Profile Stock Kenilworth Systems Corporation (OTCBB: KENS) Chairman & President Herbert Lindo Interviewed
Kenilworth Systems Corporation, a Mineola, New York-based public company, is a technology company with significant resources and intellectual property. The company began its success as a security systems developer for nuclear power facilities. Kenilworth has also helped the Australian government with their Cashless Wagering systems which eventually led to other efforts directed at gaming industry opportunities.
www.kenilworthsystemscorporation.com Phone: 516-741-1352
Herbert Lindo, Chairman & President, spoke with Wall Street Reporter Magazine on October 6, 2006.
Question: Give us an understanding of the company’s business model and tell us about the patented Roulabette System.
KENS: We have a series of patents to what we call Roulabette. What it comes down to is that subscribers to digital satellite programming in the United States and other industrialized nations of the world will be able to bet as they watch live in-progress casino table game action on their television screen. Viewers will be able to wager from remote locations as if they were in the casino playing at the table. We call the system Roulabette. Upon our request, the international law firm of Greenberg Traurig rendered an opinion that we are legal in the United States and do not violate the 1961 Wire Act, which is very important since Congress just passed a law which prohibits the use of credit cards and debit cards. We do not use either. Roulabette will primarily be deployed in conjunction with lottery systems, both in the United States and in foreign countries. Digital satellite subscribers will be able to go to their local lottery agent and make deposits and/or collect winnings in the same manner as if they are purchasing lottery tickets using pre-encoded Roulabette Play Cards inserted into the lottery terminal. Last Saturday, Congress passed the legislation, which has propelled us right into the U.S. market. For three years, the House was trying to prevent Internet gambling from foreign countries, and it couldn’t get approved in the Senate. Last Saturday, all of a sudden they did attach it to the Homeland Security bill. Once the bill is combined and printed, we do not violate that Act because we do not use any credit facilities with our wagering. What we’re doing is asking satellite subscribers, if they want to play along with us, to go to their local lotteries and buy tickets and make deposits. By using lotteries that can accept cash-only deposits, we will be assured that high school students and college freshmen will not be able to participate. By using the lotteries’ data system, the compulsive gambler can be identified, and, if necessary, limited or shut out. It’s a practical solution to all illegal betting. The Roulabette System is identical to the simulcasting of horse and dog racing, permitted in the United States. The wagering takes place at the receiving location, not at the sending location. Roulabette programs will include casino entertainment and commentators similar to those for sporting events and poker terminals in order to assist players with the rules and strategies of the game.
Question: Kenilworth Systems recently received final approval for the first live-in-progress casino table game broadcast from the Philippines Amusement and Gaming Corporation. Explain to us the importance of receiving this approval.
KENS: We concentrated on the Philippines because they are strategically located in the Asian and the Pacific Rim market. We’ve requested if we could play along, an agreement which is on our Web site. What we’re doing now, in order to prove that we don’t disturb other players, we did a live test, also available on our Web site. In March, we conducted a live in-progress casino table game test to demonstrate the ability to broadcast the table games for around-the-world viewing without disrupting the normal security, monitoring, and protecting the privacy of players at adjoining tables. The film clip of the test broadcast which was made at a Roulabette table located in a new Hyatt Hotel and Casino, Manila is available for viewing on our website. We have acquired the broadcast site for Roulabette, now we have to obtain agreements from jurisdictions that will permit to receive the broadcast. We are doing that right now in Europe, South America, and other markets. One of the prime markets will be China itself since they have 12 lotteries. In Asia, there are 170 million satellite and cable subscribers. We point out to everybody – “why would anyone play along with a virtual make-believe casino game when they can play along with a real-time live casino game instead without having to travel to a casino?” We have some statistics which show that China has 12 lotteries which had a net win last year of the equivalent of USD$87 billion. Estimates from the Professor in the Beijing University in China estimated that last year Chinese residents wagered the equivalent of USD$500 billion illegally. That’s a tremendous amount and a tremendous market for us because “why would they let this escape?” The same thing in the United States – “why let the foreign money escape the foreigners and none that collect on it?” We propose like for instance in the United States, the passing of the bill on Saturday puts us squarely in business in the U.S. We expect that sooner or later we will be able to broadcast from a casino operator in Las Vegas a minimum of horse and dog race simulcast plays, as they have 500 of these in the country and they can play along directly there. We also have filed patents. There are also 10 million slot machines in the world that are in use, and we have filed a patent which has not as yet been approved; this would permit us to play along in a slot machine a live casino game which you could do. The game would be still presented, the same games, the same handle program, and everything is the same. If you touch a button and all of a sudden you switch from a virtual game to playing a live game and switch back again, which means that for the price of a handle pull, you can place a wager on a live game which should be a tremendous incentive for people for a change of pace; for casinos overall, it will teach them how to play roulette. A lot of people don’t know how to play roulette. In fact, they’re afraid to go to a roulette table because they don’t understand it. The same thing goes for dice. Dice betting, how do you bet come, how do you bet don’t come, and everything, all this will be explained by using slot machines. For instance, slot machines and race tracks in the United States are known as video lottery terminals. If you gain approval from lotteries to include them, it would be a tremendous business as far as casinos are concerned and would also be a tremendous advantage because it teaches people to play and understand the real game. Baccarat is another game which very few people understand. It’s simple – the odds are best in Baccarat and not anything else that they offer you. Casinos are built from losers, not winners. It’s like flipping a coin, either heads or tails, we used to do it as kids and they’re still doing it today, except now it’s called Baccarat.
Question: The estimated markets for this type of gambling is over USD$500 billion annually. What type of competition does Kenilworth currently face, and what are the barriers to entry that will help it maintain its position?
KENS: We believe when we are fully deployed both in the United States and internationally, we are in a USD$500 billion net win market, which is shared with lotteries, satellite broadcasters, and other companies which will be involved with us. We retain 30% of that net win, and we pay for all operating costs. After operating costs and everything left, to be fully deployed we should earn USD$100 billion annually, which would be after taxes in foreign countries, the United States, and other places. We have no warehouses, no banks, no buildings, no brick-and-mortar casinos. All of this is clear profit, and that potential will be recognized as soon as we start to get better deployed. The market in general doesn’t even fully understand what satellite broadcasting is or what is a live game broadcast versus a virtual broadcast. That will be to our benefit. Since that bill was passed and prohibits the use of credit facilities, we had never even thought about using, or using banks to manage our wagering because banks can also provide credit facilities. We’re not violating anything passed on Saturday, which is a plus. We will immediately start to look into how we can start deploying this from Las Vegas to simulcast centers in the United States. That’s our first aim.
Question: Will the company be looking to enter into partnerships or strategic alliances to further its objectives?
KENS: Absolutely. We plan to form joint ventures and alliances with other companies because this is a major project that needs cash to deploy rapidly, the sooner the better. We are open to any partnership or strategic alliance with anyone who comes. The most likely companies will be satellite broadcasters and casino operators.
Question: Tell us about the background and experience of the Board and senior management team.
KENS: Originally, we were in the business of supplying security systems to nuclear generating electric power plants. After both Three Mile Island and Chernobyl, there isn’t a Congressman or Senator who would endorse nuclear power generating facilities in the United States. There are 102 facilities in operation, and we were supplying security systems for 92 of them. 36 plants that we had contracted for never came online. That’s the idea, what do we with our updated security system? We have a good card system which can’t be duplicated, copied or infringed upon. We decided to take the cash out of the gaming industry; our first customer in Melbourne, Australia was the Totalizator Agency Board (TAB). They contacted us to design the software. We were primarily a software company. We had 62 software employees working for us as early as 1975. We were in the beginning of this, but we designed software especially for nuclear power and security systems. We followed people. Our system provided that the minute you came into the parking lot, we knew where you are, and we followed you to make sure that everything went right. That kind of security was not necessary for casinos or anywhere else. We went ahead and started to do this, and we introduced the tracking system used today in slot machines in Las Vegas. We introduced it in 1985, Governor O’Brien approved it, and the State Legislature approved it. We believe because of this connection and everything else that we will be able to obtain early approval for a casino operator in Las Vegas to cooperate with us to bring the live games to simulcast centers – we have 500, some in New York and some in Long Island. They can capture the money that’s flowing out of the country, estimated between USD$15 billion and USD$20 billion. Why lose it? Why not collect it and use it for schools the way they were supposed to be? Lotteries are aiding school teaching and teachers. This will very quickly become something accepted rather than rejected. There are concerned citizens and certain Senators who represented us against expanding gambling. We’re not expanding gambling. We’re expanding entertainment. When you can make a USD$0.25 bet, you’re not gambling, you’re looking for entertainment and pastime – that’s our aim and our game, that’s what we want. Have you any idea how many quarters they are available throughout the industrialized world? We are in a huge market and attracting the lottery player, the guy who buys a lottery ticket for a dollar and wants to become a millionaire. If they invest in Kenilworth eventually, they can become the millionaire by just biding their time until we get the breakthrough we need.
Question: What is your vision for Kenilworth over the next two to three years?
KENS: Our vision is to not only attract companies that join us in financing, but bring in personnel, so we can teach them what we have and they can develop. There is no technical breakthrough needed for what we’re doing. We believe as we get this recognition, first of all our stock price will enhance itself, but more importantly, let’s assume we have approval in Nevada from the State Legislature and the Gaming Control Boards to broadcast from Las Vegas. Las Vegas is the gaming capital of the world; everybody wants to visit it because there’s something to see. Once you’ve been there once or twice, unless you’re a heavy gambler, you don’t need to go back. Everybody has a little gambling instinct in himself or herself, that’s why all of the lotteries are prospering, although some of them are not doing too well. We have plenty of Off-Track Betting Centers that are struggling because of the high price of oil – the extra USD$2 or USD$20 a week that customers were spending on lottery tickets or for our entertainment is disappearing. Oil prices are coming down a little bit, but it’s not going to stay there.
Question: In summary, why would Kenilworth Systems represent a good long-term investment opportunity?
KENS: To recap, we believe we’re in the right business. Playing along with a live game is a natural progression from playing virtual and make-believe games. It is something that will catch on and probably catch on quickly.
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