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** **

 

** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x        Quarterly report pursuant to Section 13OR 15(D) of the Securities**

**ExchangeAct of 1934**

 

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

 

**OR**

 

**o****  Transition report pursuant to Section 13 or 15(D) of theSecurities Exchange**

**Actof 1934**

 

**Forthe transition period from            to**

 

**CommissionFile Number: 0-08962**

 

**KENILWORTHSYSTEMS CORPORATION**

(Exact name ofregistrant 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’stelephone number, including area code)

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  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 Rule12b-2 of the Act). o  Yes    x   No

 

State the number ofshares outstanding of each of the issuer’s classes of common stock as of thelatest practical date.

 

The number of shares ofcommon stock, $.01 par value of the Registrant outstanding as of June 30,2008 was 404,104,486.

 

 

 

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** **

**KENILWORTHSYSTEMS 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) - Six months  ended June 30, 2008 and 2007, and the period from inception, as a  Development Stage Company, to June 30, 2008 |       |
|              |   |                                                                                                                                                                                                             |       |
|              |   | Condensed  Consolidated Balance Sheets (unaudited) — June 30, 2008 and  December 31, 2007                                                                                                         |       |
|              |   |                                                                                                                                                                                                             |       |
|              |   | Condensed  Consolidated Statements of Cash Flows (unaudited) - Six months ended  June 30, 2008 and 2007, and the period from inception, as a Development  Stage Company, to June 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 LOOKINGSTATEMENTS

 

The information containedin this Form 10-Q and Kenilworth’s other filings with the SecuritiesExchange Commission contain “forward-looking” statements within the meaning ofsection 27A of the Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended, and is subject to the safeharbors created thereby. Such information involves important risks anduncertainties that could significantly affect results in the future and,accordingly, such results may differ from those expressed in any forwardlooking statements herein. Future operating results may be adversely affectedas a result of a number of factors.

 

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

 

RISKS

 

Specific reference ismade to each of the risks described in Item 7 in Part II of the Form 10-Kfor December 31, 2007 under the discussion “Cautionary Statement ForPurposes of the Safe Harbor Provisions of the Private Securities LitigationReform Act of 1995 and Risk Factors”. Reference is also made to future filingsunder Forms 10-Q and Forms 10-K and filings under the Securities Exchange Actof 1934 as amended and as may be applicable under the Securities Act of 1933 asamended.

 

INTRODUCTORY NOTE

 

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

 

This Form 10-Q isbeing filed as a “Development Stage Company” from the period beginning November 24,1998 to the present at June 30, 2008, including a charge in the amount of$4,256,926, which was the amount the Company disbursed on September 28,1998 to exit from Chapter 7 Bankruptcy Proceedings.

 

d) The Company issued125,596,193 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.

 

During the three (3) monthperiod ended September 30, 2005, the Company expensed the 25,000,000shares to be issued to Herbert Lindo, the Chairman, CEO and Chief FinancialOfficer at the rate of $0.05 per share.  At the Shareholders Meeting heldon September 13, 2005, the Shareholders approved the issuance of25,000,000 shares to Herbert Lindo.

 

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

 

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

 

During the period ended March 31,2007 and 2006, the Company made certain adjustments to the number of sharesoutstanding which did not require capital changes.

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONSAND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE(Unaudited)

 
| ** **                                     | ** ** | ** **                                             | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **Period from**        | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------|------------|-------------|------------|-----------------------------|------------|
| ** **                                     | ** ** | ** **                                             | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **November 24,**       | ** ** |
| ** **                                     | ** ** | **For the six months ended ** | ** ** | **For the three months ended** | ** ** | **1998**                | ** ** |
| ** **                                     | ** ** | **June 30,**                                      | ** ** | **June 30,**                                  | ** ** | **(Inception) to** | ** ** |
| ** **                                     | ** ** | **2008**                                               | ** ** | **2007**                                           | ** ** | **2008**                | ** ** | **2007**    | ** ** | **June 30, 2008** | ** ** |
|                                           |       | *                                                      |       |                                               |       | *                       |       |        |       | **Restated**                | ** ** |
| Revenues                                       |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Sales                                          |       | $                                                      | 0          |                                               | $          | 0                       |       | $           | 0          |                        | $          | 0 |   |   |   |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Expenses                                       |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Selling,  general and administrative           |       | $                                                      | 859,681    |                                               | $          | 832,509                 |       | $           | 680,583    |                        | $          | 613,722 |   | $ | 13,185,007 |   |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Other  income (expenses)                       |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Interest  income                               |       | —                                                 |       | —                                             |       | —                  |       | —      |       | 922                         |       |
| Interest  expense                              |       | —                                                 |       | —                                             |       | —                  |       | —      |       | (775,018                    | )          |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Total  other income (expense)                  |       | —                                                 |       | —                                             |       | —                  |       | —      |       | (2,688,926                  | )          |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Net  loss                                      |       | $                                                      | (859,681   | )                                                  | $          | (832,509                | )          | $           | (680,583   | )                           | $          | (613,722 | ) | $ | (16,008,323 | ) |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Basic  and diluted loss per share              |       | $                                                      | (0.002     | )                                                  | $          | (0.002                  | )          | $           | (0.002     | )                           | $          | (0.001 | ) | $ | (0.10 | ) |
|                                           |       |                                                   |       |                                               |       |                    |       |        |       |                        |       |
| Weighted  average number of shares outstanding |       | 404,104,486                                            |       | 304,688,294                                        |       | 404,104,486             |       | 304,668,294 |       | 86,811,567                  |       |

 

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* Includes a NON CASHloss of  $510,776 resulting from the saleand issuance of 62,625,002 shares of RESTRICTED Common Stock, par value $0.01per share, for cash, consulting fees and conversion of loans at less than parvalue.

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED BALANCE SHEET(Unaudited)

 
| ** **                                                                                                                                        | ** ** | **June 30,  2008** | ** **    | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|-----------------------------|------------|
|                                                                                                                                              |       |                    |          |                        |       |
| ASSETS                                                                                                                                            |       |                    |          |                        |       |
| CURRENT  ASSETS                                                                                                                                   |       |                    |          |                        |       |
| Cash                                                                                                                                              |       | $                       | 3,948         |                        | $          | 1,232 |   |
| Prepaid  expenses                                                                                                                                 |       | 40,000                  |          | 80,000                      |       |
| Loan  receivable — including from stockholders, net                                                                                          |       | 20,120                  |          | 20,120                      |       |
| Receivable  from Herbert Lindo (Note 8)                                                                                                           |       | 750,000                 |          | 750,000                     |       |
|                                                                                                                                              |       |                    |          |                        |       |
| TOTAL  CURRENT ASSETS                                                                                                                             |       | $                       |  814,068 |                        | $          |     851,352 |   |
|                                                                                                                                              |       |                    |          |                        |       |
| PROPERTY  AND EQUIPMENT — NET                                                                                                                |       | 11,896                  |          | 14,868                      |       |
|                                                                                                                                              |       |                    |          |                        |       |
| SECURITY  DEPOSIT                                                                                                                                 |       | 17,777                  |          | 13,677                      |       |
|                                                                                                                                              |       |                    |          |                        |       |
| TOTAL  ASSETS                                                                                                                                     |       | $                       | 843,741       |                        | $          | 879,897 |   |
|                                                                                                                                              |       |                    |          |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ DEFICIT                                                                                                       |       |                    |          |                        |       |
| CURRENT  LIABILITIES                                                                                                                              |       |                    |          |                        |       |
| Accounts  payable and accrued expenses                                                                                                            |       | $                       | 183,879       |                        | $          | 210,717 |   |
| Payroll  taxes payable (Note 7)                                                                                                                   |       | 147,351                 |          | 73,341                      |       |
| Loans  payable — including accrued interest                                                                                                  |       | 19,817                  |          | 19,129                      |       |
|                                                                                                                                              |       |                    |          |                        |       |
| TOTAL  CURRENT LIABILITIES                                                                                                                        |       | $                       |  351,047 |                        | $          |     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 404,104,486 and 327,741,562 shares, respectively |       | 4,041,044               |          | 3,277,415                   |       |
| Additional  paid-in capital                                                                                                                       |       | 31,149,766              |          | 31,137,730                  |       |
| Accumulated  deficit                                                                                                                              |       | (34,698,116             | )             | (33,838,435                 | )          |
|                                                                                                                                              |       |                    |          |                        |       |
| TOTAL  STOCKHOLDER’S EQUITY                                                                                                                  |       | 492,694                 |          | 576,710                     |       |
|                                                                                                                                              |       |                    |          |                        |       |
| TOTAL  LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                  |       | $                       | 843,741       |                        | $          | 879,897 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30,(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** **    | ** ** | **Period from**                  | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|---------------|------------|---------------------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** **    | ** ** | **November 24,  1998**           | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** **    | ** ** | **to**                                | ** ** |
| ** **                                                                      | ** ** | **2008**   | ** ** | **2007**      | ** ** | **June 30, 2008  Restated** | ** ** |
| Cash  flows from operating activities                                           |       |       |       |          |       |                                  |       |
| Net loss                                                                        |       | $          | (859,681   | )             | $          | (832,509                              | )          | $ | (16,008,323 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities |       |       |       |          |       |                                  |       |
| Depreciation                                                                    |       | 2,972      |       | 6,376         |       | —                                |       |
| Patent  Impairment                                                              |       | —     |       | —   |       | 73,962                                |       |
| Accretion  of convertible debt discount                                         |       |       |       | —   |       | 72,656                                |       |
| Beneficial  conversion feature                                                  |       |       |       |          |       | 1,182,097                             |       |
| Common  stock issued for services                                               |       | 20,675,000 |       | 933,500  |       | 30,374,432                            |       |
| 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                                                               |       | (40,000    | )          | (25,000       | )          | (40,000                               | )          |
| Accounts  payable and accrued expenses                                          |       | 183,879    |       | 297,219       |       | 351,047                               |       |
| Payroll  taxes payable                                                          |       | 147,351    |       | 141,000       |       | 147,351                               |       |
| Net  cash used in operating activities                                          |       | (525,479   | )          | (532,586      | )          | (2,504,864                            | )          |
| Cash  flows from investing activities                                           |       |       |       |          |       |                                  |       |
| Repayment  of loans -stockholder                                                |       | —     |       | 35,477        |       | (20,120                               | )          |
| Proceeds  from loan receivable - stockholder                                    |       |       |       |          |       | 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                                          |       | (220,000   | )          | 26,055        |       | (220,000                              | )          |
| Cash  flows from financing activities                                           |       |       |       |          |       |                                  |       |
| Proceeds  from Paid in Capital                                                  |       | 12,000     |       |          |       |                                  |       |
| Proceeds  from convertible notes payable                                        |       | —     |       | —        |       | 1,754,861                             |       |
| Proceeds  from sale of common stock                                             |       | 220,000    |       | —        |       | 220,000                               |       |
| Proceeds  from stock subscriptions receivable                                   |       | —     |       | —        |       | 40,000                                |       |
| Net  cash provided by financing activities                                      |       | 220,000    |       | 506,531       |       | 3,662,666                             |       |
| Net  change in cash                                                             |       |       |       | 357           |       | 78,775                                |       |
| Cash  – beginning of period                                                |       | 9,254      |       | 9,611         |       | —                                |       |
| Cash  - end of period                                                           |       | $          | 3,948      |          | $          | 9,254                                 |       | $ | 78,775 |   |

 
| 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 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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**KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSED NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE 1 - BASIS OF PRESENTATION

 

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of April 1, 2008 contain all adjustments (consisting of only normalaccruals) necessary to present fairly the consolidated balance sheets as of June 30,2008 and December 31, 2007 and the related statements of operations andcash flows for the three (3) month periods ended June 30, 2008 and2007.  These financial statements should be read in conjunction with theconsolidated financial statements and notes thereto included in our AnnualReport on FORM 10-K for the fiscal year ended December 31, 2007.

 

The results of operationsfor the three (3) month period ended June 30, 2008 are notnecessarily indicative of the results for the entire year ending December 31,2008.

 

NOTE 2 - THE COMPANY AND NATURE OF BUSINESS

 

Kenilworth SystemsCorporation (the “Company”) was incorporated in New York in April 1968 andsince 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.

 

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

 

NOTE 3 - PRINCIPLES OF CONSOLIDATION

 

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

 

NOTE 4 - GOING CONCERN UNCERTAINTY

 

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

 

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

 

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES

 

During the quarters endedJune 30, 2008 and June 30, 2007 respectively, the Company sold tovarious private investors $220,000 and $135,000 principal amount of ConvertiblePromissory Notes made loans to the company and issued Stock Purchase and OptionAgreements bearing interest at rates ranging from 4.00% to 12.00% perannum.  The Notes had a six-month and one-year term and were immediatelyconvertible at the option of the noteholder into shares of restricted commonstock based on conversion prices ranging from $.005 to $0.10 per share. All Notes issued in the quarters ended June 30, 2008 and June 30,2007 were converted into a total of 62,625,002 and 10,786,001 restricted common shares, respectively.

 

NOTE 6 - NON CASH TRANSACTIONS

 

Common shares issued forservices

 

2008:

 

The Company issued20,675,000 shares as compensation for services rendered during the quarterperiod ended June 30, 2008.  The services were valued at $413,500.

 

2007:

 

The Company issued750,000 shares as compensation for services rendered during the first quarterand second quarter period ended June 30, 2007.  The services werevalued at $37,500.

 

2006:

 

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

 

NOTE 7 – PAYROLL TAXES PAYABLE

 

The Company has madearrangements with the Internal Revenue Service (IRS) and the New York StateDepartment of Taxation to pay approximately $147,351 in past due payroll taxes,including all penalties and interest accrued during the years 2007 and the six (6) monthperiod ended June 30, 2008 in monthly installments, by the end of thecalendar year 2008.  The agreements provide that the Company must pay allpresent taxes, when due, and payments must remain current in 2008.

 

NOTE 8 - RECEIVABLE FROM HERBERT LINDO

 

On November 27, 2006Herbert Lindo, the Chairman and Chief Executive Officer exercised a fivemillion (5,000,000) share option for seven hundred fifty thousand dollars($750,000) at fifteen cents ($0.15) per share pursuant to the Company’sPerformance and Equity Plan. The price per share was the price for the Optionwhich would have expired on the following date. Mr. Lindo does not own anyother Options pursuant to the Plan. The average market price of the CommonStock 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 seven hundredfifty thousand dollars ($750,000) from the Company and pledged the five million(5,000,000) and other shares he owns, as collateral for the loan. The fivemillion (5,000,000) shares have been issued as restricted shares.

 

NOTE 9 - SUBSEQUENT EVENTS

 

Subsequent to June 30,2008, the Company obtained two (2) $10,000 loans due September 23, 2008at an interest rate of twelve percent (12%) per annum from two (2) presentinvestors.

 

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

 

RESULTS OF OPERATIONS

 

Since we exited frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting to $1,093,538 and $850,079 in year 2007 and 2006 and for thesix-months ended June 30, 2008 we sustained losses amounting to $859,681which includes a NON-CASH loss of $510,776 compared to a loss of $613,722 forthe quarter ending June 30, 2007. Kenilworth has had no revenues fromoperations during the past fifteen (15) years and there can be no assurancesthat it will ever have revenues from present planned operations.

 

LIQUIDITY AND CAPITALRESOURCES

 

Our present plans are todevelop a wagering system dubbed “RoulabetteTM” that would allow patrons in theindustrialized world to play and wager on live in-progress simulcast casinotable games on TV’s placed in hotels, resorts, bars and other public gatheringplaces and in homes and offices on personal computers (PC’s) or television setsconnected to set top boxes for Interactive TV via digital satellite, digitalcable and Internet broadcasts emanating from strictly regulated casinos.

 

PART II

 

ITEM 1—DESCRIPTIONOF BUSINESS

 

Kenilworth SystemsCorporation hereinafter referred to as “Kenilworth”, the “Company” or “we”, wasincorporated 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 approvedcredits for their entire claims and paid, in full, all administrative fees andexpenses.  The designation is hindering the Company in its operations.

 

GENERAL

 

Since early in the year2000 we have been solely engaged in developing patents, markets andinvestigating how best to obtain Governmental approvals, by engaging lobbyistsand consultants that would allow television satellite and cable subscribersthroughout the industrialized world to play and wager along from remotelocations with live, in-progress casino table games (Roulette, Craps, Baccaratand more) from strictly regulated casinos located in the United States andother locations around the world.

 

Employing the latestencrypted satellite, cable and Internet technology and placing televisioncameras in strategic locations above the casino table games, without disruptingthe normal game-monitoring activities, (a separate control room would directthe various camera angles), and transmitting the table games over the digitalsatellite, digital cable and Internet networks (in countries that permitInternet wagering) to television sets (“TV’s”), which become a platform forplaying along with the casino games wherever TV’s are located.

 

Kenilworth titled theoverall 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”).  On average, households in the U.S. have three (3) TV’s. (It is important since the satellite and cable companies will charge a separatefee for 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 

 

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believes it will become amore than $500 billion **net win**Marketwithin five (5) years throughout the industrialized world (by the yearended 2012).

 

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

 

All forty-three (43)lotteries in the United States are owned and operated by County and Stateagencies.  Since the beginning of year 2007, Texas, Illinois and Indianaare engaged in privatizing their lotteries by selling or leasing (on long termleases) their lotteries.  Maryland, Michigan, Iowa and New Jersey are alsoexploring the privatization of their lotteries. This could greatly enhance ourefforts to broadcast the live casino table games to these lottery locations andcould result in having Cafés that offer terminals and TV sets to playalong.  Internet Cafés that offer wagering on various events have been ahuge success in the Asian Market. With Internet wagering outlawed in the UnitedStates, our patented satellite, one-way broadcasts offer the best possibilityto establish satellite Cafés.

 

Throughout the rest ofthe world, lotteries are owned by government agencies or non profit charitableagencies that distribute the net earnings to benefit social and charitableprograms, or by private entities that pay a percentage of their net win todesignated government agencies.

 

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

 

There are no technicalbreakthroughs required.  The equipment for the technology is readilyavailable.  What is needed is to get through the maze of Local, County,State and Federal regulations in each U.S. State and foreign countries. When the first State in the United States grants the Company permission totransmit the broadcast from one of its casinos to their residents and to Statesthat do not have any casinos, (the entire East coast of the United States), theother forty-three (43) States with lotteries will join expeditiously. Thesame will occur in foreign countries.

 

Kenilworth will share the**net win** revenue with allparticipating 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.

 

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

 

In addition, throughoutthe United States and most foreign countries there are hundreds of facilitiesthat simulcast live in-progress horse/dog races.  At most facilities thereare several large TV screens that show the races from the different tracks withgeneral theater-type seating for patrons and at private cubicles withtelevision sets outfitted with touch screens.  The cubicles rent foradditional fees.  After players open an account and select pin numbers,they can watch, in privacy, each race offered on the different tracks on the TVand place wagers on the different races by simply changing channels.  Theplayers may also watch sporting events, the news, the stock market reports, andin the near future RoulabetteTM, live, in-progress casino table games.  Thesimulcast centers have their own databases to manage the cash deposit and paywinnings on the horse/dog races and will be able to manage the casino games, onthe same methods as the lotteries will manage RoulabetteTM.  With privateTV’s, available in simulcast centers, especially at night, when fewer tracksare operating.

 

When playing along withlive table games from a highly regulated jurisdiction, players will be assuredthat the game results are exactly what they see; and, playing along with livecasino table games such as Roulette, Craps and Baccarat, we believe, willprovide interaction, fun and far more excitement than 

 

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playing make believeanimated (virtual) games. It is the next best thing, we believe, to actuallybeing at the table in the casino.

 

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

 

In prior years,Kenilworth completed a prototype system that allowed casino patrons to play alongwith live in-progress casino table games **onlywithin the confines of a casino,** via closed circuit television. Alsoin 1990, we developed and delivered for the TAB (Totalizator Agency Board) aquasy government agency of the State of Victoria, Australia, a cashless slotmachine system. Both systems required debit cards and central mainframecomputers to manage the wagers. By making use of the expertise applied in thedevelopment of the aforementioned systems we plan to develop asecond-generation system that will manage the wagers by the microprocessorinstalled in TV set-top boxes or an attachment directly connected to the TV setto receive satellite and/or Internet broadcasts. This as planned would allow aplayer in an interactive manner, at a remote location (outside the casinoconfines), to experience the actual play and excitement at the casino tablegame and to make wagers on the various games, without having to be physicallypresent at the casino or casino table.  There are no assurances we will beable to successfully develop any system.

 

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

 

Where authorized, hotels,resorts, clubs and other public gathering places will be able to offer casinotable game action in their establishments without incurring the costs tooperate a casino. There are now believed to be more than ten million(10,000,000) slot machines played throughout the world, outside of casinoconfines.

 

RoulabetteTM is a conceptintended to be built and there can be no assurances that it will ever bebuilt.  The Patented microprocessors to be installed in the TV set topboxes 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 December 31, 2006, 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.

 

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Simulcast broadcasts ofdigital satellite and digital cable transmissions around the world must meet,and will be supervised by, the regulations by the gaming authorities of thebroadcasting casino and the jurisdiction, which receives the broadcast. We believe the supervision will not be difficult to enforce, because allsimulcast wagering is “cash only”, from regulated, supervised bettingsites.  There are no wire money transfers with banks and no credit ordebit 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).

 

Kenilworth was the firstto use color personal computers (PC’s) to replace electromechanical slotmachines (1988).  We provided the software for the first Tabaret locatedat the Menzie at the Rialto in Melbourne, Australia, which opened in November 1990. This consisted of cashless, variable denomination and multiple games,virtual PAT’s (“Player Activated Terminals”).   Prior theretoKenilworth sponsored, with the assistance of three (3) Nevada casinooperators, 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.

 

Kenilworth has been apublicly traded Company since 1968. Prior to commencing its endeavors into itspresent business in 1988, it also provided security systems to Nuclear ElectricGenerating Plants in the U.S. and foreign countries, as well as time/attendancesystems at a major department store chain.

 

MARKETING STRATEGY/SALESPLAN

 

Our marketing strategyconsists of developing the RoulabetteTM Slot terminal and the RoulabetteTMbroadcasts. We estimate at this time, that we will need at least approximatelyten million dollars ($10,000,000) for promoting the RoulabetteTM concept. We donot have this money nor do we have any agreements or understanding to procurethis money. We may never get this money. If we do obtain this money, it may notbe sufficient. Further, should such monies be available it may not be availableon terms satisfactory to Kenilworth or it may be available on such terms thatsubstantially dilute the interest of existing shareholders. If we obtain thismoney, we will need substantial additional funds for the proposed marketingplan and there can be no assurances that such funds will ever be available toallow Kenilworth to engage in business on a profitable basis.

 

At the present time, wedo not engage technically oriented employees who will be able to assist in thedevelopment of RoulabetteTM (we have available three [3] former technicalKenilworth employees that have indicated to rejoin Kenilworth at theappropriate time). It will be necessary for us to obtain additional personnelqualified and with the expertise to develop RoulabetteTM. We would requireadditional 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.

 

The Company willoutsource the development of RoulabetteTM and the microprocessors for the TV settop boxes.

 

In the United States,Kenilworth must refrain from using the Worldwide Web (WWW) Internet to managewagers from individuals outside of the casino confines. It is against the law.In RoulabetteTM, the play-along broadcast emanates from casinos that areregulated by strict and comprehensive rules and state and jurisdictionregulations, enforced by gaming control regulators and everybody plays alongwith the same live table game. There is a world of difference between playingin a virtual make believe casino compared with an actual casino.

 

For the reasons stated,Kenilworth will ask state lotteries, Off-Track Betting (OTB) corporations,pari-mutuel race tracks, and other state and federal regulated agencies tomanage the wagers from individuals playing along on their PC’s and theirtelevision sets using interactive TV set top boxes that convert regulartelevision sets into minicomputers within their state or jurisdiction. Therecan be no assurances that we will be able to obtain any arrangement with any ofthese entities or that they would be on suitable terms.

 

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The individuals wouldhave to pre-deposit funds into an account with the wager management company andthen place wagers with their credit balance. The wagers and running balanceswill be transmitted to the RoulabetteTM player’s PC and/or television sets withtelephone lines not crossing any state lines, similar in principle to telephoneaccounts wagering offered by the New York State Off-Track Betting Corporationand the state of Nevada casino sports book and recently with remote purchase oflottery tickets in many states within the United States.

 

After we obtainpermission to play RoulabetteTM, of which there can be no assurances, in agiven state and engage a wager management organization in order to promote digitalsatellite and interactive television to the state’s residents, Kenilworth wouldinstall the eighteen (18) inch dish antenna and converter box required toreceive digital TV programming and interactive TV at its own cost, if thesubscriber opens a RoulabetteTM wagering account for two hundred dollars ($200).In addition, Kenilworth would pay the monthly subscription fees to view alldigital TV programming offered and the Internet service provider (ISP)subscription fee if the customer wagers at least one hundred twenty dollars($120) each month — win, lose, or draw — makes no difference.  In the U.S.the contracts would be financed by satellite carriers such as EchoStar andDirecTV.

 

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

 

To gain approval for ourRoulabetteTM-style gambling in jurisdictions that have not approved any gamblinglegislation, Kenilworth proposes to engage lobbyists to introduce, promote, andobtain legislative approval to permit RoulabetteTM-style gambling. Our strategyis to find depressed resort areas and have the resort/hotel operators convincetheir local politicians of the benefits to their business and the localeconomies and request them to promote legislative approval, either state-wideor limited to their areas. Riverboat gambling started to rehabilitate decayingwaterfronts. RoulabetteTM can do the same in depressed economic areas.  Noassurances can be given that we can obtain any such approvals.

 

When the live casino TVbroadcasts are beamed for global viewing, Kenilworth will seek out similarorganizations, as proposed for the United States and betting shops and slotroute operators that can provide the servicing of individual accounts andplacement of RoulabetteTM terminals in hotels, clubs, pubs, racetracks, etc. Inall instances, we plan to offer only profit sharing arrangements tofranchisees, which will require leasing all the equipment necessary to thefranchisee, to discourage competition.

 

In overseasinstallations, wherever permitted, Kenilworth will make use of the WWW Internetonly to manage the wagers, and only in jurisdictions that permit the datacollection of the gambler, not for the live broadcast.

 

In the event asubstantial amount is won by a player, Kenilworth will make the payment to thewinner, via money wire transfer, to the establishment which managed the wager,within twenty-four (24) hours.  Kenilworth will establish a worldwide cagefor winning payments; or, a guarantee payment by a well-recognizedinternational bank.

 

COMPETITION

 

Many segments of thegaming industry are characterized by intense competition, with a large numberof companies offering the same type of wagering products and services. None ofthese companies, at present, are believed to offer the same or similarequipment or systems as intended by RoulabetteTM. The most likely competitionwill come from slot machine manufacturers who could relatively quickly adaptslot machines to play along with live casino table games. We believe there arethree (3) major slot machine 

 

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manufacturers in theworld, all of which have vastly greater capital resources and substantiallymore personnel than the Company and may have under development systems thatdirectly compete with RoulabetteTM.

 

Our present plans are tobroadcast the live casino table games from companies that own casinosthroughout the industrialized world. Other casino owners may start their ownbroadcasts and have their own terminals manufactured that compete withKenilworth after Kenilworth has done all its pioneering for play-alongwagering.

 

PATENTS, TRADEMARKS ANDINTELLECTUAL PROPERTY

 

Our most important assetsare Patents we have acquired and RoulabetteTM related trademarks and servicemarks.  The Patent granted on June 10, 2003 titled “SYSTEM AND METHODFOR REMOTE ROULABETTE AND OTHER GAME PLAY USING GAME TABLE AT A CASINO” andPatent Application filed October 15, 2003, entitled “METHOD AND SYSTEM FORSUPPLYING FUNDS TO A TERMINAL FOR REMOTE WAGERING”, “MULTI-USE GAMING MACHINE”trademarks.

 

ROULABETTETM, as inpre-marked cards similar to lottery cards to select number in each game, usedwith 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 China,after a seven (7) year delay.

 

GOVERNMENT REGULATIONS

 

Kenilworth has nolicenses from any casino regulating authorities and may not require any casinolicenses at the present time and may never become able to obtain any licensesthat may be required in the future. Each state has its own regulations, and instates where Kenilworth does business, Kenilworth will have to comply withthese regulations and there can be no assurances that it will be able to do soor obtain the necessary license in an applicable jurisdiction. The following discussionis not necessarily complete, or current regarding laws and regulations that maybe applicable to us.  Any present laws are also subject to future change,amendment or cancellation.

 

Item 2.   LEGAL PROCEEDINGS:

 

None

 

Item 3.   CHANGE IN SECURITIES:

 

None

 

Item 4.   DEFAULT UPON SENIOR SECURITIES:

 

None

 

Item 5.   SUBMISSION OF A MATTER TO A VOTE OF SECURITIES HOLDERS:

 

None

 

Item 6.   OTHER INFORMATION:

 

The Company plans to holdits next Annual Meeting of Shareholders in November 2007 or any adjournmentthereof with proxy materials mailed to shareholders of record in twenty (20)days prior to the proposed meeting dates.

 

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Item 7.   EXHIBITS AND REPORTS ON FORM 8-K:

 

Ex 31.1 Certification ofChief Financial Officer of the Company Required by Rule 13a-14(a) or Rule 15d-14(c) ofthe Exchange Act

 

Ex 32.1 Certification ofChairman and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2007.

 

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SIGNATURE

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed in its behalf by the undersigned thereunto dulyauthorized.

 
|        |   | KENILWORTH SYSTEMS  CORPORATION                                  |
|--------|--------|------------------------------------------------------------------|
|   |   |
|   | By:    | /s/ HERBERT LINDO                                                |
|   |   | Herbert Lindo,                                                   |
|   |   | Chairman, Chief  Executive Officer and Chief   Financial Officer |
|   |   | July 29, 2008                                               |

 

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