Cheyenne Mountain Entertainment is out of money, out of employees, and nearly out of time.
The studio behind the new video game Stargate: Resistance and the long-anticipated MMO Stargate Worlds is currently undergoing evaluation by a court-appointed receiver, and has effectively ceased operations. Because the leadership of the company is currently in dispute (story), the receiver is empowered by the court to take over management in the interim.
The receiver, Edward Burr, has released his initial findings regarding the current state of the company in a release directed at shareholders, posted on the CME and Firesky Web sites and sent by e-mail to all known shareholders.
According to the release CME currently has no employees and less than $10,000 in the bank. It owes at least $2 million to creditors, unpaid payroll of about $1.1 million dating to March 2009, and federal and state payroll taxes of $3 million. The company has also been named in five legal complaints with a potential liability that the receiver estimates at approximately $10.1 million.
The company cannot pay the rent on its space in Phoenix, Arizona, and the landlord has indicated that he will “lock the doors” at midnight on March 31. To make matters worse, there is also a question about whether CME was the one to sign the original lease at all.
Needless to say, with no employees in an office space about to be closed down, work on Stargate Worlds has come to a halt. “With regard to actual operations, game development has ceased,” according to the report. “Not to be redundant, but there are no employees.”
Things look brighter for the game that has been released, however. In partnering with Phoenix-based Fresh Start Studios, Cheyenne Mountain Games (an operational subsidiary of CME) has effectively sold off Stargate: Resistance and held on to continuing royalty rights for having developed the game. FSS is run by a number of CME shareholders concerned with keeping the online game up and running. The company is now paying for the maintenance and development of the game, and is responsible for making the licensing payments to MGM.
“As represented to the Receiver, their sole intent was to preserve the game and prevent it from going offline due to lack of funding, employees leaving because they had not been paid, etc.,” the report says.
But as part of the agreement, CMG reserves the right to repurchase Resistance. It would need to repay the $300,000 that FSS paid to take over the game, plus 10 percent, within the first year.
The Receiver must now either ratify the deal with Fresh Start, or the CME shareholders must act to repay FSS and nullify the arrangement. Assuming that Resistance stays with Fresh Start its development can continue unencumbered. In fact, the company released a new update for the game just yesterday.
What is next for Cheyenne Mountain? The company is awaiting dispensation on a $3 million state tax credit to ease some of its immediate debt. Otherwise, its only income is in royalties from Stargate: Resistance paid by Fresh Start, tied to the game’s net receipts.
CME remains in litigation over both its rightful leadership and a February 12 bankruptcy filing. The receiver is evaluating whether it makes sense to keep the company in bankruptcy court, and may request that the bankruptcy petition be withdrawn if he deems that it is not in the company’s best interests.
(Thanks to Aaron at SG Gaming Info for the tip)
©2006-2013 GateWorld.net. All rights reserved. This material may not be reprinted without written consent from GateWorld. Click here to learn more.