Sin City Developer Close to Going Out of Business

Red Mile Entertainment is struggling to continue its operations after Atari  Interactive terminated its co-publishing agreement for Heroes Over Europe with Red Mile, according to a Red Mile filing with the Securities and Exchange Commission.

The February 11 termination—which Red Mile is disputing—means Atari is no longer making milestone payments that Red Mile needs to continue its operations. Before the termination, Atari was making guaranteed and back-end royalty payments to Red Mile.

On the same day, Heroes developer Transmission Games (formerly IR Gurus) sent Red Mile a termination notice claiming Red Mile failed to make a $281,000 payment under its agreement with Transmission. Heroes was scheduled to ship this spring for PC, PlayStation 3 and Xbox 360.

To stay afloat, Red Mile is attempting to increase its $1 million line of credit with Tiger Paw Capital, which is owned and operated by Red Mile board member Kenny Cheung. Should Red Mile not get that increase or fail to secure new funding by March 31, it is unlikely it will stay in business, it said.

Red Mile’s largest property is its license to develop games based on Frank Miller’s Sin City comic book series. To complete development of this title and Heroes, the company anticipates needing an additional $10 million in the next two to three years. Should it be able to do this, it expects to ship Sin City in fiscal 2012 (which begins April 1, 2011).