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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

 
| **(Mark  One)**                                                                                                                                                                | ** **                                                                                               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                     | ** **                                                                                               |
| **x**                                                                                                                                                                          | **Quarterly  report pursuant to Section 13 OR 15(D) of the Securities Exchange  Act of 1934**  |
| ** **                                                                                                                                                                     |
| **For  the quarterly period ended March 31, 2009**                                                                                                                        |
| ** **                                                                                                                                                                     |
| **OR**                                                                                                                                                                         |
| ** **                                                                                                                                                                     |
| **o**                                                                                                                                                                          | **Transition  report pursuant to Section 13 or 15(D) of the Securities Exchange  Act of 1934** |
| ** **                                                                                                                                                                     |
| **For  the transition period from              to             ** |
| ** **                                                                                                                                                                     |
| **Commission  File Number: 0-08962**                                                                                                                                           |

 

**KENILWORTHSYSTEMS CORPORATION**

(Exact name ofregistrant as specified in its charter)

 

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

 

**(516)741-1352**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  x   No  o

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 
| Large  accelerated filer o                     | Accelerated  filer o         |
|------------------------------------------------|-----------------------------------|
|                                           |                              |
| Non-accelerated  filer o                       | Smaller  reporting company x |
| (Do not check if  a smaller reporting company) |                              |

 

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

 

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

 

The number of shares ofcommon stock, $.01 par value of the Registrant outstanding as of March 31,2009 was 458,986,086.

 

 

 

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

 

**INDEX**

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

 

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FORWARD LOOKINGSTATEMENTS

 

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

 

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

 

RISKS

 

Specific reference ismade to each of the risks described in Item 7 in Part II of the Form 10-Kfor December 31, 2008 under the discussion “Cautionary Statement ForPurposes of the Safe Harbor Provisions of the Private Securities LitigationReform Act of 1995 and Risk Factors”. Reference is also made to future filingsunder Forms 10-Q and Forms 10-K and filings under the Securities Exchange Actof 1934 as amended and as may be applicable under the Securities Act of 1933 asamended.

 

INTRODUCTORY NOTE

 

This Form 10-Q isbeing filed as a “Development Stage Company” from the period beginning November 24,1998 to the present at March 31, 2009, including a charge in the amount of$4,256,926, which was the amount the Company disbursed on September 28,1998 to exit from Chapter 7 Bankruptcy Proceedings.

 

d) The Company issued23,139,000 shares of its Restricted Common Stock since December 31,2008.  All of the shares may have the restrictions lifted pursuant to Rule 144B after six (6) months which may substantially depress the trading priceof the Company’s Stock in the future.

 

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

 

***Remainderof page intentionally left blank***

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONSAND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE

(Unaudited)

 
| ** **                                    | ** ** | ** **                                         | ** ** | ** **              | ** ** | **Period from**         | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** **                                         | ** ** | ** **              | ** ** | **November 24,**        | ** ** |
| ** **                                    | ** ** | **For the three months ended** | ** ** | **1998**                | ** ** |
| ** **                                    | ** ** | **March 31,**                                 | ** ** | **(Inception) to** | ** ** |
| ** **                                    | ** ** | **2009**                                           | ** ** | **2008**                | ** ** | **March 31, 2009** | ** ** |
| ** **                                    | ** ** | *****                                              |       |                    |       | **Restated**                 |       |
| Revenues                                      |       |                                               |       |                    |       |                         |       |
| Sales                                         |       | $                                                  | 0          |                    | $          | 0                            |       |   |   |
|                                          |       |                                               |       |                    |       |                         |       |
| Expenses                                      |       |                                               |       |                    |       |                         |       |
| Selling, general and administrative           |       | $                                                  | 193,437    |                    | $          | 859,681                      |       | $ | 13,292,203 |   |
|                                          |       |                                               |       |                    |       |                         |       |
| Other income (expenses)                       |       | —                                             |       | —                  |       |                         |       |
| Interest income                               |       |                                               |       |                    |       | 922                          |       |
| Interest expense                              |       | —                                             |       | —                  |       | (776,218                     | )          |
|                                          |       |                                               |       |                    |       |                         |       |
| Total other income (expense)                  |       | —                                             |       | —                  |       | 2,688,926                    |       |
|                                          |       |                                               |       |                    |       |                         |       |
| Net loss *                                    |       | $                                                  | (193,437   | )                       | $          | (859,681                     | )          | $ | (16,144,623 | ) |
|                                          |       |                                               |       |                    |       |                         |       |
| Basic and diluted loss per share              |       | $                                                  | (0.0004    | )                       | $          | (0.002                       | )          | $ | (0.10 | ) |
|                                          |       |                                               |       |                    |       |                         |       |
| Weighted average number of shares outstanding |       | 458,986,086                                        |       | 404,104,486             |       | 458,986,086                  |       |

 

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* Includes a NON CASHloss of $48,778 resulting from the sale and issuance of 24,389,000 shares ofRESTRICTED Common Stock, par value $0.01 per share, for cash at less than parvalue during the period from January 1, 2009 and March 31, 2009 withthe loss charged to paid-in capital.

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION(A DEVELOPMENT STAGE COMPANY)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
| ** **                                                                                                                                          | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                                                                                                                                |       |                     |       |                        |       |
| ASSETS                                                                                                                                              |       |                     |       |                        |       |
| CURRENT ASSETS                                                                                                                                      |       |                     |       |                        |       |
| Cash                                                                                                                                                |       | $                        | 3.274      |                        | $          | 2,391 |   |
| Prepaid expenses (Note 6)                                                                                                                           |       | 60,000                   |       | 80,000                      |       |
| Loan receivable — including from stockholders, net                                                                                             |       | 21,600                   |       | 21,600                      |       |
| Receivable from Herbert Lindo (Note 8)                                                                                                              |       | 770,101                  |       | 767,289                     |       |
|                                                                                                                                                |       |                     |       |                        |       |
| TOTAL CURRENT ASSETS                                                                                                                                |       | $                        | 854,975    |                        | $          | 871,270 |   |
|                                                                                                                                                |       |                     |       |                        |       |
| PROPERTY AND EQUIPMENT — NET                                                                                                                   |       | 300                      |       | 603                         |       |
|                                                                                                                                                |       |                     |       |                        |       |
| SECURITY DEPOSIT                                                                                                                                    |       | 13,677                   |       | 13,677                      |       |
|                                                                                                                                                |       |                     |       |                        |       |
| TOTAL ASSETS                                                                                                                                        |       | $                        | 868,952    |                        | $          | 885,560 |   |
|                                                                                                                                                |       |                     |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                          |       |                     |       |                        |       |
| CURRENT LIABILITIES                                                                                                                                 |       |                     |       |                        |       |
| Accounts payable and accrued expenses                                                                                                               |       | $                        | 110,998    |                        | $          | 158,529 |   |
| Payroll taxes payable (Note 7)                                                                                                                      |       | 23,180                   |       | 169,695                     |       |
| Loans payable — including accrued interest                                                                                                     |       | 21,027                   |       | 20,264                      |       |
|                                                                                                                                                |       |                     |       |                        |       |
| TOTAL CURRENT LIABILITIES                                                                                                                           |       | $                        | 155,205    |                        | $          | 348,488 |   |
|                                                                                                                                                |       |                     |       |                        |       |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                 |       |                     |       |                        |       |
| Preferred Stock - par value $.01 per share; authorized 50,000,000  shares; no shares issued and outstanding                                         |       |                     |       |                        |       |
| Common stock - par value $.01 per share; authorized 1,000,000,000  shares; issued and outstanding 434,597,086 and 458,986,086 shares,  respectively |       | 4,589,860                |       | 4,345,970                   |       |
| Additional paid-in capital                                                                                                                          |       | 31,229,952               |       | 31,103,730                  |       |
| Accumulated deficit                                                                                                                                 |       | (35,106,065              | )          | (34,912,628                 | )          |
|                                                                                                                                                |       |                     |       |                        |       |
| TOTAL STOCKHOLDER’S EQUITY                                                                                                                     |       | 713,747                  |       | 537,072                     |       |
|                                                                                                                                                |       |                     |       |                        |       |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY                                                                                                     |       | $                        | 868,952    |                        | $          | 885,560 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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KENILWORTH SYSTEMSCORPORATION

(A DEVELOPMENTSTAGE COMPANY)

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 31,

(Unaudited)

 
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Period from**         | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **November 24,**        | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **1998**                     | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **to**                       | ** ** |
| ** **                                                                      | ** ** | **2009**   | ** ** | **2008**   | ** ** | **March 31, 2009** | ** ** |
| ** **                                                                      |       |       |       |       |       | **Restated**                 |       |
| Cash flows from operating activities                                            |       |       |       |       |       |                         |       |
| Net loss                                                                        |       | $          | (193,437   | )          | $          | (161,006                     | )          | $ | (16,308,956 | ) |
| Adjustments to reconcile net loss to net cash provided by operating  activities |       |       |       |       |       |                         |       |
| Depreciation                                                                    |       | 623        |       | 1,486      |       |                         |       |
| Patent Impairment                                                               |       | —     |       | —     |       | 73,962                       |       |
| Accretion of convertible debt discount                                          |       | —     |       | —     |       | 72,656                       |       |
| Beneficial conversion feature                                                   |       | —     |       |       |       | 1,182,097                    |       |
| Common stock issued                                                             |       | —     |       |       |       | 51,049,432                   |       |
| Common stock issued to induce debt conversion                                   |       | —     |       | 2,800      |       | 63,276                       |       |
| Common stock issued for interest due on notes payable                           |       | —     |       | —     |       | 8,501                        |       |
| Accrued interest transferred to capital                                         |       | —     |       | —     |       | 4,209                        |       |
| Loss on Investment                                                              |       | —     |       | —     |       | 60,000                       |       |
| Other                                                                           |       | —     |       | —     |       | 21,100                       |       |
| Increase (decrease) in cash attributable to changes in assets and  liabilities: |       |       |       |       |       |                         |       |
| Prepaid expenses                                                                |       | 60,000     |       | 60,000     |       | (20,000                      | )          |
| Loan Receivable                                                                 |       | 21,600     |       | 20,120     |       |                         |       |
| Accounts payable and accrued expenses                                           |       | (47,531    | )          | (81,874    | )          | 235,261                      |       |
| Payroll taxes payable                                                           |       | (23,180    | )          | (68,347    | )          | 85,300                       |       |
| Net cash used in operating activities                                           |       | (201,365   | )          | (248,809   | )          | (2,504,864                   | )          |
| Cash flows from investing activities                                            |       | —     |       |       |       |                         |       |
| Repayment of loans — related parties                                       |       | —     |       | 19,429     |       | (20,120                      | )          |
| Proceeds from loan receivable — stockholder                                |       | —     |       | —     |       | 4,000                        |       |
| Payment of patent costs                                                         |       | —     |       | —     |       | (73.962                      | )          |
| Purchase of property and equipment                                              |       | —     |       | —     |       | 0                            |       |
| Security deposit                                                                |       | (13,677    | )          | (17,777    | )          | (17,777                      | )          |
| Net cash used in investing activities                                           |       | —     |       | 1,652      |       | (220,000                     | )          |
| Cash flows from financing activities                                            |       |       |       |       |       | 3,662,666                    |       |
| Proceeds from Paid in Capital                                                   |       |       |       |       |       |                         |       |
| Proceeds from convertible notes payable                                         |       |       |       |       |       |                         |       |
| Proceeds from sale of common stock                                              |       | 175,000    |       | 142,706    |       |                         |       |
| Proceeds from stock subscriptions receivable                                    |       | —     |       | —     |       | —                       |       |
| Net cash provided by financing activities                                       |       | 175,000    |       | 144,358    |       | —                       |       |
| Net change in cash                                                              |       |       |       |       |       | —                       |       |
| Cash — beginning of period                                                 |       | 21,401     |       | 4,189      |       | —                       |       |
| Cash - end of period                                                            |       | $          | 3,274      |       | $          | 21,401                       |       | $ | — |   |
| Supplemental disclosure of non-cash activities:                                 |       |       |       |       |       |                         |       |
| Common stock issued for patent costs                                            |       | $          | —     |       | $          | —                       |       | $ | 10,000 |   |
| Exchange of loans payable for convertible notes payable                         |       | $          | —     |       | $          | —                       |       | $ | 50,000 |   |
| Conversion of notes payable to common stock                                     |       | $          | —     |       | $          | —                       |       | $ | 1,388,500 |   |
| Conversion of loan payable - related party to common stock                      |       | $          | —     |       | $          |                         | $          | 16,170 |   |
| Cancellation of stock subscriptions receivable                                  |       | $          | —     |       | $          | —                       |       | $ | 29,000 |   |
| Common stock issued for subscriptions receivable                                |       | $          | —     |       | $          | —                       |       | $ | 71,500 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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

 

**CONDENSED NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**(UNAUDITED)**

 

NOTE 1 - BASIS OF PRESENTATION

 

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”)beginning as of January 1, 2009 contain all adjustments (consisting of onlynormal accruals) necessary to present fairly the consolidated balance sheets asof March 31, 2009 and December 31, 2008 and the related statements ofoperations and cash flows for the three (3) month periods ended March 31,2009 and 2008  These financial statements should be read in conjunctionwith the consolidated financial statements and notes thereto included in ourAnnual Report on FORM 10-K for the fiscal year ended December 31,2008

 

The results of operationsfor the three (3) month period ended March 31, 2009 are notnecessarily indicative of the results for the entire year ending December 31,2009.

 

NOTE 2 - THE COMPANY AND NATURE OF BUSINESS

 

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

 

The Company was inbankruptcy proceedings under Chapter 7 and 11 of the Bankruptcy Code for theperiod from August 28, 1982 through September 28, 1998. The Companyceased all operations, between February 2, 1991 through September 28,1998.

 

NOTE 3 - PRINCIPLES OF CONSOLIDATION

 

The consolidatedfinancial statements include the accounts of Kenilworth Systems Corporation andits wholly owned subsidiaries: Video Wagering Systems Corporation, RoulabetteTMNevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth Systems(UK) Limited, Kenilworth Satellite Broadcasting Corporation (a DelawareCorporation) and Satellite Gaming Consultants, Inc. (a DelawareCorporation). None of these subsidiaries has any assets or liabilities, exceptSatellite Gaming Consultants, Inc; their activities are consolidatedherein.

 

NOTE 4 - GOING CONCERN UNCERTAINTY

 

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

 

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

 

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES AND STOCKPURCHASE AND OPTION AGREEMENTS

 

During the quarters endedMarch 31, 2009 and March 31, 2008 respectively, the Company sold tovarious private investors $175,000 and $135,000 principal amount of ConvertiblePromissory Notes, made loans to the Company and issued Stock Purchase andOption Agreements bearing interest at rates ranging from 4.00% to 12.00% perannum.  The Notes had a six-month and one-year term and were immediatelyconvertible at the option of the noteholder into shares of restricted commonstock based on conversion prices ranging from $.005 to $0.10 per share andpurchase prices at $0.008 per share.  All Notes issued and shares sold inthe quarters ended March 31, 2009 and March 31, 2008 were convertedinto a total of 24,389,000 and 13,797,922 restricted common shares,respectively.

 

STOCK OPTIONS

 

From its inception in April 2008through May 2009, the Company granted Stock Options for 115,709,000restricted Common Shares, par value $0.01 per share at an average price of$0.011 per share in connection with the private sale to accredited investors ofStock Purchase and Option Agreements. The Option grant is for a period of two (2) years from the date ofthe Stock Purchase and Option Agreements.

 

NOTE 6 - NON CASH TRANSACTIONS

 

Common shares issued forservices

 

2009:

 

NONE

 

2008:

 

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

 

PREPAID EXPENSES

 

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

 

 

NOTE 7 — PAYROLL TAXES PAYABLE

 

The Company has madearrangements with the Internal Revenue Service (IRS) and the New York StateDepartment of Taxation to pay approximately $168,695 in past due payroll taxes,including all penalties and interest accrued during the years 2008 and thethree (3) month period ended March 31, 2009 in monthly installments,by the end of the calendar year 2009.  The agreements provide that theCompany must pay all present taxes, when due, and payments must remain currentin 2009.  At March 31, 2009 the Company was delinquent inapproximately $23,180 in payments to the IRS and will attempt to negotiate newpayment schedules covering the delinquent payments.

 

NOTE 8 - RECEIVABLE FROM HERBERT LINDO

 

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

 

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November 27, 2006was high: $0.05, low: $0.03. As provided in the Plan, Herbert Lindo borrowedthe seven hundred fifty thousand dollars ($750,000) from the Company andpledged the five million (5,000,000) and other shares he owns, as collateralfor the loan. The five million (5,000,000) shares have been issued asrestricted shares.

 

At a regular meeting ofthe Board of Directors in July 2008, the Board unanimously approved (with Mr. Lindoabstaining) to extend the $750,000 loan until December 31, 2009, provided Mr. Lindopays a nominal one and one-half percent (1.5%) interest from November 2006. Mr. Lindo agreed to pay the interest which totaled $17,289 through March 31,2009. Mr. Lindo provides his services to the company without anyremuneration.

 

NOTE 9 - SUBSEQUENT EVENTS

 

Subsequent to June 30,2008, the Company obtained two (2) $10,000 loans due September 23,2008 at an interest rate of twelve percent (12%) per annum from two (2) presentinvestors.  The loans have been extended to October 23, 2008 withonly the addition of agreed interest to October 2008.  The loans were converted into Stock Purchaseand Option Agreements in the first quarter of 2009.

 

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

 

RESULTS OF OPERATIONS

 

Since we exited frombankruptcy proceedings on September 23, 1998 we have had no revenues fromoperations. We sustained substantial losses from general administrativeexpenses amounting to $34,912,625 through December 31, 2008 and for thethree-months ended March 31, 2009 we sustained a loss amounting to$193,437 which include NON-CASH loss of $48,778. Kenilworth has had no revenuesfrom operations during the past sixteen (16) years and there can be noassurances that it will ever have revenues from present planned operations.

 

LIQUIDITY AND CAPITALRESOURCES

 

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

 

PART II

 

ITEM 1—DESCRIPTIONOF BUSINESS

 

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

 

GENERAL

 

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

 

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wager along from remotelocations with live, in-progress casino table games (Roulette, Craps, 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 “Roulabette”.  There are thirty-eight million (38,000,000)satellite and seventy-three million (73,000,000) cable TV subscribers in theUnited States and more than five hundred million (500,000,000) subscribersthroughout the rest of the industrialized world (“The Market”).

 

On average, households inthe U.S. have three (3) TV’s.  (It is important since the satelliteand cable companies will charge a separate fee for transmitting the table gamesto` TVs and laptops).  Public gathering places can accommodate (be able tonetwork) up to one thousand (1,000) or more TV sets with a single satellitereceiving dish, direct cable connections, or streamed via the Internet. With wagering possible in homes, hotel rooms, resort rooms, pubs, restaurants,race tracks and other public gathering places, the Company believes it will becomea more than $500 billion net win****Market within five (5) yearsthroughout the industrialized world (by the year ended 2014).

 

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

 

All forty-six (46)lotteries in the United States are owned and operated by County and Stateagencies. This could greatly enhance our efforts to broadcast the livecasino table games to these lottery locations and could result in having Cafésthat offer terminals and TV sets to play along.  Internet Cafés that offerwagering on various events have been a huge success in the Asian Market. On May 6,2009 Congressman Barney Frank introduced legislation that may, in the not toodistant future, legalize internet gambling in the United States.

 

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

 

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

 

There are no technicalbreakthroughs required.  The equipment for the technology is readilyavailable.  What is needed is to get through the maze of Local, County,State and Federal regulations in each U.S. State and foreign countries. When the first State in the United States grants the Company permission totransmit the broadcast from one of its casinos to their residents and to Statesthat do not have any casinos, (the entire East coast of the United States), theother forty-six (46) States with lotteries will join expeditiously. The samewill occur in foreign countries.

 

Kenilworth will share thenet win revenue with allparticipating entities that provide Roulabette gaming without costs of any kind.  Statelotteries or their private operators will receive a minimum of forty percent(40%) of the total net win fromtheir respective jurisdictions.  Withthirty percent (30%) inuring to the Company and thirty percent (30%) to thestrictly regulated casinos.

 

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

 

In addition, throughoutthe United States and most foreign countries there are hundreds of facilitiesthat simulcast live in-progress horse/dog races.  At most facilities thereare several large TV screens that show 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 foradditional fees.  After players open an account and select pin numbers,they can watch, in privacy, each race offered on the different tracks on the TVand place 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 Roulabette, 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 Roulabette.  With private TV’s,available in simulcast centers, especially at night, when fewer tracks areoperating.

 

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 believe animated(virtual) games. It is the next best thing, we believe, to actually being atthe 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 any ofsuch money. At present, the Company does not have the funds readily availablebut hopes to obtain same, from investors, as soon as 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) a quasy government agency of the State of Victoria, Australia, acashless slot machine system. Both systems required debit cards and centralmainframe computers to manage the wagers. By making use of the expertiseapplied in the development of the aforementioned systems we plan to develop asecond-generation system that will manage the wagers by the microprocessorinstalled in TV set-top boxes or an attachment directly connected to the TV setto receive satellite and/or Internet broadcasts. This as planned would allow aplayer in an interactive manner, at a remote location (outside the casinoconfines), to experience the actual play and excitement at the casino tablegame and to make wagers on the various games, without having to be physicallypresent at the casino or casino table.  There are no assurances we will beable to successfully develop any system.

 

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

 

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

 

Roulabette is a conceptintended to be built and there can be no assurances that it will ever bebuilt.  The Patented microprocessors to be installed in the TV set topboxes have not been designed.

 

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**SUMMARY**:

 

(1.)                               Kenilworth continues to fine tune itspatented technology dubbed Roulabette.  It now plans to “outsource” themanufacturing of all the components instead as formerly manufacture some of theequipment in its 26,000 square foot facility located in Melville, NY. Roulabette would allow casino patrons and other players to play along with livein-progress casino table games such as Roulette, Craps and Baccarat and morevia digital satellite, digital cable television or Internet broadcasts(simulcasts) emanating from strictly regulated casinos located in the UnitedStates and other locations around the world, to self-sufficient computerterminals dubbed “Roulabette Slots” and digital satellite, cable TV set topboxes or the Internet in countries that permit Internet gaming. The Roulabetteterminal is a proposal intended to be built and there can be no assurances thatit will ever be built.  The microprocessors to be installed in the TV settop boxes have not been designed. We have as at March 30, 2009, no firmagreements, customers, or proposals for any future business and there can be noassurances that we will ever have same. **Referenceis also made to each of the “Risk Factors” that are set forth in Item 7 of FORM 10-Kfor the year ended December 31, 2008.**

 

(2.)                               We believe the thousand virtual casinowebsites via the Internet obtain sixty percent (60%) of their annual revenuefrom customers in the U.S.  These website have been shut down whenPresident Bush signed the Internet Enforcement Act of 2006.  Since thenthe U.S. Congress has indicated it may lift Federal Internet Wagering in 2009to increase Federal and State revenue to benefit education.

 

Simulcast broadcasts ofdigital satellite and digital cable transmissions around the world must meet,and will be supervised by, the regulations by the gaming authorities of thebroadcasting casino and the jurisdiction, which receives the broadcast. We believe the supervision will not be difficult to enforce, because allsimulcast wagering is “cash only”, from regulated, supervised bettingsites.  There are no wire money transfers with banks and no credit ordebit cards permitted.  We believe this fact should ease any oppositionfrom concerned citizens and anti-gambling groups, as regulation and enforcementresponsibility will be vested in each individual state or foreign jurisdiction.

 

Kenilworth was the firstto use color personal computers (PC’s) to replace electromechanical slotmachines in 1988.  We provided the software for the first Tabaret locatedat the Menzie at the Rialto in Melbourne, Australia, which opened in November 1990. This consisted of cashless, variable denomination and multiple games,virtual PAT’s (“Player Activated Terminals”).  Prior thereto Kenilworthsponsored, with the assistance of three (3) Nevada casino operators,legislation to permit cashless wagering in the state of Nevada.  Thelegislation, which is in the form of an amendment to existing casino controlstatutes, permits the use of account cards (debit cards) and was signed intolaw by Governor Richard H. Bryan on June 13, 1985.

 

Kenilworth has been apublicly traded Company since 1968. Prior to commencing its endeavors into itspresent business in 1988, it also provided security systems to Nuclear ElectricGenerating Plants in the U.S. and foreign countries, as well as time/attendancesystems at a major department store chain.

 

MARKETING STRATEGY/SALESPLAN

 

Our marketing strategyconsists of developing the Roulabette Slot terminal and the Roulabettebroadcasts. We estimate at this time, that we will need at least approximatelyten million dollars ($10,000,000) for promoting the Roulabette concept. We donot have this money nor do we have any agreements or understanding to procurethis money. We may never get this money. If we do obtain this money, it may notbe sufficient. Further, should such monies be available it may not be availableon terms satisfactory to Kenilworth or it may be available on such terms thatsubstantially dilute the interest of existing shareholders. If we obtain thismoney, we will need substantial additional funds for the proposed marketingplan and there can be no assurances that such funds will ever be available toallow Kenilworth to engage in business on a profitable basis.

 

At the present time, wedo not engage technically oriented employees who will be able to assist in thedevelopment of Roulabette (we have available three [3] former technicalKenilworth employees that have 

 

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indicated to rejoinKenilworth at the appropriate time). It will be necessary for us to obtainadditional personnel qualified and with the expertise to develop Roulabette. Wewould require additional employees and several more consultants and there canbe no assurances of our being able to obtain any necessary personnel. There canbe no assurances of the availability of any such employees and consultants.

 

The Company willoutsource the development of Roulabette and the microprocessors for the TV settop boxes.

 

In the United States,Kenilworth must refrain from using the Worldwide Web (WWW) Internet to managewagers from individuals outside of the casino confines. It is presently againstthe law. In Roulabette, the play-along broadcast emanates from casinos that areregulated by strict and comprehensive rules and state and jurisdictionregulations, enforced by gaming control regulators and everybody plays alongwith the same live table game. There is a world of difference between playingin a virtual make believe casino compared with an actual casino.

 

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

 

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

 

After we obtainpermission to play Roulabette, of which there can be no assurances, in agiven state and engage a wager management organization in order to promotedigital satellite and interactive television to the state’s residents,Kenilworth would install the eighteen (18) inch dish antenna and converter boxrequired to receive digital TV programming and interactive TV at its own cost,if the subscriber opens a Roulabette wagering account for two hundred dollars($200). In addition, Kenilworth would pay the monthly subscription fees to viewall digital TV programming offered and the Internet service provider (ISP)subscription fee if the customer wagers at least one hundred twenty dollars($120) each month — win, lose, or draw — makes no difference.  In the U.S.the contracts would be financed by satellite carriers such as EchoStar andDirecTV.  If the internet legislationintroduced on May 6, 2009 passes both Houses of Congress, the need fordish antennas would no longer be required.

 

In states with approvedlottery and/or other gambling legislation, we plan to introduce Roulabette Slotterminals to hotels, clubs (similar to card clubs in California) and resorts,to provide upscale gathering places for tourists and local residents.Charitable organizations that are permitted to conduct “Nevada Nights” andBingo games may wish to offer Roulabette gaming on a more permanent basis. Toreceive the broadcast signal, all that would be required is an eighteen (18)inch dish TV antenna and distribution equipment. The Roulabette terminals areintended to be self-sufficient and accept dollar bills (or script, to controlthe amount an individual is allowed to wager in one day or other time period).We plan to lease all the equipment necessary to participants for a share of theprofits.

 

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

 

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

 

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

 

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

 

COMPETITION

 

Many segments of thegaming industry are characterized by intense competition, with a large numberof companies offering the same type of wagering products and services. None ofthese companies, at present, are believed to offer the same or similarequipment or systems as intended by Roulabette. The most likely competitionwill come from slot machine manufacturers who could relatively quickly adaptslot machines to play along with live casino table games. We believe there arethree (3) major slot machine manufacturers in the world, all of which havevastly greater capital resources and substantially more personnel than theCompany and may have under development systems that directly compete withRoulabette.

 

Our present plans are tobroadcast the live casino table games from companies that own casinosthroughout the industrialized world. Other casino owners may start their ownbroadcasts and have their own terminals manufactured that compete withKenilworth after Kenilworth has done all its pioneering for play-alongwagering.

 

PATENTS, TRADEMARKS ANDINTELLECTUAL PROPERTY

 

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

 

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

 

GOVERNMENT REGULATIONS

 

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

 

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Item 2.           LEGALPROCEEDINGS:

 

None

 

Item 3.           CHANGEIN SECURITIES:

 

None

 

Item 4.           DEFAULTUPON SENIOR SECURITIES:

 

None

 

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

 

None

 

Item6.           OTHER INFORMATION:

 

The Company plans to holdits next Annual Meeting of Shareholders in January 2010 or any adjournmentthereof with proxy materials mailed to shareholders of record in twenty (20)days prior to the proposed meeting dates.

 

Item7.           EXHIBITS AND REPORTS ON FORM 8-K:

 

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

 

Ex 32.1 Certification ofChairman and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2007.

 

SUBSEQUENT EVENTS:

 

The Company issued4,375,000 shares of restricted Common Shares through May 7, 2009 inconnection with the sale of Stock Purchase and Option Agreements for $37,000.

 

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SIGNATURE

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed in its behalf by the undersigned thereunto dulyauthorized.

 
|   |   | KENILWORTH SYSTEMS  CORPORATION                               |
|--------|--------|---------------------------------------------------------------|
|   |   |                                                          |
|   | By:    | /s/ HERBERT LINDO                                             |
|   |   | Herbert Lindo,                                                |
|   |   | Chairman, Chief  Executive Officer and ChiefFinancial Officer |
|   |   | May 14, 2009                                             |

 

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