**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

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**FORM 10-Q**

 

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**(Mark One)**

 

| **x**                                                       | **Quarterly report pursuant to  Section 13 OR 15(D) of the Securities Exchange Act of 1934**  |
|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                        |
| **For  the quarterly period ended September 30, 2007** |
|                                                        |
| **OR**                                                      |
|                                                        |
| **o**                                                       | **Transition report pursuant to  Section 13 or 15(D) of the Securities Exchange Act of 1934** |

 

**For thetransition period from             to**

 

**CommissionFile Number: 0-08962**

 

**KENILWORTHSYSTEMS CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **New York**                              | ** ** | **84-1641415**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State  of incorporation)                 |       | (I.R.S.  employer identification no.) |
|                                      |       |                                  |
| **185 Willis Avenue, Mineola, New York**  | ** ** | **11501**                             |
| (Address  of principal executive offices) |       | (Zip  Code)                           |
|                                      |       |                                  |

 

**(516)741-1352**

(Registrant’s telephonenumber, 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 was requiredto file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes  x   No  o

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 ofSeptember 30, 2007 was 317,491,228.

 

 

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**Table ofContents**

**KENILWORTHSYSTEMS CORPORATION AND SUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**INDEX**
| ** **        | ** **                                                                                                                                                                                                                                                                          | ** ** |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Part I.**  | **Financial Information**                                                                                                                                                                                                                                                           | ** ** |
|              |                                                                                                                                                                                                                                                                                |       |
| Item 1.           | Financial Statements                                                                                                                                                                                                                                                                |       |
|              |                                                                                                                                                                                                                                                                                |       |
|              | Condensed  Consolidated Statements of Operation and Deficit — Nine months  endedSeptember 30, 2007 and 2006, Three months ended September 30,  2007 and 2006, and the period, as a Development Stage Company, from inception  to September 30, 2006 (unaudited) | 4          |
|              |                                                                                                                                                                                                                                                                                |       |
|              | Condensed  Consolidated Balance Sheets — September 30, 2007 and December 31,  2006 (unaudited)                                                                                                                                                                       | 5          |
|              |                                                                                                                                                                                                                                                                                |       |
|              | Condensed  Consolidated Statements of Cash Flows — Nine months ended September 30,  2007 and 2006, and the period, as a Development Stage Company, from inception  to September 30, 2007 (unaudited)                                                                 | 6          |
|              |                                                                                                                                                                                                                                                                                |       |
|              | 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                                                                                                                                                                                                                         |       |
|              |                                                                                                                                                                                                                                                                                |       |
| **Part II.** | **Other Information**                                                                                                                                                                                                                                                               | **13**     |
|              |                                                                                                                                                                                                                                                                                |       |
| Item 1.           | Legal Proceedings                                                                                                                                                                                                                                                                   | 13         |
|              |                                                                                                                                                                                                                                                                                |       |
| Item 6.           | Exhibits                                                                                                                                                                                                                                                                            | 13         |
|              |                                                                                                                                                                                                                                                                                |       |
|              | Signature                                                                                                                                                                                                                                                                           | 14         |

 

FORWARD LOOKINGSTATMENTS

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, andSection 21E of the Securities Exchange Act of 1934, as amended, and issubject to the safe harbors created thereby. Such information involves importantrisks and uncertainties that could significantly affect results in the futureand, 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.

 

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RISKS

Specificreference is made to each of the risks described in Item 7 in Part II of theForm 10-K for December 31, 2006 under the discussion “CautionaryStatement For Purposes of the Safe Harbor Provisions of the Private SecuritiesLitigation Reform Act of 1995 and Risk Factors”. Reference is also made tofuture filings under Forms 10-Q and Forms 10-K and filings under the SecuritiesExchange Act of 1934 as amended and as may be applicable under the SecuritiesAct of 1933 as amended.

INTRODUCTORY NOTE

**The 10-Q has not been reviewed bythe Company’s Independent Auditor.**

This FORM 10-Q is beingfiled as a “Development Stage Company” from the period beginning November 24,1998 to the present at September 30, 2007 including a charge in the amount of$4,256,926, which was the amount the Company disbursed on September 28, 1998 tobe discharged from Chapter 7 Bankruptcy Proceedings.

d) The Company issued167,764,093 shares of its Restricted Common Stock since January 1, 2002. All of the shares may have the restrictions lifted pursuant to Rule 144 and144K within one (1) or two (2) years which may substantially depress thetrading price of the Company’s Stock in the future.

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

At 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 of 53,652instead of $303,652.

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

During the quarter periodended September 30, 2006 the Company issued restricted common shares forconversion of Convertible Promissory Notes and to consultants in settlement ofdebt, 17,662,000 shares for $394,600.

 

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KENILWORTH SYSTEMSCORPORATION

(A DEVELOPMENTSTAGE COMPANY)

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

AND DEFICIT ACCUMULATEDDURING THE DEVELOPMENT STAGE

(Unaudited)
| ** **                                    | ** ** | **For the nine months ended  September  30,** | ** ** | **For the three months ended  September 30,** | ** ** | **Period from  November 24,  1998  (Inception)  to  December 31,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                                                    | ** ** | **2006**                                                               | ** ** | **2007**                                                                     | ** ** | **2006** | ** ** | **2006** | ** ** |
|                                          |       |                                                                        |       |                                                                   |       |                                                                         |       |   |   |   |   |
| Expenses                                      |       |                                                                        |       |                                                                   |       |                                                                         |       |   |   |   |   |
| Selling, general and administrative           |       | $                                                                           | 968,809    |                                                                   | $          | 779,479                                                                      |       | $ | 136,300 |   | $ | 157,974 |   |   |   |
|                                          |       |                                                                        |       |                                                                   |       |                                                                         |       |   |   |   |   |
| Net loss                                      |       | $                                                                           | 968,809    |                                                                   | $          | 779,479                                                                      |       | $ | 136,300 |   | $ | 157,974 |   | $ | 7,607,338 |   |
|                                          |       |                                                                        |       |                                                                   |       |                                                                         |       |   |   |   |   |
| Basic and diluted loss per share              |       | $                                                                           | (0.003     | )                                                                      | $          | (0.003                                                                       | )          | $ | (0.001 | ) | $ | (0.001 | ) |   |   |
|                                          |       |                                                                        |       |                                                                   |       |                                                                         |       |   |   |   |   |
| Weighted average number of shares outstanding |       | 371,491,228                                                                 |       | 253,541,133                                                            |       | 317,491,228                                                                  |       | $ | 253,541,133 |   |   |   |
|                                               |            |                                                                             |            |                                                                        |            |                                                                              |            |  |  |  |  |  |  |  |  |  |

 

The accompanying notesare an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION

(A DEVELOPMENTSTAGE COMPANY)

CONDENSEDCONSOLIDATED BALANCE SHEETS

(Unaudited)
| ** **                                                                                                                                        | ** ** | **September 30,**

**2007** | ** ** | **December 31,**

**2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                        | ** ** | ** **                       | ** ** | ** **                      | ** ** |
| ASSETS                                                                                                                                            |       |                             |       |                            |       |
| CURRENT ASSETS                                                                                                                                    |       |                             |       |                            |       |
| Cash                                                                                                                                              |       | $                                | 47,439     |                            | $          | 49,995 |   |
| Prepaid expenses                                                                                                                                  |       | —                           |       | 75,000                          |       |
| Loan receivable                                                                                                                                   |       | 30,000                           |       | 30,000                          |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                            |       | 757,000                          |       | 750,000                         |       |
|                                                                                                                                              |       |                             |       |                            |       |
| Total current assets                                                                                                                              |       | 834,439                          |       | 904,995                         |       |
|                                                                                                                                              |       |                             |       |                            |       |
| PROPERTY AND EQUIPMENT — NET                                                                                                                 |       | 22,314                           |       | 31,878                          |       |
|                                                                                                                                              |       |                             |       |                            |       |
| SECURITY DEPOSIT                                                                                                                                  |       | 9,422                            |       | 9,422                           |       |
|                                                                                                                                              |       |                             |       |                            |       |
| TOTAL ASSETS                                                                                                                                      |       | $                                | 866,175    |                            | $          | 946,295 |   |
|                                                                                                                                              |       |                             |       |                            |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                              |       |                             |       |                            |       |
|                                                                                                                                              |       |                             |       |                            |       |
| CURRENT LIABILITIES                                                                                                                               |       |                             |       |                            |       |
| Accounts payable and accrued expenses                                                                                                             |       | $                                | 272,557    |                            | $          | 311,358 |   |
| Payroll taxes payable                                                                                                                             |       | 61,000                           |       | 141,000                         |       |
| Loans payable — including accrued interest                                                                                                   |       | 36,186                           |       | 33,787                          |       |
| Loans payable — automobile                                                                                                                   |       | —                           |       | 750                             |       |
|                                                                                                                                              |       |                             |       |                            |       |
| TOTAL CURRENT LIABILITIES                                                                                                                         |       | 369,743                          |       | 486,895                         |       |
|                                                                                                                                              |       |                             |       |                            |       |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                               |       |                             |       |                            |       |
| Preferred stock - par value $.01 per share; authorized 2,000,000  shares; no shares issued and outstanding                                        |       |                             |       |                            |       |
| Common stock - par value $.01 per share; authorized 500,000,000  shares; issued and outstanding 317,491,228 and 278,508,293 shares,  respectively |       | 3,174,912                        |       | 2,785,082                       |       |
| Additional paid-in capital                                                                                                                        |       | 31,035,226                       |       | 30,419,215                      |       |
| Accumulated Deficit                                                                                                                               |       | (33,713,706                      | )          | (32,744,897                     | )          |
|                                                                                                                                              |       |                             |       |                            |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                   |       | 496,432                          |       | 459,400                         |       |
|                                                                                                                                              |       |                             |       |                            |       |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                   |       | $                                | 866,175    |                            | $          | 946,295 |   |

 

The accompanying notesare an integral part of these financial statements.

 

 

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KENILWORTH SYSTEMSCORPORATION

(A DEVELOPMENTSTAGE COMPANY)

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDEDSEPTEMBER 30,

(Unaudited)
| ** **                                                                      | ** ** | **2007** | ** ** | **2006** | ** ** | **Period from**

**November 24,**

**1998**

**(Inception)**

**to**

**December 31,**

**2006** | ** ** |
|---------------------------------------------------------------------------------|------------|----------|------------|----------|------------|-------------------------------------------------------------------------------------------------------|------------|
| Cash flows from operating activities                                            |       |     |       |     |       |                                                                                                  |       |
| Net loss                                                                        |       | $        | (968,809   | )        | $          | (779,479                                                                                              | )          | $ | (7,607,338 | ) |
| Adjustments to reconcile net loss to net cash provided by operating  activities |       |     |       |     |       |                                                                                                  |       |
| Depreciation                                                                    |       |     |       |     |       | 28,431                                                                                                |       |
| Amortization of patent                                                          |       |     |       |     |       | 12,795                                                                                                |       |
| Accretion of convertible debt discount                                          |       |     |       |     |       | 72,656                                                                                                |       |
| Beneficial conversion feature                                                   |       |     |       |     |       | 1,452,097                                                                                             |       |
| Common stock issued for services                                                |       |     |       |     |       | 2,923,910                                                                                             |       |
| Common stock issued to induce debt conversion                                   |       |     |       |     |       | 63,276                                                                                                |       |
| Common stock issued for interest due on notes payable                           |       |     |       |     |       | 8,501                                                                                                 |       |
| Accrued interest transferred to capital                                         |       |     |       |     |       | 5,495                                                                                                 |       |
| Other                                                                           |       |     |       |     |       | 21,100                                                                                                |       |
| Increase (decrease) in cash attributable to changes in assets and  liabilities: |       |     |       |     |       |                                                                                                  |       |
| Prepaid expenses                                                                |       | —   |       | 230,000  |       | (53,350                                                                                               | )          |
| Loan receivable                                                                 |       | (30,000  | )          | (16,000  | )          | (6,300                                                                                                | )          |
| Accounts payable and accrued expenses                                           |       | (272,557 | )          | (105,532 | )          | 140,975                                                                                               |       |
| Payroll taxes payable                                                           |       | (61,000  | )          | 54,730   |       | 16,009                                                                                                |       |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Net cash used in operating activities                                           |       | (605,252 | )          | (616,281 | )          | (2,142,264                                                                                            | )          |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Cash flows from investing activities                                            |       |     |       |     |       |                                                                                                  |       |
| Receivable from sale of stock subscriptions (H. Lindo)                          |       | 757,000  |       | (80,000  | )          | (4,000                                                                                                | )          |
| Proceeds from loan payable - stockholder                                        |       | —   |       | 16,000   |       | 4,000                                                                                                 |       |
| Payment of patent costs                                                         |       | —   |       | (4,841   | )          | (73,752                                                                                               | )          |
| Purchase of property and equipment                                              |       | —   |       | (62,678  | )          | (63,548                                                                                               | )          |
| Security deposit                                                                |       | 9,422    |       | —   |       | (4,250                                                                                                | )          |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Net cash used in investing activities                                           |       | (266,922 | )          | (131,519 | )          | (141,550                                                                                              | )          |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Cash flows from financing activities                                            |       |     |       |     |       | (1,138                                                                                                | )          |
| Proceeds from loans payable - stockholders                                      |       |     |       |     |       | 65,000                                                                                                |       |
| Payment of loans payable - related parties                                      |       |     |       |     |       | (127,967                                                                                              | )          |
| Proceeds from loans payable - related parties                                   |       |     |       |     |       | 154,137                                                                                               |       |
| Payment of loans payable - related parties                                      |       |     |       |     |       | (32,000                                                                                               | )          |
| Proceeds from paid in capital                                                   |       | 129,270  |       | 139,506  |       | 2,069,861                                                                                             |       |
| Proceeds from sale of common stock                                              |       | 257,500  |       | 625,523  |       | 132,500                                                                                               |       |
| Proceeds from stock subscriptions receivable                                    |       |     |       |     |       | 52,500                                                                                                |       |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Net cash provided by financing activities                                       |       | 757,000  |       | 765,029  |       | 2,312,893                                                                                             |       |
|                                                                            |       |     |       |     |       |                                                                                                  |       |
| Net change in cash                                                              |       | (2,556   | )          | 17,229   |       |                                                                                                  |       |
| Cash- beginning of period                                                       |       | 49,995   |       | 5,495    |       |                                                                                                  |       |
| Cash — end of period                                                       |       | $        | 47,439     |     | $          | 22,724                                                                                                |       |   |   |
|                                                                                 |            |          |            |          |            |                                                                                                       |            |  |  |  |

 

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

In theopinion of management, the accompanying unaudited condensed consolidated financialstatements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of January 1, 2007 contain all adjustments (consisting ofonly normal accruals) necessary to present fairly the consolidated balancesheets as of September 30, 2007 and December 31, 2006 and the relatedstatements of operations and cash flows for the nine (9) month periodended September 30, 2007 and 2006.  These financial statements should beread in conjunction with the consolidated financial statements and notesthereto included in our Annual Report on FORM 10-K.

Theresults of operations for the nine (9) month period ended September 30,2007 are not necessarily indicative of the results for the entire year endingDecember 31, 2007.

NOTE2 - THE COMPANYAND NATURE OF BUSINESS

KenilworthSystems Corporation (the “Company”) was incorporated in New York inApril 1968 and since exiting from bankruptcy proceedings now plans to beengaged in the business of developing and having terminals and other equipmentmanufactured and design systems that permit individuals from remote locations,to play along with 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 throughSeptember 28, 1998.

NOTE3 - PRINCIPLES OFCONSOLIDATION

Theconsolidated financial statements include the accounts of Kenilworth Systems Corporationand its wholly owned subsidiaries: Video Wagering Systems Corporation,RoulabetteTM Nevada Corporation, Kenilworth Systems Nevada Corporation,Kenilworth Systems (UK) Limited, Kenilworth Satellite Broadcasting Corporation(a Delaware Corporation) and Satellite Gaming Consultants, Inc. (a DelawareCorporation). None of these subsidiaries has any assets or liabilities, exceptSatellite Gaming Consultants, Inc.

NOTE4 - RISK FACTORAND GOING CONCERN UNCERTAINTY

Asindicated in Note 2, the Company exited from Chapter 7 in September 1998and has not yet commenced revenue producing operations. These factors createuncertainty as to the Company’s ability to operate as a going-concern andcontinue in business. Management plans to develop a wagering system that allowscasino patrons and individuals outside the casino to play along remotely withlive in-progress casino table games. The Company 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.

 

 

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES

 

During the quarters endedSeptember 30, 2007 and September 30, 2006 respectively, the Company sold tovarious private investors $257,500 and $394,600 principal amount of ConvertiblePromissory Notes bearing interest at rates ranging from 4.00% to 8.00% perannum.  The Notes had a one-year term and were immediately convertible atthe option of the noteholder into shares of restricted common stock based onconversion prices ranging from $.025 to $.10 per share.  All Notes issuedin the quarters ended September 30, 2007 and September 30, 2006 were convertedinto a total of 12,822,934 and 17,662,000 common shares, respectively.

NOTE 6 - NON CASH TRANSACTIONS

Common shares issued forservices

2007:

TheCompany issued 750,000 shares as compensation for services rendered during thesecond quarter period ended June 30, 2007.  The services were valued at$15,000.

NOTE 7 - INVESTMENT IN LIGHTHOUSE SUPPLIES& SERVICES, INC.

In order to operate abusiness in the Philippines and engage in a business relationship with thePhilippine Amusement and Gaming Corporation (PAGCOR), we purchased LighthouseSupplies & Services, Inc (Lighthouse) for US$60,000.  The previousowners, all citizens of the Republic of the Philippines, agreed to continue toserve as directors representing fifty-one percent (51%) with Kenilworth directorsrepresenting forty-nine percent (49%) of the Board.  The Philippines Directors were to receiveannual compensation for their services. In order to conserve cash, the Company cancelled the Lighthouse purchaseand expensed the $60,000 payment.

NOTE8 - PAYROLL TAXESPAYABLE

TheCompany has made arrangements with the Internal Revenue Service (IRS) and theNew York State Department of Taxation to pay approximately $141,000 in past duepayroll taxes, including all penalties and interest accrued during the years2006 and 2005, in monthly installments.  The agreements provide that theCompany must pay all present taxes, when due, and payments must remain currentin 2007.  On October 25, 2007 the Companyreduced the IRS payroll liability by $80,000. The Company is paying monthly all past due state payroll taxes.

NOTE9 - RECEIVABLEFROM HERBERT LINDO

OnNovember 27, 2006 Herbert Lindo, the Chairman and Chief Executive Officerexercised a five million (5,000,000) share option for seven hundred fiftythousand dollars ($750,000) at fifteen cents ($0.15) per share pursuant to theCompany’s Performance and Equity Plan. The price per share was the price forthe Option which would have expired on the following date. Mr. Lindo doesnot own any other Options pursuant to the Plan. The average market price of theCommon Stock for the thirty (30) days prior to 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.  Mr. Lindo increased his indebtedness by anadditional $7,000 during the third quarter.

NOTE10 - SUBSEQUENTEVENTS

Subsequentto September 30, 2007, the Company received $40,000 in transit from thesale of Convertible Promissory Notes.

 

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ITEM 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

RESULTS OF OPERATIONS

Since we emerged frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting of $850,079 and $3,815,302 in year 2006 and 2005 and for thenine-months ended September 30, 2007 we sustained a loss amounting to $968,809compared to a loss of $779,479 for the nine month period ending September 30,2006. Kenilworth has had no revenues from operations during the past fifteen(15) years and there can be no assurances that it will ever have revenues frompresent planned operations.

LIQUIDITY AND CAPITALRESOURCES

Our present plans are todevelop a wagering system dubbed “RoulabetteTM” that would allow patrons in theindustrialized world to play and wager on live in-progress simulcast casinotable games on TV’s placed in hotels, resorts, bars, cafés and other publicgathering places and in homes and offices on personal computers (PC’s) ortelevision sets connected to TVs via digital satellite, digital cable andInternet broadcasts emanating from strictly regulated casinos.

PART II

ITEM 1—DESCRIPTION OFBUSINESS

Kenilworth SystemsCorporation hereinafter referred to as “Kenilworth”, the “Company” or “we”, wasincorporated on April 25, 1968 under the laws of the State of NewYork.  Kenilworth has been a publicly traded Company since August 1968formerly on the National NASDAQ Market, presently on the OTC Pink Sheet Marketsince exiting from bankruptcy proceedings in September 1998. Kenilworth is now being presented as a Development Stage Company.

GENERAL

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

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

Kenilworth titled theoverall project “RoulabetteTM”.  There are thirty-eight million(38,000,000) satellite and seventy-three million (73,000,000) cable TVsubscribers in the United States and more than five hundred million(500,000,000) subscribers throughout the rest of the industrialized world (“TheMarket”).  On average, households in the U.S. have three (3) TV’s. (It is important since the satellite and cable companies will charge a separatefee for transmitting the table games).  Public gathering places canaccommodate (be able to network) up to one thousand (1,000) or more TV setswith a single satellite receiving dish, direct cable connections, or streamedvia the Internet.  With wagering possible in homes, hotel rooms, resortrooms, pubs, restaurants, cafés, race tracks and other public gathering places,the Company believes it will become a more than $500 billion **net win**Market within five (5) yearsthroughout the industrialized world (by the year ended 2012).

 

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

All forty-three (43)lotteries in the United States are owned and operated by County and Stateagencies.  Since the beginning of year 2007, Texas, Illinois, Indiana,Maryland, Michigan, Iowa, New Jersey and California are exploring theprivatization of their lotteries. This could greatly enhance our efforts tobroadcast the live casino table games to these lottery locations and couldresult in having Cafés that offer terminals and TV sets to play along. Internet Cafés that offer wagering on various events have been a huge successin the Asian Market. With Internet wagering outlawed in the United States, ourpatented satellite, one-way broadcasts offer the best possibility to establishsatellite Cafés.

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

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

There are no technicalbreakthroughs required.  The equipment for the technology is readilyavailable.  What is needed is to get through the maze of Local, County, Stateand Federal regulations in each U.S. State and foreign countries.  Whenthe first State in the United States grants the Company permission to transmitthe broadcast from one of its casinos to their residents and to States that donot have any casinos, (the entire East coast of the United States), the otherforty-three (43) States with lotteries will join expeditiously. The samewill occur in foreign countries.

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

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

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

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

To conduct permanentbroadcasts Kenilworth believes it will require a minimum of ten million dollars($10,000,000) and there are no assurances we will ever be able to obtain suchmoney. At present, the Company does not have the funds readily available buthopes to obtain same, from investors, as soon as 

 

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Kenilworth can commencebroadcasting from a casino in the United States or other casinos throughout theworld.

In prior years,Kenilworth completed a prototype system that allowed casino patrons to playalong with live in-progress casino table games **only within the confines of a casino,** via closed circuittelevision. Also in 1990, we developed and delivered for the TAB (TotalizatorAgency Board) then 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 the development of the aforementioned systems we plan todevelop a second-generation system that will broadcast the live casino tablegame action via the airways. 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 to successfullydevelop any system.

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

Where authorized, hotels, resorts, clubs, cafés and other publicgathering places will be able to offer casino table game action in theirestablishments without incurring the costs to operate a casino. There are nowbelieved to be more than ten million (10,000,000) slot machines playedthroughout the world, outside of casino confines.

 

RoulabetteTM is a concept intended to be built and there can be noassurances that it will ever be built.

 

**New GamingEnforcement Law**

 

The Internet Gambling Prohibition and Enforcement Act of 2006, signedinto law by President Bush on October 13, 2006, will not prohibit but ratherenhances the Company’s proposed RoulabetteTM System of playing along remotelywith live casino table games. We deal with cash only.

 

Internet gambling was always outlawed in the U.S. Las Vegas lobbied tomake it legal to allow casino players to wager, from home or other remote locations,directly with the casino of their choice. With the credit card prohibition,that appears to become improbable. RoulabetteTM will be primarily deployed inconjunction with Lottery Systems. Digital satellite and cable subscribers willbe able to go to their local lottery agents and make cash deposits and/orcollect winnings, in the same manner as if they are purchasing lottery tickets,using pre-encoded ‘RoulabetteTM Play Cards’ inserted in the lottery terminals.Our basic patent encompasses remote satellite broadcasts and a pendingapplication is directed to having exclusively state lotteries and otherauthorized public agencies manage all the cash handling and distribution. Usinglotteries, that can only by law, accept cash deposits, concerned citizens andlegislators will be assured that the high school student and college freshmanwill not be able to participate. By using the lotteries database, thecompulsive gambler can be identified and, if necessary, limited or shut down.The additional revenue collected from the lottery will be available to fundstate activities such as boost school aid and teacher’s salaries.

 

**If Kenilworth is permitted tobroadcast the live game action from a Las Vegas casino, state and federalgovernment agencies will earn and collect the substantial income that formerlywas earned illegally by overseas operators.**

 

Unless an alternative is found, the illegal wagering may not stop.Determined players will find other means to make their deposits and continue towager with their foreign providers.**If theU.S. resident gamers have legal access for their casino and sports bettinghabits, the foreign operators will cease to exist. Their prime market was, andmay remain, the U.S. resident.**

 

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RoulabetteTM action is designed to offer entertainment, not hardcoregambling.

 

It is a practical solution to most illegal gambling. The RoulabetteTMSystem is identical to simulcasts of horse and dog racing. The wagering takesplace at the receiving locations, lotteries, homes, religious organizationsthat conduct Nevada nights using rented terminals provided by Kenilworth, notat the remote casino locations.

 

The RoulabetteTM program will include entertainment and commentators(much like commentators of sporting events and poker tournaments) to assistplayers with the rules and regulations of the games. Live casino table gameaction may also be offered on slot machines and video lottery terminals, as analternative and change of pace from native games.

 

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 of our patents, filedin the forty-nine (49) industrialized countries in the world, provide fortransmitting remote, live in-progress casino table games via telephone lines,Internet and satellite (satellite primarily for the U.S. market) and theairways (cell phone wagering).  Using broadband, Internet is simpler andmore economical to operate than using satellite transmission.

RoulabetteTM offerscontent to the broadcasting industry and a medium for local and internationaladvertisers.

According to WangXuehong, head of the China Center for Lottery Studies of Beijing University,revenue form legal lotteries in China in 2005 reached 70 billion Yuan ($87.5billion US dollars).

We have two (2) U.S.patents pending using lottery terminals to manage the wagering.  Thepatents have been published and filed with our other patents throughout theforty-nine (49) countries.  It may become the incentive needed for theChinese Government to permit our live, in-progress table games from a casino inMacau.

In order to gain a breakthrough the maze of regulations we just need to demonstrate the viability ofRoulabetteTM,  initially withoutparticipating in actual gambling.  Similar to poker tournaments that areoffered for viewing only.

**Ifgovernments cannot control illegal gambling, why not make it legal and allowthe various government agencies share in the net win revenue.**

 

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PART II.OTHER INFORMATION

Item1.    LEGAL PROCEEDINGS:

None

Item 2.   CHANGE IN SECURITIES:

None

Item 3.   DEFAULT UPON SENIOR SECURITIES:

None

Item 4.   SUBMISSION OF A MATTER TO A VOTE OF SECURITIES HOLDERS:

None

Item 5.   OTHER INFORMATION:

The Company plans to holdits Annual Meeting of Shareholders in January 2008 or any adjournment thereofwith proxy materials mailed to shareholders of record  prior to theproposed meeting dates.

Item6.    EXHIBITS AND REPORTS ON FORM 8-K:

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

Ex 32.1 Chairman and Chief Executive Officer Certification pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.

 

 

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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,                        |
|   | President and Chief Financial Officer |
|   | November 12, 2007                |

 

 

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