As a direct result of the major losses incurred by Citadel following the passing of the UIGEA in the U.S., online casino deposits specialist, ESI Entertainment Systems Inc. has taken a $6.2 million write-off on deferred assets. The company further revealed that its end-of-year net losses for 2006 (ending February 28) were valued at 27 cents per share. This is a stark contrast from the prior year's earnings valued at $1.3 Million - an eight cents per share gain.

The cash impairment was pinned on two of ESI's subsidiaries, Citadel and Playline, although Citadel is the primary culprit. Considering that 90% of ESI's business was derived from Citadel, this is not a long stretch by any means. Citadel has long been a third party payment method of choice for a large portion of U.S. internet bettors putting stakes down on anything from online casino games and poker to sports events and instant scratch-off lottery tickets.

Despite this loss, ESI still reported a revenue increase of 19% to $22 million, as well as a 41% rise in gross profit to $13.5 million. The company says that with the uncertainty imposed by the UIGEA - not to mention the crackdown on other payment processors and online casino operators - they had no choice but to effectively cease doing business with U.S. online gamblers. And just when the company thought they would dodge the crackdown by the U.S. Department of Justice, a sizable chunk of Citadel's own funds were recently seized.

ESI now says they are focusing their efforts on developing a new payment system that will securely allow home computer users to swipe their debit and credit cards from a home terminal, rather than entering their financial details on a website form. Called Secure Swipe, the technology looks promising. ESI is also pushing their online merchant fund monitoring software, called Citadel Switch. Even with the $6M plus write-off, it looks like the company will bounce back in due time.