UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

For the transition period from             to                   

Commission File Number: 0-08962

KENILWORTH SYSTEMS CORPORATION

(Exact name of registrant as specified in its charter)

 

(516) 741-1352

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x   No  o

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

The number of shares of common stock, $.01 par value of the Registrant outstanding as of March 31, 2007 was 287,594,294.

Table of Contents

KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

INDEX

Part I.		Financial Information
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets (unaudited) - March 31, 2007 and December 31, 2006		4
		Condensed Consolidated Statements of Operation (and Deficit) (unaudited) - Three months ended March 31, 2007 and 2006, and the period from inception, as a Development Stage Company, to March 31, 2007		5
		Condensed Consolidated Statements of Cash Flows (unaudited) - Three months ended March 31, 2007 and 2006, and the period from inception, as a Development Stage Company, to March 31, 2007		6
		Condensed Notes to Consolidated Financial Statements (unaudited)		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
Part II.		Other Information
Item 1.		Description of Business		9
Item 2.		Legal Proceedings		15
Items 3,4,5,6				15
Item 7.		Exhibits		15
Signature				16

 

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FORWARD LOOKING STATEMENTS

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

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

RISKS

Specific reference is made to each of the risks described in Item 7 in Part II of the Form 10-K for December 31, 2006 under the discussion “Cautionary Statement For Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and Risk Factors”. Reference is also made to future filings under Forms 10-Q and Forms 10-K and filings under the Securities Exchange Act of 1934 as amended and as may be applicable under the Securities Act of 1933 as amended.

INTRODUCTORY NOTE

This Form 10-Q is being filed as a “Development Stage Company” from the period beginning November 24, 1998 to the present at March 31, 2007, 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 issued 140,957,048 shares of its Restricted Common Stock since December 31, 2004.  All of the shares may have the restrictions lifted pursuant to Rule 144 and 144K within one (1) or two (2) years which may substantially depress the trading price of the Company’s Stock in the future.

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

At the Shareholders Meeting held on May 28, 2003, the Shareholders approved the issuance of 20,000,000 shares to be issued to Herbert Lindo the Chairman and President of the Company.  Unlike the 25,000,000 shares issuable to Herbert Lindo, which were expensed, the 20,000,000 shares were not expensed.

Herbert Lindo requested to have the 45,000,000 shares issued during the period ended March 31, 2006.  The Company expensed the 20,000,000 shares during the period at the rate of $0.015 per share, which amounted to a reduced capital adjustment of 53,652 instead of $303,652.

During the period ended March 31, 2007 and 2006, the Company made certain adjustments to the number of shares outstanding which did not require capital changes.

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KENILWORTH SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

		March 31, 2007			December 31, 2006
ASSETS
CURRENT ASSETS
Cash		$	4,198		$	49,995
Prepaid expenses		50,000			75,000
Loan receivable — including from stockholders		30,000			30,000
Receivable from Herbert Lindo (Note 8)		750,000			750,000
TOTAL CURRENT ASSETS		834,198			904,995
PROPERTY AND EQUIPMENT — NET		28,690			31,878
SECURITY DEPOSIT		9,422			9,422
TOTAL ASSETS		$	872,310		$	946,295
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	275,787		$	311,358
Payroll taxes payable (Note 7)		141,000			141,000
Loans payable – including accrued interest		34,632			33,787
Loans payable — automobile		500			750
TOTAL CURRENT LIABILITIES		451,919			486,895
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock - par value $.01 per share; authorized 2,000,000 shares; no shares issued and outstanding
Common stock - par value $.01 per share; authorized 500,000,000 shares; issued and outstanding 287,594,294 and 278,508,293 shares, respectively		2,875,942			2,785,082
Additional paid-in capital		30,508,133			30,419,215
Accumulated deficit		(32,963,684		)	(32,744,897		)
TOTAL STOCKHOLDER’S EQUITY		420,391			459,400
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY		$	872,310		$	946,295

 

The accompanying notes are an integral part of these financial statements.

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KENILWORTH SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)

		Three months ended March 31,						Period from November 24, 1998 to
		2007			2006			March 31, 2006
Revenues
Sales		0			0			0
Expenses
Selling, general and administrative		$	218,787		$	349 ,088		$	8,449,455
Other income (expenses)
Interest income		—			—			922
Interest expense		—			—			(811,312		)
Total other income (expense)		—			—			(810,390		)
Net loss		$	(218,787	)	$	(349,088	)	$	(8,668,242	)
Basic and diluted loss per share		(0.0001		)	(0.0016		)
Weighted average number of shares outstanding		287,594,294			213,321,462

 

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KENILWORTH SYSTEMS CORPORATION
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Three Months ended March 31						Period from November 24, 1998 to
		2007			2006			March 31, 2006
Cash flows from operating activities
Net loss		$	(218,787	)	$	(349,088	)	$	(4,124,400	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		3,188			3,301			23,141
Amortization of patent		—			1,888			11,087
Accretion of convertible debt discount					—			72,656
Beneficial conversion feature		—			—			669,097
Common stock issued for services		37,500			325,000			7,748,660
Common stock issued to induce debt conversion		136,100			164,000			6,145,276
Common stock issued for interest due on notes payable		—			—			8,501
Accrued interest transferred to capital		—			—			4,270
Other								21,100
Increase (decrease) in cash attributable to changes in assets and liabilities:
Prepaid expenses		(110,000		)	160,000			153,750
Loan receivable		23,700			(6,300		)	(6,300		)
Accounts payable and accrued expenses		(101,919		)	(173,868		)	184,092
Payroll taxes payable		(53,244		)	87,756			87,756
Net cash used in operating activities		(283,462		)	(212,689		)	(212,689		)
Cash flows from investing activities
Payment of loan receivable-stockholder		—			—			(4,000		)
Proceeds from loan receivable-stockholder		—			—			4,000
Payment of patent costs		—			(7,200		)	(67,026		)
Purchase of property and equipment		—			—			(58,567		)
Security deposit		(9,422		)	(9,422		)	(4,250		)
Net cash used in investing activities		(283,462		)	(16,622		)	(113,221		)
Cash flows from financing activities
Proceeds from loans payable – stockholders		30,000			—			85,000
Payment of loans payable – stockholders		—			—			(10,000		)
Proceeds from loans payable - related parties		—			—			154,137
Repayment of loans payable - related parties		34,632			—			(137,967		)
Proceeds from convertible notes payable								1,400,361
Proceeds from sale of common stock		136,100			325,000			457,600
Proceeds from stock subscriptions receivable		—			154,000			40,000
Net cash provided by financing activities		136,100			64,732			1,728,763
Net change in cash								3,334
Cash - beginning of period		49,995			3,334			—
Cash - end of period		$	4,198		$	3,777		$	3,334
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		$	136,100		$	—		$	1,388,500
Conversion of loan payable - related party to common stock		$	750,000		$	—		$	16,170
Cancellation of stock subscriptions receivable		$	—		$	—		$	29,000
Common stock issued for subscriptions receivable		$	—		$	20,000		$	71,500

 

The accompanying notes are an integral part of these financial statements.

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KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Kenilworth Systems Corporation and subsidiaries (“Kenilworth”) beginning as of January 1, 2007 contain all adjustments (consisting of only normal accruals) necessary to present fairly the consolidated balance sheets as of March 31, 2007 and December 31, 2006 and the related statements of operations and cash flows for the three (3) month periods ended March 31, 2007 and 2006.  These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on FORM 10-K.

The results of operations for the three (3) month period ended March 31, 2007 are not necessarily indicative of the results for the entire year ending December 31, 2007.

NOTE 2 - THE COMPANY AND NATURE OF BUSINESS

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

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

NOTE 3 - PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Kenilworth Systems Corporation and its wholly owned subsidiaries: Video Wagering Systems Corporation, Roulabette™ Nevada Corporation, Kenilworth Systems Nevada Corporation, Kenilworth Systems (UK) Limited, Kenilworth Satellite Broadcasting Corporation (a Delaware Corporation) and Satellite Gaming Consultants, Inc. (a Delaware Corporation). None of these subsidiaries has any assets or liabilities, except Satellite Gaming Consultants, Inc.

NOTE 4 - GOING CONCERN UNCERTAINTY

As indicated in Note 2, the Company exited from Chapter 7 in September 1998 and has not yet commenced revenue producing operations. These factors create uncertainty as to the Company’s ability to operate as a going-concern and continue in business. Management plans to develop a wagering system that allows casino patrons and individuals outside the casino to play along remotely with live in-progress casino table games. The Company plans to obtain the necessary funding by offering its Common Stock, Senior Cumulative Convertible Preferred Shares and/or continue to sell Convertible Promissory Notes in private placements. There can be no assurances the Company can be successful in obtaining such financing.

The accompanying financial statements have been prepared assuming the Company is a going-concern and do not reflect adjustments, if any that would be necessary if the Company were not a going-concern.

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NOTE 5 - CONVERTIBLE PROMISSORY NOTES

During the quarters ended March 31, 2007 and March 31, 2006 respectively, the Company sold to various private investors $136,100 and $154,000 principal amount of Convertible Promissory Notes bearing interest at rates ranging from 4.00% to 8.00% per annum.  The Notes had a one-year term and were immediately convertible at the option of the noteholder into shares of restricted common stock based on conversion prices ranging from $.05 to $.10 per share.  All Notes issued in the quarters ended March 31, 2007 and March 31, 2006 were converted into a total of 10,786,001 and 12,582,000 common shares, respectively.

NOTE 6 - NON CASH TRANSACTIONS

Common shares issued for services

2007:

The Company issued 750,000 shares as compensation for services rendered during the first quarter period ended March 31, 2007.  The services were valued at $37,500.

2006:

The Company issued 26,500,000 shares as compensation for services rendered during the first quarter period ended March 31, 2006.  The services were valued at $403,662.

NOTE 7 – PAYROLL TAXES PAYABLE

The Company has made arrangements with the Internal Revenue Service (IRS) and the New York State Department of Taxation to pay approximately $141,000 in past due payroll taxes, including all penalties and interest accrued during the years 2006 and 2005, by the end of the calendar year 2007.  The agreements provide that the Company must pay all present taxes, when due, and payments must remain current in 2007.

NOTE 8 - RECEIVABLE FROM HERBERT LINDO

On November 27, 2006 Herbert Lindo, the Chairman and Chief Executive Officer exercised a five million (5,000,000) share option for seven hundred fifty thousand dollars ($750,000) at fifteen cents ($0.15) per share pursuant to the Company’s Performance and Equity Plan. The price per share was the price for the Option which would have expired on the following date. Mr. Lindo does not own any other Options pursuant to the Plan. The average market price of the Common Stock for the thirty (30) days prior to November 27, 2006 was high: $0.05, low: $0.03. As provided in the Plan, Herbert Lindo borrowed the seven hundred fifty thousand dollars ($750,000) from the Company and pledged the five million (5,000,000) and other shares he owns, as collateral for the loan. The five million (5,000,000) shares have been issued as restricted shares.

 

NOTE 9 - SUBSEQUENT EVENTS

Subsequent to March 31, 2007, the Company raised an additional $80,000 from the sale of Convertible Promissory Notes.

Subsequent to March 31, 2007, the Company issued 3,440,000 shares for consultants for services rendered.  The consultant fees and services were valued at $167,000.

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

RESULTS OF OPERATIONS

Since we exited from bankruptcy proceedings on September 23, 1998 we have had no revenues from operations. We sustained substantial losses from general administrative expenses amounting to $850,079 and $3,815,302 in year 2006 and 2005 and for the three-months ended March 31, 2007 we sustained losses amounting to $218,787 compared to a loss of $349,088 for the quarter ending March 31, 2006. Kenilworth has had no revenues from operations during the past fifteen (15) years and there can be no assurances that it will ever have revenues from present planned operations.

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LIQUIDITY AND CAPITAL RESOURCES

Our present plans are to develop a wagering system dubbed “Roulabette™” that would allow patrons in the industrialized world to play and wager on live in-progress simulcast casino table games on TV’s placed in hotels, resorts, bars and other public gathering places and in homes and offices on personal computers (PC’s) or television sets connected to set top boxes for Interactive TV via digital satellite, digital cable and Internet broadcasts emanating from strictly regulated casinos.

PART II

ITEM 1—DESCRIPTION OF BUSINESS

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

GENERAL

Since early in the year 2000 we have been solely engaged in developing patents, markets and investigating how best to obtain Governmental approvals, by engaging lobbyists and consultants that would allow television satellite and cable subscribers throughout the industrialized world to play and wager along from remote locations with live, in-progress casino table games (Roulette, Craps, Baccarat and more) from strictly regulated casinos located in the United States and other locations around the world.

Employing the latest encrypted satellite, cable and Internet technology and placing television cameras in strategic locations above the casino table games, without disrupting the normal game-monitoring activities, (a separate control room would direct the various camera angles), and transmitting the table games over the digital satellite, digital cable and Internet networks (in countries that permit Internet wagering) to television sets (“TV’s”), which become a platform for playing along with the casino games wherever TV’s are located.

Kenilworth titled the overall project “Roulabette™”.  There are thirty-eight million (38,000,000) satellite and seventy-three million (73,000,000) cable TV subscribers in the United States and more than five hundred million (500,000,000) subscribers throughout the rest of the industrialized world (“The Market”).  On average, households in the U.S. have three (3) TV’s.  (It is important since the satellite and cable companies will charge a separate fee for transmitting the table games).  Public gathering places can accommodate (be able to network) up to one thousand (1,000) or more TV sets with a single satellite receiving 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 become a more than $500 billion net win Market within five (5) years throughout the industrialized world (by the year ended 2012).

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

All forty-three (43) lotteries in the United States are owned and operated by County and State agencies.  Since the beginning of year 2007, Texas, Illinois and Indiana are engaged in privatizing their lotteries by selling or leasing (on long term leases) their lotteries.  Maryland, Michigan, Iowa and New Jersey are also exploring the privatization of their lotteries. This could greatly enhance our efforts to broadcast the live casino table games to these lottery locations and could result in having Cafés that offer terminals and TV sets to play along.  Internet Cafés that offer wagering on various events have been a huge success in the

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Asian Market. With Internet wagering outlawed in the United States, our patented satellite, one-way broadcasts offer the best possibility to establish satellite Cafés.

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

These foreign lotteries also have the same databases as lotteries in the United States, except most lotteries throughout Europe pool their lotteries between countries, not unlike Mega Millions and PowerBall in the United States, which makes the distribution simpler and very cost effective for both Kenilworth and the lotteries.

There are no technical breakthroughs required.  The equipment for the technology is readily available.  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 to transmit the broadcast from one of its casinos to their residents and to States that do not have any casinos, (the entire East coast of the United States), the other forty-three (43) States with lotteries will join expeditiously. The same will occur in foreign countries.

Kenilworth will share the net win revenue with all participating entities that provide Roulabette™ gaming without costs of any kind.  State lotteries or their private operators will receive a minimum of forty percent (40%) of the total net win from their respective jurisdictions.

In States and foreign countries that designate exclusively lottery proceeds to schools and their teachers it is a welcome contribution.  It also will help close budget gaps.

In addition, throughout the United States and most foreign countries there are hundreds of facilities that simulcast live in-progress horse/dog races.  At most facilities there are several large TV screens that show the races from the different tracks with general theater-type seating for patrons and at private cubicles with television sets outfitted with touch screens.  The cubicles rent for additional fees.  After players open an account and select pin numbers, they can watch, in privacy, each race offered on the different tracks on the TV and place wagers on the different races by simply changing channels.  The players may also watch sporting events, the news, the stock market reports, and in the near future Roulabette™, live, in-progress casino table games.  The simulcast centers have their own databases to manage the cash deposit and pay winnings on the horse/dog races and will be able to manage the casino games, on the same methods as the lotteries will manage Roulabette™.  With private TV’s, available in simulcast centers, especially at night, when fewer tracks are operating.

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

To conduct permanent broadcasts 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 of such money. At present, the Company does not have the funds readily available but hopes to obtain same, from investors, as soon as Kenilworth can commence broadcasting from a casino in the United States or other casinos throughout the world.

In prior years, Kenilworth completed a prototype system that allowed casino patrons to play along with live in-progress casino table games only within the confines of a casino, via closed circuit television. Also in 1990, we developed and delivered for the TAB (Totalizator Agency Board) a quasy government agency of the State of Victoria, Australia, a cashless slot machine system. Both systems required debit cards and central mainframe computers to manage the wagers. By making use of the expertise applied in the

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development of the aforementioned systems we plan to develop a second-generation system that will manage the wagers by the microprocessor installed in TV set-top boxes or an attachment directly connected to the TV set to receive satellite and/or Internet broadcasts. This as planned would allow a player in an interactive manner, at a remote location (outside the casino confines), to experience the actual play and excitement at the casino table game and to make wagers on the various games, without having to be physically present at the casino or casino table.  There are no assurances we will be able to successfully develop any system.

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

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

Roulabette™ is a concept intended to be built and there can be no assurances that it will ever be built.  The Patented microprocessors to be installed in the TV set top boxes have not been designed.

SUMMARY:

(1.)          Kenilworth continues to fine tune its patented technology dubbed Roulabette™.  It now plans to “outsource” the manufacturing of all the components instead as formerly manufacture some of the equipment in its 26,000 square foot facility located in Melville, NY.  Roulabette™ would allow casino patrons and other players to play along with live in-progress casino table games such as Roulette, Craps and Baccarat and more via digital satellite, digital cable television or Internet broadcasts (simulcasts) emanating from strictly regulated casinos located in the United States and other locations around the world, to self-sufficient computer terminals dubbed “Roulabette™ Slots” and digital satellite, cable TV set top boxes or the Internet in countries that permit Internet gaming. The Roulabette™ terminal is a proposal intended to be built and there can be no assurances that it will ever be built.  The microprocessors to be installed in the TV set top boxes have not been designed. We have as at December 31, 2006, no firm agreements, customers, or proposals for any future business and there can be no assurances that we will ever have same. Reference is also made to each of the “Risk Factors” that are set forth in Item 7.

(2.)          We believe the thousand virtual casino websites via the Internet obtain sixty percent (60%) of their annual revenue from customers in the U.S.  These website have been shut down when President Bush signed the Internet Enforcement Act of 2006.

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

Kenilworth was the first to use color personal computers (PC’s) to replace electromechanical slot machines (1988).  We provided the software for the first Tabaret located at the Menzie at the Rialto in Melbourne, Australia, which opened in November 1990.  This consisted of cashless, variable denomination and multiple game, virtual PAT’s (“Player Activated Terminals”).   Prior thereto Kenilworth sponsored, with the assistance of three (3) Nevada casino operators, legislation to permit cashless wagering in the state of Nevada.  The legislation, which is in the form of an amendment to existing casino control statutes, permits

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the use of account cards (debit cards) and was signed into law by Governor Richard H. Bryan on June 13, 1985.

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

THE STATUS WITH PAGCOR

During January 2006, the Company reestablished negotiations with the Philippines Amusement and Gaming Corporation (“PAGCOR”) for permission to broadcast live, in-progress casino table games from their casinos.

PAGCOR is the Republic of the Philippines chartered government gaming monopoly.  PAGCOR partially owns and exclusively operates all fourteen (14) Filipino casinos, some of which are located in exclusive resort facilities frequented by Asian patrons (tourists).

In March 2006, Kenilworth conducted a live, in-progress casino table game test to demonstrate the ability to broadcast the table games, for around the world viewing, without disrupting the normal security monitoring and protecting the privacy of players at adjoining table games.  The film clip of the test broadcast which was made at a roulette table located in the new Hyatt Hotel and Casino, Manila, is available for viewing on our website www.kenilworthsys.com (see Press Release: Monday, March 6, 2006).

In April 2006, Kenilworth offered to pay PAGCOR monthly payments, for hosting the broadcasts when they commence, for a period of ten (10) years; US $1 million for year one (1); US $2 million for years two (2) and three (3); US $5 million for years four (4) through seven (7) and US $10 million for every year thereafter, totaling US $636,000,000 over the ten (10) year period. The payments have to be made regardless from where we broadcast.  Kenilworth requires the flexibility to broadcast from other casinos besides the Philippines.

In July 2006, PAGCOR’s Board of Directors approved to commence the first live, in-progress casino table game broadcasts to emanate from the new (August 2005) Hyatt Hotel & Casino in Manila, Philippines.

We, thus, have acquired a broadcast site for Roulabette™.  Now we have to obtain agreements for locations that will permit us to receive the broadcasts.  We are in an active search in Europe, including Eastern Europe, South America, China, India and the Pacific Rim nations.  We filed our patents in all of these destinations. 

In 2002, the Philippines Government permitted the establishment of two (2) Internet Cafés in the Manila area and allowed the operators, for a fee to PAGCOR, to provide life-like action on virtual baccarat, accept sports bets and video broadcast of actual in-progress cock fights with wagering on the outcome.  By year end 2004, the number of Cafés operating in the Manila area increased to sixty (60) Cafés.  At the end of 2006 there are now six hundred (600) Cafés in Manila with an additional thirty four hundred (3,400) throughout the country.

Kenilworth never attempted to provide live in-progress real time casino table games to the Cafés since President Gloria Macapagal-Arroyo stated, at all times, that our broadcast should not expand gambling throughout the Philippines.  The Cafés now represent a huge profit base for PAGCOR which provides the income from its overall operation entirely for socio-civic endeavors.  PAGCOR is the most profitable corporation in the Philippines.

The phenomenal success by the Internet Cafés may not require our broadcasts to improve PAGCOR’s income stream.   Kenilworth planned to broadcast to the Pacific Rim countries to maintain the tourist’s

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trade to the Philippines resorts, all of which have casinos, and now have to compete with Macau.  We believe PAGCOR will require our broadcasts to maintain the tourist trade.

MARKETING STRATEGY/SALES PLAN

Our marketing strategy consists of developing the Roulabette™ Slot terminal and the Roulabette™ broadcasts. We estimate at this time, that we will need at least approximately ten million dollars ($10,000,000) for promoting the Roulabette™ concept. We do not have this money nor do we have any agreements or understanding to procure this money. We may never get this money. If we do obtain this money, it may not be sufficient. Further, should such monies be available it may not be available on terms satisfactory to Kenilworth or it may be available on such terms that substantially dilute the interest of existing shareholders. If we obtain this money, we will need substantial additional funds for the proposed marketing plan and there can be no assurances that such funds will ever be available to allow Kenilworth to engage in business on a profitable basis.

At the present time, we do not engage technically oriented employees who will be able to assist in the development of Roulabette™ (we have available three [3] former technical Kenilworth employees that have indicated to rejoin Kenilworth at the appropriate time). It will be necessary for us to obtain additional personnel qualified and with the expertise to develop Roulabette™. We would require additional employees and several more consultants and there can be no assurances of our being able to obtain any necessary personnel. There can be no assurances of the availability of any such employees and consultants.

The Company will outsource the development of Roulabette™ and the microprocessors for the TV set top boxes.

In the United States, Kenilworth must refrain from using the Worldwide Web (WWW) Internet to manage wagers from individuals outside of the casino confines. It is against the law. In Roulabette™, the play-along broadcast emanates from casinos that are regulated by strict and comprehensive rules and state and jurisdiction regulations, enforced by gaming control regulators and everybody plays along with the same live table game. There is a world of difference between playing in 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 to manage the wagers from individuals playing along on their PC’s and their television sets using interactive TV set top boxes that convert regular television sets into minicomputers within their state or jurisdiction. There can be no assurances that we will be able to obtain any arrangement with any of these entities or that they would be on suitable terms.

The individuals would have to pre-deposit funds into an account with the wager management company and then place wagers with their credit balance. The wagers and running balances will be transmitted to the Roulabette™ player’s PC and/or television sets with telephone lines not crossing any state lines, similar in principle to telephone accounts wagering offered by the New York State Off-Track Betting Corporation and the state of Nevada casino sports book and recently with remote purchase of lottery tickets in many states within the United States.

After we obtain permission to play Roulabette™, of which there can be no assurances, in a given state and engage a wager management organization in order to promote digital satellite and interactive television to the state’s residents, Kenilworth would install the eighteen (18) inch dish antenna and converter box required 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 view all 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 and DirecTV.

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In states with approved lottery and/or other gambling legislation, we plan to introduce Roulabette™ Slot terminals 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” and Bingo games may wish to offer Roulabette™ gaming on a more permanent basis. To receive the broadcast signal, all that would be required is an eighteen (18) inch dish TV antenna and distribution equipment. The Roulabette™ terminals are intended to be self-sufficient and accept dollar bills (or script, to control the 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 the profits.

To gain approval for our Roulabette™-style gambling in jurisdictions that have not approved any gambling legislation, Kenilworth proposes to engage lobbyists to introduce, promote, and obtain legislative approval to permit Roulabette™-style gambling. Our strategy is to find depressed resort areas and have the resort/hotel operators convince their local politicians of the benefits to their business and the local economies and request them to promote legislative approval, either state-wide or limited to their areas. Riverboat gambling started to rehabilitate decaying waterfronts. Roulabette™ can do the same in depressed economic areas.  No assurances can be given that we can obtain any such approvals.

When the live casino TV broadcasts are beamed for global viewing, Kenilworth will seek out similar organizations, as proposed for the United States and betting shops and slot route operators that can provide the servicing of individual accounts and placement of Roulabette™ terminals in hotels, clubs, pubs, racetracks, etc. In all instances, we plan to offer only profit sharing arrangements to franchisees, which will require leasing all the equipment necessary to the franchisee, to discourage competition.

In overseas installations, wherever permitted, Kenilworth will make use of the WWW Internet only to manage the wagers, and only in jurisdictions that permit the data collection of the gambler, not for the live broadcast.

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

COMPETITION

Many segments of the gaming industry are characterized by intense competition, with a large number of companies offering the same type of wagering products and services. None of these companies, at present, are believed to offer the same or similar equipment or systems as intended by Roulabette™. The most likely competition will come from slot machine manufacturers who could relatively quickly adapt slot machines to play along with live casino table games. We believe there are three (3) major slot machine manufacturers in the world, all of which have vastly greater capital resources and substantially more personnel than the Company and may have under development systems that directly compete with Roulabette™.

Our present plans are to broadcast the live casino table games from companies that own casinos throughout the industrialized world. Other casino owners may start their own broadcasts and have their own terminals manufactured that compete with Kenilworth after Kenilworth has done all its pioneering for play-along wagering.

PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

Our most important assets are Patents we have acquired and Roulabette™ related trademarks and service marks.  The Patent granted on June 10, 2003 titled “SYSTEM AND METHOD FOR REMOTE ROULABETTE AND 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 REMOTE WAGERING”, “MULTI-USE GAMING MACHINE” trademarks

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ROULABETTE™, as in pre-marked cards similar to lottery cards to select number in each game, used with terminals “ROULABETTE™ SWIPE CARD” to activate set-top boxes to play Roulabette™ and “PLAY ALONG WITH ROULABETTE™, LIVE” and MULTI-USE GAMING MACHINE.

GOVERNMENT REGULATIONS

Kenilworth has no licenses from any casino regulating authorities and may not require any casino licenses at the present time and may never become able to obtain any licenses that may be required in the future. Each state has its own regulations, and in states where Kenilworth does business, Kenilworth will have to comply with these regulations and there can be no assurances that it will be able to do so or obtain the necessary license in an applicable jurisdiction. The following discussion is not necessarily complete, or current regarding laws and regulations that may be applicable to us.  Any present laws are also subject to future change, amendment or cancellation.

Item 2.    LEGAL PROCEEDINGS:

None

Item 3.    CHANGE IN SECURITIES:

None

Item 4.    DEFAULT UPON SENIOR SECURITIES:

None

Item 5.    SUBMISSION OF A MATTER TO A VOTE OF SECURITIES HOLDERS:

None

Item 6.    OTHER INFORMATION:

The Company plans to hold its Annual Meeting of Shareholders in September 2007 or any adjournment thereof with proxy materials mailed to shareholders of record in August 2007 prior to the proposed meeting dates.

Item 7.    EXHIBITS AND REPORTS ON FORM 8-K:

8-K – filed February 7, 2007: Item 4.01 Change of Independent Auditors

8-K/A Amendment No. 1 – filed February 22, 2007: Item 4.01 Changes in Registrant’s Certifying Accountant

8-K/A Amendment No. 2 – filed February 28, 2007: Item 4.01 Changes in Registrant’s Certifying Accountant

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

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized.

	KENILWORTH SYSTEMS CORPORATION
By:	/s/ HERBERT LINDO
	Herbert Lindo,
	Chairman, Chief Executive Officer and Chief Financial Officer
	May 10, 2007