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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****         ****Quarterly report pursuant to Section 13 OR15(D) of the SecuritiesExchange Act of 1934**

** **

**For the quarterly period ended September 30, 2008**

 

**OR**

 

**o****          ****Transition reportpursuant to Section 13 or 15(D) of the Securities ExchangeAct 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 mark whether the Registrant (1) has filed allreports required to be filed by section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes  x   No  o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act). o  Yes    x  No

 

Statethe number of shares outstanding of each of the issuer’s classes of commonstock as of the latest practical date.

 

Thenumber of shares of common stock, $.01 par value of the Registrant outstandingas of September 30, 2008 was 421,094,586.

 

 

 

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**KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

 

**INDEX**

 
| **Part I.**  | **Financial Information**                                                                                                                                                                                                   |   |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              |                                                                                                                                                                                                                        |   |
| Item 1.           | Unaudited Condensed Consolidated Financial  Statements                                                                                                                                                                      |   |
|              |                                                                                                                                                                                                                        |   |
|              | Condensed Consolidated Statements of  Operation (and Deficit) (unaudited) - Nine months ended September 30,  2008 and 2007, and the period from inception, as a Development Stage Company,  to September 30, 2008 |   |
|              |                                                                                                                                                                                                                        |   |
|              | Condensed Consolidated Balance Sheets  (unaudited) — September 30, 2008 and December 31, 2007                                                                                                                |   |
|              |                                                                                                                                                                                                                        |   |
|              | Condensed  Consolidated Statements of Cash Flows (unaudited) - Nine months ended  September 30, 2008 and 2007, and the period from inception, as a  Development Stage Company, to September 30, 2008              |   |
|              |                                                                                                                                                                                                                        |   |
|              | 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                                                                                                                                                                 |   |
|              |                                                                                                                                                                                                                        |   |
| Item 4.           | Controls and Procedures                                                                                                                                                                                                     |   |
|              |                                                                                                                                                                                                                        |   |
| **Part II.** | **Other Information**                                                                                                                                                                                                       |   |
|              |                                                                                                                                                                                                                        |   |
| Item 1.           | Description of Business                                                                                                                                                                                                     |   |
|              |                                                                                                                                                                                                                        |   |
| Item 2.           | Legal Proceedings                                                                                                                                                                                                           |   |
|              |                                                                                                                                                                                                                        |   |
| Items             |                                                                                                                                                                                                                        |   |
| 3,4,5,6           |                                                                                                                                                                                                                        |   |
|              |                                                                                                                                                                                                                        |   |
| Item 7.           | Exhibits                                                                                                                                                                                                                    |   |
|              |                                                                                                                                                                                                                        |   |
| Signature         |                                                                                                                                                                                                                        |   |

 

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FORWARD LOOKING STATEMENTS

 

Theinformation contained in this Form 10-Q and Kenilworth’s other filingswith the Securities Exchange Commission contain “forward-looking” statementswithin the meaning of section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, asamended, and is subject to the safe harbors created thereby. Such informationinvolves important risks and uncertainties that could significantly affectresults in the future and, accordingly, such results may differ from thoseexpressed in any forward looking statements herein. Future operating resultsmay be adversely affected as a result of a number of factors.

 

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

 

RISKS

 

Specificreference is made to each of the risks described in Item 7 in Part II ofthe Form 10-K for December 31, 2007 under the discussion “CautionaryStatement For Purposes of the Safe Harbor Provisions of the Private SecuritiesLitigation Reform Act of 1995 and Risk Factors”. Reference is also made tofuture filings under Forms 10-Q and Forms 10-K and filings under the SecuritiesExchange Act of 1934 as amended and as may be applicable under the SecuritiesAct of 1933 as amended.

 

INTRODUCTORYNOTE

 

**The 10-Q has not been reviewed by the Independent Auditor.**

 

ThisForm 10-Q is being filed as a “Development Stage Company” from the periodbeginning November 24, 1998 to the present at September 30, 2008,including a charge in the amount of $4,256,926, which was the amount theCompany disbursed on September 28, 1998 to exit from Chapter 7 BankruptcyProceedings.

 

d)The Company issued 125,596,193 shares of its Restricted Common Stock since December 31,2006.  All of the shares may have the restrictions lifted pursuant to Rule 144B after six (6) months which may substantially depress the trading priceof the Company’s Stock in the future.

 

Duringthe three (3) month period ended September 30, 2005, the Companyexpensed the 25,000,000 shares to be issued to Herbert Lindo, the Chairman, CEOand Chief Financial Officer at the rate of $0.05 per share.  At theShareholders Meeting held on September 13, 2005, the Shareholders approvedthe issuance of 25,000,000 shares to Herbert Lindo.

 

Atthe Shareholders Meeting held on May 28, 2003, the Shareholders approvedthe issuance of 20,000,000 shares to be issued to Herbert Lindo the Chairmanand President of the Company.  Unlike the 25,000,000 shares issuable toHerbert Lindo, which were expensed, the 20,000,000 shares were not expensed.

 

HerbertLindo requested to 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.

 

Duringthe period ended March 31, 2007 and 2006, the Company made certainadjustments to the number of shares outstanding which did not require capitalchanges.

 

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KENILWORTH SYSTEMS CORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENTOF OPERATIONSAND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE

(Unaudited)

 
| ** **                                     | ** ** | ** **                                        | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **Period from**             | ** ** |
|------------------------------------------------|------------|---------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------|------------|-------------|------------|----------------------------------|------------|
| ** **                                     | ** ** | ** **                                        | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **November 24,**            | ** ** |
| ** **                                     | ** ** | **For the nine months ended** | ** ** | **For the three months ended** | ** ** | **1998**                | ** ** |
| ** **                                     | ** ** | **September 30,**                            | ** ** | **September 30,**                             | ** ** | **(Inception) to** | ** ** |
| ** **                                     | ** ** | **2008**                                          | ** ** | **2007**                                           | ** ** | **2008**                | ** ** | **2007**    | ** ** | **September 30, 2008** | ** ** |
| ** **                                     | ** ** | *****                                             | ** ** | ** **                                         | ** ** | *****                   | ** ** | ** **  | ** ** | **Restated**                     | ** ** |
| Revenues                                       |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Sales                                          |       | $                                                 | 0          |                                               | $          | 0                       |       | $           | 0          |                             | $          | 0 |   |   |   |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Expenses                                       |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Selling, general and administrative            |       | $                                                 | 932,897    |                                               | $          | 968,809                 |       | $           | 107,196    |                             | $          | 136,300 |   | $ | 13,292,203 |   |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Other income (expenses)                        |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Interest income                                |       |                                              |       |                                               |       |                    |       |        |       | 922                              |       |
| Interest expense                               |       |                                              |       |                                               |       |                    |       |        |       | (776,218                         | )          |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Total other income (expense)                   |       |                                              |       |                                               |       |                    |       |        |       | 2,688,926                        |       |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Net loss                                       |       | $                                                 | (932,897   | )                                                  | $          | (968,809                | )          | $           | (107,196   | )                                | $          | (136,300 | ) | $ | (16,144,623 | ) |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Basic and diluted loss per share               |       | $                                                 | (0.002     | )                                                  | $          | (0.002                  | )          | $           | (0.002     | )                                | $          | (0.001 | ) | $ | (0.10 | ) |
|                                           |       |                                              |       |                                               |       |                    |       |        |       |                             |       |
| Weighted average number of shares  outstanding |       | 421,094,586                                       |       | 371,491,228                                        |       | 421,094,586             |       | 317,491,228 |       | 421,094,586                      |       |

 

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*Includes a NON CASH loss of $544,756 resulting from the sale and issuance of77,375,602 shares of RESTRICTED Common Stock, par value $0.01 per share, forcash, consulting fees and conversion of loans at less than par value during theperiod from April 1, 2008 and September 30, 2008.

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATEDBALANCE SHEET

(Unaudited)

 
| ** **                                                                                                                                        | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
|                                                                                                                                              |       |                         |       |                        |       |
| ASSETS                                                                                                                                            |       |                         |       |                        |       |
| CURRENT ASSETS                                                                                                                                    |       |                         |       |                        |       |
| Cash                                                                                                                                              |       | $                            | 12,286     |                        | $          | 1,232 |   |
| Prepaid expenses                                                                                                                                  |       | 20,000                       |       | 80,000                      |       |
| Loan receivable — including from  stockholders, net                                                                                          |       | 20,120                       |       | 20,120                      |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                            |       | 767,008                      |       | 750,000                     |       |
|                                                                                                                                              |       |                         |       |                        |       |
| TOTAL CURRENT ASSETS                                                                                                                              |       | $                            | 819,414    |                        | $          | 851,352 |   |
|                                                                                                                                              |       |                         |       |                        |       |
| PROPERTY AND EQUIPMENT — NET                                                                                                                 |       | 10,375                       |       | 14,868                      |       |
|                                                                                                                                              |       |                         |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 17,777                       |       | 13,677                      |       |
|                                                                                                                                              |       |                         |       |                        |       |
| TOTAL ASSETS                                                                                                                                      |       | $                            | 847,566    |                        | $          | 879,897 |   |
|                                                                                                                                              |       |                         |       |                        |       |
| LIABILITIES  AND STOCKHOLDERS’ DEFICIT                                                                                                       |       |                         |       |                        |       |
| CURRENT LIABILITIES                                                                                                                               |       |                         |       |                        |       |
| Accounts payable and accrued expenses                                                                                                             |       | $                            | 108,947    |                        | $          | 210,717 |   |
| Payroll taxes payable (Note 7)                                                                                                                    |       | 85,300                       |       | 73,341                      |       |
| Loans payable — including accrued interest                                                                                                   |       | 41,014                       |       | 19,129                      |       |
|                                                                                                                                              |       |                         |       |                        |       |
| TOTAL CURRENT LIABILITIES                                                                                                                         |       | $                            | 235,261    |                        | $          | 303,187 |   |
|                                                                                                                                              |       |                         |       |                        |       |
| 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 421,094,586 and  327,741,562 shares, respectively |       | 4,210,945                    |       | 3,277,415                   |       |
| Additional paid-in capital                                                                                                                        |       | 31,235,776                   |       | 31,137,730                  |       |
| Accumulated deficit                                                                                                                               |       | (34,834,416                  | )          | (33,838,435                 | )          |
|                                                                                                                                              |       |                         |       |                        |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                   |       | 612,305                      |       | 576,710                     |       |
|                                                                                                                                              |       |                         |       |                        |       |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                   |       | $                            | 847,566    |                        | $          | 879,897 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATEDSTATEMENT OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**             | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24,**            | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **1998**                         | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **to**                           | ** ** |
| ** **                                                                      | ** ** | **2008**   | ** ** | **2007**   | ** ** | **September 30, 2008** | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Restated**                     | ** ** |
| Cash flows from operating activities                                            |       |       |       |       |       |                             |       |
| Net loss                                                                        |       | $          | (932,897   | )          | $          | (968,809                         | )          | $ | (16,115,519 | ) |
| Adjustments to reconcile net loss to net  cash provided by operating activities |       |       |       |       |       |                             |       |
| Depreciation                                                                    |       | 4,493      |       | 6,376      |       |                             |       |
| Patent Impairment                                                               |       | —     |       | —     |       | 73,962                           |       |
| Accretion of convertible debt discount                                          |       | —     |       | —     |       | 72,656                           |       |
| Beneficial conversion feature                                                   |       |       |       |       |       | 1,182,097                        |       |
| Common stock issued                                                             |       | 16,990,100 |       | 933,500    |       | 51,049,432                       |       |
| 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                                         |       | —     |       | —     |       | 4,209                            |       |
| Loss on Investment                                                              |       | —     |       | —     |       | 60,000                           |       |
| Other                                                                           |       | —     |       | —     |       | 21,100                           |       |
| Increase (decrease) in cash attributable to  changes in assets and liabilities: |       |       |       |       |       |                             |       |
| Prepaid expenses                                                                |       | (20,000    | )          | (25,000    | )          | (20,000                          | )          |
| Accounts payable and accrued expenses                                           |       | 235,261    |       | 297,219    |       | 235,261                          |       |
| Payroll taxes payable                                                           |       | 85,300     |       | 141,000    |       | 85,300                           |       |
| Net cash used in operating activities                                           |       | (627,843   | )          | (532,586   | )          | (2,504,864                       | )          |
| Cash flows from investing activities                                            |       |       |       |       |       |                             |       |
| Repayment of loans – stockholder                                           |       | —     |       | 35,477     |       | (20,120                          | )          |
| Proceeds from loan receivable – stockholder                                |       | 17,008     |       |       |       | 4,000                            |       |
| Payment of patent costs                                                         |       | —     |       | —     |       | (73.962                          | )          |
| Purchase of property and equipment                                              |       | —     |       | —     |       | 0                                |       |
| Security deposit                                                                |       | (17,777    | )          | (9,422     | )          | (17,777                          | )          |
| Net cash used in investing activities                                           |       | (769       | )          | 26,055     |       | (220,000                         | )          |
| Cash flows from financing activities                                            |       |       |       |       |       | 3,662,666                        |       |
| Proceeds from Paid in Capital                                                   |       |       |       |       |       |                             |       |
| Proceeds from convertible notes payable                                         |       |       |       | —     |       |                             |       |
| Proceeds from sale of common stock                                              |       | 113,000    |       | —     |       |                             |       |
| Proceeds from stock subscriptions  receivable                                   |       | —     |       | —     |       | —                           |       |
| Net cash provided by financing activities                                       |       | 515,612    |       | 506,531    |       | —                           |       |
| Net change in cash                                                              |       | 11,054     |       | 357        |       | —                           |       |
| Cash – beginning of period                                                 |       | 1,232      |       | 9,611      |       | —                           |       |
| Cash - end of period                                                            |       | $          | 12,286     |       | $          | 9,254                            |       | $ | — |   |
| Supplemental disclosure of non-cash  activities:                                |       |       |       |       |       |                             |       |
| Common stock issued for patent costs                                            |       | $          | —     |       | $          | —                           |       | $ | 10,000 |   |
| Exchange of loans payable for convertible  notes payable                        |       | $          | —     |       | $          | —                           |       | $ | 50,000 |   |
| Conversion of notes payable to common stock                                     |       | $          | —     |       | $          | 136,100                          |       | $ | 1,388,500 |   |
| Conversion of loan payable - related party  to common stock                     |       | $          | —     |       | $          | 750,000                          |       | $ | 16,170 |   |
| Cancellation of stock subscriptions  receivable                                 |       | $          | —     |       | $          | —                           |       | $ | 29,000 |   |
| Common stock issued for subscriptions  receivable                               |       | $          | —     |       | $          | —                           |       | $ | 71,500 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE1 - BASIS OFPRESENTATION

 

Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of July 1, 2008 contain all adjustments (consisting of onlynormal accruals) necessary to present fairly the consolidated balance sheets asof September 30, 2008 and December 31, 2007 and the relatedstatements of operations and cash flows for the three (3) month periodsended September 30, 2008 and 2007.  These financial statements shouldbe read in conjunction with the consolidated financial statements and notesthereto included in our Annual Report on FORM 10-K for the fiscal yearended December 31, 2007.

 

Theresults of operations for the three (3) month period ended September 30,2008 are not necessarily indicative of the results for the entire year ending December 31,2008.

 

NOTE2 - THE COMPANY ANDNATURE OF BUSINESS

 

KenilworthSystems Corporation (the “Company”) was incorporated in New York in April 1968and since exiting 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,Internet and Cable Broadcasts around the world.

 

TheCompany was in bankruptcy proceedings under Chapter 7 and 11 of the BankruptcyCode for the period from August 28, 1982 through September 28, 1998.The Company ceased all operations, between February 2, 1991 through September 28,1998.

 

NOTE3 - PRINCIPLES OFCONSOLIDATION

 

Theconsolidated financial statements include the accounts of Kenilworth SystemsCorporation and its wholly owned subsidiaries: Video Wagering Systems Corporation,RoulabetteTM Nevada Corporation, Kenilworth Systems Nevada Corporation,Kenilworth Systems (UK) Limited, Kenilworth Satellite Broadcasting Corporation(a Delaware Corporation) and Satellite Gaming Consultants, Inc. (aDelaware Corporation). None of these subsidiaries has any assets orliabilities, except Satellite Gaming Consultants, Inc.

 

NOTE4 - GOING CONCERNUNCERTAINTY

 

Asindicated in Note 2, the Company exited from Chapter 7 in September 1998and has not yet commenced revenue producing operations. These factors createuncertainty as to the Company’s ability to operate as a going-concern andcontinue in business. Management plans to develop a wagering system that allowscasino patrons and individuals outside the casino to play along remotely withlive in-progress casino table games. The Company continues to obtain thenecessary funding by offering its Common Stock, Senior Cumulative ConvertiblePreferred Shares, and sell Convertible Promissory Notes and/or Stock Purchaseand Option Agreements in private placements. There can be no assurances theCompany can be successful in continuing to obtain such financing.

 

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

 

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NOTE5 - CONVERTIBLEPROMISSORY NOTES AND STOCK PURCHASE AND OPTION AGREEMENTS

 

Duringthe quarters ended September 30, 2008 and September 30, 2007respectively, the Company sold to various private investors $113,000 and$257,500 principal amount of Convertible Promissory Notes, made loans to thecompany and issued Stock Purchase and Option Agreements bearing interest atrates ranging from 4.00% to 12.00% per annum.  The Notes had a six-monthand one-year term and were immediately convertible at the option of thenoteholder into shares of restricted common stock based on conversion pricesranging from $.005 to $0.10 per share and purchase prices at $0.008 pershare.  All Notes issued and shares sold in the quarters ended September 30,2008 and September 30, 2007 were converted into a total of 79,615,102and 12,822,934 restricted common shares, respectively.

 

NOTE6 - NON CASHTRANSACTIONS

 

Commonshares issued for services

 

2008:

 

TheCompany issued 20,675,000 shares as compensation for services rendered duringthe quarter period ended September 30, 2008.  The services werevalued at $418,500.

 

2007:

 

TheCompany issued 750,000 shares as compensation for services rendered during thefirst quarter and second quarter period ended June 30, 2007.  Theservices were valued at $37,500.

 

2006:

 

TheCompany issued 26,500,000 shares as compensation for services rendered duringthe first quarter period ended March 31, 2006.  The services werevalued at $403,662.

 

NOTE7 – PAYROLL TAXESPAYABLE

 

TheCompany has made arrangements with the Internal Revenue Service (IRS) and theNew York State Department of Taxation to pay approximately $147,351 in past duepayroll taxes, including all penalties and interest accrued during the years2007 and the nine (9) month period ended September 30, 2008 inmonthly installments, by the end of the calendar year 2008.  Theagreements provide that the Company must pay all present taxes, when due, andpayments must remain current in 2008.  AtSeptember 30, 2008 the Company was delinquent in approximately $19,582 inpayments to the IRS and will attempt to negotiate new payment schedulescovering the delinquent payments.

 

NOTE8 - RECEIVABLE FROMHERBERT LINDO

 

OnNovember 27, 2006 Herbert Lindo, the Chairman and Chief Executive Officerexercised a five million (5,000,000) share option for seven hundred fiftythousand dollars ($750,000) at fifteen cents ($0.15) per share pursuant to theCompany’s Performance and Equity Plan. The price per share was the price forthe Option which would have expired on the following date. Mr. Lindo doesnot own any other Options pursuant to the Plan. The average market price of theCommon Stock for the thirty (30) days prior to November 27, 2006 was high:$0.05, low: $0.03. As provided in the Plan, Herbert Lindo borrowed the sevenhundred fifty thousand dollars ($750,000) from the Company and pledged the fivemillion (5,000,000) and other shares he owns, as collateral for the loan. Thefive million (5,000,000) shares have been issued as restricted shares.

 

Ata regular meeting of the Board of Directors in July 2008, the Boardunanimously approved (with Mr. Lindo abstaining) to extend the $750,000loan until December 31, 2009, provided Mr. Lindo pays a nominal oneand one-half percent (11⁄2%) interest from November 2006.  Mr. Lindo agreed to pay the interestwhich totaled $17,008 through September 30, 2008. Mr. Lindo provideshis services to the company without any remuneration.

 

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NOTE9 - SUBSEQUENT EVENTS

 

Subsequentto June 30, 2008, the Company obtained two (2) $10,000 loans due September 23,2008 at an interest rate of twelve percent (12%) per annum from two (2) presentinvestors.  The loans have been extendedto October 23, 2008 with only the addition of agreed interest to October 2008.

 

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

 

RESULTSOF OPERATIONS

 

Sincewe exited from bankruptcy proceedings on September 23, 1998 we have had norevenues from operations. We sustained substantial losses from generaladministrative expenses amounting to $1,093,538 and $850,079 in year 2007 and2006 and for the nine-months ended September 30, 2008 we sustained lossesamounting to $932,897 which include NON-CASH loss of $544,756 compared to aloss of $968,809 for the nine-months ending September 30, 2007. Kenilworthhas had no revenues from operations during the past fifteen (15) years andthere can be no assurances that it will ever have revenues from present plannedoperations.

 

LIQUIDITYAND CAPITAL RESOURCES

 

Ourpresent plans are to develop a wagering system dubbed “RoulabetteTM” that wouldallow patrons in the industrialized world to play and wager on live in-progresssimulcast casino table games on TV’s placed in hotels, resorts, bars and otherpublic gathering places and in homes and offices on personal computers (PC’s)or television sets connected to set top boxes for Interactive TV via digitalsatellite, digital cable and Internet broadcasts emanating from strictlyregulated casinos.

 

PART II

 

ITEM 1—DESCRIPTION OF BUSINESS

 

KenilworthSystems Corporation hereinafter referred to as “Kenilworth”, the “Company” or “we”,was incorporated on April 25, 1968 under the laws of the State of NewYork.  Kenilworth has been a publicly traded Company since August 1968formerly on the National NASDAQ Market, presently on the OTC Pink Sheet Marketsince exiting from bankruptcy proceedings in September 1998. Kenilworth is now being presented as a Development Stage Company.  TheCompany believes this designation is incorrect.  The Company exited fromChapter 7 Proceedings having made a 100% cash distribution to all approvedcreditors for their entire claims and paid, in full, all administrative feesand expenses.  The designation is hindering the Company in its operations.

 

GENERAL

 

Sinceearly in the year 2000 we have been solely engaged in developing patents,markets and investigating how best to obtain Governmental approvals, byengaging lobbyists and consultants that would allow television satellite, cablesubscribers and internet network throughout the industrialized world to playand wager along from remote locations with live, in-progress casino table games(Roulette, Craps, Baccarat and more) from strictly regulated casinos located inthe United States and other locations around the world.

 

Employingthe latest encrypted satellite, cable and Internet technology and placingtelevision cameras in strategic locations above the casino table games, withoutdisrupting the normal game-monitoring activities, (a separate control roomwould direct the various camera angles), and transmitting the table games overthe digital satellite, digital cable and Internet networks (in countries thatpermit Internet wagering) to television sets (“TV’s”), which become a platformfor playing along with the casino games wherever TV’s are located.

 

Kenilworthtitled the overall project “RoulabetteTM”.  There are thirty-eight million(38,000,000) satellite and seventy-three million (73,000,000) cable TVsubscribers in the United States and more than five hundred million(500,000,000) subscribers throughout the rest of the industrialized world (“TheMarket”).  

 

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Onaverage, households in the U.S. have three (3) TV’s.  (It isimportant since the satellite and cable companies will charge a separate feefor transmitting the table games).  Public gathering places canaccommodate (be able to network) up to one thousand (1,000) or more TV setswith a single satellite receiving dish, direct cable connections, or streamedvia the Internet.  With wagering possible in homes, hotel rooms, resortrooms, pubs, restaurants, race tracks and other public gathering places, theCompany believes it will become a more than $500 billion **net win**Market within five (5) yearsthroughout the industrialized world (by the year ended 2013).

 

Tobest market the casino games, the Company is selecting lotteries throughout theworld to manage and operate the distribution and cash handling (deposits to playand paying winnings) using the lotteries’ existing databases for the sale oflottery tickets, and paying winnings at regular lottery licensed terminallocations.

 

Allforty-six (46) lotteries in the United States are owned and operated by Countyand State agencies.  Approximately twelve (12) states, including New York,are proposing to sell or lease (on long term leases) their lotteries. Maryland, Michigan, Iowa and New Jersey are also exploring the privatization oftheir lotteries. This could greatly enhance our efforts to broadcast the livecasino table games to these lottery locations and could result in having Cafésthat offer terminals and TV sets to play along.  Internet Cafés that offerwagering on various events have been a huge success in the Asian Market. WithInternet wagering outlawed in the United States, our patented satellite,one-way broadcasts offer the best possibility to establish satellite Cafés.

 

Throughoutthe rest of the world, lotteries are owned by government agencies or non profitcharitable agencies that distribute the net earnings to benefit social andcharitable programs, or by private entities that pay a percentage of their netwin to designated government agencies.

 

Theseforeign lotteries also have the same databases as lotteries in the UnitedStates, except most lotteries throughout Europe pool their lotteries betweencountries, not unlike Mega Millions and PowerBall in the United States, whichmakes the distribution simpler and very cost effective for both Kenilworth and thelotteries.

 

Thereare no technical breakthroughs required.  The equipment for the technologyis readily available.  What is needed is to get through the maze of Local,County, State and Federal regulations in each U.S. State and foreigncountries.  When the first State in the United States grants the Companypermission to transmit the broadcast from one of its casinos to their residentsand to States that do not have any casinos, (the entire East coast of theUnited States), the other forty-six (46) States with lotteries will joinexpeditiously. The same will occur in foreign countries.

 

Kenilworthwill share the **net win** revenuewith all participating entities that provide RoulabetteTM gaming without **costs of any kind. **State lotteries ortheir private operators will receive a minimum of forty percent (40%) of thetotal **net win** from theirrespective jurisdictions.

 

InStates and foreign countries that designate exclusively lottery proceeds toschools and their teachers it is a welcome contribution.  It also willhelp close state and other budget gaps.

 

Inaddition, throughout the United States and most foreign countries there arehundreds of facilities that simulcast live in-progress horse/dog races. At most facilities there are several large TV screens that show the races fromthe different tracks with general theater-type seating for patrons and atprivate cubicles with television sets outfitted with touch screens.  Thecubicles rent for additional fees.  After players open an account and selectpin numbers, they can watch, in privacy, each race offered on the differenttracks on the TV and place wagers on the different races by simply changingchannels.  The players may also watch sporting events, the news, the stockmarket reports, and in the near future RoulabetteTM, live, in-progress casinotable games.  The simulcast centers have their own databases to manage thecash deposit and pay winnings on the horse/dog races and will be able to managethe casino games, on the same methods as the lotteries will manageRoulabetteTM.  With private TV’s, available in simulcast centers,especially at night, when fewer tracks are operating.

 

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Whenplaying along with live table games from a highly regulated jurisdiction,players will be assured that the game results are exactly what they see; and,playing along with live casino table games such as Roulette, Craps andBaccarat, we believe, will provide interaction, fun and far more excitementthan playing make believe animated (virtual) games. It is the next best thing,we believe, to actually being at the table in the casino.

 

Toconduct permanent broadcasts Kenilworth believes it will require a minimum often million dollars ($10,000,000) and there are no assurances we will ever beable to obtain any of such money. At present, the Company does not have thefunds readily available but hopes to obtain same, from investors, as soon as Kenilworthcan commence broadcasting from a casino in the United States or other casinosthroughout the world.

 

Inprior years, Kenilworth completed a prototype system that allowed casinopatrons to play along with live 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 or an attachment directlyconnected to the TV set to receive satellite and/or Internet broadcasts. Thisas planned would allow a player in an interactive manner, at a remote location(outside the casino confines), to experience the actual play and excitement atthe casino table game and to make wagers on the various games, without havingto be physically present at the casino or casino table.  There are noassurances we will be able to successfully develop any system.

 

Wealso propose for slot machine manufacturers to develop “RoulabetteTM SlotMachines”.  The RoulabetteTM Slot will offer the regular slot or videolottery games and by the touch of a button, the live in-progress casino tablegames.  Slot players are offered a change of pace at the cost of a slothandle pull.  The games are transmitted to the RoulabetteTM Slot viasatellite or the Internet (all broadcasts are encrypted to prevent unauthorizeduse of the broadcasts).

 

Whereauthorized, hotels, resorts, clubs and other public gathering places will beable to offer casino table game action in their establishments withoutincurring the costs to operate a casino. There are now believed to be more thanten million (10,000,000) slot machines played throughout the world, outsideof casino confines.

 

RoulabetteTMis a concept intended to be built and there can be no assurances that it willever be built.  The Patented microprocessors to be installed in the TV settop boxes have not been designed.

 

**SUMMARY**:

 

(1.)         Kenilworth continues to fine tune its patented technology dubbedRoulabetteTM.  It now plans to “outsource” the manufacturing of all thecomponents instead as formerly manufacture some of the equipment in its 26,000square foot facility located in Melville, NY.  RoulabetteTM would allow casinopatrons and other players to play along with live in-progress casino tablegames such as Roulette, Craps and Baccarat and more via digital satellite,digital cable television or Internet broadcasts (simulcasts) emanating fromstrictly regulated casinos located in the United States and other locationsaround the world, to self-sufficient computer terminals dubbed “RoulabetteTMSlots” and digital satellite, cable TV set top boxes or the Internet incountries that permit Internet gaming. The RoulabetteTM terminal is a proposalintended to be built and there can be no assurances that it will ever bebuilt.  The microprocessors to be installed in the TV set top boxes havenot been designed. We have as at September 30, 2008, no firm agreements,customers, or proposals for any future business and there can be no assurancesthat we will ever have same. **Reference isalso made to each of the “Risk Factors” that are set forth in Item 7.**

 

(2.)         We believe the thousand virtual casino websites via the Internet obtain sixtypercent (60%) of their annual revenue from customers in the U.S.  Thesewebsite have been shut down when President Bush signed the Internet EnforcementAct of 2006.  since then the U.S.Congress has indicated it may lift Federal Internet Wagering in 2009 toincrease Federal and State revenue to benefit education.

 

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Simulcastbroadcasts of digital satellite and digital cable transmissions around theworld must meet, and will be supervised by, the regulations by the gaming authoritiesof the broadcasting casino and the jurisdiction, which receives thebroadcast.  We believe the supervision will not be difficult to enforce,because all simulcast wagering is “cash only”, from regulated, supervisedbetting sites.  There are no wire money transfers with banks and no creditor debit cards permitted.  We believe this fact should ease any oppositionfrom concerned citizens and anti-gambling groups, as regulation and enforcementresponsibility will be vested in each individual state (or foreignjurisdiction).

 

Kenilworthwas the first to use color personal computers (PC’s) to replaceelectromechanical slot machines in 1988.  We provided the software for thefirst Tabaret located at the Menzie at the Rialto in Melbourne, Australia,which opened in November 1990.  This consisted of cashless, variabledenomination and multiple games, virtual PAT’s (“Player Activated Terminals”). Prior thereto Kenilworth sponsored, with the assistance of three (3) Nevadacasino operators, legislation to permit cashless wagering in the state ofNevada.  The legislation, which is in the form of an amendment to existingcasino control statutes, permits the use of account cards (debit cards) and wassigned into law by Governor Richard H. Bryan on June 13, 1985.

 

Kenilworthhas been a publicly traded Company since 1968. Prior to commencing itsendeavors into its present business in 1988, it also provided security systemsto Nuclear Electric Generating Plants in the U.S. and foreign countries, aswell as time/attendance systems at a major department store chain.

 

MARKETINGSTRATEGY/SALES PLAN

 

Ourmarketing strategy consists of developing the RoulabetteTM Slot terminal and theRoulabetteTM broadcasts. We estimate at this time, that we will need at leastapproximately ten million dollars ($10,000,000) for promoting the RoulabetteTMconcept. We do not have this money nor do we have any agreements orunderstanding to procure this money. We may never get this money. If we doobtain this money, it may not be sufficient. Further, should such monies beavailable it may not be available on terms satisfactory to Kenilworth or it maybe available on such terms that substantially dilute the interest of existingshareholders. If we obtain this money, we will need substantial additionalfunds for the proposed marketing plan and there can be no assurances that suchfunds will ever be available to allow Kenilworth to engage in business on aprofitable basis.

 

Atthe present time, we do not engage technically oriented employees who will beable to assist in the development of RoulabetteTM (we have available three [3]former technical Kenilworth employees that have indicated to rejoin Kenilworthat the appropriate time). It will be necessary for us to obtain additionalpersonnel qualified and with the expertise to develop RoulabetteTM. We wouldrequire additional employees and several more consultants and there can be noassurances of our being able to obtain any necessary personnel. There can be noassurances of the availability of any such employees and consultants.

 

TheCompany will outsource the development of RoulabetteTM and the microprocessorsfor the TV set top boxes.

 

Inthe United States, Kenilworth must refrain from using the Worldwide Web (WWW)Internet to manage wagers from individuals outside of the casino confines. Itis presently against the law. In RoulabetteTM, the play-along broadcast emanatesfrom casinos that are regulated by strict and comprehensive rules andstate and jurisdiction regulations, enforced by gaming control regulators andeverybody plays along with the same live table game. There is a world ofdifference between playing in a virtual make believe casino compared with anactual casino.

 

Forthe reasons stated, Kenilworth will ask state lotteries, Off-Track Betting(OTB) corporations, pari-mutuel race tracks, and other state and federalregulated agencies to manage the wagers from individuals playing along on theirPC’s and their television sets using interactive TV set top boxes that convertregular television sets into minicomputers within their state or jurisdiction.There can be no assurances that we will be able to obtain any arrangement withany of these entities or that they would be on suitable terms.

 

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Theindividuals would have to pre-deposit funds into an account with the wagermanagement company and then place wagers with their credit balance. The wagersand running balances will be transmitted to the RoulabetteTM player’s PC and/ortelevision sets with telephone lines not crossing any state lines, similar inprinciple to telephone accounts wagering offered by the New York StateOff-Track Betting Corporation and the state of Nevada casino sports book andrecently with remote purchase of lottery tickets in many states within theUnited States.

 

Afterwe obtain permission to play RoulabetteTM, of which there can be noassurances, in a given state and engage a wager management organization inorder to promote digital satellite and interactive television to the state’sresidents, Kenilworth would install the eighteen (18) inch dish antenna and converterbox required to receive digital TV programming and interactive TV at its owncost, if the subscriber opens a RoulabetteTM wagering account for two hundreddollars ($200). In addition, Kenilworth would pay the monthly subscription feesto view all digital TV programming offered and the Internet service provider(ISP) subscription fee if the customer wagers at least one hundred twentydollars ($120) each month — win, lose, or draw — makes no difference.  Inthe U.S. the contracts would be financed by satellite carriers such as EchoStarand DirecTV.

 

Instates with approved lottery and/or other gambling legislation, we plan tointroduce RoulabetteTM Slot terminals to hotels, clubs (similar to card clubs inCalifornia) and resorts, to provide upscale gathering places for tourists andlocal residents. Charitable organizations that are permitted to conduct “NevadaNights” and Bingo games may wish to offer RoulabetteTM gaming on a morepermanent basis. To receive the broadcast signal, all that would be required isan eighteen (18) inch dish TV antenna and distribution equipment. TheRoulabetteTM terminals are intended to be self-sufficient and accept dollarbills (or script, to control the amount an individual is allowed to wager inone day or other time period). We plan to lease all the equipment necessary toparticipants for a share of the profits.

 

Togain approval for our RoulabetteTM-style gambling in jurisdictions that have notapproved any gambling legislation, Kenilworth proposes to engage lobbyists tointroduce, promote, and obtain legislative approval to permit RoulabetteTM-stylegambling. Our strategy is to find depressed resort areas and have the resort/hoteloperators convince their local politicians of the benefits to their businessand the local economies and request them to promote legislative approval,either state-wide or limited to their areas. Riverboat gambling started torehabilitate decaying waterfronts. RoulabetteTM can do the same in depressedeconomic areas.  No assurances can be given that we can obtain any suchapprovals.

 

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

 

Inoverseas installations, wherever permitted, Kenilworth will make use of the WWWInternet only to manage the wagers, and only in jurisdictions that permit thedata collection of the gambler, not for the live broadcast.

 

Inthe event a substantial amount is won by a player, Kenilworth will make thepayment to the winner, via money wire transfer, to the establishment whichmanaged the wager, within twenty-four (24) hours.  Kenilworth willestablish a worldwide cage for winning payments; or, a guarantee payment by awell-recognized international bank.

 

COMPETITION

 

Manysegments of the gaming industry are characterized by intense competition, witha large number of companies offering the same type of wagering products andservices. None of these companies, at present, are believed to offer the sameor similar equipment or systems as intended by RoulabetteTM. The most likelycompetition will come from slot machine manufacturers who could relativelyquickly adapt slot machines to play along with live casino table games. Webelieve there are three (3) major slot machine manufacturers in the world,all of which have vastly greater capital resources and substantially more 

 

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personnelthan the Company and may have under development systems that directly competewith RoulabetteTM.

 

Ourpresent plans are to broadcast the live casino table games from companies thatown casinos throughout the industrialized world. Other casino owners may starttheir own broadcasts and have their own terminals manufactured that competewith Kenilworth after Kenilworth has done all its pioneering for play-alongwagering.

 

PATENTS,TRADEMARKS AND INTELLECTUAL PROPERTY

 

Ourmost important assets are Patents we have acquired and RoulabetteTM related trademarksand service marks.  The Patent granted on June 10, 2003 titled “SYSTEMAND METHOD FOR REMOTE ROULABETTE AND OTHER GAME PLAY USING GAME TABLE AT ACASINO” and Patent Application filed October 15, 2003, entitled “METHODAND SYSTEM FOR SUPPLYING FUNDS TO A TERMINAL FOR REMOTE WAGERING”, “MULTI-USEGAMING MACHINE” trademarks.

 

ROULABETTETM,as in pre-marked cards similar to lottery cards to select number in each game,used with terminals “ROULABETTETM SWIPE CARD” to activate set-top boxes to playRoulabetteTM and “PLAY ALONG WITH ROULABETTETM, LIVE” and MULTI-USE GAMINGMACHINE.  Our patents are filed in forty-nine (49) industrializedcountries of the world and are approved, both in Russia and recently in Chinaand Japan, after a seven (7) year delay.

 

GOVERNMENTREGULATIONS

 

Kenilworthhas no licenses from any casino regulating authorities and may not require anycasino licenses at the present time and may never become able to obtain anylicenses that may be required in the future. Each state has its own regulations,and in states where Kenilworth does business, Kenilworth will have to complywith these regulations and there can be no assurances that it will be able todo so or obtain the necessary license in an applicable jurisdiction. Thefollowing discussion is not necessarily complete, or current regarding laws andregulations that may be applicable to us.  Any present laws are alsosubject to future change, amendment or cancellation.

 

Item 2.    LEGAL PROCEEDINGS:

 

None

 

Item 3.    CHANGE IN SECURITIES:

 

None

 

Item 4.    DEFAULT UPON SENIOR SECURITIES:

 

None

 

Item5.    SUBMISSION OF A MATTER TO A VOTE OF SECURITIES HOLDERS:

 

None

 

Item6.    OTHER INFORMATION:

 

TheCompany plans to hold its next Annual Meeting of Shareholders in December 2008or any adjournment thereof with proxy materials mailed to shareholders ofrecord in twenty (20) days prior to the proposed meeting dates.

 

Item7.    EXHIBITS AND REPORTS ON FORM 8-K:

 

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

 

Ex32.1 Certification of Chairman and Chief Executive Officer Pursuant to 18U.S.C. Section 1350, as adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2007.

 

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SIGNATURE

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed in its behalf by the undersigned thereuntoduly authorized.

 
|   |   | KENILWORTH  SYSTEMS CORPORATION              |
|--------|--------|----------------------------------------------|
|   |   |                                         |
|   | By:    | /s/  HERBERT LINDO                           |
|   |   | Herbert  Lindo,                              |
|   |   | Chairman,  Chief Executive Officer and Chief |
|   |   | Financial  Officer                           |
|   |   | October 15,  2008                       |

 

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