Form 10-K for KENILWORTH SYSTEMS CORP
Form 10-K for KENILWORTH SYSTEMS CORP
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31-Mar-2011
Annual Report
ITEM 7 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion following should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.
(A) RESULTS OF OPERATIONS
Since we exited from bankruptcy proceedings on September 28, 1998, we have had no revenues from operations, and therefore sustained losses from general administration expenses amounting to $612,012 in
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2010, $1,054,596 in 2009 and $1,074,193 in 2008. Kenilworth has had no revenues from operations since exiting from Bankruptcy Proceedings in September 1998.
(B) LIQUIDITY AND CAPITAL RESOURCES
Kenilworth has not conducted any new business operations since 1991. At December 31, 2010, 2009 and 2008 we had a deficiency in working capital of $365,022, $318,796 and $302,138 respectively. In Kenilworth's present state of operation to continue a viable business plan, Kenilworth requires little funding. We have been dependant upon the resources of its Chairman and Chief Executive Officer, who receives no compensation, and funds received from private investors, totaling $421,900 in 2010, $1,036,000 in 2009 and $511,000 in 2008. In addition the Company issued restricted Common Stock for services totaling $10,000 for 1,250,000 shares in 2010, $345,000 for 11,500,000 shares in 2009 and $523,565 for 52,355,522 shares in 2008.
Our present plans are to continue to develop a wagering system titled "Roulabette" that would allow patrons all over the industrialized world to view and wager on live casino table games on terminals 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 and laptop computers Interactive TV via digital satellite and digital cable broadcasts emanating from strictly regulated casinos. At present we do not have sufficient liquidity and capital resources to develop our business or to remain in business and we may never have such resources.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND RISK FACTORS
The information contained in this Form 10-K and Kenilworth's 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.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Annual Report on this Form 10-K contains statements that are forward-looking, including, but not limited to, statements relating to our business strategy and development activities as well as other capital spending, financing sources, the effects of regulation (including gaming and tax regulations), expectations concerning future operations, margins, profitability and competition. Any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, in some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "would," "could," "believe," "expect," "anticipate," "estimate," "intend," "plan," "continue" or the negative of these terms or other comparable terminology. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by us. These risks and uncertainties include, but are not limited to, our lack of recent operating history, existing management, general domestic or international economic conditions, pending or future legal proceedings, changes in federal or state tax laws or the administration of such laws, changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions), applications for licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations). You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this 10-K report for the year ended December 31, 2010, and subsequent events reported in this FORM 10-K.
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RISK FACTORS
NO OPERATING HISTORY
We have had no new revenues from operations since 1991. We exited from bankruptcy proceedings in 1998 without assets and liabilities. We have had no revenues from operations since then and we may never have any revenues from operations in the future, which may result in the termination of our business.
WE HAVE NO WORKING CAPITAL
As of December 31, 2010 the working capital deficiency of Kenilworth was $365,022. This will not enable Kenilworth to achieve any of its planned operations. There can be no assurances that Kenilworth will again have sufficient working capital to engage in its planned operations. Although we have been able to obtain working capital from investors that purchase Convertible Promissory Notes, Stock Purchase and Options Agreements and by issuing restricted Common Shares for services rendered.
OUR BUSINESS IS ONLY IN THE PLANNING STAGE
Kenilworth's business except for the completion of the $9,000,000 contract with the Totalizator Agency Board of Victoria, Australia, and the revenue from providing encoded access cards to United States and foreign Nuclear Electric Generating Plants, remains in the planning stage. The Company does not receive any income from the live, in-progress Roulette table game from the new Sosua Grand Casino in the Dominican Republic. We plan to engage in the development, manufacturing by subcontractors, and marketing of an operation entitled Roulabette. Roulabette would allow casino patrons and other players to play along from remote locations with live in-progress casino table games such as Roulette, Craps, Baccarat and more via digital satellite and digital cable television and Internet broadcasts (simulcasts) emanating from strictly regulated casinos located in the United States or via the Internet in other locations around the world, to self-sufficient computer terminals dubbed "Roulabette" and digital satellite and cable TV set top boxes, and other computer devices. The Roulabette terminals are 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 or attached to TVs have not been designed. We have, as at December 31, 2010, no specific agreements, customers or proposals for any future business and there can be no assurances that we will ever have same.
RAPID CHANGES IN TECHNOLOGY
The technology and Roulabette in general is subject to rapid change. Kenilworth will need to maintain an ongoing research and development effort of which there can be no assurances of success or availability of funds. Additionally, there can be no assurances that the development of technologies and products by competitors will not render the Kenilworth's products or technologies non-competitive or obsolete.
WE ARE ENGAGED IN A HIGHLY COMPETITIVE INDUSTRY
Our business is subject to significant competition. Competition exists from larger companies that possess substantially greater technical, financial, sales and marketing resources that Kenilworth presently possesses. Such competition is expected to increase. Such increased competition may have a material adverse effect on Kenilworth's ability to successfully market its products.
WE WERE GRANTED A PATENT FOR THE VARIOUS ASPECTS OF SIMULCAST WAGERING
On June 10, 2003, the U.S. Patent for the various aspects of wagering on live in-progress casino table games was granted by the U.S. Patent Office to Herbert Lindo, the Inventor and which Patent was assigned by Herbert Lindo to the Company in August 2000. We filed the Patent for approval in fifty-one (51) countries in the industrialized world including Russia and China. There can be no assurances that foreign patents will be issued and the challenges will not be instituted against the validity or enforceability of our
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patent. Herbert Lindo also filed two (2) Patents in the U.S. Patent Offices in September and October 2004 which Patents have been published to use lottery terminals to accept deposits for wagers placed with the TV set top boxes and the use of Play Cards similar to lottery tickets, which have also been assigned to the Company by Herbert Lindo. A Patent Application for Multi-Use Gaming Machines invented by Herbert Lindo and Gordon Coplein, Esq. was published on February 1, 2007 and assigned, by the inventors, to Kenilworth.
OUR ROULABETTE TERMINALS ARE SUBJECT TO VARIOUS FEDERAL, STATE, LOCAL AND FOREIGN JURISDICTION LAWS AND REGULATIONS
The use of the Roulabette System may be subject to various federal, state and local laws and regulations both in the United States and foreign countries. There can be no assurances that we will ever be able to obtain licenses or permits necessary to conduct our business or that we will be able to comply with these applicable laws and regulations.
The Roulabette System is planned to allow casino patrons and other players to play along with live, in-progress casino table games such as Roulette, Craps, Baccarat and more via digital satellite television and digital cable programming emanating from regulated casinos, via the Internet to countries that permit Internet streaming.
OUR OFFICERS AND DIRECTORS WILL HAVE SIGNIFICANT CONTROL OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TO A VOTE OF OUR SHAREHOLDERS
Our executive officers and directors together with their affiliates beneficially own a significant percentage of our outstanding common stock. These stockholders, if acting together, will be able to significantly influence all matters requiring approval by our stockholders including the election of directors and the approval of mergers or similar transactions even if the stockholders disagree.
SHARES ELIGIBLE FOR FUTURE SALE COULD CAUSE OUR STOCK PRICE TO FALL
If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock would most likely fall. As of December 31, 2010 we had added an additional 90,960,000 of restricted shares of Common Stock outstanding, which are eligible for sale by our Shareholders under new SEC Rule 144 B of the Securities Act of 1933 as amended which reduces the holding period to six (6) months or are otherwise registered for sale
