**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

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**FORM 10-Q**

 

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**(Mark One)**

 

**x**                              Quarterlyreport pursuant to Section 13 OR 15(D) of the Securities Exchange Actof 1934

 

**For the quarterly periodended September 30, 2006**

 

**OR**

 

**o**                                 Transitionreport pursuant to Section 13 or 15(D) of the Securities Exchange Actof 1934

 

**For the transition periodfrom             to**

 

**Commission File Number:0-08962**

 

**KENILWORTH SYSTEMS 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 mark whether the 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 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes  x   No  o

State the number of shares outstanding of each of theissuer’s classes of common stock as of the latest practical date

The number of shares of common stock, $.01 par valueof the Registrant outstanding as of September 30, 2006 was 262,588,579.

 

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**Table ofContents**

**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**INDEX**
|                   | ** ** |                                                                                                                                                                                                                                                    | ** ** | ** ** |
|-------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| **Part I.**  | ** ** | **Financial Information**                                                                                                                                                                                                                          |       |       |
|              |       |                                                                                                                                                                                                                                               |       |       |
| Item 1.           |       | Financial Statements                                                                                                                                                                                                                               |       |       |
|              |       |                                                                                                                                                                                                                                               |       |       |
|              |       | Condensed  Consolidated Balance Sheets — September 30, 2006 and December 31,  2005 (unaudited)                                                                                                                                      |       | 4          |
|              |       |                                                                                                                                                                                                                                               |       |       |
|              |       | Condensed Consolidated  Statements of Operation and Deficit — Nine months ended September 30,  2006 and 2005, Three months ended September 30, 2006 and 2005, and the  period from inception to September 30, 2005 (unaudited) |       | 5          |
|              |       |                                                                                                                                                                                                                                               |       |       |
|              |       | Condensed  Consolidated Statements of Cash Flows — Nine months ended September 30,  2006 and 2005, and the period from inception to September 30, 2006  (unaudited)                                                                 |       | 6          |
|              |       |                                                                                                                                                                                                                                               |       |       |
|              |       | Condensed  Notes to Consolidated Financial Statements (unaudited)                                                                                                                                                                                  |       | 7          |
|              |       |                                                                                                                                                                                                                                               |       |       |
| Item 2.           |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                        |       | 8          |
|              |       |                                                                                                                                                                                                                                               |       |       |
| Item 3.           |       | Quantitative and Qualitative Disclosures About  Market Risk                                                                                                                                                                                        |       |       |
|              |       |                                                                                                                                                                                                                                               |       |       |
| **Part II.** | ** ** | **Other Information**                                                                                                                                                                                                                              |       |       |
|              |       |                                                                                                                                                                                                                                               |       |       |
| Item 1.           |       | Legal Proceedings                                                                                                                                                                                                                                  |       | 14         |
|              |       |                                                                                                                                                                                                                                               |       |       |
| Item 6.           |       | Exhibits                                                                                                                                                                                                                                           |       | 14         |
|              |       |                                                                                                                                                                                                                                               |       |       |
|              |       | Signature                                                                                                                                                                                                                                          |       | 14         |

 

FORWARD LOOKINGSTATMENTS

The information containedin this Form 10-Q and Kenilworth’s other filings with the SecuritiesExchange Commission may contain “forward-looking” statements within the meaningof section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended, and issubject to the safe harbors created thereby. Such information involvesimportant risks and uncertainties that could significantly affect results inthe future and, accordingly, such results may differ from those expressed inany forward looking statements herein. Future operating results may beadversely affected as a result of a number of factors.

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.

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RISKS

Specific reference ismade to each of the risks described in Item 7 of the Form 10-K forDecember 31, 2005 under the discussion “Cautionary Statement For Purposesof the Safe Harbor Provisions of the Private Securities Litigation Reform Actof 1995 and Risk Factors”. Reference is also made to future filings under Forms10-Q and Forms 10-K and filings under the Securities Exchange Act of 1934 as amendedand as may be applicable under the Securities Act of 1933 as amended.

INTRODUCTORY NOTE

This FORM 10-Q is beingfiled as a “Development Stage Company” from the period beginning November 24,1998 to the present at September 30, 2006, including a charge in the amount of$4,256,926, which was the amount the Company disbursed on September 28, 1998 tobe discharged from Chapter 7 Bankruptcy Proceedings.

d) The Company issued154,964,093 shares of its Restricted Common Stock since January 1, 2002. All of the shares may have the restrictions lifted pursuant to Rule 144 and144K within one (1) or two (2) years which may substantially depress thetrading price of the Company’s Stock in the future.

During the three (3)month period ended September 30, 2005, the Company expensed the 25,000,000shares to be issued to Herbert Lindo, the Chairman, CEO and Chief FinancialOfficer at the rate of $0.05 per share.  At the Shareholders Meeting heldon September 13, 2005, the Shareholders approved the issuance of 25,000,000shares to Herbert Lindo.

At the ShareholdersMeeting held on May 28, 2003, the Shareholders approved the issuance of20,000,000 shares to be issued to Herbert Lindo the Chairman and President ofthe Company.  Unlike the 25,000,000 shares issuable to Herbert Lindo,which were expensed, the 20,000,000 shares were not expensed.

Herbert Lindo requestedto have the 45,000,000 shares issued during the period ended March 31,2006.  The Company expensed the 20,000,000 shares during the period at therate of $0.015 per share, which amounted to a reduced capital adjustment of53,652 instead of $303,652.

During the period endedMarch 31, 2006, the Company made certain adjustments to the number of sharesoutstanding which did not require capital changes.

During the quarter periodended September 30, 2006 the Company issued restricted common shares forconversion of Convertible Promissory Notes and to consultants in settlement ofdebt, 17,662,000 shares for $394,600.

**On July 25, 2006 the per shareprice reporting system reported a sale of seven hundred (700) shares of ourCommon Stock at $1.34 per share, which was incorrect.  As a result, the Company’s per share highprice for the last twelve (12) months statistically reports a high price of$1.34.  The high price for the lasttwelve (12) months should read seven cents ($0.07) per share at July 25, 2006.**

 

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**KENILWORTH SYSTEMS CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**
| ** **                                                                                                                                        | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                        |       |                         |       |                        |       |
|                                                                                                                                              |       |                         |       |                        |       |
| ASSETS                                                                                                                                            |       |                         |       |                        |       |
| CURRENT ASSETS                                                                                                                                    |       |                         |       |                        |       |
| Cash                                                                                                                                              |       | $                            | 22,724     |                        | $          | 5,495 |   |
| Prepaid expenses                                                                                                                                  |       | 50,000                       |       | 280,000                     |       |
| Loan receivable  — employee and stockholders                                                                                                 |       | 42,300                       |       | 26,300                      |       |
| Receivable from  sale of stock subscriptions (Note 8)                                                                                             |       | 80,000                       |       | —                      |       |
|                                                                                                                                              |       |                         |       |                        |       |
| Total current  assets                                                                                                                             |       | 195,024                      |       | 311,795                     |       |
|                                                                                                                                              |       |                         |       |                        |       |
| PROPERTY AND EQUIPMENT  - NET                                                                                                                     |       | 51,688                       |       | 49,010                      |       |
|                                                                                                                                              |       |                         |       |                        |       |
| PATENT                                                                                                                                            |       | 81,604                       |       | 76,763                      |       |
|  Acquisition of  Lighthouse (Note 7)                                                                                                         |       | 60,000                       |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 9,422                        |       | 9,422                       |       |
|                                                                                                                                              |       |                         |       |                        |       |
| Total assets                                                                                                                                      |       | $                            | 397,738    |                        | $          | 446,990 |   |
|                                                                                                                                              |       |                         |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES                                                                          |       |                         |       |                        |       |
| Accounts payable  and accrued expenses                                                                                                            |       | $                            | 121,425    |                        | $          | 224,842 |   |
| Payroll taxes  payable                                                                                                                            |       | 98,608                       |       | 43,878                      |       |
| Loans payable -  stockholder                                                                                                                      |       | 16,000                       |       | —                      |       |
| Loans payable -  automobile                                                                                                                       |       | 705                          |       | 2,820                       |       |
|                                                                                                                                              |       |                         |       |                        |       |
| Total current  liabilities                                                                                                                        |       | 236,738                      |       | 271,540                     |       |
|                                                                                                                                              |       |                         |       |                        |       |
| STOCKHOLDERS’ EQUITY  (DEFICIT)                                                                                                              |       |                         |       |                        |       |
| Preferred stock - par  value $.01 per share; authorized 2,000,000 shares; no shares issued and  outstanding                                       |       |                         |       |                        |       |
| Common stock - par  value $.01 per share; authorized 500,000,000 shares; issued and outstanding  262,588,579 and 200,036,249 shares, respectively |       | 2,625,885                    |       | 2,000,362                   |       |
| Additional  paid-in capital                                                                                                                       |       | 30,209,412                   |       | 30,069,906                  |       |
| Accumulated  Deficit                                                                                                                              |       | (32,674,297                  | )          | (31,894,818                 | )          |
|                                                                                                                                              |       |                         |       |                        |       |
| Total  stockholders’ equity                                                                                                                  |       | 161,000                      |       | 175,450                     |       |
|                                                                                                                                              |       |                         |       |                        |       |
| Total liabilities and  stockholders’ equity (deficit)                                                                                        |       | $                            | 397,738    |                        | $          | 446,990 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

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**KENILWORTHSYSTEMS CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**ANDDEFICIT 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,** | ** ** |
| ** **                                     | ** ** | **2006**                                                                    | ** ** | **2005**                                                               | ** ** | **2006**                                | ** ** | **2005**    | ** ** | **2006**                    | ** ** |
|                                           |       |                                                                        |       |                                                                   |       |                                    |       |        |       |                        |       |
| Expenses                                       |       |                                                                        |       |                                                                   |       |                                    |       |        |       |                        |       |
| Selling, general and administrative            |       | $                                                                           | 779,479    |                                                                   | $          | 3,267,912                               |       | $           | 157,974    |                        | $          | 1,877,071 |   |   |   |
|                                           |       |                                                                        |       |                                                                   |       |                                    |       |        |       |                        |       |
| Net loss                                       |       | $                                                                           | 779,479    |                                                                   | $          | 3,267,912                               |       | $           | 157,974    |                        | $          | 1,877,071 |   | $ | 7,607,338 |   |
|                                           |       |                                                                        |       |                                                                   |       |                                    |       |        |       |                        |       |
| Basic and  diluted loss per share              |       | $                                                                           | (0.003     | )                                                                      | $          | (0.021                                  | )          | $           | (0.001     | )                           | $          | (0.011 | ) |   |   |
|                                           |       |                                                                        |       |                                                                   |       |                                    |       |        |       |                        |       |
| Weighted average number  of shares outstanding |       | 253,541,133                                                                 |       | 152,634,248                                                            |       | 253,541,133                             |       | 167,313,242 |       |                        |       |
|                                                |            |                                                                             |            |                                                                        |            |                                         |            |             |            |                             |            |  |  |  |  |  |

 

The accompanying notes are an integral part of thesefinancial statements.

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**KENILWORTH SYSTEMS CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE NINE MONTHS ENDED SEPTEMBER 30,**

**(Unaudited)**
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**         | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24,  1998**  | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **(Inception)  to**          | ** ** |
| ** **                                                                      | ** ** | **2006**   | ** ** | **2005**   | ** ** | **September 30,  2006** | ** ** |
| Cash flows from  operating activities                                           |       |       |       |       |       |                         |       |
| Net loss                                                                        |       | $          | (779,479   | )          | $          | (3,267,912                   | )          | $ | (7,607,338 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities |       |       |       |       |       |                         |       |
| Depreciation                                                                    |       |       |       | 11,827     |       | 28,431                       |       |
| Amortization of  patent                                                         |       |       |       | 4,919      |       | 12,795                       |       |
| Accretion of  convertible debt discount                                         |       |       |       | —     |       | 72,656                       |       |
| Beneficial  conversion feature                                                  |       |       |       | 837,000    |       | 1,452,097                    |       |
| Common stock  issued for services                                               |       |       |       | 1,726,346  |       | 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      |       | 5,495                        |       |
| Other                                                                           |       |       |       | —     |       | 21,100                       |       |
| Increase  (decrease) in cash attributable to changes in assets and liabilities: |       |       |       |       |       |                         |       |
| Prepaid expenses                                                                |       | 230,000    |       | 40,400     |       | (53,350                      | )          |
| Loan receivable  — employee and stockholders                               |       | (16,000    | )          | (6,300     | )          | (6,300                       | )          |
| Accounts payable  and accrued expenses                                          |       | (105,532   | )          | (77,797    | )          | 140,975                      |       |
| Payroll taxes  payable                                                          |       | 54,730     |       | (43,513    | )          | 16,009                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash used in  operating activities                                          |       | (616,281   | )          | (773,744   | )          | (2,142,264                   | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Cash flows from  investing activities                                           |       |       |       |       |       |                         |       |
| Receivable from  sale of stock subscriptions                                    |       | (80,000    | )          | —     |       | (4,000                       | )          |
| Proceeds from  loan payable - stockholder                                       |       | 16,000     |       | —     |       | 4,000                        |       |
| Payment of  patent costs                                                        |       | (4,841     | )          | (7,113     | )          | (73,752                      | )          |
| Purchase of  property and equipment                                             |       | (62,678    | )          | (4,981     | )          | (63,548                      | )          |
| Security deposit                                                                |       |       |       | —     |       | (4,250                       | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash used in  investing activities                                          |       | (131,519   | )          | (12,094    | )          | (141,550                     | )          |
|                                                                            |       |       |       |       |       |                         |       |
| Cash flows from  financing activities                                           |       |       |       | (1,138     | )          | (1,138                       | )          |
| Proceeds from  loans payable - stockholders                                     |       |       |       | 5,000      |       | 65,000                       |       |
| Payment of loans  payable - related parties                                     |       |       |       | (1,950     | )          | (127,967                     | )          |
| Proceeds from  loans payable - related parties                                  |       |       |       | 13,000     |       | 154,137                      |       |
| Payment of loans  payable - related parties                                     |       |       |       | (32,000    | )          | (32,000                      | )          |
| Proceeds from  paid in capital                                                  |       | 139,506    |       | 794,500    |       | 2,069,861                    |       |
| Proceeds from  sale of common stock                                             |       | 625,523    |       | 10,000     |       | 132,500                      |       |
| Proceeds from  stock subscriptions receivable                                   |       |       |       | 27,500     |       | 52,500                       |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net cash  provided by financing activities                                      |       | 765,029    |       | 814,912    |       | 2,312,893                    |       |
|                                                                            |       |       |       |       |       |                         |       |
| Net change in cash                                                              |       | 17,229     |       | 29,074     |       |                         |       |
| Cash- beginning of  period                                                      |       | 5,495      |       | 5          |       |                         |       |
| Cash — end of period                                                       |       | $          | 22,724     |       | $          | 29,079                       |       |   |   |
|                                                                                 |            |            |            |            |            |                              |            |  |  |  |

 

The accompanying notes are an integral part of thesefinancial statements.

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**KENILWORTH SYSTEMS CORPORATION**

**AND SUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**CONDENSED NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

NOTE 1- BASIS OF PRESENTATION

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of January 1, 2006 contain all adjustments (consisting ofonly normal accruals) necessary to present fairly the consolidated balancesheets as of September 30, 2006 and December 31, 2005 and the relatedstatements of operations and cash flows for the three (3) month periodsended September 30, 2006 and 2005.  These financial statements should beread in conjunction with the consolidated financial statements and notesthereto included in our unaudited Annual Report on FORM 10-K, as aDevelopment Stage Company, filed with the Securities and Exchange Commission onAugust 28, 2006.

The results of operationsfor the three (3) month period ended September 30, 2006 are notnecessarily indicative of the results for the entire year endingDecember 31, 2006.

NOTE 2- THE COMPANY AND NATURE 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 manufactured bysubcontractors and design systems that permit individuals from remotelocations, to play along with live in progress casino table games via TV(simulcast) satellite and Internet 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 November 24, 1998.

NOTE 3- PRINCIPLES OF CONSOLIDATION

The consolidatedfinancial statements include the accounts of Kenilworth Systems Corporation andits wholly owned subsidiaries: Video Wagering Systems Corporation, RoulabetteTMNevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth Systems(UK) Limited, Kenilworth Satellite Broadcasting Corporation (a DelawareCorporation) and Satellite Gaming Consultants, Inc. (a Delaware Corporation).None of these subsidiaries has any assets or liabilities, except SatelliteGaming Consultants, Inc.  The financialsare consolidated in this report.

NOTE 4- GOING CONCERN UNCERTAINTY

As indicated in Note 2,the Company emerged from Chapter 7 in September 1998 and has not yetcommenced revenue producing operations. These factors create uncertainty as tothe Company’s ability to operate as a going-concern and continue in business.Management plans to develop a wagering system that allows casino patrons andindividuals outside the casino to play along remotely with live in-progresscasino table games. The Company plans to obtain the necessary funding byoffering its Common Stock, Senior Cumulative Convertible Preferred Sharesand/or continue to sell Convertible Promissory Notes in private placements.There can be no assurances the Company can be successful in obtaining suchfinancing.

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

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NOTE 5 –CONVERTIBLE PROMISSORY NOTES

During the quarters endedSeptember 30, 2006 and September 30, 2005 respectively, the Company sold tovarious private investors $394,600 and $567,000 principal amount of ConvertiblePromissory Notes bearing interest at rates ranging from 4.00% to 8.00% perannum.  The Notes had a one-year term and were immediately convertible atthe option of the noteholder into shares of restricted common stock based onconversion prices ranging from $.05 to $.10 per share.  All Notes issuedin the quarters ended September 30, 2006 and September 30, 2005 wereconverted into a total of 17,662,000 and 11,240,000 common shares,respectively.

NOTE 6 -NON CASH TRANSACTIONS

Common shares issued forservices

2006:

The Company issued26,500,000 shares as compensation for services rendered during the firstquarter period ended March 31, 2006.  The services were valued at$403,662.

The Company issued13,700,000 shares as compensation for services rendered during the secondquarter period ended June 30, 2006.  The services were valued at$333,493.

The Company issued3,710,000 shares as compensation for services rendered during the third quarterperiod ended September 30, 2006.  Theservices were valued at $127,000.

NOTE 7 –INVESTMENT IN LIGHTHOUSE SUPPLIES & SERVICES, INC.

In order to operate abusiness in the Philippines and engage in a business relationship with thePhilippine Amusement and Gaming Corporation (PAGCOR), we purchased LighthouseSupplies & Services, Inc (Lighthouse) for US$60,000.  The previousowners, all citizens of the Republic of the Philippines, agreed to continue toserve as directors representing fifty-one percent (51%) with Kenilworthdirectors representing forty-nine percent (49%) of the Board.

NOTE 8 –SUBSEQUENT EVENTS

Subsequent to September30, 2006, the Company received $80,000 from the sale of stock subscriptions.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Since we emerged frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting of $3,815,302 and $768,229 in year 2005 and 2004 and for thenine-months ended September 30, 2006 we sustained a loss amounting to $779,479compared to a loss of $3,267,912 for the nine month period ending September 30,2005. Kenilworth has had no revenues from operations during the past fourteen (14)years and there can be no assurances that it will ever have revenues frompresent planned operations.

LIQUIDITY AND CAPITALRESOURCES

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 TV’s located in hotels, resorts, bars and other public gatheringplaces and in homes and offices or on personal computers 

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(PC’s) or television setsconnected to set top boxes for one-way TV’s via digital satellite, digitalcable and Internet broadcasts emanating from strictly regulated casinos.

GENERAL

Since early in the year2000 we have been solely engaged in developing patents, markets andinvestigating how best to obtain Governmental approvals, by engaging lobbyistsand consultants that would allow television satellite and cable subscribersthroughout the industrialized world to play and wager along 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 stations would direct thevarious camera angles), and transmitting the table games over the digitalsatellite, digital cable and broadband Internet networks to television sets (“TV’s”),which become a platform for playing along with the casino games wherever TV’sare located.

Kenilworth titled theoverall project “RoulabetteTM”.  There are 120 million TV subscribers inthe United States and more than 300 million subscribers throughout the rest ofthe industrialized world (“The Market”).  On average, households in theU.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 to network) up to 200 TV setswith a simple satellite receiving dish or direct cable connections.  With wageringpossible in homes, hotel rooms, resort rooms, pubs, restaurants, race tracksand other public gathering places the Company believes it will become a morethan $500 billion net win****Marketwithin five (5) years (2011) 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)lotteries in the United States are owned and operated by County and Stateagencies.  Throughout the rest of the world lotteries are owned bygovernment agencies or non profit charitable agencies that distribute the netearnings to benefit social and charitable programs, or by private entities thatpay a percentage of their net win to designated government agencies.

These foreign lotteriesalso have the same databases as lotteries in the United States, except mostlotteries throughout Europe pool their lotteries between countries, not unlikeMega Millions and PowerBall in the 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 jurisdictions.  When the firstState in the United States grants the Company permission to transmit thebroadcast from one of its casinos to their residents and to States that do nothave any casinos, (the entire East coast of the United States), the other forty(40) States with lotteries will join expeditiously.

Kenilworth will share thenet win revenue with allparticipating entities that provide RoulabetteTM gaming without costs of any kind. Lotteries willreceive a minimum of forty percent (40%) of the total net win from their respective jurisdictions.

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

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In addition, throughoutthe United States there are approximately five hundred (500) facilities that simulcast live in-progress horse/dograces.  At all facilities there are several large TV screens that show theraces from the different tracks with general theater type seating for patronsand at private cubicles with television sets outfitted with touchscreens.  The cubicles rent for additional fees.  After players openan 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 simply changingchannels.  The players, at present, may also watch sporting events, thenews, the Stock market reports, and in the near future RoulabetteTM, live,in-progress casino table games.  The simulcast centers have their owndatabases to manage the cash deposit and pay winnings on the horse/dog racesand will be able to manage the casino games, with the same databases. With fifty to one hundred fifty (50-150) private TV’s, available in simulcastcenters, especially at night, when fewer tracks are operating, it willsubstantially increase attendance and net revenue.

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

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.

In prior years,Kenilworth completed a prototype system that allowed casino patrons to playalong with live in-progress casino table games only within the confines of acasino, via closed circuit television. Also in 1990, we developed and deliveredfor the TAB (Totalizator Agency Board) a quasy government agency of the Stateof Victoria, Australia, a cashless slot machine system. Both systems requireddebit cards and central mainframe computers to manage the wagers. By making useof the expertise applied in the development of the aforementioned systems weplan to develop 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.

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

Where authorized, hotels,resorts clubs and other public gathering places will be able to offer casinotable game action in their establishments without incurring the costs tooperate a casino. The RoulabetteTM Slot is expected to offer an alternative toslot 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. There are no assurances that the necessary approvals will be granted.

We believe there arepowerful arguments for state legislatures to amend their Lottery Acts, ifnecessary, to include “Play Along with RoulabetteTM Live”. Lottery revenue isgradually decreasing in every state. Thirty-two (32) states and the District ofColumbia are pooling their lottery prizes with the “Mega Millions” and “MegaBucks” national lotteries. In most of these states, the state lottery finds itdifficult to obtain sufficient numbers of players to make up a minimum weeklylottery prize of one million dollars ($1,000,000). In most states, the revenuefrom lottery play benefits education. States need something more 

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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, 2006, no firm developed agreement,customers except our agreement with the Philippines Amusement and GamingCorporation (PAGCOR) for proposals submitted for future business and there canbe no assurances that we will ever have same.

Kenilworth plans toobtain the necessary funding by offering in Private Placements, Common Shares,Convertible Promissory Notes, and Cumulative Convertible Preferred Shares andConvertible Debentures and/or by the sale of limited joint ventureparticipations in future RoulabetteTM franchises. There can be no assurancesthat the Company will be able to secure any of these funds.

THE STATUS WITH PAGCOR

During January 2006, theCompany reestablished negotiations with the Philippines Amusement and GamingCorporation (“PAGCOR”) for permission to broadcast live, in-progress casinotable games from their casinos.

PAGCOR is the Republic ofthe Philippines chartered government gaming monopoly.  PAGCOR partiallyowns and exclusively operates all fourteen (14) Filipino casinos, some of whichare located in exclusive resort facilities frequented by Asian patrons(tourists).

In March 2006, Kenilworthconducted a live, in-progress casino table game test to demonstrate the abilityto broadcast the table games, for around the world viewing, without disruptingthe normal security monitoring and protecting the privacy of players atadjoining table games.  The film clip of the test broadcast which was madeat a roulette table located in the new Hyatt Hotel and Casino, Manila, isavailable for viewing on our website www.kenilworthsys.com (see Press Release:Monday, March 6, 2006).

In April 2006, Kenilworthguaranteed to pay PAGCOR monthly payments, for hosting the broadcasts when theycommence, for a contract period of ten (10) years; US $1 million for year one(1); US $2 million for years two (2) and three (3); US $5 million for yearsfour (4) through seven (7) and US $10 million for every year thereafter,totaling US $636,000,000 over the ten (10) year period.

The payments have to bemade regardless from where we broadcast.  Kenilworth requires theflexibility to broadcast from other casinos besides the Philippines.

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

**We haveacquired the broadcast site for RoulabetteTM.  Now we have to obtainagreements from jurisdictions that will permit to receive the broadcasts. We are in an active search in Europe, including Eastern Europe, South America,China, India and the Pacific Rim nations.**

Virtual casino gambling,using the Internet, has flourished not only in the United States, but alsothroughout the industrialized world.

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In England and Ireland,horseracing and football wagering has been permitted on gaming platforms foryears.  Now, in advance of new proposed United Kingdom gaming legislation,virtual casino gaming is taking place.

Illegal gambling isthriving in the most populated markets in Asia, China, India and the PacificRim Nations.

China may be the firstcountry to accept RoulabetteTM.  The Chinese Government does not wish theirconstituents to visit Macau.  Macau represents all that Las Vegas has tooffer and is entirely American.  China controls and restricts (censors)all news services, foreign newspapers, magazines and all publications that donot meet their ideology.  China’s economy is advancing at an astonishingpace but remains a Communist oriented society and remains obstructive to therest of the industrialized world, despite joining the World Trade Organization(WTO).  The Chinese Government views Macau as a “stop over” for touriststhat visit China, as yet, a virgin destination and for other affluent Asiangamblers.

We believe RoulabetteTMwagering may receive early acceptance in China. The Government can control theamount of the wagering and more importantly, can determine the source of thefunds (wagers).  The same scenario may be said of India.

****New Gaming Enforcement Law May Shift Casino andSports Wagering to State Lotteries****

The Internet GamblingProhibition and Enforcement Act of 2006, signed into law by President Bush onFriday, October 13, 2006, will not prohibit but rather enhances the Company’sproposed RoulabetteTM System of playing along remotely with live casino tablegames. We deal with cash only.

Internet gambling wasalways outlawed in the U.S. Las Vegas lobbied to make it legal to allow casinoplayers to wager, from home or other remote locations, directly with the casinoof their choice. With the credit card prohibition, that appears to becomeimprobable. RoulabetteTM will be primarily deployed in conjunction with LotterySystems. Digital satellite and cable subscribers will be able to go to theirlocal lottery agents and make cash deposits and/or collect winnings, in thesame manner as if they are purchasing lottery tickets, using pre-encoded ‘RoulabetteTMPlay Cards’ inserted in the lottery terminals. Our basic patent encompassesremote satellite broadcasts and a pending application is directed to havingexclusively state lotteries and other authorized public agencies manage all thecash handling and distribution. Using lotteries, that can only by law, acceptcash deposits, concerned citizens and legislators will be assured that the highschool student and college freshman will not be able to participate. By usingthe lotteries database, the compulsive gambler can be identified and, ifnecessary, limited or shut down. The additional revenue collected from thelottery will be available to fund state activities such as boost school aid andteacher’s salaries.

**IfKenilworth is permitted to broadcast the live game action from a Las Vegascasino, state and federal government agencies will earn and collect thesubstantial income that formerly was earned illegally by overseas operators.**

Unless an alternative isfound, the illegal wagering may not stop. Determined players will find othermeans to make their deposits and continue to wager with their foreignproviders.**If the U.S. resident gamers have legal access fortheir casino and sports betting habits, the foreign operators will cease toexist. Their prime market was, and may remain, the U.S. resident.**

RoulabetteTM action isdesigned to offer entertainment, not hardcore gambling.

It is a practicalsolution to most illegal gambling. The RoulabetteTM System is identical tosimulcasts of horse and dog racing. The wagering takes place at the receivinglocations, lotteries, homes, religious organizations that conduct Nevada nightsusing rented terminals provided by Kenilworth, not at the remote casinolocations.

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The RoulabetteTM programwill include entertainment and commentators (much like commentators of sportingevents and poker tournaments) to assist players with the rules and regulationsof the games. Live casino table game action may also be offered on slotmachines and video lottery terminals, as an alternative and change of pace fromnative games.

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 of our patents, filedin the forty-nine (49) industrialized countries in the world, provide fortransmitting remote, live in-progress casino table games via telephone lines,Internet and satellite (satellite primarily for the U.S. market).  Usingbroadband, Internet is simpler and more economical to operate than usingsatellite transmission.

RoulabetteTM offers content to the broadcasting industryand a medium for local andinternational advertisers.

According to WangXuehong, head of the China Center for Lottery Studies of Beijing University,revenue form legal lotteries in China in 2005 reached 70 billion Yuan ($87.5billion US dollars).

We have two (2) U.S.patents pending using lottery terminals to manage the wagering.  Thepatents have been published and filed with our other patents throughout theforty-nine (49) countries.  It may become the incentive needed for theChinese Government to permit our live, in-progress table games from thePhilippines or from a casino in Macau.

In order to gain a breakthrough the maze of regulations we just need to demonstrate the viability ofRoulabetteTM by broadcasting the live games from the Hyatt Casino in Manila forviewing by cable and satellite subscribers, initially without participating inactual gambling.  Similar to poker tournaments that are offered forviewing only.

**Ifgovernments cannot control illegal gambling, why not make it legal and allowthe various government agencies share in the net win revenue.**

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PART II.OTHER INFORMATION

Item 1.    LEGAL PROCEEDINGS:

None

Item 2.    CHANGE IN SECURITIES:

None

Item 3.    DEFAULT UPON SENIORSECURITIES:

None

Item 4.    SUBMISSION OF A MATTERTO A VOTE OF SECURITIES HOLDERS:

None

Item 5.    OTHER INFORMATION:

TheCompany plans to hold its Annual Meeting of Shareholders in December 2006 orJanuary 2007 or any adjournment thereof with proxy materials mailed toshareholders of record  prior to theproposed meeting dates.

Item 6.    EXHIBITS AND REPORTS ONFORM 8-K:

Ex31.1 Certification of Chief Financial Officer of the Company Required byRule 13a-14(a) or Rule 15d-14(c) of the Exchange Act

Ex32.1 Chairman and Chief Executive Officer Certification pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002.

 

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SIGNATURE

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed in its behalf by the undersigned thereunto dulyauthorized.
|        | KENILWORTH SYSTEMS CORPORATION        |   |
|--------|---------------------------------------|--------|
|   |                                  |   |
| By:    | /s/ Herbert Lindo                     |   |
|   | Herbert Lindo,                        |   |
|   | President and Chief Financial Officer |   |
|   | November 6, 2006            |   |

 

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