**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.20549**

** **

**FORM 10-K**

** **

**(MarkOne)**

 

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

 

| **KENILWORTH  SYSTEMS CORPORATION**                       |
|-----------------------------------------------------------|
| (Exact name of registrant as specified in its charter)    |
|                                                      |   |   |
| **NEW YORK**                                              |   | **13-2610105** |
| (State of Incorporation)                                  |   | (I.R.S. employer identification no.) |
|                                                      |   |   |
| **185 WILLIS AVENUE, MINEOLA, NEW YORK**                  |   | **11501** |
| (Address of principal executive offices)                  |   | (Zip Code) |
|                                                      |   |   |
| **(516) 741-1352**                                        |
| (Registrant’s telephone number, including area code) |

 

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

 

Indicate by check mark whetherthe Registrant (1) has filed all reports required to be filed by section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. Yes ýNo o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section229.405 of this chapter) is not contained herein, and will not be contained, tothe best of the registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. o

 

Indicate by check mark whetherthe Registrant has filed all documents and reports required to be filed bySection 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent tothe distribution of securities under a plan confirmed by court. Yes ýNo o

 

The number of shares outstandingof the company’s common stock as of December 31, 2002 totaled 89,304,589shares.

 

The aggregate market value ofthe voting stock held by non-affiliates (73,571,589 shares) of the Company onMarch 22, 2003 was $13,242,886. The price at which the common stock sold on theaforesaid date was $0.18.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Part III which includes Item 10(Directors and Executive Officers of the Registrant), Item 11 (ExecutiveCompensation), Item 12 (Security Ownership of Certain Beneficial Owners andManagement) and Item 13 (Certain Relationships and Related Transactions) willbe incorporated in the registrant’s proxy statement to be filed within onehundred twenty (120) days of December 31, 2002, and are incorporated herein byreference thereto.

 

In addition to historicalinformation, This Annual Report on Form 10-K contains certain forward-lookingstatements and Risk Factors. We expressly disclaim any obligations onundertaking to release publicly any updates or revisions to any forward-lookingstatements contained herein to reflect any change in our expectations withregard thereto or to reflect any change in events, conditions or circumstanceson which any such forward-looking statement is based in whole or in part.Readers should amongst the other statements contained herein and future filingswith the Securities and Exchange Commission, including the Quarterly Reports onForm 10-Q to be filed, carefully review in Item 7 “Cautionary Statements forPurposes of the “Safe Harbor” Provisions of the Private Securities LitigationReform Act of 1995 and Risk Factors”. All of the Risk Factors contained thereinshould be carefully read.

 

 

----

 

PART I

 

ITEM1—DESCRIPTION OF BUSINESS

 

THE COMPANY

 

Kenilworth Systems Corporationhereinafter referred to as “Kenilworth” or “we” was incorporated on April 25,1968 under the laws of the State of New York.

 

PLANNED BUSINESS

 

Our present plans are todevelop a wagering system that would allow patrons all over the industrializedworld to play and wager on live casino table games on terminals called“Roulabette”Ô placed in hotels,resorts, bars and other public gathering places and in homes and offices onpersonal computers (PC’s) or television sets connected to set top boxes forInteractive TV via digital satellite broadcasts emanating from strictlyregulated U.S. casinos.

 

On March 28, 2002, the Companyentered into a contract with Archon Corporation for a thirty (30) day test tosimulcast live in-progress roulette table game action that eventually couldallow players worldwide to wager along with table players at Archon’s PioneerCasino in Laughlin, Nevada. The test, a world first, was to demonstrate to theNevada Gaming Control Board, and other U.S. and foreign Gaming Regulators thathave regulated gaming forums, such as lotteries, racing, OTB, etc., thebenefits of the Kenilworth “Play Along with Nevada Live” concept.

 

The Nevada Gaming Authoritiesmust approve any contracts between Kenilworth, a casino operator and thesimulcast test proposal before any test can take place.

 

The proposed live test wascancelled by mutual consent.  It wasdetermined that the proposed simulcasts of live in-progress casino table games,had first to be approved by the Nevada State Legislature in the form of alegislative bill, permitting the “Live Game Broadcasts” from Nevada.

 

The Nevada State Legislaturemeets for four months once every two years. The current session began on February 3, 2003.   We have retained lobbyists and legislative advisors to introducelegislation that, if approved, will establish the regulatory framework forworldwide simulcasts, via digital satellite transmission of live, in-progress,casino table game play.

 

If the proposed legislativebill is passed and signed by the State of Nevada’s governor, Kenilworth willinitially broadcast Roulette, Craps and Baccarat games to jurisdictions aroundthe industrialized world.

 

It may be that in order for hotels not to be required to obtain casinolicenses in their jurisdictions to offer “Roulabette”Ô, they may have to limit thewagering to minimal amounts, so as to qualify the games as entertainment forregistered hotel guests.  Resort gamingwill establish a trend for the entire hotel industry worldwide.

 

In the event a substantial amount is won by a player, Kenilworth willmake payment to the winner, via money wire transfer to the establishment withintwenty-four (24) hours.  Kenilworth willestablish a worldwide cage for winning payments; or, a guarantee of payment bya well-recognized international bank.

 

When playing along with livetable games from a highly regulated jurisdiction, players are assured that thegame results are exactly what they see; and, playing along with casino tablegames such as

 

2

----

 

roulette, craps and baccaratprovides interaction, fun and far more excitement than playing make believeanimated (virtual) games. It is the next best thing to actually being at thetable.

 

During a proposed thirty (30)day test, live table game play will only be simulcast within the state ofNevada, and wagering will only be allowed at the actual roulette table. Playersaround the world may eventually “Play Along with Nevada Live” via severaldifferent wagering methods, including INTERACTIVE TV services like by satellitebroadcast providers. Satellite broadcasters in the U.S., Europe, and Asia wouldbe subject to regulatory requirements in the various jurisdictions in which thebroadcasts are directed.

 

To conduct the initialbroadcast Kenilworth believes it will require five million dollars($5,000,000). At present, the Company does not have the funds available butexpects to obtain same, from investors, as soon as the legislation is passed,the test is approved by the Nevada Gaming Regulatory Authorities, and is poisedto commence.

 

In prior years, Kenilworthcompleted a prototype system that allowed casino patrons to play along withlive in-progress casino table games only within the confines of a casino, viaclosed circuit television. Also in 1990, we developed and delivered for the TABin Australia, a cashless slot machine system. Both systems required debit cardsand central mainframe computers to manage the wagers. By making use of theexpertise applied in the development of the aforementioned systems we plan todevelop a second-generation terminal that will manage the wagers. This asplanned would allow a player in an interactive manner, at a remote location(outside the casino confines), to experience the actual play and excitement atthe casino table game and to make wagers on the various games, without havingto be physically present at the casino or casino table.

 

The proposed terminal dubbed“Roulabette”Ô consists of apersonal computer (PC) with two (2) monitors. One monitor displays the live in-progress casino table game play as wellas advertising.  The second, which isoutfitted with a touch screen, allows a player to place wagers directly overthe games displayed on the first monitor. It also has a variable denomination bill acceptor and a bar code ticketdispenser.  Both monitors are housed inan attractive enclosure. The RoulabetteÔterminal is the size of a typical “low boy” slot machine (desk topheight).  Each terminal isself-sufficient, manages wagers from $0.25 to $100.00 or the equivalent in mostany currency, and receives the table game play via simulcast satellite TVtransmissions (with dish antennas) or local cable connection.

 

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. The RoulabetteÔterminal is expected to offer an alternative to slot machine players. There arenow believed to be more than ten (10) million slot machines played throughoutthe world.

 

Kenilworth will seek to promoteto state lotteries, and other state regulated entities, the ability to operatewebsites that will manage the wagers. The program will ask state legislaturesto amend their lottery horse/dog racing and OTB legislation to includeRoulabetteÔ

 

3

----

 

wagering or promulgate newlegislation. There are no assurances that the necessary approvals will begranted.

 

There are powerful argumentsfor state legislatures to amend their Lottery Acts to include “Play Along withNevada Live”. Lottery revenue is gradually decreasing in every state.Thirty-eight (38) states and the District of Columbia are pooling their lotteryprizes with the “Power Ball” and “Big Game” national lotteries. In most ofthese states, the state lottery finds it difficult to obtain sufficient numbersof players to make up a minimum weekly lottery prize of one million dollars($1,000,000). In most states, the revenue from lottery play benefits education.States need something more attractive to restore revenue. With “Play Along withNevada Live”, there is interaction, excitement and fun. All at much better oddsthan may be offered by the lotteries. The lotteries can establish maximumwagers daily, weekly and monthly limits, and monitor compulsive gamblers.

 

Once play along in homes andother public gathering places has started, we intend to introduce casino gamessuch as “limited tournament play”. For twenty-five dollars ($25.00), playerscan sign up with their respective website operators and make up to thirty (30)wagers on any table game. The individual that wins the most money during aspecific tournament game period may win as much as a million dollars($1,000,000) in addition to their game play win. As more interactive play alongwith casino games develops, the prizes can be increased and multiplied. Thelimited tournament play games can be scheduled more than once a day, duringspecific hours of the day, on specific days or nights of the week or once ortwice a month. Actual live experience will determine scheduling.

 

NATURE OF PLANNED BUSINESS

 

The gaming industry iscomprised primarily of five (5) service industries: (1) traditional pari-mutuelwagering on horse and dog racing; (2) casino, Indian Reservations, and riverboatgambling; (3) lotteries; (4) charitable organization gambling (Bingo and LasVegas Nights); and (5) Sports book.

 

Kenilworth intends to operateprimarily in the casino segment.

 

KENILWORTH MANIFEST

 

(The Manifest contains forward-looking statements)

 

Casino gambling throughout the world, in every form, is on theincrease.  Most jurisdictions need therevenue from gambling to balance their budgets or increase their taxcollection.

 

Kenilworth Systems Corporationcan provide simulcast gaming worldwide, giving everyone the opportunity ofplaying a casino table game as if they were on the floor of a major casino inLas Vegas, Nevada.  This projectprovides all of the benefits and actual excitement of playing in a casino,without the need of the bricks and mortar.  Gaming enthusiasts will welcome the chance to place wagers on livein-progress casino table games, whether they are at a local tavern, hotel,resort, racetrack or other public gathering place, or at home.  Kenilworth is

 

4

----

 

leading the industry in thisarea, and its technology allows all of this to happen.

 

Our system has the potential toreplace the existing two thousand (2,000) foreign virtual gambling websites nowin play, which garnished more than three (3) billion dollars from U.S. citizensin 2001 without paying any U.S. taxes.

 

The Nevada State Legislaturemeets for four months once every two years. The current session began on February 3, 2003.   We have retained lobbyists and legislative advisors to introducelegislation that, if approved, will establish the regulatory framework forworldwide simulcasts, via digital satellite transmission of live, in-progress,casino table game play.

 

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

 

Franchising of the simulcast will allow broadcasts to jurisdictionsthat have approved gaming regulations, except in Nevada where the broadcastswill be “blacked out”.

 

Kenilworth will offer a percentage of its worldwide net winnings to theState of Nevada, other jurisdictions (states), and the appropriate sponsoringNevada casinos.

 

All franchisees will be required to make the broadcasts available tosatellite dish and cable subscribers in their jurisdictions.   Kenilworth, as part of its marketing plan,will supply the appropriate TV, cable, and interactive equipment (for bettingterminals) to the franchisee.

 

The Nevada Regulatory Authorities will monitor all franchisees of theKenilworth System.  A violation of theNevada regulations by a franchisee will result in a termination of thefranchise.

 

Kenilworth plans to broadcast the simulcast in rotation from five majorLas Vegas casinos, so that there will be a casino available on every day.  Kenilworth will install in eachparticipating casino a communication room, which will be manned by licensedemployees who will be paid by Kenilworth for their services.  The casino broadcast will be permanentlylinked to the Nevada satellite uplink site (RCN), and sent by satellite to thedownlink/uplink international satellite site in Maryland, for distribution tothe satellite footprints around the world. The Maryland uplink site is operated by a consortium of satelliteproviders covering ninety percent (90%) of the industrialized world.

 

For “Play Along With Las Vegas, Live” a franchisee will be required toprovide the at home player with the ability to deposit funds into theirpre-paid gambling accounts anytime, and on the spur of the moment.

 

We will provide Licensed Betting Offices  (bookmakers) in Europe, and OTB offices in the U.S., to managethe wagering accounts for at home players. They will be able to accept last minute deposits.  In jurisdictions, which have lotteryterminals in place, arrangements will be made with the lottery to accept instantdeposits and pay winners, using the lottery terminals as the managing device.

 

5

----

 

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

 

Betting offices and lottery terminal providers will either share in thenet win managed by each, or be paid a fixed commission for the amountdeposited.

 

Where authorized, hotels, resorts, clubs, pubs, racetracks and otherpublic gathering places (the “site”) will be able to offer casino table gameaction in their establishments without incurring casino operating costs.  At our expense, we will place RoulabetteÔ terminals and/or advanced PDA’s atthe site, enabling wagering via the site’s television set.

 

A RoulabetteÔterminal consists of a personal computer (PC) with two (2) monitors.  One monitor displays the live in-progresscasino table game play as well as advertising. The second, which is outfitted with a touch screen, allows a player toplace wagers directly over the games displayed on the first monitor.  It also has a variable denomination billacceptor and a bar code ticket dispenser. Both monitors are housed in an attractive enclosure. The RoulabetteÔ terminal is the size of a typical“low boy” slot machine (desk top height). Each terminal is self-sufficient, manages wagers from $0.25 to $100.00or the equivalent in most any currency, and receives the table game play viasimulcast satellite TV transmissions (with dish antennas) or local cableconnection.

 

It may be that in order for hotels not to be required to obtain casinolicenses to offer “Roulabette”Ô,they may have to limit the wagering to minimal amounts, so as to qualify thegames as entertainment for registered hotel guests.  Resort gaming will establish a trend for the entire hotelindustry.

 

In the event a substantial amount is won by a player, Kenilworth willmake payment to the winner, via money wire transfer to the establishment withintwenty-four (24) hours.  Kenilworth willestablish a worldwide cage for winning payments; or, a guarantee of payment bya well-recognized international bank.

 

In August 2002, the AttorneyGeneral of the United States (John Ashcroft) informed the Nevada Gaming ControlBoard (Chairman and Commissioner Dennis Neilander, Esq.) that Internet wageringinformation is in violation of the 1961 Wire Act and, therefore, cannot bepermitted in the United States or transmitted from the United States to othercountries in the world.  Previously, theNevada State Legislature had approved Internet gambling (February 2001) subjectto the approval by the U.S. Attorney General’s office.  Nevada is the only state that approvedInternet gambling.  Most states haveoutlawed Internet gambling. Others have taken no action.  Our system will replace the present Internetsites, thus eliminating the need and cost of enforcing the Internet ban.

 

Our proposed simulcast, viadigital satellites, does not use a wire transmission and communicationfacility.  A recent Louisiana decision(lower court) ruled that the Wire Act does not apply to broadcasts.  We

 

6

----

 

are not within the constraintsof the Internet gambling interdiction. Our broadcast is similar to horseracing and sporting events, where thesimulcast is transmitted via satellites to the various satellite dish subscribers,and then downloaded to cable companies. Licensed Betting Offices, OTB offices and racetracks that offer out ofstate horse racing will pick up the satellite broadcasts with their own dishantennas, or in overseas locations via the Internet.  Wire transmission within state boundaries does not violate theFederal 1961 Wire Act.

 

Last September, the House of Representatives voted and passed theInternet Gambling Enforcement Act, which bans credit and debit cards, checks,“Western Union type” wire transmission and all other means of transferringmoney for use in connection with Internet Wagering. Since the Senate did notapprove a companion Bill by the end of the year, the House and Senate must passthe legislation again in 2003.  Thereappears to be an anti-Internet gambling sentiment in Congress and passage byboth houses appears certain.  Our methodis distinct, as players using our system, unlike the Internet, will be subjectto state casino regulations and will not be permitted to use credit or debitcards.

 

In our worldwide plans, wagers can be placed with Licensed BettingOffices and lottery terminal operators. They are only permitted to accept cash at their offices or lotteryterminal locations.  Currently, they areobliged to make sure that no one underage places or collects wagers onhorseracing, sporting events or the lottery. The same will apply when they accept wagers or pay winnings on our livesimulcast broadcasts.  It is simple and100% foolproof.

 

Since gambling for tax revenuein twenty-three (23) states passed overwhelmingly, at the last election (Nov.5, 2002), we will make plans to offer simulcasts of live, in-progress, casinotable game play across the United States. Initially our simulcast will be for entertainment purposes only.

 

The proposed broadcast does not require any sophisticated electronics;only the acceptance by the satellite and cable operators and the approval ofthe Federal Communications Commission. We have been unofficially advised that, for entertainment only (nowagering), our broadcasts will be classified the same as any program now beingbroadcast via the networks.  Forgambling, we will require an FCC license, which we do not believe will bedifficult to obtain (simulcasting of horse racing requires an FCC license).

 

As the Justice Department has prevented the EchoStar and DirecTVmerger, we doubt that we will have any problem in exclusively franchisingeither company.  Initially, they maybroadcast our simulcasts for advertising revenue.  Later, with live games, they will share in the net win, which iswhat we expect to negotiate in Europe and Asia.

 

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

 

 

7

----

 

LOGICAL QUESTIONS:

 

(1.)          Whyaren’t major casinos in Nevada that have substantial resources, and the casinotable games, competing with us?

 

The answer is simple.  They arecasino operators.  If they, even byaccident, have a minor playing along with their broadcasts, or commit any otherviolation, they lose their Nevada and other state Casino licenses.  Establishing a subsidiary for theirtransmissions does not absolve them from the violation.  Kenilworth is not a licensed casinooperator.  Kenilworth holds the U.S.patent and they would have to operate under our license.

 

Further, we plan to broadcast from five (5) strip casinos in rotation,in order that each casino will have the opportunity, on certain days, tobroadcast during prime time.  When wemanage the broadcast in their casino, we will have the same crew in thecommunication room (4 technicians, 24 hours a day, 7 days a week).  For example, on Monday at Caesar’s, Tuesdayat the Venetian, Wednesday at MGM, and so on. If another casino attempts to compete with us, they will violate ourpatent.  They would also have to engagetheir own crews (24 hours a day, 7 days a week), hire the same satelliteprovider for their broadcast to Europe or Asia, and pay a percentage of theirnet win to other franchisees (at least the same percentage of our net win ormore, as we all will compete to have them manage the wagering).

 

The Nevada Casinos fare better in accepting a percentage of our netwin, which they will receive without any operating costs.  They will probably be exempt from Nevadataxes, as we are paying five percent (5%) on their simulcasts to the state (nodouble taxation).

 

Net win is determined before deduction of expenses.  It’s a term used to collect taxes on gamblingrevenue (table drop) before operating expenses.  In Europe, and now in some states in the U.S., this tax amountsto an average of twenty percent (20%), with minimum annual taxes of up to onehundred million dollars.

 

We propose to offer two percent (2%) of our net win to the Nevadaschool system, and another three percent (3%) to the state of Nevada.  On a worldwide basis revenue could reach, inthe not too distant future, in the one hundred billion dollar range.  That could earn Nevada five billion dollarsannually; more than twice their present budget needs.  Law enforcement agencies estimate that Americans wagered $380billion in 2001 on sporting events (mostly illegally).  Our system can be regulated and tested(unlike Internet sites).

 

Presently, Nevada’s schoolsystem spends  $1,200 less, per child,than the average state school system nationwide.  Nevada should welcome our contribution, as it will supplement itseducation budget.

 

(2.)                               Why wouldn’t the U.S. Congress alsoprevent simulcasting of live casino table games, like it has with Internetgambling?

 

The Interstate Horse Racing Actof 1978 permits simulcasts of races via satellite transmission between states,which are then downloaded to cable systems. Horse and sporting club owners are traditional and

 

8

----

 

substantial contributors toHouse and Senate campaigns.  It is bigbusiness that would have to be abolished if our proposed simulcasts areoutlawed.  The probability of its abolitionis remote.

 

(3.)          Whathappens if the Nevada State Legislature does not, or cannot, authorize the livegame broadcasts?

 

We will proceed.  We will introduce our proposed legislation to other states suchas New Jersey, Michigan, New Orleans and Connecticut.

 

(4.)          Whatwill happen if non-casino or casino operators attempt to compete with us?

 

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

 

(5.)          Will there beopposition by Nevada casino operators?

 

The past has proven to theNevada casino industry that as more casinos are built in the United States(there are now seven hundred fifty [750] casinos outside of Nevada), morevisitors come to Nevada. Our worldwide broadcasts will substantially enhancethe overall demand to visit Las Vegas or any other state that permits ourbroadcasts.

 

SUMMARY:

 

(1.)          In order not to endanger the viability of the their local casinos,the Legislature should allow our proposed simulcasts, as there are too manyother prominent and well-regulated casinos in the U.S. from which oursimulcasts can be transmitted around the world.  For example, Atlantic City, N.J., Connecticut, (Foxwood andMohegan Sun, the two most profitable casinos in the world), Detroit, NewOrleans, etc. Most casinos are owned by the very same casino operators we planto solicit in Las Vegas.  Nevada is theleader of the casino industry.  As such,it cannot afford to pass up our new innovation.

 

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

 

(3.)          If Nevada approvesthe simulcasts, it will likely spell the end of most of the existing two (2)thousand Internet Virtual casino websites around the world.  It will be likely that no one will wagerwith a make believe casino game when they know that they can play along with alive game from Las Vegas.

 

The two (2) thousand virtualcasino websites via the Internet obtain sixty percent (60%) of their annualrevenue from customers in the U.S.

9

----

 

Although Internet gambling isoutlawed, it is presently not very well enforced by the U.S. JusticeDepartment.  Much of the opposition inCongress against Internet gambling stems from the fact that the websites are notlegitimate, and may even be used for money laundering.  Further, the websites do not effectivelyprevent minors and underage college students from wagering.  Approximately one hundred (100) entitiescontrol the two (2) thousand websites. When one site experiences losses, it isshut down and another site is created. We expect that a majority of these sites will shut down because of oursimulcasts, thus directly reducing the number of sites, which need to bepoliced.

 

Simulcast broadcasts around the world must meet, and will be supervisedby, the regulations of the Nevada Gaming Authorities and the jurisdiction,which receives the broadcast.  Thesupervision will not be difficult to enforce, because all simulcast wagering is“cash only”, from regulated, supervised betting sites.  There are no wire money transfers with banksand no credit or debit cards permitted. This fact should ease any opposition from Congress, as regulation andenforcement responsibility will be vested in each individual state (orjurisdiction).

 

Kenilworth was the first to use color personal computers (PC’s) toreplace electromechanical slot machines (1988).  We provided the software for the first Tabaret located at theMenzie in Melbourne, Australia, which opened in November 1990.  This consisted of cashless, variabledenomination and multiple game virtual PAT’s (“Player ActivatedTerminals”).   Prior thereto Kenilworthsponsored, with the assistance of three Nevada casino operators, legislation topermit cashless wagering in the state of Nevada.  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 a publicly traded Company since 1968. Prior toentering into the casino arena, it provided security systems to NuclearElectric Generating Plants in the U.S. and foreign countries, as well astime/attendance systems at a major department store chain.

 

MARKETING STRATEGY/SALES PLAN

 

In the United States Kenilworthexpects to refrain from using the Worldwide Web (WWW) Internet to manage wagersfrom individuals outside of the casino confines. Legislators have voiced strongobjections to having their constituents’ gamble one-on-one against computerslocated on Caribbean islands, totally unregulated. In RoulabetteÔ,the play-along broadcast emanates from casinos that are regulated by strict andcomprehensive rules and state regulations, enforced by gaming controlregulators and everybody plays along with the same live table game. There is aworld of difference between playing in a virtual make believe casino comparedwith an actual casino.

 

For the reasons stated,Kenilworth will ask state lotteries, Off-Track Betting (OTB) corporations,pari-mutuel race tracks, and other state and federal regulated agencies tomanage the wagers from individuals playing along on their PC’s and theirtelevision sets using interactive

 

10

----

 

TV set top boxes that convertregular television sets into minicomputers within their state.

 

The individuals would have topre-deposit funds into an account with the wager management company and thenplace wagers with their credit balance. The wagers and running balances will betransmitted to the RoulabetteÔplayer’s PC and/or television sets with telephone lines not crossing any statelines, similar in principle to telephone accounts wagering offered by the NewYork State Off-Track Betting Corporation and the state of Nevada casino sportsbook.

 

After we obtain permission toplay RoulabetteÔ in a given stateand engages a wager management organization in order to promote digitalsatellite and interactive television to the state’s residents, Kenilworth wouldinstall the eighteen (18) inch dish antenna and converter box required toreceive digital TV programming and interactive TV at its own cost, if thesubscriber opens a RoulabetteÔ wagering accountfor two hundred dollars ($200). In addition, Kenilworth would pay the monthlysubscription fees to view all digital TV programming offered and the internetservice provider (ISP) subscription fee if the customer wagers at least onehundred twenty dollars ($120) each month—win, lose, or draw—makes nodifference.

 

In states with approved lotteryand/or other gambling legislation, we plan to introduce RoulabetteÔterminals to hotels, clubs (similar to card clubs in California) and resorts,to provide upscale gathering places for tourists and local residents.Charitable organizations that are permitted to conduct “Nevada Nights” andBingo games may wish to offer RoulabetteÔgaming on a more permanent basis. To receive the broadcast signal, all thatwould be required is an eighteen (18) inch dish TV antenna and distributionequipment. The RoulabetteÔ terminals areintended to be self-sufficient and accept dollar bills (or script, to controlthe amount an individual is allowed to wager in one day or other time period).We plan to lease all the equipment necessary to participants for a share of theprofits.

 

To gain approval for ourRoulabetteÔ-style gambling injurisdictions that have not approved any gambling legislation, Kenilworthproposes to engage lobbyists to introduce, promote, and obtain legislativeapproval to permit RoulabetteÔ-style gambling.Our strategy is to find depressed resort areas an have the resort/hoteloperators convince their local politicians of the benefits to their businessand the local economies and request them to promote legislative approval,either state-wide or limited to their areas. Riverboat gambling started torehabilitate decaying waterfronts. RoulabetteÔcan do the same in depressed economic areas.

 

When the live casino TVbroadcasts are beamed for global viewing, Kenilworth will seek out similarorganizations, as proposed for the United States and betting shops and slotroute operators, that can provide the servicing of individual accounts andplacement of RoulabetteÔterminals in hotels, clubs, pubs, racetracks, etc. In all instances, we plan tooffer only profit sharing arrangements to franchisees, which will requireleasing all the equipment necessary to the franchisee, to discouragecompetition.

 

11

----

 

In overseas installations,wherever permitted, Kenilworth will make use of the WWW Internet to manage thewagers.

 

COMPETITION

 

Many segments of the gamingindustry are characterized by intense competition, with a large number ofcompanies offering the same type of wagering products and services. None of thesecompanies at present are believed to offer the same or similar equipment orsystems as intended by RoulabetteÔ.The most likely competition will come from slot machine manufacturers who couldrelatively quickly adapt slot machines to play along with live casino tablegames. There are three (3) major slot machine manufacturers in the UnitedStates, all of which have vastly greater resources than the Company and mayhave under development systems that directly compete with RoulabetteÔ.

 

We immediately plan only tobroadcast the live casino table games from five (5) companies that own casinos.Other casino owners may start their own broadcasts and have their own terminalsmanufactured that compete with Kenilworth after Kenilworth has done all itspioneering for play-along wagering.

 

PATENTS

 

On February 25, 2003, our U.S.patent for the various aspects of wagering on live in-progress casino tablegames via digital satellite transmission was approved and we have taken thesteps to protect our interests in other areas of the industrialized world.There can be no assurances that foreign patents will be issued and challengeswill not be instituted against the validity or enforceability of our patent.

 

GOVERNMENT REGULATIONS

 

Kenilworth has no licenses fromany casino regulating authorities and may not require any casino licenses atthe present time and may never become able to obtain any licenses that we willrequire in the future. Each state has its own regulations, and in states whereKenilworth does business, Kenilworth will have to comply with theseregulations. The following discussion is not necessarily complete, or currentregarding laws and regulations that may be applicable to us.

 

NEW JERSEY

 

In order to sell its RoulabetteÔwagering systems to casinos in New Jersey, Kenilworth must be licensed by theNew Jersey Casino Control Commission (CCC) in accordance with the New JerseyCasino Control Act as a manufacturer and distributor of gaming equipment. Wewill have to make arrangements to apply for licensing in New Jersey. The NewJersey Commission may require that persons holding in excess of five percent(5%) of the publicly traded equity securities of Kenilworth qualify under theCasino Control Act. Any beneficial holder of the voting securities owned may berequired to file an application, be investigated, and have his qualificationsdetermined if the CCC has reason to believe that such ownership may beinconsistent with the declared policies of the Casino Control Act.

 

12

----

 

NEVADA

 

The manufacture anddistribution of gaming devices in Nevada are subject to the Nevada GamingControl Act (the “Nevada Act”), and to licensing and regulatory control by theState Gaming Control Board and various local, city and county regulatoryagencies (collectively, the “Nevada Gaming Regulators”). The laws, regulationsand supervisory procedures of the Nevada Gaming Regulators are based upondeclarations of public policy which are concerned with, among other things, (i)the character of persons having any direct or indirect involvement with gaming,(ii) application of appropriate accounting practices and procedures, (iii)maintenance of internal fiscal affairs and the safeguarding of assets andrevenues, (iv) record keeping and reporting to the Nevada Gaming Regulators,(v) fair operations of games, and (vi) the raising of revenues through taxationand licensing fees.

 

No publicly traded corporationis eligible to apply for, or hold gaming licenses in Nevada. A publicly tradedcorporation may be registered and found suitable to acquire or to hold aninterest in a corporate subsidiary, which holds such gaming licenses. BeforeKenilworth may do business in Nevada, it will have to register with the NevadaGaming Regulators as a publicly traded holding company and found suitable tohold an interest in a licensed subsidiary. After an investigation is completed,licensing may take approximately ninety (90) days. No proceeds from the publicsale of securities by a registered holding company may be used to acquire,construct, operate, or finance gaming facilities in Nevada or to retire orextend obligations incurred for such purposes unless the public offering ofthose securities has been approved by the Nevada Gaming Regulators.

 

The Nevada Gaming Regulatorsmay require any individual who has a Material relationship with us to beinvestigated and licensed or found suitable. Any person who acquired fivepercent (5%) or more of Kenilworth’s securities must report the acquisition tothe Nevada Gaming Regulators. Any person who becomes a beneficial owner of tenpercent (10%) or more of Kenilworth’s securities must apply for a finding ofsuitability. The Nevada Regulators have the power to investigate any securityholder of Kenilworth.

 

If Kenilworth registers as apublicly traded holding company, the Nevada Gaming Regulators would have thepower, at any time, to require the Company’s stock certificates to bear alegend indicating that the stock is subject to the Nevada Gaming Control Actand the regulations of the Nevada Gaming Regulators. The Nevada GamingRegulators, through the power to regulate licensees and otherwise under Nevadalaw, would have the power to impose additional restrictions on the holders ofKenilworth’s securities at any time.

 

FEDERAL

 

The Federal Gambling DevicesAct of 1962 (the “Federal Act”) makes it unlawful for a person to manufacture,deliver, or receive gaming machines, gaming machine type devices and componentsthereof across interstate lines unless that person has first registered withthe Attorney General of the United States. In addition, various record keepingand equipment identification requirements are imposed by the

 

13

----

 

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 slot machines is controlled by state and federal law, whichmay also apply to our RoulabetteÔgaming terminals. Certain foreign countries permit the importation, sale, oroperation of slot machines. Where importation is permitted, some countriesprohibit or restrict the payout feature of the traditional slot machine orlimit the operation of slot machines to a controlled number of casinos orcasino-like locations. Certain of these jurisdictions also require thelicensing of gaming devices. Our RoulabetteÔterminals may be considered similar to slot machines and may have to meet theseregulations.

 

FABRICATION/ASSEMBLY OPERATION

 

When we start to market theRoulabetteÔ Wagering System,we plan to engage sub-contractors to assemble/manufacture the terminals fromstandard or specially manufactured (to our specifications) electronic, TV, andother components purchased from vendors or manufactured by subcontractors.

 

EMPLOYEES

 

Kenilworth at present has five(5) employees. Three (3) perform administration work and the other two (2) workon research related to casino wagering and marketing around the world. TheCompany has engaged Consultants that will manage the proposed satellitetransmission programs.

 

BACKLOG

 

We do not have any backlog.

 

ITEM2—PROPERTIES

 

Kenilworth leasesmonth-to-month approximately fifteen hundred (1,500) square feet in an officebuilding paying fifteen hundred dollars ($1,500) per month rent.  The Company plans to move to larger officespace (5,000 square feet) in Mineola, NY with annual rent of approximately onehundred fifty thousand dollars ($150,000).

 

ITEM 3—LEGALPROCEEDINGS

 

Since emerging from Chapter 7Bankruptcy Proceedings on September 23, 1998, Kenilworth has not been involvedin any significant legal proceedings.

 

14

----

 

ITEM4—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

Not Applicable.

 

 

EXECUTIVE OFFICERS OF THE REGISTRANT

 

The names, ages and positionsheld by each of Kenilworth’s directors and executive officers are as follows:

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

 

All of the above executiveofficers and directors have been elected to serve until the next Annual Meetingof Shareholders or until their respective successors are elected and qualified.The Board presently anticipates that the Shareholders Meeting will be held inlate May 2003.

 

PART II

 

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

 

(a) After Kenilworth emergedfrom Bankruptcy Proceedings in September of 1998, its Common Stock resumedtrading on the OTC Pink Sheets under the old trading symbol “KENS”. Thefollowing table sets forth high and low closing sales prices for our CommonStock, as reported on the OTC Pink Sheets.

 

15

----

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

 

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

 

(c) Dividends. Kenilworth hasnot paid any dividends on its Common Stock. We plan to apply any earnings itachieves to expansion of the business and does not expect to pay any dividendsin the foreseeable future.

 

ITEM6—SELECTED FINANCIAL DATA

 

The following table summarizescertain selected financial data and is qualified by reference to, and should beread in conjunction with, the Consolidated Financial Statements and relatedNotes thereto and with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” included elsewhere herein.

 

16

----

 

Selected Financial Data for thefive (5) years ended December 31, 2002, are as Follows:

 

SUMMARY OF OPERATIONS

 
|                                   |   | **2002** |          | **2001** |    | **2000** |   | **1999** |           | **1998** |   |
|----------------------------------------|--------|----------|---------------|----------|---------|----------|--------|----------|----------------|----------|--------|
| Net sales from operations              |   | $        | 0             |     | $       | 0        |   | $        | 0              |     | $      | 0 |   | $ | 0 |   |
| Other income                           |   |     |          |     |    |     |   | $        | 0              |     | $      | 4,300,403 |   |
| Liabilities during the Earnings (loss) |   | $        |  (660289 | )        | $       | (421,491 | )      | $        |  (136,589 | )        | $      |  (11,830 | ) | $ |  (4,475,430 | ) |
| Bankruptcy                             |   |     |          |     |    |     |   |     |           |     |   |
| Earnings (loss)                        |   |     |          |     |    |     |   |     |           |     |   |
| Proceedings per common share           |   | $        | (.00          | )        | $       | (.00     | )      | $        | (.00           | )        | $      | (.01 | ) | $ | (.07 | ) |
| Fully diluted                          |   | $        | (.00          | )        | $       | (.00     | )      | $        | (.00           | )        | $      | (.01 | ) | $ | (.02 | ) |
| Capital Resources as of December 31,   |   |     |          |     |    |     |   |     |           |     |   |
| Total assets                           |   | 255,878  |          | $        | 120,811 |     | $      | 47,859   |           | $        | — |   | $ | 0 |   |
| Current assets                         |   | 219,281  |          | $        | 112,804 |     | $      | 37,564   |           | $        | 9,034  |   | $ | 16,000 |   |
| Current liabilities                    |   | 107,458  |          | $        | 100,730 |     | $      | 28,365   |           | $        | 242    |   | $ | 7,912 |   |
| Stockholders’ equity              |   | 148,420  |          | $        | 20,081  |     | $      | 19,494   |           | $        | 8,792  |   | $ |   |   |

 

ITEM 7—MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

 

(A) RESULTS OF OPERATIONS

 

Since we emerged frombankruptcy proceedings on September 23, 1998, we had no revenues fromoperations, and therefore sustained losses from general administration expensesamounting to $660,289 in 2002 and $421,491 in 2001. Kenilworth has had norevenues from operations during the past eleven (11) years and there can be noassurances that it will ever have revenue from present planned operations.

 

(B) LIQUIDITY AND CAPITALRESOURCES

 

Kenilworth has not conductedany business and operations since 1991. At December 31, 2002 our workingcapital was $10,071. In Kenilworth’s present state of operation to formulate aviable business plan, Kenilworth requires very little funding to continue thisplanning. We have been dependant upon the resources of its President whoreceives no compensation and funds received in 2002 from private investors oftwo hundred ninety thousand dollars ($290,000.00) and since December 31,2002 two hundred fifty thousand dollars ($250,000) through March 15, 2003.

 

Our present plans are todevelop a wagering system dubbed “RoulabetteÔ“that would allow patrons all over the industrialized world to play and wager onlive casino table games on terminals placed in hotels, resorts, bars and otherpublic gathering places and in homes and offices on personal computers (PC’s)or television sets connected to set top boxes for Interactive TV via digitalsatellite broadcasts emanating from strictly regulated U.S. casinos.

 

17

----

 

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

 

The information contained inthis Form 10-K and Kenilworth’s other filings with the Securities ExchangeCommission may contain “forward- looking” statements within the meaning ofsection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended, and is subject to the safe harborscreated thereby. Such information involves important risks and uncertaintiesthat could significantly affect results in the future and, accordingly, suchresults may differ from those expressed in any forward looking statementsherein. Future operating results may be adversely affected as a result of anumber of factors. Set forth below are certain important factors that couldcause actual results to differ materially from those in such “forward-looking”statements that are directed to each shareholder and potential shareholder ofKenilworth.

 

YOU SHOULD NOT RELY ONFORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY UNCERTAIN

 

You should not rely onforward-looking statements in this Form 10-K. This Form 10-K containsforward-looking statements that involved risks and uncertainties. We use words suchas “anticipates”, “believes”, “plans”, “expects”, “future”, “intends” andsimilar expressions to identify such forward- looking statements. You shouldnot place undue reliance on these forward-looking statements, which apply onlyas of the date of this Form 10-K. Our actual results could differ materiallyfrom those anticipated in these forward-looking statements for many reasons,including the risks faced by Kenilworth as described below and elsewhere inthis Form 10-K.

 

NO OPERATING HISTORY

 

We have had no revenues fromoperations since 1991. We emerged from our bankruptcy proceedings in 1998without assets. We have had no revenue from operations since then and we maynever have any revenues from operations in the future.

 

WE HAVE NO WORKING CAPITAL

 

As of December 31, 2002 theworking capital of Kenilworth is $10,071. This will not enable Kenilworth toachieve any of its planned operations. There can be no assurances thatKenilworth would ever have sufficient working capital to engage in its plannedoperations.

 

OUR BUSINESS IS ONLY IN THEPLANNING STAGE

 

Kenilworth’s business presentlyis solely in the planning stage. We plan to engage in the development,manufacturing, marketing of an operation entitled RoulabetteÔ.RoulabetteÔ would allow casino patrons and other players toplay along with live in-progress casino table games such as Roulette, Craps andBaccarat via digital satellite television broadcasts (simulcasts) emanatingfrom strictly state regulated casinos located in the United States and otherlocations around the world, to self-sufficient computer terminals dubbed“RoulabetteÔ“. The RoulabetteÔterminal is a proposal intended to be

 

18

----

 

built and there can be noassurances that it will ever be built. We have no agreements, customers orproposals for any future business.

 

WE NEED AT LEAST TEN MILLIONDOLLARS ($10,000,000)

 

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

 

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

 

At the present time, we do nothave any employees who will be able to develop RoulabetteÔ.It will be necessary for us to obtain personnel qualified and with theexpertise to develop RoulabetteÔ. We believe atthis time we would require initially six (6) employees and several consultants.There can be no assurances of the availability of any such employees andconsultants.

 

WE ARE DEPENDANT UPON OURPRESIDENT

 

Kenilworth has been dependantupon the services of its president Herbert Lindo who is seventy-seven (77)years old. Herbert Lindo has performed his services during the past recentyears without compensation. Should Kenilworth procure working capital, therecan be no assurances that he will continue to work without receivingcompensation. There also can be no assurances of Herbert Lindo’s continued availability.

 

RAPID CHANGES IN TECHNOLOGY

 

The technology and RoulabetteÔin general is subject to rapid change. Kenilworth will need to maintain anongoing research and development effort of which there can be no assurances ofsuccess or availability of funds. Additionally, there can be no assurances that the development oftechnologies and products by competitors will not render the Kenilworth’sproducts or technologies non-competitive or obsolete.

 

WE ARE ENGAGED IN A HIGHLYCOMPETITIVE INDUSTRY

 

Our business is subject tosignificant competition. Competition exists from larger companies that possesssubstantially greater technical, financial, sales and marketing resources thatKenilworth presently possesses. Such competition is expected to increase. Such increasedcompetition may have a material adverse effect on Kenilworth’s ability tosuccessfully market its products.

 

19

----

 

WE WERE GRANTED A PATENT FORTHE VARIOUS ASPECTS OF SIMULCAST WAGERING

 

On February 25, 2003, our U.S.patent for the various aspects of wagering on live in-progress casino tablegames was approved and we have taken the steps to protect our interests inother areas of the industrialized world. There can be no assurances thatforeign patents will be issued and the challenges will not be institutedagainst the validity or enforceability of our patent.

 

OUR ROULABETTEÔTERMINAL IS SUBJECT TO VARIOUS FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS

 

The use of RoulabetteÔis subject to various federal, state and local laws and regulations both in theUnited States and foreign countries. There can be no assurances that we willever be able to obtain licenses or permits necessary to conduct our business orthat we will be able to comply with these applicable laws and regulations.

 

PRIOR CONVICTION OF HERBERTLINDO

 

Herbert Lindo, the president ofKenilworth, was convicted in 1993 on three (3) counts of having permitted three(3) banks located in the Upper Peninsula of Michigan to sell unregistered, legended,restricted Kenilworth shares pursuant to SEC Rule 144 prior to the bank havingthe then required two (2) year holding period. The sales took place in 1987 and1988. Mr. Lindo was found not guilty of conspiring to sell unregisteredsecurities which was not met, pursuant to SEC Rule 144. The Securities andExchange Commission did not enter into the case. The indictments were broughtby the U.S. Attorney of the Western District of Michigan. Mr. Lindo wassentenced to one thousand (1,000) hours of community service, fifteen (15)months house arrest, and fined six hundred thousand dollars ($600,000).

 

In 1992, the holding period forexemption pursuant to Rule 144 was reduced to one (1) year. The changed Ruledid not apply to the 1987-88 sales. No one lost any money and Kenilworth hadreceived fair value for the pledged securities. The government never chargedMr. Lindo with fraud. Mr. Lindo claimed he had no knowledge of the sales by thebanks.

 

Because of this conviction,Herbert Lindo is likely not be found suitable by any Casino Control Commissionor other regulatory body to hold licenses. When the time to apply for licensingRoulabetteÔ arrives, Mr. Lindowill resign totally from Kenilworth and place his Kenilworth shares into avoting trust. Until that time, Herbert Lindo believes that he is best suited tomanage the post bankruptcy reorganization and to transform Kenilworth into aviable business.

 

THERE CAN BE NO ASSURANCES THATCASINO OPERATORS WILL PARTICIPATE IN THE ROULABETTEÔBUSINESS

 

The RoulabetteÔsystem is planned to allow casino patrons and other players to play along withlive in progress casino table games such as Roulette, Craps and Baccarat viadigital satellite television programming emanating from state regulatedcasinos. There can be no assurances that casino operators will ever participatein Kenilworth’s business.

 

20

----

 

OUR OFFICERS AND DIRECTORS WILLHAVE SIGNIFICANT CONTROL OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TOA VOTE OF OUR SHAREHOLDERS

 

Our executive officers anddirectors together with their affiliates beneficially own a significantpercentage of our outstanding common stock. These stockholders, if actingtogether, will be able to significantly influence all matters requiringapproval by our stockholders including the election of directors and theapproval of mergers or similar transactions even if the stockholders disagree.

 

SHARES ELIGIBLE FOR FUTURE SALECOULD CAUSE OUR STOCK PRICE TO FALL

 

If our stockholders sell substantialamounts of our common stock in the public market, the market price of ourcommon stock could fall. As of March 15, 2003 we had ninety seven million sixhundred eighty-five thousand nine hundred forty-four (97,685,944) shares ofcommon stock outstanding of which seventy two million nine hundred fortythousand three hundred thirty (72,940,330) are eligible for sale by ourshareholders.

 

WE DO NOT INTEND TO PAYDIVIDENDS

 

We are not able to pay anydividends 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 commonstock.

 

 

ITEM8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements, theaccompanying notes and the Report of the Independent Accountant is filed aspart of this Report annexed at the end of this report.

 

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

 

The Company’s formerIndependent Auditors ended their business in the early part of 2002.

 

PART III

 

Item 10, Item 11, Item 12, andItem 13 (DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVECOMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,and CERTAIN RELATIONSHIPS AND RELATED TRANACTIONS, respectively), will be incorporatedin the registrant’s Proxy Statement to be filed within one hundred twenty (120)days of December 31, 2002, and will be incorporated herein by reference.

 

21

----

 

PART IV

 

Item 13-OTHEREVENTS

 

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

 

At the Annual Meeting of theShareholders of Kenilworth held on July 17, 2002, Herbert Lindo, Kit Wong andJoyce Clark, the incumbent and four (4) new management endorsed directors: GinoScotto, Patrick J. McDevitt, Steve Donner and Preston Smart were unanimouslyelected by the shareholders.

 

There were no other proposalspresented at the meeting.  Mr. Lindonoted that the Company would have to engage a new Independent Auditor as itsprior years Auditor discontinued their business.

 

Immediately after theshareholders meeting, the Board of Directors authorized the issuance of fivemillion (5,000,000) shares of authorized but unissued Common Stock of theCorporation to the Directors in lieu of compensation and liability insurancefor the ensuing year.

 

On October 11, 2002, the Boardof Directors unanimously agreed to ask Preston Smart to resign from theCorporation’s Board of Directors.  As amember of the Board, Preston Smart and the Corporation may be faced with apossible conflict of interest in future planned objectives by the Corporation.

 

On October 11, 2002, the Boardof Directors unanimously elected Maureen Plovnick to the Board ofDirectors.  Mrs. Plovnick is theCorporate Secretary and Vice President of the Company, Corporate Secretary andDirector of the Kenilworth Nevada Corporation and a Director of KenilworthSystems (UK) Limited.

 

ITEM14—EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 

(a)   (1) Financial Statements

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

 

 

(c) Exhibits

 

3(1)Certificate of Incorporation and Amendments

 

3(2) By-Laws

 

21  Subsidiaries of the Registrant

 

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

 

22

----

 

 

INDEPENDENTAUDITORS’ REPORT

 

To the Board of Directors of

Kenilworth Systems Corporation:

 

I have audited the accompanyingconsolidated balance sheets of Kenilworth Systems Corporation and subsidiariesas of December 31, 2002 and the related consolidated statements of operationsand stockholder’s equity and cash flow for the year ended December 31, 2002.The financial statements are the responsibility of the Company’s management. Myresponsibility is to express an opinion on these financial statements based onmy audits.

 

I conducted the audit inaccordance with generally accepted auditing standards. Those standards requirethat I plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprincipals used and significant estimates made by management, as well asevaluating the overall financial statement presentation. I believe that myaudit provides a reasonable basis for my opinion.

 

In my opinion, the consolidatedfinancial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Kenilworth Systems Corporationas of December 31, 2002 and the results of its operations and its cash flow forthe year then ended in conformity with generally accepted accountingprincipals.

 

The accompanying consolidatedfinancial statements have been prepared assuming that the Company will continueas a going concern. As discussed in Note 7 to the consolidated financialstatements, the Company has recently emerged from bankruptcy and has not yetcommenced operations. Future operations are contingent on obtaining funding.These conditions raise substantial doubt about its ability to continue as agoing concern. Management’s plans regarding those matters are also described inNote 7. The consolidated financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.

 
| Arnold  Blackman, CPA |   |
|-----------------------|--------|
| New York, NY          |   |
|                  |
| March 30,  2003       |

 

 

23

----

 

KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES

CONSOLIDATEDBALANCE SHEETS,AS OF DECEMBER 31, 2002 AND 2001

 
|                                                                                                                                                      |   | **2002**    |          | **2001**    |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|---------------|-------------|--------|
| ASSETS                                                                                                                                                    |   |        |          |        |   |
|                                                                                                                                                      |   |        |          |        |   |
| Cash                                                                                                                                                      |   | $           | 10,071        |        | $      | 15,266 |   |
| Due from Shareholders (subscriptions)                                                                                                                     |   | —      |          | 17,577      |   |
| Due from related party                                                                                                                                    |   | —      |          | 42,461      |   |
| Prepaid Expenses                                                                                                                                          |   | 232,544     |          | —      |   |
| Property, Plant and Equipment, Net                                                                                                                        |   | 13,263      |          | 8,007       |   |
| TOTAL ASSETS                                                                                                                                              |   | $           | 255,878       |        | $      | 120,811 |   |
|                                                                                                                                                      |   |        |          |        |   |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                      |   |        |          |        |   |
|                                                                                                                                                      |   |        |          |        |   |
| Accrued Liabilities                                                                                                                                       |   | $           | 93,883        |        | 94,182 |   |
| Payroll Taxes Payable                                                                                                                                     |   | 13,575      |          | 6,548       |   |
| Note Payable                                                                                                                                              |   | —      |          | 0           |   |
| TOTAL LIABILITIES                                                                                                                                         |   | $           | 107,458       |        | $      | 100,730 |   |
|                                                                                                                                                      |   |        |          |        |   |
| Common Stock, $.01 par value, authorized  200,000,000 shares; issued and outstanding 73,115,484 in December 31, 2001  and 89,304,589 in December 31, 2002 |   | $           |  893,045 |        | $      | 731,154 |   |
| Paid in capital                                                                                                                                           |   | 24,765,146  |          | 24,245,867  |   |
| Deficit                                                                                                                                                   |   | (25,617,229 | )             | (24,956,940 | )      |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                           |   | $           | 40,962        |        | $      | 20,081 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUIY                                                                                                            |   | $           | 148,420       |        | $      | 120,811 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

24

----

 

KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                                |   | **YEAR ENDED  DEC. 31, 2002** |        | **YEAR ENDED  DEC. 31, 2001** |   | **YEAR ENDED  DEC. 31, 2000** |   |
|-----------------------------------------------------|--------|-------------------------------|-------------|-------------------------------|--------|-------------------------------|--------|
| Revenues:                                           |   |                          |        |                          |   |                          |   |
| Sales                                               |   | $                             | 0           |                          | $      | -0-                           |   | $ | -0- |   |
| Costs and Expenses:                                 |   |                          |        |                          |   |                          |   |
| Selling, general and administrative  expenses       |   | 660,289                       |        | 421,491                       |   | 133,964                       |   |
| Interest expense (income)                           |   | —                        |        |                          |   | 3,216                         |   |
| Total Costs and Expenses                            |   | 660,289                       |        | 421,491                       |   | 137,180                       |   |
| Net income (loss) before other income and  (losses) |   | (660,289                      | )           | (421,491                      | )      | (137,180                      | )      |
| Increase Income                                     |   |                          |        | -0-                           |   | 591                           |   |
| Total                                               |   |                          |        | -0-                           |   | 591                           |   |
| Net income (loss)                                   |   | (660,289                      | )           | (421,491                      | )      | (136,589                      | )      |
| Deficit — Beginning Of year                    |   | (24,956,940                   | )           | (24,535,450                   | )      | (24,398,861                   | )      |
| Deficit — End Of year                          |   | $                             | (25,617,229 | )                             | $      | (24,956,940                   | )      | $ | (24,535,450 | ) |
|                                                |   |                          |        |                          |   |                          |   |   |   |   |
| Earnings (Loss) per Share of common stock  (Note 5) |   | $                             | -0-         |                          | $      | -0-                           |   | $ | 0 |   |
| Average number of shares outstanding                |   | 89,304,589                    |        | 73,115,484                    |   | 64,264,323                    |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

 

KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIESSTATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                                                                       |                          |     |                          |   |                         |   |
|--------------------------------------------------------------------------------------------|-------------------------------|----------|-------------------------------|--------|------------------------------|--------|
|                                                                                       | **YEAR ENDED  DEC. 31, 2002** |     | **YEAR ENDED  DEC. 31, 2001** |   | **YEAR ENDED  DEC. 31,2000** |   |
| CASH FLOWS USED IN OPERATING ACTIVITIES                                                    |                          |     |                          |   |                         |   |
| Net Loss                                                                                   | $                             | (660,289 | )                             | $      | (421,491                     | )      | $ | (136,589 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |                          |     |                          |   |                         |   |
| Stock issuance for services rendered                                                       | 258,016                       |     |                          |   | 26,624                       |   |
| Depreciation                                                                               |                          |     |                          |   | 1,144                        |   |
| Changes in operating assets and  liabilities:                                              |                          |     |                          |   |                         |   |
| Due from shareholder                                                                       |                          |     | (17,577                       | )      | 19,950                       | )      |
| Accrued expenses and taxes                                                                 | 107,458                       |     | 100,730                       |   | 18,123                       |   |
|                                                                                       |                          |     |                          |   |                         |   |
| Total adjustments                                                                          | 365,474                       |     | 338,338                       |   | 25,941                       |   |
| Net cash used in operating activities                                                      | (294,815                      | )        |                          |   | (110,648                     | )      |
|                                                                                       |                          |     |                          |   |                         |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                       |                          |     |                          |   |                         |   |
| Purchases of Property and Equipment                                                        | (5,256                        | )        | -0-                           |   | (11,439                      | )      |
| Net cash used in investing activities                                                      | (5,256                        | )        | -0-                           |   | (11,439                      | )      |
|                                                                                       |                          |     |                          |   |                         |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                       |                          |     |                          |   |                         |   |
| Proceeds from loans payable                                                                |                          |     | 210,000                       |   | 123,167                      |   |
| Proceeds from stock issuances                                                              | 290,000                       |     | -0-                           |   | 7,500                        |   |
|                                                                                       |                          |     |                          |   |                         |   |
| Net cash provided by financing activities                                                  |                          |     | 210,000                       |   | 130,667                      |   |
| Net increase (decrease) in cash                                                            | 5,195                         |     | 6,684                         |   | 8,580                        |   |
| Cash beginning of period                                                                   | 15,266                        |     | 8,582                         |   | 2                            |   |
|                                                                                       |                          |     |                          |   |                         |   |
| Cash—end of period                                                                    | $                             | 10,071   |                          | $      | 15,266                       |   | $ | 8,582 |   |
|                                                                                            |                               |          |                               |        |                              |        |  |  |  |  |

 

25

----

 

NON-CASH TRANSACTIONS

 

During the year ended December31, 2002 the Company issued shares of Common Stock for conversion ofConvertible Promissory Notes totaling five hundred twenty thousand dollars($520,000).

 

The Company issued common stockin lieu of payment for services rendered in the amounts of one hundred fiftythousand dollars and sixty thousand dollars ($150,000 and $60,000) during the yearsended December 31, 2002 and December 31, 2001 respectively.

 

In connection with theemergence from bankruptcy in September 1998 the trustee distributed fourmillion three hundred thousand four hundred and three dollars ($4,300,403) topay one hundred percent (100%) of all approved claims.

 

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

 

KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 
|                                                     | **COMMON SHARES** | ** ** | **ADDITIONAL  PAID-IN  CAPITAL** | ** ** | **RETAINED  EARNINGS** | ** ** |
|----------------------------------------------------------|-------------------|------------|----------------------------------|------------|------------------------|------------|
| **SHARES**                                               |              | **AMOUNT** |
|                                                     |              |       |                             |       |                   |       |   |   |   |   |   |
| Balances, December 31, 1999                              | 62,289,018        |       | $                                | 622,890    |                   | $          | 23,784,76 |   | $ | (24,398,861 | ) |
|                                                     |              |       |                             |       |                   |       |   |   |
| Issuance of Stock in connection with  conversion of debt | 944,028           |       | 9,440                            |       | 111,227                |       |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| For services                                             | 1,699,456         |       | $                                | 16,995     |                   | $          | 9,629 |   |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| Net Income/(Loss)                                        |              |       |                             |       | (136,589               | )     |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |   |   |   |
| Balances, December 31, 2000                              | 64,932,502        |       | $                                | 649,325    |                   | $          | 23,905,619 |   | $ | (24,535,450 | ) |
|                                                     |              |       |                             |       |                   |       |   |   |
| Issuance of Stock in connection with  conversion of debt | 6,582,982         |       | 65,829                           |       | 227,900                |       |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| For services                                             | 1,600,000         |       | 16,000                           |       | 112,348                |       |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| Net Income/(Loss)                                        |              |       |                             |       | (421,491               | )     |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| Balances, December 31, 2001                              | 73,115,484        |       | $                                | 731,154    |                   | $          | 24,245,867 |   | $ | (24,956,940 | ) |
|                                                     |              |       |                             |       |                   |       |   |   |
| Issuance of Stock in connection with  Conversion of debt | 6,312,436         |       | 290,000                          |       |                   |       |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| For services                                             | 9,876,669         |       | 258,016                          |       | 258,016                |       |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| Net income/(Loss)                                        |              |       |                             |       | (660,289               | )     |   |   |
|                                                     |              |       |                             |       |                   |       |   |   |
| Balances, December 31, 2002                              |              | 89,304,589 |                             | $          | 893,045                |       | $ | 24,765,146 |   | $ | (25,617,229 | )  |
|                                                          |                   |            |                                  |            |                        |            |  |  |  |  |  |  |  |  |  |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

26

----

 

KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTS

 

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

THE COMPANY AND NATURE OFBUSINESS

 

Kenilworth Systems Corporation(the “Company”) was incorporated in New York in April 1968 and now plans to beengaged in the business of developing and manufacturing terminals that permitindividuals from remote locations, to play along with live in progress casinotable games located outside the casino confines via TV simulcast satellitebroadcast around the world.

 

The Company was in bankruptcyproceedings under Chapter 7 and 11 of the Bankruptcy Code for the period fromAugust 28, 1982 through September 23, 1998 the Company ceased all operationsfrom February 1990 to September 23, 1998.

 

ADVERTISING COSTS

 

Advertising costs are expensedas incurred.

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financialstatements include the accounts of Kenilworth Systems Corporation and itswholly owned subsidiaries: Video Wagering Systems Corporation, RoulabetteÔNevada Corporation and Kenilworth Systems Nevada Corporation. None of thesubsidiary has any assets or liabilities.

 

EARNINGS PER SHARE

 

The Company computes andpresents earnings (loss) per share in accordance with the requirements ofStatement of Financial Accounting Standards (“SFAS”) No. 128 “Earnings PerShare”.

 

Basic loss per share is basedon the weighted-average number of shares of common stock outstanding for theperiod, which were ($.00), ($.00), and ($.00) for the year ended December 31,2002, 2001 and 2000 respectively.

 

Diluted earnings per share hasnot been presented in the accompanying financial statements because the effectof assumed conversion of convertible promissory notes was anti-dilutive.

 

INCOME TAXES

 

The Company uses the liabilitymethod to account for income taxes in accordance with requirements of SFAS No.109.

 

27

----

 

USE OF ESTIMATES IN THEFINANCIAL STATEMENTS

 

The preparation of financialstatements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ fromthese estimates.

 

The Company’s financialstatements include cash, receivables and accounts payable. Due to theshort-term nature of these instruments, the fair value of these instrumentsapproximates their recorded values.

 

PROPERTY AND EQUIPMENT

 

Property and Equipment arestated at cost. For financial reporting purposes, property and equipment aredepreciated utilizing the Straight-Line Method over the estimated useful livesof the related assets as follows:

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

 

NOTE 2—DUE FROM RELATED PARTIES AT DECEMBER 31, 2002

 

Due from related parties atDecember 31, 2001 represents advances made to a stockholder of the Company inthe normal course of business. Such amounts are non-interest bearing and haveno definite repayment terms.

 

NOTE 3—PROPERTY AND EQUIPMENT

 

Property and Equipment consistof the following as of December 31, 2002 and December 31, 2001.

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

 

Depreciation expense for theyears ended December 31, 2002 and December 31, 2001 was $588 and $3,432,respectively.

 

28

----

 

NOTE 4 —BANKRUPTCYPROCEEDINGS

 

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 the Companyoperated during reorganization proceedings. On June 7, 1985, a United StatesBankruptcy Judge confirmed the Company’s Plan of Reorganization. On April 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 failed to consummate itsplan of reorganization and on February 25, 1991 the case was converted to acase under Chapter 7 of the Bankruptcy Code. By order of the Court dated June19, 1991 the Chapter 7 was reconverted to a case under Chapter 11 of theBankruptcy Code. A second plan of reorganization was approved and a second orderof confirmation was entered in connection with the Chapter 11 case on October2, 1991. However, the Debtor was unable to consummate its second plan ofreorganization, and by order dated November 25, 1991, the case was reconvertedto a case under Chapter 7 of the bankruptcy Code.

 

From February 1991 throughSeptember 1998, the Company was inactive. In September 1998 a United StatesBankruptcy Judge in the Eastern District of New York approved the Final Reportand Accounts submitted by the Chapter 7 Trustee of the Estate of Kenilworth andafter obtaining approval from the U.S. Trustee, Kenilworth made a one hundredpercent (100%) cash distribution to the creditors and paid in full alladministrative fees and expenses. The Company emerged from Bankruptcy on September23, 1998 with no assets and no liabilities. For the period September 24, 1998through November 23, 1998 the Company was in the process of monitoring thepayments by check to the creditors. No other activity occurred during thatperiod.

 

NOTE 5—INCOME TAXES

 

The Company is a “C”Corporation for tax purposes.

 

The Company estimates that ithas available approximately ten million dollars ($10,000,000) in net operatingloss carry-forwards, which expire at various dates through 2020. Utilization ofthe NOL carry-forward may be limited under various sections of the InternalRevenue Code depending on the nature of the Company’s operations.

 

The Company has a deferred taxasset of approximately two million eight hundred thousand dollars ($2,800,000)arising from its net operating loss carry-forwards. The deferred tax asset hasbeen fully reserved due to the uncertainty of future realization.

 

NOTE 6—CONVERTIBLEPROMISSORY NOTES

 

During the year 2002,Convertible Promissory Notes totaling five hundred twenty thousand dollars($520,000) issued in 2002 where converted into 11,520,605 shares of CommonStock which included accrued interest.

 

29

----

 

In November and December 2001Convertible Promissory Notes totaling two hundred and ten thousand dollars($210,000) issued during the second quarter of 2001 were converted into4,861,111 shares of Common Stock which included accrued interest.

 

All Notes were converted intorestricted common stock of the Company as the term is defined under theSecurities Act of 1933. All proceeds have been used to defray current expenses.

 

NOTE 7—GOING CONCERN UNCERTAINTY

 

As indicated in Note 4, theCompany emerged from Chapter 7 in September 1998 and has not yet commencedoperations. These factors create uncertainty as to the Company’s ability tooperate as a going-concern. Management plans to develop a wagering system thatallows casino patrons and individuals outside the casino to play along withlive casino table games. The first step in the plan is to conduct testing.Unless the Company is able to obtain sufficient funds, none of the tests andinitial development work can commence. The Company plans to obtain thenecessary funding by offering its common stock, or Senior Cumulative ConvertiblePreferred Shares in a private placement, or selling limited joint ventureparticipations in future “play along with casino game” franchises.

 

If initial testing issuccessful, the second step is to obtain the proper licenses from the gamingcontrol regulators in the various venues the Company intends to offer itssystem. Upon successful licensing, the Company plans to obtain financing fromregular banking sources to finance the manufacturing of the computer terminalsthat allow the worldwide play along.

 

The accompanying financialstatements have been prepared assuming the Company is a going-concern and donot reflect adjustments, if any, that would be necessary if the Company werenot a going-concern.

 

NOTE 8—COMMITMENTS AND CONTINGENCIES

 

OUTSTANDING PAYROLL TAXES

 

As of year-end, the InternalRevenue Service is contending that the Company owes payroll taxes includinginterest and penalties totaling almost $400,000 for various periods from1985-1991. The Company is currently in negotiations with the IRS to resolvethese issues. In management’s opinion, no accruals are necessary since itbelieves that these assessments are incorrect and were discharged in itsbankruptcy proceedings.  Similarcontentions were made by the New York State Income Tax Authorities, which havebeen officially cancelled by the New York State Taxing Authorities on July 1,2002.

 

30

----

 

NOTE 9 —QUARTERLYFINANCIAL INFORMATION—UNAUDITED

 

The following table sets forthcertain unaudited condensed quarterly financial data for the fiscal years endedDecember 31, 2002 and 2001. This information has been prepared on the samebasis as the consolidated financial statements and all necessary adjustmentshave been included in the amounts stated below to present fairly the selectedquarterly information when read in conjunction with its consolidated financialstatements and notes thereto. Historical quarterly financial results and trendsmay not be indicative of future results.

 

KENILWORTH SYSTEMS CORPORATIONQUARTERLY DATA2002 AND 2001

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

 

NOTE 10—STOCKOPTIONS

 

The Company does not plan, atthis time, to make any adjustments to its financials as the result of havingissued stock options totaling three million five hundred thousand (3,500,000)Common Shares of the Company.  Theexercise price of the stock options are well above the price per share of theCommon Stock for the last five (5) years.

 

NOTE 11—PREPAIDITEMS

 

At the Board of DirectorsMeeting held on July 17, 2002 the Board authorized the issuance of five million(5,000,000) shares of authorized but unissued Common Stock of the Corporationto the Directors in lieu of compensation and liabilities insurance for theensuing year: Gino Scotto, Kit Wong, Patrick J. McDevitt, Joyce Clark andMaureen Plovnick.  Accordingly, $232,544is recorded as prepaid expenses.

 

 

31

----

                Herbert Lindo,Chairman and President of Kenilworth Systems Corporation (“Kenilworth”) since1972, advised the Company's board of Directors that on June 26, 2002 theSheriff 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 weresold to Tappan Zee Capital Corp. (“Tappan Zee”).  On the date of the Sale the Shares had a market value in excessof nine hundred thousand dollars ($900,000). The Sheriff seized and sold the Shares on behalf of Tappan Zee, as aresult of a claim by Tappan Zee in a disputed civil suit brought in the NewYork Supreme Court for $128,062.  TappanZee was both the foreclosing party and the purchaser.

 

                Kenilworth claims that the Sheriff's AuctionSale was conducted in a fraudulent manner by (1) failing to comply with therules and regulations set forth under the Securities and Exchange CommissionAct of 1933 and 1934, as amended (The "Acts"), and (2) by failing toproperly advertise the Sale, failing to notify any or all Kenilworthshareholder's (numbering approximately 5,500), and (3) failing to register theShares with the Securities and Exchange Commission before conducting the Saleor in the absence of registering the Shares, or obtain a No-Action letter fromthe Commission permitting the Public Sale, and (4) by making an immediatedistribution of the Shares, and (5) by failing to file required notices of 13D-G as provided under the Acts.  TappanZee and its Counsel and the Sheriff's department were advised in courtdocuments and correspondence that their acts violated Federal and StateSecurities Laws, prior to the Sale.

 

                Kenilworth will seek in Federal Courts tocancel the 10,333,450 shares, which were subject of the Sheriff Auctions Sale,and seek triple damages under RICO on behalf of the shareholders of Kenilworth.

 

CERTIFICATION

 

I, Herbert Lindo, certify that:

 

1.                                       Ihave reviewed this annual report on Form 10-K of Kenilworth SystemsCorporation;

 

2.                                       Basedon my knowledge, this annual report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements are made, notmisleading with respect to the period covered by this annual report;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this annual report;

 

4.                                       Asregistrant's certifying officer I am responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and I have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to my by others within those entities, particularly during the period inwhich this annual report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant's disclosure controls and procedures as ofa date within 90 days prior to the filing date of this annual report (March 27,2003); and

 

c)                                      presentedin this annual report our conclusions about the effectiveness of the disclosurecontrols and procedures based on my evaluation as of March 27, 2003;

 

32

----

 

5.             All significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant's ability to record, process, summarize andreport financial data and have identified for the registrant's auditor anymaterial weaknesses in internal controls; and

 

a)             any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant's internal controls; and

 

6.             The registrant'sother officers and I have indicated in this annual report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  March 27, 2003 | By:    | /s/ Herbert  Lindo   |
|----------------------------|--------|----------------------|
|                       |   | President  and Chief |
|                       |   | Financial  Officer   |

 

 

33

----

 

SIGNATURES

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

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

 

Pursuant to the requirements ofSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities and on thedates indicated.

 
| **NAME**                 |   | **TITLE** |   | **DATE**        |
|--------------------------|--------|-----------|--------|-----------------|
|                     |   |      |   |            |
| /s/ HERBERT  LINDO       |   | Director  |   | March 27,  2003 |
| Herbert  Lindo           |   |      |   |            |
|                     |   |      |   |            |
| /s/ JOYCE  CLARK         |   | Director  |   | March 27,  2003 |
| Joyce Clark              |   |      |   |            |
|                     |   |      |   |            |
| /s/ KIT WONG             |   | Director  |   | March 27,  2003 |
| Kit Wong                 |   |      |   |            |
|                     |   |      |   |            |
| /s/ GINO  SCOTTO         |   | Director  |   | March 27,  2003 |
| Gino Scotto              |   |      |   |            |
|                     |   |      |   |            |
| /s/ MAUREEN  PLOVNICK    |   | Director  |   | March 27,  2003 |
| Maureen  Plovnick        |   |      |   |            |
|                     |   |      |   |            |
| /s/ PATRICK  J. MCDEVITT |   | Director  |   | March 27,  2003 |
| Patrick J.  McDevitt     |   |      |   |            |

 

34

----