Video Game Company Seeks Chapter 11 Debt Protection

Houston-Area Developer Under Financial Fire

In a recent move prompted by an appellate court decision to reinstate the $9 million debt against video game developer TimeGate Studios Inc, a business located in Sugar Land, just outside Houston. The company is seeking to auction off their business, with their primary creditors serving as the lead bidder.

TimeGate Studios, best known for developing action games such as Aliens: Colonial Marines and Section 8, is hoping to auction off their assets, which are valued at around $2.6 million. According to court documents relating to the Chapter 11 Bankruptcy filing, the small business reported assets of under $10 million and debt under $50 million in their petition with the Houston-located U.S. Bankruptcy Court. Affidavits filed by TimeGate's chief financial restructuring officer allege the company employs 33 people at their Sugar Land offices in Texas.

The source of the company's financial woes, according to court documents, dates back to 2009, when TimeGate sued their publisher, SouthPeak Interactive, claiming the defendants had failed to pay royalties from sales of their joint effort, Section 8. The publisher fired back, filing a countersuit alleging TimeGate had failed to invest the amount of capital agreed upon, in addition to several other fraud claims. SouthPeak won that suit, winning an arbitration of nearly $8 million in damages, as well as ownership of the Section 8 license.

A bankruptcy attorney working on behalf of TimeGate refused to give up, and the case went to a federal court, where the decision was overturned in March. Unfortunately for the beleaguered developers, however, the 5^th Circuit Court of Appeals chose to side again with SouthPeak, reinstating the damages against the company.

TimeGate has opted to file for Chapter 11 Bankruptcy in order to help offset the decision, as well as pursuing the auction. Representatives of the developer say the proceeds of the auction will help them launch another videogame, a multiplayer focused shooter called Minimum expected to generate around $30 to $75 million in sales.

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