**UNITED STATES********SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**(Mark One)**

 
| **ý** | **Quarterly  report pursuant to Section 13 OR 15(D) of the Securities Exchange  Act of 1934** |
|------------|---------------------------------------------------------------------------------------------------------|

 

**For thequarterly period ended June 30, 2005**

 

**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**

 

**KENILWORTH SYSTEMS CORPORATION**

(Exact name of registrant 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’s telephone number, including area  code) |

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  ý   No  o

 

Statethe number of shares outstanding of each of the issuer’s classes of commonstock as of the latest practical date

 

Thenumber of shares of common stock, $.01 par value of the Registrant outstandingas of June 30, 2005 was 159,371,245.

 

 

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##### **Tableof Contents**

 

**KENILWORTH SYSTEMS CORPORATION ANDSUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

 

**INDEX**

 
| **Part I.**  | **Financial Information**                                                                                                                                                                                                          |   |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              |                                                                                                                                                                                                                               |   |
| Item 1.           | Financial Statements                                                                                                                                                                                                               |   |
|              |                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated  Balance Sheets (unaudited) – June 30, 2005 and December 31, 2004                                                                                                                            | 3      |
|              |                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated  Statements of Operation and Deficit (unaudited) – Six months ended June 30,  2005 and 2004, Three months ended June 30, 2005 and 2004, and the period  from inception to June 30, 2005 | 4      |
|              |                                                                                                                                                                                                                               |   |
|              | Condensed Consolidated  Statements of Cash Flows (unaudited) – Six months ended June 30, 2005  and 2004, and the period from inception to June 30, 2005                                                             | 5      |
|              |                                                                                                                                                                                                                               |   |
|              | Condensed  Notes to Consolidated Financial Statements (unaudited)                                                                                                                                                                  | 6      |
|              |                                                                                                                                                                                                                               |   |
| Item 2.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                        | 8      |
|              |                                                                                                                                                                                                                               |   |
| Item 3.           | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                         |   |
|              |                                                                                                                                                                                                                               |   |
| Item 4.           | Controls and Procedures                                                                                                                                                                                                            |   |
|              |                                                                                                                                                                                                                               |   |
| **Part II.** | **Other Information**                                                                                                                                                                                                              | 11     |
|              |                                                                                                                                                                                                                               |   |
| Item 1.           | Legal Proceedings                                                                                                                                                                                                                  | 11     |
|              |                                                                                                                                                                                                                               |   |
| Item 6.           | Exhibits                                                                                                                                                                                                                           | 11     |
|              |                                                                                                                                                                                                                               |   |
| Signature         |                                                                                                                                                                                                                               | 12     |

 

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFEHARBOR” PROVISIONS OF THEPRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND RISK FACTORS

 

Theinformation contained in this Form 10-Q and Kenilworth’s other filingswith the Securities Exchange Commission may contain “forward-looking”statements within the meaning of section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934,as amended, and is subject to the safe harbors created thereby. Suchinformation involves important risks and uncertainties that could significantlyaffect results in the future and, accordingly, such results may differ fromthose expressed in any forward looking statements herein. Future operatingresults may be adversely affected as a result of a number of factors.

 

Youshould not rely on forward-looking statements in this Form 10-Q. This Form 10-Qcontains forward-looking statements that involved risks and uncertainties. Weuse words such as “anticipates”, “believes”, “plans”, “expects”, “future”, “intends”and similar expressions to identify such forward-looking statements. You shouldnot place undue reliance on these forward-looking statements, which apply onlyas of the date of this Form 10-Q. Our actual results could differmaterially from those anticipated in these forward-looking statements for manyreasons, including the risks faced by Kenilworth as described below andelsewhere in this Form 10-Q.

 

RISKS

 

Specificreference is made to each of the risks described in Item 7 of the Form 10-K/AAmendment No.1 for December 31, 2004 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.

 

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KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 
| ** **                                                                                                                                        | ** ** | **June 30, 2005** | ** ** | **December 31, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                        | ** ** | **(Unaudited)**   | ** ** | ** **            | ** ** |
|                                                                                                                                              |       |              |       |                  |       |
| ASSETS                                                                                                                                            |       |              |       |                  |       |
| CURRENT  ASSETS                                                                                                                                   |       |              |       |                  |       |
| Cash                                                                                                                                              |       | $                 | 78,775     |                  | $          | 5 |   |
| Prepaid expenses                                                                                                                                  |       | 31,250            |       | 93,750                |       |
| Loan receivable - employee                                                                                                                        |       | 4,800             |       | —                |       |
|                                                                                                                                              |       |              |       |                  |       |
| Total current assets                                                                                                                              |       | 114,825           |       | 93,755                |       |
|                                                                                                                                              |       |              |       |                  |       |
| PROPERTY AND  EQUIPMENT - NET                                                                                                                     |       | 30,223            |       | 36,863                |       |
|                                                                                                                                              |       |              |       |                  |       |
| PATENT                                                                                                                                            |       | 66,543            |       | 68,763                |       |
|                                                                                                                                              |       |              |       |                  |       |
| SECURITY  DEPOSIT                                                                                                                                 |       | 4,250             |       | 4,250                 |       |
|                                                                                                                                              |       |              |       |                  |       |
| Total assets                                                                                                                                      |       | $                 | 215,841    |                  | $          | 203,631 |   |
|                                                                                                                                              |       |              |       |                  |       |
| LIABILITIES  AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                   |       |              |       |                  |       |
| CURRENT  LIABILITIES                                                                                                                              |       |              |       |                  |       |
| Accounts payable and accrued expenses                                                                                                             |       | $                 | 101,087    |                  | $          | 218,772 |   |
| Payroll taxes payable                                                                                                                             |       | 16,255            |       | 59,522                |       |
| Loans payable - stockholders                                                                                                                      |       | 5,000             |       | 10,000                |       |
| Loans payable - related parties                                                                                                                   |       | —            |       | 25,120                |       |
|                                                                                                                                              |       |              |       |                  |       |
| Total current liabilities                                                                                                                         |       | 122,342           |       | 313,414               |       |
|                                                                                                                                              |       |              |       |                  |       |
| 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 200,000,000 shares; issued and outstanding 159,371,245 and  137,551,245 shares, respectively |       | 1,593,712         |       | 1,375,512             |       |
| Additional paid-in capital                                                                                                                        |       | 27,887,194        |       | 26,468,771            |       |
| Less: stock subscriptions receivable                                                                                                              |       | (57,500           | )          | (15,000               | )          |
| Accumulated  Deficit                                                                                                                              |       | (24,379,119       | )          | (24,379,119           | )          |
| Deficit accumulated during the development  stage                                                                                                 |       | (4,950,788        | )          | (3,559,947            | )          |
|                                                                                                                                              |       |              |       |                  |       |
| Total stockholders' equity (deficit)                                                                                                              |       | 93,499            |       | (109,783              | )          |
|                                                                                                                                              |       |              |       |                  |       |
| Total liabilities and stockholders' equity  (deficit)                                                                                             |       | $                 | 215,841    |                  | $          | 203,631 |   |

 

The accompanying notes are an integral partof these financial statements.

 

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** **

KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

** **

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

AND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE

(Unaudited)

 
| ** **                                     | ** ** | ** **                                 | ** ** | ** **                                   | ** ** | ** **         | ** ** | ** **  | ** ** | **Period from**            | ** ** |
|------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------------------|------------|--------------------|------------|-------------|------------|----------------------------|------------|
| ** **                                     | ** ** | ** **                                 | ** ** | ** **                                   | ** ** | ** **         | ** ** | ** **  | ** ** | **November 24, 1998** | ** ** |
| ** **                                     | ** ** | **For the six months ended June 30,** | ** ** | **For the three months ended June 30,** | ** ** | **(Inception) to** | ** ** |
| ** **                                     | ** ** | **2005**                                   | ** ** | **2004**                                     | ** ** | **2005**           | ** ** | **2004**    | ** ** | **June 30, 2005**     | ** ** |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Expenses                                       |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Selling, general and administrative            |       | $                                          | 823,733    |                                         | $          | 1,064,073          |       | $           | 662,430    |                       | $          | 355,861 |   | $ | 3,627,352 |   |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Other income (expenses)                        |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Interest income                                |       | —                                     |       | 81                                           |       | —             |       | 20          |       | 922                        |       |
| Interest expense                               |       | (567,108                                   | )          | (290,690                                     | )          | (513,046           | )          | (74,424     | )          | (1,324,358                 | )          |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Total other income (expense)                   |       | (567,108                                   | )          | (290,609                                     | )          | (513,046           | )          | (74,404     | )          | (1,323,436                 | )          |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Net loss                                       |       | $                                          | (1,390,841 | )                                            | $          | (1,354,682         | )          | $           | (1,175,476 | )                          | $          | (430,265 | ) | $ | (4,950,788 | ) |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Basic and diluted loss per share               |       | $                                          | (0.010     | )                                            | $          | (0.011             | )          | $           | (0.008     | )                          | $          | (0.003 | ) | $ | (0.057 | ) |
|                                           |       |                                       |       |                                         |       |               |       |        |       |                       |       |
| Weighted average number of shares  outstanding |       | 141,952,995                                |       | 122,770,497                                  |       | 150,929,745        |       | 124,075,068 |       | 86,811,567                 |       |
|                                                |            |                                            |            |                                              |            |                    |            |             |            |                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

The accompanying notes are an integral partof these financial statements.

 

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** **

KENILWORTH SYSTEMS CORPORATION

(A DEVELOPMENT STAGE COMPANY)

** **

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**            | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24, 1998** | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **to**                     | ** ** |
| ** **                                                                      | ** ** | **2005**   | ** ** | **2004**   | ** ** | **June 30, 2005**     | ** ** |
| Cash flows from operating activities                                            |       |       |       |       |       |                       |       |
| Net loss                                                                        |       | $          | (1,390,841 | )          | $          | (1,354,682                 | )          | $ | (4,950,788 | ) |
| Adjustments to reconcile net loss to net  cash provided by operating activities |       |       |       |       |       |                       |       |
| Depreciation                                                                    |       | 6,640      |       | 3,257      |       | 23,244                     |       |
| Amortization of patent                                                          |       | 2,607      |       | 2,376      |       | 10,483                     |       |
| Accretion of convertible debt discount                                          |       | —     |       | —     |       | 72,656                     |       |
| Beneficial conversion feature                                                   |       | 567,000    |       | 288,640    |       | 1,182,097                  |       |
| Common stock issued for services                                                |       | 476,346    |       | 606,198    |       | 1,673,910                  |       |
| 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                                         |       | 107        |       | 2,038      |       | 4,316                      |       |
| Other                                                                           |       | —     |       | —     |       | 21,100                     |       |
| Increase (decrease) in cash attributable to  changes in assets and liabilities: |       |       |       |       |       |                       |       |
| Prepaid expenses                                                                |       | 62,500     |       | —     |       | (31,250                    | )          |
| Loan receivable - employee                                                      |       | (4,800     | )          | —     |       | (4,800                     | )          |
| Accounts payable and accrued expenses                                           |       | (117,685   | )          | (25,122    | )          | 101,087                    |       |
| Payroll taxes payable                                                           |       | (43,267    | )          | (8,051     | )          | 16,255                     |       |
|                                                                            |       |       |       |       |       |                       |       |
| Net cash used in operating activities                                           |       | (441,393   | )          | (485,346   | )          | (1,809,913                 | )          |
|                                                                            |       |       |       |       |       |                       |       |
| Cash flows from investing activities                                            |       |       |       |       |       |                       |       |
| Payment of loan receivable-stockholder                                          |       | —     |       | —     |       | (4,000                     | )          |
| Proceeds from loan receivable - stockholder                                     |       | —     |       | 4,000      |       | 4,000                      |       |
| Payment of patent costs                                                         |       | (387       | )          | (5,879     | )          | (67,026                    | )          |
| Purchase of property and equipment                                              |       | —     |       | (38,875    | )          | (58,567                    | )          |
| Security deposit                                                                |       | —     |       | (4,250     | )          | (4,250                     | )          |
|                                                                            |       |       |       |       |       |                       |       |
| Net cash used in investing activities                                           |       | (387       | )          | (45,004    | )          | (129,843                   | )          |
|                                                                            |       |       |       |       |       |                       |       |
| Cash flows from financing activities                                            |       |       |       |       |       |                       |       |
| Proceeds from loans payable - stockholders                                      |       | 5,000      |       | 10,000     |       | 65,000                     |       |
| Payment of loans payable - related parties                                      |       | (1,950     | )          | (81,150    | )          | (11,950                    | )          |
| Proceeds from loans payable - related  parties                                  |       | 13,000     |       | —     |       | 154,137                    |       |
| Payment of loans payable - related parties                                      |       | —     |       | —     |       | (116,017                   | )          |
| Proceeds from convertible notes payable                                         |       | 479,500    |       | 552,000    |       | 1,754,861                  |       |
| Proceeds from sale of common stock                                              |       | 10,000     |       | 25,000     |       | 132,500                    |       |
| Proceeds from stock subscriptions  receivable                                   |       | 15,000     |       | 25,000     |       | 40,000                     |       |
|                                                                            |       |       |       |       |       |                       |       |
| Net cash provided by financing activities                                       |       | 520,550    |       | 530,850    |       | 2,018,531                  |       |
|                                                                            |       |       |       |       |       |                       |       |
| Net change in cash                                                              |       | 78,770     |       | 500        |       | 78,775                     |       |
|                                                                            |       |       |       |       |       |                       |       |
| Cash - beginning of period                                                      |       | 5          |       | 5          |       | —                     |       |
|                                                                            |       |       |       |       |       |                       |       |
| Cash - end of period                                                            |       | $          | 78,775     |       | $          | 505                        |       | $ | 78,775 |   |
|                                                                            |       |       |       |       |       |                       |       |
| Supplemental disclosure of non-cash  activities:                                |       |       |       |       |       |                       |       |
| Common stock issued for patent costs                                            |       | $          | —     |       | $          | —                     |       | $ | 10,000 |   |
| Conversion of notes payable to common stock                                     |       | $          | 567,000    |       | $          | 552,000                    |       | $ | 1,830,500 |   |
| Conversion of loan payable - related party  to common stock                     |       | $          | 16,170     |       | $          | —                     |       | $ | 16,170 |   |
| Exchange of loans payable for convertible  notes payable                        |       | $          | 30,000     |       | $          | —                     |       | $ | 80,000 |   |
| Cancellation of stock subscriptions  receivable                                 |       | $          | —     |       | $          | 29,000                     |       | $ | 29,000 |   |
| Common stock issued for subscriptions  receivable                               |       | $          | 57,500     |       | $          | —                     |       | $ | 129,000 |   |

 

 

Theaccompanying notes are an integral part of these financial statements.

 

5

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**KENILWORTH SYSTEMS CORPORATION**

**AND SUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE 1 - BASIS OF PRESENTATION

 

In the opinion of management, the accompanying unaudited condensedconsolidated financial statements of Kenilworth Systems Corporation andsubsidiaries (“Kenilworth”) beginning as of January 1, 2005 contain alladjustments (consisting of only normal accruals) necessary to present fairlythe consolidated balance sheets as of June 30, 2005 and December 31, 2004 andthe related statements of operations and cash flows for the six (6) monthperiods ended June 30, 2005 and 2004. These financial statements should be read in conjunction with theaudited consolidated financial statements and notes thereto included in ourAnnual Report on FORM 10-K/A, restated as a Development Stage Company, filedwith the Securities and Exchange Commission on July 13, 2005.

 

The results of operations for the six (6) month period ended June 30,2005 are not necessarily indicative of the results for the entire year endingDecember 31, 2005.

 

NOTE2 - THE COMPANY ANDNATURE OF BUSINESS

 

KenilworthSystems Corporation (the “Company”) was incorporated in New York in April 1968and since emerging 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 andsatellite cable broadcast around the world.

 

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

 

NOTE3 - PRINCIPLES OFCONSOLIDATION

 

Theconsolidated financial statements include the accounts of Kenilworth SystemsCorporation and its wholly owned subsidiaries: Video Wagering SystemsCorporation, RoulabetteTM Nevada Corporation, Kenilworth Systems NevadaCorporation, Kenilworth Systems (UK) Limited and Kenilworth SatelliteBroadcasting Corporation (a Delaware Corporation). None of these subsidiarieshas any assets or liabilities.

 

6

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**KENILWORTH SYSTEMS CORPORATION**

**AND SUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

 

**CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)**

**(UNAUDITED)**

 

NOTE4 - GOING CONCERNUNCERTAINTY

 

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

 

NOTE 5 – CONVERTIBLEPROMISSORY NOTES

 

During the six months ended June 30, 2005 and 2004, respectively,the Company sold to various investors $567,000 and $552,000 principal amount ofConvertible Promissory Notes bearing interest at rates ranging from 4.00% to5.50% per annum.  The Notes had aone-year term and were immediately convertible at the option of the noteholderinto shares of restricted common stock at conversion prices ranging from $.05to $.12 per share in 2005 and $.05 in 2004. The conversion prices of Notes issued in 2005 were subsequently adjustedto $.05 per share, resulting in a noncash interest charge of $567,000 for the June 2005period.

 

All Notes were converted into a total of 11,240,000 and 11,140,000shares of common stock, respectively, during the six months ended June 30,2005 and 2004.

 

NOTE 6 –STOCKHOLDERS’ EQUITY

 

During the six months ended June 30, 2005 and 2004, the Companyissued 9,680,000 and 12,134,327 shares of common stock, respectively, ascompensation to directors, consultants and other service providers.

 

During the six months ended June 30, 2005 and 2004, respectively,the Company sold 900,000 shares of common stock for $26,170 and 750,000 sharesfor $25,000 to private investors.

 

NOTE 7- SUBSEQUENT EVENTS

 

Subject to shareholder approval during the Annual Shareholders’Meeting, the Board of Directors has voted to increase the number of Authorizedshares to 500,000,000.

 

7

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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

 

RESULTSOF OPERATIONS

 

Sincewe emerged from bankruptcy proceedings on September 23, 1998 we have hadno revenues from operations. We sustained substantial losses from generaladministrative expenses amounting to $1,860,296 and $768,229 in year 2004 and2003 and for the six (6) months ended June 30, 2005 we sustainedlosses amounting to $885,241 compared to a loss of $1,354,682 for the six (6) monthsended June 30, 2004. Kenilworth has had no revenues from operations duringthe past thirteen (13) years and there can be no assurances that it will everhave revenues from present planned operations.

 

LIQUIDITYAND CAPITAL RESOURCES

 

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

 

GENERAL

 

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

 

Employingthe latest encrypted satellite and cable 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 and digital cable networks to television sets (“TV’s”), which becomea platform for playing along with the casino games wherever TV’s are located.

 

Kenilworthtitled the overall proposed project “RoulabetteTM”.  There are 120 million TV subscribers in theUnited States and more than 300 million subscribers throughout the rest of theworld (“The Market”).  On average,households in the U.S. have 2 1⁄2 TV’s. (It is important since the satellite and cable companies will charge aseparate fee for transmitting the table games). Public gathering places can accommodate (be able to network) up to 200TV sets with a simple satellite receiving dish or direct cableconnections.  With wagering possible inhomes, hotel rooms, resort rooms, pubs, restaurants, race tracks and otherpublic gathering places the Company believes will become a more than $500billion net win****Market within five (5) yearsthroughout the industrialized world.

 

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

 

Allforty one (41) lotteries in the United States are owned and operated by Countyand State agencies.  Throughout the restof the world lotteries are owned by government agencies or non profitcharitable agencies that distribute the net earnings to benefit social andcharitable programs, or by private entities that pay a percentage of their netwin to designated government agencies.

 

Theseforeign lotteries also have the same databases as lotteries in the UnitedStates, except most lotteries throughout Europe pool their lotteries betweencountries, not unlike Mega Millions and PowerBall in the

 

8

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UnitedStates, which makes the distribution simpler and very cost effective for bothKenilworth and the lotteries.

 

Thereare no technical breakthroughs required. The technology is readily available. What is needed is to get through the maze of Local, County, State andFederal regulations in each U.S. State and foreign countries.  When the first State in the United Statesgrants the Company permission to transmit the broadcast from one of its casinosto their residents and to States that do not have any casinos, (the entire Eastcoast of the United States), the other forty (40) States with lotteries willjoin expeditiously.

 

Thelotteries will receive forty percent (40%) of the net win without costs of any kind. In addition, theStates’ general fund will receive five percent (5%) of the net win, alsowithout costs of any kind.

 

InStates that designate exclusively lottery proceeds to schools and theirteachers it is a welcome contribution. In other States it will close budget gaps.

 

Inaddition, throughout the United States there are five hundred (500) facilitiesthat simulcast live in-progress horse/dog races.  At all facilities there are several large TVscreens that show the races from the different tracks with general theater typeseating for patrons and at private cubicles with television sets outfitted withtouch screens.  The cubicles rent foradditional fees.  After players open anaccount and select pin numbers, they can watch each race offered on thedifferent tracks on the TV and place wagers on the different races by simplychanging channels.  The players may alsowatch sporting events, the news, the Stock market reports, and in the nearfuture RoulabetteTM, live, in-progress casino table games.  The simulcast centers have their owndatabases to manage the cash deposit and pay winnings on the horse/dog racesand will be able to manage the casino games, on the same methods as thelotteries will manage RoulabetteTM.  Withfifty to one hundred (50-100) private TV’s, available in simulcast centers,especially at night, when fewer tracks are operating.

 

Whenplaying along with live table games from a highly regulated jurisdiction,players will be assured that the game results are exactly what they see; and,playing along with live casino table games such as Roulette, Craps and Baccaratwe believe will provide interaction, fun and far more excitement than playingmake believe animated (virtual) games. It is the next best thing, we believe,to actually being at the table in the casino.

 

Toconduct the initial broadcast Kenilworth believes it will require ten milliondollars ($10,000,000) and there are no assurances we will ever be able toobtain any of such money. At present, the Company does not have the fundsreadily available but hopes to obtain same, from investors, as soon asKenilworth can commence broadcasting from a casino in the United States orother casinos throughout the world.

 

Inprior years, Kenilworth completed a prototype system that allowed casinopatrons to play along with live in-progress casino table games only within theconfines of a casino, via closed circuit television. Also in 1990, we developedand delivered for the TAB (Totalizator Agency Board) a quasy government agencyof the State of Victoria, Australia, a cashless slot machine system. Bothsystems required debit cards and central mainframe computers to manage thewagers. By making use of the expertise applied in the development of the aforementionedsystems we plan to develop a second-generation system that will manage thewagers by the microprocessor installed in TV set-top boxes to receive satellitebroadcasts. This as planned would allow a player in an interactive manner, at aremote location (outside the casino confines), to experience the actual playand excitement at the casino table game and to make wagers on the variousgames, without having to be physically present at the casino or casinotable.  There are no assurances we will be able to successfully developany system.

 

Theproposed “RoulabetteTM” system also will provide RoulabetteTM terminals that maybe placed in resorts, racetracks or other gathering places which consists of apersonal computer (PC) with two (2) monitors.  One (1) monitorwill display the live in-progress casino table game play as well asadvertising.  The second, which will be outfitted with a touch screen,allows a player to place wagers directly over the games displayed on the firstmonitor.  It will also have a variable denomination bill acceptor and abar code ticket dispenser.  Both monitors will be housed in an attractiveenclosure. The RoulabetteTM terminal will

 

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bethe size of a typical “low boy” slot machine (desk top height).  Eachterminal would be self-sufficient, manages wagers from $0.25 to $100.00 or theequivalent in most any currency, and receives the table game play via simulcastdigital satellite TV transmissions (with dish antennas) or local digital cableconnection from legally operating casinos throughout the industrialized world.

 

Whereauthorized, hotels, resorts clubs and other public gathering places will beable to offer casino table game action in their establishments withoutincurring the costs to operate a casino. The RoulabetteTM terminal is expectedto offer an alternative to slot machine players. There are now believed to be morethan ten (10) million slot machines played throughout the world.

 

Kenilworthwill seek to promote to state lotteries and foreign jurisdictions, and otherstate regulated entities, the ability to operate websites that will manage thewagers. The program will ask state legislatures to amend their lotteryhorse/dog racing and OTB legislation to include RoulabetteTM wagering orpromulgate new legislation. There are no assurances that the necessaryapprovals will be granted.

 

Webelieve there are powerful arguments for state legislatures to amend theirLottery Acts to include “Play Along with RoulabetteTM Live”. Lottery revenue isgradually decreasing in every state. Thirty-two (32) states and the District ofColumbia are pooling their lottery prizes with the “PowerBall” and “Big Game”national lotteries. In most of these states, the state lottery finds itdifficult to obtain sufficient numbers of players to make up a minimum weeklylottery prize of one million dollars ($1,000,000). In most states, the revenue fromlottery play benefits education. States need something more attractive torestore revenue. With “Play Along with RoulabetteTM Live”, there is interaction,excitement and fun. All which we believe may be at much better odds than may beoffered by the lotteries. The lotteries can establish maximum wagers daily,weekly and monthly limits, and monitor compulsive gamblers, and almost prevent100% of the underaged from wagering on RoulabetteTM by use of lottery terminalsto make deposits in cash to wager along.

 

ProjectRoulabetteTM is a concept intended to be developed and there can be noassurances that it will ever be developed successfully.  The Patented microprocessors to be installedin the TV set top boxes or the Television set directly have not beendesigned.  We have as at June 30,2005, no firm developed agreement, customers except for proposals submitted forfuture business and there can be no assurances that we will ever have same.

 

Kenilworthplans to obtain the necessary funding by offering in Private Placements, CommonShares, Convertible Promissory Notes, and Cumulative Convertible PreferredShares and/or by the sale of limited joint venture participations in futureRoulabetteTM franchises. There can be no assurances that the Company will beable to secure any of these funds.

 

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PART II.

OTHER INFORMATION

 

| Item 1.  |   | 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:                                      |

 

TheCompany plans to hold its Annual Meeting of Shareholders on or about September 13,2005 or any adjournment thereof with proxy materials mailed to shareholders ofrecord on August 2, 2005 prior to the proposed meeting dates.

 

| Item 6. |   | 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 |

 

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**FORM 10-Q**

 

**Section 1350 Certifications**

 

**Quarter ended June 30, 2005**

 

I,Herbert Lindo, Chairman, President and Principal Financial Officer ofKenilworth Systems Corporation (the “Company”), certify, pursuant to Section 906of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to thebest of my knowledge:

 

(1)     the Quarterly Report on Form 10-Q of theCompany for the second quarter ended June 30, 2005 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

 

(2)     the information contained in the Reportfairly presents, in all material respects, the financial condition and resultsof operations of the Company.

 

Dated:   August 12,2005

 

 
|   | /s/  Herbert Lindo                                    |   |
|--------|-------------------------------------------------------|--------|
|   | Herbert  Lindo                                        |
|   | Chairman,  President and Principal  Financial Officer |

 

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SIGNATURE

 

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

 

 
|   | KENILWORTH  SYSTEMS CORPORATION        |
|--------|----------------------------------------|
|   |                                   |
| By:    | /s/ Herbert Lindo                      |   |
|   | Herbert  Lindo,                        |
|   | President  and Chief Financial Officer |
|   | August 12, 2005              |

 

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