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UNITED
STATES
SECURITIES 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 June 30, 2010
OR
o
Transition report
pursuant to Section 13 or 15(D) of the Securities Exchange Act of
1934
For the transition period from
to
Commission File Number: 0-08962
KENILWORTH
SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
New York
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84-1641415
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(State of incorporation)
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(I.R.S. employer identification no.)
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185 Willis Avenue, Mineola, New York
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11501
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(Address of principal executive offices)
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(Zip Code)
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(516) 741-1352
(Registrants 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
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 registrant was required to submit and post such files). Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
x
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(Do not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes
o
No
x
State
the number of shares outstanding of each of the issuers 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 June 30, 2010 was 617,201,586.
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FORWARD LOOKING STATEMENTS
The
information contained in this Form 10-Q and Kenilworths other filings
with the Securities Exchange Commission 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, 2009 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
The
Companys management has always objected to the SEC designation as a
Development Stage Company
. The
Company made a one hundred percent (100%) cash distribution to all approved
creditors and
paid in full all administrative
fees and expenses when we exited from Bankruptcy Proceedings.
The
Development Stage Company designation applies ONLY to Bankrupt Companies that
exit from Bankruptcy Proceedings
that do not
pay all approved creditors in full.
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left blank
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KENILWORTH SYSTEMS CORPORATION
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
AND DEFICIT
(Unaudited)
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For the six months ended
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June 30,
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2010
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2009
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*
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Revenues
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Sales
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$
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0
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$
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0
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Expenses
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Selling, general and administrative
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$
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178,117
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$
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682,684
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Other income (expenses)
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Interest income
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Interest expense
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5,210
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Total other income (expense)
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5,210
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Net loss *
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$
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172,907
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$
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682,684
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Basic and diluted loss per share
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$
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.0002
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$
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.001
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Weighted average number of shares outstanding
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617,201,586
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490,063,586
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*
Includes a NON CASH loss of $48,778 resulting from the sale and issuance of
24,389,000 shares of RESTRICTED Common Stock, par value $0.01 per share, for
cash at less than par value during the period from January 1, 2009 and
March 31, 2009 with the loss charged to paid-in capital.
The accompanying notes are an integral part of these financial
statements.
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KENILWORTH SYSTEMS CORPORATION
CONDENSED CONSOLIDATED
BALANCE SHEETS
(Unaudited)
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June 30,
2010
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December 31,
2009
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ASSETS
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CURRENT ASSETS
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Cash
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$
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3,038
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$
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123,633
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Prepaid expenses (Note 6)
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60,000
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80,000
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Loan receivable from vendors including accrued
interest
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52,400
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58,600
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Receivable from Herbert Lindo (Note 8)
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777,886
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775,725
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TOTAL CURRENT ASSETS
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$
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893,324
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$
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1,037,958
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PROPERTY AND EQUIPMENT NET
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975
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1,156
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SECURITY DEPOSIT
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13,677
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13,677
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TOTAL ASSETS
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$
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907,976
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$
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1,052,791
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LIABILITIES AND
STOCKHOLDERS EQUITY
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CURRENT LIABILITIES
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Accounts payable and accrued expenses
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$
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93,419
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$
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165,349
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Payroll taxes payable (Note 7)
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176,000
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18,108
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Loans payable including accrued interest
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21,400
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25,101
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TOTAL CURRENT LIABILITIES
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$
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290,819
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$
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208,558
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STOCKHOLDERS EQUITY (DEFICIT)
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Preferred Stock - par value $.01 per share;
authorized 50,000,000 shares; no shares issued and outstanding
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Common stock - par value $.01 per share;
authorized 1,000,000,000 shares; issued and outstanding 617,201,586 and
587,691,586 shares, respectively
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6,172,015
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5,876,915
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Additional paid-in capital
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33,316,658
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32,010,088
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Accumulated deficit
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(324,415,697
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)
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(32,242,790
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)
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TOTAL STOCKHOLDERS EQUITY
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617,157
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844,233
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
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$
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907,976
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$
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1,052,791
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The accompanying notes are an integral part of these financial
statements.
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KENILWORTH SYSTEMS CORPORATION
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(Unaudited)
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2010
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2009
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Cash flows from operating activities
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Net loss
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$
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(172,907
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)
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$
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(193,437
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)
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Increase (decrease) in cash attributable to
changes in assets and liabilities:
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Prepaid expenses
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60,000
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60,000
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Loan Receivable
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52,400
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21,600
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Accounts payable and accrued expenses
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(93,419
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)
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(47,531
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)
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Payroll taxes payable
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(149,600
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)
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(23,180
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)
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Net cash used in operating activities
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303,526
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(201,365
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)
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Security deposit
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(13,677
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)
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(13,677
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)
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Net cash used in investing activities
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Cash flows from financing activities
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Proceeds from Paid in Capital
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Proceeds from convertible notes payable
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Proceeds from sale of common stock
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174,600
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175,000
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Proceeds from stock subscriptions receivable
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Net cash provided by financing activities
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174,600
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175,000
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Net change in cash
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Cash beginning of period
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3,274
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21,401
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Cash - end of period
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$
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3,308
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$
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3,274
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The accompanying notes are an integral part of these financial
statements.
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KENILWORTH SYSTEMS CORPORATION AND SUBSIDIARIES
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, 20010 contain all adjustments (consisting of
only normal accruals) necessary to present fairly the consolidated balance
sheets as of June 30, 2010 and December 31, 2009 and the related
statements of operations and cash flows for the six (6) month periods
ended June 30, 2010 and 2009 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 for the fiscal year
ended December 31, 2009.
The
results of operations for the six (6) month period ended June 30,
2010 are not necessarily indicative of the results for the entire year ending
December 31, 2010.
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 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 for Satellite Gaming Consultants, Inc. whose activities are
consolidated herein.
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 Companys 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 continues to obtain the
necessary funding by offering its Common Stock, Senior Cumulative Convertible
Preferred Shares, and sell Convertible Promissory Notes and/or Stock Purchase
and Option Agreements in private placements. There can be no assurances the
Company can be successful in continuing to obtain 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 AND STOCK PURCHASE AND OPTION
AGREEMENTS
During
the period ended June 30, 2010 and June 30, 2009 respectively, the
Company sold to various private investors $675,500 and $175,000 principal
amount of Convertible Promissory Notes, made loans to the Company and issued
Stock Purchase and Option Agreements bearing interest at rates ranging from
4.00% to 12.00% per annum. The Notes had a six-month and 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 $.005 to $0.10
per share and purchase prices at $0.008 per share.
STOCK
OPTIONS
From
its inception in April 2008 through May 2009, the Company granted
Stock Options for 115,709,000 restricted 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 of Stock Purchase and Option Agreements. The
Option grant is for a period of two (2) years from the date of the Stock
Purchase and Option Agreements.
In
the period ending June 30, 2010, 2008 options were exercised for $24,000
(3,000,000 shares).
NOTE
6
- NON CASH TRANSACTIONS
Common
shares issued for services
2010:
NONE
2009:
NONE
PREPAID
EXPENSES
Prepaid
expenses consist of the unamortized value of stock issued to directors for the
twelve month period ending September 30, 2009. The balance will be
amortized on a straight-line basis over the remaining term. The directors
receive no other compensation.
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 $168,695 in past due
payroll taxes, including all penalties and interest accrued during the years
2008 and the three (3) month period ended March 31, 2009 in monthly
installments, by the end of the calendar year 2009. The agreements
provide that the Company must pay all present taxes, when due, and payments
must remain current in 2009. At March 31, 2009 the Company was
delinquent in approximately $23,180 in payments to the IRS and will attempt to
negotiate new payment schedules covering the delinquent payments.
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
Companys 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
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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.
At
a regular meeting of the Board of Directors in July 2008, the Board
unanimously approved (with Mr. Lindo abstaining) to extend the $750,000 loan
until December 31, 2009, provided Mr. Lindo pays a nominal one and
one-half percent (1.5%) interest from November 2006. Mr. Lindo
agreed to pay the interest which totaled $18,763 through June 30, 2010.
Mr. Lindo provides his services to the company without any
remuneration. The loan remains open at June 30,
2010.
NOTE
9
- SUBSEQUENT EVENTS
Subsequent
to June 30, 2010, the Company sold $37,000 in Stock Purchase and Option
Agreements.
ITEM
2. MANAGEMENTS 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 $34,912,625 through December 31, 2008
and for the six-months ended June 30, 2010 we sustained a loss amounting
to $172,907. Kenilworth has had no revenues from operations during the past
sixteen (16) years and there can be no assurances that it will ever have
revenues from present planned operations.
LIQUIDITY
AND CAPITAL RESOURCES
Our
present plans are to develop a wagering system, Roulabette, that would allow
patrons in the industrialized world to play and wager on live in-progress
simulcast casino table games on TVs placed in hotels, resorts, bars and other
public gathering places and in homes and offices on personal computers (PCs)
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 1DESCRIPTION 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 was formerly presented as a Development
Stage Company. The Company believes this designation is incorrect.
The Company exited from Chapter 7 Proceedings having made a 100% cash
distribution to all approved creditors for their entire claims and paid, in
full, all administrative fees and expenses. The designation is hindering
the Company in its operations and management dropped the Development Stage
Company designation in the third quarter period of 2009.
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, cable
subscribers and internet network 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.
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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 (TVs), which become a platform
for playing along with the casino games wherever TVs 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) TVs. (It is
important since the satellite and cable companies will charge a separate fee
for transmitting the table games to` TVs and laptops). 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 2014).
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-six (46) lotteries in the United States are owned and operated by County
and State agencies. 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
Asian Market. On May 6, 2009 Congressman Barney Frank introduced
legislation that may, in the not too distant future, legalize internet gambling
in the United States.
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-six (46) 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. With thirty percent (30%)
inuring to the Company and thirty percent (30%) to the strictly regulated
casinos.
In
states and foreign countries that designate lottery proceeds exclusively to
schools and their teachers, it will be a welcome contribution. It also
will help close state and other budget gaps.
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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 TVs, 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 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
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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 March 30, 2009, 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 of FORM 10-K for the year ended
December 31, 2009.
(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
websites were shut down when President Bush signed the Internet Enforcement Act
of 2006. Since then the U.S. Congress has indicated it may lift this ban
against Federal Internet Wagering in 2010 to increase Federal and State revenue
to benefit education.
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 (PCs) to replace
electromechanical slot machines in 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 games, virtual PATs (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 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.
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.
It
will be necessary for us to obtain additional personnel qualified and with the
expertise to further 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.
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 presently against the law. In Roulabette, the
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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
PCs 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 players 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 states
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. If the internet legislation
introduced on May 6, 2009 passes both Houses of Congress, the need for
dish antennas would no longer be required.
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.
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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. 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.
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. Our patents are filed in fifty-one (51) industrialized countries
of the world and are approved, both in Russia and recently in China and Japan,
after a seven (7) year delay.
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
12
Table of Contents
Item
5.
SUBMISSION OF A
MATTER TO A VOTE OF SECURITIES HOLDERS:
None
Item
6.
OTHER
INFORMATION:
The
Company plans to hold its next Annual Meeting of Shareholders in
October 2010 or any adjournment thereof with proxy materials mailed to shareholders
of record in twenty (20) days prior to the proposed meeting dates.
Item
7.
EXHIBITS AND
REPORTS ON FORM 8-K:
Ex
31.1 Certification of Chief Financial Officer of the Company Required by
Rule 13a-14(a) or Rule 15d-14(c) of the Exchange Act
Ex
32.1 Certification of Chairman 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:
Mr. Herbert
Lindo, the Chairman and CEO passed away on July 25, 2010. The Board of Directors implemented the
Companys succession plan, electing Mr. Dan Snyder to carry on Mr. Lindos
responsibilities as Chief Executive Officer, Chief Financial Officer,
President, Treasurer and Director. Joyce
Clark was elected Chairman.
The
Company issued 3,000,000 shares of restricted Common Shares through July 17,
2010 in connection with the sale of Stock Purchase and Option Agreements.
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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.
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KENILWORTH
SYSTEMS CORPORATION
|
|
|
|
By:
|
/s/
Dan W. Snyder
|
|
Chief
Executive Officer, Chief Financial Officer, President, Treasurer and Director
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|
|
|
August 13,
2010
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|
14
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