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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

| **x**                                                                                                                                                                         | **Quarterly  report pursuant to Section 13 OR 15(D) of the Securities Exchange  Act of 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                          |                                                                                                     |
| **For  the quarterly period ended June 30, 2009**                                                                                                                        |
|                                                                                                                                                                          |                                                                                                     |
| **OR**                                                                                                                                                                        |
|                                                                                                                                                                          |                                                                                                     |
| **o**                                                                                                                                                                         | **Transition  report pursuant to Section 13 or 15(D) of the Securities Exchange  Act of 1934** |
|                                                                                                                                                                          |                                                                                                     |
| **For  the transition period from               to           ** |
|                                                                                                                                                                          |                                                                                                     |
| **Commission  File 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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes o   No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting 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) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct).  Yes o   No  x

 

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

 

The number of shares ofcommon stock, $.01 par value of the Registrant outstanding as of June 30,2009 was 490,036,586.

 

 

 

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

 

**INDEX**

 
| **Part I.**  | **Financial  Information**                                                                                                                                                                                      |   |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              |                                                                                                                                                                                                            |   |
| Item 1.           | Unaudited Condensed  Consolidated Financial Statements                                                                                                                                                          |   |
|              |                                                                                                                                                                                                            |   |
|              | Condensed Consolidated Statements of Operation (and  Deficit) (unaudited) - Six months ended June 30, 2009 and 2008, and the  period from inception, as a Development Stage Company, to June 30, 2009 |   |
|              |                                                                                                                                                                                                            |   |
|              | Condensed Consolidated Balance Sheets (unaudited) —  June 30, 2009 and December 31, 2008                                                                                                         |   |
|              |                                                                                                                                                                                                            |   |
|              | Condensed Consolidated Statements of Cash Flows  (unaudited) - Six months ended June 30, 2009 and 2008, and the period  from inception, as a Development Stage Company, to June 30, 2009              |   |
|              |                                                                                                                                                                                                            |   |
|              | Condensed Notes to Consolidated Financial Statements  (unaudited)                                                                                                                                               |   |
|              |                                                                                                                                                                                                            |   |
| Item 2.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                     |   |
|              |                                                                                                                                                                                                            |   |
| Item 3.           | Quantitative and  Qualitative Disclosures About Market Risk                                                                                                                                                     |   |
|              |                                                                                                                                                                                                            |   |
| Item 4.           | Controls and Procedures                                                                                                                                                                                         |   |
|              |                                                                                                                                                                                                            |   |
| **Part II.** | **Other Information**                                                                                                                                                                                           |   |
|              |                                                                                                                                                                                                            |   |
| Item 1.           | Description of  Business                                                                                                                                                                                        |   |
|              |                                                                                                                                                                                                            |   |
| Item 2.           | Legal Proceedings                                                                                                                                                                                               |   |
|              |                                                                                                                                                                                                            |   |
| Items 3,4,5,6     |                                                                                                                                                                                                            |
|              |                                                                                                                                                                                                            |   |
| Item 7.           | Exhibits                                                                                                                                                                                                        |   |
|              |                                                                                                                                                                                                            |   |
| Signature         |                                                                                                                                                                                                            |   |

 

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FORWARD LOOKINGSTATEMENTS

 

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

 

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

 

RISKS

 

Specific reference ismade to each of the risks described in Item 7 in Part II of the Form 10-Kfor December 31, 2008 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

 

This Form 10-Q isbeing filed as a “Development Stage Company” from the period beginning November 24,1998 to the present at March 31, 2009, 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 issued31,352,000 shares of its Restricted Common Stock since December 31,2008.  All of the shares may have the restrictions lifted pursuant to Rule 144B after six (6) months which may substantially depress the trading priceof the Company’s Stock in the future.

 

During the period ended March 31,2007, the Company made certain adjustments to the number of shares outstandingwhich did not require capital changes.

 

***Remainder of page intentionally left blank***

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

AND DEFICITACCUMULATED DURING THE DEVELOPMENT STAGE

(Unaudited)

 
| ** **                                     | ** ** | ** **                                       | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **Period from**        | ** ** |
|------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------|------------|-------------|------------|-----------------------------|------------|
| ** **                                     | ** ** | ** **                                       | ** ** | ** **                                         | ** ** | ** **              | ** ** | ** **  | ** ** | **November 24,**       | ** ** |
| ** **                                     | ** ** | **For the six months ended** | ** ** | **For the three months ended** | ** ** | **1998**                | ** ** |
| ** **                                     | ** ** | **June 30,**                                | ** ** | **June 30,**                                  | ** ** | **(Inception) to** | ** ** |
| ** **                                     | ** ** | **2009**                                         | ** ** | **2008**                                           | ** ** | **2009**                | ** ** | **2008**    | ** ** | **June 30, 2009** | ** ** |
| ** **                                     | ** ** | *****                                            | ** ** | *****                                              | ** ** | *****                   | ** ** | *****       | ** ** | **Restated**                | ** ** |
| Revenues                                       |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Sales                                          |       | $                                                | 0          |                                               | $          | 0                       |       | $           | 0          |                        | $          | 0 |   |   |   |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Expenses                                       |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Selling,  general and administrative           |       | $                                                | 682,684    |                                               | $          | 859,681                 |       | $           | 339,212    |                        | $          | 680,583 |   | $ | 13,867,691 |   |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Other  income (expenses)                       |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Interest  income                               |       | —                                           |       | —                                             |       | —                  |       | —      |       | 922                         |       |
| Interest  expense                              |       | —                                           |       | —                                             |       | —                  |       | —      |       | (775,018                    | )          |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Total  other income (expense)                  |       | —                                           |       | —                                             |       | —                  |       | —      |       | (2,688,926                  | )          |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Net  loss                                      |       | $                                                | (682,684   | )                                                  | $          | (859,681                | )          | $           | (339,212   | )                           | $          | (680,583 | ) | $ | (16,693,005 | ) |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Basic  and diluted loss per share              |       | $                                                | (0.001     | )                                                  | $          | (0.002                  | )          | $           | (0.0007    | )                           | $          | (0.002 | ) |   |   |
|                                           |       |                                             |       |                                               |       |                    |       |        |       |                        |       |
| Weighted  average number of shares outstanding |       | 490,063,586                                      |       | 404,104,486                                        |       | 490,036,586             |       | 404,104,486 |       |                        |       |

 

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* Includes a NON CASHloss of  $510,776 resulting from the sale and issuance of 62,625,002shares of RESTRICTED Common Stock, par value $0.01 per share, for cash,consulting fees and conversion of loans at less than par value in 2008 and$162,875 for issuance of 15,503,500 shares in 2009 in the three month periodended March 31, 2009 that resulted in an increased loss of $150,035 in theperiod.

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
| ** **                                                                                                                                          | ** ** | **June 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                                                                                                                                |       |                    |       |                        |       |
| ASSETS                                                                                                                                              |       |                    |       |                        |       |
| CURRENT  ASSETS                                                                                                                                     |       |                    |       |                        |       |
| Cash                                                                                                                                                |       | $                       | 103        |                        | $          | 2,391 |   |
| Prepaid  expenses (Note 6)                                                                                                                          |       | 40,000                  |       | 80,000                      |       |
| Loan  receivable — including from stockholders, net                                                                                            |       | 22,200                  |       | 21,600                      |       |
| Receivable  from Herbert Lindo (Note 8)                                                                                                             |       | 770,101                 |       | 767,289                     |       |
|                                                                                                                                                |       |                    |       |                        |       |
| TOTAL  CURRENT ASSETS                                                                                                                               |       | $                       | 832,404    |                        | $          | 871,270 |   |
|                                                                                                                                                |       |                    |       |                        |       |
| PROPERTY  AND EQUIPMENT — NET                                                                                                                  |       | 0                       |       | 603                         |       |
|                                                                                                                                                |       |                    |       |                        |       |
| SECURITY  DEPOSIT                                                                                                                                   |       | 8,677                   |       | 13,677                      |       |
|                                                                                                                                                |       |                    |       |                        |       |
| TOTAL  ASSETS                                                                                                                                       |       | $                       | 841,081    |                        | $          | 885,560 |   |
|                                                                                                                                                |       |                    |       |                        |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                           |       |                    |       |                        |       |
| CURRENT  LIABILITIES                                                                                                                                |       |                    |       |                        |       |
| Accounts  payable and accrued expenses                                                                                                              |       | $                       | 141,844    |                        | $          | 158,529 |   |
| Payroll  taxes payable (Note 7)                                                                                                                     |       | 22,840                  |       | 169,695                     |       |
| Loans  payable — including accrued interest                                                                                                    |       | 21,434                  |       | 20,264                      |       |
|                                                                                                                                                |       |                    |       |                        |       |
| TOTAL  CURRENT LIABILITIES                                                                                                                          |       | $                       | 186,118    |                        | $          | 348,488 |   |
|                                                                                                                                                |       |                    |       |                        |       |
| STOCKHOLDERS’  EQUITY (DEFICIT)                                                                                                                |       |                    |       |                        |       |
| Preferred  Stock - par value $.01 per share; authorized 50,000,000 shares; no shares  issued and outstanding                                        |       |                    |       |                        |       |
| Common  stock - par value $.01 per share; authorized 1,000,000,000 shares; issued and  outstanding 490,036,586 and 434,597,086 shares, respectively |       | 4,900,365               |       | 4,345,970                   |       |
| Additional  paid-in capital                                                                                                                         |       | 31,349,910              |       | 31,103,730                  |       |
| Accumulated  deficit                                                                                                                                |       | (35,595,312             | )          | (34,912,628                 | )          |
|                                                                                                                                                |       |                    |       |                        |       |
| TOTAL  STOCKHOLDER’S EQUITY                                                                                                                    |       | 654,693                 |       | 537,072                     |       |
|                                                                                                                                                |       |                    |       |                        |       |
| TOTAL  LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                    |       | $                       | 841,081    |                        | $          | 885,560 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION

(A DEVELOPMENTSTAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSENDED JUNE 30,

(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**        | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24,**       | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **1998**                    | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **to**                      | ** ** |
| ** **                                                                      | ** ** | **2009**   | ** ** | **2008**   | ** ** | **June 30, 2009** | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Restated**                | ** ** |
| Cash  flows from operating activities                                           |       |       |       |       |       |                        |       |
| Net  loss                                                                       |       | $          | (682,684   | )          | $          | (859,681                    | )          | $ | (16,991,640 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities |       | 0          |       | 2,972      |       |                        |       |
| Depreciation                                                                    |       |       |       |       |       |                        |       |
| Patent  Impairment                                                              |       |       |       |       |       |                        |       |
| Accretion  of convertible debt discount                                         |       |       |       |       |       |                        |       |
| Beneficial  conversion feature                                                  |       |       |       |       |       | 1,182,097                   |       |
| Common  stock issued for services                                               |       | 23,497,500 |       | 20,675,000 |       | 51,049,432                  |       |
| Common  stock issued to induce debt conversion                                  |       |       |       |       |       | 63,276                      |       |
| Common  stock issued for interest due on notes payable                          |       |       |       |       |       | 8,501                       |       |
| Loss  on Investment                                                             |       |       |       |       |       | 60,000                      |       |
| Other                                                                           |       |       |       |       |       | 21,100                      |       |
| Increase  (decrease) in cash attributable to changes in assets and liabilities: |       |       |       |       |       |                        |       |
| Prepaid  expenses                                                               |       | (40,000    | )          | (40,000    | )          | (20,000                     | )          |
| Loan  Receivable                                                                |       | (22,200    | )          |       |       |                        |       |
| Accounts  payable and accrued expenses                                          |       | 186,118    |       | 297,219    |       | 235,261                     |       |
| Payroll  taxes payable                                                          |       | 22,840     |       | 147,351    |       | 85,300                      |       |
| Net  cash used in operating activities                                          |       | (428,082   | )          | (525,479   | )          | (2,504,864                  | )          |
| Cash  flows from investing activities                                           |       |       |       |       |       |                        |       |
| Repayment  of loans — related parties                                      |       |       |       |       |       | (20,120                     | )          |
| Proceeds  from loan receivable                                                  |       | (600       | )          |       |       | 4,000                       |       |
| Payment  of patent costs                                                        |       |       |       |       |       | (73.962                     | )          |
| Purchase  of property and equipment                                             |       | 0          |       | 0          |       | 0                           |       |
| Security  deposit                                                               |       | (8,677     | )          | (17,777    | )          | (17,777                     | )          |
| Net  cash used in investing activities                                          |       | 8,077      |       | 0          |       | (220,000                    | )          |
| Cash  flows from financing activities                                           |       |       |       |       |       | 4,345,350                   |       |
| Proceeds  from sale of common stock                                             |       | $          | 386,000    |       | $          | 220,000                     |       |   |   |
| Proceeds  from stock subscriptions receivable                                   |       |       |       |       |       | —                      |       |
| Net  cash provided by financing activities                                      |       | $          | 386,000    |       | $          | 220,000                     |       | — |   |
| Net  change in cash                                                             |       |       |       |       |       | —                      |       |
| Cash  — beginning of period                                                |       | 2,391      |       | 9,254      |       | —                      |       |
| Cash  - end of period                                                           |       | $          | 103        |       | 3,984      |                        | $          | — |   |
| 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                                    |       | $          | —     |       | $          | —                      |       | $ | 1,388,500 |   |
| Conversion  of loan payable - related party to common stock                     |       | $          | —     |       | $          | —                      |       | $ | 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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**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, 2009 contain all adjustments (consisting ofonly normal accruals) necessary to present fairly the consolidated balancesheets as of June 30, 2009 and December 31, 2008 and the relatedstatements of operations and cash flows for the six (6) month periodsended June 30, 2009 and 2008  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, 2008

 

The results of operationsfor the six (6) month period ended June 30, 2009 are not necessarilyindicative of the results for the entire year ending December 31, 2009.

 

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, RoulabetteNevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth Systems(UK) Limited, Kenilworth Satellite Broadcasting Corporation (a DelawareCorporation) and Satellite Gaming Consultants, Inc. (a DelawareCorporation). None of these subsidiaries has any assets or liabilities, exceptSatellite Gaming Consultants, Inc; their activities are consolidatedherein.

 

NOTE 4 - GOING CONCERN UNCERTAINTY

 

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

 

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

 

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES AND STOCKPURCHASE AND OPTION AGREEMENTS

 

During the quarters endedJune 30, 2009 and June 30, 2008 respectively, the Company sold tovarious private investors $63,000 and $220,000 principal amount of ConvertiblePromissory Notes, made loans to the Company and issued Stock Purchase andOption Agreements bearing interest at rates ranging from 4.00% to 12.00% perannum.  The Notes had a six-month and one-year term and were immediatelyconvertible at the option of the noteholder into shares of restricted commonstock based on conversion prices ranging from $.005 to $0.10 per share andpurchase prices at $0.008 per share.  All Notes issued and shares sold inthe quarters ended June 30, 2009 and June 30, 2008 were convertedinto a total of 16,700,500 and 62,625,002 restricted common shares,respectively.

 

STOCK OPTIONS

 

From its inception in April 2008through June 2009, the Company granted Stock Options for 132,409,500restricted Common Shares, par value $0.01 per share at an average price of$0.01 per share in connection with the private sale to accredited investors ofStock Purchase and Option Agreements.  The Option grant is for a period oftwo (2) years from the date of the Stock Purchase and Option Agreements.

 

NOTE 6 - NON CASH TRANSACTIONS

 

Common shares issued forservices

 

2009:

 

The Company issued23,179,000 shares as compensation rendered during the period ended June 30,2009. The services were valued at $347,686.

 

2008:

 

The Company issued20,675,000 shares as compensation for services rendered during the period endedDecember 31, 2008.  The services were valued at $418,500.

 

PREPAID EXPENSES

 

Prepaid expenses consistof the unamortized value of stock issued to directors for the twelve monthperiod ending September 30, 2009.  The balance will be amortized on astraight-line basis over the remaining term.  The directors receive noother compensation.

 

NOTE 7 — PAYROLL TAXES PAYABLE

 

The Company has made arrangementswith the Internal Revenue Service (IRS) and the New York State Department ofTaxation to pay approximately $22,840 in past due payroll taxes, including allpenalties and interest accrued during the years 2008 and the three (3) monthperiod ended June 30, 2009 in monthly installments, by the end of thecalendar year 2009.  The agreements provide that the Company must pay allpresent taxes, when due, and payments must remain current in 2009.  At June 30,2009 the Company was delinquent in approximately $22,840 in payments to the IRSand will attempt to negotiate new payment schedules covering the delinquentpayments.

 

NOTE 8 - RECEIVABLE FROM HERBERT LINDO

 

On November 27, 2006Herbert Lindo, the Chairman and Chief Executive Officer exercised a fivemillion (5,000,000) share option for seven hundred fifty thousand dollars($750,000) at fifteen cents ($0.15) per share pursuant to the Company’sPerformance and Equity Plan. The price per share was the price for the Optionwhich would have expired on the following date. Mr. Lindo does not own anyother Options pursuant to the Plan. The average market price of the CommonStock for the thirty (30) days prior to 

 

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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.

 

At a regular meeting ofthe Board of Directors in July 2008, the Board unanimously approved (with Mr. Lindoabstaining) to extend the $750,000 loan until December 31, 2009, provided Mr. Lindopays a nominal one and one-half percent (1.5%) interest from November 2006. Mr. Lindo agreed to pay the interest which totaled $20,101 through June 30,2009. Mr. Lindo provides his services to the company without anyremuneration.

 

NOTE 9 - SUBSEQUENT EVENTS

 

Subsequent to June 30,2008, the Company obtained two (2) $10,000 loans due September 23,2008 at an interest rate of twelve percent (12%) per annum from two (2) presentinvestors.  The loans have been extended to October 23, 2008 withonly the addition of agreed interest to October 2008.  The loans wereconverted into Stock Purchase and Option Agreements in the first quarter of2009.

 

ITEM2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

 

RESULTS OF OPERATIONS

 

Since we exited frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting to $34,912,625 through December 31, 2008 and for thesix-months ended June 30, 2009 we sustained a loss amounting to $682,684which includes NON-CASH loss of $162,875. Kenilworth has had no revenues fromoperations during the past sixteen (16) years and there can be no assurancesthat it will ever have revenues from present planned operations.

 

LIQUIDITY AND CAPITALRESOURCES

 

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

 

PART II

 

ITEM 1—DESCRIPTIONOF BUSINESS

 

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

 

GENERAL

 

Since early in the year2000 we have been solely engaged in developing patents, markets andinvestigating how best to obtain Governmental approvals, by engaging lobbyistsand consultants that would allow television satellite, cable subscribers andinternet network throughout the industrialized world to play and

 

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wager along from remotelocations with live, in-progress casino table games (Roulette, Craps andBaccarat) from strictly regulated casinos located in the United States andother locations around the world.

 

Employing the latestencrypted satellite, cable and on line 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.

 

Kenilworth titled theoverall project “Roulabette”.  There are thirty-eight million (38,000,000)satellite and seventy-three million (73,000,000) cable TV subscribers in theUnited States and more than five hundred million (500,000,000) subscribersthroughout the rest of the industrialized world (“The Market”).

 

On average, households inthe U.S. have three (3) TV’s.  (It is important since the satelliteand cable companies will charge a separate fee for transmitting the table gamesto` TVs and laptops).  Public gathering places can accommodate (be able tonetwork) up to one thousand (1,000) or more TV sets  video lottery terminals (VLTs) with a singlesatellite receiving dish, direct cable connections, or streamed via theInternet.  With wagering possible in homes, hotel rooms, resort rooms,pubs, restaurants, race tracks and other public gathering places, the Companybelieves it will become a more than $500 billion net win****Market in the near future throughout theindustrialized world.

 

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

 

All forty-six (46)lotteries in the United States are owned and operated by County and Stateagencies. This could greatly enhance our efforts to broadcast the livecasino table games to these lottery locations and could result in having Cafésthat offer terminals and TV sets to play along.  Internet Cafés that offerwagering on various events have been a huge success in the Asian Market.

 

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

 

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

 

There are no technicalbreakthroughs required.  The equipment for the technology is readilyavailable.  What is needed is to get through the maze of local, county,state and federal regulations in each U.S. State and foreign countries. When the first state in the United States grants the Company permission totransmit the broadcast from one of its casinos to their residents and to Statesthat do not have any casinos, the other forty-six (46) States with lotterieswill join expeditiously. The same will occur in foreign countries.

 

Kenilworth will share thenet win revenue with all participating entities that provide Roulabette gamingwithout costs of any kind.  State lotteries or their private operatorswill receive a minimum of forty percent (40%) of the total net win from theirrespective jurisdictions.  With thirty percent (30%) to the strictlyregulated casinos and broadcast couriers and thirty percent (30%) inuring tothe Company

 

In states and foreigncountries that designate exclusively lottery proceeds to schools and theirteachers it is a welcome contribution.  It also will help close state andother budget gaps.

 

In addition, throughoutthe United States and most foreign countries there are hundreds of facilitiesthat simulcast live in-progress horse/dog races.  At most facilities thereare several large TV screens that show 

 

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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 changingchannels.  The players may also watch sporting events, the news, the stockmarket reports, and in the near future Roulabette, live, in-progress casinotable games.  The simulcast centers have their own databases to manage thecash deposit and pay winnings on the horse/dog races and will be able to managethe casino games, on the same methods as the lotteries will manageRoulabette.  With private TV’s, available in simulcast centers, especiallyat night, when fewer tracks are operating.

 

When playing along withlive casino 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 conduct permanentbroadcasts from government regulated casinos Kenilworth believes it willrequire a minimum of ten million dollars ($10,000,000) and there are noassurances we will ever be able to obtain any of such money. At present, theCompany does not have the funds readily available but hopes to obtain same,from investors, as soon as Kenilworth can commence broadcasting from a casinoin the United States or other 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 acasino, via closed circuit television. Also in 1990, we developed and deliveredfor the TAB (Totalizator Agency Board) a quasy government agency of the Stateof Victoria, Australia, a cashless slot machine system. Both systems requireddebit cards and central mainframe computers to manage the wagers. By making useof the expertise applied in the development of the aforementioned systems weplan to develop a second-generation system that will manage the wagers by themicroprocessor installed in TV set-top boxes or an attachment directlyconnected to the TV set and lap top computers to receive satellite and/or online Internet broadcasts. This as planned would allow a player in aninteractive manner, at a remote location (outside the casino confines), toexperience the actual play and excitement at the casino table game and to makewagers on the various games, without having to be physically present at thecasino or casino table.  There are no assurances we will be able tosuccessfully develop any system.

 

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

 

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

 

Roulabette is a conceptintended to be built and there can be no assurances that it will ever bebuilt.  The patented microprocessors to be installed in the TV set topboxes and laptop computers have not been designed.  With advanced technology available in the nottoo distant future, the microprocessor may NOT BE REQUIRED.

 

PROPOSED ON LINE INTERNETGAMBLING IN THE UNITED STATES

 

On May 6, 2009Congressman Barney Frank (D., Mass) Chairman of the House Financial ServicesCommittee introduced legislation titled **Internet Gambling,Consumer Protection and Enforcement Act (H.R. 2267)** that will, ifpassed by Congress, overturn President George W. Bush’s **UnlawfulInternet Gambling Enforcement Act of 2006 (UIGEA).**

 

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H.R. 2267, if passed by Congress, legallysanctions on line Internet gaming in the U.S., the world’s largest gamblingmarket.  The primary incentive for passage of this legislation is thepotential tax benefit to local, state and federal jurisdictions and thecreation of jobs.  Price WaterhouseCoopers and others recently estimatedthat Internet gambling in the U.S. could raise nearly $52-$65 billion in taxablerevenue over the next decade (starting early in 2010).

 

If H.R. 2267 is not passed before December 1,2009 then the Federal financial regulations will require companies that issuecredit cards, banks and other payment systems ****to block any money transfer****to gambling businesses who engage in unlawful internet gambling.  Manyfinancial institutions already have implemented such policies voluntarily byrefusing to honor credit card transactions that violate UIGEA.  Both UIGEAand H.R. 2267 leave it up to each state’s discretion how they wish to implementon line Internet gambling.

 

Kenilworth owns patents in the US andfifty-one other countries including China, Japan and Russia which presentlyoffer gaming in more than 2,000 licensed regulated casinos.  The patents coversystems and methods to allow players from remote locations to wager on gamessuch as roulette, craps and baccarat, as if they are actually participating inthe live in-progress games at the casino table of their choosing, from aselection of casinos anywhere in the world.

 

When state operated lotteries becomeinvolved, a prime motive will be to ensure responsible gambling by managing thewagering with data systems which can identify problem gamblers and limit orshut down players with identifiable patterns of compulsive gambling.  Afurther requirement for any system sanctioned by states will be the preventionof underage participation.  Lotteries will also limit the amount that maybe deposited or held on deposit at specified intervals of days, weeks ormonths. The ability of Kenilworth’s patented system to support all of theseanticipated requirements is considered to be a significant competitiveadvantage in the emerging market.

 

TEST SIMULCAST AGREEMENT

 

On June 10, 2009Kenilworth entered into a six (6) month on line Test Simulcast BroadcastAgreement with Caribbean Casino and Gaming Corporation (“Caribbean”). Caribbeanis a gaming and entertainment company that operates the Sousa Grand Casino atSousa Bay Resort in Puerto Plata, Dominican Republic. The test program that isexpected to commence in September 2009 will ready Kenilworth for globalremote live on line Internet casino gaming.

 

As part of the TestAgreement, Kenilworth will pay Caribbean one half of one percent (.5%) of thenext earning derived from our patents and technology for a period of ten (10) years.

 

Kenilworth expects to beable to commence the test program by mid September and will be able to **demonstrate and market Roulabette,** starting November 1,2009, the live, in-progress casino table games, via on line Internettransmission, to viewers in the United States and the rest of the world.

 

We believe that, as hasalready happened in the field of horse racing, simulcasts of remote casinogames to homes, cell phones, racetracks, hotels, resorts, restaurantsand bars will become a major trend in gaming. Since the development of theInternet, millions of people have chosen to gamble online and today Internetgambling is offered in many different countries under a variety of licensingand regulatory regimes. It appears there will be a potential annual globalmarket of as much as $500 billion in total Internet wagering in the nearfuture.

 

Denmark, Sweden, Poland,Switzerland, France, Spain and Norway have either passed or are preparing to passlegislation to open the market for ****remote live games**** from casinoswithin their own borders.  The legislation is also intended to protectgamblers from manipulation by discouraging virtual wagering and betting onnumber generated games from studios in the U.K and other ChannelIsles.   These are likely to be the first sanctioned Internet gamingactivities to yield significant tax revenues.  The Caribbean test isintended to support wagering for such live casino table game broadcasts. Our intent is to aggressively

 

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market this gamingtechnology and pursue licensing arrangements with casino operators in all nationswhere we enjoy patent protection.

 

SUMMARY OF PROPOSEDBRIDGE LOAN/UNDERWRITING THAT EARNS $50 MILLIION IN A SECURED INVESTMENT

 

Kenilworth SystemsCorporation (“Kenilworth” or the “Company”) is soliciting a $230,000,000 bridgeloan that requires only $30,000,000 in actual cash that will be repaid in anunderwriting projected to take place in September/October 2009.

 

The $30,000,000 will bedeposited in an escrow account controlled and administered by the bridge loanlender.  The incentive for the lender isa $50,000,000 profit by purchasing 200,000,000 shares of Kenilworth CommonStock, par value $0.01 per share at $0.05 per share ($10,000,000) **directly from the Company** that is not required to beevidenced or deposited in escrow, and the purchase of 200,000,000 Common Sharesin a proposed Dutch Auction, conducted on behalf of the bridge lenders, at amaximum offering price of $0.15 per share that requires the $30 million. Thelenders profits are earned by acquiring 400,000,000 Common Shares that **are sold in the underwriting**at $35.00 per share for a netprofit of $50,000,000. The other $200,000,000 required for the bridge loan aredeferred and cancelled when the proceeds from the underwriting are disbursed.

 

As part of theunderwriting Kenilworth’s Common Stock will be reverse split 100-1 with8,900,036 Common Shares outstanding when the underwriting is completed.  The underwriters are expected to sell6,571,428 Common Shares at $35.00 per share.

 

After adjusting for thepurchase of 400,000,000 shares pre-reverse split by the bridge loan lenders,the cancellation of the additional non-issued funding of $200,000,000 and the$10,000,000 for the purchase of the 200,000,000 shares of Common Stock directlyfrom the Company, Kenilworth will receive, net of all expenses, includingunderwriters, legal fees and printing costs, $152,400,000.  On a pro forma balance sheet basis,Kenilworth will have **a book value of $16.85 pershare**with 8,900,036 shares outstanding (after the 100-1 reversesplit) plus $35,000,000 tax carry forward loss per share of $3.93 totaling =$20.78 with cash of $152,400,000. With the potential future business itsupports a proposed stock offering price of $35.00 per share. ($0.35 before thereverse split).

 

The bridge loan documentswill contain a clause similar to a Material-Adverse-Change-Clause that **will permit the cancellation of the bridge loan**.  Kenilworth will pay the twelve percent (12%)interest on the loan from the date the escrow deposit is made for the DutchAuction in the event the Company fails to obtain **a firmunderwriting commitment** or is unable to receive a sufficient buyersin**a best effort commitment.**

 

The fees payable to theescrow agent will be paid by Kenilworth.

 

PROPOSAL TO SWAPSECURITIES WITH CHINA’S WEALTH FUND

 

In April 2008,Kenilworth’s management decided that, as an American publicly traded Companyfor more than forty years, it wanted to position itself to swap Preferred Stockpaying a five percent (5%) annual dividend with U.S. Treasuries owned by Chinathereby becoming a surrogate for Chinese investments in the U.S.

 

Kenilworth is authorizedto issue 50 million Series of Convertible Preferred Stock; none ispresently issued and outstanding.

 

China’s Sovereign WealthFund, the **China Investment Corporation (CIC),** wasestablished on September 29, 2007 and financed with $200 billion ininitial capital. The CIC was created to improve the rate of return on China’s$1.5 trillion in foreign exchange reserves. One of CIC’s first investments was$3 billion in a non-voting stake (approximately 9.3%) in Blackstone Group,L.P., public offering in 2007 at $28.00 per share that opened trading at $38.00per share in the public offering. Blackstone Group, L.P. is

 

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one of the largestindependent alternative asset managers in the world.  Shortly thereafter, the CIC invested $5billion in Morgan Stanley, and made other unprofitable investments in FannieMae and Freddie Mac.

 

The continuing U.S.spending to revive the economy does not provide any encouragement for China toget their investment back soon.  Theirpurchases of additional U.S. Bonds are protecting their huge investments in theU.S. dollar. Congress would reject any purchases of more than ten percent (10%)by the CIC of any of our prime industrial firms.  For example, Congress rejected China’s bid toacquire all of Conoco’s foreign oil companies and their oil reserves.

 

We believe we can temperCongress’ objections with our plan.  Withthe swapped U.S. treasuries, we will borrow from the Fed window U.S. dollars tomake investments that will be recommended and controlled by managers such asBlackstone Group, L.P.  For instance:provide capital for Citibank to repay its TARP money, bring Lehman Brothers outof bankruptcy and restore it to its old self and purchase some of the softassets from other banks.  Collectively,it will expedite the U.S. recovery and get the U.S. out of running our auto andother TARP companies that the government has no expertise to operate.

 

Our first step has to beto **move Kenilworth from a penny stock** to a$35.00 per share stock.  That is the veryreason we are embarking on the bridge loan, underwriting and reverse splittingour Common Stock.  With our gamblingpatent ownership we should be able to prevail.

 

Kenilworth is the onlypublicly traded **manufacturing company** in theUnited States that exited from 16 years in Chapter 11 and 7 bankruptcyproceedings having paid **one hundred percent (100%)cash distribution to the creditors and paid in full all administration fees andexpenses** after securing $4.5 million in debt owed to the Company.

 

It parallels our positionas one of the only companies best suited to swap our Preferred Stock forChina’s U.S. bonds. The same scenario applies to Middle East oil producingSovereign Wealth Funds.

 

**SUMMARY**:

 

(1.)              Kenilworth continuesto fine tune its patented technology dubbed Roulabette.  It now plans to“outsource” the manufacturing of all the components instead as formerlymanufacture some of the equipment in its 26,000 square foot facility located inMelville, NY.  Roulabette would allow casino patrons and other players toplay along with live in-progress casino table games such as Roulette, Craps andBaccarat via digital satellite, digital cable television or on line Internetbroadcasts (simulcasts) emanating from strictly regulated casinos located inthe United States and other locations around the world, to self-sufficientcomputer terminals dubbed “Roulabette Slots” digital satellite, cable TV settop boxes, lap top computers, cell phones or the Internet in countries thatpermit Internet gaming. The Roulabette terminal is a proposal intended to bebuilt and there can be no assurances that it will ever be built.  Themicroprocessors to be installed in the TV set and lap top computers have notbeen designed. We have as at June 30, 2009, no firm agreements, customers,or proposals for any future business and there can be no assurances that wewill ever have same. **Reference is also madeto each of the “Risk Factors” that are set forth in Item 7 of FORM 10-Kfor the year ended December 31, 2008.**

 

(2.)              We believe thethousand virtual casino websites via the Internet obtain sixty percent (60%) oftheir annual revenue from customers in the U.S.

 

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

 

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Kenilworth was the firstto use color personal computers (PC’s) to replace electromechanical slotmachines in 1988.  We provided the software for the first Tabaret locatedat the Menzie at the Rialto in Melbourne, Australia, which opened in November 1990. This consisted of cashless, variable denomination and multiple games,virtual PAT’s (“Player Activated Terminals”).  Prior thereto Kenilworthsponsored, 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 the use of account cards (debit cards) and was signed intolaw by Governor Richard H. Bryan on June 13, 1985.

 

The Board of Directors ofKenilworth have taken all necessary corporate actions and approved the statedplans with flexibility to permit changes on “the best terms” available.

 

On January 7, 2009the shareholders approved amending the Certificate of Incorporation to increasethe authority to issue the number of shares of the Common Stock and Series ofConvertible Preferred Stock to meet the Company’s plans, as described herein.

 

MARKETING STRATEGY/SALESPLAN

 

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

 

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

 

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

 

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

 

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

 

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After we obtainpermission to play Roulabette, 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 box requiredto receive digital TV programming and interactive TV at its own cost, if thesubscriber opens a Roulabette wagering account for two hundred dollars ($200).In addition, Kenilworth would pay the monthly subscription fees to view alldigital TV programming offered and the Internet service provider (ISP)subscription fee if the customer wagers at least one hundred twenty dollars($120) each month — win, lose, or draw — makes no difference.  In the U.S.the contracts would be financed by satellite carriers such as EchoStar andDirecTV. **If the internet legislation introduced on May 6,2009 passes both Houses of Congress, the need for dish antennas would no longerbe required.**

 

In states with approvedlottery and/or other gambling legislation, we plan to introduce Roulabette Slotterminals to hotels, clubs (similar to card clubs in California) and resorts,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 Roulabette 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 Roulabette terminals areintended to be self-sufficient and accept dollar bills (or script, to controlthe amount an individual is allowed to wager in one day or other time period).We plan to lease all the equipment necessary to participants for a share of theprofits.

 

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

 

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

 

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

 

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

 

COMPETITION

 

Many segments of thegaming industry are characterized by intense competition, with a large numberof companies offering the same type of wagering products and services. None ofthese companies, at present, are believed to offer the same or similarequipment or systems as intended by Roulabette. 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 withRoulabette.

 

Our present plans are tobroadcast the live casino table games from companies that own casinos throughoutthe industrialized world. Other casino owners may start their own broadcastsand have their own terminals manufactured that compete with Kenilworth afterKenilworth has done all its pioneering for play-along wagering.

 

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PATENTS, TRADEMARKS ANDINTELLECTUAL PROPERTY

 

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

 

ROULABETTE, as inpre-marked cards similar to lottery cards to select number in each game, usedwith terminals “ROULABETTE SWIPE CARD” to activate set-top boxes to playRoulabette and “PLAY ALONG WITH ROULABETTE, LIVE” and MULTI-USE GAMING MACHINE. Our patents are filed in fifty-one (51) industrialized countries of the worldand are approved, both in Russia and recently in China and Japan, after a seven(7) year delay.

 

GOVERNMENT REGULATIONS

 

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

 
| Item 2.                                                                                                                                                                                                                             | LEGAL PROCEEDINGS:                                                                                                                                                                   |
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| Item 3.                                                                                                                                                                                                                             | CHANGE IN SECURITIES:                                                                                                                                                                |
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| Item 4.                                                                                                                                                                                                                             | DEFAULT UPON SENIOR  SECURITIES:                                                                                                                                                     |
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| Item 5.                                                                                                                                                                                                                             | SUBMISSION OF A MATTER  TO A VOTE OF SECURITIES HOLDERS:                                                                                                                             |
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|                                                                                                                                                                                                                                | None                                                                                                                                                                                 |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
| Item 6.                                                                                                                                                                                                                             | OTHER INFORMATION:                                                                                                                                                                   |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
| The Company plans to  hold its next Annual Meeting of Shareholders in January 2010 or any  adjournment thereof with proxy materials mailed to shareholders of record in  twenty (20) days prior to the proposed meeting dates. |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
| Item 7.                                                                                                                                                                                                                             | EXHIBITS AND REPORTS ON  FORM 8-K:                                                                                                                                              |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
|                                                                                                                                                                                                                                | Ex 31.1 Certification  of Chief Financial Officer of the Company Required by  Rule 13a-14(a) or Rule 15d-14(c) of the Exchange Act                               |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
|                                                                                                                                                                                                                                | Ex 32.1 Certification  of Chairman and Chief Executive Officer Pursuant to 18 U.S.C.  Section 1350, as adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2007. |
|                                                                                                                                                                                                                                |                                                                                                                                                                                 |
|                                                                                                                                                                                                                                | Ex 99.1 Test Simulcast  Agreement                                                                                                                                                    |

 

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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 |
|   |   | August 11, 2009                                            |

 

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