**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-Q**

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| **(Mark One)** |
|----------------|
| ** **     |
| x              |   | **Quarterly  report pursuant to Section 13 OR 15(D) of the Securities Exchange  Act of 1934** |
| ** **     |   | ** ** |
| ** **     |   | **For the  quarterly period ended March 31, 2007** |
| ** **     |   | ** ** |
| ** **     |   | **OR** |
| ** **     |   | ** ** |
| **o**          |   | **Transition  report pursuant to Section 13 or 15(D) of the Securities Exchange  Act of 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 checkmark whether the Registrant (1) has filed all reports required to be filedby section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 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

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

The number ofshares of common stock, $.01 par value of the Registrant outstanding as ofMarch 31, 2007 was 287,594,294.

 

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**Table ofContents**

**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

**INDEX**
| **Part I.**  | ** ** | **Financial Information**                                                                                                                                                                                            |   |   |
|-------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 1.           |       | Financial Statements                                                                                                                                                                                                 |   |   |
|              |       |                                                                                                                                                                                                                 |   |   |
|              |       | Condensed  Consolidated Balance Sheets (unaudited) - March 31, 2007 and  December 31, 2006                                                                                                                 |   | 4      |
|              |       |                                                                                                                                                                                                                 |   |   |
|              |       | Condensed  Consolidated Statements of Operation (and Deficit) (unaudited) - Three months  ended March 31, 2007 and 2006, and the period from inception, as a  Development Stage Company, to March 31, 2007 |   | 5      |
|              |       |                                                                                                                                                                                                                 |   |   |
|              |       | Condensed  Consolidated Statements of Cash Flows (unaudited) - Three months ended  March 31, 2007 and 2006, and the period from inception, as a Development  Stage Company, to March 31, 2007              |   | 6      |
|              |       |                                                                                                                                                                                                                 |   |   |
|              |       | Condensed  Notes to Consolidated Financial Statements (unaudited)                                                                                                                                                    |   | 7      |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 2.           |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                          |   | 8      |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 3.           |       | Quantitative and Qualitative Disclosures About  Market Risk                                                                                                                                                          |   |   |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 4.           |       | Controls and Procedures                                                                                                                                                                                              |   |   |
|              |       |                                                                                                                                                                                                                 |   |   |
| **Part II.** | ** ** | **Other  Information**                                                                                                                                                                                               |   |   |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 1.           |       | Description of  Business                                                                                                                                                                                             |   | 9      |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 2.           |       | Legal Proceedings                                                                                                                                                                                                    |   | 15     |
|              |       |                                                                                                                                                                                                                 |   |   |
| Items  3,4,5,6    |       |                                                                                                                                                                                                                 |   | 15     |
|              |       |                                                                                                                                                                                                                 |   |   |
| Item 7.           |       | Exhibits                                                                                                                                                                                                             |   | 15     |
|              |       |                                                                                                                                                                                                                 |   |   |
| Signature         |       |                                                                                                                                                                                                                 |   | 16     |

 

2

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FORWARD LOOKINGSTATEMENTS

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

You should notrely on forward-looking statements in this Form 10-Q. This Form 10-Qcontains forward-looking statements that involved risks and uncertainties. Weuse words such as “anticipates”, “believes”, “plans”, “expects”, “future”, “intends”and similar expressions to identify such forward-looking statements. You shouldnot place undue reliance on these forward-looking statements, which apply onlyas of the date of this Form 10-Q. Our actual results could differmaterially from those anticipated in these forward-looking statements for manyreasons, including the risks faced by Kenilworth as described below andelsewhere in this Form 10-Q.

RISKS

Specific referenceis made to each of the risks described in Item 7 in Part II of theForm 10-K for December 31, 2006 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.

INTRODUCTORY NOTE

This Form 10-Q isbeing filed as a “Development Stage Company” from the period beginning November24, 1998 to the present at March 31, 2007, including a charge in the amount of$4,256,926, which was the amount the Company disbursed on September 28, 1998 toexit from Chapter 7 Bankruptcy Proceedings.

d) The Companyissued 140,957,048 shares of its Restricted Common Stock since December 31,2004.  All of the shares may have the restrictions lifted pursuant to Rule144 and 144K within one (1) or two (2) years which may substantially depressthe trading price of the Company’s Stock in the future.

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

At theShareholders Meeting held on May 28, 2003, the Shareholders approved theissuance of 20,000,000 shares to be issued to Herbert Lindo the Chairman andPresident of the Company.  Unlike the 25,000,000 shares issuable toHerbert Lindo, which were expensed, the 20,000,000 shares were not expensed.

Herbert Lindorequested to have the 45,000,000 shares issued during the period ended March31, 2006.  The Company expensed the 20,000,000 shares during the period atthe rate of $0.015 per share, which amounted to a reduced capital adjustment of53,652 instead of $303,652.

During the periodended March 31, 2007 and 2006, the Company made certain adjustments to thenumber of shares outstanding which did not require capital changes.

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KENILWORTH SYSTEMS CORPORATION(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATEDBALANCE SHEET(Unaudited)
| ** **                                                                                                                                        | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                                                                                                                              |       |                     |       |                        |       |
| ASSETS                                                                                                                                            |       |                     |       |                        |       |
| CURRENT ASSETS                                                                                                                                    |       |                     |       |                        |       |
| Cash                                                                                                                                              |       | $                        | 4,198      |                        | $          | 49,995 |   |
| Prepaid expenses                                                                                                                                  |       | 50,000                   |       | 75,000                      |       |
| Loan receivable — including from stockholders                                                                                                |       | 30,000                   |       | 30,000                      |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                            |       | 750,000                  |       | 750,000                     |       |
|                                                                                                                                              |       |                     |       |                        |       |
| TOTAL CURRENT ASSETS                                                                                                                              |       | 834,198                  |       | 904,995                     |       |
|                                                                                                                                              |       |                     |       |                        |       |
| PROPERTY AND  EQUIPMENT — NET                                                                                                                |       | 28,690                   |       | 31,878                      |       |
|                                                                                                                                              |       |                     |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 9,422                    |       | 9,422                       |       |
|                                                                                                                                              |       |                     |       |                        |       |
| TOTAL ASSETS                                                                                                                                      |       | $                        | 872,310    |                        | $          | 946,295 |   |
|                                                                                                                                              |       |                     |       |                        |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                        |       |                     |       |                        |       |
| CURRENT  LIABILITIES                                                                                                                              |       |                     |       |                        |       |
| Accounts payable and accrued expenses                                                                                                             |       | $                        | 275,787    |                        | $          | 311,358 |   |
| Payroll taxes payable (Note 7)                                                                                                                    |       | 141,000                  |       | 141,000                     |       |
| Loans payable – including accrued interest                                                                                                   |       | 34,632                   |       | 33,787                      |       |
| Loans payable — automobile                                                                                                                   |       | 500                      |       | 750                         |       |
|                                                                                                                                              |       |                     |       |                        |       |
| TOTAL CURRENT LIABILITIES                                                                                                                         |       | 451,919                  |       | 486,895                     |       |
|                                                                                                                                              |       |                     |       |                        |       |
| 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 287,594,294 and 278,508,293  shares, respectively |       | 2,875,942                |       | 2,785,082                   |       |
| Additional paid-in capital                                                                                                                        |       | 30,508,133               |       | 30,419,215                  |       |
| Accumulated deficit                                                                                                                               |       | (32,963,684              | )          | (32,744,897                 | )          |
|                                                                                                                                              |       |                     |       |                        |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                   |       | 420,391                  |       | 459,400                     |       |
|                                                                                                                                              |       |                     |       |                        |       |
| TOTAL  LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                  |       | $                        | 872,310    |                        | $          | 946,295 |   |

 

The accompanyingnotes are an integral part of these financial statements.

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATEDSTATEMENT OF OPERATIONS AND DEFICITACCUMULATED DURING DEVELOPMENT STAGEFOR THE THREE MONTHS ENDED MARCH 31,(Unaudited)
| ** **                                     | ** ** | **Three months ended  March 31,** | ** ** | **Period from  November 24, 1998  to** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                     | ** ** | **2007**                                         | ** ** | **2006**                                              | ** ** | **March 31, 2006** | ** ** |
| Revenues                                       |       |                                             |       |                                                  |       |   |   |
| Sales                                          |       | 0                                                |       | 0                                                     |       | 0 |   |
|                                           |       |                                             |       |                                                  |       |   |   |
| Expenses                                       |       |                                             |       |                                                  |       |   |   |
| Selling, general and administrative            |       | $                                                | 218,787    |                                                  | $          | 349 ,088 |   | $ | 8,449,455 |   |
|                                           |       |                                             |       |                                                  |       |   |   |
| Other income  (expenses)                       |       |                                             |       |                                                  |       |   |   |
| Interest income                                |       | —                                           |       | —                                                |       | 922 |   |
| Interest expense                               |       | —                                           |       | —                                                |       | (811,312 | ) |
|                                           |       |                                             |       |                                                  |       |   |   |
| Total other  income (expense)                  |       | —                                           |       | —                                                |       | (810,390 | ) |
|                                           |       |                                             |       |                                                  |       |   |   |
| Net loss                                       |       | $                                                | (218,787   | )                                                     | $          | (349,088 | ) | $ | (8,668,242 | ) |
|                                           |       |                                             |       |                                                  |       |   |   |
| Basic and  diluted loss per share              |       | (0.0001                                          | )          | (0.0016                                               | )          |   |   |
|                                           |       |                                             |       |                                                  |       |   |   |
| Weighted average number  of shares outstanding |       | 287,594,294                                      |       | 213,321,462                                           |       |   |   |

 

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KENILWORTH SYSTEMSCORPORATIONAND SUBSIDIARIES(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS(UNAUDITED)
| ** **                                                                      | ** ** | **Three Months ended  March 31** | ** ** | **Period from  November 24,  1998  to** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                      | ** ** | **2007**                                        | ** ** | **2006**                                          | ** ** | **March 31, 2006** | ** ** |
| Cash flows from  operating activities                                           |       |                                            |       |                                              |       |   |   |
| Net loss                                                                        |       | $                                               | (218,787   | )                                                 | $          | (349,088 | ) | $ | (4,124,400 | ) |
| Adjustments to reconcile net loss to net cash  provided by operating activities |       |                                            |       |                                              |       |   |   |
| Depreciation                                                                    |       | 3,188                                           |       | 3,301                                             |       | 23,141 |   |
| Amortization of patent                                                          |       | —                                          |       | 1,888                                             |       | 11,087 |   |
| Accretion of convertible debt discount                                          |       |                                            |       | —                                            |       | 72,656 |   |
| Beneficial conversion feature                                                   |       | —                                          |       | —                                            |       | 669,097 |   |
| Common stock issued for services                                                |       | 37,500                                          |       | 325,000                                           |       | 7,748,660 |   |
| Common stock issued to induce debt conversion                                   |       | 136,100                                         |       | 164,000                                           |       | 6,145,276 |   |
| Common stock issued for interest due on notes  payable                          |       | —                                          |       | —                                            |       | 8,501 |   |
| Accrued interest transferred to capital                                         |       | —                                          |       | —                                            |       | 4,270 |   |
| Other                                                                           |       |                                            |       |                                              |       | 21,100 |   |
| Increase (decrease) in cash attributable to changes  in assets and liabilities: |       |                                            |       |                                              |       |   |   |
| Prepaid expenses                                                                |       | (110,000                                        | )          | 160,000                                           |       | 153,750 |   |
| Loan receivable                                                                 |       | 23,700                                          |       | (6,300                                            | )          | (6,300 | ) |
| Accounts payable and accrued expenses                                           |       | (101,919                                        | )          | (173,868                                          | )          | 184,092 |   |
| Payroll taxes payable                                                           |       | (53,244                                         | )          | 87,756                                            |       | 87,756 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash used in operating activities                                           |       | (283,462                                        | )          | (212,689                                          | )          | (212,689 | ) |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash flows from  investing activities                                           |       |                                            |       |                                              |       |   |   |
| Payment of loan receivable-stockholder                                          |       | —                                          |       | —                                            |       | (4,000 | ) |
| Proceeds from loan receivable-stockholder                                       |       | —                                          |       | —                                            |       | 4,000 |   |
| Payment of patent costs                                                         |       | —                                          |       | (7,200                                            | )          | (67,026 | ) |
| Purchase of property and equipment                                              |       | —                                          |       | —                                            |       | (58,567 | ) |
| Security deposit                                                                |       | (9,422                                          | )          | (9,422                                            | )          | (4,250 | ) |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash used in investing activities                                           |       | (283,462                                        | )          | (16,622                                           | )          | (113,221 | ) |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash flows from  financing activities                                           |       |                                            |       |                                              |       |   |   |
| Proceeds from loans payable – stockholders                                 |       | 30,000                                          |       | —                                            |       | 85,000 |   |
| Payment of loans payable – stockholders                                    |       | —                                          |       | —                                            |       | (10,000 | ) |
| Proceeds from loans payable - related parties                                   |       | —                                          |       | —                                            |       | 154,137 |   |
| Repayment of loans payable - related parties                                    |       | 34,632                                          |       | —                                            |       | (137,967 | ) |
| Proceeds from convertible notes payable                                         |       |                                            |       |                                              |       | 1,400,361 |   |
| Proceeds from sale of common stock                                              |       | 136,100                                         |       | 325,000                                           |       | 457,600 |   |
| Proceeds from stock subscriptions receivable                                    |       | —                                          |       | 154,000                                           |       | 40,000 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash provided by financing activities                                       |       | 136,100                                         |       | 64,732                                            |       | 1,728,763 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net change in  cash                                                             |       |                                            |       |                                              |       | 3,334 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash - beginning  of period                                                     |       | 49,995                                          |       | 3,334                                             |       | — |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash - end of  period                                                           |       | $                                               | 4,198      |                                              | $          | 3,777 |   | $ | 3,334 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| 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                               |       | $                                               | —     |                                              | $          | 20,000 |   | $ | 71,500 |   |

 

The accompanyingnotes are an integral part of these financial statements.

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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES(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 January 1, 2007 contain all adjustments (consisting ofonly normal accruals) necessary to present fairly the consolidated balancesheets as of March 31, 2007 and December 31, 2006 and the relatedstatements of operations and cash flows for the three (3) month periodsended March 31, 2007 and 2006.  These financial statements should beread in conjunction with the consolidated financial statements and notesthereto included in our Annual Report on FORM 10-K.

The results ofoperations for the three (3) month period ended March 31, 2007 arenot necessarily indicative of the results for the entire year endingDecember 31, 2007.

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 Delaware Corporation).None of these subsidiaries has any assets or liabilities, except SatelliteGaming Consultants, Inc.

NOTE 4- GOING CONCERN UNCERTAINTY

As indicated inNote 2, the Company exited from Chapter 7 in September 1998 and has notyet commenced revenue producing operations. These factors create uncertainty asto the Company’s ability to operate as a going-concern and continue inbusiness. Management plans to develop a wagering system that allows casinopatrons and individuals outside the casino to play along remotely with livein-progress casino table games. The Company plans to obtain the necessaryfunding by offering its Common Stock, Senior Cumulative Convertible PreferredShares and/or continue to sell Convertible Promissory Notes in private placements.There can be no assurances the Company can be successful in obtaining suchfinancing.

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

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NOTE 5- CONVERTIBLE PROMISSORY NOTES

During thequarters ended March 31, 2007 and March 31, 2006 respectively, theCompany sold to various private investors $136,100 and $154,000 principalamount of Convertible Promissory Notes bearing interest at rates ranging from4.00% to 8.00% per annum.  The Notes had a one-year term and wereimmediately convertible at the option of the noteholder into shares ofrestricted common stock based on conversion prices ranging from $.05 to $.10per share.  All Notes issued in the quarters ended March 31, 2007 andMarch 31, 2006 were converted into a total of 10,786,001 and 12,582,000common shares, respectively.

NOTE 6- NON CASH TRANSACTIONS

Common sharesissued for services

2007:

The Company issued750,000 shares as compensation for services rendered during the first quarterperiod ended March 31, 2007.  The services were valued at $37,500.

2006:

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

NOTE 7 –PAYROLL TAXES PAYABLE

The Company hasmade arrangements with the Internal Revenue Service (IRS) and the New YorkState Department of Taxation to pay approximately $141,000 in past due payrolltaxes, including all penalties and interest accrued during the years 2006 and2005, by the end of the calendar year 2007. The agreements provide that the Company must pay all present taxes, whendue, and payments must remain current in 2007.

NOTE 8- RECEIVABLE FROM HERBERT LINDO

On November 27, 2006 Herbert Lindo, the Chairman and Chief ExecutiveOfficer exercised a five million (5,000,000) share option for seven hundredfifty thousand dollars ($750,000) at fifteen cents ($0.15) per share pursuantto the Company’s Performance and Equity Plan. The price per share was the pricefor the Option which would have expired on the following date. Mr. Lindodoes not own any other Options pursuant to the Plan. The average market priceof the Common Stock for the thirty (30) days prior to November 27, 2006was high: $0.05, low: $0.03. As provided in the Plan, Herbert Lindo borrowedthe seven hundred fifty thousand dollars ($750,000) from the Company andpledged the five million (5,000,000) and other shares he owns, as collateralfor the loan. The five million (5,000,000) shares have been issued asrestricted shares.

 

NOTE 9- SUBSEQUENT EVENTS

Subsequent toMarch 31, 2007, the Company raised an additional $80,000 from the sale ofConvertible Promissory Notes.

Subsequent to March 31,2007, the Company issued 3,440,000 shares for consultants for servicesrendered.  The consultant fees andservices were valued at $167,000.

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

RESULTS OFOPERATIONS

Since we exitedfrom bankruptcy proceedings on September 23, 1998 we have had no revenuesfrom operations. We sustained substantial losses from general administrativeexpenses amounting to $850,079 and $3,815,302 in year 2006 and 2005 and for thethree-months ended March 31, 2007 we sustained losses amounting to$218,787 compared to a loss of $349,088 for the quarter ending March 31,2006. Kenilworth has had no revenues from operations during the past fifteen(15) years and there can be no assurances that it will ever have revenues frompresent planned operations.

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LIQUIDITY ANDCAPITAL RESOURCES

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

PART II

ITEM 1—DESCRIPTION OF BUSINESS

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.

GENERAL

Since early in theyear 2000 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 titledthe overall project “RoulabetteTM”.  There are thirty-eight million(38,000,000) satellite and seventy-three million (73,000,000) cable TVsubscribers in the United States and more than five hundred million(500,000,000) subscribers throughout the rest of the industrialized world (“TheMarket”).  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 believes it will become a more than $500 billion **net win**Market within five (5) yearsthroughout the industrialized world (by the year ended 2012).

To best market thecasino games, the Company is selecting lotteries throughout the world to manageand operate 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

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Asian Market. WithInternet wagering outlawed in the United States, our patented satellite,one-way broadcasts offer the best possibility to establish satellite Cafés.

Throughout therest 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.

These foreignlotteries also have the same databases as lotteries in the United States,except most lotteries throughout Europe pool their lotteries between countries,not unlike Mega Millions and PowerBall in the United States, which makes thedistribution simpler and very cost effective for both Kenilworth and thelotteries.

There are notechnical breakthroughs required.  The equipment for the technology isreadily 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-three (43) States with lotteries will joinexpeditiously. The same will occur in foreign countries.

Kenilworth willshare 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 andforeign countries that designate exclusively lottery proceeds to schools andtheir teachers it is a welcome contribution.  It also will help closebudget gaps.

In addition,throughout the United States and most foreign countries there are hundreds offacilities that simulcast live in-progress horse/dog races.  At mostfacilities there are several large TV screens that show the races from thedifferent tracks with general theater-type seating for patrons and at privatecubicles with television sets outfitted with touch screens.  The cubiclesrent for additional fees.  After players open an account and select pinnumbers, they can watch, in privacy, each race offered on the different trackson the TV and place wagers on the different races by simply changing channels. The players may also watch sporting events, the news, the stock market reports,and in the near future RoulabetteTM, live, in-progress casino table games. The simulcast centers have their own databases to manage the cash deposit andpay winnings on the horse/dog races and will be able to manage the casinogames, on the same methods as the lotteries will manage RoulabetteTM.  Withprivate TV’s, available in simulcast centers, especially at night, when fewertracks are operating.

When playing alongwith live table games from a highly regulated jurisdiction, players will beassured that the game results are exactly what they see; and, playing alongwith live casino table games such as Roulette, Craps and Baccarat, we believe,will provide interaction, fun and far more excitement than playing make believeanimated (virtual) games. It is the next best thing, we believe, to actuallybeing at the table in the casino.

To conductpermanent broadcasts Kenilworth believes it will require a minimum of tenmillion dollars ($10,000,000) and there are no assurances we will ever be ableto obtain any of such money. At present, the Company does not have the fundsreadily 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.

In prior years,Kenilworth completed a prototype system that allowed casino patrons to playalong with live in-progress casino table games **only within the confines of a casino,** via closed circuittelevision. Also in 1990, we developed and delivered for the TAB (TotalizatorAgency Board) a quasy government agency of the State of Victoria, Australia, acashless slot machine system. Both systems required debit cards and centralmainframe computers to manage the wagers. By making use of the expertiseapplied in the

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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.

We also proposefor slot machine manufacturers to develop “RoulabetteTM Slot Machines”. The RoulabetteTM Slot will offer the regular slot or video lottery games and bythe touch of a button, the live in-progress casino table games.  Slotplayers are offered a change of pace at the cost of a slot handle pull. The games are transmitted to the RoulabetteTM Slot via satellite or the Internet(all broadcasts are encrypted to prevent unauthorized use of the broadcasts).

Where authorized,hotels, resorts, clubs and other public gathering places will be able to offercasino table 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 aconcept intended to be built and there can be no assurances that it will everbe built.  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 allowcasino patrons and other players to play along with live in-progress casinotable games such as Roulette, Craps and Baccarat and more via digitalsatellite, digital cable television or Internet broadcasts (simulcasts)emanating from strictly regulated casinos located in the United States andother locations around 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.

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 foreignjurisdiction).

Kenilworth was thefirst to 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 November1990.  This consisted of cashless, variable denomination and multiplegame, virtual PAT’s (“Player Activated Terminals”).   Prior theretoKenilworth sponsored, with the assistance of three (3) Nevada casino operators,legislation to permit cashless wagering in the state of Nevada.  Thelegislation, which is in the form of an amendment to existing casino controlstatutes, permits

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the use of accountcards (debit cards) and was signed into law by Governor Richard H. Bryan onJune 13, 1985.

Kenilworth hasbeen a publicly traded Company since 1968. Prior to commencing its endeavorsinto its present business in 1988, it also provided security systems to NuclearElectric Generating Plants in the U.S. and foreign countries, as well astime/attendance systems at a major department store chain.

THE STATUS WITHPAGCOR

During January2006, the Company reestablished negotiations with the Philippines Amusement andGaming Corporation (“PAGCOR”) for permission to broadcast live, in-progresscasino table games from their casinos.

PAGCOR is theRepublic of the Philippines chartered government gaming monopoly.  PAGCORpartially owns and exclusively operates all fourteen (14) Filipino casinos,some of which are located in exclusive resort facilities frequented by Asianpatrons (tourists).

In March 2006,Kenilworth conducted a live, in-progress casino table game test to demonstratethe ability to broadcast the table games, for around the world viewing, withoutdisrupting the normal security monitoring and protecting the privacy of playersat adjoining table games.  The film clip of the test broadcast which wasmade at a roulette table located in the new Hyatt Hotel and Casino, Manila, isavailable for viewing on our website www.kenilworthsys.com (see Press Release:Monday, March 6, 2006).

In April 2006,Kenilworth offered to pay PAGCOR monthly payments, for hosting the broadcastswhen they commence, for a period of ten (10) years; US $1 million for year one(1); US $2 million for years two (2) and three (3); US $5 million for yearsfour (4) through seven (7) and US $10 million for every year thereafter,totaling US $636,000,000 over the ten (10) year period. The payments have to bemade regardless from where we broadcast.  Kenilworth requires theflexibility to broadcast from other casinos besides the Philippines.

In July 2006,PAGCOR’s Board of Directors approved to commence the first live, in-progresscasino table game broadcasts to emanate from the new (August 2005) Hyatt Hotel& Casino in Manila, Philippines.

We, thus, haveacquired a broadcast site for RoulabetteTM.  Now we have to obtainagreements for locations that will permit us to receive the broadcasts. We are in an active search in Europe, including Eastern Europe, South America,China, India and the Pacific Rim nations.  We filed our patents in all ofthese destinations.  

In 2002, thePhilippines Government permitted the establishment of two (2) Internet Cafés inthe Manila area and allowed the operators, for a fee to PAGCOR, to providelife-like action on virtual baccarat, accept sports bets and video broadcast ofactual in-progress cock fights with wagering on the outcome.  By year end2004, the number of Cafés operating in the Manila area increased to sixty (60)Cafés.  At the end of 2006 there are now six hundred (600) Cafés in Manilawith an additional thirty four hundred (3,400) throughout the country.

Kenilworth neverattempted to provide live in-progress real time casino table games to the Caféssince President Gloria Macapagal-Arroyo stated, at all times, that ourbroadcast should not expand gambling throughout the Philippines.  TheCafés now represent a huge profit base for PAGCOR which provides the incomefrom its overall operation entirely for **socio-civicendeavors**.  PAGCOR is the most profitable corporation in thePhilippines.

The phenomenalsuccess by the Internet Cafés may not require our broadcasts to improve PAGCOR’sincome stream.   Kenilworth planned to broadcast to the Pacific Rimcountries to maintain the tourist’s

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trade to thePhilippines resorts, all of which have casinos, and now have to compete withMacau.  We believe PAGCOR will require our broadcasts to maintain thetourist trade.

MARKETINGSTRATEGY/SALES PLAN

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

At the presenttime, we do not engage technically oriented employees who will be able toassist in the development of RoulabetteTM (we have available three [3] formertechnical Kenilworth 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 UnitedStates, Kenilworth must refrain from using the Worldwide Web (WWW) Internet tomanage wagers from individuals outside of the casino confines. It is againstthe law. In RoulabetteTM, the play-along broadcast emanates from casinos thatare regulated 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 reasonsstated, Kenilworth will ask state lotteries, Off-Track Betting (OTB)corporations, pari-mutuel race tracks, and other state and federal regulatedagencies to manage the wagers from individuals playing along on their PC’s andtheir television 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.

The individualswould have to pre-deposit funds into an account with the wager managementcompany and then place wagers with their credit balance. The wagers and runningbalances will be transmitted to the RoulabetteTM player’s PC and/or televisionsets with telephone lines not crossing any state lines, similar in principle totelephone accounts wagering offered by the New York State Off-Track BettingCorporation and the state of Nevada casino sports book and recently with remotepurchase of lottery 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 promotedigital satellite and interactive television to the state’s residents,Kenilworth would install the eighteen (18) inch dish antenna and converter boxrequired to receive digital TV programming and interactive TV at its own cost,if the subscriber opens a RoulabetteTM wagering account for two hundred dollars($200). In addition, Kenilworth would pay the monthly subscription fees to viewall digital 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.

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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 approvalfor our RoulabetteTM-style gambling in jurisdictions that have not approved anygambling legislation, Kenilworth proposes to engage lobbyists to introduce,promote, and obtain legislative approval to permit RoulabetteTM-style gambling.Our strategy is to find depressed resort areas and have the resort/hoteloperators convince their local politicians of the benefits to their businessand the local economies and request them to promote legislative approval,either state-wide or limited to their areas. Riverboat gambling started torehabilitate decaying waterfronts. RoulabetteTM can do the same in depressedeconomic areas.  No assurances can be given that we can obtain any suchapprovals.

When the livecasino TV broadcasts are beamed for global viewing, Kenilworth will seek outsimilar organizations, as proposed for the United States and betting shops andslot route 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-recognized internationalbank.

COMPETITION

Many segments ofthe gaming industry are characterized by intense competition, with a largenumber of companies offering the same type of wagering products and services.None of these 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 manufacturers in the world, all of which havevastly greater capital resources and substantially more personnel than theCompany and may have under development systems that directly compete withRoulabetteTM.

Our present plansare to broadcast 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 AND INTELLECTUAL PROPERTY

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

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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.

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 followingdiscussion is not necessarily complete, or current regarding laws andregulations that may be applicable to us.  Any present laws are alsosubject to future change, amendment or cancellation.

Item2.    LEGAL PROCEEDINGS:

None

Item3.    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 plansto hold its Annual Meeting of Shareholders in September 2007 or any adjournmentthereof with proxy materials mailed to shareholders of record in August 2007prior to the proposed meeting dates.

Item7.    EXHIBITS AND REPORTS ON FORM 8-K:

8-K – filedFebruary 7, 2007: Item 4.01 Change of Independent Auditors

8-K/A Amendment No. 1 – filed February 22, 2007: Item 4.01 Changes inRegistrant’s Certifying Accountant

8-K/A Amendment No. 2 – filed February 28, 2007: Item 4.01 Changes inRegistrant’s Certifying Accountant

Ex 31.1 Certification of Chief Financial Officer of the CompanyRequired by Rule 13a-14(a) or Rule 15d-14(c) of theExchange Act

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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 |
|            | May 10, 2007                                                   |

 

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