**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**(Mark One)**

 
| **ý**                                                  | ** ** | **Quarterly  report pursuant to Section 13 OR 15(D) of the Securities Exchange  Act of 1934**  |
|-------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
|                                                        |       |                                                                                                     |
| **For the quarterly period ended September 30,  2005** |
|                                                        |       |                                                                                                     |
| **OR**                                                      |
|                                                        |       |                                                                                                     |
| **o**                                                       | ** ** | **Transition  report pursuant to Section 13 or 15(D) of the Securities Exchange  Act of 1934** |

 

**For the transition period from              to             **

 

**Commission File Number: 0-08962**

 

**KENILWORTHSYSTEMS CORPORATION**

(Exact name of registrant as specified in its charter)

 
| **New York**                                              | ** ** | **84-1641415**                       |
|-----------------------------------------------------------|------------|--------------------------------------|
| (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) |

 

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

 

State the number of sharesoutstanding of each of the issuer’s classes of common stock as of the latestpractical date

 

The number of shares ofcommon stock, $.01 par value of the Registrant outstanding as ofSeptember 30, 2005 was 189,842,912.

 

 

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**Table ofContents**

 

**KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

 

**INDEX**

 
| **Part I.**  | **Financial Information**                                                                                                                                                                                                                          |   |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              |                                                                                                                                                                                                                                               |   |
| Item  1.          | Financial  Statements                                                                                                                                                                                                                              |   |
|              |                                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated Balance  Sheets – September 30, 2005 (unaudited) and December 31, 2004                                                                                                                                       |   |
|              |                                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated  Statements of Operation and Deficit (unaudited) – Nine months ended  September 30, 2005 and 2004, Three months ended September 30, 2005  and 2004, and the period from inception to September 30, 2005 |   |
|              |                                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated  Statements of Cash Flows (unaudited) – Nine months ended September 30,  2005 and 2004, and the period from inception to September 30, 2005                                                                  |   |
|              |                                                                                                                                                                                                                                               |   |
|              | Condensed Notes to  Consolidated Financial Statements (unaudited)                                                                                                                                                                                  |   |
|              |                                                                                                                                                                                                                                               |   |
| Item 2.           | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                                                                                                                                                        |   |
|              |                                                                                                                                                                                                                                               |   |
| Item  3.          | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                                                        |   |
|              |                                                                                                                                                                                                                                               |   |
| **Part II.** | **Other Information**                                                                                                                                                                                                                              |   |
|              |                                                                                                                                                                                                                                               |   |
| Item 1.           | Legal Proceedings                                                                                                                                                                                                                                  |   |
|              |                                                                                                                                                                                                                                               |   |
| Item 6.           | Exhibits                                                                                                                                                                                                                                           |   |
|              |                                                                                                                                                                                                                                               |   |
| Signature         |                                                                                                                                                                                                                                               |   |

 

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OFTHEPRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND RISK FACTORS

 

The information contained inthis Form 10-Q 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, andSection 21E of the Securities Exchange Act of 1934, as amended, and issubject to the safe harbors created thereby. Such information involvesimportant risks and uncertainties that could significantly affect results inthe future and, accordingly, such results may differ from those expressed inany forward looking statements herein. Future operating results may beadversely affected as a result of a number of factors.

 

You should not rely onforward-looking statements in this Form 10-Q. This Form 10-Q containsforward-looking statements that involved risks and uncertainties. We use wordssuch as “anticipates”, “believes”, “plans”, “expects”, “future”, “intends” andsimilar expressions to identify such forward-looking statements. You should notplace undue reliance on these forward-looking statements, which apply only asof the date of this Form 10-Q. 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-Q.

 

2

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RISKS

 

Specific reference is madeto each of the risks described in Item 7 of the Form 10-K/A Amendment No.1for December 31, 2004 under the discussion “Cautionary Statement ForPurposes of the Safe Harbor Provisions of the Private Securities LitigationReform Act of 1995 and Risk Factors”. Reference is also made to future filingsunder Forms 10-Q and Forms 10-K and filings under the Securities Exchange Actof 1934 as amended and as may be applicable under the Securities Act of 1933 asamended.

 

3

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KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 
| ** **                                                                                                                                        | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                                                                                                                                        | ** ** | **(Unaudited)**         | ** ** | ** **             | ** ** |
|                                                                                                                                              |       |                    |       |                   |       |
| ASSETS                                                                                                                                            |       |                    |       |                   |       |
| CURRENT  ASSETS                                                                                                                                   |       |                    |       |                   |       |
| Cash                                                                                                                                              |       | $                       | 29,079     |                   | $          | 5 |   |
| Prepaid expenses                                                                                                                                  |       | 53,350                  |       | 93,750                 |       |
| Loan receivable - employee                                                                                                                        |       | 6,300                   |       | —                 |       |
| Loan receivable – Stock holder                                                                                                               |       | 32,000                  |       |                   |       |
|                                                                                                                                              |       |                    |       |                   |       |
| Total current assets                                                                                                                              |       | 120,729                 |       | 93,755                 |       |
|                                                                                                                                              |       |                    |       |                   |       |
| PROPERTY AND  EQUIPMENT - NET                                                                                                                     |       | 37,292                  |       | 36,863                 |       |
|                                                                                                                                              |       |                    |       |                   |       |
| PATENT  REGISTRATION COSTS - NET                                                                                                                  |       | 70,957                  |       | 68,763                 |       |
|                                                                                                                                              |       |                    |       |                   |       |
| SECURITY  DEPOSIT                                                                                                                                 |       | 4,200                   |       | 4,250                  |       |
|                                                                                                                                              |       |                    |       |                   |       |
| Total assets                                                                                                                                      |       | $                       | 233,228    |                   | $          | 203,631 |   |
|                                                                                                                                              |       |                    |       |                   |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES                                                                          |       |                    |       |                   |       |
| Accounts payable and accrued expenses                                                                                                             |       | $                       | 140,971    |                   | $          | 218,772 |   |
| Payroll taxes payable                                                                                                                             |       | 16,009                  |       | 59,522                 |       |
| Loan payable                                                                                                                                      |       | 6,141                   |       |                   |       |
| Loans payable - stockholders                                                                                                                      |       | 5,000                   |       | 10,000                 |       |
| Loans payable - related parties                                                                                                                   |       | —                  |       | 25,120                 |       |
|                                                                                                                                              |       |                    |       |                   |       |
| Total current liabilities                                                                                                                         |       | 168,121                 |       | 313,414                |       |
|                                                                                                                                              |       |                    |       |                   |       |
| STOCKHOLDERS’  EQUITY (DEFICIT)                                                                                                              |       |                    |       |                   |       |
| Preferred stock - par value $.01 per share;  authorized 5,000,000 shares; no shares issued and outstanding                                        |       |                    |       |                   |       |
| Common stock - par value $.01 per share;  authorized 500,000,000 shares; issued and outstanding 189,842,912 and  137,551,245 shares, respectively |       | 1,898,429               |       | 1,375,512              |       |
| Additional paid-in capital                                                                                                                        |       | 29,373,656              |       | 26,468,771             |       |
| Less: stock subscriptions receivable                                                                                                              |       | —                  |       | (15,000                | )          |
| Deficit accumulated during the development  stage                                                                                                 |       | (31,206,978             | )          | (27,939,066            | )          |
|                                                                                                                                              |       |                    |       |                   |       |
| Total stockholders’ equity (deficit)                                                                                                         |       | 65,107                  |       | (109,783               | )          |
|                                                                                                                                              |       |                    |       |                   |       |
| Total liabilities and stockholders’ equity  (deficit)                                                                                        |       | $                       | 233,228    |                   | $          | 203,631 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE

(Unaudited)

 
| ** **                                     | ** ** | ** **                                         | ** ** | ** **                                         | ** ** | ** **                              | ** ** | ** **  | ** ** | **Period from**             | ** ** |
|------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|-----------------------------------------|------------|-------------|------------|-----------------------------|------------|
| ** **                                     | ** ** | ** **                                         | ** ** | ** **                                         | ** ** | ** **                              | ** ** | ** **  | ** ** | **November 24,  1998** | ** ** |
| ** **                                     | ** ** | **For the nine months ended  September  30,** | ** ** | **For the three months ended  September 30,** | ** ** | **(Inception)  to  September 30,** | ** ** |
| ** **                                     | ** ** | **2005**                                           | ** ** | **2004**                                           | ** ** | **2005**                                | ** ** | **2004**    | ** ** | **2005**                    | ** ** |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Expenses                                       |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Selling, general and administrative            |       | $                                                  | 2,429,371  |                                               | $          | 1,188,711                               |       | $           | 1,605,638  |                        | $          | 124,638 |   | $ | 5,232,990 |   |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Other income  (expenses)                       |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Interest income                                |       | —                                             |       | 101                                                |       | —                                  |       | 20          |       | 922                         |       |
| Interest expense                               |       | (838,541                                           | )          | (300,782                                           | )          | (271,433                                | )          | (10,092     | )          | (1,595,791                  | )          |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Total other  income (expense)                  |       | (838,541                                           | )          | (300,681                                           | )          | (271,433                                | )          | (10,072     | )          | (1,594,869                  | )          |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Net loss                                       |       | $                                                  | (3,267,912 | )                                                  | $          | (1,489,392                              | )          | $           | (1,877,071 | )                           | $          | (134,710 | ) | $ | (6,827,859 | ) |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Basic and  diluted loss per share              |       | $                                                  | (0.021     | )                                                  | $          | (0.012                                  | )          | $           | (0.011     | )                           | $          | (0.001 | ) |   |   |
|                                           |       |                                               |       |                                               |       |                                    |       |        |       |                        |       |
| Weighted average number of shares  outstanding |       | 152,634,248                                        |       | 121,792,181                                        |       | 167,313,242                             |       | 128,714,020 |       |                        |       |

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**              | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24,  1998**  | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **(Inception)  to**          | ** ** |
| ** **                                                                      | ** ** | **2005**   | ** ** | **2004**   | ** ** | **September 30,  2005** | ** ** |
| Cash flows  from operating activities                                           |       |       |       |       |       |                         |       |
| Net loss                                                                        |       | $          | (3,267,912 | )          | $          | (1,489,392                   | )          | $ | (6,827,859 | ) |
| Adjustments to reconcile net loss to net  cash provided by operating activities |       |       |       |       |       |                         |       |
| Depreciation                                                                    |       | 11,827     |       | 6,425      |       | 28,431                       |       |
| Amortization of patent                                                          |       | 4,919      |       | 3,622      |       | 12,795                       |       |
| Accretion of convertible debt discount                                          |       | —     |       | —     |       | 72,656                       |       |
| Beneficial conversion feature                                                   |       | 837,000    |       | 298,640    |       | 1,452,097                    |       |
| Common stock issued for services                                                |       | 1,726,346  |       | 606,198    |       | 2,923,910                    |       |
| Common stock issued to induce debt  conversion                                  |       | —     |       | —     |       | 63,276                       |       |
| Common stock issued for interest due on  notes payable                          |       | —     |       | —     |       | 8,501                        |       |
| Accrued interest transferred to capital                                         |       | 1,286      |       | 2,130      |       | 5,495                        |       |
| Other                                                                           |       | —     |       | —     |       | 21,100                       |       |
| Increase (decrease) in cash attributable to  changes in assets and liabilities: |       |       |       |       |       |                         |       |
| Prepaid expenses                                                                |       | 40,400     |       | —     |       | (53,350                      | )          |
| Loan receivable - employee                                                      |       | (6,300     | )          | —     |       | (6,300                       | )          |
| Accounts payable and accrued expenses                                           |       | (77,797    | )          | 1,225      |       | 140,975                      |       |
| Payroll taxes payable                                                           |       | (43,513    | )          | 7,833      |       | 16,009                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash used in operating activities                                           |       | (773,744   | )          | (563,319   | )          | (2,142,264                   | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Cash flows  from investing activities                                           |       |       |       |       |       |                         |       |
| Payment of loan receivable-stockholder                                          |       | —     |       | —     |       | (4,000                       | )          |
| Proceeds from loan receivable - stockholder                                     |       | —     |       | 4,000      |       | 4,000                        |       |
| Payment of patent costs                                                         |       | (7,113     | )          | (7,779     | )          | (73,752                      | )          |
| Purchase of property and equipment                                              |       | (4,981     | )          | (40,762    | )          | (63,548                      | )          |
| Security deposit                                                                |       | —     |       | (4,250     | )          | (4,250                       | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash used in investing activities                                           |       | (12,094    | )          | (48,791    | )          | (141,550                     | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Cash flows  from financing activities                                           |       | (1,138     | )          | —     |       | (1,138                       | )          |
| Proceeds from loans payable - stockholders                                      |       | 5,000      |       | 45,000     |       | 65,000                       |       |
| Payment of loans payable - related parties                                      |       | (1,950     | )          | (94,590    | )          | (127,967                     | )          |
| Proceeds from loans payable - related  parties                                  |       | 13,000     |       | —     |       | 154,137                      |       |
| Payment of loans payable - related parties                                      |       | (32,000    | )          | —     |       | (32,000                      | )          |
| Proceeds from convertible notes payable                                         |       | 794,500    |       | 562,000    |       | 2,069,861                    |       |
| Proceeds from sale of common stock                                              |       | 10,000     |       | 75,000     |       | 132,500                      |       |
| Proceeds from stock subscriptions  receivable                                   |       | 27,500     |       | 25,000     |       | 52,500                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash provided by financing activities                                       |       | 814,912    |       | 612,410    |       | 2,312,893                    |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net change  in cash                                                             |       | 29,074     |       | 300        |       | 29,079                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Cash -  beginning of period                                                     |       | 5          |       | 5          |       | —                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Cash - end  of period                                                           |       | $          | 29,079     |       | $          | 305                          |       | $ | 29,079 |   |
|                                                                            |       |       |       |       |       |                         |       |
| Supplemental  disclosure of cash flow information:                              |       |       |       |       |       |                         |       |
| Cash paid  during the period for interest                                       |       | $          | 255        |       | $          | —                       |       | $ | 255 |   |
| Common stock  issued for patent costs                                           |       | $          | —     |       | $          | —                       |       | $ | 10,000 |   |
| Conversion  of notes payable to common stock                                    |       | $          | 837,000    |       | $          | 562,000                      |       | $ | 2,100,500 |   |
| Conversion  of loan payable – related party to common stock                |       | $          | 16,170     |       | $          | —                       |       | $ | 16,170 |   |
| Exchange of  loans payable for convertible notes payable                        |       | $          | 30,000     |       | $          | —                       |       | $ | 80,000 |   |
| Cancellation  of stock subscriptions receivable                                 |       | $          | —     |       | $          | 29,000                       |       | $ | 29,000 |   |
| Common stock  issued for subscriptions receivable                               |       | $          | 12,500     |       | $          | —                       |       | $ | 84,000 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**KENILWORTH SYSTEMS CORPORATION**

**AND SUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE1 - BASIS OFPRESENTATION

 

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of January 1, 2005 contain all adjustments (consisting of onlynormal accruals) necessary to present fairly the consolidated balance sheets asof September 30, 2005 and December 31, 2004 and the related statements ofoperations and cash flows for the nine (9) month periods ended September 30,2005 and 2004.  These financial statements should be read in conjunctionwith the audited consolidated financial statements and notes thereto includedin our Annual Report on FORM 10-K/A, restated as a Development Stage Company,filed with the Securities and Exchange Commission on July 13, 2005.

 

The results of operationsfor the nine (9) month period ended September 30, 2005 are not necessarilyindicative of the results for the entire year ending December 31, 2005.

 

NOTE2 - THE COMPANY ANDNATURE OF BUSINESS

 

Kenilworth SystemsCorporation (the “Company”) was incorporated in New York in April 1968 andsince emerging from bankruptcy proceedings now plans to be engaged in thebusiness of developing and having terminals and other equipment manufacturedand design systems that permit individuals from remote locations, to play alongwith live in progress casino table games via TV (simulcast) satellite andsatellite cable broadcast around the world.

 

The Company was inbankruptcy proceedings under Chapter 7 and 11 of the Bankruptcy Code for theperiod from August 28, 1982 through September 28, 1998. The Companyceased all operations, between February 2, 1991 through September 28,1998.

 

NOTE3 - PRINCIPLES OFCONSOLIDATION

 

The consolidated financial statementsinclude the accounts of Kenilworth Systems Corporation and its wholly ownedsubsidiaries: Video Wagering Systems Corporation, RoulabetteTM NevadaCorporation, Kenilworth Systems Nevada Corporation, Kenilworth Systems (UK)Limited,  Kenilworth SatelliteBroadcasting Corporation (a Delaware Corporation) and Satellite GamingConsultants, Inc. (a Delaware Corporation). None of these subsidiaries has anyassets or liabilities except Satellite Gaming Consultants, Inc. which areincluded in the Consolidated Financial Statements.

 

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NOTE4 - GOING CONCERNUNCERTAINTY

 

As indicated in Note 2, 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 and continue in business. Management plans todevelop a wagering system that allows casino patrons and individuals outsidethe casino to play along remotely with live in-progress casino table games. TheCompany plans to obtain the necessary funding by offering its Common Stock,Senior Cumulative Convertible Preferred Shares and/or continue to sellConvertible Promissory Notes in private placements. There can be no assurancesthe Company can be successful in obtaining such financing.

 

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 were nota going-concern.

 

NOTE5 – CONVERTIBLEPROMISSORY NOTES

 

During the nine months endedSeptember 30, 2005 and 2004, respectively, the Company sold to variousinvestors $567,000 and $552,000 principal amount of Convertible PromissoryNotes bearing interest at rates ranging from 4.00% to 5.50% per annum. The Notes had a one-year term and were immediately convertible at the option ofthe noteholder into shares of restricted common stock at conversion pricesranging from $.05 to $.12 per share in 2005 and $.05 in 2004.  Theconversion prices of Notes issued in 2005 were subsequently adjusted to $.05 pershare, resulting in a noncash interest charge of $567,000 for theJune 2005 period.

 

All Notes were convertedinto a total of 11,240,000 and 11,140,000 shares of common stock, respectively,during the nine months ended September 30, 2005 and 2004.

 

During the three (3) monthperiod ended September 30, 2005 the Company did not sell any ConvertiblePromissory Notes nor did the Company issue any Common Shares upon conversion ofNotes or in settlement for services rendered to the Company.

 

NOTE6 – STOCKHOLDERS’EQUITY

 

During the nine months endedSeptember 30, 2005 and 2004, the Company issued 34,680,000 and 12,134,327shares of common stock, respectively, as compensation to directors, consultantsand other service providers.

 

During the nine months endedSeptember 30, 2005 and 2004, respectively, the Company sold 900,000 sharesof common stock for $26,170 and 1,750,000 shares for $75,000 to privateinvestors.

 

During the three monthperiod ended September 30, 2005, the Company expensed the 25,000,000 shares tobe issued to Herbert Lindo, the President and Treasurer of the Company at therate of $0.05 per share.  At theShareholder’s Meeting held on September 13, 2005, the Shareholders approved theissuance of the 25,000,000 shares to Herbert Lindo.

 

NOTE7 – ANNUALSHAREHOLDERS MEETING

 

At the Annual Meeting ofShareholders of Kenilworth Systems Corporation which was held at the WestburyManor, 1100 Jericho Turnpike, Westbury, NY 11590 on September 13, 2005 at 12:00noon, all four (4) proposals were approved by proxy and votes cast at themeeting.  The four (4) proposals are:

 

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**1.****                                     ****TO ELECT DIRECTORS**To elect seven (7) Directors for the term continuing through the next annualmeeting of Kenilworth and until their successors are duly elected.

 

**2.****                                     ****AUTHORIZATION OF ANAMENDMENT TO KENILWORTH’S CERTIFICATE OF INCORPORATION TO INCREASE THEAUTHORIZED NUMBER OF SHARES OF COMMON STOCK TO 500,000,000**

 

**3.****                                     ****RATIFICATION OF APPROVAL BYTHE BOARD OF DIRECTORS TO ISSUE 25,000,000 SHARES OF KENILWORTH COMMON STOCK TOHERBERT LINDO, THE INVENTOR OF TWO (2) ADDITIONAL PATENTS ASSIGNED TOKENILWORTH**

 

**4.****                                     ****RATIFICATION OF APPOINTMENTOF INDEPENDENT AUDITORS**

 

The Company had engagedAutomatic Data Processing (ADP) to solicit proxies and their final report whichincludes shares voted at the meeting. ADP’s final report dated September 15, 2005 on each proposal is:

 
| **TOTAL  SHARES OUTSTANDING**: |   | 158,931,245 |
|--------------------------------|--------|-------------|
|                           |   |        |
| **TOTAL  SHARES VOTED**:       |   | 116,248,387 |
|                           |   |        |
| **QUORUM**:                    |   | 73.14%      |

 

**PROPOSAL# 001 - ELECTION OF DIRECTORS**

 
| ** **           | ** ** | **FOR**     | ** ** | **WITHHELD** | ** ** |
|----------------------|------------|-------------|------------|--------------|------------|
|                 |       |        |       |         |       |
| HERBERT  LINDO       |       | 113,367,744 |       | 2,880,643    |       |
| GINO SCOTTO          |       | 113,369,264 |       | 2,879,123    |       |
| MAUREEN  PLOVNICK    |       | 113,350,464 |       | 2,897,923    |       |
| KIT WONG             |       | 113,364,514 |       | 2,883,873    |       |
| PATRICK MC  DEVITT   |       | 113,350,464 |       | 2,897,923    |       |
| JOYCE CLARK          |       | 113,364,514 |       | 2,883,873    |       |
| PAUL NUSBAUM         |       | 113,444,167 |       | 2,804,220    |       |
| TOTAL ALL  DIRECTORS |       | 793,611,131 |       | 20,127,578   |       |
| DIRECTOR  AVERAGE    |       | 113,373,018 |       | 2,875,368    |       |
| % VOTED OF  AVERAGE  |       | 97.52       | %          | 2.47         | %          |

 

**PROPOSAL# 002 - AMENDEMENT TO INCREASE THE AUTHORIZED NUMBER OF SHARES**

 
| ** **          | ** ** | **FOR**     | ** ** | **AGAINST** | ** ** | **ABSTAIN** | ** ** |
|---------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                |       |        |       |        |       |        |       |
| BENEFICIAL  COMMON  |       | 62,146,027  |       | 1,922,499   |       | 3,220,720   |       |
| REGISTERED  COMMON  |       | 48,499,783  |       | 435,910     |       | 23,448      |       |
| TOTAL SHARES  VOTED |       | 110,645,810 |       | 2,358,409   |       | 3,244,168   |       |
| % OF VOTED          |       | 95.18       | %          | 2.02        | %          | 2.79        | %          |
| % OF  OUTSTANDING   |       | 69.61       | %          | 1.48        | %          | 2.04        | %          |

 

**PROPOSAL# 003 - RATIFY APPROVAL TO ISSUE 25,000,000 SHARES OF COMMON STOCK**

 
| ** **          | ** ** | **FOR**    | ** ** | **AGAINST** | ** ** | **ABSTAIN** | ** ** |
|---------------------|------------|------------|------------|-------------|------------|-------------|------------|
|                |       |       |       |        |       |        |       |
| BENEFICIAL  COMMON  |       | 13,759,647 |       | 2,013,644   |       | 3,233,020   |       |
| REGISTERED  COMMON  |       | 48,625,411 |       | 294,880     |       | 38,850      |       |
| TOTAL SHARES  VOTED |       | 62,385,058 |       | 2,308,524   |       | 3,271,870   |       |
| % OF VOTED          |       | 91.78      | %          | 3.39        | %          | 4.81        | %          |
| % OF  OUTSTANDING   |       | 39.25      | %          | 1.45        | %          | 2.05        | %          |

 

9

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**PROPOSAL# 004 – RATIFY DEMETRIUS & COMPANY, LLC. AS INDEPENDENT AUDITORS**

 
| ** **             | ** ** | **FOR**     | ** ** | **AGAINST** | ** ** | **ABSTAIN** | ** ** |
|------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                   |       |        |       |        |       |        |       |
| BENEFICIAL  COMMON     |       | 64,553,296  |       | 251,930     |       | 2,484,020   |       |
| BENEFICIAL  REGISTERED |       | 48,922,116  |       | 15,200      |       | 21,825      |       |
| TOTAL SHARES  VOTED    |       | 113,475,412 |       | 267,130     |       | 2,505,845   |       |
| % OF VOTED             |       | 97.61       | %          | 0.22        | %          | 2.15        | %          |
| % OF  OUTSTANDING      |       | 71.39       | %          | 0.16        | %          | 1.57        | %          |

 

Immediately after theconclusion of the Shareholder’s Meeting, the newly elected Board of Directorsmet to vote for the election of two (2) additional Directors pursuant toKenilworth’s By-Laws.  After the electionof the two (2) additional Directors, the Company now has nine (9) Directors ofa permissible maximum amount of fifteen (15) Directors.

 

ITEM2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

RESULTSOF OPERATIONS

 

Since we emerged frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting to $1,860,296 and $768,229 in year 2004 and 2003 and for thenine (9) months ended September 30, 2005 we sustained lossesamounting to $3,267,912 compared to a loss of $1,489,392 for the nine(9) months ended September 30, 2004. Kenilworth has had no revenuesfrom operations during the past thirteen (13) years and there can be noassurances that it will ever have revenues from present planned operations.

 

LIQUIDITYAND CAPITAL RESOURCES

 

Our present plans are todevelop a wagering system dubbed “RoulabetteTM” that would allow patrons in theindustrialized world to play and wager on live in-progress simulcast casinotable games on terminals placed in hotels, resorts, bars and other publicgathering places and in homes and offices on personal computers (PC’s) ortelevision sets connected to set top boxes for Interactive TV via digitalsatellite and digital cable broadcasts emanating from strictly regulatedcasinos.

 

GENERAL

 

Since early in the year 2000we have been solely engaged in developing patents, markets and investigatinghow best to obtain Governmental approvals, by engaging lobbyists andconsultants that would allow television satellite and cable subscribersthroughout the industrialized world to play and wager along with live,in-progress casino table games (Roulette, Craps, Baccarat and more) fromstrictly regulated casinos located in the United States and other locationsaround the world.

 

Employing the latestencrypted satellite and cable technology and placing television cameras instrategic locations above the casino table games, without disrupting the normalgame-monitoring activities, (a separate control room would direct the variouscamera angles), and transmitting the table games over the digital satellite anddigital cable networks to television sets (“TV’s”), which become a platform forplaying along with the casino games wherever TV’s are located.

 

Kenilworth titled theoverall proposed project “RoulabetteTM”.  There are 120 million TVsubscribers in the United States and more than 300 million subscribersthroughout the rest of the world (“The Market”).  On average, householdsin the U.S. have 2 1⁄2 TV’s.  (It is important since the satellite and cablecompanies will charge a separate fee for transmitting the table games). Public gathering places can accommodate (be able

 

10

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to network) up to 200 TVsets with a simple satellite receiving dish or direct cable connections. With wagering possible in homes, hotel rooms, resort rooms, pubs, restaurants,race tracks and other public gathering places the Company believes will becomea more than $500 billion net win****Marketwithin five (5) years throughout the industrialized world.

 

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

 

All forty one (41) lotteriesin the United States are owned and operated by County and State agencies. Throughout the rest of the world lotteries are owned by government agencies ornon profit charitable agencies that distribute the net earnings to benefitsocial and charitable programs, or by private entities that pay a percentage oftheir net win to designated government agencies.

 

These foreign lotteries alsohave the same databases as lotteries in the United States, except mostlotteries throughout Europe pool their lotteries between countries, not unlikeMega Millions and PowerBall in the United States, which makes the distributionsimpler and very cost effective for both Kenilworth and the lotteries.

 

There are no technicalbreakthroughs required.  The technology is readily available.  Whatis needed is to get through the maze of Local, County, State and Federalregulations in each U.S. State and foreign countries.  When the firstState in the United States grants the Company permission to transmit thebroadcast from one of its casinos to their residents and to States that do nothave any casinos, the other forty (40) States with lotteries will joinexpeditiously.

 

The lotteries will receiveforty percent (40%) of the net win without costs of any kind. In addition, theStates’ general fund will receive five percent (5%) of the net win, alsowithout costs of any kind.

 

In States that designateexclusively lottery proceeds to schools and their teachers it is a welcomecontribution.  In other States it will close budget gaps.

 

In addition, throughout theUnited States there are five hundred (500) facilities that simulcast livein-progress horse/dog races.  At all facilities there are several large TVscreens that show the races from the different tracks with general theater typeseating for patrons and at private cubicles with television sets outfitted withtouch screens.  The cubicles rent for additional fees.  After playersopen an account and select pin numbers, they can watch each race offered on thedifferent tracks on the TV and place wagers on the different races by simplychanging channels.  The players may also watch sporting events, the news,the Stock market reports, and in the near future RoulabetteTM, live, in-progresscasino table games.  The simulcast centers have their own databases tomanage the cash deposit and pay winnings on the horse/dog races and will beable to manage the casino games, on the same methods as the lotteries willmanage RoulabetteTM.  With fifty to one hundred (50-100) private TV’s,available in simulcast centers, especially at night, when fewer tracks areoperating.

 

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

 

To conduct the initialbroadcast Kenilworth believes it will require ten million dollars ($10,000,000)and there are no assurances we will ever be able to obtain any of such money.At present, the Company does not have the funds readily available but hopes toobtain same, from investors, as soon as Kenilworth can commence broadcastingfrom a casino in the United States or other casinos throughout the world.

 

11

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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 TAB(Totalizator Agency Board) a quasy government agency of the State of Victoria,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 system that will manage the wagers by themicroprocessor installed in TV set-top boxes to receive satellite broadcasts.This as planned would allow a player in an interactive manner, at a remotelocation (outside the casino confines), to experience the actual play andexcitement at the casino table game and to make wagers on the various games,without having to be physically present at the casino or casino table. There are no assurances we will be able to successfully develop any system.

 

The proposed “RoulabetteTM”system also will provide RoulabetteTM terminals that may be placed in resorts,racetracks or other gathering places which consists of a personal computer (PC)with two (2) monitors.  One (1) monitor will display the livein-progress casino table game play as well as advertising.  The second,which will be outfitted with a touch screen, allows a player to place wagersdirectly over the games displayed on the first monitor.  It will also havea variable denomination bill acceptor and a bar code ticket dispenser. Both monitors will be housed in an attractive enclosure. The RoulabetteTMterminal willbe the sizeof a typical “low boy” slot machine (desk top height).  Each terminalwould be self-sufficient, manages wagers from $0.25 to $100.00 or theequivalent in most any currency, and receives the table game play via simulcastdigital satellite TV transmissions (with dish antennas) or local digital cableconnection from legally operating casinos throughout the industrialized world.

 

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 RoulabetteTM terminal is expected to offer an alternativeto slot machine players. There are now believed to be more than ten(10) million slot machines played throughout the world.

 

Kenilworth will seek topromote to state lotteries and foreign jurisdictions, and other state regulatedentities, the ability to operate websites that will manage the wagers. Theprogram will ask state legislatures to amend their lottery horse/dog racing andOTB legislation to include RoulabetteTM wagering or promulgate new legislation.There are no assurances that the necessary approvals will be granted.

 

We believe there arepowerful arguments for state legislatures to amend their Lottery Acts toinclude “Play Along with RoulabetteTM Live”. Lottery revenue is graduallydecreasing in every state. Thirty-two (32) states and the District of Columbiaare pooling their lottery prizes with the “PowerBall” and “Big Game” nationallotteries. In most of these states, the state lottery finds it difficult toobtain sufficient numbers of players to make up a minimum weekly lottery prizeof one million dollars ($1,000,000). In most states, the revenue from lotteryplay benefits education. States need something more attractive to restorerevenue. With “Play Along with RoulabetteTM Live”, there is interaction,excitement and fun. All which we believe may be at much better odds than may beoffered by the lotteries. The lotteries can establish maximum wagers daily,weekly and monthly limits, and monitor compulsive gamblers, and almost prevent100% of the underaged from wagering on RoulabetteTM by use of lottery terminalsto make deposits in cash to wager along.

 

Project RoulabetteTM is aconcept intended to be developed and there can be no assurances that it willever be developed successfully.  The Patented microprocessors to beinstalled in the TV set top boxes or the Television set directly have not beendesigned.  We have as at September 30, 2005, no firm developedagreement, customers except for proposals submitted for future business andthere can be no assurances that we will ever have same.

 

Kenilworth plans to obtainthe necessary funding by offering in Private Placements, Common Shares,Convertible Promissory Notes, and Cumulative Convertible Preferred Sharesand/or by the sale of limited joint venture participations in futureRoulabetteTM franchises. There can be no assurances that the Company will beable to secure any of these funds.

 

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PART II.OTHER INFORMATION

 
| Item 1.  |   | LEGAL  PROCEEDINGS:                                                                                                                                    |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                   |
|     |   | None                                                                                                                                                   |
|     |   |                                                                                                                                                   |
| Item  2. |   | CHANGE  IN SECURITIES:                                                                                                                                 |
|     |   |                                                                                                                                                   |
|     |   | None                                                                                                                                                   |
|     |   |                                                                                                                                                   |
| Item  3. |   | DEFAULT  UPON SENIOR SECURITIES:                                                                                                                       |
|     |   |                                                                                                                                                   |
|     |   | None                                                                                                                                                   |
|     |   |                                                                                                                                                   |
| Item  4. |   | SUBMISSION  OF A MATTER TO A VOTE OF SECURITIES HOLDERS:                                                                                               |
|     |   |                                                                                                                                                   |
|     |   | None                                                                                                                                                   |
|     |   |                                                                                                                                                   |
| Item  5. |   | OTHER  INFORMATION:                                                                                                                                    |
|     |   |                                                                                                                                                   |
|     |   | None                                                                                                                                                   |
|     |   |                                                                                                                                                   |
| Item  6. |   | EXHIBITS  AND REPORTS ON FORM 8-K:                                                                                                                |
|     |   |                                                                                                                                                   |
|     |   | Ex  31.1 Certification of Chief Financial Officer of the Company Required by  Rule 13a-14(a) or Rule 15d-14(c) of the Exchange Act |

 

13

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SIGNATURE

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed in its behalf by the undersigned thereunto duly authorized.

 
|   | KENILWORTH  SYSTEMS CORPORATION        |
|--------|----------------------------------------|
|   |                                   |
| By:    | /s/ Herbert Lindo                      |   |
|   | Herbert  Lindo,                        |
|   | President  and Chief Financial Officer |
|   | November 18, 2005            |

 

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