New York Company Wagers That Cashless Betting Will Make It Flush : Technology: The system has made its debut in Australia. If widely adopted, it could generate millions of dollars in sales.

Being at the threshold is Herbert Lindo’s seduction and curse. He has been verging on success for so long that even he concedes the peculiarity of gambling more than $20 million and nearly two decades on a breakthrough that was always just around the corner.

Thus it is with tremendous glee that Lindo says triumph is now within reach. “It took Xerox 17 years before it became known,” Lindo declares. “We’re in our 17th year. It’s my time.”

Those numbers are a little off. Lindo’s company, Kenilworth Systems Corp., has been around for 18 years, and the copier giant’s great leap took about 21. But Lindo is talking about revenue so large that arguing over dates would be picky.

The Melville, N.Y., company has developed a cashless betting system that made its world debut a month ago in the Australian state of Victoria. In its first 24 days of operation, the unique Tabaret casino in Melbourne drew 20,000 gamblers who spent 10 million Australian dollars, the equivalent of $7.7 million here. “That’s not bad, is it?” asks Rhett Kirkwood, a spokesman for the Tabaret agency.

Victoria’s decision to run cashless casinos with Kenilworth’s technology has given the company a revenue stream and, perhaps most important, credibility. This is a company that once was seized by the Internal Revenue Service, that has survived bankruptcy and that hasn’t held a shareholders’ meeting in two years because of the expense. It also is one that will need a lot more money to keep the pump primed.

If the gusher comes, Lindo says, the company could be awash in sales, perhaps $40 million annually two years from now. “I have demonstrated something in 18 years,” says its 65-year-old president. “That I have staying power, the will to continue and the understanding of what the market is.”

That market is gambling, a labor-intensive industry whose profit is tumbling even though revenue is rising. In Lindo’s view, casino operators should rush to embrace a technology that could cut their operating costs by as much as 60%. So far, they are not.

“It used to be when you ran a casino, all you had to know was how to open the door,” Lindo says. Gamblers still come, but, especially in Atlantic City, most are low-rollers who bet on a budget.

“The cost of booking a $100 bet at a casino is the same as booking a $1 bet,” says Jeffrey Lindo, Herb’s 38-year-old son and Kenilworth’s executive vice president. “The problem is there’s less and less $100 bettors and more and more $1 bettors.”

Much of the huge overhead is the expense of dealing in cash. There are costly accounting systems to prevent skimming, elaborate security systems to keep employees out of the till and the cost of handling cash itself. “They wrap and count more money than the Federal Reserve,” Jeffrey Lindo says.

“Quite frankly,” his father says, “we feel that unless the gaming industry takes the cash out of gaming, the gaming industry isn’t going to make any money.”

This they could do with Kenilworth’s system, which is based on electronic transfer of funds. A gambler deposits money with a cashier, who opens an account that is activated by a special plastic card. The gambler inserts the card in a slot machine and plays as usual, except that winnings and losses are tracked in the bettor’s account. There is no money except at the cashier’s cage, and thus no expense in handling it. Computers record the transfers as they do in a brokerage or bank.

With the Totalizator Agency Board of Victoria, a state-run operation, Kenilworth combined its special cards and software with a video machine that works like an automated teller machine. A bettor inserts the card and touches the screen to choose from a variety of games and select the amount of the bet.

Odds are programmed as they are now, and winning combinations--the number of pins knocked over in the bowling game, for example--are randomly generated by the computer. Gamblers at the Tabaret can play video games or use other terminals to bet on live events, such as races.

“This machine has nothing mechanical in it,” Herb Lindo says. “It has no parts to jam. There’s no money to collect, nothing. There’s nothing to steal, nothing to take--and if that isn’t attractive to the industry, then I don’t know what is.”

One fear of operators is that gamblers will not like a cashless casino. Another is that the system will not work, an anxiety that Kenilworth believes will disappear as it proves itself in Victoria.

The heart of the system is Kenilworth’s chemically encoded card, which was developed as a means of identification in high-security nuclear power plants. That business rose and then fell with the nuclear industry, and the Lindos decided they’d better find another market for their special cards.

The banking and credit-card industries were closed to Kenilworth because billions of dollars had already been spent on cards that hold information on a magnetic strip. What the Lindos needed was a cash-intensive industry in need of modernizing.

That turned out to be gambling, an industry that last year, according to Herb Lindo, took in $245 billion, legally and illegally, in the United States alone. Lindo calls legalized gambling “painless taxation” and says the Kenilworth system keeps it clean.

Developing a fraud-proof system was an enormous challenge that called for more and more research and investment. They also lost several years, Herb Lindo says, when they had to go back to develop an interim system that takes coins and cards--to reduce the industry’s anxiety about whether gamblers would miss the coins. They also have simulated that seductive clanking as a jackpot hits the hopper.

The Lindos’ apparent success in Australia actually puts them at the brink of a new crisis, which is that a tiny company will have trouble generating confidence, not to mention being vulnerable to organized crime. “We either have to very quickly become a big company or we have to look for Big Brother,” Lindo says. “The way to a big brother is to book a lot of sales.”

The Australian experience is the beginning of that. The 221 machines of the Melbourne Tabaret will soon be supplemented with the opening of four more casinos and an expansion that could lead to more than 9,000 machines in Victoria alone. Kenilworth and the Totalizator Agency Board also are negotiating a joint venture that would let them sell systems worldwide. Casinos in Asia are said to be very interested.

And a major casino in Las Vegas has agreed to test Kenilworth’s system for three to six months while the state gaming commission decides whether to approve it for use in Nevada. The other side of the coin, though, is that Kenilworth has to foot the bill for a system and 300 machines. They need $6 million the company doesn’t have, but has no choice about investing.

“When I have these orders, you can bet your bottom dollar that the vultures, the big companies, will come and look,” Lindo says.

He is confident, but doesn’t rule out a bad hand. “When somebody buys a stock for 20 cents, I hope to heck he didn’t think he bought IBM,” he says.