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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****      Quarterly report pursuant to Section 13 OR 15(D) of the SecuritiesExchange Act of 1934**

 

**For the quarterly period ended June 30, 2010**

 

**OR**

 

**o****         Transition reportpursuant to Section 13 or 15(D) of the Securities Exchange Act of1934**

 

**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)

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  x  No  o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes  o  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 inRule 12b-2 of the Act).  Yes  o  No  x

 

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 June 30, 2010 was 617,201,586.

 

 

 

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**KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES**

 

**INDEX**

 

| **Part I.**  | **Financial Information**                                                                                            |
|-------------------|----------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                 |
| Item  1.          | Unaudited  Condensed Consolidated Financial Statements                                                               |
|              |                                                                                                                 |
|              | Condensed  Consolidated Statements of Operation (and Deficit) (unaudited) - Six months  ended June 30, 2010 and 2009 |
|              |                                                                                                                 |
|              | Condensed  Consolidated Balance Sheets (unaudited) — June 30, 2010 and December 31,  2009                  |
|              |                                                                                                                 |
|              | Condensed  Consolidated Statements of Cash Flows (unaudited) - Six months ended June 30,  2010 and 2009              |
|              |                                                                                                                 |
|              | 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. ThisForm 10-Q contains forward-looking statements that involved risks anduncertainties. We use words such as “anticipates”, “believes”, “plans”, “expects”,“future”, “intends” and similar expressions to identify such forward-lookingstatements. You should not place undue reliance on these forward-lookingstatements, which apply only as of the date of this Form 10-Q. Our actualresults could differ materially from those anticipated in these forward-lookingstatements for many reasons, including the risks faced by Kenilworth asdescribed below and elsewhere 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, 2009 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

 

TheCompany’s management has always objected to the SEC designation as a **Development Stage Company**.  TheCompany made a one hundred percent (100%) cash distribution to all approvedcreditors and **paid in full all administrativefees and expenses when we exited from Bankruptcy Proceedings.**

 

TheDevelopment Stage Company designation applies ONLY to Bankrupt Companies thatexit from Bankruptcy Proceedings**that do notpay all approved creditors in full.**

 

***Remainder of page intentionallyleft blank***

 

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KENILWORTH SYSTEMS CORPORATION

 

CONDENSED CONSOLIDATEDSTATEMENT OF OPERATIONS

AND DEFICIT

(Unaudited)

 
| ** **                                    | ** ** | **For the six months ended** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | **June 30,**                                | ** ** |
| ** **                                    | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                    | ** ** | *****                                       | ** ** | ** ** | ** ** |
| Revenues                                      |       |                                        |       |   |   |
| Sales                                         |       | $                                           | 0          |   | $ | 0 |   |
|                                          |       |                                        |       |   |   |
| Expenses                                      |       |                                        |       |   |   |
| Selling, general and administrative           |       | $                                           | 178,117    |   | $ | 682,684 |   |
|                                          |       |                                        |       |   |   |
| Other income (expenses)                       |       | —                                      |       | — |   |
| Interest income                               |       |                                        |       |   |   |
| Interest expense                              |       | 5,210                                       |       | — |   |
|                                          |       |                                        |       |   |   |
| Total other income (expense)                  |       | 5,210                                       |       | — |   |
|                                          |       |                                        |       |   |   |
| Net loss *                                    |       | $                                           | 172,907    |   | $ | 682,684 |   |
|                                          |       |                                        |       |   |   |
| Basic and diluted loss per share              |       | $                                           | .0002      |   | $ | .001 |   |
|                                          |       |                                        |       |   |   |
| Weighted average number of shares outstanding |       | 617,201,586                                 |       | 490,063,586 |   |

 

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*Includes a NON CASH loss of $48,778 resulting from the sale and issuance of24,389,000 shares of RESTRICTED Common Stock, par value $0.01 per share, forcash at less than par value during the period from January 1, 2009 andMarch 31, 2009 with the loss charged to paid-in capital.

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION

 

CONDENSED CONSOLIDATEDBALANCE SHEETS

(Unaudited)

 
| ** **                                                                                                                                          | ** ** | **June 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|
|                                                                                                                                                |       |               |       |                        |       |
| ASSETS                                                                                                                                              |       |               |       |                        |       |
| CURRENT ASSETS                                                                                                                                      |       |               |       |                        |       |
| Cash                                                                                                                                                |       | $                  | 3,038      |                        | $          | 123,633 |   |
| Prepaid expenses (Note 6)                                                                                                                           |       | 60,000             |       | 80,000                      |       |
| Loan receivable — from vendors including accrued  interest                                                                                     |       | 52,400             |       | 58,600                      |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                              |       | 777,886            |       | 775,725                     |       |
|                                                                                                                                                |       |               |       |                        |       |
| TOTAL CURRENT ASSETS                                                                                                                                |       | $                  | 893,324    |                        | $          | 1,037,958 |   |
| PROPERTY AND EQUIPMENT — NET                                                                                                                   |       | 975                |       | 1,156                       |       |
|                                                                                                                                                |       |               |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                    |       | 13,677             |       | 13,677                      |       |
|                                                                                                                                                |       |               |       |                        |       |
| TOTAL ASSETS                                                                                                                                        |       | $                  | 907,976    |                        | $          | 1,052,791 |   |
|                                                                                                                                                |       |               |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                          |       |               |       |                        |       |
| CURRENT LIABILITIES                                                                                                                                 |       |               |       |                        |       |
| Accounts payable and accrued expenses                                                                                                               |       | $                  | 93,419     |                        | $          | 165,349 |   |
| Payroll taxes payable (Note 7)                                                                                                                      |       | 176,000            |       | 18,108                      |       |
| Loans payable — including accrued interest                                                                                                     |       | 21,400             |       | 25,101                      |       |
|                                                                                                                                                |       |               |       |                        |       |
| TOTAL CURRENT LIABILITIES                                                                                                                           |       | $                  | 290,819    |                        | $          | 208,558 |   |
|                                                                                                                                                |       |               |       |                        |       |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                 |       |               |       |                        |       |
| Preferred Stock - par value $.01 per share;  authorized 50,000,000 shares; no shares issued and outstanding                                         |       |               |       |                        |       |
| Common stock - par value $.01 per share;  authorized 1,000,000,000 shares; issued and outstanding 617,201,586 and  587,691,586 shares, respectively |       | 6,172,015          |       | 5,876,915                   |       |
| Additional paid-in capital                                                                                                                          |       | 33,316,658         |       | 32,010,088                  |       |
| Accumulated deficit                                                                                                                                 |       | (324,415,697       | )          | (32,242,790                 | )          |
|                                                                                                                                                |       |               |       |                        |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                     |       | 617,157            |       | 844,233                     |       |
|                                                                                                                                                |       |               |       |                        |       |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                     |       | $                  | 907,976    |                        | $          | 1,052,791 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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KENILWORTH SYSTEMS CORPORATION

 

CONDENSED CONSOLIDATEDSTATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

(Unaudited)

 
| ** **                                                                      | ** ** | **2010** | ** ** | **2009** | ** ** |
|---------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                            |       |     |       |     |       |
| Cash flows from operating activities                                            |       |     |       |     |       |
| Net loss                                                                        |       | $        | (172,907   | )        | $          | (193,437 | ) |
| Increase (decrease) in cash attributable to  changes in assets and liabilities: |       |     |       |     |       |
| Prepaid expenses                                                                |       | 60,000   |       | 60,000   |       |
| Loan Receivable                                                                 |       | 52,400   |       | 21,600   |       |
| Accounts payable and accrued expenses                                           |       | (93,419  | )          | (47,531  | )          |
| Payroll taxes payable                                                           |       | (149,600 | )          | (23,180  | )          |
| Net cash used in operating activities                                           |       | 303,526  |       | (201,365 | )          |
| Security deposit                                                                |       | (13,677  | )          | (13,677  | )          |
| Net cash used in investing activities                                           |       | —   |       | —   |       |
| Cash flows from financing activities                                            |       |     |       |     |       |
| Proceeds from Paid in Capital                                                   |       |     |       |     |       |
| Proceeds from convertible notes payable                                         |       |     |       |     |       |
| Proceeds from sale of common stock                                              |       | 174,600  |       | 175,000  |       |
| Proceeds from stock subscriptions receivable                                    |       | —   |       | —   |       |
| Net cash provided by financing activities                                       |       | 174,600  |       | 175,000  |       |
| Net change in cash                                                              |       |     |       |     |       |
| Cash — beginning of period                                                 |       | 3,274    |       | 21,401   |       |
| Cash - end of period                                                            |       | $        | 3,308      |     | $          | 3,274 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES**

 

**CONDENSEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE1 - BASIS OF PRESENTATION

 

Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of January 1, 20010 contain all adjustments (consisting ofonly normal accruals) necessary to present fairly the consolidated balancesheets as of June 30, 2010 and December 31, 2009 and the relatedstatements of operations and cash flows for the six (6) month periodsended June 30, 2010 and 2009  These financial statements should beread in conjunction with the consolidated financial statements and notesthereto included in our Annual Report on FORM 10-K for the fiscal yearended December 31, 2009.

 

Theresults of operations for the six (6) month period ended June 30,2010 are not necessarily indicative of the results for the entire year endingDecember 31, 2010.

 

NOTE2 - THE COMPANY AND NATURE OF BUSINESS

 

KenilworthSystems Corporation (the “Company”) was incorporated in New York inApril 1968 and since exiting from bankruptcy proceedings now plans to beengaged in the business of developing systems that permit individuals fromremote locations, to play along with live, in-progress casino table games viaTV (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 throughSeptember 28, 1998.

 

NOTE3 - PRINCIPLES OF CONSOLIDATION

 

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

 

NOTE4 - GOING CONCERN UNCERTAINTY

 

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 - CONVERTIBLE PROMISSORY NOTES AND STOCK PURCHASE AND OPTIONAGREEMENTS

 

Duringthe period ended June 30, 2010 and June 30, 2009 respectively, theCompany sold to various private investors $675,500 and $175,000 principalamount of Convertible Promissory Notes, made loans to the Company and issuedStock Purchase and Option Agreements bearing interest at rates ranging from4.00% to 12.00% per annum.  The Notes had a six-month and one-year termand were immediately convertible at the option of the noteholder into shares ofrestricted common stock based on conversion prices ranging from $.005 to $0.10per share and purchase prices at $0.008 per share.

 

STOCKOPTIONS

 

Fromits inception in April 2008 through May 2009, the Company grantedStock Options for 115,709,000 restricted Common Shares, par value $0.01 pershare at an average price of $0.011 per share in connection with the privatesale to accredited investors of Stock Purchase and Option Agreements.  TheOption grant is for a period of two (2) years from the date of the StockPurchase and Option Agreements.

 

Inthe period ending June 30, 2010, 2008 options were exercised for $24,000(3,000,000 shares).

 

NOTE6 - NON CASH TRANSACTIONS

 

Commonshares issued for services

 

2010:

 

NONE

 

2009:

 

NONE

 

PREPAIDEXPENSES

 

Prepaidexpenses consist of the unamortized value of stock issued to directors for thetwelve month period ending September 30, 2009.  The balance will beamortized on a straight-line basis over the remaining term.  The directorsreceive no other compensation.

 

NOTE7 — PAYROLL TAXES PAYABLE

 

TheCompany has made arrangements with the Internal Revenue Service (IRS) and theNew York State Department of Taxation to pay approximately $168,695 in past duepayroll taxes, including all penalties and interest accrued during the years2008 and the three (3) month period ended March 31, 2009 in monthlyinstallments, by the end of the calendar year 2009.  The agreementsprovide that the Company must pay all present taxes, when due, and paymentsmust remain current in 2009.  At March 31, 2009 the Company wasdelinquent in approximately $23,180 in payments to the IRS and will attempt tonegotiate new payment schedules covering the delinquent payments.

 

NOTE8 - RECEIVABLE FROM HERBERT 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 

 

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November 27,2006 was high: $0.05, low: $0.03. As provided in the Plan, Herbert Lindoborrowed the seven hundred fifty thousand dollars ($750,000) from the Companyand pledged the five million (5,000,000) and other shares he owns, ascollateral for the loan. The five million (5,000,000) shares have been issuedas restricted shares.

 

Ata regular meeting of the Board of Directors in July 2008, the Boardunanimously approved (with Mr. Lindo abstaining) to extend the $750,000 loanuntil December 31, 2009, provided Mr. Lindo pays a nominal one andone-half percent (1.5%) interest from November 2006.  Mr. Lindoagreed to pay the interest which totaled $18,763 through June 30, 2010.Mr. Lindo provides his services to the company without anyremuneration.  The loan remains open at June 30,2010.

 

NOTE9 - SUBSEQUENT EVENTS

 

Subsequentto June 30, 2010, the Company sold $37,000 in Stock Purchase and OptionAgreements.

 

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 $34,912,625 through December 31, 2008and for the six-months ended June 30, 2010 we sustained a loss amountingto $172,907. Kenilworth has had no revenues from operations during the pastsixteen (16) years and there can be no assurances that it will ever haverevenues from present planned operations.

 

LIQUIDITYAND CAPITAL RESOURCES

 

Ourpresent plans are to develop a wagering system, “Roulabette”, that would allowpatrons 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 sinceAugust 1968 formerly on the National NASDAQ Market, presently on the OTCPink Sheet Market since exiting from bankruptcy proceedings inSeptember 1998.  Kenilworth was formerly presented as a DevelopmentStage Company.  The Company believes this designation is incorrect. The Company exited from Chapter 7 Proceedings having made a 100% cashdistribution to all approved creditors for their entire claims and paid, infull, all administrative fees and expenses.  The designation is hinderingthe Company in its operations and management dropped the Development StageCompany designation in the third quarter period of 2009.

 

GENERAL

 

Sinceearly in the year 2000 we have been solely engaged in developing patents, marketsand investigating how best to obtain Governmental approvals, by engaginglobbyists 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.

 

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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 “Roulabette”.  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”).

 

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 to` TVs and laptops).  Public gatheringplaces can accommodate (be able to network) up to one thousand (1,000) or moreTV sets with a single satellite receiving dish, direct cable connections, orstreamed via the Internet.  With wagering possible in homes, hotel rooms,resort rooms, pubs, restaurants, race tracks and other public gathering places,the Company believes it will become a more than $500 billion net win****Market within five (5) yearsthroughout the industrialized world (by the year ended 2014).

 

Tobest market the casino games, the Company is selecting lotteries throughout theworld to manage and operate the distribution and cash handling (deposits toplay and paying winnings) using the lotteries’ existing databases for the saleof lottery 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. This could greatly enhance our efforts to broadcastthe live casino table games to these lottery locations and could result inhaving Cafés that offer terminals and TV sets to play along.  InternetCafés that offer wagering on various events have been a huge success in theAsian Market. On May 6, 2009 Congressman Barney Frank introducedlegislation that may, in the not too distant future, legalize internet gamblingin the United States.

 

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 andthe lotteries.

 

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 revenue with all participating entities that provideRoulabette gaming without costs of any kind.  State lotteries or theirprivate operators will receive a minimum of forty percent (40%) of the totalnet win from their respective jurisdictions.  With thirty percent (30%)inuring to the Company and thirty percent (30%) to the strictly regulatedcasinos.

 

Instates and foreign countries that designate lottery proceeds exclusively toschools and their teachers, it will be a welcome contribution.  It alsowill help close state and other budget gaps.

 

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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 andselect pin numbers, they can watch, in privacy, each race offered on thedifferent tracks on the TV and place wagers on the different races by simplychanging channels.  The players may also watch sporting events, the news,the stock market reports, and in the near future Roulabette, live, in-progresscasino table games.  The simulcast centers have their own databases tomanage the cash deposit and pay winnings on the horse/dog races and will beable to manage the casino games, on the same methods as the lotteries willmanage Roulabette.  With private TV’s, available in simulcast centers,especially at night, when fewer tracks are operating.

 

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 asKenilworth can commence broadcasting from a casino in the United States orother casinos throughout the world.

 

Inprior years, Kenilworth completed a prototype system that allowed casinopatrons to play along with live in-progress casino table games only within theconfines of a casino, via closed circuit television. Also in 1990, we developedand delivered for the TAB (Totalizator Agency Board) a quasy government agencyof the State of Victoria, Australia, a cashless slot machine system. Bothsystems required debit cards and central mainframe computers to manage thewagers. By making use of the expertise applied in the development of theaforementioned systems we plan to develop a second-generation system that willmanage the wagers by the microprocessor installed in TV set-top boxes or anattachment directly connected to the TV set to receive satellite and/orInternet broadcasts. This as planned would allow a player in an interactivemanner, at a remote location (outside the casino confines), to experience theactual play and excitement at the casino table game and to make wagers on thevarious games, without having to be physically present at the casino or casinotable.  There are no assurances we will be able to successfully developany system.

 

Wealso propose for slot machine manufacturers to develop “Roulabette SlotMachines”.  The Roulabette 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 Roulabette 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,outside of casino confines.

 

Roulabetteis 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 dubbedRoulabette.  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.  Roulabette would allowcasino 

 

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patronsand other players to play along with live in-progress casino table games suchas Roulette, Craps and Baccarat and more via digital satellite, digital cabletelevision or Internet broadcasts (simulcasts) emanating from strictlyregulated casinos located in the United States and other locations around theworld, to self-sufficient computer terminals dubbed “Roulabette Slots” anddigital satellite, cable TV set top boxes or the Internet in countries thatpermit Internet gaming. The Roulabette terminal is a proposal intended to bebuilt and there can be no assurances that it will ever be built.  Themicroprocessors to be installed in the TV set top boxes have not been designed.We have as at March 30, 2009, no firm agreements, customers, or proposalsfor any future business and there can be no assurances that we will ever havesame. **Reference is also made to each of the “RiskFactors” that are set forth in Item 7 of FORM 10-K for the year endedDecember 31, 2009.**

 

(2.)         We believe the thousand virtual casino websites via the Internet obtain sixtypercent (60%) of their annual revenue from customers in the U.S.  Thesewebsites were shut down when President Bush signed the Internet Enforcement Actof 2006.  Since then the U.S. Congress has indicated it may lift this banagainst Federal Internet Wagering in 2010 to increase Federal and State revenueto benefit education.

 

Simulcastbroadcasts of digital satellite and digital cable transmissions around theworld must meet, and will be supervised by, the regulations by the gamingauthorities of 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 foreign jurisdiction.

 

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) Nevada casino operators, legislation to permit cashless wagering inthe state of Nevada.  The legislation, which is in the form of anamendment to existing casino control statutes, permits the use of account cards(debit cards) and was signed into law by Governor Richard H. Bryan onJune 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 Roulabette Slot terminal and theRoulabette broadcasts. We estimate at this time, that we will need at leastapproximately ten million dollars ($10,000,000) for promoting the Roulabetteconcept. 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.

 

Itwill be necessary for us to obtain additional personnel qualified and with theexpertise to further develop Roulabette. We would require additional employeesand several more consultants and there can be no assurances of our being ableto obtain any necessary personnel. There can be no assurances of theavailability of any such employees and consultants.

 

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 Roulabette, the 

 

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play-alongbroadcast emanates from casinos that are regulated by strict and comprehensiverules and state and jurisdiction regulations, enforced by gaming controlregulators and everybody plays along with the same live table game. There is aworld of difference between playing in a virtual make believe casino comparedwith an actual casino.

 

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.

 

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 Roulabette 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 Roulabette, 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 andconverter box required to receive digital TV programming and interactive TV atits own cost, if the subscriber opens a Roulabette wagering account for twohundred dollars ($200). In addition, Kenilworth would pay the monthlysubscription fees to view all digital TV programming offered and the Internetservice provider (ISP) subscription fee if the customer wagers at least one hundredtwenty dollars ($120) each month — win, lose, or draw — makes nodifference.  In the U.S. the contracts would be financed by satellitecarriers such as EchoStar and DirecTV.  If the internet legislationintroduced on May 6, 2009 passes both Houses of Congress, the need fordish antennas would no longer be required.

 

Instates with approved lottery and/or other gambling legislation, we plan tointroduce Roulabette 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 Roulabette gaming on a more permanentbasis. To receive the broadcast signal, all that would be required is aneighteen (18) inch dish TV antenna and distribution equipment. The Roulabetteterminals are intended to be self-sufficient and accept dollar bills (orscript, to control the amount an individual is allowed to wager in one day orother time period). We plan to lease all the equipment necessary toparticipants for a share of the profits.

 

Togain approval for our Roulabette-style gambling in jurisdictions that have notapproved any gambling legislation, Kenilworth proposes to engage lobbyists tointroduce, promote, and obtain legislative approval to permit Roulabette-stylegambling. Our strategy is to find depressed resort areas and have theresort/hotel operators convince their local politicians of the benefits totheir business and the local economies and request them to promote legislativeapproval, either state-wide or limited to their areas. Riverboat gamblingstarted to rehabilitate decaying waterfronts. Roulabette can do the same indepressed economic areas.  No assurances can be given that we can obtainany such approvals.

 

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 Roulabette 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.

 

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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 Roulabette. 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 morepersonnel than the Company and may have under development systems that directlycompete with Roulabette.

 

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-along wagering.

 

PATENTS,TRADEMARKS AND INTELLECTUAL PROPERTY

 

Ourmost important assets are Patents we have acquired.  The Patent granted onJune 10, 2003 titled “SYSTEM AND METHOD FOR REMOTE ROULABETTE AND OTHERGAME PLAY USING GAME TABLE AT A CASINO” and Patent Application filedOctober 15, 2003, entitled “METHOD AND SYSTEM FOR SUPPLYING FUNDS TO ATERMINAL FOR REMOTE WAGERING”, “MULTI-USE GAMING MACHINE” trademarks.

 

ROULABETTE,as in pre-marked cards similar to lottery cards to select number in each game,used with terminals “ROULABETTE SWIPE CARD” to activate set-top boxes to playRoulabette and “PLAY ALONG WITH ROULABETTE, LIVE” and MULTI-USE GAMINGMACHINE.  Our patents are filed in fifty-one (51) industrialized countriesof the world and are approved, both in Russia and recently in China and 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 ownregulations, and in states where Kenilworth does business, Kenilworth will haveto comply with these regulations and there can be no assurances that it will beable to do so or obtain the necessary license in an applicable jurisdiction.The following discussion is not necessarily complete, or current regarding lawsand regulations that may be applicable to us.  Any present laws are alsosubject to future change, amendment or cancellation.

 

Item 2.             LEGAL PROCEEDINGS:

 

None

 

Item 3.             CHANGE IN SECURITIES:

 

None

 

Item 4.             DEFAULT UPON SENIORSECURITIES:

 

None

 

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

 

None

 

Item6.             OTHERINFORMATION:

 

TheCompany plans to hold its next Annual Meeting of Shareholders inOctober 2010 or any adjournment thereof with proxy materials mailed to shareholdersof record in twenty (20) days prior to the proposed meeting dates.

 

Item7.             EXHIBITS ANDREPORTS ON FORM 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 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.

 

SUBSEQUENTEVENTS:

 

Mr. HerbertLindo, the Chairman and CEO passed away on July 25, 2010.  The Board of Directors implemented theCompany’s succession plan, electing Mr. Dan Snyder to carry on Mr. Lindo’sresponsibilities as Chief Executive Officer, Chief Financial Officer,President, Treasurer and Director.  JoyceClark was elected Chairman.

 

TheCompany issued 3,000,000 shares of restricted Common Shares through July 17,2010 in connection with the sale of Stock Purchase and Option Agreements.

 

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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/  Dan W. Snyder |
|   | Chief  Executive Officer, Chief Financial Officer, President, Treasurer and Director |
|   |                                                                                 |
|   | August 13,  2010                                                                |
|        |                                                                                      |  |

 

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