotes into eleven million twenty thousand six hundred and five (11,020,605)shares of Common Stock, including accrued interest, at an average price of$.047 per share.

 

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InNovember and December 2001 Convertible Promissory Notes totaling twohundred ninety three thousand dollars ($293,000) issued during the secondquarter of 2001 were converted into 6,582,982 shares of Common Stock whichincluded accrued interest.  The Notes wereconverted at an average price of $.0445 when the bid price of the Common Stock,as traded on the Pink Sheet Market, was $.05 per share.

 

AllNotes were converted into restricted common stock of the Company as the term isdefined under the Securities Act of 1933. All proceeds have been used to defraycurrent expenses.

 

NOTE 7 —GOINGCONCERN UNCERTAINTY

 

Asindicated in Note 4, the Company emerged from Chapter 7 in September 1998and has not yet commenced operations. These factors create uncertainty as tothe Company’s ability to operate as a going-concern and continue in business.Management plans to develop a wagering system that allows casino patrons andindividuals outside the casino to play along with live casino table games. Thefirst step in the plan is to conduct testing. Unless the Company is able toobtain sufficient funds, none of the tests and initial development work cancommence. The Company plans to obtain the necessary funding by offering itscommon stock, or Senior Cumulative Convertible Preferred Shares in a privateplacement, or selling limited joint venture participations in future “playalong with casino game” franchises.

 

Ifinitial testing is successful, the second step is to obtain the proper licensesfrom the gaming control regulators in the various venues the Company intends tooffer its system. Upon successful licensing, the Company plans to obtainfinancing from regular banking sources to finance the manufacturing of thecomputer terminals that allow the worldwide play along.

 

Theaccompanying financial statements have been prepared assuming the Company is agoing-concern and do not reflect adjustments, if any, that would be necessaryif the Company were not a going-concern.

 

NOTE 8—COMMITMENTS AND CONTINGENCIES

 

OUTSTANDINGPAYROLL TAXES

 

Asof year-end, the Internal Revenue Service is contending that the Company owespayroll taxes including interest and penalties totaling almost $400,000 forvarious periods from 1985-1991. The Company is currently in negotiations withthe IRS to resolve these issues. In management’s opinion, no accruals arenecessary since it believes that these assessments are incorrect and weredischarged in its bankruptcy proceedings.  Similar contentions were madeby the New York State Income Tax Authorities, which have been officiallycancelled by the New York State Taxing Authorities on July 1, 2002.

 

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NOTE 9 —QUARTERLYFINANCIAL INFORMATION—UNAUDITED

 

Thefollowing table sets forth certain unaudited condensed quarterly financial datafor the fiscal years ended December 31, 2002 and 2001. This informationhas been prepared on the same basis as the consolidated financial statementsand all necessary adjustments have been included in the amounts stated below topresent fairly the selected quarterly information when read in conjunction withits consolidated financial statements and notes thereto. Historical quarterlyfinancial results and trends may not be indicative of future results.

 

KENILWORTH SYSTEMS CORPORATIONQUARTERLY DATA2002 AND 2001

 
|               |   | **1Q02** |   | **2Q02** |   | **3Q02** |    | **4Q02** |    | **1Q01** |   | **2Q01** |    | **3Q01** |    | **4Q01** |    |
|--------------------|--------|----------|--------|----------|--------|----------|---------|----------|---------|----------|--------|----------|---------|----------|---------|----------|---------|
| Net Sales          |   | $        | 0      |     | 0      |     | 0       |     | 0       |     | 0      |     | 0       |     | 0       |     | 0       |   |
|               |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
| Gross Profit       |   | 0        |   | 0        |   | 0        |    | 0        |    | 0        |   | 0        |    | 0        |    | 0        |    |
|               |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
| Net Loss           |   | $        | 38,542 |     | 69,167 |     | 321,191 |     | 231,389 |     | 77,625 |     | 138,180 |     | 101,975 |     | 103,711 |   |
|               |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
| Net Loss per Share |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
|               |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
| Basic              |   | $        | .007   |     | $      | .007     |    | $        | .007    |     | $      | .007     |    | $        | .005    |     | $       | .005 |   | $ | .005 |   | $ | .005 |   |
|               |   |     |   |     |   |     |    |     |    |     |   |     |    |     |    |     |    |
| Diluted            |   | $        | .007   |     | $      | .007     |    | $        | .007    |     | $      | .007     |    | $        | .005    |     | $       | .005 |   | $ | .005 |   | $ | .005 |   |
|                    |        |          |        |          |        |          |         |          |         |          |        |          |         |          |         |          |         |  |  |  |  |  |  |  |  |  |  |

 

NOTE 10—STOCKOPTIONS

 

TheCompany does not plan, at this time, to make any adjustments to its financialsas the result of having issued stock options totaling three million fivehundred thousand (3,500,000) Common Shares of the Company.  The exerciseprice of the stock options are two dollars ($2.00) per share, well above theprice per share of the Common Stock for the last five (5) years.

 

NOTE 11—PREPAIDITEMS

 

Atthe Board of Directors Meeting held on July 17, 2002 the Board authorizedthe issuance of five million (5,000,000) shares of authorized but unissuedCommon Stock of the Corporation to the Directors in lieu of Director’scompensation and liabilities insurance for the ensuing year: Gino Scotto, KitWong, Patrick J. McDevitt, Joyce Clark and Maureen Plovnick were each issuedone million (1,000,000) shares of restricted Common Stock of the company at aprice of $.05 per share, the equivalent of fifty thousand dollars ($50,000) foreach Director, a total of $250,000.  The$250,000 has been recorded for Services Rendered in the Statement ofStockholder’s Deficit.

 

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CERTIFICATION

 

I,Herbert Lindo, certify that:

 

1.                                       I have reviewed this annual report on Form10-K and the amendments on Form 10-K/A of Kenilworth Systems Corporation;

 

2.                                       Based on my knowledge, this annual reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements are made, not misleading with respectto the period covered by this annual report;

 

3.                                       Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4.                                       As registrant’s certifying officer I amresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and Ihave:

 

a)                                      designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to me by others withinthose entities, particularly during the period in which this annual report isbeing prepared and amended;

 

b)                                     evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this annual report (March 27, 2003); and

 

c)                                      presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on my evaluation as of March 27, 2003 and November 24, 2003;

 

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5.                                       All significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified and eliminated any material weaknesses in internal controls; and

 

a)                                      any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.                                       The registrant’s other officers and I haveindicated in this annual report whether or not there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

 
| Date:  November 24, 2003 | By:    | /s/ Herbert Lindo                      |   |
|------------------------------------|--------|----------------------------------------|--------|
|                               |   | President and Chief  Financial Officer |

 

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SIGNATURES

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
| KENILWORTH SYSTEMS CORPORATION         |
|----------------------------------------|
|                                   |
| By:                                    | /s/ HERBERT LINDO |   |
| Herbert Lindo                          |
|                                   |
| PRESIDENT, AND CHIEF FINANCIAL OFFICER |

 

Pursuantto the requirements of Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant and in the capacitiesand on the dates indicated.

 
| **NAME**                |   | **TITLE** |   | **DATE**            |
|-------------------------|--------|-----------|--------|---------------------|
|                    |   |      |   |                |
| /s/ HERBERT LINDO       |   | Director  |   | April 16, 2003 |
| Herbert Lindo           |   |      |   |                |
|                    |   |      |   |                |
| /s/ JOYCE CLARK         |   | Director  |   | April 16, 2003 |
| Joyce Clark             |   |      |   |                |
|                    |   |      |   |                |
| /s/ KIT WONG            |   | Director  |   | April 16, 2003 |
| Kit Wong                |   |      |   |                |
|                    |   |      |   |                |
| /s/ GINO SCOTTO         |   | Director  |   | April 16, 2003 |
| Gino Scotto             |   |      |   |                |
|                    |   |      |   |                |
| /s/ MAUREEN PLOVNICK    |   | Director  |   | April 16, 2003 |
| Maureen Plovnick        |   |      |   |                |
|                    |   |      |   |                |
| /s/ PATRICK J. MCDEVITT |   | Director  |   | April 16, 2003 |
| Patrick J. McDevitt     |   |      |   |                |

 

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