**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

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**FORM 10-Q**

 

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**(MarkOne)**

** **

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

**Actof 1934**

** **

**Forthe quarterly period ended March 31, 2008**

** **

**OR**

** **

**o****  Transition report pursuant to Section 13or 15(D) of the Securities 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 if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405 of this chapter) is not contained herein, and will notbe contained, to the best of registrant’s knowledge, indefinitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.

 

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 March 31,2008 was 341,479,484.

 

 

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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, 2008 and December 31, 2007                                                                                                                  | 1          |
|              |       |                                                                                                                                                                                                                 |       |
|              |       | Condensed Consolidated Statements of Operation (and  Deficit) (unaudited) - Three months ended March 31, 2008 and 2007, and  the period from inception, as a Development Stage Company, to March 31,  2008 | 2          |
|              |       |                                                                                                                                                                                                                 |       |
|              |       | Condensed Consolidated Statements of Cash Flows  (unaudited) - Three months ended March 31, 2008 and 2007, and the period  from inception, as a Development Stage Company, to March 31, 2008               | 3          |
|              |       |                                                                                                                                                                                                                 |       |
|              |       | Condensed Notes to Consolidated Financial Statements  (unaudited)                                                                                                                                                    | 7          |
|              |       |                                                                                                                                                                                                                 |       |
| Item 2.           |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                          | 9          |
|              |       |                                                                                                                                                                                                                 |       |
| Item 3.           |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                          |       |
|              |       |                                                                                                                                                                                                                 |       |
| Item 4.           |       | Controls  and Procedures                                                                                                                                                                                             |       |
|              |       |                                                                                                                                                                                                                 |       |
| **Part II.** | ** ** | **Other Information**                                                                                                                                                                                                | 9          |
|              |       |                                                                                                                                                                                                                 |       |
| Item 1.           |       | Description of Business                                                                                                                                                                                              | 9          |
|              |       |                                                                                                                                                                                                                 |       |
| Item 2.           |       | Legal Proceedings                                                                                                                                                                                                    | 14         |
|              |       |                                                                                                                                                                                                                 |       |
| Items 3,4,5,6     |       |                                                                                                                                                                                                                 | 14         |
|              |       |                                                                                                                                                                                                                 |       |
| Item 7.           |       | Exhibits                                                                                                                                                                                                             | 14         |
|              |       |                                                                                                                                                                                                                 |       |
| Signature         |       |                                                                                                                                                                                                                 | 16         |

 

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FORWARD LOOKINGSTATEMENTS

 

The information containedin this Form 10-Q and Kenilworth’s other filings with the SecuritiesExchange Commission may contain “forward-looking” statements within the meaningof section 27A of the Securities Act of 1933, as amended, 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 March 31, 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 issued62,971,191 shares of its Restricted Common Stock since December 31,2006.  All of the shares may have the restrictions lifted pursuant to new Rule 144B within six (6) months after April 15, 2008 which may substantiallydepress the trading price of 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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**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES****(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

 
| ** **                                                                                                                                       | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                       | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ASSETS                                                                                                                                           |       |                     |       |                        |       |
| CURRENT ASSETS                                                                                                                                   |       |                     |       |                        |       |
| Cash                                                                                                                                             |       | $                        | 21,401     |                        | $          | 1,232 |   |
| Prepaid expenses                                                                                                                                 |       | 60,000                   |       | 80,000                      |       |
| Loan receivable — including from stockholders                                                                                               |       | 20,120                   |       | 20,120                      |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                           |       | 750,000                  |       | 750,000                     |       |
|                                                                                                                                             |       |                     |       |                        |       |
| TOTAL CURRENT ASSETS                                                                                                                             |       | 851,521                  |       | 851,352                     |       |
|                                                                                                                                             |       |                     |       |                        |       |
| PROPERTY AND EQUIPMENT — NET                                                                                                                |       | 13,382                   |       | 14,868                      |       |
|                                                                                                                                             |       |                     |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                 |       | 17,777                   |       | 13,677                      |       |
|                                                                                                                                             |       |                     |       |                        |       |
| TOTAL ASSETS                                                                                                                                     |       | $                        | 882,680    |                        | $          | 879,897 |   |
|                                                                                                                                             |       |                     |       |                        |       |
| LIABILITIES AND STOCKHOLDERS’  DEFICIT                                                                                                      |       |                     |       |                        |       |
| CURRENT LIABILITIES                                                                                                                              |       |                     |       |                        |       |
| Accounts payable and accrued expenses                                                                                                            |       | $                        | 183,793    |                        | $          | 210,717 |   |
| Payroll taxes payable (Note 7)                                                                                                                   |       | 121,591                  |       | 73,341                      |       |
| Loans payable – including accrued interest                                                                                                  |       | 19,429                   |       | 19,129                      |       |
|                                                                                                                                             |       |                     |       |                        |       |
| TOTAL CURRENT LIABILITIES                                                                                                                        |       | 324,813                  |       | 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 341,479,484 and 327,741,562 shares, respectively |       | 3,414,794                |       | 3,277,415                   |       |
| Additional paid-in capital                                                                                                                       |       | 31,142,514               |       | 31,137,730                  |       |
| Accumulated deficit                                                                                                                              |       | (33,999,441              | )          | (33,838,435                 | )          |
|                                                                                                                                             |       |                     |       |                        |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                  |       | 557,867                  |       | 576,710                     |       |
|                                                                                                                                             |       |                     |       |                        |       |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                  |       | $                        | 882,680    |                        | $          | 879,897 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

4

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

 

**CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ANDDEFICIT**

**ACCUMULATEDDURING DEVELOPMENT STAGE**

**FOR THETHREE MONTHS ENDED MARCH 31,**

**(Unaudited)**

 
| ** **                                    | ** ** | **Three months ended  March 31,** | ** ** | **Period from  November 24, 1998  to** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **2008**                                         | ** ** | **2007**                                              | ** ** | **March 31, 2008** | ** ** |
| Revenues                                      |       |                                             |       |                                                  |       |   |   |
| Sales                                         |       | 0                                                |       | 0                                                     |       | 0 |   |
|                                          |       |                                             |       |                                                  |       |   |   |
| Expenses                                      |       |                                             |       |                                                  |       |   |   |
| Selling, general and administrative           |       | $                                                | 161,006    |                                                  | $          | 218,787 |   | $ | 8,829,248 |   |
|                                          |       |                                             |       |                                                  |       |   |   |
| Other income (expenses)                       |       |                                             |       |                                                  |       |   |   |
| Interest income                               |       | —                                           |       | —                                                |       | 922 |   |
| Interest expense                              |       | —                                           |       | —                                                |       | (815,741 | ) |
|                                          |       |                                             |       |                                                  |       |   |   |
| Total other income (expense)                  |       | —                                           |       | —                                                |       | — |   |
|                                          |       |                                             |       |                                                  |       |   |   |
| Net loss                                      |       | $                                                | (161,006   | )                                                     | $          | (218,787 | ) | $ | (9,048,035 | ) |
|                                          |       |                                             |       |                                                  |       |   |   |
| Basic and diluted loss per share              |       | (0.0004                                          | )          | (0.0001                                               | )          |   |   |
|                                          |       |                                             |       |                                                  |       |   |   |
| Weighted average number of shares outstanding |       | 341,479,484                                      |       | 287,594,294                                           |       |   |   |

 

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

 

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

 
| ** **                                                                      | ** ** | **Three Months ended  March 31** | ** ** | **Period from  November 24,  1998  to** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                      | ** ** | **2008**                                        | ** ** | **2007**                                          | ** ** | **March 31, 2008** | ** ** |
| Cash flows from operating activities                                            |       |                                            |       |                                              |       |   |   |
| Net loss                                                                        |       | $                                               | (161,006   | )                                                 | $          | (218,787 | ) | $ | (12,511,844 | ) |
| Adjustments to reconcile net loss to net cash provided by operating  activities |       |                                            |       |                                              |       |   |   |
| Depreciation                                                                    |       | 1,486                                           |       | 3,188                                             |       | 24,627 |   |
| Accretion of convertible debt discount                                          |       | —                                          |       | —                                            |       | 72,656 |   |
| Beneficial conversion feature                                                   |       | —                                          |       | —                                            |       | 669,097 |   |
| Common stock issued for services                                                |       | 2,800                                           |       | 37,500                                            |       | 7,748,660 |   |
| Common stock issued to induce debt conversion                                   |       | —                                          |       | 136,100                                           |       | 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                                                                |       | (60,000                                         | )          | (110,000                                          | )          | 153,750 |   |
| Loan receivable                                                                 |       | 20,120                                          |       | 23,700                                            |       | (6,300 | ) |
| Accounts payable and accrued expenses                                           |       | (81,874                                         | )          | (101,919                                          | )          | 184,092 |   |
| Payroll taxes payable                                                           |       | (68,347                                         | )          | (53,244                                           | )          | 87,756 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash used in operating activities                                           |       | (248,809                                        | )          | (283,462                                          | )          | (212,689 | ) |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash flows from investing activities                                            |       |                                            |       |                                              |       |   |   |
| Payment of loan receivable-stockholder                                          |       | —                                          |       | —                                            |       | (4,000 | ) |
| Proceeds from loan receivable-stockholder                                       |       | —                                          |       | —                                            |       | 4,000 |   |
| Purchase of property and equipment                                              |       | —                                          |       | —                                            |       | (58,567 | ) |
| Security deposit                                                                |       | (17,777                                         | )          | (9,422                                            | )          | (4,250 | ) |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash used in investing activities                                           |       |                                            |       | (283,462                                          | )          | (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                                    |       | 19,429                                          |       | 34,632                                            |       | (137,967 | ) |
| Proceeds from convertible notes payable                                         |       |                                            |       |                                              |       | 1,400,361 |   |
| Proceeds from sale of common stock                                              |       | 142,706                                         |       | 136,100                                           |       | 457,600 |   |
| Proceeds from stock subscriptions receivable                                    |       | —                                          |       | —                                            |       | 40,000 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net cash provided by financing activities                                       |       | 162,135                                         |       | 136,100                                           |       | 1,728,763 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Net change in cash                                                              |       |                                            |       |                                              |       | 3,334 |   |
|                                                                            |       |                                            |       |                                              |       |   |   |
| Cash - beginning of period                                                      |       | 4,189                                           |       | 49,995                                            |       | — |   |
| Cash - end of period                                                            |       | $                                               | 21,401     |                                              | $          | 4,198 |   | $ | 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                                |       | $                                               | —     |                                              | $          | — |   | $ | 71,500 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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

 

**CONDENSEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE1 - BASIS OFPRESENTATION

 

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

 

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

 

NOTE2 - THE COMPANY ANDNATURE OF BUSINESS

 

KenilworthSystems Corporation (the “Company”) was incorporated in New York in April 1968and since exiting from bankruptcy proceedings now plans to be engaged in thebusiness of developing and having terminals and other equipment manufacturedand design systems that permit individuals from remote locations, to play alongwith live, in-progress casino table games via TV (simulcast) Satellite,Internet and Cable Broadcasts around the world.

 

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

 

NOTE3 - PRINCIPLES OFCONSOLIDATION

 

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

 

NOTE4 - GOING CONCERNUNCERTAINTY

 

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

 

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

 

7

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NOTE5 - CONVERTIBLEPROMISSORY NOTES

 

Duringthe quarters ended March 31, 2008 and March 31, 2007 respectively,the Company sold to various private investors $135,000 and $136,100 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, 2008 andMarch 31, 2007 were converted into a total of 13,737,922 and 10,786,001common shares, respectively.

 

NOTE6 - NON CASHTRANSACTIONS

 

Commonshares issued for services

 

2008:

 

TheCompany issued 6,600,000 shares as compensation for services rendered duringthe quarter period ended March 31, 2008. The services were valued at $66,000.

 

2007:

 

TheCompany issued 750,000 shares as compensation for services rendered during thefirst quarter period ended March 31, 2007.  The services were valuedat $37,500.

 

2006:

 

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

 

NOTE7 – PAYROLL TAXESPAYABLE

 

TheCompany has made arrangements with the Internal Revenue Service (IRS) and theNew York State Department of Taxation to pay approximately $121,591 in past duepayroll taxes, including all penalties and interest accrued during the years2007 and 2006 in monthly installments, by the end of the calendar year2008.  The agreements provide that the Company must pay all present taxes,when due, and payments must remain current in 2008.

 

NOTE8 - RECEIVABLE FROMHERBERT LINDO

 

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

 

NOTE9 - SUBSEQUENT EVENTS

 

Subsequentto March 31, 2008, the Company raised an additional $155,000 from the saleof Convertible Promissory Notes and Stock Purchase and Option Agreements.

 

8

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Subsequentto March 31, 2008, the Company issued 6,000,000 shares for consultants forservices to be rendered.  The consultant fees and services were valued at$60,000.

 

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

 

RESULTSOF OPERATIONS

 

Sincewe exited from bankruptcy proceedings on September 23, 1998 we have had norevenues from operations. We sustained substantial losses from generaladministrative expenses amounting to $1,093,538 and $850,079 in year 2007 and2006 and for the three-months ended March 31, 2008 we sustained lossesamounting to $161,006 compared to a loss of $218,787 for the quarter ending March 31,2007. 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.

 

LIQUIDITYAND CAPITAL RESOURCES

 

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

 

PART II

 

ITEM 1—DESCRIPTION OF BUSINESS

 

KenilworthSystems Corporation hereinafter referred to as “Kenilworth”, the “Company” or “we”,was incorporated on April 25, 1968 under the laws of the State of NewYork.  Kenilworth has been a publicly traded Company since August 1968formerly on the National NASDAQ Market, presently on the OTC Pink Sheet Marketsince exiting from bankruptcy proceedings in September 1998. Kenilworth is now being presented as a Development Stage Company.  The Company believes this designation isincorrect.  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 has hinderedthe Company in its operations.

 

GENERAL

 

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

 

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

 

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

 

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receivingdish, direct cable connections, or streamed via the Internet.  Withwagering possible in homes, hotel rooms, resort rooms, pubs, restaurants, racetracks and other public gathering places, the Company believes it will become amore than $500 billion **net win**Marketwithin five (5) years throughout the industrialized world (by the yearended 2012).

 

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

 

Allforty-three (43) lotteries in the United States are owned and operated byCounty and State agencies.  Since the beginning of year 2007, Texas,Illinois and Indiana are engaged in privatizing their lotteries by selling orleasing (on long term leases) their lotteries.  Maryland, Michigan, Iowaand New Jersey are also exploring the privatization of their lotteries. Thiscould greatly enhance our efforts to broadcast the live casino table games tothese lottery locations and could result in having Cafés that offer terminalsand TV sets to play along.  Internet Cafés that offer wagering on variousevents have been a huge success in theAsian Market. With Internet wagering outlawed in the United States, ourpatented satellite, one-way broadcasts offer the best possibility to establishsatellite Cafés.

 

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

 

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

 

Thereare no technical breakthroughs required.  The equipment for the technologyis readily available.  What is needed is to get through the maze of Local,County, State and Federal regulations in each U.S. State and foreigncountries.  When the first State in the United States grants the Companypermission to transmit the broadcast from one of its casinos to their residentsand to States that do not have any casinos, (the entire East coast of theUnited States), the other forty-three (43) States with lotteries will joinexpeditiously. The same will occur in foreign countries.

 

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

 

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

 

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

 

Whenplaying along with live table games from a highly regulated jurisdiction,players will be assured that the game results are exactly what they see; and,playing along with live casino table games such as Roulette, Craps andBaccarat, we believe, will provide interaction, fun and far more excitementthan 

 

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playingmake believe animated (virtual) games. It is the next best thing, we believe,to actually being at the table in the casino.

 

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

 

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

 

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

 

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

 

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

 

**SUMMARY**:

 

(1.)         Kenilworth continues to fine tune its patented technology dubbed RoulabetteTM. It now plans to “outsource” the manufacturing of all the components instead asformerly manufacture some of the equipment in its 26,000 square foot facilitylocated in Melville, NY.  RoulabetteTM would allow casino patrons and otherplayers to play along with live in-progress casino table games such asRoulette, Craps and Baccarat and more via digital satellite, digital cabletelevision or Internet broadcasts (simulcasts) emanating from strictlyregulated casinos located in the United States and other locations around theworld, to self-sufficient computer terminals dubbed “RoulabetteTM Slots” anddigital satellite, cable TV set top boxes or the Internet in countries thatpermit Internet gaming. The RoulabetteTM terminal is a proposal intended to bebuilt and there can be no assurances that it will ever be built.  Themicroprocessors to be installed in the TV set top boxes have not been designed.We have as at December 31, 2006, no firm agreements, customers, orproposals for any future business and there can be no assurances that we willever have same. **Reference is also made toeach 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 

 

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jurisdiction,which receives the broadcast.  We believe the supervision will not bedifficult to enforce, because all simulcast wagering is “cash only”, fromregulated, supervised betting sites.  There are no wire money transferswith banks and no credit or debit cards permitted.  We believe this factshould ease any opposition from concerned citizens and anti-gambling groups, asregulation and enforcement responsibility will be vested in each individualstate (or foreign jurisdiction).

 

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

 

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

 

MARKETINGSTRATEGY/SALES PLAN

 

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

 

Atthe present time, we do not engage technically oriented employees who will beable to assist in the development of RoulabetteTM (we have available three [3] 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.

 

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

 

Inthe United States, Kenilworth must refrain from using the Worldwide Web (WWW)Internet to manage wagers from individuals outside of the casino confines. Itis against the law. In RoulabetteTM, the play-along broadcast emanates fromcasinos that are regulated by strict and comprehensive rules and state andjurisdiction regulations, enforced by gaming control regulators and everybodyplays along with the same live table game. There is a world of differencebetween playing in a virtual make believe casino compared with an actualcasino.

 

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

 

Theindividuals would have to pre-deposit funds into an account with the wagermanagement company and then place wagers with their credit balance. The wagersand running balances will be transmitted to the RoulabetteTM player’s PC and/ortelevision sets with telephone lines not crossing any state lines, similar in 

 

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principleto telephone 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.

 

Afterwe obtain permission to play RoulabetteTM, of which there can be noassurances, in a given state and engage a wager management organization inorder to promote digital satellite and interactive television to the state’sresidents, Kenilworth would install the eighteen (18) inch dish antenna andconverter box required to receive digital TV programming and interactive TV atits own cost, if the subscriber opens a RoulabetteTM wagering account for twohundred dollars ($200). In addition, Kenilworth would pay the monthlysubscription fees to view all digital TV programming offered and the Internetservice provider (ISP) subscription fee if the customer wagers at least onehundred twenty dollars ($120) each month — win, lose, or draw — makes nodifference.  In the U.S. the contracts would be financed by satellitecarriers such as EchoStar and DirecTV.

 

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

 

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

 

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

 

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

 

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

 

COMPETITION

 

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

 

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

 

PATENTS,TRADEMARKS AND INTELLECTUAL PROPERTY

 

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

 

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

 

GOVERNMENTREGULATIONS

 

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

 

Item2.    LEGAL PROCEEDINGS:

 

None

 

Item3.    CHANGE IN SECURITIES:

 

None

 

Item4.    DEFAULT UPON SENIOR SECURITIES:

 

None

 

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

 

None

 

Item6.    OTHER INFORMATION:

 

TheCompany plans to hold its Annual Meeting of Shareholders in the third quarterof 2008 or any adjournment thereof with proxy materials mailed to shareholdersof record in August 2008 prior to the proposed meeting dates.

 

Item7.    EXHIBITS AND REPORTS ON FORM 8-K:

 

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

 

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

 

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

 

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

 

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

 

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SIGNATURE

 

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

 
|   | KENILWORTH  SYSTEMS CORPORATION                                |
|--------|----------------------------------------------------------------|
|   |                                                           |
| By:    | /s/  HERBERT LINDO                                             |   |
|   | Herbert  Lindo,                                                |
|   | Chairman,  Chief Executive Officer and Chief Financial Officer |
|   | May 13,  2008                                             |

 

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