Table of Contents

 

 

 

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-K**

 
| **(Mark One)**                                        |
|-------------------------------------------------------|
|                                                  |   |
| **x**                                                 | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                  |   |
| **For the Fiscal Year Ended  December 31, 2009** |
|                                                  |
| **Or**                                                |
|                                                  |   |
| **o**                                                 | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934 (NO FEE REQUIRED)** |

 

**Forthe transition period from                  to                ..**

 

**Commissionfile number 0-08962**

 

**KENILWORTHSYSTEMS CORPORATION**

(Exact name ofregistrant as specified in its charter)

 

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

 

**(516)741-1352**

(Registrant’stelephone number, including area code)

 

SECURITIES REGISTEREDPURSUANT TO SECTION 12(B) OF THE ACT:  **NONE**

 

SECURITIES REGISTEREDPURSUANT TO SECTION 12(G) OF THE ACT:

 

**(TITLEOF CLASS)**

Common Stock, parvalue $.01 per share

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.   Yes x No o

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act.   Yes x  No o

 

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.   Yes x No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes o Noo

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” inRule 12b-2 of the Exchange Act.

 

| Large  accelerated filer o                     |   | Accelerated  filer o               |
|------------------------------------------------|--------|------------------------------------|
|                                           |   |                               |
| Non-accelerated  filer o                       |   | Smaller  reporting company  o |
| (Do not check if  a smaller reporting company) |   |                               |

 

The aggregate marketvalue of the registrant’s Common Stock held by non-affiliates of the Registrantbased on the closing price as reported on the Pink Sheet Market on February 5,2010 was $12,011,032.

 

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As of December 31,2009, 587,691,586 Shares of the Registrant’s Common Stock, $0.01 par value,were outstanding.

 

Portions of theRegistrant’s Proxy Statement for its 2008 Annual Meeting of Stockholders, whichwas held on January 7, 2009, are incorporated in Part III of this Form 10-K.

 

On November 27, 2006Herbert Lindo, the Chairman and Chief Executive Officer exercised a fivemillion (5,000,000) share option for seven hundred fifty thousand dollars($750,000) at fifteen cents ($0.15) per share pursuant to the Company’sPerformance and Equity Plan.  The price per share was the price for theOption which would have expired on the following date.  Mr. Lindodoes not own any other Options pursuant to the Plan.  The average marketprice of the Common Stock for the thirty (30) days prior to November 27,2006 was high: $0.05, low: $0.03.  As provided in the Plan, Herbert Lindoborrowed the seven hundred fifty thousand dollars ($750,000) from the Companyand pledged the five million (5,000,000) and other shares he owns totalingfifty million (50,000,000) shares, as collateral for the loan.  The fivemillion (5,000,000) shares have been issued and are included ascollateral.  All of Mr. Lindo’s Kenilworth shares are legended “RestrictedSecurities”.

 

At a regular meeting ofthe Board of Directors in July 2008, the Board unanimously approved (with Mr. Lindoabstaining) to extend the $750,000 loan until December 31, 2009, provided Mr. Lindopays a nominal one and one-half percent (1.5%) interest from November 2006.  Mr. Lindo agreed to pay the interestwhich totaled $25,725 through December 31, 2009.  Mr. Lindo provides his services to theCompany without any remuneration.

 

At a regular meeting ofthe Board of Directors held on January 7, 2010, the Board unanimouslyapproved (with Mr. Lindo abstaining) to extend the $750,000 loan withinterest payments until December 31, 2010.

 

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**TABLEOF CONTENTS**

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

 

**FORWARDLOOKING STATEMENTS**

 

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

 

**Readersshould amongst the other statements contained herein and future filings withthe Securities and Exchange Commission, including the Quarterly Reports on Form 10-Qto be filed, carefully review in Item 7 the following: “Cautionary Statementsfor Purposes of the “Safe Harbor” Provisions of the Private SecuritiesLitigation Reform Act of 1995 and Risk Factors”. All of the Risk Factorscontained therein should be carefully read.**

 

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INTRODUCTORY NOTETO PART IV

 

The Amendment No. 1on FORM 10-K filed to restate certain amounts which changed as the resultsof having been ordered by the Securities and Exchange Commission to file theCompany’s Financials as a “Development Stage Company” from the period beginningNovember 24, 1998 to December 31, 2008, the elimination of$4,256,926, which was the amount the Company disbursed on or about September 28,1998 to exit from Chapter 7 Bankruptcy Proceedings, and certain adjustments tolosses sustained for the periods ended December 31, 2002, 2003 and 2004for having discounted Convertible Promissory Notes from between ten cents($0.10) per share and twelve cents ($0.12) per share to five cents ($0.05) pershare.  The Company also added in PART II Item 5 — MARKET PRICES OFTHE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS: d) The Company hasoutstanding at February 5, 2010 600,551,586 Common Shares.  The Company issued 12,860,000 restrictedCommon Shares since December 31, 2009.  All of the restricted sharesmay have the restrictions lifted pursuant to new Rule 144 B within six (6) monthswhich will substantially depress the trading price of the Company’s CommonStock.

 

The Company’s managementhas always been objectionable to the SEC designation as a **DevelopmentStage Company**.  The Companymade a one hundred percent (100%) cash distribution to all approved creditorsand **paid in full all administrative fees and expenseswhen we exited from Bankruptcy Proceedings.**

 

The Development StageCompany designation ONLY applies to Bankrupt Companies that exit fromBankruptcy Proceedings**that do not pay allapproved creditors in full.**

 

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PART I

 

ITEM 1 —DESCRIPTION OF BUSINESS

 

THE COMPANY

 

Kenilworth Systems Corporationhereinafter referred to as “Kenilworth”, the “Company” or “we”, wasincorporated on April 25, 1968 under the laws of the State of NewYork.  Kenilworth has been a publicly traded Company since August 1968formerly on the National NASDAQ Market, presently on the OTC Pink Sheet Marketsince emerging from Bankruptcy Proceedings in September 1998. Kenilworth had been presented as a Development Stage Company, through September 30,2009.

 

GENERAL

 

Since early in the year2000 we have been solely engaged in developing patents, markets andinvestigating how best to obtain Governmental approvals, by engaging lobbyistsand consultants that would allow television satellite and cable subscribers andother casino gamblers throughout the industrialized world to play and wageralong from remote locations with live, in-progress casino table games(Roulette, Craps, Baccarat and more) from strictly regulated casinos located inthe United States and other locations around the world.

 

Pursuant to a TESTSIMULCAST AGREEMENT by and among: Kenilworth Systems Corporation, CaribbeanCasino & Gaming Corporation, the owner/operator of the NEW Sosua GrandCasino and the Casino Director (the Casino Regulatory Authority) of theDominican Republic, Kenilworth has been broadcasting, via the Internet, **live, in-progress Roulette table action around the world.  A world’s first from a licensed, governmentregulated casino instead of only from STUDIO CASINOS.**

 

The ability to play alongfrom **Remote Locations** from governmentregulated casinos will permanently influence casino wagering in thefuture.  No longer will U.S. residentshave to spend money and travel to gamble at a casino when they can play alongfrom the privacy of their own homes, with drinks and snacks purchased atsupermarket prices.  In these difficulteconomic times, it is entertainment at minimal costs,  with bets starting at the price of a slotmachine handle pull.

 

Employing the latestInternet technology and placing television cameras in strategic locations abovethe casino table games, without disrupting the normal game-monitoringactivities, and transmitting the table games over the Internet networks (incountries that permit Internet wagering) to television sets and laptops, whichbecome a platform for playing along with the casino games.

 

Kenilworth titled theoverall system “Roulabette”.  There are thirty-eight million (38,000,000)satellite and seventy-three million (73,000,000) cable TV subscribers in theUnited States and more than one billion (1,000,000,000) subscribers throughoutthe rest of the industrialized world (“The Market”).  On average,households in the U.S. have three (3) TV’s.  (It is important sincethe satellite and cable companies will charge a separate fee for transmittingthe table games).  Public gathering places can accommodate one thousand(1,000) or more TV sets streamed via the Internet.  With wagering possiblein homes, hotel rooms, resort rooms, pubs, restaurants, race tracks and otherpublic gathering places the Company believes it will become a more than $500billion annual **net win**Marketwithin five (5) years throughout the industrialized world.

 

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

 

All forty-four (44)lotteries in the United States are owned and operated by County and Stateagencies.  Throughout the rest of the world, lotteries are owned bygovernment agencies or non profit charitable agencies that distribute the netearnings to benefit social and charitable programs, or by private entities that

 

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pay a percentage of theirnet win to designated government agencies.These foreign lotteries also have the same databasesas lotteries in the United States; most lotteries throughout Europe also pooltheir lotteries between countries, not unlike Mega Millions and PowerBall inthe United States, which makes the distribution simpler and very cost effectivefor both Kenilworth and the lotteries.

 

As we proved in theDominican Republic, there are no technical breakthroughs required.  Whatis needed is to get through the maze of Local, County, State and Federalregulations in each U.S. State and foreign countries.  When the firstState in the United States grants the Company permission to transmit thebroadcast from one of its casinos to their residents and to States that do nothave any casinos, (the entire East coast of the United States), the otherforty-three (43) States with lotteries will join expeditiously. The samewill occur in foreign countries.

 

Kenilworth expects toshare the **net win** revenue with allparticipating entities that provide Roulabette gaming without **costs of any kind. **State lotteries ortheir private operators will receive a proposed minimum of forty percent (40%)of the total **net win** from theirrespective jurisdictions.

 

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

 

In addition, throughoutthe United States and most foreign countries there are hundreds of facilitiesthat simulcast live in-progress horse/dog races.  At most facilities thereare several large TV screens that show the races from the different tracks withgeneral theater-type seating for patrons and at private cubicles withtelevision sets outfitted with touch screens.  The cubicles rent foradditional fees.  After players open an account and select pin numbers, theycan watch, in privacy, each race offered on the different tracks on the TV andplace wagers on the different races.  The players may also watch sportingevents, the news, the stock market reports, and in the near future Roulabette,live, in-progress casino table games.  The simulcast centers have theirown databases to manage the cash deposit and pay winnings on the horse/dograces and will be able to manage the casino games, on the same methods as thelotteries will manage Roulabette.  With private TV’s, available insimulcast centers, especially at night, when fewer tracks are operating.

 

When playing along withlive table games from a highly regulated jurisdiction, players will be assuredthat the game results are exactly what they see; and, playing along with livecasino table games such as Roulette, Craps and Baccarat will provideinteraction, fun and far more excitement than playing virtual games on videolottery terminals. It is the next best thing to actually being at the table inthe casino.

 

To conduct additionallive broadcasts from future permanent locations Kenilworth believes it willrequire a minimum of ten million dollars ($10,000,000) and there are noassurances we will ever be able to obtain any of such money. At present, theCompany does not have the funds readily available but hopes to obtain same,from investors, as soon as Kenilworth can obtain governmental permission andcommence broadcasting from a casino in the United States together with othercasinos throughout the world.

 

In 1990, we developed anddelivered for the TAB (Totalizator Agency Board) a quasy government agency ofthe State of Victoria, Australia, a cashless slot machine system. Both systemsrequired debit cards and central mainframe computers to manage the wagers. By makinguse of the expertise applied in the development of the aforementioned systemsand the experience gained from the Roulette broadcasts in the DominicanRepublic we plan to develop a second-generation Roulabette System that willmanage the wagers by the patented microprocessor installed in TV set-top boxesor an attachment directly connected to the TV set or installed in the millionsof lap top computers to receive Internet broadcasts that will reach $500billion annually.  The extra traffic willbe overwhelmingly the core of the Internet requiring to manage the wagering inthe TVs and lap tops to avoid mistakes and possible fraud. This as plannedwould allow a player in an interactive manner, at a remote location (outsidethe casino confines), to experience the actual play and excitement at thecasino table game and to make wagers on the various games, without having to bephysically present at the casino or casino table.  There are no assuranceswe will be able to successfully develop.

 

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

 

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

 

ProjectRoulabette is a concept now in motion and intended to be built outfurther, there can be no assurances that it will ever be built.  ThePatented microprocessors to be installed in the TV set top boxes have not beendesigned.

 

**SUMMARY**:

 

(1.)         Kenilworth continues to fine tune its patented technology dubbed RoulabetteSystem.  It now plans to “outsource” the manufacturing of all thecomponents instead as formerly manufacture some of the equipment in itstwenty-six thousand (26,000) square foot facility then located in Melville,NY.  Roulabette would allow casino patrons and other players to playalong with live in-progress casino table games such as Roulette, Craps,Baccarat and more via digital cable television or Internet broadcasts(simulcasts) emanating from strictly regulated casinos located in the UnitedStates and other locations around the world, to self-sufficient computerterminals dubbed “Roulabette Slots”, digital cable TV set top boxes, laptop computers on the Internet in countries that permit Internet gaming. TheRoulabette terminal is a proposal intended to be built and there can be noassurances that it will ever be built.  The microprocessors to beinstalled in the TV set top boxes have not been designed. We have as at December 31,2009, no firm agreements, customers, or proposals for any future business andthere can be no assurances that we will ever have same. **Reference is also made to each of the “Risk Factors”that are set forth in Item 7.**

 

(2.)         We believe the thousand virtual casino websites via the Internet obtain sixtypercent (60%) of their annual revenue from customers in the U.S.  Thesewebsite have been shut down when President Bush signed the Internet EnforcementAct of 2006.

 

Simulcast broadcasts viathe Internet around the world must meet, and will be supervised by, theregulations by the gaming authorities of the broadcasting casino and thejurisdiction, which receives the broadcast.  We believe the supervisionwill not be difficult to enforce, because all simulcast wagering is “cash only”,from regulated, supervised betting sites.  There are no wire moneytransfers with banks and no credit or debit cards permitted or used.  Webelieve this fact should ease any opposition from concerned citizens andanti-gambling groups, as regulation and enforcement responsibility will bevested in each individual state (or foreign jurisdiction).

 

Kenilworth was the firstto use color personal computers (PC’s) to replace electromechanical slotmachines (1988).  We provided the software for the first Tabaret locatedat the Menzie at the Rialto in Melbourne, Australia, which opened in November 1990. This consisted of cashless, variable denomination and multiple game,virtual PAT’s (“Player Activated Terminals”).   Prior theretoKenilworth sponsored, with the assistance of three (3) 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.

 

Kenilworth has been apublicly traded Company since 1968. Prior to commencing its endeavors into itspresent business provided security systems to ninety-two (92) out of the onehundred and four (104) Nuclear Electric Power Generating Plants in the U.S. andseventeen (17) foreign countries, as well as 

 

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automated time/attendancesystems located at a major department store chains and one (1) U.S.automobile manufacturing plant.

 

The Department Stores(Gimble’s, Alexander’s and Klein’s) went out of business; the Union Membersdestroyed our test equipment at the Chrysler, Jefferson Plant in Michigan.After the accident at the Three Mile Island Station in Pennsylvania in March 1979growth of Nuclear Power Plants in the United States slowed.  Patenting our unique security system wouldhave been a security breach.  Kenilworthmanagement instead opted to take the cash out of the casino industry.

 

SUMMARY OF PROPOSEDBRIDGE LOAN/UNDERWRITING THAT EARNS $50 MILLIION FOR THE BRIDGE LOAN PROVIDERS

 

Kenilworth is solicitinga bridge loan that requires only $30,000,000 in actual cash that will be repaidin an underwriting projected to take place during the second or third periodthis year (2010).

 

The $30,000,000 will bedeposited in an escrow account **controlled andadministered by the bridge loan lenders**.  The incentive for thelenders is a $50,000,000 profit by purchasing 200,000,000 shares of KenilworthCommon Stock, par value $0.01 per share at $0.05 per share ($10,000,000) **directly from the Company** that is notrequired to be evidenced or deposited in escrow, and the purchase of200,000,000 Common Shares in a proposed Dutch Auction, conducted on behalf ofthe bridge lenders, at a minimum per share price of $0.05 and a maximumoffering price of $0.15 per share that requires the $30 million. The lendersprofits are earned by acquiring 400,000,000 Common Shares that **are sold in the underwriting**at $30.00 pershare for a net profit of $50,000,000. The other $200,000,000 required for thebridge loan are deferred and cancelled when the proceeds from the underwritingare disbursed.

 

As part of theunderwriting Kenilworth’s Common Stock will be reverse split 100-1 withapproximately eleven million (11,000,000) Common Shares issued and outstandingwhen the underwriting is completed.  The underwriters are expected to sell4,000,000 Common Shares at $30.00 per share, in the underwriting for $240,000,000from which the bridge lenders receive $84,000,000 (itemized on page 13/14).

 

After adjusting for thepurchase of 400,000,000 shares pre-reverse split by the bridge loan lenders andthe $10,000,000 for the purchase of the 200,000,000 shares of Common Stock directlyfrom the Company, Kenilworth will receive, net of all expenses, includingunderwriters, legal fees and printing costs, approximately $117,000,000. On a pro forma balance sheet basis, Kenilworth will have **a book value of $16.10 per share**with 11,000,000shares outstanding (after the 100-1 reverse split) plus $35,967,224 tax carryforward loss per share of $3.93 totaling = $20.78 with cash of $110,000,000.With the potential future business it supports a proposed stock offering priceof $30.00 per share. ($0.30 before the reverse split).

 

The bridge loan documentswill contain a clause similar to a Material-Adverse-Change-Clause that **will permit the cancellation of the bridge loan**. Kenilworth will pay the twelve percent (12%) interest on the loan from the datethe escrow deposit is made for the Dutch Auction in the event the Company failsto obtain **a firm underwriting commitment**or is unable to receive sufficient buyers in**a best effort commitment.**

 

The fees payable to theescrow agent, American Stock Transfer & Trust Company (the DutchAuction manager) will be paid by Kenilworth.

 

PROPOSAL TO SWAPSECURITIES WITH CHINA’S WEALTH FUND

 

In April 2008,Kenilworth’s management decided that, as an American publicly traded Companyfor more than forty-one (41) years, it wanted to position itself to swapPreferred Stock paying a five percent (5%) annual dividend with U.S. Securitiesowned by China thereby becoming a surrogate for Chinese investments in the U.S.

 

Kenilworth is authorizedto issue 50 million Series of Convertible Preferred Stock; none ispresently issued and outstanding.

 

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China’s Sovereign Wealth Fund, the **China Investment Corporation (CIC),** wasestablished on September 29, 2007 and financed with $200 billion ininitial capital. The CIC was created to improve the rate of return on China’s$1.5 trillion in foreign exchange reserves. One of CIC’s first investments was$3 billion in a non-voting stake (approximately 9.3%) in Blackstone Group,L.P., public offering in 2007 at $28.00 per share that opened trading at $38.00per share in the public offering. Blackstone Group, L.P. is one of the largestindependent alternative asset managers in the world.  Shortly thereafter,the CIC invested $5 billion in Morgan Stanley, and made other unprofitableinvestments in Fannie Mae and Freddie Mac.  Recently the CIC acquiredadditional shares of Blackstone Group, L.P. both in the open market anddirectly from Blackstone Group L.P. and made substantial investments inamusement, shopping centers and hotel companies.

 

The continuing U.S. spending to revive the economydoes not provide any encouragement for China to get their investment backsoon.  Their purchases of additional U.S. Bonds are protecting their hugeinvestments in the U.S. dollar. Congress would reject any purchases of morethan ten percent (10%) by the CIC of any of our prime industrial firms. For example, Congress rejected China’s bid to acquire all of Conoco’s foreignoil companies and their oil reserves.

 

We believe we can temper Congress’ objections with ourplan.  With the swapped U.S. treasuries, we will borrow from the Fedwindow U.S. dollars to make investments that will be recommended and controlledby managers such as Blackstone Group, L.P.  For instance: provide capitalfor Citibank to repay its TARP money, bring Lehman Brothers out of bankruptcyand restore it to its old self and purchase some of the soft assets from otherbanks.  Collectively, it will expedite the U.S. recovery and get the U.S.out of running our auto and other TARP companies that the government has noexpertise to operate.

 

Our first step has to be to **move Kenilworth from a penny stock** to a $30.00 per sharestock.  That is the very reason we are embarking on the bridge loan,underwriting and reverse splitting our Common Stock.  With our gamblingpatent ownership we should be able to prevail.

 

Kenilworth is the only publicly traded **manufacturing company** in the United Statesthat exited from 16 years in Chapter 11 and 7 bankruptcy proceedings havingpaid **one hundred percent (100%) cashdistribution to the creditors and paid in full all administration fees andexpenses** after securing $4.5 million in debt owed to the Company.

 

It parallels our position as one of the only companiesbest suited to swap our Preferred Stock for China’s U.S. securities. The samescenario applies to Middle East oil producing Sovereign Wealth Funds.

 

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**PROPOSEDUNDERWRITING**

**Expectedto take place during the second or third quarter period in 2010.**

**Theoffering will include a 100-1 Reverse Split.**

 
| Proposed Sale:  8,000,000 Common Stock @ $30.00 per share                                                                                                       |       |   |            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------|-----------------|
|                                                                                                                                                            |       |   |            |
| Gross Proceeds                                                                                                                                                  |       | $      | 240,000,000     |   |
| Underwriting fees,  legal, printing, etc.                                                                                                                       |       | $      | (34,000,000     | ) |
|                                                                                                                                                            |       |   |            |
| **Net  Proceeds**                                                                                                                                               | ** ** | **$**  | **206,000,000** | ** ** |
|                                                                                                                                                            |       |   |            |
| Bridge Lenders:  $30,000,000 plus                                                                                                                               |       |   |            |
|                                                                                                                                                            |       |   |            |
| $50,000,000 Profit                                                                                                                                              |       | $      | 80,000,000      |   |
| Six (6) month loan  interest at 12%                                                                                                                        |       | $      | 2,000,000       |   |
| Legal and miscellaneous  expenses                                                                                                                               |       | $      | 2,000,000       |   |
|                                                                                                                                                            |       |   |            |
|                                                                                                                                                            | ** ** | **$**  | **84,000,000**  | ** ** |
|                                                                                                                                                            |       |   |            |
| American Stock  Transfer & Trust Company, the Dutch Auction Managers                                                                                   |       |   |            |
| Fees, including legal,  estimate                                                                                                                                |       | $      | 5,000,000       |   |
|                                                                                                                                                            |       |   |            |
| **Total  Expenses**                                                                                                                                             | ** ** | **$**  | **89,000,000**  | ** ** |
|                                                                                                                                                            |       |   |            |
| **Net  Proceeds from underwriting**                                                                                                                             | ** ** | **$**  | **117,000,000** | ** ** |
|                                                                                                                                                            |       |   |            |
| Common shares  outstanding after completion of underwriting 11,000,000                                                                                          |       |   |            |
|                                                                                                                                                            |       |   |            |
| Book value                                                                                                                                                      |       | $      | 10.63           |   |
| Carry-forward loss  $35,967,224                                                                                                                                 |       | $      | 3.27            |   |
|                                                                                                                                                            |       |   |            |
| Book value                                                                                                                                                      |       | $      | 13.90           |   |
| Per share dilution                                                                                                                                              |       | $      | 16.10           |   |
|                                                                                                                                                            |       |   |            |
| Use of proceeds:                                                                                                                                                |       |   |            |
|                                                                                                                                                            |       |   |            |
| Develop proprietary  microprocessors to manage live, in-progress casino table games in TVs, PCs,  laptops, video lottery terminals and Roulabette slot machines |       |   |            |

 

MARKETING STRATEGY/SALES PLAN

 

Our marketing strategy consists of developing theRoulabette Slot terminal and the Roulabette System simulcasts. Weestimate at this time, that we will need at least approximately ten milliondollars ($10,000,000) for promoting the Roulabette System. We do not havethis money nor do we have any agreements or understanding to procure this money.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 marketingplan and there can be no assurances that such funds will ever be available toallow Kenilworth to engage in business on a profitable basis.

 

At the present time, we engage only two(2) technically oriented employees who are able to assist in thedevelopment of Roulabette System. It will be necessary for us to obtainadditional personnel qualified and with the expertise to develop the RoulabetteSystem further. We would require additional employees and several moreconsultants in respective locations and there can be no assurances of our beingable to obtain any necessary personnel. There can be no assurances of theavailability of any such employees and consultants.

 

The Company willoutsource the development of the Roulabette System and the microprocessorsfor the TV set top boxes and laptops.

 

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In the United States, Kenilworth must refrain fromusing the Worldwide Web (WWW) Internet to manage wagers from individualsoutside of the casino confines. It is presently against the law. In Roulabette,the play-along broadcast emanates from casinos that are regulated by strict andcomprehensive rules and state and jurisdiction regulations, enforced bygaming control regulators and everybody plays along with the same live tablegame. There is a world of difference between playing in a virtual make believecasino compared with an actual casino.

 

For the reasons stated, Kenilworth will ask statelotteries, Off-Track Betting (OTB) corporations, pari-mutuel race tracks, andother state and federal regulated agencies to manage the wagers fromindividuals playing along on their PC’s, laptops and their television setsusing interactive TV set top boxes that convert regular television sets intominicomputers within their state or jurisdiction. There can be no assurancesthat we will be able to obtain any arrangement with any of these entities orthat they would be on suitable terms.

 

The individuals would have to pre-deposit funds intoan account with the wager management company and then place wagers with theircredit balance. The wagers and running balances will be transmitted to theRoulabette player’s PC, television sets, laptops with telephone lines notcrossing any state lines, similar in principle to telephone accounts wageringoffered by the New York State Off-Track Betting Corporation and the state ofNevada casino sports book and recently with remote purchase of lottery ticketsin many states within the United States.

 

After we obtain permission to play Roulabette, ofwhich there can be no assurances, in a given state and engages a wagermanagement organization in order to promote interactive television to thestate’s residents, Kenilworth would install the eighteen (18) inch dish antennaand converter box required to receive digital satellite TV programming andinteractive TV at its own cost, if the subscriber opens aRoulabette wagering account for two hundred dollars ($200). In addition,Kenilworth would pay the monthly subscription fees to view all digital TVprogramming offered and the Internet service provider (ISP) subscription fee ifthe customer wagers at least one hundred twenty dollars ($120) each month —win, lose, or draw — makes no difference.  In the U.S. the contracts wouldbe financed by the satellite carrier such as EchoStar and DirecTV, or cablecompanies.

 

In states with approved lottery and/or other gamblinglegislation, we plan to introduce Roulabette Slot terminals to hotels,clubs (similar to card clubs in California) and resorts, to provide upscalegathering places for tourists and local residents. Charitable organizationsthat are permitted to conduct “Nevada Nights” and Bingo games may wish to offerRoulabette gaming on a more permanent basis. To receive the broadcastsignal, all that would be required is an eighteen (18) inch dish TV antenna anddistribution equipment. The Roulabette terminals are intended to beself-sufficient and accept dollar bills (or script, to control the amount anindividual is allowed to wager in one day or other time period). We plan tolease all the equipment necessary to participants for a share of the profits.

 

To gain approval for our Roulabette-style gambling injurisdictions that have not approved any gambling legislation, Kenilworthproposes to engage lobbyists to introduce, promote, and obtain legislative approvalto permit Roulabette-style gambling. Our strategy is to find depressed resortareas and have the resort/hotel operators convince their local politicians ofthe benefits to their business and the local economies and request them topromote legislative approval, either state-wide or limited to their areas.Riverboat gambling started to rehabilitate decaying waterfronts.Roulabette can do the same in depressed economic areas.  Noassurances can be given that we can obtain any such approvals.

 

When the live casino TV broadcasts are beamed forglobal viewing, Kenilworth will seek out similar organizations, as proposed forthe United States and betting shops and slot route operators that can providethe servicing of individual accounts and placement of Roulabette terminalsin hotels, clubs, pubs, racetracks, etc. In all instances, we plan to offeronly profit sharing arrangements to franchisees, which will require leasing allthe equipment necessary to the franchisee, to discourage competition.

 

In overseas installations, wherever permitted,Kenilworth will make use of the WWW Internet only to manage the wagers, andonly in jurisdictions that permit the data collection of the gambler, not forthe live broadcast.

 

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In the event a substantial amount is won by a player,Kenilworth will make the payment to the winner, via money wire transfer, to theestablishment which managed the wager, within twenty-four (24) hours. Kenilworth will establish a worldwide cage for winning payments; or, aguarantee payment by a well-recognized international bank.

 

COMPETITION

 

Many segments of the gaming industry are characterizedby intense competition, with a large number of companies offering the same typeof wagering products and services. None of these companies, at present, arebelieved to offer the same or similar equipment or systems as intended byRoulabette. The most likely competition will come from slot machinemanufacturers who could relatively quickly adapt slot machines to play alongwith live casino table games. We believe there are three (3) major slotmachine manufacturers in the world, all of which have vastly greater capitalresources and substantially more personnel than the Company and may have underdevelopment systems that directly compete with Roulabette.

 

Our present plans are to broadcast the live casinotable games from companies that own casinos throughout the industrializedworld. Other casino owners may start their own broadcasts and have their ownterminals manufactured that compete with Kenilworth after Kenilworth has doneall its pioneering for play-along wagering.

 

PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

 

Our most important assets are Patents we have acquiredand Roulabette related trademarks and service marks. The Patentgranted on June 10, 2003 titled “SYSTEM AND METHOD FOR REMOTE ROULABETTEAND OTHER GAME PLAY USING GAME TABLE AT A CASINO” and Patent Application filedOctober 15, 2003, entitled “METHOD AND SYSTEM FOR SUPPLYING FUNDS TO ATERMINAL FOR REMOTE WAGERING”, “MULTI-USE GAMING MACHINE” trademarksROULABETTE, as in pre-marked cards similar to lottery cards to select number ineach game, used with terminals “ROULABETTE SWIPE CARD” to activate set-topboxes to play Roulabette and “PLAY ALONG WITH ROULABETTE, LIVE” andMULTI-USE GAMING MACHINE.

 

DELAYED APPROVAL OF PATENTS IN CHINA, HONG KONG ANDJAPAN

 

In 2008, we reported that after a seven (7) yeardelay, China and Hong Kong have accepted our Roulabette System patents forremote live, in-progress casino table game wagering action.  Since thenJapan has also accepted our Roulabette patents.

 

To assist us in our marketing efforts in China, we arepleased to confirm that we have signed contracts with Charles P. Wang and FredCatapano. Both gentlemen have each more than thirty (30) years of experience,with Chinese government agencies and Chinese marketing and possess theappropriate “know how”.

 

We were surprised at the Japanese approval. Japan hasNO CASINOS which translates to us, that they would entertain remote wageringfrom other Asian countries that offer casino action.  Otherwise, whyapprove something that will not, in the near Japanese future, occur? Affluent Japanese gamblers visit South Korea, the Philippines and of late,Macau.  That leaves the average wage earner to play Pachinko games inJapan for their gambling entertainment.  The Pachinko player is thepotential remote casino table game player.

 

China now leadsthe world with 231 million laptop owners; a mere seventeen percent (17%) of itspopulation, compared with 216 million seventy-one percent (71%) owners that usethe Internet in the United States.   Adoption of the Roulabette systemis capable of providing five times more Internet players in China than in theUnited States once the most sought after market in the world.

 

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**Charles P. Wang Dossier**

 

**1988-1993 Former President — ChinaInstitute of America**Premiere cultureand education organization promoting better U.S./China relations since 1933.

 

**Former Executive Director — ChineseAmerica Planning Counsel**Largest socialservice organization serving Asian Americans in New York.

 

**1995-2001 Former Vice Chairman U.S.Commission on Civil Rights**Appointed byPresident George Bush.

 

**Former Assistant Commissioner — NYState Department of Social Services**Under GovernorMario Cuomo.

 

Introduces and accompanies Chinese Heads of State andDignitaries when they visit with U.S. Congressional, State and City Officialsand at meetings at the United Nations in New York.

 

Mr. Wang was invited to meet Chinese Premier WenJiaboa while he was attending the September United Nations meetings ofWorld Leaders.

 

Mr. Catapano is the owner of **Well Made Toys Manufacturing Corp.**, one ofthe largest U.S. manufacturers and importer of toys from China with offices inHong Kong and elsewhere in China.  With his thirty (30) years ofexperience in dealing with Chinese Government Officials and manufacturers, manyof which are government owned, Kenilworth has members of his office staffexpertise available in facilitating our Roulabette marketing plans. They arewell acquainted with how to procure talent and “know how” in China. Mr. Catapano is a major Kenilworth shareholder.

 

GOVERNMENT REGULATIONS

 

Except for the ongoing, live, in-progress Roulettegame at the Sosua Grand Casino in Puerto Plata, Dominican Republic, 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 may be required in the future. Each state has its ownregulations, and in states where Kenilworth does business, Kenilworth will haveto comply with these regulations and there can be no assurances that it will beable to do so or obtain the necessary license in an applicable jurisdiction.The following discussion is not necessarily complete, or current regarding lawsand regulations that may be applicable to us.  Any present laws are alsosubject to future change, amendment or cancellation.

 

**Federal**

 

The Federal Gambling Devices Act of 1962 (the “FederalAct”) makes it unlawful for a person to manufacture, deliver, or receive gamingmachines, gaming machine type devices and components thereof across interstatelines unless that person has first registered with the Attorney General of theUnited States.

 

In addition, various record keeping and equipmentidentification requirements are imposed by the Federal Act. Violations of theFederal Act may result in seizure or forfeiture of equipment, as well as otherpenalties.

 

**Other Regulations**

 

The manufacture, distribution, sale, and use of slotmachines are controlled by state and federal law, which may also apply to ourRoulabette gaming terminals. Certain foreign countries permit theimportation, sale, or operation of slot machines. Where importation ispermitted, 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

 

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devices. Our Roulabette terminals may beconsidered similar to slot machines and may have to meet these regulations.

 

FABRICATION/ASSEMBLY OPERATION

 

When we start to market the Roulabette WageringSystem, of which there can be no assurances, we plan to engage sub-contractorsto assemble/manufacture the terminals from standard or specially manufactured (toour specifications) electronic, TV, and other components purchased from vendorsor manufactured by subcontractors.

 

EMPLOYEES

 

Kenilworth, at present, has four (4) full timeemployees to perform administrative work and software development workrelated to the ongoing casino wagering from the Dominican Republic andmarketing around the world, in addition to the officers that manage the affairsof the Company. The Company has engaged consultants to assist us in the UnitedStates, Europe and Asian markets and that may manage the proposed INTERNETtransmission programs, and others that may assist in the marketing ofRoulabette broadcasts throughout the industrialized world.

 

Kenilworth maintains medical insurance for the two(2) office employees, who do not contribute to the costs of the Plan.

 

BACKLOG

 

We do not have any backlog.

 

ITEM 2 — PROPERTIES

 

Kenilworth leases two thousand seven hundred plus(2,700+) square feet in an office building paying three thousand seven hundreddollars ($3,700) per month rent plus fuel and electric cost adjustments fromthe date of the lease, renewed for a five (5) year term to end inMarch 2015.

 

ITEM 3 — LEGAL PROCEEDINGS

 

Since exiting from Chapter 7 Bankruptcy Proceedings onSeptember 23, 1998, Kenilworth has not been involved in any significantlegal proceedings.

 

ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

 

Not applicable.

 

EXECUTIVE OFFICERS OF THEREGISTRANT

 

The names, ages and positions held by each ofKenilworth’s directors and executive officers are as follows:

 
| **NAME**      | ** ** | **AGE** | ** ** | **OFFICES AND  POSITIONS HELD**                                                       | ** ** | **FIRST  ELECTED  OFFICER OF  KENILWORTH** |
|---------------|------------|---------|------------|---------------------------------------------------------------------------------------|------------|--------------------------------------------|
| HERBERT LINDO |       | 84      |       | PRESIDENT,CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE  OFFICER AND CHIEF FINANCIAL OFFICER |       | 1972                                       |
| KIT WONG      |       | 79      |       | SECRETARY                                                                             |       | 1999                                       |

 

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All of the above Executive Officers and Directors havebeen elected to serve until the next Annual Meeting of Shareholders or until theirrespective successors are elected and qualified. The Board presentlyanticipates that the next Shareholders Meeting will be held during the secondquarter period of 2010.

 

PART II

 

ITEM 5 — MARKET PRICES OF THE COMPANY’S COMMON STOCKAND RELATED STOCKHOLDER MATTERS

 

(a)          Kenilworth exited from Bankruptcy Proceedings inSeptember of 1998, its Common Stock which had been trading on the NASDAQNational Market, is now 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.

 
| ** **                                           | ** ** | **LOW** | ** ** | **HIGH** | ** ** |
|------------------------------------------------------|------------|---------|------------|----------|------------|
| **2008**                                             |       |    |       |     |       |
|                                                 |       |    |       |     |       |
| January 1, 2008  Through March 31, 2008    |       | $       | 0.008      |     | $          | 0.0175 |   |
|                                                 |       |    |       |     |       |
| April 1, 2008  Through June 30, 2008       |       | $       | 0.005      |     | $          | 0.011 |   |
|                                                 |       |    |       |     |       |
| July 1, 2008  Through September 30, 2008   |       | $       | 0.004      |     | $          | 0.008 |   |
|                                                 |       |    |       |     |       |
| October 1, 2008  Through December 31, 2008 |       | $       | 0.012      |     | $          | 0.001 |   |
|                                                 |       |    |       |     |       |
| **2009**                                             |       |    |       |     |       |
|                                                 |       |    |       |     |       |
| January 1, 2009  Through March 30, 2009    |       | $       | 0.006      |     | $          | 0.02 |   |
|                                                 |       |    |       |     |       |
| April 1, 2009  Through June 30, 2009       |       | $       | 0.006      |     | $          | 0.010 |   |
|                                                 |       |    |       |     |       |
| July 1, 2009  Through September 30, 2009   |       | $       | 0.009      |     | $          | 0.010 |   |
|                                                 |       |    |       |     |       |
| October 1, 2009  Through December 31, 2009 |       | $       | 0.010      |     | $          | 0.025 |   |
|                                                 |       |    |       |     |       |
| **2010**                                             |       |    |       |     |       |
|                                                 |       |    |       |     |       |
| January 1, 2010  Through February 5, 2010  |       | $       | 0.025      |     | $          | 0.065 |   |

 

(b)         Holders. There were approximately ten thousand(10,000) holders of record of Common Stock of Kenilworth as ofMarch 5, 2010.

 

(c)          Dividends. Kenilworth has not paid any dividends onits Common Stock. We plan to apply any earnings it achieves to expansion of thebusiness and does not expect to pay any dividends in the foreseeable future.

 

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(d)         No underwriters were involved in the sale of theunregistered Convertible Promissory Notes and Stock Purchase and OptionAgreements.  Exemption from registration is claimed underSection 4(2) of the SEC Act of 1933 as amended.  The proceedsfrom the sale of all unregistered securities have all been used for workingcapital.

 

The Company has outstanding 587,691,586 CommonShares.  All of the restricted shares may have the restriction liftedpursuant to new SEC Rule 144 B within six (6) months which maysubstantially depress the trading price of the Company’s stock.

 

(e)          The  Equity Compensation Plan expired inNovember 27, 2006.  The Company plans to ask the Shareholders toapprove a future plan when the Company’s business becomes more viable andprofitable.

 

ITEM 6 — SELECTED FINANCIAL DATA

 

The following table summarizes certain selectedfinancial data and is qualified by reference to, and should be read inconjunction with, the Consolidated Financial Statements and related Notesthereto and with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” included elsewhere herein.

 

Selected Financial Data for the five (5) yearsended December 31, 2009, are as Follows:

 

SUMMARY OF OPERATIONS

 
| ** **                            | ** ** | **2009**   | ** ** | **2008**     | ** ** | **2007**     | ** ** | **2006**     | ** ** | **2005**     | ** ** |
|---------------------------------------|------------|------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|
| ** **                            | ** ** | ** ** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated** | ** ** | **Restated** | ** ** |
| Net sales from  operations            |       | $          | —     |         | $          | —       |       | $            | —     |         | $          | — |   | $ | — |   |
| Other income                          |       | $          | —     |         | $          | —       |       | $            | —     |         | $          | — |   | $ | — |   |
| Net loss accumulated                  |       | $          | 2,330,162  |         | $          | 1,074,193    |       | $            | 1,093,538  |         | $          | 850,079 |   | $ | 3,815,302 |   |
| Loss per common share                 |       | $          | 0.004      |         | $          | 0.002        |       | $            | 0.003      |         | $          | 0.003 |   | $ | 0.02 |   |
| Loss per common share —  diluted |       | $          | 0004       |         | $          | 0.002        |       | $            | 0.003      |         | $          | 0.003 |   | $ | 0.02 |   |
| Consolidated balance  sheet data:     |       |       |       |         |       |         |       |         |       |         |       |
| Total current  liabilities            |       | $          | 208,558    |         | $          | 318,488      |       | $            | 303,187    |         | $          | 486,895 |   | $ | 217,540 |   |
| Stockholders’ Equity  (deficit)  |       | $          | 35,967,224 |         | $          | 34,912,628   |       | $            | 576,710    |         | $          | 459,400 |   | $ | 75,450 |   |

 

ITEM 7 — MANAGEMENT DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The discussion following should be read in conjunctionwith, and is qualified in its entirety by, the consolidated financialstatements and the notes thereto included elsewhere in this Annual Report onForm 10-K.

 

(A) RESULTS OF OPERATIONS

 

Since we exited from bankruptcy proceedings onSeptember 28, 1998, we have had no revenues from operations, and thereforesustained losses from general administration expenses amounting to $1,054,596in 2009, $1,074,193 in 2008 and $1,093,538 in 2007.  Kenilworth has had norevenues from operations since exiting from Bankruptcy Proceedings inSeptember 1998.

 

(B) LIQUIDITY AND CAPITAL RESOURCES

 

Kenilworth has not conducted any new businessoperations since 1991. At December 31, 2009, 2008 and 2007 we had adeficiency in working capital of $318,796, $302,138 and $301,957 respectively.In Kenilworth’s present state of operation to continue a viable business plan,Kenilworth requires little funding. We have been dependant upon the resourcesof its Chairman and Chief Executive Officer, who receives no compensation, andfunds received from private investors, totaling $1,036,000 in 2009,

 

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$511,000 in 2008 and $832,500 in 2007.  Inaddition the Company issued restricted Common Stock for services totaling$345,000 for 11,500,000 shares in 2009, $523,565 for 52,355,522 shares in 2008and $306,400 for 10,240,000 shares in 2007.

 

Our present plans are to continue to develop awagering system titled “Roulabette” that would allow patrons all over the industrializedworld to view and wager on live casino table games on terminals placed inhotels, resorts, bars and other public gathering places and in homes andoffices on personal computers (PC’s) or television sets connected to set topboxes and laptop computers Interactive TV via digital satellite and digitalcable broadcasts emanating from strictly regulated casinos.  At present wedo not have sufficient liquidity and capital resources to develop our businessor to remain in business and we may never have such resources.

 

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR”PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 ANDRISK FACTORS

 

The information contained in this Form 10-K andKenilworth’s other filings with the Securities Exchange Commission contain“forward-looking” statements within the meaning of section 27A of theSecurities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended, and is subject to the safe harbors createdthereby. Such information involves important risks and uncertainties.

 

Forward-Looking Statements

 

The Private Securities Litigation Reform Act of 1995provides a “safe harbor” for forward-looking statements. Certain informationincluded in this Annual Report on this Form 10-Kcontains statements thatare forward-looking, including, but not limited to, statements relating to ourbusiness strategy and development activities as well as other capital spending,financing sources, the effects of regulation (including gaming and taxregulations), expectations concerning future operations, margins, profitabilityand competition. Any statements contained in this Form 10-K that are notstatements of historical fact may be deemed to be forward-looking statements.Without limiting the generality of the foregoing, in some cases, you canidentify forward-looking statements by terminology such as “may,” “will,”“should,” “would,” “could,” “believe,” “expect,” “anticipate,” “estimate,”“intend,” “plan,” “continue” or the negative of these terms or other comparableterminology. Such forward-looking information involves important risks anduncertainties that could significantly affect anticipated results in the futureand, accordingly, such results may differ from those expressed in any forward-lookingstatements made by us. These risks and uncertainties include, but are notlimited to, our lack of recent operating history, our dependence on HerbertLindo, our Chairman and Chief Executive Officer who is eighty-four (84) yearsold and existing management, general domestic or international economicconditions, pending or future legal  proceedings, changes in federal orstate tax laws or the administration of such laws, changes in gaming laws orregulations (including the legalization of gaming in certain jurisdictions),applications for licenses and approvals under applicable jurisdictional lawsand regulations (including gaming laws and regulations).  You should notplace undue reliance on any forward-looking statements, which are based only oninformation currently available to us. We undertake no obligation to publiclyrelease any revisions to such forward-looking statements to reflect events orcircumstances after the date of this 10-K report for the year endedDecember 31, 2009, and subsequent events reported in this FORM 10-K.

 

***Remainder of page intentionally left blank***

 

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**RISK FACTORS**

 

**NO OPERATING HISTORY**

 

We have had no new revenues from operations since1991. We exited from bankruptcy proceedings in 1998 without assets andliabilities. We have had no revenues from operations since then and we maynever have any revenues from operations in the future, **which may result in the termination of our business**.

 

**WE HAVE NO WORKING CAPITAL**

 

As of December 31, 2009 the working capitaldeficiency of Kenilworth was $318,796. This will not enable Kenilworth toachieve any of its planned operations. There can be no assurances thatKenilworth will again have sufficient working capital to engage in its plannedoperations.  Although we have been able to obtain working capital frominvestors that purchase Convertible Promissory Notes, Stock Purchase andOptions Agreements and by issuing restricted Common Shares for servicesrendered.

 

**OUR BUSINESS IS ONLY IN THE PLANNINGSTAGE**

 

Kenilworth’s business except for the completion of the$9,000,000 contract with the Totalizator Agency Board of Victoria, Australia,and the revenue from providing encoded access cards to United States andforeign Nuclear Electric Generating Plants, remains in the planning stage. TheCompany does not receive any income from the live, in-progress Roulette tablegame from the new Sosua Grand Casino in the Dominican Republic. We plan toengage in the development, manufacturing by subcontractors, and marketing of anoperation entitled Roulabette. Roulabette would allow casino patrons and otherplayers to play along from remote locations with live in-progress casino tablegames such as Roulette, Craps, Baccarat and more via digital satellite anddigital cable television and Internet broadcasts (simulcasts) emanating fromstrictly regulated casinos located in the United States or via the Internet inother locations around the world, to self-sufficient computer terminals dubbed“Roulabette” and digital satellite and cable TV set top boxes, and othercomputer devices. The Roulabette terminals are a proposal intended to be builtand there can be no assurances that it will ever be built.  Themicroprocessors to be installed in the TV set top boxes or attached to TVs havenot been designed. We have, as at December 31, 2009, no specificagreements, customers or proposals for any future business and there can be noassurances that we will ever have same.

 

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

 

In order to commence to develop the Roulabetteterminal and the Roulabette broadcasts, we estimate at this time, that we willneed at least approximately ten million dollars ($10,000,000). We do not havethis 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 marketingplan and there can be no assurances that such funds will ever be available toallow Kenilworth to engage in business on a profitable basis.

 

**OUR BUSINESS IS SUBJECT TO OURABILITY TO OBTAIN AND RETAIN KEY PERSONNEL**

 

At the present time, we only employ two(2) software designers and a number of software consultants who will beable to develop Roulabette. It will be necessary for us to obtain additionalpersonnel qualified and with the expertise to develop Roulabette. We believe atthis time we would require additional employees and several more consultants.There can be no assurances of the availability of any such employees andconsultants.  The Company expects to outsource the development ofRoulabette and the microprocessors for the TVs, set top boxes, PCs and laptopcomputers.  No assurances can be given that the Company will be able to dothis successfully.

 

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**WE ARE DEPENDANT UPON HERBERT LINDO**

 

Kenilworth has been dependant upon the services of itsChairman and Chief Executive Officer Herbert Lindo who is eighty-four (84)years old. Herbert Lindo has performed his services during the past nineteen(19) years without compensation. Should Kenilworth procure working capital,there can be no assurances that he will continue to work without receivingcompensation. There also can be no assurances of Herbert Lindo’s continuedavailability.  We believe without assurances that present management iscapable to continue our present plans in the event that Herbert Lindo is notavailable.

 

**RAPID CHANGES IN TECHNOLOGY**

 

The technology and Roulabette in general is subject torapid change. Kenilworth will need to maintain an ongoing research anddevelopment effort of which there can be no assurances of success oravailability of funds.  Additionally, there can be no assurances that thedevelopment of technologies and products by competitors will not render theKenilworth’s products or technologies non-competitive or obsolete.

 

**WE ARE ENGAGED IN A HIGHLYCOMPETITIVE INDUSTRY**

 

Our business is subject to significant competition.Competition exists from larger companies that possess substantially greatertechnical, financial, sales and marketing resources that Kenilworth presentlypossesses. Such competition is expected to increase. Such increased competitionmay have a material adverse effect on Kenilworth’s ability to successfullymarket its products.

 

**WE WERE GRANTED A PATENT FOR THEVARIOUS ASPECTS OF SIMULCAST WAGERING**

 

On June 10, 2003, the U.S. Patent for the variousaspects of wagering on live in-progress casino table games was granted by theU.S. Patent Office to Herbert Lindo, the Inventor and which Patent was assignedby Herbert Lindo to the Company in August 2000.  We filed the Patentfor approval in fifty-one (51) countries in the industrialized world includingRussia and China. There can be no assurances that foreign patents will beissued and the challenges will not be instituted against the validity orenforceability of our patent.  Herbert Lindo also filed two(2) Patents in the U.S. Patent Offices in September andOctober 2004 which Patents have been published to use lottery terminals toaccept deposits for wagers placed with the TV set top boxes and the use of PlayCards similar to lottery tickets, which have also been assigned to the Companyby Herbert Lindo.  A Patent Application for Multi-Use Gaming Machinesinvented by Herbert Lindo and Gordon Coplein, Esq. was published onFebruary 1, 2007 and assigned, by the inventors, to Kenilworth.

 

**OUR ROULABETTE TERMINALS ARE SUBJECTTO VARIOUS FEDERAL, STATE, LOCAL AND FOREIGN JURISDICTION LAWS AND REGULATIONS**

 

The use of the Roulabette System may be subject tovarious federal, state and local laws and regulations both in the United Statesand foreign countries. There can be no assurances that we will ever be able toobtain licenses or permits necessary to conduct our business or that we will beable to comply with these applicable laws and regulations.

 

The Roulabette System is planned to allow casinopatrons and other players to play along with live, in-progress casino tablegames such as Roulette, Craps, Baccarat and more via digital satellitetelevision and digital cable programming emanating from regulated casinos, viathe Internet to countries that permit Internet streaming.

 

**OUR OFFICERS AND DIRECTORS WILL HAVESIGNIFICANT CONTROL OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TOA VOTE OF OUR SHAREHOLDERS**

 

Our executive officers and directors together withtheir affiliates beneficially own a significant percentage of our outstandingcommon stock. These stockholders, if acting together, will be able tosignificantly

 

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influence all mattersrequiring approval by our stockholders including the election of directors andthe approval of mergers or similar transactions even if the stockholdersdisagree.

 

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

 

If our stockholders sellsubstantial amounts of our common stock in the public market, the market priceof our common stock could fall. As of February 5, 2010 we added 12,860,000restricted shares of Common Stock outstanding, which are eligible for sale byour Shareholders under new SEC Rule 144 B of the Securities Act of 1933 asamended which reduces the holding period to six (6) months or areotherwise registered for sale.

 

**WE DONOT INTEND TO PAY DIVIDENDS**

 

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

 

ITEM 8 — FINANCIALSTATEMENTS

 

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

 

ITEM 9 — CHANGESAND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

On October 2, 2006,Demetrius & Company, L.L.C. (“Demetrius”) resigned as independentregistered public accountants of Kenilworth Systems Corporation (the “Company”). The Company’s Board of Directors accepted the resignation of Demetrius.

 

The report of Demetriuson the Company’s financial statements as of December 31, 2004 and for theyear then ended neither contains an adverse opinion or a disclaimer of opinionnor is modified as to uncertainty, audit scope or accounting principles, exceptthat the opinion includes an explanatory paragraph that the Company hasincurred operating losses since its inception as a development stage companyfor the period beginning September 24, 1998, which raises substantialdoubt about the Company’s ability to continue as a going concern. Demetrius did not issue a report on the Company’s financial statements as of December 31,2005 or for the years then ended.

 

During the fiscal yearsended December 31, 2004 and 2005 and the period from January 1, 2006to October 2, 2006, there were no disagreements with Demetrius on anymatter of accounting principles or practices, financial statement disclosure,or auditing scope or procedure, which, if not resolved to the satisfaction ofDemetrius, would have caused it to make reference to the subject matter of thedisagreement in connection with its report.

 

Effective February 5,2007, the Company engaged KGS, LLP as its independent certified publicaccountants with respect to the fiscal years ended December 31, 2005, 2006and 2007.  The Company’s Board of Directors approved the engagement ofKGS, LLP.  KGS, LLP. has not yet audited any of the Company’s financialsfrom the time Demetrius ended their audit engagement.  The delay was notcaused by KGS, LLP.

 

ITEM 9A — CONTROLSAND PROCEDURES

 

a.)          Disclosure Controlsand Procedures

 

The Company hasevaluated, under the supervision and with the participation of the Company’smanagement including the Company’s Chairman, Chief Executive Officer who isalso its Financial Officer.  The effectiveness of the Company’s disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15 (e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of 

 

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the end of the periodcovered by this Report.  Because of the inherent limitations in allcontrol systems evaluation of controls can provide only reasonable assurancethat all control issues and instances of fraud, if any, within the Company havebeen detected.  However, based on that evaluation, the Company’sChairman and Chief Executive Officer whois also the Company’s Chief Financial Officer have concluded that the Company’sdisclosure controls and procedures were effective as of the end of the periodcovered by this Report at a reasonable assurance level.

 

b.)         Changes in InternalControl over Financial Reporting

 

There was no change inthe Company’s internal control over financial reporting that occurred duringthe annual period ending December 31, 2009, that has materially affected,or is reasonably likely to materially affect the Company’s internal controlover financial reporting.

 

PART III

 

ITEM 10 —DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 
| **Name**             | ** ** | **Age** | ** ** | **Position**                                                                                                 |
|----------------------|------------|---------|------------|--------------------------------------------------------------------------------------------------------------|
|                 |       |    |       |                                                                                                         |
| Herbert Lindo        |       | 84      |       | Director, Chairman of  the Board, President, Treasurer, Chief Executive Officer and Chief Financial  Officer |
|                 |       |    |       |                                                                                                         |
| Joyce Clark          |       | 74      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Kit Wong             |       | 79      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Patrick J. Mc Devitt |       | 68      |       | Director                                                                                                     |
|                 |       |    |       |                                                                                                         |
| Edward Vietmeier     |       | 48      |       | Director                                                                                                     |

 

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

 

Kit Y. Wong has served asa Director of Kenilworth since 1999, since December 2005 he also serves asSecretary of the Company. He is part owner and operator of several Chineserestaurants in the New York metropolitan area.  Mr. Wong devotes onlya portion of his time to the business of Kenilworth.

 

Patrick J. Mc Devitt hasbeen a licensed representative for Securities firms for the past nine (9) years.He retired in 2003 from the Securities business and joined his wife in the CPAbusiness.  Mr. Mc Devitt devotes only a portion of his time to thebusiness of Kenilworth.

 

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

 

Edward Vietmeier is aprofessional golfer and participates in major golf tournaments throughout theUnited States.  He is also the operator of a public golf course inPennsylvania.  The immediate members of his family are shareholders of ourCompany’s stock. Mr. Vietmeier devotes only a portion of his time to thebusiness of Kenilworth.

 

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DIRECTORS IN OTHER PUBLICCOMPANIES

 

Kit Wong, a Director ofthe Company, serves as a Director of a private plastic extrusion company.

 

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

 

NONE

 

SECTION 16(a) BENEFICIALOWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) ofthe Securities Exchange Act of 1934 requires Kenilworth’s Executive Officersand Directors, and persons who beneficially own more than ten percent (10%) ofour Common Stock, to file initial reports of ownership and reports of changesin ownership with the Securities and Exchange Commission. Executive Officers,Directors and greater than ten percent (10%) beneficial owners are required bySEC regulations to furnish us with copies of all Section 16(a) formsthey file. Through December 31, 2007 only Herbert Lindo, Chairman andChief Executive Officer owns beneficially more than ten percent (10%) of ourCommon Stock.  The Company is presently reviewing the compliance for theforegoing.

 

AUDIT COMMITTEE ANDCHARTER

 

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

 

The Audit Committee ofthe Board of Directors (the “Audit Committee”) shall have the responsibility toassist the Board of Directors in fulfilling its fiduciary and other obligationswith respect to accounting and financial matters. Specifically, and withoutlimiting the generality of the foregoing, the Audit Committee shall:

 

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

 
| 1.)    | Review the adequacy and  effectiveness of the Company’s system of internal financial controls and  accounting practices to achieve reliability and integrity in the Company’s  financial statements, and initiate such examinations of such controls and  practices as the Audit Committee deems advisable. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                  |
| 2.)    | Review the  qualification, performance and independence of the Company’s independent  auditors and recommend independent auditors for appointment annually by the  Board of Directors.                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                  |
| 3.)    | Prior to the  commencement of the Company’s annual external audit, review with the  Company’s independent auditors the scope of their audit function and  estimated audit fees.                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                  |
| 4.)    | Subsequent to the  completion of the Company’s annual external audit, review the report and  recommendations of the independent auditors with the independent auditors and  the Company’s management.                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                  |
| 5.)    | Review the annual and  quarterly consolidated financial statements of the company and other  financial disclosures of the Company and the accounting principles being  applied in such statements and disclosures.                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                  |
| 6.)    | Review the authority  and duties of the Company’s chief financial officer and chief accounting  officer and the performance by each of them of their respective duties.                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                  |
| 7.)    | Review the insurance  programs for the Company including professional malpractice, general  liability, director and officer liability and property insurance, and the  insurers carrying the Company’s insurance.                                                                                                |

 

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| 8.)    | Oversee the  establishment and thereafter periodically review a corporate code of conduct  and the Company’s policies on ethical business practices.                                                   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                        |
| 9.)    | Prior to public  release, review with management and the Independent Accountants, the  financial results for the prior year including the Company’s annual report on  Form 10-K/A.                |
|   |                                                                                                                                                                                                        |
| 10.)   | Review the committee’s  charter annually and revise as appropriate.                                                                                                                                    |
|   |                                                                                                                                                                                                        |
| 11.)   | Meet with the Chief  Financial Officer and the Independent Accountants, in separate executive  sessions, to discuss any matters that the committee or these groups believe  should be considered privately. |
|   |                                                                                                                                                                                                        |
| 12.)   | Take such other actions  concerning the Company’s accounting and financial functions as the Committee  deems appropriate with respect to the matters described above.                                  |

 

**Code ofEthics**

 

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

 

ITEM 11 — EXECUTIVECOMPENSATION

 

a.)           The following table sets forth the exercise of optionsand SARs during the fiscal year ended December 31, 2009.

 

AggregatedOption/SAR Exercises in Last Fiscal YearAnd FY-End Option/SAR Values

NONE

 
| ** **     | ** ** | ** **                    | ** ** | ** **                 | ** ** | **Number of**                                        | ** ** | **Value of unexercised**    | ** ** |
|----------------|------------|-------------------------------|------------|----------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------|------------|
| ** **     | ** ** | ** **                    | ** ** | ** **                 | ** ** | **securities underlying  unexercised options/** | ** ** | **in- the-  money options** | ** ** |
| ** **     | ** ** | ** **                    | ** ** | ** **                 | ** ** | **SARS at FY-end (#)**                     | ** ** | **SARS at FY-end($)**       | ** ** |
| ** **     | ** ** | **Shares acquired**      | ** ** | ** **                 | ** ** | **exercisable /**                                    | ** ** | **exercisable /**                | ** ** |
| **Name**       | ** ** | **on exercise (#)** | ** ** | **Value realized($)** | ** ** | **Unexercisable**                                         | ** ** | **unexercisable**                     | ** ** |
| Herbert  Lindo |       | 5,000,000                     |       | $                          | 20,000     |                                                      | 0          |                                  | 0          |   |
|                |            |                               |            |                            |            |                                                           |            |                                       |            |  |

 

No options or SARs weregranted during the year ended December 31, 2008.  Herbert Lindoexercised his five million (5,000,000) share Option on November 27, 2006.

 

b.)          The Registrant has no employment agreements with anyof its Executive Officers or Directors.

 

c.)           The Registrant has no compensation committee at thistime.

 

d.)          Stock Performance Graph is not applicable.

 

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

 

Kenilworth has notdeclared a dividend since its inception in 1968.

 

e.)           The following table sets forth the total compensationof the President and each Executive Officer of Kenilworth whose total salaryand bonus exceeds $100,000.

 

**SUMMARYCOMPENSATION TABLE**

 
| ** **                  | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long term compensation** | ** ** |
|-----------------------------|------------|------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** ** | ** ** | **Awards** | ** ** | **Payout** | ** ** |
| ** **                  | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **Other** | ** ** | **Restricted** | ** ** | **Securities** | ** ** | **LTIP** | ** ** | **All** | ** ** |
| **Name and**           | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | **annual** | ** ** | **stock** | ** ** | **underlying** | ** ** | **payouts** | ** ** | **other** | ** ** |
| **principal position** | ** ** | **Year**   | ** ** | **Salary ($)**          | ** ** | **Bonus ($)**                   | ** ** | **compensation($)** | ** ** | **award(s)($)** | ** ** | **options/SARS (#)** | ** ** | **($)** | ** ** | **compensation($)** | ** ** |
| Herbert  Lindo              |       | 2009       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2008       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2007       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                        |       | 2006       |       | 0                            |       | 0                                    |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |

 

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

 

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

 

The following table setsforth as of March 1, 2010 the ownership with respect to each ExecutiveOfficer and Director and each person known to own beneficially more than fivepercent (5%) of the Company’s Common Stock.

 

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

 

The number of sharesbeneficially owned by each person, Director or Executive Officer is determinedunder rules of the Securities and Exchange Commission, and the informationis not necessarily indicative of beneficial ownership for any otherpurpose.  Under such rules, beneficial ownership includes any shares as towhich the individual has the right to acquire as of May 31, 2008 throughthe exercise of any stock option or other right.  Unless otherwiseindicated, each person has sole voting and investment power (or shares suchpowers with his spouse) with respect to the shares set forth in the followingtable:

 

**BENEFICIALOWNERSHIP TABLE**

 
| ** **                                                                            | ** ** | ** **                         | ** ** | **AMOUNT AND**    | ** ** | ** **         | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------|------------|--------------------|------------|
| ** **                                                                            | ** ** | ** **                         | ** ** | **NATURE OF**     | ** ** | **PERCENT**        | ** ** |
| **NAME AND ADDRESS OF**                                                | ** ** | ** **                         | ** ** | **BENEFICIAL**         | ** ** | **OF**             | ** ** |
| **BENEFICIAL OWNER**                                                             | ** ** | **TITLE OF CLASS**       | ** ** | **OWNERSHIP (1)** | ** ** | **CLASS (1)** | ** ** |
| Herbert  Lindo (1)                                                                    |       |                               |       |                   |       |               |       |
| 185  Willis Avenue                                                                    |       | Common Stock                       |       |                   |       |               |       |
| Mineola,  NY 11501                                                                    |       | $ 0.01 par  value             |       | 50,000,000             |       | 11.9               | %          |
|                                                                                  |       |                               |       |                   |       |               |       |
| The  total number of shares beneficially owned by allDirectors and Executive Officers |       | Common Stock$ 0.01 par  value |       | 21,359,465             |       | 5.0                | %          |
|                                                                                  |       |                               |       | 71,359,465             |       | 16.9               | %          |

 

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The percent of class hasbeen determined with 587,691,586 shares issued and outstanding on December 31,2009.

 

ITEM 13 — CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

 

NONE

 

ITEM 14 —PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The Company has appointedKGS, LLP. as Independent Auditor’s for the fiscal year ending December 31,2006, 2007 and 2008 and to restate the Company’s financials as A DevelopmentStage Company as directed by the SEC.  KGS, LLP. has not commenced theaudit for the respective years.  The Company’s back office accountants,which were not timely compensated during some of their work, halted thefinancial preparation for the audit.  As the result of the delays, KGS, LLPresigned in 2008.  The Company has not as yet engaged an IndependentAuditor.

 

**FeesIncurred by Kenilworth**

 

Fees for professionalservices provided are estimated:

 
| ** **       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------|------------|----------|------------|----------|------------|----------|------------|
|             |       |     |       |     |       |     |       |
| Accounting  Fees |       | $        | 7,263      |     | 4,000      |     | $          | 75,000 |   |
|                  |            |          |            |          |            |          |            |  |  |

 

The Company has no AuditCommittee.

 

PART IV

 

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

 

(a)  (1) FinancialStatements

 
| Consolidated  balance sheets as of December 31, 2009 and 2008                                               |
|------------------------------------------------------------------------------------------------------------------|
|                                                                                                             |
| Consolidated statement of operations and deficit for  the periods ended December 31, 2009, 2008 and 2007    |
|                                                                                                             |
| Consolidated  statement of cash flows for the periods ended December 31, 2009, 2008  and 2007               |
|                                                                                                             |
| Consolidated  statement of changes in stockholders equity the years ended December 31,  2009, 2008 and 2007 |
|                                                                                                             |
| Notes to consolidated financial statements                                                                       |

 

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

 

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

 

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

 

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

 

Kenilworth or HerbertLindo, as an individual will seek in Federal or State Courts to cancel the10,333,450 shares, which were subject of the Sheriff Auctions Sale, and seektriple damages under RICO on behalf of the shareholders of Kenilworth, thedamaged parties.  Herbert Lindo and Kenilworth have not commenced anyproceedings against the Sheriff’s Office of Nassau County and Tappan Zee andthe attorney’s representations Tappan Zee since we believe that the Statue for**Security Fraud** has no expiration date.

 

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

 

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

 

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

 

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

 
| 3.1    | Certificate of  Incorporation and prior Amendments thereto are incorporated by reference to  Exhibit 3.1. |
|--------|----------------------------------------------------------------------------------------------------------------|
|   |                                                                                                           |
| 3.2    | Certificate of  Amendment to the Certificate of Incorporation dated January 26, 2009  Annexed hereto.     |

 

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| 3.3    | The Bylaws are Annexed  in Exhibit 3 (2) to the Registrant’s Annual Report on  FORM 10-K for the fiscal year ended December 31, 2001.                                                                                                                                                                                                   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 10.1   | Sample Stock Purchase  and Option Agreement                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 10.2   | Kenilworth Systems  Corporation Performance and Equity Incentive Plan incorporated by reference  to the exhibit 10.2 to the Registrant’s Annual Report on form 10-K for the  fiscal year ended December 31, 2001.  The Plan has expired.                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 10.3   | Three (3) year  lease with Police Benevolent Association (PBA) of Nassau County for office  space at 185 Willis Avenue, Mineola, NY 11501 renewed to May 30, 2009  for approximately two thousand three hundred (2,300) square feet for two  thousand six hundred dollars ($2,600) per month, plus adjustments for  electricity and real estate taxes. |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 21.1   | Subsidiaries of the  Registrant                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 23.1   | Consent of KGS, LLP.  Independent Auditor, when provided.  Resigned in 2008.                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 31.1   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934.                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 31.2   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934.                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 32.1   | Certification of the  Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 32.2   | Certification of the  Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 99.1   | Exclusive Software Development  Agreement                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                             |
| 99.2   | Promissory Note                                                                                                                                                                                                                                                                                                                                                  |

 

REPORT ON FORM 8-K

 

None

 

ITEM 8.01  OTHER EVENTS

 

None

 

ITEM  9.01             FINANCIAL STATEMENTS AND EXHIBITS

 

(c)                                  Exhibits

 

The followingexhibits are annexed hereto:

 

**On February 7,2007 the Company reported on FORM 8-K/A:**

 

**Item4.01               Changes inRegistrant’s Certifying Accountant.**

 

On October 2, 2006,Demetrius & Company, L.L.C. (“Demetrius”) resigned as independentregistered public accountants of Kenilworth Systems Corporation (the “Company”). The Company’s Board of Directors accepted the resignation of Demetrius.

 

The report of Demetriuson the Company’s financial statements as of December 31, 2004 and for theyear then ended neither contains an adverse opinion or a disclaimer of opinionnor is modified as to uncertainty, audit scope or accounting principles, exceptthat the opinion includes an explanatory 

 

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paragraph that theCompany has incurred operating losses since its inception as a developmentstage company for the period beginning November 24, 1998, which raisessubstantial doubt about the Company’s ability to continue as a goingconcern.  Demetrius did not issue a report on the Company’s financialstatements as of December 31, 2005 or for the year then ended.

 

During the fiscal yearsended December 31, 2004 and 2005 and the period from January 1, 2006to October 2, 2006, there were no disagreements with Demetrius on anymatter of accounting principles or practices, financial statement disclosure,or auditing scope or procedure, which, if not resolved to the satisfaction ofDemetrius, would have caused it to make reference to the subject matter of thedisagreement in connection with its report.

 

Effective February 5,2007, the Company engaged KGS, LLP as its independent certified publicaccountants with respect to the fiscal years ended December 31, 2005 and2006.  The Company’s Board of Directors approved the engagement of KGS,LLP.

 

**Item 9.01****                                            ****Financial Statements andExhibits.**

 

(d)                                 **Exhibits**.

 

16.                               Letter from Demetrius & Company,L.L.C. to the Securities and Exchange Commission.

 

**Exhibit 16**

 

**[LETTERHEADOF DEMETRIUS & COMPANY, L.L.C.]**

 

February 27,2007

 

Securities and ExchangeCommissionMail Stop 7561100 F Street NEWashington, DC 20549

 

Ladies and Gentlemen:

 

We have read thestatements made by Kenilworth Systems Corporation which were provided to us on February 27,2007, which we understand will be filed with Commission pursuant Item 4.01in the Form 8-K/A. We agree with the statements under Item 4.01concerning firm. We have no basis to agree or disagree with other statementsmade.

 

Yours truly,

*** ***
| ***/s/ Demetrius & Company, L.L.C.*** |   |
|------------------------------------------------|--------|

 

**On February 7,2007 the Company reported on FORM 8-K:**

 

ITEM 4.01 CHANGE OFINDEPENDENT AUDITORS:

 

The Company engaged KGS,LLP as its Independent Certifying Accountants.  The former Auditors,Demetrius & Company, LLP had advised the Company, on October 2,2006, that the client-auditor relationship has ceased.  The ending of therelationship was not as the result of any dispute.

 

**On November 12,2008 the Company reported on FORM 8-K:**

 

Item 4.01 Changes inRegistrant’s Certifying Accountant

 

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On November 6, 2008,KGS, LLP resigned as Independent Registered Public Accountant of KenilworthSystems Corporation (the “Company”). The Company’s Board of Directors, at aspecial meeting held on November 12, 2008 at which a quorum of Directorswas present, accepted the resignation of KGS, LLP and authorized the Company toengage a new independent registered public accountant for the Board to approveand introduced for approval by the shareholders at the Annual Meeting ofShareholders on January 7, 2009, for the year ended December 31,2009.

 

There were nodisagreements with KGS, LLP.

 

Item 9.01 FinancialStatement Exhibits

 

d. Exhibits.

 

16. Letters from KGS, LLPto the Securities and Exchange Commission dated November 6, 2008 and November 12,2008.

 

**Exhibit 16**

 
|                                    |                                 |   |
|------------------------------------|--------------------------------------|--------|
|                               |                                 |
|                               | 125 Jericho Turnpike, Suite 300 |
| **KGS  LLP**                       | Jericho, NY 11753-1024               |
| ***Certified Public Accountants*** | (516) 997-7500 Fax:  (516) 997-3480  |
|                               | Email: info@kgsllp.com               |
|                               |                                 |

 

November 6, 2008

 

Mr. Herbert Lindo

Kenilworth SystemsCorporation

185 Willis Avenue

Suite #4

Mincola, NY 11501

 

Dear Mr. Lindo:

 

Effective February 7,2007, Kenilworth Systems Corporation, the “Company”, engaged KGS LLP (“KGS”) toaudit the Company’s financial statements as of and for the years ended December 31,2005 and 2006. During the time frame from being engaged to date, the Companyhas filed various financial statements with the Securities and ExchangeCommission without submitting the final documents for the review or audit ofKGS. Since KGS has not been provided the necessary documents, we have notcompleted any auditing or review procedures to express an opinion or any otherform of assurances on the financial statements submitted.

 

In light of these facts,this is to confirm that the client-auditor relationship between the Company(commission file No. 0-08962) and KGS LLP has ceased.

 

Very truly yours,

 
| KGS LLP |   |
|---------|--------|

 
|  |   |
|--|--------|

 

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| Mitchell Kahn |   |
|---------------|--------|

 

 

November 12, 2008

 

Securities and ExchangeCommission

100 F Street, N.E.

Washington, D.C. 20549

 

Gentlemen:

 

We have readItem 4.01 of Form 8-K dated November 12, 2008, of KenilworthSystems Corporation and are in agreement with the statements contained inItem 4.01.

 
|   | /s/ KGS LLP |
|--------|-------------|

 

***Remainder of page intentionally left blank***

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATED BALANCE SHEETS**

**ASOF DECEMBER 31, (Unaudited)**

 
| ** **                                                                                                                                               | ** ** | **2009**    | ** ** | **2008**    | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
|                                                                                                                                                     |       |        |       |        |       |
| ASSETS                                                                                                                                                   |       |        |       |        |       |
| CURRENT  ASSETS                                                                                                                                          |       |        |       |        |       |
| Cash                                                                                                                                                     |       | $           | 123,633    |        | $          | 2,391 |   |
| Prepaid  expenses Note (4)                                                                                                                               |       | 80,000      |       | 80,000      |       |
| Loan  receivable                                                                                                                                         |       | 58,600      |       | 21,600      |       |
| Receivable  from Herbert Lindo                                                                                                                           |       | 775,725     |       | 767,289     |       |
| Total  current assets                                                                                                                                    |       | $           | 1,037,958  |        | $          | 871,270 |   |
| SOFTWARE  DEVELOPMENT AGREEMENT — NET Note (14)                                                                                                     |       | 3,299,960   |       |        |       |
| PROPERTY  AND EQUIPMENT — NET                                                                                                                       |       | $           | 1,156      |        | $          | 603 |   |
|                                                                                                                                                     |       |        |       |        |       |
| SECURITY  DEPOSIT                                                                                                                                        |       | $           | 13,677     |        | 13,677     |   |
| TOTAL  ASSETS                                                                                                                                            |       | $           | 4,352,751  |        | $          | 885,560 |   |
|                                                                                                                                                     |       |        |       |        |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                               |       |        |       |        |       |
| CURRENT  LIABILITIES                                                                                                                                     |       |        |       |        |       |
| Accounts  payable and accrued expenses                                                                                                                   |       | $           | 165,349    |        | $          | 128,529 |   |
| Payroll  taxes payable                                                                                                                                   |       | 18,108      |       | 169,695     |       |
| Loans  payable — including accrued interest                                                                                                         |       | 25,101      |       | 20,264      |       |
| Total  Current Liabilities                                                                                                                               |       | 208,558     |       |        |       |
| LONG  TERM DEBT — Note (14)                                                                                                                         |       | 3,500,000   |       |        |       |
|                                                                                                                                                     |       | $           | 3,708,538  |        | $          | 318,488 |   |
| COMMITMENTS  AND CONTINGENCY — see notes                                                                                                            |       |        |       |        |       |
|                                                                                                                                                     |       |        |       |        |       |
| STOCKHOLDERS’  EQUITY (DEFICIT)                                                                                                                     |       |        |       |        |       |
| Preferred  Stock — par value $.01 per share; authorized 50,000,000 shares; no shares  issued and outstanding                                        |       |        |       |        |       |
| Common  stock — par value $.01 per share; authorized 1,000,000,000 shares; issued and  outstanding 587,691,586 and 434,597,086 shares, respectively |       | 5,876,915   |       | 4,345,970   |       |
| Additional  paid-in capital                                                                                                                              |       | 32,010,088  |       | 31,103,730  |       |
| Accumulated  deficit                                                                                                                                     |       | (37,242,790 | )          | (34,912,628 | )          |
| TOTAL  STOCKHOLDER’S EQUITY                                                                                                                         |       | 644,213     |       | 537,072     |       |
| TOTAL  STOCKHOLDER’S LIABILITIES AND EQUITY                                                                                                         |       | $           | 4,352,751  |        | $          | 885,560 |   |

 

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

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS**

 
| ** **                                     | ** ** | **YEARS ENDED**  | ** ** | **YEARS ENDED**  | ** ** | **YEARS ENDED**  | ** ** |
|------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **DECEMBER 31,** | ** ** | **DECEMBER 31,** | ** ** | **DECEMBER 31,** | ** ** |
| ** **                                     | ** ** | **2009**              | ** ** | **2008**              | ** ** | **2007**              | ** ** |
|                                           |       |                  |       |                  | ** ** | **Restated**          | ** ** |
| Expenses                                       |       |                  |       |                  |       |                  |       |
| Selling,  general and administrative           |       | $                     | 1,054,596  |                  | $          | 1,074,193             |       | $ | 1,093,538 |   |
|                                           |       |                  |       |                  |       |                  |       |
| Other  (expenses)                              |       | 1,275,566             |       |                  |       |                  |       |
| Interest  income                               |       | —                |       | —                |       | —                |       |
| Interest  expense                              |       | —                |       | —                |       | —                |       |
| Total  other (expense)                         |       | 2,330,162             |       | 0                     |       | 0                     |       |
| Net  loss                                      |       | $                     | 2,130,162  |                  | $          | 1,074,193             |       | $ | 1,093,538 |   |
| Basic  and diluted loss per share              |       | $                     | (0.004     | )                     | $          | (0.002                | )          | $ | (0.003 |   |
| Weighted  average number of shares outstanding |       | 587,691,586           |       | 434,597,086           |       | 327,741,562           |       |

 

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

 

***Remainder of page intentionally left blank***

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

**STATEMENTS OF CASH FLOWS**

 
| ** **                                                                      | ** ** | **YEARS ENDED**  | ** ** | **YEARS ENDED**  | ** ** | **YEARS ENDED**  | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                      | ** ** | **DECEMBER 31,** | ** ** | **DECEMBER 31,** | ** ** | **DECEMBER 31,** | ** ** |
| ** **                                                                      | ** ** | **2009**              | ** ** | **2008**              | ** ** | **2007**              | ** ** |
|                                                                            |       |                  |       |                  |       |                  |       |
| CASH  FLOWS FROM OPERATING ACTIVITIES                                           |       |                  |       |                  |       |                  |       |
| Net  loss                                                                       |       | $                     | (2,330,162 | )                     | $          | (1,074,193            | )          | $ | (1,093,538 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities |       |                  |       |                  |       |                  |       |
| Depreciation                                                                    |       |                  |       | 15,265                |       | 17,010                |       |
| Amortization  of patent (Note 6)                                                |       | 200,040               |       | —                |       | —                |       |
| Accretion  of convertible debt discount                                         |       |                  |       | —                |       | —                |       |
| Beneficial  conversion feature                                                  |       |                  |       |                  |       |                  |       |
| Common  stock issued for services                                               |       | 11,500,000            |       | 370,500               |       | 204,800               |       |
| Common  stock issued to induce debt conversion                                  |       |                  |       | —                |       | —                |       |
| Common  stock issued for interest due on notes payable                          |       | —                |       | —                |       | —                |       |
| Accrued  interest transferred to capital                                        |       | —                |       | —                |       | —                |       |
| Other                                                                           |       | —                |       | —                |       | —                |       |
| Increase  (decrease) in cash attributable to changes in assets and liabilities: |       |                  |       |                  |       |                  |       |
| Prepaid  expenses                                                               |       | (80,000               | )          | (80,000               | )          | (80,000               | )          |
| Accounts  payable and accrued expenses                                          |       | 3,690,430             |       | 128,529               |       | 229,846               |       |
| Payroll  taxes payable                                                          |       | 18,108                |       | 169,695               |       | 73,341                |       |
| Net  cash used in operating activities                                          |       | 1,036,000             |       | 470,209               |       | 648,541               |       |
|                                                                            |       |                  |       |                  |       |                  |       |
| CASH  FLOWS FROM INVESTING ACTIVITIES                                           |       |                  |       |                  |       |                  |       |
| Payment  of loan receivable — stockholder                                  |       | (58,600               | )          | —                |       | —                |       |
| Proceeds  from loan receivable — stockholder                               |       | —                |       |                  |       |                  |       |
| Payment  of patent costs (Note 6)                                               |       | —                |       |                  |       |                  |       |
| Purchase  of property and equipment                                             |       | 3,500,000             |       | 1,000                 |       |                  |       |
| Security  deposit                                                               |       | 13,677                |       | 13,677                |       | 13,677                |       |
| Net  cash used in investing activities                                          |       |                  |       |                  |       |                  |       |
|                                                                            |       |                  |       |                  |       |                  |       |
| CASH  FLOWS FROM FINANCING ACTIVITIES                                           |       |                  |       |                  |       |                  |       |
| Proceeds  from loans payable—stockholders                                  |       |                  |       |                  |       |                  |       |
| Repayment  of loans payable — stockholders                                 |       |                  |       | —                |       | —                |       |
| Proceeds  from loans payable — related parties                             |       |                  |       |                  |       |                  |       |
| Repayment  of loans payable — related parties                              |       |                  |       |                  |       |                  |       |
| Proceeds  from convertible notes                                                |       |                  |       | 511,000               |       | 832,500               |       |
| Proceeds  from sale of common stock                                             |       | 1,036,000             |       |                  |       |                  |       |
| Proceeds  from stock subscriptions receivable                                   |       | —                |       | —                |       | —                |       |
| Net  cash provided by financing activities                                      |       | 1,036,000             |       | 511,000               |       | 832,500               |       |
| Net  loss during Development Stage Enterprise                                   |       |                  |       |                  |       |                  |       |
| Net  change in cash                                                             |       |                  |       | —                |       | —                |       |
| Cash  — beginning of year                                                  |       | $                     | 2,391      |                  | $          | 1,232                 |       | $ | 49,995 |   |
| Cash  — end of year                                                        |       | $                     | 123,633    |                  | $          | 2,391                 |       | $ | 1,232 |   |
| Supplemental  disclosure of non-cash activities:                                |       |                  |       |                  |       |                  |       |
| Common  stock issued for patent costs                                           |       | $                     | 0          |                  | $          | 0                     |       | $ | 0 |   |
| Exchange  of loans payable for convertible notes payable                        |       | $                     | —     |                  | $          | —                |       | $ | — |   |
| Conversion  of notes payable to common stock                                    |       | $                     |       |                  | $          | 312,801               |       | $ | 987,500 |   |
| Cancellation  of stock subscriptions receivable                                 |       | $                     | —     |                  | $          | —                |       | $ | — |   |
| Common  stock issued for subscriptions receivable                               |       | $                     | —     |                  | $          | —                |       | $ | — |   |

 

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

 

***Remainder of page intentionally left blank***

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS**

**OFCHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)**

 
| ** **                                                                   | ** ** | **COMMON STOCK** | ** ** | **ADDITIONAL** | ** ** | **STOCK**            | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|----------------------|------------|
| ** **                                                                   | ** ** | **SHARES**            | ** ** | **PAR  VALUE** | ** ** | **PAID-IN  CAPITAL** | ** ** | **SUBSCRIPTIONS  RECEIVABLE** | ** ** |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Balances December 31, 2007                                              |       | 327,741,562           |       | 3,277,415      |       | $                    | 31,137,730 |   |   |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Common stock issued for services                                             |       | 52,355,522            |       | 523,565        |       | 0                    |       |   |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Sale of common stock                                                         |       | 54,500,000            |       | 545,000        |       | (34,000              | )          |   |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Balances December 31, 2008                                              |       | 434,597,086           |       | 4,345,970      |       | $                    | 31,103,730 |   | 0 |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Common stock issued for services                                             |       | 23,452,500            |       | 231,525        |       | 1,166,778            |       |   |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Common stock issued in connection with Stock  Purchase and Option Agreements |       | 129,642,000           |       | 1,296,420      |       | (260,420             | )          |   |   |
|                                                                         |       |                  |       |           |       |                 |       |   |   |
| Balances December 31, 2009                                              |       | 587,691,586           |       | 5,876,915      |       | 32,010,088           |       |   |   |

 

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

 

***Remainder of page intentionally left blank***

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

NOTE 1 — THE COMPANY AND NATURE OF BUSINESS

 

Kenilworth Systems Corporation(the “Company”) was incorporated in New York in April 1968 and completedan S-1 Registration in August 1968.  The Company is currently engagedin the development and eventual by outsourcing the manufacture the terminalsthat will permit individuals to play along with live in-progress casino tablegames at locations inside and outside the casino confines (remotelocations).  Games will be available via TV simulcast of digital satelliteand digital cable broadcasts to individuals at homes, offices and publicgathering places and wherever television sets are located around theworld.  The Company’s business remains in continuous development stagealthough it completed a nine million dollar ($9,000,000) contract with theTotalizator Agency Board (“TAB”), a state government agency of Victoria,Australia, while being in voluntary bankruptcy reorganization under Chapter 11,of the United States Bankruptcy Code. Successful execution of its business planis dependent up such factors as: the ability to raise substantial capital andassemble a skilled and experienced management team, obtaining regulatoryapproval from gaming authorities and other governmental bodies, customeracceptance of a new experience in casino gaming, and technological feasibility.

 

These challenges createuncertainty as to the Company’s ability to operate as a going concern and couldresult in the termination of its business.  Management continues todevelop a wagering system that allows casino patrons and individuals inside andoutside the casino to play and wager 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 will attempt to obtain the necessary funding by offeringits Common Stock or Preferred Stock to private investors**.**

 

If initial testing issuccessful, the second step is to obtain, if required, the appropriate licensesfrom gaming control regulators in the various venues the Company intends tooffer its system. Upon successful testing, the Company intends to seekfinancing from banking sources for the manufacture of a microprocessor thatwill be installed in digital set top boxes, digital cable boxes, or asattachments to TVs when necessary.  These appliances will then be able toconvert an ordinary television set into a computer terminal using the TV set asthe monitor for remote casino game play and wagering. This technology isprotected by the Company’s recently issued patents (see Note 6).

 

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

 

NOTE2 — SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

 

Principles ofconsolidation

 

The consolidatedfinancial statements include the accounts of Kenilworth Systems Corporation andits wholly owned subsidiaries: Video Wagering Systems Corporation, RoulabetteTMNevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth U.K.Ltd., Kenilworth Satellite Broadcasting Corporation and Satellite GamingConsultants, Inc., both Delaware Corporations. None of the subsidiarieshas any significant assets or liabilities except Satellite Gaming Consultantswhich acts primarily as depository and disburses payments of expenses payableby Kenilworth.

 

Use of estimates

 

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

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

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

 

Cash and cash equivalents

 

The Company considers allhighly liquid debt instruments with an original maturity of three months orless when purchased to be cash equivalents.  There were cash equivalentsat December 31, 2008 and 2007.

 

Property and equipment

 

Property and equipmentare stated at cost.  Equipment is depreciated over the estimated usefullives of the respective assets, ranging from five to seven (5-7) years. Leasehold improvements are amortized over the shorter of either the asset’suseful life or the related lease term.  Depreciation is computed on thestraight-line method for financial reporting purposes.

 

Impairment of long-livedAssets

 

The Company regularlyreviews long-lived assets for indicators of impairment.  Management’sjudgments regarding the existence of impairment indicators are based onperformance.  Future events could cause management to conclude thatimpairment indicators exist and that the value of long-lived assets isimpaired.  When events or circumstances indicate that the carrying amountof an asset may not be recoverable, the fair value of the asset is compared toits carrying value.  Impairment losses are measured as the amount by whichthe carrying value of an asset exceeds its estimated fair value.

 

Advertising costs

 

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

 

Income taxes

 

Income taxes areaccounted for under the asset and liability method specified by SFAS No. 109,“Accounting for Income Taxes.”  Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities,and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the year in which those temporarydifferences are expected to be recovered or settled.

 

Fair value of financialinstruments

 

Financial instrumentsreported in the balance sheet consist of accounts payable and loans payable,the carrying value of which approximated fair value at December 31, 2008and 2007.  The fair value of the financial instruments disclosed are notnecessarily representative of the amount that could be realized or settled nordoes the fair value amount consider the tax consequences of realization orsettlement.

 

Stock-based compensation

 

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

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

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

 

Loss per share

 

Basic loss per share iscalculated by dividing net loss by the weighted-average number of common sharesoutstanding during the period. Diluted loss per share is calculated by dividingnet loss by the weighted-average number of common shares outstanding, plus theweighted average number of net shares that would be issued upon the exercise orconversion of dilutive securities, such as stock options and warrants, andconvertible debt.  There were no dilutive securities outstanding as of December 31,2009, 2008 and 2007.  Accordingly, diluted loss per share for 2009, 2008and 2007 is the same as basic loss per share.

 

New AuthoritativeAccounting Pronouncements

 

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

 

NOTE 3 — BANKRUPTCY PROCEEDINGS

 

Throughout the 1980’s theCompany experienced working capital shortages that resulted in the Companyfiling a voluntary petition for reorganization under Chapter 11 of the UnitedStates bankruptcy Code. From August 28, 1982 to June 7, 1985 theCompany operated during reorganization proceedings. On June 7, 1985, aUnited States Bankruptcy Judge confirmed the Company’s Plan of Reorganization. OnApril 27, 1988, the Bankruptcy Court entered a final decree in the case.On October 27, 1988, the case was re-opened on grounds the Debtor failedto consummate its plan of reorganization and on February 25, 1991 the casewas converted to a case under Chapter 7 of the Bankruptcy Code. By order of theCourt dated June 19, 1991 the Chapter 7 was reconverted to a case underChapter 11 of the Bankruptcy Code. A second plan of reorganization was approvedand a second order of confirmation was entered in connection with the Chapter11 case on October 2, 1991. However, the Debtor was unable to consummateits second plan of reorganization, and by order dated November 25, 1991,the case was reconverted to a case under Chapter 7 of the Bankruptcy Code.

 

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

 

NOTE 4 — PREPAID EXPENSES

 

Prepaid expenses consistof the unamortized value of stock issued to directors for the twelve-monthservice period ending September 30, 2009.  The balance will beamortized on a straight-line basis over the remaining term.  The Company issued one million (1,000,000)restricted Common Shares to the members of the Board of Directors: Joyce Clark,Kit Wong, Patrick Mc Devitt, and Edward Vietmeier for the one (1) yearperiod ended December 31, 2010.  TheDirectors receive no other compensation for their services.  The Company **does not**provide for Director’s Liability Insurance.

 

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

 

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

 

NOTE 5 — PROPERTY AND EQUIPMENT

 

Property and equipmentconsist of the following:

 
| ** **                          | ** ** | **2009** | ** ** | **2008** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
|                                |       |     |       |     |       |
| Office  equipment                   |       | $        | 20,790     |     | $          | 19,800 |   |
| Leasehold  improvements             |       | 21,000   |       | 21,000   |       |
| Furniture  and fixtures, automobile |       | 35,620   |       | 35,620   |       |
|                                |       |     |       |     |       |
|                                |       | 77,410   |       | 76,420   |       |
| Less:  Accumulated amortization     |       | 76,254   |       | 75,817   |       |
| Total  property and equipment, net  |       | $        | 1,156      |     | $          | 603 |   |

 

NOTE 6 — PATENT

 

The Company owns a patentand has pending, three (3) additional patents for technology that willenable it to provide real-time transmission of roulette and other game playfrom live tables at a casino facility.  Prior to December 31, 2006,the costs incurred in connection with the submission and approval of the patentapplications has been capitalized.  A U.S. patent was awarded in June 2003. The Company previously amortized patent costs.  On December 31, 2006,the Company elected to write-off all patent costs to meet generally acceptedaccounting principles (GAAP).  The $81,604 of accrued costs was chargedagainst capital.

 

NOTE 7 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 
| ** **                                                     | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                           |       |     |       |     |       |
| Legal  and other professional fees, including accrued payables |       | $        | 0          |     | $          | 38,298 |   |
| Payroll  Taxes (approximately, including penalties)            |       | 18,108   |       | 169,695  |       |
| Other                                                          |       | 0        |       | 110,495  |       |
|                                                           |       |     |       |     |       |
|                                                           |       | $        | 18,108     |     | $          | 318,488 |   |

 

The Company is payingdelinquent taxes in monthly installments while paying present taxes current.

 

NOTE 8 — LOANS PAYABLE

 

2008:

 

During the year, theCompany borrowed from two (2) shareholders, $10,000 each with annualinterest payments of twelve percent (12%).  Each loan was converted intoStock Purchase and Option Agreements totaling 1,337,500 shares and an option toacquire an additional 1,337,500 shares at $0.0096 per share for a period of two(2) years.

 

During the year 2005, theCompany borrowed from a private Shareholder fifty thousand dollars ($50,000)which now has a balance due including accrued interest at eight percent (8%)annually at December 31, 2009 $25,101.  As part of the number ofextension of the loan, the Company issued during 2008, one million (1,000,000)shares if its Common Stock to the lender.

 

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NOTE 9 — CONVERTIBLE PROMISSORY NOTES

 

During 2008, 2007 and2006, respectively, the Company sold to various private investors $511,000,$832,500, $765,400 principal amount of Convertible Promissory Notes bearinginterest at rates ranging from 4.00% to 10.00% per annum and Stock Purchase andOption Agreements.  The Notes had a one (1) year term and wereimmediately convertible at the option of the note holder into shares of restrictedcommon stock based on conversion prices ranging from $0.025 and $0.05 pershare.  All Notes and shares sold in 2008, 2007 and 2006 were convertedinto a total of 54,500,002, 49,733,259 and 20,356,000 common shares,respectively.  The issuance of the Notes gave rise to a beneficialconversion feature (BCF) in the amount of: none in 2006, $368,640 in 2005 and$188,191 in 2004, reflecting the benefit of conversion prices that were belowthe market price of the Company’s common stock.  The BCF was charged infull to operations on the respective issuance dates of the Notes with anoffsetting credit to additional paid-in capital.  The Company accounts forBCF under the recognition and measurement principles of Emerging Issues TaskForce (EITF) 98-5, “Accounting for Convertible Securities with BeneficialConversion Features or Contingently Adjustable Conversion Ratios to CertainConvertible Instruments” and EITF-00-27, “Application of EITF Issue 98-5.

 

During 2009, the Companysold to various private investors $1,036,000 principle amount of Stock Purchaseand Option Agreements.

 

NOTE 10 — INCOME TAXES

 

The provision for incometaxes consists of the following:

 
| ** **                  | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------|------------|---------------------------------------------|------------|
| ** **                  | ** ** | **2009**                                    | ** ** | **2008** | ** ** | **2007** | ** ** |
|                        |       |                                        |       |   |   |   |   |
| Current:                    |       |                                        |       |   |   |   |   |
| Federal                     |       | $                                           | —     |   | $ | — |   | $ | — |   |
| State                       |       | —                                      |       | — |   | — |   |
|                        |       | —                                      |       | — |   | — |   |
|                        |       |                                        |       |   |   |   |   |
| Deferred:                   |       |                                        |       |   |   |   |   |
| Federal                     |       | —                                      |       | — |   | — |   |
| State                       |       | —                                      |       | — |   | — |   |
|                        |       | —                                      |       | — |   | — |   |
|                        |       |                                        |       |   |   |   |   |
| Provision  for income taxes |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

The Company did not haveany revenue from operations since exiting Bankruptcy Proceedings in September 1998.

 

The effective income taxrate differed from the U. S. federal statutory rate as follows:

 
| ** **                                    | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | **2009**                                    | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                          |       |                                        |       |   |   |   |   |
| Federal  income tax benefit at statutory rate |       | $                                           | N/A        |   | $ | N/A |   | $ | N/A |   |
| State  income taxes, net of federal benefit   |       | N/A                                         |       | N/A |   | N/A |   |
| Increase  in valuation allowance              |       | N/A                                         |       | N/A |   | N/A |   |
|                                          |       |                                        |       |   |   |   |   |
|                                          |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

The Company did not haveany income.

 

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The difference betweenthe U. S. federal tax rate and the Company’s effective tax rate in 2009, 2008and 2007 is due primarily to changes in the valuation allowance related to thenet deferred tax asset, offset by certain nondeductible expenses.

 

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

 

Deferred tax assets:

 
| ** **                 | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |
| Net  operating losses      |       | $        | 2,330,162  |     | $          | 1,074,193 |   |
| Less:  Valuation allowance |       | —   |       | —   |       |
|                       |       |     |       |     |       |
| Net  deferred tax assets   |       | $        | 2,330,162  |     | $          | 1,074,193 |   |

 

The benefits of netoperating losses will not be recognized until management determines thatrealization is more likely than not to occur.  Accordingly, management hasestablished a valuation allowance to offset the tax benefits of net operatinglosses for all periods presented.  At December 31, 2008, the Companyhad net operating loss carry-forwards of $34,912,625 expiring through 2024 andapproximately $12,000,000 equipment loss when the Bankruptcy Trustee closed theonly leased manufacturing facility of the Company and the equipment wasdestroyed by the landlord. Utilization of NOL carry-forwards may be limitedunder various sections of the Internal Revenue Code depending on the nature ofthe Company’s operations.

 

NOTE 11 — COMMITMENT

 

Operating lease

 

The Company rentsapproximately 2,700 square feet of office space in Mineola, NY under a leaseexpiring in May 2015.  Annual rent is approximately $45,600, payablemonthly.  The lease also requires the Company to pay its share ofincreases in real estate taxes, operating costs and repairs over the base yearamounts.  Following is a schedule of minimum lease payments requiredunder the lease.

 
| **Year ending May 2015** |   |   |    |
|-----------------------------------------|--------|--------|---------|
|                                    |   |   |    |
| 2010                                    |   | $      | 45,600  |   |
| 2011                                    |   | 45,600 |    |
| 2012                                    |   | 45,600 |    |
| 2013                                    |   | 45,600 |    |
| 2014                                    |   | 45,600 |    |
| Total                                   |   | $      | 228,000 |   |

 

NOTE 12 — RELATED PARTY TRANSACTIONS

 

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

 

As provided in the Plan,Herbert Lindo borrowed the seven hundred fifty thousand ($750,000) from theCompany and pledged the five million (5,000,000) and other shares he owns, as collateralfor the loan.  The five million (5,000,000) share have been issued asrestricted shares.

 

At a regular meeting ofthe Board of Directors in July 2008, the Board unanimously approved (with Mr. Lindoabstaining) to extend the $750,000 loan until December 31, 2009, provided Mr. Lindopays a 

 

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nominal one and one-half(11⁄2%) interest from November 2006.  Mr. Lindo agreed to pay theinterest which totaled $25,725 thorough December 31, 2009.  Mr. Lindoprovides his services to the Company without any remuneration.

 

NOTE 13 — STOCKHOLDERS’ DEFICIT

 

Authorized shares

 

The Company is authorizedto issue up to 1,000,000,000 shares of Common Stock and up to 50,000,000 sharesof Preferred Stock.  Both classes have a par value of $.01 pershare.  The rights and preferences of the preferred shares will bedesignated by the Board of Directors.

 

Sales of unregisteredcommon stock

 

In fiscal 2009, theCompany obtained $1,036,000 from the sale of 129,642,000 shares of common stockto a group of accredited private investors at an average price of $0.007 pershare.

 

Loan receivable

 

At December 31, 2009the Company was owed $58,600 on loans to consultants, including accruedinterest.

 

Common shares issued forservices

 

2009: The Company issued11,500,000 restricted shares to consultants for services rendered or to berendered with a stated value of $345,000.

 

2008: The Company issued18,525,001 restricted shares to consultants for services rendered or to berendered with a stated value of $370,500.

 

2007: The Company issued10,240,000 restricted shares to consultants and for services rendered with astated value of $307,200.

 

Conversion of Notes,Stock Purchase and Option Agreements and related transactions

 

During 2009, 2008 and2007, the Company issued 129,642,000, 54,500,002 and 49,733,259 shares,respectively, upon sales of the Convertible Notes and Stock Purchase and OptionAgreements.

 

Equity plan

 

In December 2000,the Company adopted a stockholders approved the Performance and EquityIncentive Plan (the Plan).  The Plan expired on November 28,2006.  The present members of the Board of Directors of the Company haveindicated that until the Company has substantial earnings to refrain fromasking the Company’s Shareholder’s to approve a new Plan.

 

Note 14 - EXCLUSIVE SOFTWARE DEVELOPMENTAGREEMENT

 

The Company is obligatedto make a lump sum payment of $3,500,000 to three (3) members of asoftware team hereinafter described as the Blyth Development Group (“Blyth”)that has operated a **Studio Casino**locatedin the Republic of Costa Rica.  Thestudio provided casino games in real time with real dealers.  Dealers can chat with dealers via text chatand dealers can “chat back” using real time streaming audio.

 

Blyth developed theStudio Casino from the ground up over a period of three (3) years tocompletion.

 

Blyth engaged promoterslocated in the various European countries to provide the Blyth Casino action tomarket the games.

 

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Kenilworth engaged Blythto exclusively design the live, in-progress Roulette game the Company has beenstreaming, via the Internet, to all industrial countries in whichKenilworth  has patent protection.

 

The exclusiveness andnon-disclosure portion of the developed technology required Blyth todiscontinue their operation in Costa Rica. The contract is for a period of five (5) years expiring in2013.  The $3,500,000 is payable at theend of the contract period together with all accrued interest at four percent(4%) per annum starting December 31, 2010 or sooner in the event theCompany receives a lump sum payment in **excess** of$10,000,000.00.

 

NOTE 15 — SUBSEQUENT EVENTS

 

The Company, through February 5,2010 has issued 12,860,000 shares by the sale of Stock Purchase and OptionAgreements for $102,900, an average price of $0.008 per share.

 

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

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

 

 

Pursuant to therequirements of Securities Exchange Act of 1934, this report has been signedbelow by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

 
| **NAME**                 | ** ** | **TITLE** | ** ** | **DATE**            | ** ** |
|--------------------------|------------|-----------|------------|---------------------|------------|
|                     |       |      |       |                |       |
| /s/  HERBERT LINDO       |       | Director  |       | March 12, 2010 |       |
| Herbert  Lindo           |       |      |       |                |       |
|                     |       |      |       |                |       |
| /s/  JOYCE CLARK         |       | Director  |       | March 12, 2010 |       |
| Joyce  Clark             |       |      |       |                |       |
|                     |       |      |       |                |       |
| /s/  KIT WONG            |       | Director  |       | March 12, 2010 |       |
| Kit  Wong                |       |      |       |                |       |
|                     |       |      |       |                |       |
| /s/  PATRICK J. MCDEVITT |       | Director  |       | March 12, 2010 |       |
| Patrick  J. McDevitt     |       |      |       |                |       |
|                     |       |      |       |                |       |
| /s/  EDWARD VIETMEIER    |       | Director  |       | March 12, 2010 |       |
| Edward  Vietmeier        |       |      |       |                |       |

 

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