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JANUARY 15, 2009 At the Annual Meeting of Shareholders of Kenilworth Systems Corporation (“Kenilworth” or the “Company”) which was held at The Holiday Inn – Westbury, 369 Old Country Road, Carle Place, N.Y. 11514 on January 7, 2009 at 12:00 noon, all proposals were approved by proxy and votes cast at the meeting. The three (3) proposals are:
The Company had engaged BROADRIDGE FINANCIAL SOLUTIONS, INC. (“Broadridge”) to solicit proxies and their final report which includes shares voted at the meeting on January 7, 2009 on each proposal is: TOTAL SHARES OUTSTANDING: 421,094,586 PROPOSAL # 1 – ELECTION OF DIRECTORS PROPOSAL # 2 – AMENDMENT TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON AND PREFERRED STOCK
# OF SHARES # OF SHARES # OF SHARES TOTAL PERCENTAGE 212,759,255 7,484,772 589,117 66.40%
PROPOSAL # 3 – RATIFICATION OF APPOINTMENT OF NEW INDEPENDENT AUDITORS
# OF SHARES # OF SHARES # OF SHARES TOTAL PERCENTAGE
At the meeting, Herbert Lindo, the Chairman and Chief Executive Officer of Kenilworth, during the question and answer period suggested how Kenilworth may be able to profit from the increase in the authorized number of Common and Preferred Stock. In our regular business, Remote live, in-progress casino table game wagering, the world economic crisis, until recently, has translated huge casino industry income to first time losses. This has to benefit our position in the patent ownership for remote live, in-progress casino table game wagering. The public will continue to gamble with lotteries, on video lottery terminals/VLTs located at most horse/dog racetracks and eventually for the price of a slot handle pull, from home, nearby cafés, hotels, resorts and public gathering places; more for entertainment than hard core casino gambling. Recently, the Chinese Patent and Trademark Law Offices advised Darby & Darby, our patent attorneys, recommending that Kenilworth should amend the original patent application filed on August 6, 2001 at a time when China declined to accept gambling patents. In February 2008, the Chinese Law Offices advised Kenilworth that they would accept, for processing, our patent application in the same form, our patents for Remote casino wagering was granted in the United States on June 10, 2003. The Chinese Law Offices assisted our patent attorneys to make the appropriate changes, which have been made. Kenilworth believes the changes will lend to early granting permission to broadcast from a Macau casinos to the Chinese mainland gamblers. The very reason we wish to immediately obtain the expertise from the operators of the Costa Rica wagering studio. A film from the studio was projected onto a large screen by Paul Terrell, the expert that designed and implemented the software required for the remote wagering, including the cash management system, at the Shareholder’s Meeting. Kenilworth presently does not have any preferred stock issued and outstanding. Preferred Stock is senior to Common Stock. In most instances, like Kenilworth Preferred Stock, is Convertible into Common Stock. This causes the Preferred Stock to be valued in relation to the trading price of the Common Stock, although the Preferred Stock may not trade on any stock exchange. We propose that our Preferred Stock will pay a semi-annual dividend of five percent (5%). For example, a $20.00 Preferred Share will pay a $1.00 dividend. This will attract owners of U.S. Treasury Securities that presently yield less than two percent (2%) and will yield less and less as Congress approves more and more TARP funds (Trouble Asset Relief Program) and approve proposed multi-billion dollar stimulus programs. We believe we could attract treasury securities in exchange of our Preferred Stock. Let’s refer to it as a “Swap Agreement”. We accept treasuries that presently yield very little and issue our Preferred Stock that will pay a five percent (5%) dividend. The immediate question is how can Kenilworth expect to make money when Kenilworth is paying out more than the Securities presently yield. We expect to use the proceeds to make loans to owners of shopping centers, offices, factory and apartment buildings that yield fifteen to seventeen percent (15-17%). Everybody can do this and, undoubtedly, are doing it right now. We are looking to China and other foreign countries that hold U.S. treasuries as a potential for our Swap Agreements. The Chinese government owns more than 1.5 trillion dollars of U.S. foreign exchange reserves. An additional 500 billion is owned by other foreign governments and private entities, located in the oil producing countries of the Middle East. China established its major sovereign wealth fund, the China Investment Corporation (CIC) on September 29, 2007. Financed with $200 billion in initial capital, the CIC is one of the largest sovereign wealth funds (SWFs) in the world. Although many of the CIC’s initial investments were apparently political in nature, the CIC’s top management have repeatedly asserted that future investments will be commercially-based, seeking to maximize the return on the investment. According to top Chinese officials, the CIC was created to improve the rate of return on China’s $1.5 trillion on foreign exchange reserves and to soak up some of the nation’s excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC may be allocated more of China’s growing stock of foreign exchange reserves. Kenilworth is suited to manage foreign investments in U.S. industrial firms, that would otherwise raise concerns by Congress, and Roulabette™ wagering may soak up some of Chinese excess financial liquidity. In order to possibly interest China and others to swap U.S. treasuries or other under valued assets for Kenilworth Preferred, we must first increase the trading price of Kenilworth’s Common Stock. Kenilworth has been a publicly traded Company since October 1, 1968 (40 years) with 421,094,586 Common Shares issued and outstanding. After the January Shareholder’s Meeting, the Company is now authorized to issue 1,000,000,000 Common Shares and 50,000,000 Preferred Shares. The Common Stock trades on the Pink OTC Markets. A 24/7 automated market with the ticker symbol “KENS”. Kenilworth owns patents for Remote, Live In-progress Casino Table Game Wagering filed in forty–nine (49) industrialized countries of the world: the United States, Europe, including Russia and in the Asian Markets, China, India, Korea, South America and Japan. Remote wagering is the next best to actually wagering at the casino table game. A future annual net win market of five hundred billion dollars ($500,000,000,000) to be shared by local governments, participating casinos, satellite and cable television providers and lotteries which may wish to manage the wagering with bets starting at $0.25. Its unique position in the casino gambling world makes Kenilworth a desirable partner for any organization that wishes to participate in the phenomenon of using laptops at home, coffee houses, hotel room TVs, restaurants, bars, resorts, horse, dog and auto racetracks and other public gathering places to wager on Roulabette™ games. As a U.S. organized Company, which now has available up to fifty million (50,000,000) shares of Convertible Preferred Stock A, B, C, D etc. (with none presently outstanding), the potential investment dollars would be acquired by Kenilworth by the sale of Convertible Preferred Stock paying a fixed dividend. The investment money will be solely managed and controlled by personnel engaged by the purchasers of the Convertible Preferred Stock. Kenilworth’s stock price is presently under one cent ($0.01) per share which price should be increased very quickly by a $200,000,000 Bridge Loan with an underwriting to take out the Bridge Loan by the end of the second quarter of 2009. Kenilworth’s current outstanding debt is only $235,261 with available income tax carry-forward loss credits of $34,834,416 at September 30, 2008 (the losses are in the software writing business). Our present loss rate is approximately $300,000 quarter annually. With appropriate covenants, the Bridge Loan can be 100% secured. In order to be able to obtain a minimum $31.00 per share stock price in the underwriting, we suggest the following financial engineering: The lender of the Bridge Loan acquires 192,000,000 shares of Kenilworth’s Common Stock directly from the Company at five cents ($0.05) per share; five (5) times its present market price of one cent ($0.01) per share. The investment would cost $9,600,000. In a Dutch Auction the lender would then acquire an additional 192,000,000 shares at a maximum per share price of fifteen cents ($0.15) per share, at a cost of $28,800,000 with legal fees and other costs $200,000 maximum; a total cost of $29,000,000; together with the direct purchase cost of shares from the Company $38,600,000. The acquisition of the 384,000,000 shares would represent sixty-two and six-tenths of one percent (62.6%) of the then outstanding shares. Kenilworth will have received the $200,000,000 Bridge Loan plus $9,600,000 from the direct purchase of shares totaling $209,600,000 after operating costs for six (6) months $600,000 will leave Kenilworth with $209,000,000 in cash, approximately five (5) months after the Bridge Loan is funded. Simultaneously in the underwriting, Kenilworth will reverse split its Common Stock 100 to 1 with 6,130,965 shares outstanding with a cash book value of $34.08 per share. ($209,000,000 divided by 6,130,965 shares = $34.08) In order to repay the Bridge Loan of $200,000,000, together with loan interest payments at twelve percent (12%) per annum for five (5) months totaling $10,000,000, the Company would have to sell approximately 7,000,000 shares in the underwriting at $31.00 per share to NET $217,000,000 ($210,000,000 plus $7,000,000 underwriting costs). With the book value of $34.08 in cash, this should be a relatively simple underwriting. With a pre-announcement of purchasing additional Preferred Stock by the Bridge Loan Lender and/or investors, Kenilworth stock should trade at a substantial premium of $31.00 per share. The Bridge Loan Lender and/or investors will own, after the reverse split, 3,840,000 shares at $31.00 equal to $119,040,000 with an investment in Kenilworth stock of $9,600,000 direct purchase and $29,000,000 in the Dutch Auction a net investment of $38,600,000 resulting in a profit of $80,440,000+ for a five (5) month investment. The Chinese Investment Corporation (CIC), investors from Taiwan or Hedge Funds from the U.S. and/or overseas should become interested parties. With fixed dividends of the Convertible Preferred Stock, its a very suitable method to earn a better return then available from U.S. Treasury bonds or Corporate Bonds earning returns of approximately two percent (2%). As part of the underwriting, Kenilworth will be re-listed on the NASDAQ Stock Market. The purpose of the Bridge Loan and the underwriting is to increase the per share price of Kenilworth Common Stock. The proposal explained in the aforementioned paragraphs is very doable even during the present worldwide financial crisis. There are billions of dollars sitting on the side lines waiting for Dow Jones Averages to convincingly hit the bottom. This may very well happen in the second quarter of 2009, in time for our proposed underwriting. A good question is “Why would anyone be interested to purchase the Kenilworth Common and Convertible Preferred Stock?” There are two (2) reasons: First: To manage Overseas Capital that may not be welcomed by Congressional action. Simply put, Congress does not want the U.S. industrial empire to become a share cropper’s empire. In the past, U.S. industrialized companies did exactly what we don’t wish to happen in the U.S.; foreign companies acquiring substantial (more than 9.5%) in U.S. firms, especially in the securities sensitive industries such as defense contractors, airlines, and homeland security. In the past, GM, Ford, Johnson & Johnson, Proctor & Gamble, etc. owned 100% of companies, in foreign countries not in partnership with native companies; the very reason why foreign governments now object and disrespect our good will toward them. We don’t have many friends among the Developing Countries, in the United Nations nor with the International Monetary Fund (IMF). The oil rich nations have made available oil dollars to U.S. banks. Banks require money to lend to make money. The trouble right now is the banks lent or invested the money in assets (primarily mortgages) that have lost their value which now puts most banks in the housing industry and requiring more capital to offset losses. What has all this to do with Kenilworth? Our Bridge Loan and take out underwriting is not unlike a hedge fund, that HAS NOT LOST ANY MONEY since no investments have been made except in the Remote Casino Wagering Field “Roulabette™”. Kenilworth is proposing an underwriting which is under priced and will generate additional profits when over subscribed. What we are saying is, “The Kenilworth proposed underwriting is the old time money maker.” We provided $7,000,000 for underwriting costs, discounts, etc. plus there will be warrants/options for the underwriters to be exercised later and profits from the sale of shares, if the underwriting is over subscribed. All this in a simple $217,000,000 underwriting (NOT billions of dollars underwriting). Second Reason: The Convertible Preferred Stock can be purchased with cash, U.S. Treasury Securities and Corporate Bonds that presently yield less than the fixed dividend Kenilworth will offer; five to six percent (5%-6%). What is needed for Kenilworth is to invest the proceeds in exceptional money makers, and/or pay the dividend from cash paid from purchasers that bought the convertible preferred stock later at higher prices. That is what happened to hedge funds. They received investment money from individuals, pension plans, endowments, universities, etc. with their investments impaired to the point that some hedge funds and other capital funds have to discontinue because of overwhelming redemptions (investors asking for their money back) and losses sustained from their investments. Kenilworth is starting from scratch without any existing losses and can offer the Convertible Preferred Stock to U.S. and foreign investors with fixed dividend payment. If Kenilworth Common Stock rises, the purchasers of the Convertible Preferred Stock have an additional income by converting the Preferred Stock into Common Stock. Since the Preferred Stock is redeemable, Kenilworth can force conversion. That will happen when we are successful with Roulabette™. It always will be in the mind of the Convertible Preferred investors. The $80,440,000 profit for the Bridge Loan lenders can be substantially increased if they acquire more than 192,000,000 common shares directly from the Company at five cents ($0.05) per share. In the underwriting, each common share is worth thirty-one cents ($0.31) per share before the reverse split. Additional direct purchases make unrestricted cash available to our Company for operating expenses that we will require to promote Roulabette™. At this time, the Chinese Investment Corporation (CIC) is prevented by Beijing from making any more investments in the United States. This may only be temporary. The CIC was formed primarily for the purpose of improving the rate of return on China’s $1.5 trillion in foreign exchange reserves and recently the Central Government wishes to soak up some of the nation’s excess financial liquidity. Kenilworth offers this opportunity with the Preferred Stock which offers a fixed dividend and can soak up the excess liquidity with Roulabette™ wagering if and when approved. With Roulabette™ the government becomes a partner with Kenilworth by taxing and sharing in our net win. In time, the CIC may become a purchaser of a series of our Convertible Preferred Stock. Why didn’t Kenilworth propose the plan to increase the price of its Common Stock before? We did, more than eight (8) months ago before the stock market downturn. Events that occurred in China, our target, prevented it. The then CIC group was replaced with four (4) former ministers of the Chinese Government, the CIC is currently operating both out of Beijing and Hong Kong. Now we are hoping the Beijing order not to invest in the U.S. will be lifted. The formula for the underwriting and the prior Bridge Loan was derived after carefully studying lesser and larger Bridge Loan amounts. With a lesser Bridge Loan, we can’t achieve the book value of all cash or reliable securities to entice the underwriters. The purchase price of the shares in a usual underwriting is determined by the historical and potential future earning power of a company. Most companies that engage underwriters are not as yet publicly traded; they have underwritings to bailout the insiders. Kenilworth is a publicly traded company and its future earning potential is great but does not have the historical earning record required by the underwriter, and the stock unfortunately trades at just over one cent. No one wishes to invest in penny stocks. The fact that we are a forty (40) year old public Company with 10,000 shareholders that survived 1987 and this present financial crisis is to our credit but now we can attract affluent investors who will look at Kenilworth as a viable investment. We can put a $200,000,000 Bridge Loan together with as many investors as needed. We can structure a loan agreement with each lender receiving a proportionate share of the $80,000,000 projected minimum profit. All funds would be placed into bank trust funds and subject to be released to Kenilworth’s escrow bank account only if the entire $200,000,000 is subscribed. How will the proposed bridge loan and take out underwriting affect our present Kenilworth shareholders? Before the proposed 100-1 reverse split, every one million (1,000,000) shares are worth $0.31 per share or $310,000 after the reverse split the new ten thousand (10,000) shares have a value of $31.00 per share also equaling $310,000. Investors that recently purchased Stock Purchase and Option Agreements for every $10,000 investment own 1,250,000 shares with an option to acquire an additional 1,250,000 shares which is worth, after exercising the option, a total of 2,500,000 shares with a value after the underwriting of $775,000. Even in bad economic times, Kenilworth’s stock will trade substantially higher than the required $31.00 per share in the underwriting to repay the Bridge Loan including expenses of $217,000,000. Since the Bridge Loan providers will have a profit of $80,440,000+ for a five (5) month loan, our chances to achieve our goal are excellent. Kenilworth wishes to bring to the attention of our Shareholders and potential new purchasers of our Common and Preferred Stock that the afore made plans and their future results are only plans that Kenilworth management will vigorously pursue. The anticipated results may NOT MATERIALIZE or may substantially change with different results. On December 3, 2008 Kenilworth reported that the owners/operators of Live Dealer Casino located in Costa Rica have agreed, in principle, to jointly market 24/7 “The Live Casino” concept throughout the Asian Markets, with Kenilworth as the sponsor. The Agreement has not been consummated at this writing. The Parties are now in negotiation for Kenilworth to pay, up front, signing bonuses for the active software designers that created the remote, live in-progress casino table game wagering to other gaming hosts located in Europe that will assist Kenilworth in marketing to European gamblers. The designers with their experience will join our Company without Kenilworth acquiring any of their separate corporate entities. We will agree on the sign-up bonuses in the same manners as ball players receive bonuses to sign up with sports teams. When we finalize our agreement, we will make a Press Release detailing the terms and how we expect to have available the expertise of the principle software managers to provide the live in-progress casino table game wagering. As the result of the proposed agreement, Kenilworth will save the development costs to implement our own version of remote wagering in conjunction with our patents in the Asian, European and U.S. Markets. This report should be read in conjunction with, and qualified in its entirety by the consolidated financial statements and the notes thereto included in our Annual Reports on FORM 10-K. RISK FACTORS No Operating History We have had no new revenues from operations since 1991. We exited from bankruptcy proceedings in 1998 without assets and liabilities. We have had no revenues from operations since then and we may never have any revenues from operations in the future, which may result in the termination of our business. FORWARD LOOKING STATEMENT
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