UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

 

 

 

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 ý No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court. Yes ý No o

 

The number of shares outstanding of the company’s common stock as of December 31, 2002 totaled 89,304,589 shares.

 

The aggregate market value of the voting stock held by non-affiliates (73,571,589 shares) of the Company on March 22, 2003 was $13,242,886. The price at which the common stock sold on the aforesaid date was $0.18.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Part III which includes Item 10 (Directors and Executive Officers of the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and Related Transactions) will be incorporated in the registrant’s proxy statement to be filed within one hundred twenty (120) days of December 31, 2002, and are incorporated herein by reference thereto.

 

In addition to historical information, This Annual Report on Form 10-K contains certain forward-looking statements and Risk Factors. We expressly disclaim any obligations on undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statement is based in whole or in part. Readers should amongst the other statements contained herein and future filings with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q to be filed, carefully review in Item 7 “Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995 and Risk Factors”. All of the Risk Factors contained therein should be carefully read.

 

 

PART I

 

ITEM 1—DESCRIPTION OF BUSINESS

 

THE COMPANY

 

Kenilworth Systems Corporation hereinafter referred to as “Kenilworth” or “we” was incorporated on April 25, 1968 under the laws of the State of New York.

 

PLANNED BUSINESS

 

Our present plans are to develop a wagering system that would allow patrons all over the industrialized world to play and wager on live casino table games on terminals called “Roulabette”Ô 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 broadcasts emanating from strictly regulated U.S. casinos.

 

On March 28, 2002, the Company entered into a contract with Archon Corporation for a thirty (30) day test to simulcast live in-progress roulette table game action that eventually could allow players worldwide to wager along with table players at Archon’s Pioneer Casino in Laughlin, Nevada. The test, a world first, was to demonstrate to the Nevada Gaming Control Board, and other U.S. and foreign Gaming Regulators that have regulated gaming forums, such as lotteries, racing, OTB, etc., the benefits of the Kenilworth “Play Along with Nevada Live” concept.

 

The Nevada Gaming Authorities must approve any contracts between Kenilworth, a casino operator and the simulcast test proposal before any test can take place.

 

The proposed live test was cancelled by mutual consent.  It was determined that the proposed simulcasts of live in-progress casino table games, had first to be approved by the Nevada State Legislature in the form of a legislative bill, permitting the “Live Game Broadcasts” from Nevada.

 

The Nevada State Legislature meets for four months once every two years.  The current session began on February 3, 2003.   We have retained lobbyists and legislative advisors to introduce legislation that, if approved, will establish the regulatory framework for worldwide simulcasts, via digital satellite transmission of live, in-progress, casino table game play.

 

If the proposed legislative bill is passed and signed by the State of Nevada’s governor, Kenilworth will initially broadcast Roulette, Craps and Baccarat games to jurisdictions around the industrialized world.

 

It may be that in order for hotels not to be required to obtain casino licenses in their jurisdictions to offer “Roulabette”Ô, they may have to limit the wagering to minimal amounts, so as to qualify the games as entertainment for registered hotel guests.  Resort gaming will establish a trend for the entire hotel industry worldwide.

 

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

 

When playing along with live table games from a highly regulated jurisdiction, players are assured that the game results are exactly what they see; and, playing along with casino table games such as

 

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roulette, craps and baccarat provides interaction, fun and far more excitement than playing make believe animated (virtual) games. It is the next best thing to actually being at the table.

 

During a proposed thirty (30) day test, live table game play will only be simulcast within the state of Nevada, and wagering will only be allowed at the actual roulette table. Players around the world may eventually “Play Along with Nevada Live” via several different wagering methods, including INTERACTIVE TV services like by satellite broadcast providers. Satellite broadcasters in the U.S., Europe, and Asia would be subject to regulatory requirements in the various jurisdictions in which the broadcasts are directed.

 

To conduct the initial broadcast Kenilworth believes it will require five million dollars ($5,000,000). At present, the Company does not have the funds available but expects to obtain same, from investors, as soon as the legislation is passed, the test is approved by the Nevada Gaming Regulatory Authorities, and is poised to commence.

 

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 in 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 terminal that will manage the wagers. 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.

 

The proposed terminal dubbed “Roulabette”Ô consists of a personal computer (PC) with two (2) monitors.  One monitor displays the live in-progress casino table game play as well as advertising.  The second, which is outfitted with a touch screen, allows a player to place wagers directly over the games displayed on the first monitor.  It also has a variable denomination bill acceptor and a bar code ticket dispenser.  Both monitors are housed in an attractive enclosure. The RoulabetteÔ terminal is the size of a typical “low boy” slot machine (desk top height).  Each terminal is self-sufficient, manages wagers from $0.25 to $100.00 or the equivalent in most any currency, and receives the table game play via simulcast satellite TV transmissions (with dish antennas) or local cable connection.

 

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. The RoulabetteÔ terminal is expected to offer an alternative to slot machine players. There are now believed to be more than ten (10) million slot machines played throughout the world.

 

Kenilworth will seek to promote to state lotteries, and other state regulated entities, the ability to operate websites that will manage the wagers. The program will ask state legislatures to amend their lottery horse/dog racing and OTB legislation to include RoulabetteÔ

 

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wagering or promulgate new legislation. There are no assurances that the necessary approvals will be granted.

 

There are powerful arguments for state legislatures to amend their Lottery Acts to include “Play Along with Nevada Live”. Lottery revenue is gradually decreasing in every state. Thirty-eight (38) states and the District of Columbia are pooling their lottery prizes with the “Power Ball” and “Big Game” national lotteries. In most of these states, the state lottery finds it difficult to obtain sufficient numbers of players to make up a minimum weekly lottery prize of one million dollars ($1,000,000). In most states, the revenue from lottery play benefits education. States need something more attractive to restore revenue. With “Play Along with Nevada Live”, there is interaction, excitement and fun. All at much better odds than may be offered by the lotteries. The lotteries can establish maximum wagers daily, weekly and monthly limits, and monitor compulsive gamblers.

 

Once play along in homes and other public gathering places has started, we intend to introduce casino games such as “limited tournament play”. For twenty-five dollars ($25.00), players can sign up with their respective website operators and make up to thirty (30) wagers on any table game. The individual that wins the most money during a specific tournament game period may win as much as a million dollars ($1,000,000) in addition to their game play win. As more interactive play along with casino games develops, the prizes can be increased and multiplied. The limited tournament play games can be scheduled more than once a day, during specific hours of the day, on specific days or nights of the week or once or twice a month. Actual live experience will determine scheduling.

 

NATURE OF PLANNED BUSINESS

 

The gaming industry is comprised primarily of five (5) service industries: (1) traditional pari-mutuel wagering on horse and dog racing; (2) casino, Indian Reservations, and riverboat gambling; (3) lotteries; (4) charitable organization gambling (Bingo and Las Vegas Nights); and (5) Sports book.

 

Kenilworth intends to operate primarily in the casino segment.

 

KENILWORTH MANIFEST

 

(The Manifest contains forward-looking statements)

 

Casino gambling throughout the world, in every form, is on the increase.  Most jurisdictions need the revenue from gambling to balance their budgets or increase their tax collection.

 

Kenilworth Systems Corporation can provide simulcast gaming worldwide, giving everyone the opportunity of playing a casino table game as if they were on the floor of a major casino in Las Vegas, Nevada.  This project provides all of the benefits and actual excitement of playing in a casino, without the need of the bricks and mortar.   Gaming enthusiasts will welcome the chance to place wagers on live in-progress casino table games, whether they are at a local tavern, hotel, resort, racetrack or other public gathering place, or at home.  Kenilworth is

 

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leading the industry in this area, and its technology allows all of this to happen.

 

Our system has the potential to replace the existing two thousand (2,000) foreign virtual gambling websites now in play, which garnished more than three (3) billion dollars from U.S. citizens in 2001 without paying any U.S. taxes.

 

The Nevada State Legislature meets for four months once every two years.  The current session began on February 3, 2003.   We have retained lobbyists and legislative advisors to introduce legislation that, if approved, will establish the regulatory framework for worldwide simulcasts, via digital satellite transmission of live, in-progress, casino table game play.

 

Initially, the broadcast will be of Roulette, Craps and Baccarat games.

 

Franchising of the simulcast will allow broadcasts to jurisdictions that have approved gaming regulations, except in Nevada where the broadcasts will be “blacked out”.

 

Kenilworth will offer a percentage of its worldwide net winnings to the State of Nevada, other jurisdictions (states), and the appropriate sponsoring Nevada casinos.

 

All franchisees will be required to make the broadcasts available to satellite dish and cable subscribers in their jurisdictions.   Kenilworth, as part of its marketing plan, will supply the appropriate TV, cable, and interactive equipment (for betting terminals) to the franchisee.

 

The Nevada Regulatory Authorities will monitor all franchisees of the Kenilworth System.  A violation of the Nevada regulations by a franchisee will result in a termination of the franchise.

 

Kenilworth plans to broadcast the simulcast in rotation from five major Las Vegas casinos, so that there will be a casino available on every day.  Kenilworth will install in each participating casino a communication room, which will be manned by licensed employees who will be paid by Kenilworth for their services.  The casino broadcast will be permanently linked to the Nevada satellite uplink site (RCN), and sent by satellite to the downlink/uplink international satellite site in Maryland, for distribution to the satellite footprints around the world.  The Maryland uplink site is operated by a consortium of satellite providers covering ninety percent (90%) of the industrialized world.

 

For “Play Along With Las Vegas, Live” a franchisee will be required to provide the at home player with the ability to deposit funds into their pre-paid gambling accounts anytime, and on the spur of the moment.

 

We will provide Licensed Betting Offices  (bookmakers) in Europe, and OTB offices in the U.S., to manage the wagering accounts for at home players.  They will be able to accept last minute deposits.  In jurisdictions, which have lottery terminals in place, arrangements will be made with the lottery to accept instant deposits and pay winners, using the lottery terminals as the managing device.

 

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A player will simply mark a ticket with his/her Set Top Box or TV set Identification Number, together with the amount to be deposited.  From that point on, the procedure is the same as selecting lottery numbers.  A winner can be paid using the reverse procedure.

 

Betting offices and lottery terminal providers will either share in the net win managed by each, or be paid a fixed commission for the amount deposited.

 

Where authorized, hotels, resorts, clubs, pubs, racetracks and other public gathering places (the “site”) will be able to offer casino table game action in their establishments without incurring casino operating costs.  At our expense, we will place RoulabetteÔ terminals and/or advanced PDA’s at the site, enabling wagering via the site’s television set.

 

A RoulabetteÔ terminal consists of a personal computer (PC) with two (2) monitors.  One monitor displays the live in-progress casino table game play as well as advertising.  The second, which is outfitted with a touch screen, allows a player to place wagers directly over the games displayed on the first monitor.  It also has a variable denomination bill acceptor and a bar code ticket dispenser.  Both monitors are housed in an attractive enclosure. The RoulabetteÔ terminal is the size of a typical “low boy” slot machine (desk top height).  Each terminal is self-sufficient, manages wagers from $0.25 to $100.00 or the equivalent in most any currency, and receives the table game play via simulcast satellite TV transmissions (with dish antennas) or local cable connection.

 

It may be that in order for hotels not to be required to obtain casino licenses to offer “Roulabette”Ô, they may have to limit the wagering to minimal amounts, so as to qualify the games as entertainment for registered hotel guests.  Resort gaming will establish a trend for the entire hotel industry.

 

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

 

In August 2002, the Attorney General of the United States (John Ashcroft) informed the Nevada Gaming Control Board (Chairman and Commissioner Dennis Neilander, Esq.) that Internet wagering information is in violation of the 1961 Wire Act and, therefore, cannot be permitted in the United States or transmitted from the United States to other countries in the world.  Previously, the Nevada State Legislature had approved Internet gambling (February 2001) subject to the approval by the U.S. Attorney General’s office.  Nevada is the only state that approved Internet gambling.  Most states have outlawed Internet gambling. Others have taken no action.  Our system will replace the present Internet sites, thus eliminating the need and cost of enforcing the Internet ban.

 

Our proposed simulcast, via digital satellites, does not use a wire transmission and communication facility.  A recent Louisiana decision (lower court) ruled that the Wire Act does not apply to broadcasts.  We

 

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are not within the constraints of the Internet gambling interdiction.  Our broadcast is similar to horseracing and sporting events, where the simulcast is transmitted via satellites to the various satellite dish subscribers, and then downloaded to cable companies.  Licensed Betting Offices, OTB offices and racetracks that offer out of state horse racing will pick up the satellite broadcasts with their own dish antennas, or in overseas locations via the Internet.  Wire transmission within state boundaries does not violate the Federal 1961 Wire Act.

 

Last September, the House of Representatives voted and passed the Internet Gambling Enforcement Act, which bans credit and debit cards, checks, “Western Union type” wire transmission and all other means of transferring money for use in connection with Internet Wagering. Since the Senate did not approve a companion Bill by the end of the year, the House and Senate must pass the legislation again in 2003.  There appears to be an anti-Internet gambling sentiment in Congress and passage by both houses appears certain.  Our method is distinct, as players using our system, unlike the Internet, will be subject to state casino regulations and will not be permitted to use credit or debit cards.

 

In our worldwide plans, wagers can be placed with Licensed Betting Offices and lottery terminal operators.  They are only permitted to accept cash at their offices or lottery terminal locations.  Currently, they are obliged to make sure that no one underage places or collects wagers on horseracing, sporting events or the lottery.  The same will apply when they accept wagers or pay winnings on our live simulcast broadcasts.  It is simple and 100% foolproof.

 

Since gambling for tax revenue in twenty-three (23) states passed overwhelmingly, at the last election (Nov. 5, 2002), we will make plans to offer simulcasts of live, in-progress, casino table game play across the United States.  Initially our simulcast will be for entertainment purposes only.

 

The proposed broadcast does not require any sophisticated electronics; only the acceptance by the satellite and cable operators and the approval of the Federal Communications Commission.  We have been unofficially advised that, for entertainment only (no wagering), our broadcasts will be classified the same as any program now being broadcast via the networks.  For gambling, we will require an FCC license, which we do not believe will be difficult to obtain (simulcasting of horse racing requires an FCC license).

 

As the Justice Department has prevented the EchoStar and DirecTV merger, we doubt that we will have any problem in exclusively franchising either company.  Initially, they may broadcast our simulcasts for advertising revenue.  Later, with live games, they will share in the net win, which is what we expect to negotiate in Europe and Asia.

 

BSkyB (NewsCorp.) and Vivendi (France) are both leaders in the betting business.  They presently control satellite broadcasts in Europe for turf and sport wagering (soccer).

 

 

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LOGICAL QUESTIONS:

 

(1.)          Why aren’t major casinos in Nevada that have substantial resources, and the casino table games, competing with us?

 

The answer is simple.  They are casino operators.  If they, even by accident, have a minor playing along with their broadcasts, or commit any other violation, they lose their Nevada and other state Casino licenses.  Establishing a subsidiary for their transmissions does not absolve them from the violation.  Kenilworth is not a licensed casino operator.  Kenilworth holds the U.S. patent and they would have to operate under our license.

 

Further, we plan to broadcast from five (5) strip casinos in rotation, in order that each casino will have the opportunity, on certain days, to broadcast during prime time.  When we manage the broadcast in their casino, we will have the same crew in the communication room (4 technicians, 24 hours a day, 7 days a week).  For example, on Monday at Caesar’s, Tuesday at the Venetian, Wednesday at MGM, and so on.  If another casino attempts to compete with us, they will violate our patent.  They would also have to engage their own crews (24 hours a day, 7 days a week), hire the same satellite provider for their broadcast to Europe or Asia, and pay a percentage of their net win to other franchisees (at least the same percentage of our net win or more, as we all will compete to have them manage the wagering).

 

The Nevada Casinos fare better in accepting a percentage of our net win, which they will receive without any operating costs.  They will probably be exempt from Nevada taxes, as we are paying five percent (5%) on their simulcasts to the state (no double taxation).

 

Net win is determined before deduction of expenses.  It’s a term used to collect taxes on gambling revenue (table drop) before operating expenses.  In Europe, and now in some states in the U.S., this tax amounts to an average of twenty percent (20%), with minimum annual taxes of up to one hundred million dollars.

 

We propose to offer two percent (2%) of our net win to the Nevada school system, and another three percent (3%) to the state of Nevada.  On a worldwide basis revenue could reach, in the not too distant future, in the one hundred billion dollar range.  That could earn Nevada five billion dollars annually; more than twice their present budget needs.  Law enforcement agencies estimate that Americans wagered $380 billion in 2001 on sporting events (mostly illegally).  Our system can be regulated and tested (unlike Internet sites).

 

Presently, Nevada’s school system spends  $1,200 less, per child, than the average state school system nationwide.  Nevada should welcome our contribution, as it will supplement its education budget.

 

(2.)                               Why wouldn’t the U.S. Congress also prevent simulcasting of live casino table games, like it has with Internet gambling?

 

The Interstate Horse Racing Act of 1978 permits simulcasts of races via satellite transmission between states, which are then downloaded to cable systems.  Horse and sporting club owners are traditional and

 

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substantial contributors to House and Senate campaigns.  It is big business that would have to be abolished if our proposed simulcasts are outlawed.  The probability of its abolition is remote.

 

(3.)          What happens if the Nevada State Legislature does not, or cannot, authorize the live game broadcasts?

 

We will proceed.  We will introduce our proposed legislation to other states such as New Jersey, Michigan, New Orleans and Connecticut.

 

(4.)          What will happen if non-casino or casino operators attempt to compete with us?

 

If they do, they run the risk of an injunction and incurring triple damages.  A patent that covers the proposed remote live in-progress casino play throughout the industrialized world was recently issued to Kenilworth.

 

(5.)          Will there be opposition by Nevada casino operators?

 

The past has proven to the Nevada casino industry that as more casinos are built in the United States (there are now seven hundred fifty [750] casinos outside of Nevada), more visitors come to Nevada. Our worldwide broadcasts will substantially enhance the overall demand to visit Las Vegas or any other state that permits our broadcasts.

 

SUMMARY:

 

(1.)          In order not to endanger the viability of the their local casinos, the Legislature should allow our proposed simulcasts, as there are too many other prominent and well-regulated casinos in the U.S. from which our simulcasts can be transmitted around the world.  For example, Atlantic City, N.J., Connecticut, (Foxwood and Mohegan Sun, the two most profitable casinos in the world), Detroit, New Orleans, etc. Most casinos are owned by the very same casino operators we plan to solicit in Las Vegas.  Nevada is the leader of the casino industry.  As such, it cannot afford to pass up our new innovation.

 

(2.)          Our RoulabetteÔ terminals, wherever they are placed (bars, resorts, hotels, racetracks, etc.) will only be leased to the operators by the finance company, which we will engage for that purpose.  If a terminal cannot meet the minimum revenue necessary to pay the monthly leasing charges, it will be moved to another location.  By placing RoulabetteÔ terminals at horse race tracks, which also offer slot machines, we will be transforming them into complete casinos, without the inherent start up and operating costs.

 

(3.)          If Nevada approves the simulcasts, it will likely spell the end of most of the existing two (2) thousand Internet Virtual casino websites around the world.  It will be likely that no one will wager with a make believe casino game when they know that they can play along with a live game from Las Vegas.

 

The two (2) thousand virtual casino websites via the Internet obtain sixty percent (60%) of their annual revenue from customers in the U.S.

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Although Internet gambling is outlawed, it is presently not very well enforced by the U.S. Justice Department.  Much of the opposition in Congress against Internet gambling stems from the fact that the websites are not legitimate, and may even be used for money laundering.  Further, the websites do not effectively prevent minors and underage college students from wagering.  Approximately one hundred (100) entities control the two (2) thousand websites. When one site experiences losses, it is shut down and another site is created.  We expect that a majority of these sites will shut down because of our simulcasts, thus directly reducing the number of sites, which need to be policed.

 

Simulcast broadcasts around the world must meet, and will be supervised by, the regulations of the Nevada Gaming Authorities and the jurisdiction, which receives the broadcast.  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.  This fact should ease any opposition from Congress, as regulation and enforcement responsibility will be vested in each individual state (or 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 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 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 entering into the casino arena, it 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

 

In the United States Kenilworth expects to refrain from using the Worldwide Web (WWW) Internet to manage wagers from individuals outside of the casino confines. Legislators have voiced strong objections to having their constituents’ gamble one-on-one against computers located on Caribbean islands, totally unregulated. In RoulabetteÔ, the play-along broadcast emanates from casinos that are regulated by strict and comprehensive rules and state 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

 

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TV set top boxes that convert regular television sets into minicomputers within their state.

 

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 RoulabetteÔ 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.

 

After we obtain permission to play RoulabetteÔ in a given state and engages 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 RoulabetteÔ 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 states with approved lottery and/or other gambling legislation, we plan to introduce RoulabetteÔ 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 RoulabetteÔ 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 RoulabetteÔ 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 RoulabetteÔ-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 RoulabetteÔ-style gambling. Our strategy is to find depressed resort areas an 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. RoulabetteÔ can do the same in depressed economic areas.

 

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 RoulabetteÔ 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.

 

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In overseas installations, wherever permitted, Kenilworth will make use of the WWW Internet to manage the wagers.

 

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 RoulabetteÔ. 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. There are three (3) major slot machine manufacturers in the United States, all of which have vastly greater resources than the Company and may have under development systems that directly compete with RoulabetteÔ.

 

We immediately plan only to broadcast the live casino table games from five (5) companies that own casinos. 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

 

On February 25, 2003, our U.S. patent for the various aspects of wagering on live in-progress casino table games via digital satellite transmission was approved and we have taken the steps to protect our interests in other areas of the industrialized world. There can be no assurances that foreign patents will be issued and challenges will not be instituted against the validity or enforceability of our patent.

 

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 we will require in the future. Each state has its own regulations, and in states where Kenilworth does business, Kenilworth will have to comply with these regulations. The following discussion is not necessarily complete, or current regarding laws and regulations that may be applicable to us.

 

NEW JERSEY

 

In order to sell its RoulabetteÔ wagering systems to casinos in New Jersey, Kenilworth must be licensed by the New Jersey Casino Control Commission (CCC) in accordance with the New Jersey Casino Control Act as a manufacturer and distributor of gaming equipment. We will have to make arrangements to apply for licensing in New Jersey. The New Jersey Commission may require that persons holding in excess of five percent (5%) of the publicly traded equity securities of Kenilworth qualify under the Casino Control Act. Any beneficial holder of the voting securities owned may be required to file an application, be investigated, and have his qualifications determined if the CCC has reason to believe that such ownership may be inconsistent with the declared policies of the Casino Control Act.

 

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NEVADA

 

The manufacture and distribution of gaming devices in Nevada are subject to the Nevada Gaming Control Act (the “Nevada Act”), and to licensing and regulatory control by the State Gaming Control Board and various local, city and county regulatory agencies (collectively, the “Nevada Gaming Regulators”). The laws, regulations and supervisory procedures of the Nevada Gaming Regulators are based upon declarations of public policy which are concerned with, among other things, (i) the character of persons having any direct or indirect involvement with gaming, (ii) application of appropriate accounting practices and procedures, (iii) maintenance of internal fiscal affairs and the safeguarding of assets and revenues, (iv) record keeping and reporting to the Nevada Gaming Regulators, (v) fair operations of games, and (vi) the raising of revenues through taxation and licensing fees.

 

No publicly traded corporation is eligible to apply for, or hold gaming licenses in Nevada. A publicly traded corporation may be registered and found suitable to acquire or to hold an interest in a corporate subsidiary, which holds such gaming licenses. Before Kenilworth may do business in Nevada, it will have to register with the Nevada Gaming Regulators as a publicly traded holding company and found suitable to hold an interest in a licensed subsidiary. After an investigation is completed, licensing may take approximately ninety (90) days. No proceeds from the public sale of securities by a registered holding company may be used to acquire, construct, operate, or finance gaming facilities in Nevada or to retire or extend obligations incurred for such purposes unless the public offering of those securities has been approved by the Nevada Gaming Regulators.

 

The Nevada Gaming Regulators may require any individual who has a Material relationship with us to be investigated and licensed or found suitable. Any person who acquired five percent (5%) or more of Kenilworth’s securities must report the acquisition to the Nevada Gaming Regulators. Any person who becomes a beneficial owner of ten percent (10%) or more of Kenilworth’s securities must apply for a finding of suitability. The Nevada Regulators have the power to investigate any security holder of Kenilworth.

 

If Kenilworth registers as a publicly traded holding company, the Nevada Gaming Regulators would have the power, at any time, to require the Company’s stock certificates to bear a legend indicating that the stock is subject to the Nevada Gaming Control Act and the regulations of the Nevada Gaming Regulators. The Nevada Gaming Regulators, through the power to regulate licensees and otherwise under Nevada law, would have the power to impose additional restrictions on the holders of Kenilworth’s securities at any time.

 

FEDERAL

 

The Federal Gambling Devices Act of 1962 (the “Federal Act”) makes it unlawful for a person to manufacture, deliver, or receive gaming machines, gaming machine type devices and components thereof across interstate lines unless that person has first registered with the Attorney General of the United States. In addition, various record keeping and equipment identification requirements are imposed by the

 

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Federal Act. Violations of the Federal Act may result in seizure or forfeiture of equipment, as well as other penalties.

 

OTHER REGULATIONS

 

The manufacture, distribution, sale, and use of slot machines is controlled by state and federal law, which may also apply to our RoulabetteÔ gaming terminals. Certain foreign countries permit the importation, sale, or operation of slot machines. Where importation is permitted, some countries prohibit or restrict the payout feature of the traditional slot machine or limit the operation of slot machines to a controlled number of casinos or casino-like locations. Certain of these jurisdictions also require the licensing of gaming devices. Our RoulabetteÔ terminals may be considered similar to slot machines and may have to meet these regulations.

 

FABRICATION/ASSEMBLY OPERATION

 

When we start to market the RoulabetteÔ Wagering System, we plan to engage sub-contractors to assemble/manufacture the terminals from standard or specially manufactured (to our specifications) electronic, TV, and other components purchased from vendors or manufactured by subcontractors.

 

EMPLOYEES

 

Kenilworth at present has five (5) employees. Three (3) perform administration work and the other two (2) work on research related to casino wagering and marketing around the world. The Company has engaged Consultants that will manage the proposed satellite transmission programs.

 

BACKLOG

 

We do not have any backlog.

 

ITEM 2—PROPERTIES

 

Kenilworth leases month-to-month approximately fifteen hundred (1,500) square feet in an office building paying fifteen hundred dollars ($1,500) per month rent.  The Company plans to move to larger office space (5,000 square feet) in Mineola, NY with annual rent of approximately one hundred fifty thousand dollars ($150,000).

 

ITEM 3—LEGAL PROCEEDINGS

 

Since emerging from Chapter 7 Bankruptcy Proceedings on September 23, 1998, Kenilworth has not been involved in any significant legal proceedings.

 

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ITEM 4—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

Not Applicable.

 

 

EXECUTIVE OFFICERS OF THE REGISTRANT

 

The names, ages and positions held by each of Kenilworth’s directors and executive officers are as follows:

 

NAME		AGE		OFFICES AND POSITIONS HELD		FIRST ELECTED OFFICER OF KENILWORTH
HERBERT LINDO		77		PRESIDENT AND CHAIRMAN OF THE BOARD		1972
GINO SCOTTO		33		DIRECTOR AND CHIEF EXECUTIVE OFFICER		2001
MAUREEN PLOVNICK		36		DIRECTOR, CORPORATE SECRETARY AND VICE PRESIDENT		2000
JOYCE CLARK		66		DIRECTOR AND VICE PRESIDENT		1998
KIT WONG		73		DIRECTOR AND VICE PRESIDENT		1999
BETTY SUE SVANDRLIK		62		VICE PRESIDENT AND ASSISTANT CORPORATE SECRETARY		1998
PATRICK J. MC DEVITT		61		DIRECTOR AND VICE PRESIDENT		2001

 

All of the above executive officers and directors have been elected to serve until the next Annual Meeting of Shareholders or until their respective successors are elected and qualified. The Board presently anticipates that the Shareholders Meeting will be held in late May 2003.

 

PART II

 

ITEM 5— MARKET PRICES OF THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

 

(a) After Kenilworth emerged from Bankruptcy Proceedings in September of 1998, its Common Stock resumed trading on the OTC Pink Sheets under the old trading symbol “KENS”. The following table sets forth high and low closing sales prices for our Common Stock, as reported on the OTC Pink Sheets.

 

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		LOW			HIGH
2001